I have grown frustrated with Charles Schwab and their lack of comprehensive mobile trading software. I decided to try some alternatives, so I first tried ETrade over a year ago, so my period of discounted trades have come and gone. I did find that TD Ameritrade provides as many tools if not more than ETrade and they provide a free paper trading account.
With TD Ameritrades free paper trading accoun, I bought 5 Tesla 320 call options with February 22nd expiration when Tesla was traded down to 309 as it appeared to bounce off 309 about an hour earlier. I was feeling good about this trade since it closed at 311 on Wednesday.
In an account with real money, I was actually short (sold with expectation of profit by depreciated premium) a 280 strike Put Option with a March 1st expiration that I sold the day after Tesla reported earnings when it was at 307. I felt good about that strike price going to 0 because Tesla just bounced off 280 in the previous week and it didn't appear to want to move lower than 300 the day after earnings. The premium was still high because it was the day after earnings so I received over $814 for a strike price 27 points away!
As Tesla moved up for the next couple of days, the premium fell. When Tesla moved up to 324, this option that I was short was worth around $320. Tesla moved between 318 and 324 before moving lower on this past Wednesday when I bought back the Put Option for $226 as it appeared that Tesla was going to move lower. I decided that I took most of the time depreciation out of the option and would cover it so I could sell another one when Tesla moves lower.
More news came out after Wednesday's close that would negatively impact Tesla's stock price so I felt good about covering the Put Option that I was short on and hoping to find another time to sell the same strike option. That time came on Friday when the FANG stocks opened higher and moved down quickly. Tesla opened lower and moved up slowly. When shorts were in control of Tesla in the past, Tesla would move lower on Friday. This time it didn't want to move lower and kept trying to move higher.
When Tesla was at 305 on Friday, February 15th, I sold another 280 strike Put Option for $585 with a March 15th expiration. I like this expiration because it shows a level of recent support which means that even if Tesla moves lower over the next month, it will be affected by time decay on top of negative option movement since I expect Tesla to move back up to 320 in the next week.
Unfortunatly, I checked my paper trading account with TD Ameritrade after the market closed on Friday and found that the trailing stop order I placed Thursday afternoon for the 320 strike 2/22 expiration Tesla calls executed Friday morning at 9:33 am when Tesla was trading at 304.
I clearly would not have wanted to sell it there and creates a new learning lesson. Thankfully it was with paper money and didn't hurt financially.
LEARNING LESSON: Do not place a trailing stop with a GTC (Good till Cancel) ever without an additional trading condition like price. You may not place an order and not monitor it and expect to profit.
I still have more time with the paper trading account with TD Ameritrade and expect to practice with it more this coming week.
With TD Ameritrades free paper trading accoun, I bought 5 Tesla 320 call options with February 22nd expiration when Tesla was traded down to 309 as it appeared to bounce off 309 about an hour earlier. I was feeling good about this trade since it closed at 311 on Wednesday.
In an account with real money, I was actually short (sold with expectation of profit by depreciated premium) a 280 strike Put Option with a March 1st expiration that I sold the day after Tesla reported earnings when it was at 307. I felt good about that strike price going to 0 because Tesla just bounced off 280 in the previous week and it didn't appear to want to move lower than 300 the day after earnings. The premium was still high because it was the day after earnings so I received over $814 for a strike price 27 points away!
As Tesla moved up for the next couple of days, the premium fell. When Tesla moved up to 324, this option that I was short was worth around $320. Tesla moved between 318 and 324 before moving lower on this past Wednesday when I bought back the Put Option for $226 as it appeared that Tesla was going to move lower. I decided that I took most of the time depreciation out of the option and would cover it so I could sell another one when Tesla moves lower.
More news came out after Wednesday's close that would negatively impact Tesla's stock price so I felt good about covering the Put Option that I was short on and hoping to find another time to sell the same strike option. That time came on Friday when the FANG stocks opened higher and moved down quickly. Tesla opened lower and moved up slowly. When shorts were in control of Tesla in the past, Tesla would move lower on Friday. This time it didn't want to move lower and kept trying to move higher.
When Tesla was at 305 on Friday, February 15th, I sold another 280 strike Put Option for $585 with a March 15th expiration. I like this expiration because it shows a level of recent support which means that even if Tesla moves lower over the next month, it will be affected by time decay on top of negative option movement since I expect Tesla to move back up to 320 in the next week.
Unfortunatly, I checked my paper trading account with TD Ameritrade after the market closed on Friday and found that the trailing stop order I placed Thursday afternoon for the 320 strike 2/22 expiration Tesla calls executed Friday morning at 9:33 am when Tesla was trading at 304.
I clearly would not have wanted to sell it there and creates a new learning lesson. Thankfully it was with paper money and didn't hurt financially.
LEARNING LESSON: Do not place a trailing stop with a GTC (Good till Cancel) ever without an additional trading condition like price. You may not place an order and not monitor it and expect to profit.
I still have more time with the paper trading account with TD Ameritrade and expect to practice with it more this coming week.
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