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@@projectfinance hi Chris, no I'm not the famous one hahahaha. Thanks for quick reply. I watched your 2:53 long video and it came with PDF file so I thought this one might be similar. Thank you very much for your great content ☺️
projectoption please could you tell me the main strategies for beginners with a small account and resources to use to get comfortable with trading with those strategies. And which do u advise I start with first.
Thank you for the well planned course, have been trying to understand how to options for 2 weeks now, this is the first time i understood how do you pick strike price...Nice job Sir!...going to look for more videos...
I’ve watched a LOT of options videos while trying to educate myself on these concepts and strategies. This is BY FAR the best I’ve seen. You not only explain the concepts, you show theoretical AND real-life examples, which solidifies the information. My only suggestion, if I had one, is not only explain the $197 premium gain on the put profit potential on the iron condor, but explain the profit potential on the call side. That would have helped fill a void in my brain. Either way, very well done. Thank you. I’ll be checking out all videos.
Wow! Thanks so much for the awesome comment. Your comment is exactly what I was going for (explain concepts, show real examples, visualize everything, etc.). Stay tuned for more content! -Chris
Big ups for putting out such an incredible content, options strategy are the foundation to a good option income trade investment. Been doing a bit of Investing myself which has been turning out great and am happy there are great people like you sharing such amazing knowledge.
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In the first strategy you say: "...as the stock price is above the short put spread as time passes, that short put spread is going to continually lose value and that's going to create profits as a put spread seller." Isn't it the other way around? Isn't it the long put that loses value and expires worthless? I am new to learning options. Thanks
I'm trying to wrap my not-at-all financial head around options trading and your complete, clear explanations are extremely helpful. I've taken notes on everything and will try all three of these with Paper Money.
So for the iron condor strategy, after you bought and sold the calls and puts, you don't need to touch it for the next 60 days? Or, should you sell your calls and buy the puts back?
How do you know how many strikes to have in between the spreads? Like how do you know when to sell 140 strike and buy 135? Why not sell 140 and buy 120? Based on what should we make that decision?
So the short & sweet version of number 1 (bullish put spread) is just selling an ITM put and buying an OTM put, both with the same exp. dates on a stock you predict is rising and simply letting them expire?
You don't have to let the spread expire as it's price will change every minute of the day. If you are right and the stock price goes up, the spread will lose value, and you can buy it back (close it) for a profit (the difference between your sale price and closing price).
Many thanks, I've been looking for "how to do options trading" for a while now, and I think this has helped. You ever tried - Jenameron Penny Smackdown - (Have a quick look on google cant remember the place now ) ? It is an awesome exclusive guide for learning an automated forex trading system without the normal expense. Ive heard some pretty good things about it and my cousin after a lifetime of fighting got great success with it.
Many thanks, I've been looking for "how to do options trading" for a while now, and I think this has helped. You ever tried - Jenameron Penny Smackdown - (Have a quick look on google cant remember the place now ) ? It is an awesome exclusive guide for learning an automated forex trading system without the normal expense. Ive heard some pretty good things about it and my cousin after a lifetime of fighting got great success with it.
ONe thing I don't understand about the Iron Condor is you say "Selling Iron Condors". I are you selling the long call and long put before expiration or holding on? Or is it more context dependent?
Great video guys. Hopefully vol picks up a bit in 2017 so my iron condors can be wider. I find myself selling more put credit spreads these days than full on iron condors. At least on the indexes. Thank you. Eric
What technical indicators do you use to determine direction with 70% confidence? Implied volatility is low as a result risk/reward ratio is 3:1. Why not buy ITM call if you are bullish?
recently got into trading options and trying to learn these strategies gets me a little lost since I'm still learning but hopefully when i come back to this video in a few days after learning more about options i understand these strategies
Hi. I think your P/L graph for the covered call example trade (the graph appearing from 16:25 onwards) is incorrect. The covered call P/L should track the stock price movements inversely. For example, when the stock price moved up above the 120 strike price at 48 days to expiration, the 120 call you sold should have increased in value and this should result in a floating loss (but your graph shows a profit for the covered call option even though the option is in the money at 48 days to expiration). Am i getting this entirely wrong?
Yes I agree with what a couple of others have written - definately more risky than it sounds to make money with forex and you can be likely to lose more than you make. You should be aware of this and take advice from other people who've made cash. I looked round many websites and discovered plenty of great advice by searching google on websites like Trevs Exchange Tactics. Good luck and hope you make some cash!
I thik I did fairly well until you wet to the platform. the I lost everything I thought I had uderstood wow you are really fast like a magician, I do't mean to be critical but I can't learn that fast.@@projectfinance
Cheers for this, I have been researching "trading weekly options for a living" for a while now, and I think this has helped. Have you ever come across - Eeyarah Mysterious Eradicator - (do a search on google ) ? It is a good one off guide for discovering how to unlock an effective options trading method to win fast minus the normal expense. Ive heard some great things about it and my mate got amazing results with it.
Nice video! My only question with these strategies is that they are all related to a long period of time. You can’t predict for how long a price will remain in a sideways… As a beginner I would like to see a pattern which I have confidence that in a matter of hours it will remain. Or at least for a few minute. Does it makes sense ?
I’m new to this! So when you buy a lower put from the put you sold it off sets it. But is that also for protection in case the strategy doesn’t work in your favor? Or is it just because you have to buy the 100 shares back?
Great info. Just wondering. If you had 200k (large cash acct) and wanted to use options for low risk steady returns - what strategy would you suggest? credit spreads? debit spreads? Just a simple easy approach. Thanks.
Hi Chris thanks for these great videos, they have been my company while washing the dishes after dinner...(LOL). May I ask if you have any recommendation for an Options Simulator? Thanks! Cheers!
