 Hello, hello, hello. Hello, everybody. Option traders, stock traders, investors, speculators. This is Lee Lowell from SmartOptionSeller.com. Today is Saturday, June 12, 2021. Welcome to another edition of our Saturday YouTube videos. We talk about options trading strategies and things about those options trading strategies, specifically what's on your screen right here, the time decay of option prices. This is what we do. We talk about option strategies and things that affect option prices. And then a little later on the video, we do our Saturday synopsis, which I take a look at the stock charts, see what's happening, see what kind of patterns are developing, try to get a gauge for what's going to be coming down the pike. And if we can see any good setups happening and what strategies, options strategies we would put forth in those trades. So let's jump right in and talk about time decay of option prices. I get questions every week about all aspects of options trading. And I've got a couple this week specifically talking about time decay and theta and what is time decay and how does it affect option prices? And is it real? Does it really happen? And the answer to that is yes, time decay is real. So let's step back for a second. So we're all on the same page here. And let me explain to you what time decay is as it affects option prices. Now, anyone who's ever bought or sold an option, and maybe if you haven't done a lot of it, but let's just say you've bought or sold an option, you pretty much know the option price on that day that you execute the trade, that's what you either paid for it or you receive for it. If you were the option seller, you receive from the option buyer. So you have that option price. Now, that option price doesn't remain static. While the trade moves towards expiration, as we all know, all options have an expiration date. And as you move towards that expiration date, the value of that option will change, obviously, and it will change according to how the stock moves. So the option price is going to change based on where the stock moves, how much time is left to expiration, and the volatility in the market. You have all these different things that affect, excuse me, that affect the options value or the options price or the options premium. Those are all the words that describe the options value. So what we're talking about today is time decay. And what that means is that every day that an option is in existence, it's going to lose a little bit of its value just due to the sheer passage of time. As each day ticks off the calendar, the option value is going to give a little bit away. The option value is going to get stripped away a little bit each day as it moves towards expiration. And the thing about it losing some of its value is that it doesn't move in a straight line. It doesn't lose like, you know, five cents per contract per day. It has, it's on a curve. And I'm going to show you that time decay curve. So what I want everyone to understand is that while the option, while you're holding that option position, whether you're an option buyer or an option seller, the option value slips away each day. So if you're an option buyer, you're not so happy about that because you're just giving money away day after day, just because time is ticking off the clock. Now, if you're an option seller, which we are, we love time decay because we like making money just because time is going by. So most option buyers don't understand that. They don't think that, well, you know, if the stock doesn't move in my favor, you know, I'm going to lose money, but it's more than that. Yes, if the stock doesn't move in your favor, you can't make any money, but you're losing money to the passage of time as well. And I always use this example when I'm trying to teach time decay to people, think of an ice cube sitting on the counter, right? At first, you don't really see a lot of that melting away of the ice cube. But over time, you can see it starts to melt away faster and faster and faster until it's just a pool of water. It's the same thing with option prices. If you're holding a very long-term option, like, you know, a six-month option, you're not going to see a lot of daily time decay of that option. You won't see a lot of its value get stripped away until you get closer to expiration. And that's what's called the time decay curve and how you measure that the time decay in an options price, like how much that option will lose per day is calculated through theta. Theta is one of the Greek outputs of the option pricing model. And here at the smart option seller, we talk about delta a lot. Delta is one of the most important Greek outputs of the option pricing model. We talk about delta a lot, but theta on the other hand is very important as well because it can tell you, it can alert you how much money you're either going to make or lose per day as you hold your option position. So let's just take a look at my little cheat sheet here and talk about time decay of option prices. Number one, all options are affected by time decay. Every option will lose a little bit of its value each day. But time decay is not an equal opportunity employer. Time decay is greater for certain options and it's greater for options within the expiration cycle. At the money options have the greatest or the largest time decay per day, no matter where it falls on the expiration scale. What are at the money options? At the money options are options with a strike price that is closest to the current price of the stock. So if the stock is at 100, the 100 puts and calls are called the at the money strike prices. So those have the largest amount of time decay, the largest theta per day. So