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You can see that the graph remains exactly the same, no matter how many contracts that you do. The only difference is exactly what your total profit is going to be, at the expiration.
Like I said, I don’t recommend that you hold it until expiration. Lots of things can happen. If you have 50% of your profit to 70% of your profit, close it out. Our normal target is about 30% of profit position. After you have a position on for a couple of weeks, and you’re making a 30% profit, that’s an excellent return on your investment. You just don’t see that.
That is how you use this Analyze tab. We’re going to go back to the Expiration +1, and you can see… Now, this is how I monitor these positions, on a daily basis. I just go to the Expiration +1, make sure my probability date is the same, and just keep an eye on this white line.
As long as the price remains between your two breakeven points, you’re going to continue to receive the decay of the Theta. If you review your CD on Greeks, you’ll notice that on our live price, we do have a positive Theta of $1.55 a day. That’s per day, per contract.
If we were to do 2 contracts, we’re up to $3.10 a day. That’s how much we should expect to receive in return for the risk that we’re taking, by holding and writing these contracts, on our short positions, above and beyond the Theta decay of our long positions. We have a positive expected return of $3.10 for 2 contracts, or $1.55 in Theta decay, per day, for 1 contract.
With the Trade tab, any position that you pull up here… Let’s say you were just buying a calendar, here. You could also pull that up. You’re going to see the same thing. You’re going to come down here, to Expiration +1. You want to see what the maximum profit potential is going to be. You want to take a look at the Theta decay, and you want to take a look at your breakevens.
Those are the things that I look at. You can monitor that on a daily basis. Eventually, at some point, you’re going to see the white line go up to – on May 2, you’ll have a profit of $81. By May 15, you’ll have a profit of $260.
You can take a look at this in many different ways. It’s a very useful piece of software that they have built into this platform. It’s really excellent.
There are some other tabs down here that you can use. If you don’t want to go directly from the Order Entry tab, you can go straight to the Analyze tab. You can go to “Add simulated trades,” over here. Here’s the risk profile. You can do whatever analysis that you need, directly within the Analyze tab.
You pull those up, go over to your Risk Profile, and you’ll see everything there. You can go there from the Trade tab, or from the Analyze tab. You can add simulated trades of your own. Click “Risk profile.” You can also take a look at the probability analysis. I don’t really look at this too much, but it does give you an idea of where prices may tend to trade at, at any future date.
You can play around with that. You can also look at volatility analysis, and see if there are any positive or negative skews on the strike prices for each one of the months, on the underlying. Normally, this is the way I like to trade. I like to look at the expiration date profit and loss graph, our current graph, and where the price fits into my calendar or double calendar.
Let’s see what else we have. We have our Quote tab, and you can put as many different symbols as you want in here. You can have an unlimited number of stocks that you can track – futures, indexes, the VIX, advanced climb numbers. You can have just about anything you want in there.
The ThinkBack system – it’s an interesting thing. I don’t really use it. It allows you to put a symbol in, and then perform an analysis of how a system would have turned out, based on back testing. You can play with that, if you like. I don’t use it too much.
The spread book is interesting. It lets you spy on what other people have put in as orders, and see what they’re doing. Whether they are doing verticals, or straddles, or strangles. I really don’t pay too much attention to that either, because I have my own strategy.
This little CNBC symbol will bring up current programs from CNBC. For example, if you were interested in the Fast Money show, you could bring that up. All you have to do is hit click. You can play that show. These are pre-recorded. Those are all recorded shows.
You can also bring up the live video, from CNBC Live TV, which is pretty cool – especially if you are traveling, and you enjoy watching CNBC, and some of their news stories. I don’t use the news stories on CNBC to trade off of. I just don’t think that’s a good idea. You should be relatively independent of the news when making trading decisions. The news tends to change so much that you can easily get whip-sawed into buying this, or buying that, or something like that.
When I talk about portfolio building, on the CD on portfolio building, I show you exactly how I make my trading positions. I talk about stocks I am going to be in, for the wealth building series, and the kind of indexes I want to be in, for our monthly income trades.
But this is pretty neat. You can go in here, if you are traveling, or you are sitting on your PC, and you don’t have a TV nearby. It’s entertainment. It’s not bad. It’s kind of fun. You can watch CNBC Live TV during market trading hours, and listen to the news, and see what their opinion is, on the current state of the economy, and so forth. It’s pretty interesting it’s pretty fun to watch.