This is probably a silly question, but in the spreads and iron condor, why not just buy the strikes that are severely OTM since we can almost guarantee the stock will remain in a certain range? For the iron condor example in the video, why not buy a the 170 and strikes for the 165 call spread and the 110 and 105 strikes for the put spread? I guess I don’t understand the downside to this
Hi Zach, Great question. The answer is that options with strike prices further from the stock price are cheaper because there's a lower probability of the options having any value at expiration compared to options with strike prices closer to the stock price. Because of this, selling iron condors with strike prices extremely far from the stock price will not yield much premium, which means you won't have much profit potential and you'll still have plenty of risk. Using just a short call spread as an example, if the stock is at $100, the 110/115 call spread will collect far more premium than the 125/130 call spread, as there's a much higher chance that the stock price is above $110 at expiration compared to $125. The same concept holds true for selling put spreads. The further the put spread is from the stock price, the less the profit potential will be. Also, since less premium is collected overall, the loss potential increases. Does this help clear things up? Let me know if you need more clarification. Best regards, Chris
I have another question. Btw, thanks for your first answer. Do you have to stick with thr minimun of 60 days for your strategies to work or it can work with expiration dates earlier than 60 days? And thanks again
Hi Israel! I typically trade with around 60 days to expiration when entering trades, but traders can trade whatever time frame they like. Unfortunately, I can't just go out and say that trading shorter-term expiration cycles will be more or less successful than trading ~60 days to expiration. The historical results will be different when analyzing different trade time frames. tastytrade did a study a few years back on this topic: ua-cam.com/video/TCg1EX6vc2Y/v-deo.html They may have done updates of this study but I couldn't find one. I hope this helps! -Chris
When doing an iron condor or any of the other strategies. Do I HAVE to wait for the contract to expire so I can get the profit? or can I close out all the positions and take the profits sooner?
Take the profits at any time, if the price for the options drops a lot and there is still a long time to expiration then calculate how much more you will make if you wait till expiration. If the remaining profit is more than you will make by closing out and starting a new position then don't close yet. But if you will be able to make more in a new position than you will give up by closing the current position before expiration then do that.
This is just superb, been searching for "equity options in india" for a while now, and I think this has helped. Ever heard of - Jenameron Penny Smackdown - (search on google ) ? Ive heard some unbelievable things about it and my friend got excellent results with it.
Your max loss is the width of your strikes (E.G. sold the 100 Strike put & bought the 95 strike put. 100 strike - 95 strike = $5 5 dollars x 100 options = $500.00). However, before your spread gets a positional delta over -30. (which means your position has a 30% likelihood of trading in the money), you want to either adjust your position or roll it out to make money on your "losing trade." If you do NOT wish to... A. adjust it (close your spread and open it at a further strike price away from where the security is trading), or B. roll it out (close the position and open the same position again but this time with the next expiration month - thus allowing more time for the position to correct itself to your benefit), ...because your assumption of the direction of the stock has changed - then simply exit it early at a slight loss and not the maximum loss of $500.00
Thank you for your video. A lot of insights and good info., I have a question. It may sound stupid, and I apologize. I just started getting options. In the example one, I know if an option goes worthless and out of the money you lose everything. Did you lose anything in the first one? I know you said you had a profit of $100, but how much money did you invest to get a return of $100? Or that $100 plus money for selling the long put? My apologies again for the question
Hi Israel, Great question! It's confusing at first, but option prices change over time based on the amount of time they have left until they expire, and where the stock price is relative to the strike prices. If you buy an in-the-money option and it becomes out-of-the-money, you don't instantly lose everything you invested in the option. The option's price will slowly decrease if the option becomes further out-of-the-money, or if time passes while the option's value is mostly extrinsic. With a short put spread (sell a put, buy another put at a lower strike price), the put options will lose value as time passes when the stock price is above the short put's strike price. In the video example, the 210/205 put spread was sold for $1.00 ($100), which means the risk was $4.00 ($400) because the spread's value can only reach $5.00 (the width of the strikes). Since the spread was sold for $1.00, an increase to $5.00 represents a loss of $4.00 ($400). With a maximum loss potential of $400, a trader would need $400 to put the trade on. A $100 profit on a $400 margin requirement is a 25% return on risk/margin. In the example, the stock price is well above the 210/205 put spread at expiration, and both puts expire worthless because they're out-of-the-money. Since the spread was sold for $1.00 and both options expired worthless, the profit on the trade is $100 per spread that was sold. Does this help? Please let me know if you have follow-up questions. I'm happy to help! -Chris
projectoption thank you for your explanation. Sounds so clear when you put it that way. I'll try these strategies and I apprexiate your vid and the help!
@@projectfinance I had the same question, but still dont' quite understand. Trying to put in my words, if I bought the long put for $1000 and I sold the short put for $500, my total premium is $500. If it expires OTM, doesn't this mean I lost $500 since I had to pay the $1000 for the long put when it expired worthless?
This video on the covered call totally makes sense to me, not the other video. There is no mention of short or selling call options here. Awesome covered calls makes sense now. This is the way I originally learned.
Glad it makes sense! The reason I mention short calls in the other video is because the covered call position does not exist without the short call component. You can't have a covered call position without selling a call option against stock. Whichever way of thinking about it is easier for you, go with that! -Chris
Big Thanks to you Chris, for sharing all your knowledge to us!. This video has been very educational for me and with the the PMCCI will start operating at Tasty 's demo.