if you're trading options, if you're a buyer or a seller of at the money options, your time decay is going to be the largest. Now the longer you give or the longer you have until the expiration day, the slower the time decay will occur. So if you're an option buyer, it seems intuitive that maybe you want to buy a longer term option because if the stock doesn't move in your favor right away, you won't lose a lot of money to time decay. So that's why I always tell people if you're going to buy options, stick to longer term options because you're not going to lose money just because time is ticking away. So the longer the expiration, the slower the time decay. Now as I said, time decay is an option seller's best friend and an option buyers worst enemy because at each day passes, you're going to lose a little bit of value just due to the sheer passage of time. So as an option seller, you want that, you want to see the option decay. So option sellers think that well, if I'm going to get all that time decay, well maybe I should just sell very, very short term options like one day options or one week options. And yes, the time to get time decay is very high in those short term options, but you have to play the at the money options. And when you play at the money options on very short dated expiration scale, you don't have a lot of error. You don't have a lot of room for error. The stock could jump or fall on you very hard. And the time decay will be offset by what you'll lose because the stock moved against you. So you have to be very careful. So right here at the bottom I'm selling near dated options isn't always the smartest move because and I'll show you on in the option chain and we'll look at if you sell at the money very short dated options, you don't get a lot of wiggle room. The stock could jump on you and you'll give up all that time decay profit because the stock has moved against your position. So be careful if you're selling short dated options because you want all that time decay, you have to be pretty sure where the stock is going to move to, you know, in your favor. And here theta shows the actual dollar amount per day that is given up due to time decay. So let's take a look at the option chain. Actually first, let's take a look at the the option time decay chart. This may hate this may help some of you visualize how time decay works in an option. So this is your standard time decay chart for options trading. Now what you'll see is it's broken up into 30 day chunks starting at 120 days going all the way down to zero days. Now the curve shows you how much the option loses to the daily time decay. And on the on the left hand side here it shows you how much the premium is left in the option how much how much price it still has. So as you can see here in the first 30 days from 120 days down to 90 this 30 day block you can see the curve barely barely goes down the option is not losing a lot of value to time decay. It goes from 100 percent to roughly 95 percent still that option still has it's you know 95 percent of its value. So it hasn't lost a lot to time decay. Loses about 5 percent of its value. Now in the next 30 day chunk from 90 days down to 60 days until expiration still doesn't lose that much. Only a little bit loses about 10 percent of its value from this curve. So you can see the little triangle here. You see the triangle small here here this triangle this right 90 degree triangle right here. So from 90 days to 60 days it really doesn't lose a lot of value either. The next 30 day chunk from 60 days to 30 days it loses a little bit more of its value from about 85 percent to 70 percent. So about 15 percent of its value. So you can see as the closer we move to expiration this 90 degree triangle starts to get bigger as we get closer to expiration. And then the last 30 day chunk from 30 days down to zero days you can see how much it loses it loses this whole chunk loses can lose 70 percent of its value down to that last day. So these 30 days right here is huge. Okay. So a lot of a lot of option sellers will try to concentrate on selling options in those last 30 days of life. But once again if the stock moves really large in those last 30 days that stock movement could overtake the money you'll make on the time decay itself. So you need to be careful when you're trying to sell very short dated options. Okay. There's always there's always a trade off. You know there's no free lunch anywhere. But just know that the time decay if you're an option buyer it's much harder for an option buyer to succeed in the long run over and over again if you're buying these short dated options because if the stock doesn't move in your favor you're just going to give up all this money to time decay. All right. So let's take a look of let's take a look at how that looks on an actual option chain the actual option prices and we'll see what happens. So here's the option chain for Microsoft options. Okay. Microsoft last closed at $257.65. Okay. So we got calls on the left puts on the right. So what you want to look at is the two columns with the theta column. All right. So if you have your option chain with your broker and you want to know how much you can lose or make per day you look you have to have the theta column and every broker every platform in their option chain should have a theta column. All right. So as I said the at the money options has the largest theta. That's the amount of money you will lose per day per contract as each day passes. Now we're looking here at Microsoft $257.65. We're looking at the June 18th 2021 expires in six days from now next Friday next Friday June 18th and when you look down the strike column you go to the the at the