 Good morning everybody, traders, friends, investors. This is Lee Lowell from smartoptionseller.com. Today is Saturday, May 22nd, 2021. Welcome to another edition of our Saturday YouTube video, our options trading videos. We go over options trading strategies and then later on we look at the charts as part of our Saturday synopsis. We look at the indexes, we look at individual stocks, see what they've been doing, see where they may be going. But the first part of our video is always about an options trading strategy and what I can help teach you about how to become a better trader. Now I always have this cheat sheet up on my screen which is today, how to sell put options. Here's my process. At the smartoptionseller, selling put options is our bread and butter. That's what we do. That is what we do most more than anything else as part of options trading. We sell put options. So I continue and I always get emails from people saying, Lee, I understand selling put options. I know what the strategy is, I know how to do it. But I wanna know what your process is. How do you, what's your step from A to Z? How do you go about picking a stock and then deciding, okay, it's time to sell a put option on this particular stock? How do you do it? I wanna know what your process is. Well, I made a lot of videos like this and I've always included my process, my five step plan, what I look for, but it's always good to renew because people come on at different times and they see these videos at different times. So once again, I will walk through my process of how to sell put options and how do I do it and why do I do it and why, and how and why do I pick the stocks that I choose to sell put options on? So it's all about helping you become a better trader and how to help you become a smarter and more profitable put option seller. So that's what we're doing. That's what we're going to discuss today. So let's jump right in. How to sell put options, here's my process. Well, number one, let's just make sure everyone's on the same page so we understand what selling put options is all about. In the options trading world, there's always, there's only two kinds of options, call options and put options. We only, I'd say not only, but most of the time we settle on selling put options and why is that? Because selling put options is a neutral to bullish strategy for the stock's direction. Or even if you're trading or selling put options on the indexes as well. The stock market continues to go up over time. In the long run, the stock market always goes up. So you might as well stick to a strategy that plays that long-term direction, which is neutral to bullish. Selling put options takes advantage of that long-term strategy or that long-term direction in the market. Now I understand people can trade very short-term options, you know, one day, one week, one month, whatever. And in that very short time, the market can be very erratic. So it's hard to take advantage of a long-term direction of the market if you're trading very short-term. So I try to use options that trade or expire within a couple months. You know, sometimes one month, but I need to make sure we can get, we need to allow the stock to move in our direction that we think it's going to move. And sometimes you need a little bit more time. So I don't sell put options usually on a very short-term basis because the market is just too erratic in that short-term. You know, unless I'm really sure of something, you know, then I'll sell, you know, a one-week put option, but that's pretty rare for me because I like to give the stock time to move in the direction that I think it's going to move. Okay, so number one, you have to know selling put options is a neutral to bullish strategy. You don't wanna sell put options on stocks that are going downwards. And how do you tell if a stock's moving downwards? Well, you just look at a stock chart and if you see the stock trending lower, it would be very hard to sell put options on a stock that's moving lower because it could keep moving lower. And you don't want the stock to move lower when you sell put options. So make sure you check the chart. Make sure you look at the charts to see the stock is moving in the right direction, which is either flat to rising. Okay, that's number one. You wanna make sure the stock's moving in the right direction. So what I do is that, you know, when I'm ready to sell a put option either for myself or for our newsletter, I'm always going to stick with one of my favorite stocks. And how do I, where do I come up with the stocks? How do I pick my favorite stocks? Well, over the 30 years that I've been in this business, I've cultivated a stock watch list that includes almost all of the stocks that I like to look at on a regular basis. These are leaders in their sectors, leaders in their field, stalwarts in the business, stalwarts in their industries, stocks that have been around for a long time and just generally large, popular, good, solid companies. And what do I mean by that? Well, companies that make quality products and companies that have good earnings quarter after quarter, you know, their sales are increasing over time. You don't wanna pick stocks that are unprofitable quarter after quarter, because eventually the stock price will follow those earnings lower, okay? There's a lot of companies, you know, a lot of new companies, tech stocks that don't have earnings yet, but they're trading on hype, they're trading on forward-looking, you know, projections. But eventually those companies have to create products that are profitable for the company. Otherwise, the stock will eventually move lower. So I've cultivated this list of stocks and you can do the same. And what I'll do is I've talked about how to build your own watch list and I'll put a video