Happy New Year!
I want to share with you a trade I recently took using directional options. Illustrated below is my analysis and trade plan prior to executing this trade. There are a few points I want to cover regarding this trade.
First and foremost is the trade plan, I always have a point of entry and where I want to take profits prior to executing any trades. This is key, I'm never entering poisitions blindly, there is ALWAYS a trade plan in place.
Second point I want to discuss is my Entry. $69.35 was a key level that I was watching. Based on this analysis that was the price point where I wanted to start my position. As soon as that level broke, I entered this trade the date was January 3rd.
Below the chart is the price I paid for the 72 calls on this stock, my entry price was $1.18 per contract.
Last point is my Exit. The next level of interest for me was at $73.40, this was area where I wanted to start taking profits and closing out my position. After 2 days of CRM (this stock) rallying, I decided to take profits just shy of my area of interest. The 60 min RSI was overextended, so I decided to close out this position, the date was January 4th.
Below the chart is the price I sold these 72 calls, my exit price was 2.29 per contract.
The main take away here is that there was a trade plan in place. Too often traders enter positions with no plan of attack. How would one know when to enter and when to exit without a trade plan?
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