money options which would be the $257.50 strike. Now it's the same theta is the same for puts and calls. Same amount of money will be lost whether it's a put or call doesn't matter. So the $257.50 puts $257.50 calls are over here you're going to lose 16 and a half cents per day starting at six days left 16 and a half cents these are the calls here scroll over here so roughly 16 and a half cents as well for the put options these at the money options 16 and a half cents when you go down in the strikes or you go up in the strikes you'll see how the theta numbers get smaller as you move down as you move up in the strikes or as you move down in the strikes the theta gets smaller the highest data as I said is at the at the money strikes so between now and tomorrow let's just say the market was open today and tomorrow these $257.50 puts and calls are going to lose 16 and a half cents per contract just because we flip the calendar over to the next day so if you're a holder if you're a buyer of of either of the puts or calls your your option value your option position is going to lose 16 and a half cents a contract that's 16 and a half dollars 16 and a half dollars you have to multiply this by 100 because each option contract is worth 100 shares of stock so 16 and a half dollars you will lose between today and tomorrow just because we turn the calendar over to the next day if you're a buyer or a holder of that option you're like wow that sucks I'm gonna lose 16 and a half bucks just because we move to the next day so as an option buyer if you're playing these short-term options you better make sure that stock moves in your favor very quickly otherwise you're holding on to something that's just slipping away from you just because time's ticking away on the other hand if you're an option seller you're like yeah I'm gonna make 16 and a half dollars in my sleep I'm gonna go to bed tonight I'm gonna wake up tomorrow and I'm gonna be 16 and a half dollars richer per contract as long as the stock doesn't you know really fluctuate wildly against you okay this is assuming that this is assume well this this is gonna happen regardless but if you're a holder of that option or you're selling that option if the stock moves big enough in the direction you will either you can either overtake this money that you'll lose just because the stock moved in your favor or against you depending on if you're an option buyer seller okay so let's take a look at what happens let's go out to a longer dated option on Microsoft here let's move out to the November options has 160 days until expiration so the at the money strikes are either the 255 or the 260 we don't have the 257 and a half strikes listed so here you can see the theta is about five cents per day so the longer you have until expiration the smaller the amount of money you'll lose per day as time starts to take away okay so between November and October let's look at this 30-day chunk right here a little over 30 days in October now remember the theta is about five cents a day in October the theta is still a little over five cents a day so you haven't lost that much money in that 30-day chunk between November and October about two cents you know $2 per contract now if we go to the September's you'll see that the theta is now up to you know 5.7 5.8 cents so it's gotten a little bit bigger not a lot lost about five cents or five dollars per contract per theta per theta now if we go to the August options now we're at 6.8 cents so now you're looking at you know a dollar per day that you're losing I'm sorry 10 cents it went from 5.7 cents to 6.8 cents so now it's you're losing about 10 dollars that that between August and September the theta has gotten larger okay went from 5.7 cents to 6.8 cents or roughly 6.7 cents so you're starting to see the theta get larger now if we go down to July the July options the theta is you know 7.8 to 8 cents so it's getting a little bit bigger and then as we move into June as we are looking here the theta gets quite large the 257 outputs 16 and a half cents so as you get closer to expiration you're going to lose more money you're going to lose money faster or the theta if you're an option buyer if you're an option seller you can gain that money faster okay depends if you're an option buyer option seller now we can look at the an option calculator let's go to ivolatility.com you can use their their option calculator and you can see I have the same uh Microsoft I'll put the the same price 257.65 so we're kind of looking at the same numbers six days until expiration June 18th uh options you can see the theta here is now they have it about 17 and a half cents so that all depends on you know not every calculator is the same not all the numbers will match up but but they'll be somewhat close so ivolatility has 17 and a half cents theta per day where the option chain at Interactive Brokers has about 16 and a half cents so let's move this out to 150 days or so and we'll see that the theta now is five you know roughly five cents five dollars um five cents per contract is what you'll lose overnight five dollars in actual dollars is what you'll lose overnight for these longer dated options okay so if we go down 120 days which is a 30 day block theta is now 5.4 cents 5.3 cents you're only losing a small amount so if we go back to let's look at this put in 31 days until expiration the theta is 8.2 cents roughly 8.2 cents and if we go down to one day before expiration we'll see that theta is now 42 for almost 43 cents per day so between you know one day left until day of expiration you're going to lose at least 43 cents if you're an option buyer if you're an option seller you'll gain 43 cents just due to the passage