I might be wrong but I believe you explained the Covered Calls upside down. In another video, you said that shorting calls is a bearish strategy. In other words, selling calls means you enter into the obligation to sell your stocks at a target price. So, if the price rises beyond the premium, you lose, because it will be cheaper to get shares from you than from the market. On the other hand, if the price decreases, then you keep the premium because it will be cheaper to get shares from the market, than taking them from you. Not the other way around. Or am I wrong?
I new so forgive me. But in layman’s term, you essentially BUY those positions (above or below) your SELL positions as an ‘insurance’ policy to mitigate your risk and exposure potential to massive substantial loss correct?!?!?!
The only thing I’m confused about is whether you need to actually have 100ct of any stock you’re doing an option strategy against. I only have a few positions of any given stocks in my portfolio. Do I need to have the multiplier equivalent to start trading options?
No. You don’t need 100 shares to buy an option. You need 100 shares for some strategies but there are plenty where u don’t. That’s a benefit of options
In Brazil we have both American and European options, which can be executed anytime or only on expiration day respectively. Do these strategies work on both kinds or only on American options?
Winner of a video, I have been researching "day trading uk tips" for a while now, and I think this has helped. Ever heard of - Annahiy Stockify Sabinianus - (Have a quick look on google cant remember the place now ) ? Ive heard some decent things about it and my mate got amazing results with it.
This was great, I have been researching "stock option trading journal software" for a while now, and I think this has helped. Ever heard of - Winoorfa Option Olegroson - (Have a quick look on google cant remember the place now ) ? Ive heard some extraordinary things about it and my partner got cool results with it.
Hi so ihave 80% win rate on my options but i usually break even or small loss. What could i be doing wrong. Right now i bundle two to three OTM options in either direction. I do have a small acct im playing with 600 bucks. And i consider myself an options scalper. Most time the fees are more than my profit!
With iron condor. what if during the 60 days i see the stock price get closer too much to one side. Can i create new iron condor to adjust the stock price as in the middle again?and what is the impact of this move on the total revenue?and close the previous iron condor within the range so i might make some proft there but i lower my risk by placing new iron condor(as if i am chessing the stock price to keep it in the middle range) and i might do it several times until expiration
These might seem like dumb questions but with the short put spread, you're actually opening two different positions and placing 2 separate orders correct?? Also if the share price rises significantly wouldn't the gains be offset by the put you bought at the lower strike price??
Hey Cashmere! You are combining two transactions into one order/position. You are simultaneously selling a put and buying a put at a lower strike price, but you complete both of those transactions in one order. The put you sell will be more expensive than the put you buy, which means the losses on the put you buy will not exceed the profits from the put you sell if things go well (the stock price remains above the spread over time). I just redid my bull put spread video and it should be very helpful for you: ua-cam.com/video/fSMCL5U9M-I/v-deo.html Check it out! -Chris
projectoption thanks so much for the quick reply!! About the combining it into one order is this what the “add a leg” means when I’m placing the order. Like is that how it’s done lol
Unfortunately, I have no idea. I've never used Fidelity's platform/website. You'll have to contact them to see how to do spread orders. Wish I could help more! -Chris
Love your videos in general, and have learned a lot. But this one seems like a rare misfire, at least in its declaration as “for beginners”. I’ve been studying options intensively now for a few weeks, and it’s not easy material. I’ve been taking the last week or two to wrap my head around simple bull put spreads vs bear call spreads. So jumping right to Iron Condor, with four legs to the trade, seems way beyond “for beginners”. I’ll probably start wrestling with the iron condor concept in another month or two, maybe more. So I’ll be back here then. :)
I want to implement these strategies but I don't have the necessary option levels to trade spreads. What do I do? Is there a broker who allows these levels for anybody or do I really have to buy naked calls/puts for a period of time before I can trade these strategies that involve spreads?
You'll have to wait until you get approved for the higher tiers. If you don't want to wait, you'll have to consider switching brokerage firms. I personally trade with tastyworks, which gives you full options trading privileges if you apply for "The Works" margin account. tastyworks.com/accounts No hard sell here. You should do your own research if you are considering switching brokerages, but I trade with tastyworks because of the ease of platform use and their commission/fee structure for options traders. If you do sign up with them and you want to get access to one of the projectoption courses/strategy research products, you can use the "projectoption" code when signing up. Again, no hard sell, just informing you of the standing offer we have in case you do go that route. Let me know if you have any questions! -Chris
You will have to get approved for higher tiers or switch brokerages. I trade with tastyworks and they approve traders for full privileges if you apply for "the works" margin account. If you get approved for a margin account, you'll likely be able to get the fully-privileged account: tastyworks.com/accounts/ No hard sell here. I think it's good for everyone to do their own brokerage research. Just letting you know who I trade with and what they offer.
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I’m more like a conservative trader. I started with covered calls. But I only do it on my long hold positions as an income generating strategy. But the downside is that I make pretty less as I set 7d expiry. So does this mean iron condor will give me 2x profit compared to covered calls?
I have FB bull put position right now and the the price is close to sell Put price ($5 to sell Put price) what should I do? close position? eventhough I already put Bear Call spread to off set the floating loss
Hi Harry, Could you give me more information on your position? 1) Strike prices / expiration 2) Your entry price(s) on the spread(s) With more information, I can be more specific with my response. -Chris
I have FB Bull Put Nov155/135 (floatins loss 214%) and FB Bear Call Nov200/205 (floating profit 46%), I was going to add more Bear Call to off set the loss.What do you think ?
I have FB Nov Bull Put 155/135 (floating loss 214%) and FB Bear Call Nov 200/205 (floating profit 46%). I was going to add more Bear Call to offsett the loss.What do you think?
