Plays for Monday (9/29)

Well the new plays have been a bit scarce lately with all the ruckus in the financial sector. That's one thing that I still have to fight myself on ... patience. I don't have to stay fully invested all the time. It's better to be patient and wait for the good plays to come along, than to get into bad plays because I'm in a hurry. There is one stock that's been showing up in one of my scans for the past week, but it's not quit ripe yet. I'll let you know if/when it's ready to play :-).

As promised though I do want to share and explain the play on FDX. Something new I've been experimenting with is "legging out" of my strangles. I always "leg in" by getting into the call and put separately based on stock movement. But I typically will wait to sell the strangle until the whole trade is 10% profitable. What I run into then are trades like FDX. It is almost profitable on a downward swing of the stock, but then bounces off a support before I get out. Normally I would just have to ride it out, but why? Why not sell the put at a handy profit, and then ride just the call back up?

So here is what I'm going to do this time. Set a sell order on the put if the stock moves above the high of Friday's candlestick (82.23). But then that leaves me one-sided in the play if the stock subsequently drops again. And remember, the whole purpose of this strategy is to put in your orders at night and then let them babysit themselves during the day. So, I set a second order for insurance, that is triggered by the first order. Meaning that with the sell order for the put is executed it will automatically enter an order to by back that same put if the stock price falls below the low of Friday's candle (80.25). This is a complex order type known on my trading platform as "1st Triggers All".

So it would look like this ...
Order #1 - Sell FDX Jan 85P @ market if stock >82.23
Order #2 - After Order #1 executes, buy FDX Jan 85P @ market if stock <80.25