of time okay so that's how time decay works time decay is a constant it's always moving and it gets bigger and bigger as you get closer to expiration so if you're an option buyer and you think you know where the stock is going to go and you say i'm just going to buy a one-week option because i know the stock is going to move in my favor well if the stock doesn't move in your favor you're going to give up a lot of money to time decay now if you're an option seller as we talked about you'll make that money due to time decay but let's take a look here so the 257.5 puts with six days left 16.5 cents of time decay well you if you're going to sell these options you need to be pretty sure that this you hope that the stock stays within that range okay if you're let's just say you sold the put and the call you sold a you know a straddle an at the money straddle and all of a sudden the stock you know blast higher on you you're going to lose money and the time decay won't help you as much so be sure if you're playing short-term options be sure you know where the stock may be going okay so i'll bring up the the cheat sheet one more time time decay it's there it's always there it's part of an options value and just be aware that it it does exist and theta can tell you how much money you can lose or make per day depending on if you're an option buyer or seller all right so there's your your little lesson in time decay let's move on to our saturday synopsis where we take a look at the charts we look at the indexes we look at individual stocks to see what's been happening see what i see moving forward looking for certain patterns support and resistance points and get an idea of you know what what we could be thinking about doing so let's open up the chart we look at the spy which is the exchange traded fund for the sp 500 index as i've been talking for many many weeks many many months now we have been bullish i've been bullish the market is going up the market is going up and that's what the market does in the long run it goes up because the stock market is made up of companies that produce products that people want that people pay for that if they sell enough for these products they make money their earnings go up and their stock price goes up that's how the stock market works and the s and p 500 and the dow Jones 30 and the nasdaq 100 are all made up of stocks that are picked by the the the makers of those indexes and they keep stocks in there that are worthy that are quality stocks they deem quality stocks and so those companies are going to produce products that people buy and their earnings are going to go up now not all stocks are successful obviously but the index itself will continue to go up over time because people keep buying the products and their earnings go up it's just this repeating cycle so as of now with the pandemic at least here in the us we have almost half of the us i think it's half now that or more than half have had at least one dose of a vaccine and i think you know low 40 percent of all adults here in the us have a full vaccination so the us is completely opening back up people are going out they're spending money that means they're buying more products that means stock prices should go up in the long run in the short term you know day to day week to week prices are very erratic but in the long run prices will go up stock prices will go up so i drew this i have this little triangle here this is called an ascending triangle and this is the s and p 500 now between this week and last week the last few weeks we really have not had a lot of movement have not had a lot of movement and that's what happens during the summer you get the summer dull drums people go away take vacations they you know they just step away so trading gets subdued and you get get these these you know sideways patterns for a while and that you can see that right here we haven't had a big move in the s and p 500 for a little bit but this ascending triangle is a bullish setup pattern okay you got the uptrending price action and you have this resistance area and it and and the and the stock keeps you know bumping up against the resistance just waiting to break through and once it breaks through then it moves on to the next leg of the bull run which is exactly what's happening here in the s and p 500 and you can see the last two days this is thursday and friday this week the sp 500 moved above or the sp y moved above the resistance line which is an excellent sign that the next bull leg is going to happen when you have enough people watching the same patterns it becomes this self-fulfilling prophecy that okay we see it breaking out it's time to get on board so you get this rush of orders these buy orders that will continue to push it up until the next pattern develops whatever that may be so i can see here this is a good sign s and p 500 moving above resistance this to me is the signal that the next bull leg is going to happen okay but once again it's the it's the pattern the ascending triangle pattern that i like that it is making me bullish so if you've been thinking about getting on board you know this could be your signal now i talk about a self-fulfilling prophecy if enough people see the same technical pattern they get on board you know sometimes that's regardless of the the fundamentals of the company okay people keep saying stock prices are stretched you know their fundamentals don't don't reflect where the stock price should be well that's how it's always been i mean if you look back at the history of time okay here's the monthly chart of the s and p 500 2008 and you know that we had the meltdown and it just gone straight up from there all along the way people