I concluded the 12/28/20 post in this thread with "We'll monitor the THO chart and look for an entry for a new long position." Found it today.
This morning before the market opened, I noticed THO had bounced off the 50sma and was peeking over the 8ema and 20sma. The bid/ask spread on the options are terrible, but its still a better alternative than a decent amount of the stock. I used the stock last time and it tied up a lot of equity. The world was crazy then (12/23/20) but its even more crazy now. So today I really preferred defined risk at a fraction of the stock value I'd have to put at risk.
The option market is closed pre-market so I had to wait but I knew I'd be busy at the open. However, since this stock moves fast across price ranges, I wanted to catch it before it got away from me.
So here's what I did. I entered a conditional buy order for a Feb 105 Call. The condition was that the stock price was between 97.50 and 98. The thinking is if it hits 97.50 then its going higher. Of course, that's not necessarily true, and the 97.50 figure was by eye, so its a bit risky. I specified the upper limit of 98 in case it gapped up on the open, or option trading was delayed while the stock rocketed upward.
If you look at today's chart you can see the Open and the Low of the day were equal (95.41). This is another bullish indication. At 9:52am ET the order triggered and we got a Call for $3.95. When the order filled I added a Target at just below the 61.8% Fib extension of the green range at 113.64 and a Stop just below today's open at 95.36.
Interactive Brokers has an order type called a "Snap-Mid". This results in a limit order where the limit is the midpoint of the Bid/Ask spread. I used this for the Target and the Stop. I also added a backup Stop that would result in a market order a little lower at 94.36 in case the Stop-Limit doesn't fill. Of course, I used the same OCO (aka OCA) code that will close all the other orders when any of them fill.
Later in the day, I noticed we had a nice paper profit. This stock is so dynamic relative to price levels that achieving a risk free trade would be very, very desirable. So, what I did was enter a limit order to sell a Feb 115 Call at $4.00. Remember, we paid $3.95 for the 105 Call, so if we sell the 115 Call for $4.00 we'll have no risk! The downside is our profit will be limited to a fraction of the 115-105=$10 spread. A $10 equity in an equity option is worth $10 x 100 shares = $1,000. If this hedge order triggers we'll be in a 105/115 Bullish Call Vertical Spread at zero cost. Not a bad thing.
Here's the bullish indications I saw that got us in:
- Retest, Bounce off 50sma
- Left/Right Combo
- Slow round curve
- Close over 8ema
- Above all MA's
- ADX Cross
Summary (Feb 105 Call):
Entry 3.95
Stop when Stock = 95.36
Target when stock = 113.64
Pending hedge order to sell Feb 115 Call at $4.00
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