Timing Theta Decay…

Hey 5-Star Trader,

“Tuesday Trade” Journal: One of the most important concepts in trading is to review your work, and learn from the good and the bad. Identifying what is working is critical — to do more of it. So, to lead by example, each Tuesday, you’ll get a trade from my trading journal, in which I explain my 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.

For “Tuesday Trade” this week, I want to outline my trade in Cloudflare (NET).

Technology is a huge part of our everyday lives and makes daily tasks much easier on the whole. However, as the tech sector continues to grow, so does the need for security. That is where Cloudflare comes in as a company specializing in protecting information and securing websites. Because I believe so strongly that tech and security are the way of the future, it is always nice when a setup presents itself.

Near the beginning of last month, the market was roaring higher, and NET had recently moved substantially upward. This caught my attention, so I investigated further. That is when I saw that NET also had 223% implied volatility. I knew if I played my cards right I would see a nice return so I got in — SELL -1 IRON CONDOR NET 100 (Weeklys) 5 NOV 21 200/220/200/180 CALL/PUT @13.52 limit order (LMT).

The idea behind this trade was to sell at the money premium with the goal of buying it back the next day for about 30-40% profit. However, if the ticker were to trade right at $200, it could be more. This was set to be an earnings overnight trade with no stop, making this riskier in nature. I paid about  $650 per contract and risked 1.5% of my account.

The very next day at market open I checked on my position. NET was looking pretty good, as it floated back down to the $200 price point. I decided to continue to hold, waiting for more theta decay. Finally, right before the last hour in the market, I squeezed as much out of it as possible and I bought back in, collecting my profit — BUY +1 IRON CONDOR NET 100 (Weeklys) 5 NOV 21 200/220/200/180 CALL/PUT @6.19 LMT.

-Danielle =)

Up Next...

NVDA: The Gift that Keeps on Giving

Nvidia shares have experienced a meteoric rise, so all eyes were on its earnings report last week. Investors were not disappointed, as NVDA reported explosive growth plus a highly anticipated stock split. Why Stock Splits are Exciting NVDA’s reported 10:1 split will take place on June 10th, less than two weeks away! This event is … Read more

Read More

SPX 0 DTE: Part II

Hey traders! I posted a video on a neutral SPX 0 DTE strategy on Monday, and I had many questions, so I decided to do a follow-up video with a second example. In this video, I cover several questions, including the width of my iron condors, the length of time, the risk-to-reward, and more. Check … Read more

Read More

Trade Review: Using a Neutral 0 DTE SPX Strategy

  In today’s Trade Review episode, I cover a quick SPX 0 DTE trade from last Friday at market close. In this video review, I cover: Why I decided to make a bet that the market would trade sideways into the close How I analyzed the options chain and technical chart patterns Why I decided … Read more

Read More

Subscribe Today!

Want my up-to-date analysis, setups, top trading tips, and more? Be a Five Star trader, and join my free newsletter today!

Sign Up Now