TSLA to 1050…
A Tuesday Trade Edition: One of the most important concepts in trading is to review your work, and learn from the good and the bad. It’s critical to identify what’s working — to do more of it. Each week, you’ll get a trade from my trading journal, in which I explain my whole thought process from start to finish. Trading is all about finding something that works, and applying it, over and over again. That’s how you find trading success. So study up on this “Tuesday Trade” and let’s get to work.
It’s always a fun time when you feel like you can predict the future. Obviously as traders, we can’t. We never really know what the market is going to do, but through analysis (and experience) we can sometimes hit the nail exactly on the head.
That’s what I did last night (and into the rest of the trading day today).
To help you with this little ‘before and after,’ I’m going to start at the beginning of this Tesla trade…
BEFORE (Yesterday):
Here at Simpler Trading one of the really awesome things we provide traders with is the Free Nightly Videos. You don’t need to be a member, you don’t need to pay us anything, you don’t even really need to give us your email if you don’t want to. Now it’s easiest if we have your email because then each night these videos come directly to your inbox, however, they’re also posted online.
Why am I telling you all about the Free Nightly Videos?
Now if you know me, you know I love Tesla. However, specifically yesterday, I’d been eyeing it for a variety of reasons…
- It was close to a previous all-time high (1025)
- It was up on high volume
- AND it had multi-time frame squeezes
- Plus bright green TrendStrength Candles on the chart
I knew it was time to jump in when Tesla was nearing the end of the trading day up 5%, and it was going out on high volume. After all, the several days prior to yesterday, Tesla had been testing that all-time high, but didn’t get there… until it pulled back.
How’d I set myself up for success?
If you remember, I sent out an email yesterday addressing a comment about my Stacked Profits Class, which has my hybrid butterfly strategy in it. This strategy was exactly what I needed for this setup. How? As you can probably guess, I was targeting $1050, so I used multiple butterflies and a spread to get in.
Plus, for this trade specifically, I used my small account, with low cost, high reward butterflies in addition to a spread.
What was I hoping for?
I was hoping for about a $20 gap up overnight after it closed yesterday at $1009.
AFTER (Today, July 30th):
Now Tesla didn’t immediately gap up (it gapped up a few dollars), but it still took off immediately at the open, with volume and momentum behind it. How did I know there was volume and momentum behind it? My TrendStrength Candles. Luckily, I was already positioned with my flies targeting $1050, and TSLA went directly to my target and paused.
Currently I’m holding my flies, waiting for them to mature.
With butterflies, they work the best when the price is closest to the target (1050) right at expiration. As they made my target two days early, I still have a double on the trade overnight, but if I hold them longer, I have the opportunity to see if they could be 5x winners or more.
Remember that ‘poolside’ trade I made while on vacation?
This was the exact same setup.
For me, when I’m trading a smaller account and I have a specific target on a trade, I like to use my Stacked Profits strategy where I use the target as the center strike in my butterfly. How do I do that? I layer butterflies. In this trade, I have 3 different flies, and I buried them based on the width.
The great part of this strategy is that if you have a smaller account, and you don’t want to pay a lot on options, this setup allows you to do that.
Awesome Danielle!
I’ve been doing butterflies for about 6 months but I rarely have made any money using this strategy. I guess the width is important and having a small account, I usually resorted paying not much because butteflies by nature is a low-probability trade that you’d have to combine other factors to increase your odd.
Great job!!