are saying the fundamentals don't match up with the stock price the fundamentals don't match up with the stock price the fundamentals don't match up with the stock price but yet stock prices keep going up that's just how the stock market works yes we'll have pullbacks over time which is good we need those pullbacks to kind of reset things and shake out the the weak hands but it goes up over time because that's what the stock market is supposed to do as long as the the stock market is composed of companies that keep creating products that people want to buy then the stock prices have to go up right who's to say that a fundamental of a company has to coincide with a certain stock price it doesn't make sense yes you can look at long-term parameters of of price to earn it p e ratios and whatever else whatever other fundamentals people concentrate on of course stock prices are going to look stretched at some point but yet they keep going up so you have to reset those those fundamental values i'm a technical guy i look at the charts more than anything else and because i assume everything with that's known about that company gets reflected in the charts so i look at the charts and so do millions and millions of other people when they see this thing breaking out above this ascending triangle they're going to start buying it as well that's just how it works okay so that's the smb 500 let's take a look at the dow let's take a look at the dow the dow has been very flat you can see right here very flat over the last couple weeks not really going anywhere has not hit an all-time high recently here's the all-time high back on may 10th about a month ago and you know what can we draw what can we see well you know the dow just like the sp 500 is going up you have the you know you can draw these these um you know when you draw trend lines it's a little bit more art than science okay it depends where do you want to you connect the lows you know do you want to connect it here and then you can also have you know the resistance line here you draw it over so it's sort of making a little triangle pattern as well it's in the eye of a holder depending on how you see it you know so the dow could keep working its way sideways for a little bit but you can't deny that it's going up and we have the the 20 day simple moving average the the 50 day simple moving average and the 200 day simple moving average all of them are sloping upwards i'll take this off so we can see better they're all sloping upwards which is a good thing with stocks are when stocks are in an uptrend you want to see the moving averages in an uptrend as well okay my rsi indicator down here which is an overbought oversold indicator is right in the middle of the range you know 50 something it's telling me we're not overbought we're not oversold it's just got a nice slow move higher which is good which is what we want to see if you're bullish okay people always try to pick tops people always try to pick tops saying this is it here comes the next bear market it may go down for a little bit but then it keeps going up so i don't i don't get on the short side because the market just goes up you have to be very nimble and have to be very quick if you want to make money on the on the down swing so let's take a look at the nasdaq which was has been the weakest of the three but has really started to catch up now i have these i leave these patterns on here over over the week so we can see how things have been shaking out over time now the nasdaq has been the weaker of the three but when it starts when people start to buy it catches up very quickly okay now we can also sort of see we have the the w pattern okay we talked about the w pattern you can kind of see the w pattern here and once it gets above the resistance line it'll probably start to move pretty good uh let let me just let me just blow this up a little bit so we can see it better so you can see the triangle pattern okay move i mean the the w pattern blow this up a little bit a little bit of manual labor as i like to say so you can see a w pattern is pretty bullish okay apply we got one more do this one right here okay so it's all about looking for patterns it's all about looking at trend lines support resistance so now we have the w pattern which is is a bullish pattern okay all it has to do is get above this resistance line doesn't always happen but it's there for you to take a look at once it gets above this line the nasdaq should start to move up on all time new highs as well so we keep an eye on things see what's happening otherwise you know it's been in this sideways channel for a bit um you know it could get knocked back down and it could start to move back down towards maybe the the 200-day moving average if if there's a lot of sellers that come in so keep an eye on the nasdaq you want to see it get above this resistance level if you do your own charting as well all right let's take a look at some individual stock charts but for the most part i the indexes look strong to me looks like they want to go up especially in that that that sp 500 so let's take a look at some individual charts i want to show you the the ascending triangle pattern on some other some other charts to show you how strong that pattern is so let's take a quick look at cisco cisco systems cisco has been making or had been making the you can see the ascending triangle pattern it's got the upslope and the flat top and just this past week the last couple days it broke through it okay it broke through it it's got the momentum building up it's trying to blast through it it's got all this pressure and once it goes through it goes through pretty strong and it should have some follow through you