By now you should be fairly familiar with our entries and what to look for when buying an option. You can see above the trigger, which was a close above the high of the low day.
You can also see that we are going up above the resistance area (purple line) as well on this day, and that our Stochastic indicator in the lower part of the screen is below the 75 line, so we are good to go regarding the chart.
I then checked the Big Chart - it was good because it was not in the red.
So, it was time to find our target and figure our risk to reward. Looking at a longer term chart, I figured the target to be approx $45
The target is past support/resistance at the $45 area.
So, I took the price at the time which was $33.30.
The target is $45
The stop is $0.25 below the low of the low day, which would be $29.75
The risk to reward is roughly 1:3 (if you are lost on this, please refer back to an earlier post to figure this). Since I want at least 1:2 then I'm good to keep moving forward on this trade.
I pulled up my online brokers trading screen:
I chose the January expiration options due to the time frame. I then chose the January 29 Call Option to buy. It had a Delta of .71 and had plenty of open interest.
I ended up buying the January 29 Call Option for $7.00
After buying this option, I then put in my stop to trigger at a price of $29.75. My other stop will trigger when the option value goes to $3.50 (50%).
Now all we do is monitor this position daily, we're done for right now.
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