Hey there, VWAPians!
Hope everyone had a great weekend! Did ya get all your Christmas shopping done?
If you’re like me, you’re waiting ’til the last minute, because there’s nothing I love more than hittin’ the mall when everyone and your cousin is there, Blanche.
You know the best gift you could give this holiday season?
Instead of some goofy socks or a lottery ticket, the gift of ME and my Warlock’s World would be the gift that KEEPS GIVING.
You get entertained. Right off the bat, that’s worth the price of admission.
You get access to not only my Multiday VWAP code in ThinkorSwim, but you get access to my Multiday VWAP knowledge and experience.
This is the knowledge I’m dropping EVERY day from 8:30 to 9:30 a.m. ET on Money Morning LIVE.
This is the experience I’m sharing when I step into my Warlock’s World and jam out VWAP trades from 9:30 to 11 a.m. ET.
Then, on days like today, I come back to the BIG room at 1 p.m. to bless the world with my presence and more VWAP insights.
If you’ve already joined me in my Warlock’s World, first, give yourself an attaboy.
If you don’t know, I don’t come alone.
In all my years of experience, I’ve learned that trading is SO much more than 1-minute Multiday VWAP reversals.
There’s a psychology to what happens when money is on the line and when losses kick you in the gut.
That’s why I have Coach Brian King teach his Foundations course from 11 to Noon E.T. He’s incredible at breaking you down and building you up the right way.
However, Coach King is off this week due to the BEST gift in the world… the birth of his baby girl!
Congrats to the King family! She’s gorgeous!
Not only does he break down my trades, but he gives Warlock’s World members his own amazing ear-to-the-Street insights and trade ideas.
8-Balleris so good, in fact, that I’m handing him the reins to my Warlock’s World on Tuesday for my regular session!
Don’t worry, he’ll still be around for the Daily Decode that day, so maybe we should call him 16-Baller?
It’s not like I won’t be around, Blanche.
You’ll still be able to find me on Money Morning LIVE and for our super special evening session called Mistletoe Mania!
And like an infomercial… but wait, there’s more!
When we’re able to find him in his forest sanctum, sometimes I bring in the Maharajah of the Multiday, my coder Solid Jell-O.
Solid isn’t just responsible for the wizardry that makes the Multiday VWAP possible on your ThinkorSwim charts, but he’s one of the most advanced VWAP traders this side of the multiverse.
That’s why my VWAPians LOVE when I bring him in to break VWAP down to its molecular structure… LIKE TODAY!
That’s right, if you haven’t already heard, Solid will be teleporting into my Warlock’s World today at 1:30 p.m. for another VWAP charting course, and to answer whatever questions you may have!
What a lineup.
Let’s break that down one more time for the guy in the back:
ME. VWAP. 8-Baller. Solid Jell-O.
And Coach Brian King, when he’s not having babies.
With all that value, how could you not be a member of my Warlock’s World?
Speaking of value, I know that some of my VWAPians have been clamoring for the best way to get value out of trading options using VWAP.
Well thankfully, I had a trade on Friday on AMC Entertainment (AMC) that made for a great example…
I know not all of my VWAPians have the account size to day trade expensive stocks like Amazon (AMZN) or Google (GOOG).
That’s where something like options comes into play.
Options trading might be the fastest-growing part of stock trading.
It can give traders the ability to control 100 shares of stock that they might not be able to otherwise.
And the returns can be exponential.
There’s a caveat there, because so can the losses.
There are many dimensions to an individual option that determine pricing – moneyness, time, volatility… etc.
But here’s the great thing about trading VWAP… I don’t care about ANY of that stuff.
Many option traders are speculators, but NOT ME.
We trade in the moment. So it’s not speculation, it’s REACTION.
I teach you how to set yourself up and how to react.
When it comes to options, since we’re “in the moment” traders, we prefer options at-the-money and with the closest expiration.
All those different factors that determine option pricing generally make them more expensive.
An option with the same strike price will be more expensive the further it is from expiration, due to time value.
But remember, we’re not speculating. So we don’t care about where a stock’s price might be in two, three, six months. All we care about is TODAY.
That’s why when I trade options, I stick with the closest expiration date. The closer it is to expiration, the cheaper that option is going to be.
The next most important thing for me is the option being at-the-money (ATM).
Speculators buy out-of-the-money options hoping and praying that someday in the future, the stock will get to that price.
For nimble day trading, this doesn’t work as well.
ATM options tend to more directly reflect the move a stock is making currently.
They change in value like the stock does.
Take a look at this chart for the AMC $25 call option from last Friday, the same day it was expiring.
AMC $25 call 1-minute chart from Dec 17
AMC stock broke VWAP on Dec. 17
The reason these two charts look nearly identical is because the $25 call was an at-the-money option on Friday.
AMC broke VWAP at $24.12, and broke the Multiday VWAP around $24.75.
Because this was an option that expired that SAME DAY, there was no worrying about paying extra for TIME.
The $25 call price when AMC broke the Multiday VWAP was $0.75, or $75 per contract.
When AMC stock rallied one hour later, the option increased in value to $3.75, or $375 per contract.
That’s a 400% return!
When I trade shares, I tend to trade in large blocks.
The same trade using 100 shares would have cost more than $2,700 just to get in.
That’s why options can be an amazing tool, especially for smaller accounts.
That doesn’t mean that VWAPians should overpay for their trades.
Again, that’s why when it comes to options, I use at-the-money, closest-expiration options.
That’s all for now, VWAPians! Don’t forget to come hang out with me in the BIG ROOM today at 1 p.m. ET right here!
Then come BACK to my Warlock’s World for a special VWAP session at 1:30 p.m.!
AND you’ve already signed up for Mistletoe Mania, right?
That’s a WHOLE LOT of Warlock content.
Kenny “The Warlock” Glick
December 20 2021
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