@@keshav567 The P/L of any options trade is equal to the difference between your sale price and purchase price, multiplied by the number of contracts and then 100. If you sold 5x puts for $7.50 and bought back (closed) the puts for $3.00, your profit would be: ($7.50 Sale Price - $3.00 Purchase Price) x 5 Contracts x 100 = $3.50 x 500 = $1,750.
@@satoshiorange Thank you for the nice video first, now, $7.5 - $3.00 = $4.5, in the calculation is the other $1 for commission or something else. And also what is typically the strategy to close before expiration, reading in some forums people use the option like day trading does it make sense
Hi Carlos! No, you don't have to wait to expiration to close out an option position. If you sell/short an option, you can buy it back (close it) at any time to secure the profit or loss at that moment. If you buy back the option for a lower price than you sold it for, you'll realize a profit on the position. If you buy back the option for a price higher than you sold it for, you'll realize a loss on the position. -Chris
I know this is a good video. I'm still confused, though. 😆 Edit: Every time I watch it, it sinks in more. Thank you for this video. It's exactly what I need!
Hi Chris, your videos are awesome. In your opinion, is it profitable to sell credit spread in low IV environment (IVR 30 or lower) instead of buying debit spread?
Hi Ricez, Thanks for the video feedback! I appreciate it. Unfortunately, I can't say that selling/buying spreads is profitable in any IV environment. You can have a profitable spread buying/selling strategy in low OR high IV environments. The IV environment itself doesn't guarantee a profitable strategy. What's more important is your plan for when to enter trades, how to size the trades, and when to exit, which you have to develop on your own over time and as you gain more experience. -Chris
Question: For the Iron Condor strategy, why do you purchase a call and put above the short call/put positions? Are the long call/put positions meant to be loss protection against the share price moving beyond the short call/put positions? Thanks!
This probably wont get answered but im gonna shoot my shot. Trading spreads still exposes you for the risk of getting assigned at anytime...is there anyway to avoid this? Like do you recommend i take the loss and close the spread if my short is ITM for the buyer to avoid getting assigned?
It WILL get answered! Yes, trading spreads still leaves the potential for assignment on the short option. The only way to completely avoid assignment is to close the short option when it's in-the-money. However, assignment is rare unless the short in-the-money option has very little extrinsic value. The reason for this is because any option that is exercised is converted to stock immediately and any extrinsic value in that option is sacrificed by the trader who exercises the option. So, if an option's value has $200 of extrinsic value, the trader exercising the option would essentially burn $200. This is why it's not common for options to get exercised. I've been trading for 6 years and I've only been assigned 2-3 times. Even then, it doesn't change your position's risk and you can close out right after being assigned. I'd recommend watching our video on exercise/assignment: ua-cam.com/video/jFGzRCze-ds/v-deo.html I hope this helps! Let me know if you have any other questions. -Chris
Quick question: What software do you use to simulate your market actions? Asking so that I can suggest the same to my professor to use it in class and explain this. And possibly for me to play around with it too. Thanks!
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This might sound dumb, but how can you sell a contract that you never had then buy another one? It doesnt make sense to me, im very new into this. Thanks
Hi Chris, Great question. In options/stock trading, selling something without owning it is called 'shorting.' In the context of stock, 'shorting' is essentially borrowing shares that you plan on returning (buying back) at a lower price. When shorting stocks/options, you want the price of whatever you're selling to decrease. The idea is to sell high and buy low instead of buy low and sell high. Be careful shorting stocks/options, as the risk is typically significantly more when compared to buying stocks/options. If you do sell options, it's a good idea to limit the risk by purchasing another option against the option you've sold. It's confusing, I know, but you'll get the hang of it as you're exposed to various options strategies and begin trading them. I hope this helps. -Chris
projectoption hey i would just like to say that since i have left this comment i really took the time to try to understand options and now im even confident in understanding strategies. Im very grateful for your channel and the others here on youtube for helping me and opening new doors for me to supplement my income in the future. I just wanna say thanks!!
Glad I read through the comments. This was exactly my confusion. I knew what shorting a stock was, but didn't quite understand what selling an option was. Now I know it's the same concept. Thanks to Chris for the question I also had, and a strong thanks to Chris at projectoption for all the effort you put into this channel to help all us newbs. Projectoption is by far leaps and bounds above the rest of the options guys on YT, you are greatly appreciated by so many.
so on SSE platform to do a vertical put option it always defaults to a sell to open price lower than the buy to open price, and if you do it the other way around the max loss is relatively high. If you do it the other way around (sell higher price than buy to open) then it seems to give you a max loss lesss than your profit. Whats the disadvantage of doing the buy to open price slightly higher than the sell to open price?
On your first two examples. You need to address what 's your potential maximum loss against your potential maximum gain. If the risk reward is not conducive in your favor. The reward ratio wouldn't make sense. Example: To make $150.00 for max gain versus to $600.00 of possible loss.
Hi Kerry, That's a good point. With that said, everything in options trading ties into probabilities. With $150 max gain and $600 max loss, the probability of the trade making money is higher than 50%, in theory, because the loss potential is greater than the profit potential. Such risk/reward ratios are common when selling options/spreads. On the other hand, if a trader bought an option and had $500 of max loss but unlimited profit potential, that trade would have a less than 50% probability of making money, in theory. In my opinion, the strategy being traded doesn't matter as much as the trading plan the trader is following (how they manage and size the position, etc). I hope this helps! -Chris
Thanks for the comment! To exit any of these trades, execute the opposite trade as the entry. For instance, if you sell a put spread (example: short the 100 put and buy the 90 put), you can close the trade by purchasing the put spread (buy the 100 put and sell the 90 put). The P/L will be the difference between your sale (entry) price and purchase (exit) price. It's just like trading stocks. When you buy a stock and later go to close it, you sell the shares (opposite transaction as your entry).