link at the end of this video. It'll come up on the screen. It'll be one of my past videos of how to build your watch list, how to pick stocks to put in your watch list, okay? So you have to choose a stock that you're interested in buying one of your favorite stocks. And this is all my process of selling put options. So once I've decided on a stock, then I look at the chart. And I wanna make sure the chart is showing that the stock is somewhat in and up trend, okay? So, you know, here we're on step three here. So we know it's a neutral to bullish strategy when you sell put options. You wanna find your favorite stock and then you wanna check the charts to see what kind of trend that stock is currently in. Because before I decide, hey, I wanna buy X or potentially buy a certain stock, I have to check the charts. I wanna make sure the stock is moving up because there's no reason for me to buy a stock while it's currently in a downtrend. That's just, you're gonna be swimming upstream, which is much harder to do. And you're gonna be frustrated if the stock keeps going lower and you've bought it, it's going to frustrate you. So you always want to stick with stocks that are moving in the right direction and that is higher. That's if you're bullish, of course, okay? So once again, when you sell a put option, you're obligating yourself to potentially buy this particular stock sometime in the future at a price of your choosing. So you have to decide, okay, I like this stock. Where am I, where would I be willing to buy this stock somewhere down the road? A lot cheaper or cheaper than where it currently trades. I'm not looking to buy the stock right at its current trading price. I wanna get a good deal on the stock. I wanna buy this stock cheaper than where it currently is right now. And by doing so, I mean, obviously you can't do that. If the stock's here and you wanna buy it down here, there's no way you're going to buy it down here because it's trading up here currently. So how could you buy a stock cheaper than where it's currently trading? Well, you can sell a put option at a strike price down here, okay? So the stock's here, you sell your strike price down here and in the off chance that the stock actually drops that far over the term of the expiration, well, then you'll get to buy that stock. So you have to decide on what price would I be willing to step up and buy this stock in the future? Now, what you're doing is you're basically saying, in today's date, I'm making a decision that sometime in the future, I will buy the stock lower or down here. And obviously you don't know what's gonna happen in the future. So you have to be comfortable with that potential purchase price happening in the future, okay? So things can happen between now and the future that could affect that stock's price, either higher or lower. So you're sort of making a decision today, hey, I'm willing to step up and buy this stock in the future. So you have to make sure it's at a price that you would be comfortable buying that stock. Now, how do you do that? Well, number four here, you decide on a potential buy level. So if the stock falls somewhere in the future, you say, okay, I'm okay buying this stock at X price. For me, that's at least a 20% downside from where it currently trades. So if the stock's at 100, 20% below that would be $80. At a minimum, that would be my potential buy area for the stock because I've decided, okay, $80 is 20% discount to where it currently trades. Yeah, I'd be okay buying that stock. Whatever the stock is, wherever it trades, you have to decide where your comfort level would be to potentially buy it. And we'll look at some charts and we'll see how I actually do that. Now, the next step is once you've decided where you potentially wanna buy it, that is the strike price level. Then you check the options chains. You check the chains to see how much you can get when you sell that put option. Remember, you're the option seller. So you're selling it and you're getting money for it. To me, at a minimum, I like to try to get at least a 25 cent premium when I sell that put option. That's just, premium is just what is another word for the options price, the option value is premium. So I'm hoping to get at least a 25 cent premium for that option that's at least 20% below the current price of the stock, the strike price. And I'd like to try to stay within a three month expiration period. Doesn't always happen, sometimes have to go out to four months, depending on the stock, depending on what's happening in the market, depending on where volatility is. So you go through the expiration months, and this is a little bit of a manual labor. You gotta check a couple different expiration dates and see how much the options are paying for your chosen strike price. Okay, then you can, the next step, you can also check the probability of what are the chances of the stock falling from its current price all the way down to your potential buy price within the expiration period. And the probability calculator, and I'll show you how you do that as well, will give you an idea of the chances of you actually being able to buy that stock. The way that I do it, and the way we do it in the newsletter, we really don't want to buy the stock. We just wanna collect the cash, we wanna collect the premium that the put option buyers pay us. We'll have that option either expire worthless or we buy it back eventually for a very cheap price. And then we move on to the next trade, because buying stock entails shelling out thousands of dollars of cash. Okay. And sometimes a lot of our readers of our newsletter, they don't really have all that money to buy all the shares of stocks. So we're, what we really wanna do is sell the put option well out of the money. And that's what these