Many have been trying to figure me out for years, what is the secret to trading options, finding plays and how/why to stay with a play longer than most would think practical.
It’s nearly impossible to replicate what I do – you just don’t see charts, technicals and patterns the same way. That’s not to say you won’t be successful trading on your own – you can and will be if you put the time in to watch, learn and listen.
The notes below may give you a glimpse into my eyes and mind and may help you learn something as well.
That being said, I want to show you a recent trade in Wynn. On Feb 22 we bought some Mar 120 calls on the casino name for a price of 3.
The stock was about 119 so it was all time premium. It was coming off a strong day and broke resistance at 115. I wanted in as I expected a good-sized move to 130 or beyond. The choice was the 120 call (see the chart below).
Now, I tend to be notoriously early on option plays. However, unless the chart breaks then it is no reason to sell the play.
Time decay? Yes, always a factor – but when you buy time you might as well use the time. This is counter-intuitive and probably breaks the rules of some risk management systems but it has worked for me over the years.
Some guys would have told you to blow out the trade two days later with the option at 1.6. Oh, what a miss that would have been – Friday the call was up to 11.
Being patient and waiting pays off. While I cut the risk down by selling an upside call (and capturing the premium) some held on and made a massive score (over 250%).
This trade setup was perfect – waiting through a little pain as the option dropped some 50% in two days paid off handsomely. Bottom line: WYNN was a massive winner for us!
Additional note: My good friend Ron Roll at daytrader bootcamp was on this name just about the same time. In fact, after his tweet of ‘getting long WYNN right here’ I sent him a note back telling him which calls we were in (he replied with a smiley face). Ron has come up with some brilliant plays over the past few months and is on quite the ‘roll’. He called this market upturn and shows why on this chart everyday. It’s always comforting to know when other strong technical ‘marksmen’ are in the same camp. He tweeted out the name to anyone who would listen – and who wouldn’t if they were truly wanting to cash in (@gtotoy).