want to see a couple days worth of the breakthrough before maybe deciding to say okay this is a strong indicator then i want to get on board so wait for a couple days to see if it blasts through cisco looks pretty good so uh oracle as well had made the same pattern okay not that long ago oracle ascending triangle this is this is a classic pattern oracle once it finally got through look how hard it blasts through it's pulled back a little bit and it may be gearing up for the next next leg higher again sometimes when it blasts through it likes to pull back a little bit uh as long as it doesn't fall back through the resistance line or the triangle it should probably it's probably gearing up for its next leg of the move higher okay so that's oracle cisco what else i think was um i think ibm may have made a pattern yep ibm as well here's ibm international business scenes also ascending triangle pattern blasted through pretty good this week okay so you want to look for these patterns on the chart how do you get a little bit more education on these well let me take you to another website which i've shown before chart patterns dot com chart patterns dot com here's the ascending triangle pattern it gives a quick little synopsis of what these patterns are and what you can look for okay you scroll down the page you can click on any of these links it'll show you examples you click on the ascending triangle box right here and it'll give you more of a definition of what it is okay you can see these are these are the exact patterns that i've just shown you on the charts and once it gets through the resistance it's off to the races okay so these are the things you want to look for on the charts it's all about pattern recognition support and resistance and watching the trend the trend is which way is the stock moving okay and we know our physics an object in motion tends to stay in that same motion until something moves it in a in a different direction it's the same thing with charts it's the same thing with stocks here's the s and p 500 it's going to keep moving in that same direction until something comes along and knocks it back down well what what would that be well we had the pandemic last year of february march of 2020 something like that otherwise if this if the company is still making good products and people are still buying it's going to keep moving up until something happens maybe a disastrous earnings report or the ceo of the company has been fudging the numbers for the last five years something like that will will turn the tide but otherwise if the news is decent and earnings are decent why would the stock start to go down it wouldn't so you watch the trend lines you watch the momentum and and you play it until it shows you otherwise okay so let's take a look at some individual stocks we always do here let's take a look at apple we always look at apple now apple is really hasn't gone much anywhere since no last august last september it hit a high last august meandered around hit a new high back early in this year and it's just been kind of consolidating it really hasn't gone anywhere in you know nine or ten months just kind of hovering between you know 110 140 dollars a share and you can see look how tight this range is right here it's a very small range right here it's going it's gearing up when it when it when a stock trades in a very tight range like this it's building up this energy it's going to explode one direction or another and it's been hugging on the 200 day moving average does not doesn't seem to want to drop below it we can see here one two three it has you know had three attempts to go down below the 200 day moving average not a lot of people want to see apple drop okay so they're defending this 200 day moving average and it bounces off and it goes back up but it's been really tight been really tight eventually apple is going to move hard in one direction or another it just needs a catalyst to do that what that catalyst is i don't know but eventually something will happen obviously i wanted to go higher i'm long apple and i've just been kind of waiting around for something to happen and it's just not it's not following through in one direction or another or another so you got to have some patience and this is a thing where if you're an option buyer and you've been buying apple call options hoping that'll go higher this is where that time decay has been killing you right it just apple's not going anywhere so you're losing money day after day if you've been an apple buyer option buyer if you're an option seller this has been great for you because the time decay has just been eating away and and giving you a profitable position all right so that's apple we looked at microsoft uh in that in the example for time decay and microsoft has been in this nice little uptrending channel okay you can draw the channel lines you connect the tops you connect some of the bottoms how far back you go i don't know you know three to six months you you draw some tops draw some bottoms and you can see it's been in this pattern now and it bounced three times off the bottom here so if you're looking to potentially get long microsoft you know follow the patterns if you see that it's bouncing off the trend line maybe it's time to buy so here was your last buy so now microsoft may start to go up towards this top line we can draw we can remove this and and oops let me get rid of this and we can draw a new one you know we can extend the line out you can go from here just draw it a little bit longer so it'll give you an idea of where it may move to if it continues to move up okay so that's the channel um let's take a look at some other charts tesla tesla's had a pretty