strike prices are called out of the money strike prices. We want the stock to stay above those strike prices so that the option can expire worthless. And we move on and do the trade again on many different stocks. So we collect all this income and that's how we build our, yeah, build up our portfolio. Portfolio's worth goes up over time. You're collecting all this money and so your portfolio value is going up. And in the meanwhile, you don't have to buy shares of stock. But in the off chance that you do end up having to buy the stock, you know what, it's at a pretty cheap price from where it was trading prior. Okay, so you check the probability to see what would be the chances of you actually having to step up and buy those shares of stock. Now, if you have a very high probability of that not happening, of you not having to buy the stock, well, that's a good thing. We look for over 90% chance of us not having to buy the stock, okay? That means the stock has a 90% chance of not dropping to our strike price. That's the way that we do it. So once you've decided on the option, you decide on the expiration date and you check the probability, then you go ahead and you sell the put option. You sell the put option and you collect the cash from the put option buyer. And at that point, you're just waiting. You're waiting to see what happens. And step eight is you can manage the trade. So let's just say you sold the put option, the stock was here, all of a sudden the stock starts to drop on you. Are you still willing to step up and buy that stock at your chosen price? Maybe you're thinking, well, you know what? They had a really bad earnings announcement and the CEO was caught doing some bad stuff. The stock prices started to drop. Maybe I don't really wanna buy the stock anymore. Bad things are happening. Well, that's fine. Stuff like that happens. What you have to do at that point is manage the trade. Just like if you had just bought stock, how do you manage your trade? Do you have a stop loss set? Do you have a bailout point? It's up to you to decide how to manage the trade. Some things you can do is you can set a stop loss or you can roll the put option if necessary. We talked about rolling in one of our previous videos where if you've sold the put option, you could always buy that put option back at any time. You're not obligated to hold it until expiration. You could buy that put option back and then you can sell a new put option for a much lower strike price in a further out expiration date. That's what's called rolling the put option. Or you just set yourself a stop loss. If the stock drops say 20% and you're like, you know what, I'm out. The stock is not doing well. I'm out 20% drop. I have to get out of this trade. And then you just buy the put option back that you originally sold. And it might be for a profit or a loss at that point, depending on where it is in the expiration cycle. So you're never married to the trade. You can always get out of the option trade at any time you want, okay? So here's the eight steps. And number nine is once again, these are just my rules. These are the things that I follow. All the rules that I'm showing you here or all the guidance I'm showing you here can be tweaked based on your outlook for the stock and how long you wanna be in the trade. Nothing is set in stone. These are not black and white rules. Everything could be moved around or tweaked to fit your risk profile and your outlook for the stock. So these are just guidelines of things that I use, how we use them and why they work so well. So let's just take a quick look at how I actually go through these steps and what I do. Number one always to me is you have to check the charts, okay, so let's pull up. Let's pull up, I have Merck up here. Okay, this is a daily chart of Merck and we want to see a stock that is, as I said, in an uptrend, moving higher because you want to go with what the market is showing you. You want to move into a stock that's trending higher when you sell put options. Now here is a daily chart of Merck going back to, you know, a year and a half ago. Here's where it currently trades, okay? It traded $79.18, that's where it closed on. Yesterday, Friday, May 21st, 2021. Now, you know, this stock doesn't really look like it's going anywhere. And Merck's just kind of been trading around this, you know, 75 to 85 level for a long period of time since the pandemic last March. It's been trading in this pretty wide range. So, you know, if I wanted to sell put options on Merck, the stock's moving sideways, which is fine. I want to see it go up more than sideways. But, you know, that's just something that you have to look at the charts. Now, if I was saying, you know what, I like healthcare, I like healthcare stocks, I like Merck, I know the company puts out great products. You know what, I want to try to buy some shares of Merck but I don't want to buy it at its current $79 price. Where should I buy some shares of Merck down the road if that's possible? Now, you can also see in the chart, and what I can do is you can see that, you know, it's kind of in a little bit of an uptrend here. And it looks like it has some resistance right around here. So, it could be in this, what's called an ascending triangle pattern. Okay, Merck's moving upwards, it's kind of going up. And if it can get through this resistance around $80, I think that the stock's going to keep going. Now, mind you, this is not a recommendation, this is not personal investment advice, this is just me showing you an example here of how to play it on a stock called Merck. And I'm not selling put options on Merck, I'm just showing you it as an example. So, if I think Merck can get through $80, it's going to keep going higher. And it's sort of been moving up. So, I'm a little bullish