Goooood morning, VVVVWAPians!
I’m sorry I wasn’t able to join you for my regular Money Morning LIVE appearance yesterday.
There’s nowhere I would rather be in the morning than on the right side of VWAP with you.
But alas, I was poisoned so I had no choice. Who would poison “The Warlock,” you ask?
Probably Cathie Wood, who else is there?!
But I didn’t leave you alone… No, no you had the VWAP, the ONLY thing you really need to be on the right side of the market, and life.
By now, you should know where to find the best VWAP candidates to trade, the setups to look for, and the best earnings trade on earth.
So I can only assume your day was great in my absence.
Now let me hear about it in the chat during my usual 9:30 a.m. ET LIVE trading hour!
I especially want to hear if you had any VWAP option winners, because today is all about harnessing the power of calls and puts, in honor of my good buddy Mark Sebastian.
Mark is going LIVE today at 1pm ET to share his secrets to finding low-cost ($1 or less) options that have the potential to provide a 10x return.
Oh, and it’s FREE to attend.
Just RSVP right here and set your alarm for 1 p.m. ET TODAY.
And listen, Mark may be humble, but his knowledge is power. And I’m no dummy.
Nor am I humble…
“The Warlock” has no equal… but if he did, it might just be Mark.
And in the meantime, let’s talk about why I might choose to trade options on certain days while not on others…(Hint: risk/reward)
Is It Risky, Though?
Here’s something I like to do on Fridays.
Why Friday? Glad you asked.
Options expiration of course.
Now shut up and listen.
As you know, my whole schtick is to be “on the right side of VWAP.” It’s the only trade I need… seriously.
But when I spot a trade, how do I execute it?
It’s almost too simple, really. My preferred method of day trading stocks is to buy and sell shares of the stock outright.
Shocking, I know. Vanilla Ice Cream, anyone?
What you may not know – but actually should because I’ve said it all before – is I also SOMEtimes trade options in the underlying stock, instead of buying or shorting shares.
Scoop of Chocolate, anyone?
And my favorite time to pull this little stunt is on a Friday, as noted earlier, because weekly options expire at the close EVERY Friday (and don’t get me started on the 3rd Friday of the month, that’s for another time).
The key here is the expiration date. Time has value, and it’s priced into the option premium.
Therefore, if the option is expiring in a month, I am overpaying if all I want to do is essentially take a day trade.
With the advent of weekly expirations, however, I don’t have to pay for time I don’t need anymore, so I get the leverage of an option without the cost of time.
And my favorite day to play this game is Friday when the weeklies are set to expire and time value has withered away.
Think about trading risk for a second.
If I buy 1,000 shares of Glick’s Glasses at $21, how much could I lose?
The answer is $21,000. Sure, I would have a series of stops and targets and a bunch of other mumbo jumbo, but theoretically if the stock goes to zero, I would lose $21k.
Now if I buy 10 calls, in lieu of buying 1,000 shares outright, I can control my risk even more.
That’s because a call option allows me to profit on a stock’s upside move, but at a fraction of the cost it would take to buy that same stock outright – and with defined risk out of the gate.
A bought call gives me the right to buy 100 shares of the underlying stock at a certain price within a certain time period, but I don’t have to buy the shares (called “exercising” my option). I could buy the contract to open and sell it to close for a profit, without ever having to touch the shares.
Let’s say 10 call contracts cost me $150 to control those same 1,000 shares in Glick’s Glasses.
How much could I lose if the stock went to zero? The answer this time is $150.
With a bought option, I know my max loss before I get in.
What’s the likelihood of a $21 stock going to zero in the blink of an eye? Not likely, but what if there was a catastrophic event, terrorist attack, cyber-attack… or we find out Glick never made glasses at all… you get the picture.
Don’t make me tell the Funko story.
Circling back… I prefer to just buy and sell shares of stock like a normal person. But there are times when I find leveraging the option to be in my best interest, like on options expiration dates, when I don’t have to pay the Time Tax.
I get to use a small amount of money to control a larger stake with a very defined risk and I’m not overpaying for time value. As a day trader, that’s important to me.
If you really want to know all about options, though, don’t miss Mark’s free webinar today at 1pm EST just by RSVPing right here…
Some of the stocks I’m stalking this morning include COUP, AMC, CLOV, BBIG, PATH, and SOFI… to name a few.
So make sure you join me LIVE right here at 9:30 a.m. ET to find out why… and to get on the right side of VWAP.
You can also find an earnings calendar near the bottom of the ThisIsVWAP.com home page for more stocks to watch.
Kenny “The Warlock” Glick
September 08 2021