ugly chart for a while but just like apple it's been it's defending this 200 day moving average this is the the granddaddy of moving averages you this is the last line in the sand and you can see it's dropped through the 200 day moved above it dropped below so it's really fighting this 200 day moving average right here the longs people that are bullish do not want to see it really go far below the 200 day moving edge because that could really spell some trouble on a technical basis so you really need tesla to get going again you can also maybe draw another little triangle pattern um there's a congestion pattern eventually it's going to blast out higher or lower in a strong way you can see all these other triangle patterns that we drew so tesla has a habit of of making these triangle patterns and then and then going in one way but then falling back again so tesla's this is a very ugly chart i really can't decide what what i think about it you can also draw some support here down around the 550 level that seems to be a floor for now that tesla does not want to drop below so you got a floor here maybe um you know if you want to get long at some point on tesla however that may be buying some shares of stock or selling some put options or put option spreads or buying call options whatever you know you want to make sure that it doesn't drop below 550 so maybe maybe you wait to see some more confirmation that it's ready to start moving up but tesla it's a very ugly looking chart i'm i'm not making really an assessment either way in our newsletter we have sold put spreads put option spreads is more of a neutral to bullishly directional trade but we have a lot of cushion okay we have a lot of cushion on this trade so hope we don't want tesla to fall too far but we do have some cushion there let's take a look what else uh walmart is another big one that we like walmart um you know the biggest of the biggest physical retailers uh and so also kind of just trading in this narrow range all the the moving averages the 200 day 20 day 50 day they're all kind of converging they're getting very close to each other when that happens eventually the stock will explode one way or the other um you know let me get rid of this get rid of this line see uh if i can see any kind of pattern here you know not really not so much it's just kind of meandering around um nothing to really gain from this chart just it's got a little bit of an uptrend but overall it really hasn't moved much since last august too just like the apple trade just kind of in that same range nothing really going on with with uh walmart what else do we have some of the the pharmaceutical companies got a boost this week elie lily ran up 20 the other day i think that's the biggest move in one day moving the history of that stock uh i was very surprised so there was some news out uh so this is elie lily murk all the stock whoops i don't know what's going on with murk here's bad tick there's a bad tick in the charts let's not look at murk um bristol mires bristol mires you know had pretty good move this week so some of the healthcare stocks had had a good move higher this week but really hasn't gone much bristol mires let's take a look at um what other uh we have amazon we always look at amazon and netflix these are the big ones these are the stocks that people are interested in amazon still in this wide range really hasn't gone much either even though it's a very expensive stock it really hasn't gone much um since last summer just kind of staying in this range you know this would be great for option sellers uh if you're if you're willing to take that risk whether you're selling strangles straddles uh iron condors whatever this would be a good this is a good stock to do it on okay but not really going anywhere um netflix still kind of hanging around the lows within its channel netflix also has a wide channel here we can we can redraw this we can stretch it out a little bit more okay stretch it out a little bit still in this range but starting to move down towards the lows here's the last move a little bit of a down move so at the moment it's on a downswing where will it bottom don't know yet don't know yet but but if you're long net netflix you really don't want to see it fall below this this long term line not much happening with netflix let's look at some of the meme stocks these have been actively game stop game stop they had that they were up big and then they dropped big so this is game stop um you know once again i'm not playing these but it's fun to watch because the the volumes and the trading ranges are very large it had uh you know we had a triangle here had some sideways action then it finally blasted higher but it's come down a good bit amc also got in on the action just the last couple weeks look at this rally but it's dropped a bit as well so if you're playing these stocks please be careful um there is a there is a website that um let me see i think i have it on my phone here it that shows you the short interest the the way these stocks are why these stocks are moving is because they have a lot of high short interest in them what that means is that there's big institutions and hedge funds are selling short these stocks hoping the price goes down and the uh the redditors the wall street bets group on reddit uh try to buy these stocks up and try to force the these institutions to buy back their shares in a short squeeze so let me see if i could find what's that website that i use here we go so it is the i think it's high short interest dot com let me type this in let me type this in here and see if i get it high short interest okay yeah so here's the website right here high short interest dot com