on Merck right now. So, I want to sell a put option. Well, what do I do? Well, we look for a put option strike at least 20% below where it currently trades, where the current stock price is. So, it's around $79, 20% below, that's roughly a little under $16 per share. Subtracts $16 from $79. So, that's about $63, okay? $63, actually, let me pull this down a little bit. So, $63 is somewhere down here. Okay, here's $65. The 63 strike is somewhere down here. Here's where Merck currently trades, $63 is all the way down here. That's a nice buffer. What do we mean by that? Well, we want to give ourselves some wiggle room for the stock to move around. Stocks move higher, they move lower. So, you need to give yourself some room for the stock to make its normal gyrations without getting knocked out of the trade prematurely. That's the reason why we have a big buffer. We don't want to get knocked out of the trade prematurely. So, we choose one of these out-of-the-money strikes all the way down here. Would you be comfortable potentially buying Merck at at least $63 per share? It's currently trading at $79. So, that's a nice $16 discount. And you think, okay, yeah, I'd be willing to step up and buy Merck at $63. So, now the next step is we have to look at the option chain. See what people are paying for these Merck out-of-the-money strike prices. So, what you do is you go to your option chain. I have this already pulled up. Now, this is an option chain for Merck. We've got put options on the right-hand side. The bid-ask-com is all we need to look at. Those are the only prices you're really concerned with because that'll tell you how much money you can receive when you sell a put option. So, Merck's at $79 roughly. We're looking for at least the strike price at $63 or lower that will pay us at a minimum 25-cent credit, okay? So, you scan down. Now, here's how many days left until expiration. I said in the guidelines, we want something minimum three months or not more than three months if we can. So, we start at August expiration, 90 days out till expiration, and we scan down the strike price-com till we get to at least a 63 strike or lower. 62 and a half is our strike price, at least 20% buffer. Now, it went out 10-cent bid at 25-cent offer. It's probably more like a 15-cent bid at 25-cent offer. We probably could not get 25 cents since it's already offered at 25 cents. We wanna see something with at least maybe a 25-cent bid because if we sell it, we know we'll get 25 cents. Now, you can move up to the 65 strike, which is a 25-cent bid, 39-cent offer. You can do something in the middle maybe at 30 cents, but $65 is not the full 20% buffer. So, you have to decide, is $65, am I still okay potentially buying Merck at 65 bucks? That's up to you. We can go out to the next expiration date, which is September, so that's 118 days out. That's just under four months. So, do you wanna go out four months in time? That's up to you. Scan down the strike prices. We look at the 62 and a half, which is a little bit more than 20% cushion, and that is a 26-cent bid, 36-cent offer. We could still probably sell that somewhere in the middle around 30 cents a contract, which would meet our criteria of getting at least 25-cent credit. If you sell it for 30 cents, that's better than selling it for 25 cents. 30 cents is better than 25 cents when you're selling it. When you're buying it, you don't wanna buy it for 30, because it's more expensive than 25 cents. So, we can sell it for roughly 30 cents. That meets our criteria. It's a little longer than we'd like to go out in the expiration scale, but $62.5 is a good buffer, a good distance below $79. So, it's all about figuring out, okay, how far out in the expiration scale do I wanna go? Which strike price is offering me at least 25-cent credit? Now, if 25 cents is not enough for you, because some people will tell me, Lee, that 25 cents, what am I gonna do with 25 cents? That's not a lot of money. Well, over time, when you're selling these things over and over again, and you're having such a high probability of profit, the money adds up. But if you're thinking, you know what? 25 cents is not enough for me, well, then you have to choose a different strike price. A higher put option strike price, that pays more. The 70 puts pay out about 90 something cents per contract. And you have to multiply that by 100 to tell you actually the amount of money you get. So, let's just say 95 cents, multiply that by 100. That's 95 bucks that you'll get for selling each put option contract. The 62.5, you get $30 for selling each one contract. One contract equals 100 shares of stock. So, if you were to have to buy these in the future, that's $62.5 times 100, okay? That's $6,250 that you would have to pay out at expiration if you were forced to buy the shares of stock. Now, that would mean Merck would fall from $79 all the way down to 62.5. That's the only way that you'd actually have to buy the shares of stock, okay? So, you have to decide, are you willing to step up and buy the shares of stock at 62.5 or 70? That's $7,000 if you have to buy your 100 shares. So, you have to decide ahead of time. So, you pick the stock first, you check the charts, you check the expiration, you check the strike prices, see it if it all meets your criteria. Now, how do we check the probability? Now, what we can do is we can go to our, let me pull up the probability calculator here. So, here's the probability calculator. This is on our website at smartopsinseller.com and you can check the probability of what are the chances of Merck falling from its current price of $79 all the way down to $62.5 within the expiration period. And that'll tell you the chance of you have to step up and buy the stock. So, here, we've got at the top of the inputs and the bottom will tell