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Example Trade Management: Invesco Solar ETF (TAN) & American Water Works (AWK) - YouTube
Channel: TD Ameritrade Network
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let's do some trading with tony zhang
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joining us the chief strategist at
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options play tony welcome back to the
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show let's uh do a little trade
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management here from your uh bullish tan
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trade the solar etf last time we spoke
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march 15th couple weeks it's to be
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grinding higher here
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yeah that's exactly right it's grinding
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higher it's doing exactly what we're
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expecting to to stay above that 74 level
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currently around the 77 levels so the
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the put credit spread that we sold is
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roughly at fifty percent of max gain so
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the ba the best way to manage these
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types of trades is that if you've traded
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only a single contract now is about time
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to take profits and
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trade the next and put it into the next
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trade but if you traded multiple
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contracts this is a time where you can
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take half the contracts off take some
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profits but leave the other half on to
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potentially make the full 100 of the
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credit that you received on this put
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credit spread okay sold the uh uh here's
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the tan 77 right now uh and uh area on
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the chart it gets kind of interesting
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another one of those it's sort of back
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into a level that uh had been support 70
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uh when it was trading above that as
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high as 100 bucks
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from a year ago up through last november
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so i like the point of maybe taking some
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profits at this juncture okay so tony
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now you're thinking about utilities
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water utilities in particular why is
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that
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yeah so if we look at utilities as a
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sector you know this is right now the
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strongest sector we see in the broader
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markets
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utilities recently just broke out above
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the 72 level which was the all-time high
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i think this is an important level for
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us to start paying attention to
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utilities as a sector and you can play
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this you by either going along the xlu
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as a sector itself or you can play this
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with some of the individual names and i
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was looking at american water works
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one of the darlings if you will of this
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particular sector in 2021 but recently
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had this huge 24
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correction recently
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and i think this is potentially an
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opportunity for american water works to
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play a little bit of catch up here it
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was one of the best performing stocks in
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this particular sector had this
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significant drawdown which did reset
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valuations american water works by far
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one of the most uh you know rich if you
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will in terms of valuations in this
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particular sector this reset i think
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provides a better entry opportunity for
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some investors who may have missed out
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on the moves we've seen in american
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water works last year and if you look at
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the chart patterns here recently over
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the past month or so what we've seen is
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a completion of a bottoming formation
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which actually just today completed it's
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uh that inverted head and shoulders
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pattern that we saw uh complete over the
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past week or so the neckline is around
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161 162 and we just got the breakout
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here today so i think the timing on this
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particular trade is great for this
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breakout back into that 175 and even as
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high as that 189 all-time high we've
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seen here on american waterworks okay so
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the call spread 175 you're selling the
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165 you are buying and we're pretty much
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uh they're about a dollar away the 165
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uh right now at 163 80 cents roughly so
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looking for an extension of this move
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and a nice push higher
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yeah that's exactly right earlier today
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when we were looking at this we were
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actually looking at the 160 170 just
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before the breakout but now that we've
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seen the breakout we're moving the
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strikes up to the 165 175s paying about
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three dollars and sixty cents for this
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ten dollar wide debit spread so paying
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address just a little under one third of
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the or just above one third of the
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vertical with that means that the
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potential uh reward is two-thirds of
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that ten dollars so almost a two to one
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risk to reward ratio if by the may
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expiration which is roughly 52 days from
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now you see american water works trade
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towards that upper strike 175 which i
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think is a fairly conservative target
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given the all-time highs are in that 190
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range if it trades above that 175 area
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you're looking at a 2-1 risk reward
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ratio this is an opportunity to take
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some profits perhaps some partial
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profits and keep a part of the position
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for that two to one risk to reward ratio
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and then potentially even rolling that
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to a higher strike price again targeting
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that 190 high to the upside as we get
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into the second half of this year okay
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so you're pretty bullish on this and uh
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ready to extend it uh if we do get that
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move
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but right now looking for just a
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continuation up here at 164 roughly uh
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and uh a stock that's made a
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pretty giant u-turn for your utility
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quite a volatile uh stock here tony zayn
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great stuff we'll check in on the trade
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shortly appreciate it as always
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chief strategist thank you so much for
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having me yes sir absolutely and options
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please
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you
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