it'll show you all the the highest stocks with the the greatest short interest meaning there's a lot of short sellers now you can see here some of these stocks work course is is the the biggest uh the high highest shortest stock right now 40 of the flow 40 of the available shares available for that stock as being shorted right now okay clover was another big mover this week um geogroup link so you have these stocks that are that are highly shorted so you got to be careful these let's look at um i know clover moved pretty good this week look at that so the stock went from you know you know eight or nine dollars all the way up to over 28 29 bucks but it's come back this week so it it rallied and then it lost half of its half of its move up so you got to be careful with these stocks um those are though there's some of the exciting stocks happening right now but you can you can lose a lot of money so please be careful what other stocks we look at paypal paypal is starting to move out of this little triangle pattern and it's it started to blast higher and it's above the moving averages which is good so paypal could be on its next leg higher if you want to look at possible bullish activity or bullish positions on paypal i'm trying to see what i've seen during the week um procter and gamble okay so procter and gamble let's take a look at this procter and gamble had been making the ascending triangle pattern it was bumping up against the resistance pretty good here thought it might go through but it got knocked back down fell down through the triangle right here so this has sort of been negated you know not everyone works out sort of been negated here so um we we take a look at well i'm going to remove this now so now we we look for what other patterns is there well you can you can maybe draw a little you got your resistance again up here but now you have maybe another little could be in this channel right here now you know it's all in the eye of the beholder that's procter and gamble not much happening now waiting for it maybe it'll try to move back up again uh let's see let's see let's see oh amd we always look at amd still still kind of just hanging around very very tight range this week not much happening not much happening but it hasn't fallen through below this this low line here around 74 dollars or so and up here you know that's just not much happening had a couple w patterns that didn't follow through so amd is just kind of kicking around not really doing much sideways action there let me see what else we got let's see what else we have disney disney is sort of okay so i had drawn this down trending channel before this we've had this on for a few weeks now probably so disney's in this little downtrend channel okay downtrending it's right now it's bumping against the upper line of the downtrend channel so if you're thinking oh maybe maybe i'll buy some put options ourselves short some shares of disney you might want to wait until you see that it starts to move down again because if it pops above the the upper resistance line and gets above this 50-day moving average that could mean disney's on the next leg higher finally but if it if it if it doesn't get through it and starts to tick back down that could be your signal that disney's still in a downtrend okay there's another one chlorox i wanted to show you that which is in a downtrend chlorox has been in a long downtrend here look at this thing it was in the uptrend and then something came along to knock it down and now it's in this this pretty wide this this downtrend channel right here okay so this is chlorox now you don't want to get long a stock in a downtrend until it shows you otherwise here you you wanted to stay long until it showed you otherwise now it's in a downtrend so chlorox has gone from one extreme to the other okay so if you're if you're thinking okay well maybe i want to get short or or bearish position on chlorox you have you have the momentum on your side so i just want to show you these patterns all right so we're getting close to 50 minutes here i think that's all for now lastly let me show you the vix the vix is the volatility indicator getting back down to lows 15 under 16 percent getting back down to those those values right before the pandemic hit back here so we're right in that so volatility's come down that means option prices have come down people are more complacent and that just means the stock market has had this nice slow move higher and that's what happens volatility and market action moving in opposite directions all right so that's it for your saturday synopsis of stock market stocks still look strong keep an eye on this s and p 500 keep an eye on the 425 level roughly if it gets through that a couple days it's probably going to keep moving higher all right so i hope you all have found this today's video helpful give me a thumbs up leave me a comment don't forget to subscribe hit that red button in the bottom right hand corner of the video send me an email we'll go to our website smartoptionseller.com here's our put selling basics free guide if you want to learn about selling put options which is what we do put your name and email address here we'll send your free copy also our services services tab we have our two newsletters and our one-on-one coaching and last week i know i mentioned our deep dive webinar into put option selling that's sort of um still in in process here so if you have interest in a deep dive seminar you know keep keep checking back here or send me an email saying you're interested we'll make sure you're on the list okay that's all for me today i hope everyone has a great weekend and a great trading week ahead this is lee lowell signing off