Hi I've been watching your videos for a few days and subscribed to your channel great info...but I still cant decide on what to do on my acct... I own 100 shares of a stock, my cost basis is $42 after covid19 and the shutdown the stock fell to $24 per share... I'm still holding and dont want to sell.... the covered call option that's going to pay the highest premiums are in the money... but if I write one of those doesn't it mean that someone can just ex excersise it from me? I'm confused on what to do?
I am a regular viewer with like buttons. Are these doable for a small cash acct newbie ? I want to start with small amt with options til i get more experienced. Thank u for ur good contents. Mahalo. From. Hawaii.....😁
Limited risk strategies such as buying/selling spreads (or combining them into iron condors or butterflies) can be implemented in small accounts, but you will need the privileges to trade spreads. I'm not sure you will be able to trade option spreads with a cash account.
@@projectfinance so i guess i need to talk to different brokers who is willing to do business cause they make commissions i do enjoy ur intelligent channel. Mahalo from Hawaii.
Nothing beats knowing your profit is on the increase. Don't be a victim to gamblers out there, ask the right questions, if you get a reliable pro-trader to assist please treasure it. Trade wisely and stay safe.
Thanks! I have a bunch of historical options data stored in a database. I use Python to analyze/simulate trading strategies and also create data visualizations.
Are there any adverse effects to closing an iron condor before expiration? Even if the stock price is within the two spreads? (i.e paying commissions on manually closing the trade, getting debited for the premium that I collected at the open of the trade?) ... BTW I have TD Ameritrade
Closing an iron condor before expiration costs commissions but you will guarantee profits if you buy back the iron condor for a price cheaper than you initially sold it for. Of course, by closing the trade you remove the potential for earning the maximum profit potential when the stock price is in-between the short call and short put strike prices at expiration. If you trade a lot of iron condors, I'd check out the tastyworks commission structure to see if it makes sense for you: www.projectoption.com/tastyworks/. I hope this helps! Let me know if you have any other questions. -Chris
Awesome Chris, I appreciate it. I indeed have an account with tastyworks and I am a current user. They have a great commission structure but their software (both mobile and desktop) is still in its infancy and I feel isn't up to par with thinkorswim. Which I've been a long time user of...
Thank you! In this video, I was using thinkorswim. However, I've since switched to tastyworks for their commission rates: www.projectoption.com/tastyworks/
Hi Jonathan, here are the links for our butterfly strategy videos: Long Butterfly (Buying a Call or Put Butterfly): ua-cam.com/video/tmDBN5of89U/v-deo.html Short Iron Butterfly (Selling an Iron Butterfly -- an Iron Condor with the same short strikes): ua-cam.com/video/7CBW_Oidsd0/v-deo.html Actually, I love the butterfly strategies and use them every single month. It's one of my go-to strategies on the S&P 500. I use the short iron butterfly and long butterfly interchangeably.
Strategies that make money when the stock falls: 1) Buying puts/put spreads 2) Selling call spreads 3) Buying calls on volatility products (VIX, VXX, UVXY)
Interested in getting first access to my options strategy data library where I analyze the performance of popular options strategies with various trade management rules? Sign up for my newsletter and see the welcome email for more information: pfnews.substack.com/subscribe
Get $200 to $250 in free stock when opening a new tastyworks brokerage account: geni.us/tastyworks
Wtf is up with these comments?
Hi Chris
Could you please link the PDF file of the strategies to this video, thanks for another great video
@@onlyentertainmentandfun Hi James,
I don't have a PDF file that goes along with this video. Are you the James Hetfield from Metallica?
@@projectfinance hi Chris, no I'm not the famous one hahahaha. Thanks for quick reply. I watched your 2:53 long video and it came with PDF file so I thought this one might be similar. Thank you very much for your great content ☺️
Looks like is not for free to access anymore..
What was your first options trading strategy? Which strategies do you think new options traders should start with? Comment below!
projectoption please could you tell me the main strategies for beginners with a small account and resources to use to get comfortable with trading with those strategies. And which do u advise I start with first.
Finally someone who explained with great visual and actual trade software. CONGRATSULATION.
Hey man.. from a fellow educator its nice to see someone just educate without all the click bait.. very nice work im a fan.
Thank you for the well planned course, have been trying to understand how to options for 2 weeks now, this is the first time i understood how do you pick strike price...Nice job Sir!...going to look for more videos...
Lemme know when you find out 😂
Man..I am your big fan... it’s an understatement that how much I liked you.. but I don’t have any better words to express it
I’ve watched a LOT of options videos while trying to educate myself on these concepts and strategies. This is BY FAR the best I’ve seen. You not only explain the concepts, you show theoretical AND real-life examples, which solidifies the information. My only suggestion, if I had one, is not only explain the $197 premium gain on the put profit potential on the iron condor, but explain the profit potential on the call side. That would have helped fill a void in my brain. Either way, very well done. Thank you. I’ll be checking out all videos.
Wow! Thanks so much for the awesome comment. Your comment is exactly what I was going for (explain concepts, show real examples, visualize everything, etc.).
Stay tuned for more content!
-Chris
Big ups for putting out such an incredible content, options strategy are the foundation to a good option income trade investment. Been doing a bit of Investing myself which has been turning out great and am happy there are great people like you sharing such amazing knowledge.
Just started my journey and am hopeful it would turn out okay.
Still struggling with mine and trying multiple strategies but my trade is not getting any better, just wished their is an opportunity to help me earn.
With a well structured trading system and strategy success is 💯 percent achievable. If you looking for a reliable body and brokerage, write to advance capital trade centre.