us our probabilities. So, we've got $79 for the current stock. We have 118 days in the future. The future volatility is 20%. I'll show you where to get that number. You don't have to worry about dividends or interest rates. You can leave those zero because they play such a small role. And you put in your target $62.5 for both boxes, 62.5. And when you click on Go, the calculator will tell you what are the chances of Merck falling from $79 down to $62 in 118 days from now. And here is what this box and this box is all that we care about. This is telling us we have less than a 2% chance. There's less than a 2% chance that Merck will fall that far in the expiration period. Conversely, on this side, there's a 98% chance that Merck will not fall down to $62.5. So, that means you have a 98% chance that you won't have to step up and buy the stock. That's a pretty high probability. So, that means you're pretty protected from Merck falling that far and you having to step up and pay $6,250. Now, you may wanna buy Merck at $62.5 and you think, well, I only have a 2% chance of that happening. I want a better chance to buy shares of Merck. So, then you have to pick a higher strike price. So, let's just say we chose the 70 strike price for Merck and let's see what the chances are of that happening. Okay, click go. So, now there's a 14% chance that you may have to buy the stock. Conversely, there's an 85% chance that you won't have to buy shares of Merck. Okay, so the higher the strike price you choose, which will be closer to the current price of the stock, the higher the probability it is that you may have to step up and buy shares of that stock. Okay, so you check the probability, calculators is on our website, you can find it. Now, where do we get the 20%? This default, this means 20%. You only have to put in the number 20. Where do you get the future volatility number? Well, that, you can go to ivolatility.com and let me just see, yep, ivolatility.com right here. You type in Merck in the basic options tab Merck and it'll bring up this volatility chart right here. This is a volatility chart, not a price chart. And there's two lines, the blue line and the orange line. And that signifies the historical volatility and the implied volatility. Here's the colors right here. And they kind of move in tandem. This is the volatility. This shows you how erratic the price of Merck stock is over a period of time. And right now, both of the numbers are right around 20%. That means the price of Merck stock is fluctuating higher or lower of 20% around its current price based on its past movements. So 20%, you look at the current number for both of these and if they're at different levels, then you probably take an average of the two of them. Now you can see that the Merck volatility got above 30% over the last year, all the way down to a low of about 13, 14% over the last year. But right now it's right around 20%. So you take that 20% number and you pump it back into the probability calculator and there you can get your results. Okay, so that's how you do it. That's how you find a put option to sell on a stock that you've decided ahead of time. So let's go back to our cheat sheet here. And it's all about picking a stock from your watch list and I'll put the video up on later to show you how to create, help create your own watch list if you don't already have stocks that you look at. Okay, so you find your stock that you like, you decide where could I potentially buy that stock, you sell the put out or you check the expiration dates, try to get at least 25 cent premium. That's just the way I do it, okay? And then you check the probability and you sell it and you wait it out and you manage the trade. Just remember here, all the rules can be tweaked. If you don't like 25 cent premium, you want something higher, then you have to choose a different, a higher strike price. Or you go further out in time. The more time you give, the more money you will get. So like I said, manual labor, you have to check the expiration dates. And it's all based on my outlook for the stock. I like healthcare, I like Merck. Looks like it's moving into an uptrend. Okay, I'm willing to step up and sell a put option at this time. If Merck was in a downtrend, I wouldn't choose Merck. So make sure you check the stock charts, okay? So that's how you do it. All right, so there's your lesson on selling put options the way that I do it, my process, you can watch the video and take a screenshot of this picture, keep it on your desk, whatever, okay? These are all guidelines. This is not real individual investment advice. So please take that to heart. Okay, so let's move into our Saturday synopsis where we take a look at the charts, we look at the indexes, and we see what's been happening in the market over the last week, couple weeks and see what may be moving forward. And here is part of my watch list that I've cultivated over the years, but we always want to look at the S&P 500 as the broadest measure of the overall market as represented by the SPY, which is the Exchange Traded Fund for the S&P 500. I like to look at this chart first so we can see what's been happening. Obviously, here's the pandemic from last year. Hit the lows. So the general market's just been going up since last March, and it has been going up, but it has the pullbacks along the way. That's normal gyrations of the market. And if you've been watching my videos, we talk about when stocks and or indexes are in an uptrend, they will typically bounce when they pull back off of one of their moving average lines. Which moving average lines? Well, I use a blue 20-day, a red 50-day, and a green or orange, I don't know what color this is, 200-day. These are all simple moving averages, not exponential, simple moving averages, 20, 50, 200. And