MM77 - SKHY Deep Dive

Today I want to go a little more advanced and talk about synthetic longs versus modified synthetic longs. This is not financial advice. I am not a CPA and I am not a trading advisor. This is an important lesson, because I have had so many questions come up in Kilo Club about margin, and about how to know what you can and cannot afford to do.

Here is the setup. The other day, Invest Answers put out a trade, a synthetic long on SKHY, and I want to walk you through my thought process and, just as importantly, how I play it forward. A lot of you already know I am a plan A, plan B, plan C person, so let's go through those together.

My plan B conversation started the very minute I saw this trade, and here is why. SKHY was trading around 165 when the trade was placed, and that is smack in the middle of its range. The high is up around 195 to 200, and the low is around 120. So sitting in the 160 area, the middle of the range, I might as well toss a coin and call which way we are going. Granted, it looked like it was heading up and I understand the bullish case, but I always want to know what my next step will be if I am wrong.

So let me put the two trades side by side, the synthetic long and the modified synthetic long, because the numbers, and especially what happens when the trade moves against you, are the whole lesson.