Write them through mail with
In the first strategy you say:
"...as the stock price is above the short put spread as time passes, that short put spread is going to continually lose value and that's going to create profits as a put spread seller."
Isn't it the other way around? Isn't it the long put that loses value and expires worthless?
I am new to learning options. Thanks
I'm trying to wrap my not-at-all financial head around options trading and your complete, clear explanations are extremely helpful. I've taken notes on everything and will try all three of these with Paper Money.
So for the iron condor strategy, after you bought and sold the calls and puts, you don't need to touch it for the next 60 days? Or, should you sell your calls and buy the puts back?
How do you know how many strikes to have in between the spreads? Like how do you know when to sell 140 strike and buy 135? Why not sell 140 and buy 120? Based on what should we make that decision?
So the short & sweet version of number 1 (bullish put spread) is just selling an ITM put and buying an OTM put, both with the same exp. dates on a stock you predict is rising and simply letting them expire?
You don't have to let the spread expire as it's price will change every minute of the day. If you are right and the stock price goes up, the spread will lose value, and you can buy it back (close it) for a profit (the difference between your sale price and closing price).
Many thanks, I've been looking for "how to do options trading" for a while now, and I think this has helped. You ever tried - Jenameron Penny Smackdown - (Have a quick look on google cant remember the place now ) ? It is an awesome exclusive guide for learning an automated forex trading system without the normal expense. Ive heard some pretty good things about it and my cousin after a lifetime of fighting got great success with it.
Many thanks, I've been looking for "how to do options trading" for a while now, and I think this has helped. You ever tried - Jenameron Penny Smackdown - (Have a quick look on google cant remember the place now ) ? It is an awesome exclusive guide for learning an automated forex trading system without the normal expense. Ive heard some pretty good things about it and my cousin after a lifetime of fighting got great success with it.
ONe thing I don't understand about the Iron Condor is you say "Selling Iron Condors". I are you selling the long call and long put before expiration or holding on? Or is it more context dependent?
Finally a vid that makes the complex understandable
!!!
What different stock options between tasty and interactie broker?
Do you use Delta to determine strike price when selling a cover call? Thank you
Great video guys. Hopefully vol picks up a bit in 2017 so my iron condors can be wider. I find myself selling more put credit spreads these days than full on iron condors. At least on the indexes. Thank you. Eric
What technical indicators do you use to determine direction with 70% confidence? Implied volatility is low as a result risk/reward ratio is 3:1. Why not buy ITM call if you are bullish?
What happens if you close a covered call before expiration?
recently got into trading options and trying to learn these strategies gets me a little lost since I'm still learning but hopefully when i come back to this video in a few days after learning more about options i understand these strategies
Hi. I think your P/L graph for the covered call example trade (the graph appearing from 16:25 onwards) is incorrect. The covered call P/L should track the stock price movements inversely. For example, when the stock price moved up above the 120 strike price at 48 days to expiration, the 120 call you sold should have increased in value and this should result in a floating loss (but your graph shows a profit for the covered call option even though the option is in the money at 48 days to expiration). Am i getting this entirely wrong?
Made my head hurt but good video.
Options can be confusing, especially at first. It will all begin to make more sense the more time you spend with it!
Thanks for the comment.
-Chris
Yes I agree with what a couple of others have written - definately more risky than it sounds to make money with forex and you can be likely to lose more than you make.
You should be aware of this and take advice from other people who've made cash. I looked round many websites and discovered plenty of great advice by searching google on websites like Trevs Exchange Tactics. Good luck and hope you make some cash!
I thik I did fairly well until you wet to the platform. the I lost everything I thought I had uderstood wow you are really fast like a magician, I do't mean to be critical but I can't learn that fast.@@projectfinance
Lol.
Cheers for this, I have been researching "trading weekly options for a living" for a while now, and I think this has helped. Have you ever come across - Eeyarah Mysterious Eradicator - (do a search on google ) ? It is a good one off guide for discovering how to unlock an effective options trading method to win fast minus the normal expense. Ive heard some great things about it and my mate got amazing results with it.
Nice video! My only question with these strategies is that they are all related to a long period of time. You can’t predict for how long a price will remain in a sideways…
As a beginner I would like to see a pattern which I have confidence that in a matter of hours it will remain. Or at least for a few minute.
Does it makes sense ?
I’m new to this! So when you buy a lower put from the put you sold it off sets it. But is that also for protection in case the strategy doesn’t work in your favor? Or is it just because you have to buy the 100 shares back?
Finally found u man I been looking how to trade option. I don't know nothing about options. 🍻
I believe covered call is not for beginners.. that is for wealthy who owns the stock quantity equal to options 1 contract lot size.. Nice video
Good morning guys! I have a question. Is it possible trading sereval spread strategies with bitcoin? Thanks!
Great info. Just wondering. If you had 200k (large cash acct) and wanted to use options for low risk steady returns - what strategy would you suggest? credit spreads? debit spreads? Just a simple easy approach. Thanks.
Hi Chris thanks for these great videos, they have been my company while washing the dishes after dinner...(LOL). May I ask if you have any recommendation for an Options Simulator? Thanks! Cheers!
This is probably a silly question, but in the spreads and iron condor, why not just buy the strikes that are severely OTM since we can almost guarantee the stock will remain in a certain range? For the iron condor example in the video, why not buy a the 170 and strikes for the 165 call spread and the 110 and 105 strikes for the put spread? I guess I don’t understand the downside to this
Hi Zach,
Great question. The answer is that options with strike prices further from the stock price are cheaper because there's a lower probability of the options having any value at expiration compared to options with strike prices closer to the stock price.
