VWAP and Options?!?
Hello there, VWAPians!
Yesterday my Warlock’s World community and I had the BEST. DAY. EVER.
As usual.
In addition to 1-minute multiday VWAP reversals on earnings from stocks like Micron (MU) and Direct Digital Holdings (DRCT), I also got to flex my VWAP muscle on some crazy names such as Adagio Therapeutics (ADGI) and Tilray (TLRY).
One of my newer Warlock’s World family members asked a great question:
How do I trade VWAP using options?
This is a GREAT question.
Especially for my small account members who may gravitate toward options.
To trade VWAP using options, I prefer tradingweekly options with the nearest strike price, either at- or in-the-money.
As a day trader, I’m not planning on holding on to these options for more than a few hours AT MOST.
That’s why I prefer weekly options with the closest expiration – I don’t need to pay extra for the time value.
And I prefer options that will most reflect the stock’s price movement, which is why I like to trade at- or in-the-money options.
For example, yesterday I was hunting TLRY for the third or fourth day in a row.
TLRY broke out on Wednesday
TLRY broke VWAP at $8.34 per share.
SInce TLRY has weekly options, I would have been looking at the options that expire April 1.
I would have been going after the $8 or $8.50 calls.
I most likely would have bought the $8 calls for $0.71.
They rose as high as $1.23!
On 100 contracts, or $7,100, I would have made a profit of $5,200!
For my smaller account players, on 10 contracts, I would have made $520.
Either way, it would have been a more than 70% gain!
Options can be a great way for Warlock’s World members with smaller accounts to gain exposure to stocks that might not be able to trade with some size.
But remember, options are much more risky than stock.
However, all of the teachings of VWAP still apply.
That’s why if you can afford to trade 1,000 contracts, or 100 contracts, or even 10 contracts, it’s important to join my Warlock’s World.
Learn how to trade VWAP.
Right side of VWAP, right side of life.
That’s all for now, VWAPians!
Kenny “The Warlock” Glick
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March 31 2022
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