I have the RSI, 14-day RSI indicator down here. This is an overbought, oversold indicator. Okay, so most stocks, when they pull back, when they're in an uptrend, will typically bounce off either the 20-day or 50-day moving average. We really don't want to see it move all the way down to the 200-day. Cause that entails something, you know, pretty big news item that is knocking the stock down all the way to the 200-day moving average. And you want to see the moving averages moving upwards, trending upwards. You don't want to see moving averages sloping downwards. That means a stock's in a downtrend. We don't want that, okay? So as you can see here, the S&P 500 has bounced two times recently off the 50-day moving average. So if there's a stock that's bullish that you're thinking, okay, I want to buy some shares of this stock, you wait for a pullback, wait for a pullback. And you can see, even though it's gone through the 20-day, it's pulled back through the 20-day moving average a number of times, it usually catches its breath on the 50-day, okay? So if you were missing the bullish move here, you can wait to a pullback. And what do you do is you wait to see if it bounces. Before you jump in, wait to see if it bounces off the 50-day. Once it bounces, then you can feel more confident about getting into a bullish trade. So the S&P 500 looks strong over the last two weeks. There has been some selling in the market, mostly in the NASDAQ, the tech stock. So we'll look at that as well. But right now, the S&P 500 looks pretty good. Yeah, we had this little pullback two times it bounced right off the 50-day moving average. So if you wanted to get long, you wait for these bounces. Will the market continue to go up? I'm bullish in the long run, in the long run. We're talking years and years. In the very short term, on a day-to-day basis, too erratic. I'm not a day trader. It's just too erratic, it's too emotional. I can't handle those swings. So I look for the longer term, longer term, okay? Years out. And over time, in the long run, the market continues to go up. But if you're trading these couple months like we do in our newsletters, we are a shorter-term trading newsletter, not day trading, but months in advance, we wanna see the bounces, okay? We wait for a bounce before we get into a trade. But anyway, the market looks strong. Here in the U.S., vaccines are moving strong. People are getting vaccinated. Businesses are opening up. People have money. They're buying stuff now, going out to restaurants. Businesses are doing better. Earnings are coming out. We've had a lot of earnings come out. Businesses are doing okay. So that just means the stock market is going to go up because companies are doing well. People are buying stuff. Now there's talk of rising interest rates, rising inflation. Yes, that can be the case. That can be the case. But over decades and decades of stock markets of rising interest rates, falling interest rates, rising interest rates, rising inflation, falling inflation, the market continues to go up because there are companies that will always do well and they'll always make products that people buy. So in these indexes, the S&P 500 and the Dow Jones and the Nasdaq, they're made up of companies that will do well over time. And when you have a laggard, sometimes those companies get dropped out of the indexes and replaced by new ones. So the indexes are always looking at or always replacing bad companies with good companies. So eventually the market as a whole will always go up over time. So you wanna wait for the balances off the moving averages. Let's take a look at the Dow, which has been very strong. Let's pull up the Dow. Obviously you can see same thing. It's a strong uptrend, bounces off the 50-day moving average. Here was the last bounce we had. Looks like Wednesday this week, right here, bounce right off the 50-day moving average, like right on cue. So stocks that are in a strong uptrend will typically bounce either the 20-day, here to bounce off the 20-day, or it'll bounce off the 50-day. Yes, sometimes it goes down below it, but I like to use my three-day rule. If it closes below the 50-day for more than three days, then you have to wait, then you have to watch to see where it's going. So here, let's look at over here, it fell through both the 20-day and 50-day, had more than three days, but was getting close to the 200-day moving average, and then it just rallied, and then it did it again, but it bounced right off the 200-day moving average and rallied again. So nothing is set in stone, nothing is guaranteed, but more often than not, it will bounce off, I like to use the 50-day more than the 20-day. And if it falls through the 50-day, then you have the 200-day waiting for it down here. And then you can also check the RSI indicator, whatever indicators you use. A stock in motion tends to stay in that same motion. So if you're bullish, wait for the bounce, wait for the bounce, and if it doesn't bounce, then you stay out. You can always nibble, you don't have to go full force in a full position. If you think it's going to bounce, take a little position and wait for the confirmation, and then you can get in with the rest of your position. So let's take a look at the NASDAQ, which has been somewhat weaker of late than the Dow and the S&P 500. So here's the NASDAQ. It goes down, up, down, and so it's sort of stuck in this sideways pattern. Let's draw a little bit of a trend line here. So we've got the top part of a channel here. This is more art than science, so you've got probably the bottom of the channel here. Depending on how far back you want to look. So it's bouncing, it's bouncing. What I would really like to see, what was encouraging is that we had this big down move right here, here's this down move, but it bounced