Weren’t We Discussing Ranges?
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Weren't We Discussing Ranges?

Henry Gambell - April 14, 2016

Good evening, everyone. This is Henry Gambell with Simpler Options, and in tonight's free video I wanted to take a look at Facebook. What we're looking at right now is currently a five minute chart of it, and you can see how we had a very--not a huge gap up--but we had a nice gap up to start the day. And then progressively sold off from there. There was some news that came out that apparently Facebook's advertising was not as up to par as it was during the same quarter a year ago, but then it came back out and said, okay, maybe that's actually not true.

This was just a good example. I wish I had a better technical level to show you. I didn't really pause at a perfect level, other than 200 day moving average. There's not a lot of symmetry or anything like that. But it's just an example of, I think, trying to trade off of news like this is very difficult.

Instead, trying to be patient and trying to work ideas like what we've been sharing with the idea of Facebook consolidating here at this 110 strike, is much more effective and much more related to price, as opposed to coming through headlines and trying to find the latest in a five minute thing that has happened.

Now, depending on how you positioned yourself in this, you may have been shaken out. I feel with options it is so easy to clearly define your risk in every single trade, that you shouldn't be shaken out of markets. So when this was selling off, sure, it's not exactly what I wanted to see, but, you know, holding my position and being able to get through that, and then seeing it end up down 10 cents on the day? That is exactly what I wanted.

So we've been working some unbalanced butterflies on this. Today we came in an added a iron fly, and this is the best way, or one of the best ways that I have found to work at the money premium, while not doing it with unlimited risk.

The first thing that you'll think of, if we come over and look at our trade tab, we have a good chunk of open interest here at the 110s. The 110 puts are not quite as heavy, but you can work the idea of being a range-bound chart, showing some decent open interest in both of those strikes, and the first thing you think is the short straddle. Well, you can protect yourself in something like that by doing the short straddle, then coming out and buying protection to create the iron fly.

So that's one of the positions positions that we tacked on here towards the end of the day. I think that is perfectly fine to work into this Friday. If you really want to work it into next week, that might work out okay, too, I have little bit more of an expiration feel for it right now than into next week, but the main thing is, just don't chase the news, focus on price action, and position yourself in a way that you can tolerate these types of swings, and not be shaken out.

I hope that helps, it gives you an idea for some trades to put on for tomorrow into Friday, and one last thing, I want to make sure you guys are aware of Tucker's class that he'll be doing this Thursday, the 14th, from 7 - 8, he's going to be covering some of the strategies he's been using this trend trading. If that's something that interests you, that is a free webinar on Thursday. You have a great rest of your night, and I will see you at the next free video.