- April 13, 2019
- Posted by: CoachMike
- Categories: Options Trading, Swing Trading, Trade Of The Week, Trading Article
We saw the market make another run up towards all time highs this week. Over the last few years we have seen every market selloff bought up quickly with very little damage being done for any length of time.
As a result we continue to see many stocks at extreme overbought conditions.
ROKU – CALL SPREAD
One of those overbought stocks that we have been tracking is Roku (Symbol: ROKU).
The stock is up over 300% just over the last few months.
With such an overbought extreme we are looking to place our Options Trade Of The Week to benefit from Roku moving sideways or reversing lower.
To do this we will be selling a call spread.
- We will be using the September 27 weekly options that have 21 days left to expiration.
- We will be selling the 175/177.5 call spread for $.95 per spread.
- This means we are selling the 175 call and buying the 177.5 call at the same time.
- We are collecting $95 per spread which is our max profit potential.
- The max risk on the trade is $155 per spread.
This trade will give us 5 ways of making money on the trade.
We make money if the stock moves up, down, or sideways as long as it stays below $175.95.
We also make money from time decay adding up and from volatility decreasing. That gives us 5 ways of making money on the trade.
As a result of having 5 ways of making money with a credit spread, these trades will give us a much higher winning percentage long term when compared to just buying the outright calls or puts.
Taking this approach will allow us to react to many different market conditions and will give us more consistent growth in our accounts.
Best of all we can place these trades with defined risk which makes them very safe trades to place.
For a complete break down of our Trade Of The Week as well as a look at our open trades from the last few weeks make sure you review the video below.
You will learn the details of how we are placing trade trade including how we plan on managing it from start to finish.
If you are interested in learning how to find these trades, feel free to contact me directly with any questions you might have. Mike@netpicks.com.
FYI: Mike, the Max RIsk on the Roku Bear Call Spread is 1.55 not 2.20?
If ROKU stays below $175.95 what would our profit be at expiration date?