pretty good. But it bounced right up through the 20 day and 50 day. It kind of tagged both of them, but finished yesterday on the lows, finished below the 50 day. So I would like to see the NASDAQ pop above here for this week. Get above both the moving averages and start to move back up towards this resistance line up here. Okay, here's sort of the line in the sand right now. The NASDAQ needs to get up and through the resistance line for the real next bull move to occur. But until then, it may keep meandering in here until people realize, okay, these NASDAQ stocks, these stocks that make up the NASDAQ, it's time to buy those stocks. So let's take a look at some of those individual stocks and see what's been keeping the NASDAQ down. Of course, a big player is Tesla in the NASDAQ. Tesla of late has had a down move. Now we have, for those of you that follow Tesla, Elon Musk, he's been talking or he's been tweeting about Bitcoin and all. They have a large stake in Bitcoin, Tesla does. So the moves in Tesla can affect the price of their stock. And because they have a pretty sizable position over a billion dollars worth of Bitcoin, if Bitcoin drops, that means the value of Tesla's company can go down as well. So Tesla's sort of in this ugly, very ugly chart pattern right here, it's been hovering right around the 200 day moving average. This is critical right here. And it's sort of maybe getting a little oversold as well. So what we really wanna see is we want to see Tesla pop off of this 200 day moving average. The more time it spends below it, the more chance it could continue down lower. So we really don't wanna see Tesla drop from here. We wanna see it get through the 200 day and start to move back up. But you never know, because Bitcoin, if Bitcoin keeps going down, then Tesla stock might go down, which also affects the overall NASDAQ composite because Tesla makes up a big part of the NASDAQ. So Tesla needs to get off its butt here and start to move higher. Let's take a look at another one of the big NASDAQ stocks is Apple. We always talk about Apple. I'm long Apple. I want Apple to go up. It's also been kind of meandering. Hasn't really been doing much, which is a little frustrating. But here's the 200 day moving average right here. Apple dropped to it two times very recently, but bounced. And right now it's sitting at resistance right on this 50 day moving average. And you've got the 20 day lurking above. We want to see Apple get above here and start to move higher. Our goal is to get up to the 145 level, which is its all time highs. So it's been having trouble really finding a direction. Eventually, eventually I believe all these stocks will continue to move higher because that's what they do. They put out products, they make products that people buy. So eventually people will say, okay, Apple is at a value point here. Let's start to buy it up. But until that happens, we can see meandering, but we really need Apple to get above these moving averages and start to go higher. Let's look at Amazon. Cause these are the big popular tech stocks that a lot of people are focused on. Amazon has been in this wide channel. And I can get rid of these old lines that don't really apply anymore. So you just have this back and forth, back and forth. Does it not really do anything? Kind of hovering around all the moving averages right here. So that just means when the moving averages get very close to each other, that just means the stock's been trading in a sideways pattern, not a lot of direction. So eventually it's going to have to pop. It will explode one way or the other because it can't trade sideways forever. That's just not how it works. I mean, it could trade sideways for a long time, but eventually it's going to move above or below one of these lines here. And I'm hoping that it will be higher. And I think a lot of people hope that as well. Let's take a look at some other stocks, Microsoft. Microsoft has been in this channel that we drew. It's been in the channel bouncing, bounced a couple of times off the lower channel. So when you have a stock in an uptrend and it has these moves, you can draw the channels and here's your more of a high probability setup of getting long. If it bounces off the bottom of the channel, you can take that bullish trader, you can nibble on a bullish trade to see if it's going to move higher. Now, hopefully the next step for Microsoft will start to move back up towards this upper channel. This is called higher probability trading. You draw the patterns, you have the channel here. Most likely it should bounce. Or if you want to wait, wait until it bounces and then get in. Okay, those are, though it's called higher probability setups. What else? We look at, we always look at AMD. AMD has sort of been frustrating as well for us. We've sold put options on AMD, but we still have Cushion. We always choose Cushion out of the money strikes because you never know what a stock is going to do. You want to give it the chance to move around. It had been this downtrend, started going sideways, popped above the resistance line, came back down and it was sitting on this lower resistance line, traded there a couple of times, almost looked like it was going to get through it, but it bounced back. So it's sitting kind of near the 20 day and the 50 day right here, moving averages. Everything, most of the tech stocks are having trouble right now. That's because of this whole inflation narrative and this interest rates, rising interest rates narrative. For these tech stocks, these companies that are more high growth stocks, in order for them to keep growing, they may have to borrow money. And if interest rates goes up, borrowing money costs more. If inflation goes up, it costs them more to get the raw materials for them to create their