Because of this, selling iron condors with strike prices extremely far from the stock price will not yield much premium, which means you won't have much profit potential and you'll still have plenty of risk.
Using just a short call spread as an example, if the stock is at $100, the 110/115 call spread will collect far more premium than the 125/130 call spread, as there's a much higher chance that the stock price is above $110 at expiration compared to $125.
The same concept holds true for selling put spreads. The further the put spread is from the stock price, the less the profit potential will be. Also, since less premium is collected overall, the loss potential increases.
Does this help clear things up? Let me know if you need more clarification.
Best regards,
Chris
@@projectfinance You explained it perfectly, thank you very much. Just curious, is there a certain delta you like to sell for your spreads?
I have another question. Btw, thanks for your first answer. Do you have to stick with thr minimun of 60 days for your strategies to work or it can work with expiration dates earlier than 60 days? And thanks again
Hi Israel!
I typically trade with around 60 days to expiration when entering trades, but traders can trade whatever time frame they like.
Unfortunately, I can't just go out and say that trading shorter-term expiration cycles will be more or less successful than trading ~60 days to expiration. The historical results will be different when analyzing different trade time frames.
tastytrade did a study a few years back on this topic: ua-cam.com/video/TCg1EX6vc2Y/v-deo.html
They may have done updates of this study but I couldn't find one.
I hope this helps!
-Chris
@@projectfinance rolling forward. this is best.
As an options trader this is great video.
Thanks for the comment! I appreciate it.
Thanks for this video. I think I'll start trading the bull put spread and the iron condors in my demo account
Do u do supply and demand if u do can u make a video on it because I have trouble knowing when a stock is going up or down
When doing an iron condor or any of the other strategies. Do I HAVE to wait for the contract to expire so I can get the profit? or can I close out all the positions and take the profits sooner?
Take the profits at any time, if the price for the options drops a lot and there is still a long time to expiration then calculate how much more you will make if you wait till expiration. If the remaining profit is more than you will make by closing out and starting a new position then don't close yet. But if you will be able to make more in a new position than you will give up by closing the current position before expiration then do that.
In the 1st strategy, how'd it get 1.43? The midpoint of 3.4/3.6 minus 1.98/2.16?
Great Vid. And Jason Bond annoys
This is just superb, been searching for "equity options in india" for a while now, and I think this has helped. Ever heard of - Jenameron Penny Smackdown - (search on google ) ? Ive heard some unbelievable things about it and my friend got excellent results with it.
how about your loss if trade doesn't go our way. i would love to know it. thanks
Your max loss is the width of your strikes (E.G. sold the 100 Strike put & bought the 95 strike put. 100 strike - 95 strike = $5 5 dollars x 100 options = $500.00).
However, before your spread gets a positional delta over -30. (which means your position has a 30% likelihood of trading in the money), you want to either adjust your position or roll it out to make money on your "losing trade."
If you do NOT wish to...
A. adjust it (close your spread and open it at a further strike price away from where the security is trading), or
B. roll it out (close the position and open the same position again but this time with the next expiration month - thus allowing more time for the position to correct itself to your benefit),
...because your assumption of the direction of the stock has changed - then simply exit it early at a slight loss and not the maximum loss of $500.00
Thank you for your video. A lot of insights and good info., I have a question. It may sound stupid, and I apologize. I just started getting options. In the example one, I know if an option goes worthless and out of the money you lose everything. Did you lose anything in the first one? I know you said you had a profit of $100, but how much money did you invest to get a return of $100? Or that $100 plus money for selling the long put? My apologies again for the question
Hi Israel,
Great question! It's confusing at first, but option prices change over time based on the amount of time they have left until they expire, and where the stock price is relative to the strike prices. If you buy an in-the-money option and it becomes out-of-the-money, you don't instantly lose everything you invested in the option. The option's price will slowly decrease if the option becomes further out-of-the-money, or if time passes while the option's value is mostly extrinsic.
With a short put spread (sell a put, buy another put at a lower strike price), the put options will lose value as time passes when the stock price is above the short put's strike price. In the video example, the 210/205 put spread was sold for $1.00 ($100), which means the risk was $4.00 ($400) because the spread's value can only reach $5.00 (the width of the strikes). Since the spread was sold for $1.00, an increase to $5.00 represents a loss of $4.00 ($400). With a maximum loss potential of $400, a trader would need $400 to put the trade on. A $100 profit on a $400 margin requirement is a 25% return on risk/margin.
In the example, the stock price is well above the 210/205 put spread at expiration, and both puts expire worthless because they're out-of-the-money. Since the spread was sold for $1.00 and both options expired worthless, the profit on the trade is $100 per spread that was sold.
Does this help? Please let me know if you have follow-up questions. I'm happy to help!
-Chris
projectoption good explaination
projectoption thank you for your explanation. Sounds so clear when you put it that way. I'll try these strategies and I apprexiate your vid and the help!
@@projectfinance I had the same question, but still dont' quite understand. Trying to put in my words, if I bought the long put for $1000 and I sold the short put for $500, my total premium is $500. If it expires OTM, doesn't this mean I lost $500 since I had to pay the $1000 for the long put when it expired worthless?
This video on the covered call totally makes sense to me, not the other video. There is no mention of short or selling call options here. Awesome covered calls makes sense now. This is the way I originally learned.
Glad it makes sense! The reason I mention short calls in the other video is because the covered call position does not exist without the short call component. You can't have a covered call position without selling a call option against stock.
Whichever way of thinking about it is easier for you, go with that!
-Chris
Big Thanks to you Chris, for sharing all your knowledge to us!. This video has been very educational for me and with the the PMCCI will start operating at Tasty 's demo.
