You can Swing and position trade stocks and options using Master Trader Technical Strategies (MTS) to generate wealth and income from Directional and Income Options Trades.
Swing trading expects a move higher or lower over the next few days to two weeks. To profit from that move, we can buy or short the stock.
We can also trade various options strategies. The most common would be to buy a call (bullish bet) for a move higher or a put (bearish bet) for a move lower.
These are directional options strategies and will produce a larger profit if prices move in the intended direction. Time and speed of the move being a factor.
You can also profit from a bias based that the stock will not move lower by selling a naked put or a credit spread. Income Options strategies.
The monthly chart below has a huge, beautiful W-Bottom.
The new low made in September had no follow-through; instead, snapping right back as you can see on the daily chart.
Short Puts To Acquire Stock At 12.6% Discount
For the month of October, the robust rally in MGI from a low of $2.73 created the Bullish Wide Range Bar (+WRB) on the monthly chart.
This +WRB was a closing new monthly high from this multi-month bottoming process, suggesting higher prices. Because of the huge Price Void (look to the left and there is insignificant resistance or consolidation to the left because of the rapid, fluid move down), there is nothing to stop it from moving higher, possibly around $10.00/share.
It is acceptable to trade off the monthly chart for position trading on bullish setups; however, we prefer looking down to smaller time frames to get a better entry.
The daily is not a great new long setup; thus, we are recommending selling put options. When you sell puts, you receive money for the obligation to buy stock on or before expiration at the agreed strike price.
We gave our subscribers of Master Trader All-Inclusive Advisory Market Edge Membership the following trade idea based on this approach:
11/2: MGI – Consider shorting Nov (11/20) $5 puts for $.50+/share. Breakout daily/weekly, monthly huge W-Bottom. We will take the assignment as core long if needed. If assigned at $5.00, this would give us a cost basis of $4.50/share, which is a 12.6% discount to the closing price. Stop $4.08
At expiration, if MGI is trading below $5.00/share, we will be obligated to purchase MGI at that price. But if we sell the puts for $.50/share, then our cost basis is $4.50/share.
If you sell 10 contracts of the Nov (11/20) $5 puts for $.50/share, then $500 immediately is deposited into your account, and you are we will be obligated to purchase 1000 shares of MGI at $5.00/share within the next 18 days.
Only two scenarios exist at expiration. The puts either expire worthless (i.e., above $5.00/share) and you make $500, or you forced to buy 1000 shares of MGI at $5.00/share with a cost basis of $4,500.
The return on capital if the puts expire worthless is 50% ($500/1,000 maintenance requirement).
If assigned stock, you obtained a 12.6% discount to MGI’s closing price on 10/30 (annualized is 252%)!
Since we like the monthly chart, it’s a win-win scenario!
Our comprehensive Master Trader All-Inclusive Advisory Market Edge Membership includes the Master Trader Advisory Swing and Options Trader — plus much more – in providing ongoing, invaluable trading information for active investors and traders.
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Happy trading! If you have any questions or comments, please e-mail Greg Capra at Greg@mastertrader.com or Dan Gibby at Dan@mastertrader.com