products. So the dual narrative of rising inflation and rising interest rates will hit tech stocks more because those are more of the growth companies that they need to borrow money and they need to get the materials to build their stock. So that's why these growth stocks are having more trouble right now. The older, more stable, the stalwarts in the Dow and the S&P 500, that's why those indexes aren't getting as hit as hard as the NASDAQ is right now. So the tech stocks are the ones that are being frustrating to everyone that is long right now. So that's AMD. We really wanna see AMD get back up. Let me see what else we have here. Let's look at Disney. Disney is a great stalwart, but it's been selling off of late. I drew this channel probably a couple of weeks ago and we can make a new channel right here or reconnect the lines. So here's the channel for Disney and it's bouncing off this bottom channel right now. Hopefully it'll go back up. Disney's a great long-term company, but you'll have to go through these periods of pullbacks and maybe wanna wait. If you got bullish here, you wait for the bounce and maybe then your next move is to see if it pops through this down-trending line. So it's all about drawing trend lines, looking at moving averages, looking at price patterns to help you gauge when it's time to get in and or get out. Let's scroll through the list. Let's take a look at other things here. Procter & Gamble, another stalwart, another company. Now here's a, I like this pattern right here for Procter & Gamble. You've got this uptrend, okay? Got the uptrend and then you have this resistance right around here, okay? So we draw the resistance line for Procter & Gamble. So this is called a rising ascending wedge. If Procter & Gamble could get up through this resistance line, you know, probably above 139-140, looks like the next stop is trying to tag its all-time highs here. Okay, so you've got a rising stock. You've got the resistance and it's building up all this energy to pop through the resistance. You don't wanna see it drop back down. So you probably wanna wait for a couple days of seeing it pop through the resistance before deciding, yep, I'm ready for the bullish, my bullish trade. All right, so it's all about looking at the charts, looking at the patterns. Let's see, any other thing we wanna look at. Let's look at the two Bitcoin-related stocks. We have Riot and Mara. This is Riot. Obviously, we drew this congestion pattern right here. Congestion pattern, the stock will either go up it, above the resistance, really hard or below it. Obviously we saw Riot came down with a price of Bitcoin and it's sitting right on the 200-day moving average for Riot. Mara, almost the same thing, was in this up channel and it popped down through it, getting close to support at the 200-day moving average. Now this all depends on what Bitcoin's doing. Those stocks are Bitcoin-related. Anything else that's really worth looking at. PayPal, PayPal and Square, the two payment providers. Getting close to support down here. If you wanna draw, you can draw the triangle here, the congestion pattern. It's sort of in this kind of a triangle pattern. So you wanna watch. You wanna see if it drops down below, gets maybe down through the 200-day or you wanna see it pop above. Square, same thing. Square is kind of sitting on support right now. Got some support, maybe right around here. You really don't wanna see Square get too far below this support line because it's already trading right on the 200-day moving average. If it gets through maybe 190, you could see some more downside. So just watch the price patterns, watch the moving averages. That helps you decide when is the optimal time to get in, you want it higher probability trades. What's all about selling put options we talked about earlier, you wanna wait for the higher probability setups. That procter and gamble setup is a little bit more easier to see. If it gets through 139, 140 for a couple of days, that's a higher probability trade for selling put options, okay? The momentum will take it. The momentum in stock trading, momentum is key because once people watch the same patterns, they all get in at the same time and that propels the momentum, okay? So that's what you want to look for. All right, so that's it for your Saturday synopsis. Once again, I'm bullish in the long run. Day-to-day basis, anything could happen, but I think in the longer run, things will continue to move higher. The NASACs having a little trouble, the Dow and S&P are stronger. So take that into consideration when you're looking at certain stocks. All right, so let's quickly go to our website and I want to show you where you can get the put-selling basis. Oh, let's show you where the probability calculator is. If you go on our website and you go over here to the More tab, helpful links, click on that and the probability calculator is right here, top one. Click on that, it'll open up the probability calculator. You also go to our put-selling basics section right here. This is our free guide. Scroll down, put your name, email address. You get a free copy of our put-selling basics ebook. Lastly, our services tab right here. Click on it or hover your mouse over it. Shows you our two newsletters and our one-on-one coaching. So that's it for me today. I hope this video has been helpful. Give me a thumbs up in this YouTube video. Don't forget to subscribe. Hit that subscribe button in the bottom right-hand corner. Leave me a comment, give me a thumbs up. Send me an email, we're here to help. We want everyone to become better option traders. Okay, we're getting close to our 50 minute mark here. That's all for me today. This is Lee Lowell. I hope everyone has a great weekend and a great week ahead. I will see you all next week. Take care.