You're welcome! Glad it was helpful! I'll be doing a video on the PMCC in the coming month. Stay tuned!
I might be wrong but I believe you explained the Covered Calls upside down. In another video, you said that shorting calls is a bearish strategy. In other words, selling calls means you enter into the obligation to sell your stocks at a target price. So, if the price rises beyond the premium, you lose, because it will be cheaper to get shares from you than from the market. On the other hand, if the price decreases, then you keep the premium because it will be cheaper to get shares from the market, than taking them from you. Not the other way around. Or am I wrong?
On the put spread example, what happens if the stock falls below the short put strike but above the long put strike?
I new so forgive me. But in layman’s term, you essentially BUY those positions (above or below) your SELL positions as an ‘insurance’ policy to mitigate your risk and exposure potential to massive substantial loss correct?!?!?!
The only thing I’m confused about is whether you need to actually have 100ct of any stock you’re doing an option strategy against. I only have a few positions of any given stocks in my portfolio. Do I need to have the multiplier equivalent to start trading options?
No. You don’t need 100 shares to buy an option. You need 100 shares for some strategies but there are plenty where u don’t. That’s a benefit of options
You have one the best presentations and lessons about options. How can I support the channel????
@user name taken LMFAO
In Brazil we have both American and European options, which can be executed anytime or only on expiration day respectively. Do these strategies work on both kinds or only on American options?
Put like, the video is very useful for me...
Winner of a video, I have been researching "day trading uk tips" for a while now, and I think this has helped. Ever heard of - Annahiy Stockify Sabinianus - (Have a quick look on google cant remember the place now ) ? Ive heard some decent things about it and my mate got amazing results with it.
This was great, I have been researching "stock option trading journal software" for a while now, and I think this has helped. Ever heard of - Winoorfa Option Olegroson - (Have a quick look on google cant remember the place now ) ? Ive heard some extraordinary things about it and my partner got cool results with it.
Hi so ihave 80% win rate on my options but i usually break even or small loss. What could i be doing wrong. Right now i bundle two to three OTM options in either direction. I do have a small acct im playing with 600 bucks. And i consider myself an options scalper. Most time the fees are more than my profit!
Awesome explanation, which platform is this?
Thanks Chris. Just so clearly explained!
I don't understand the difference between selling a call and buying a call?
With iron condor. what if during the 60 days i see the stock price get closer too much to one side. Can i create new iron condor to adjust the stock price as in the middle again?and what is the impact of this move on the total revenue?and close the previous iron condor within the range so i might make some proft there but i lower my risk by placing new iron condor(as if i am chessing the stock price to keep it in the middle range) and i might do it several times until expiration
These might seem like dumb questions but with the short put spread, you're actually opening two different positions and placing 2 separate orders correct?? Also if the share price rises significantly wouldn't the gains be offset by the put you bought at the lower strike price??
Hey Cashmere!
You are combining two transactions into one order/position. You are simultaneously selling a put and buying a put at a lower strike price, but you complete both of those transactions in one order.
The put you sell will be more expensive than the put you buy, which means the losses on the put you buy will not exceed the profits from the put you sell if things go well (the stock price remains above the spread over time).
I just redid my bull put spread video and it should be very helpful for you: ua-cam.com/video/fSMCL5U9M-I/v-deo.html
Check it out!
-Chris
projectoption thanks so much for the quick reply!! About the combining it into one order is this what the “add a leg” means when I’m placing the order. Like is that how it’s done lol
Which platform are you trading on? "add a leg" would mean adding an option to your order.
projectoption I use Fidelity. I guess my question is how would you open such an order?
Unfortunately, I have no idea. I've never used Fidelity's platform/website. You'll have to contact them to see how to do spread orders.
Wish I could help more!
-Chris
During the covered call example you were saying 1.04 when the option chain read 1.08? Just curious..
Love your videos in general, and have learned a lot. But this one seems like a rare misfire, at least in its declaration as “for beginners”. I’ve been studying options intensively now for a few weeks, and it’s not easy material. I’ve been taking the last week or two to wrap my head around simple bull put spreads vs bear call spreads. So jumping right to Iron Condor, with four legs to the trade, seems way beyond “for beginners”. I’ll probably start wrestling with the iron condor concept in another month or two, maybe more. So I’ll be back here then. :)
Another month?!?! The video is only 10 mins.
Question so do I have to wait till the 60day expiration till I get paid?
You automatically receive the credit, how you actually making your profit is buying back the spread at a cheaper price than you sold
I want to implement these strategies but I don't have the necessary option levels to trade spreads. What do I do? Is there a broker who allows these levels for anybody or do I really have to buy naked calls/puts for a period of time before I can trade these strategies that involve spreads?
You'll have to wait until you get approved for the higher tiers. If you don't want to wait, you'll have to consider switching brokerage firms. I personally trade with tastyworks, which gives you full options trading privileges if you apply for "The Works" margin account. tastyworks.com/accounts
No hard sell here. You should do your own research if you are considering switching brokerages, but I trade with tastyworks because of the ease of platform use and their commission/fee structure for options traders. If you do sign up with them and you want to get access to one of the projectoption courses/strategy research products, you can use the "projectoption" code when signing up. Again, no hard sell, just informing you of the standing offer we have in case you do go that route.
Let me know if you have any questions!
-Chris
You will have to get approved for higher tiers or switch brokerages. I trade with tastyworks and they approve traders for full privileges if you apply for "the works" margin account. If you get approved for a margin account, you'll likely be able to get the fully-privileged account:
tastyworks.com/accounts/
No hard sell here. I think it's good for everyone to do their own brokerage research. Just letting you know who I trade with and what they offer.
yes but i don't see any backtests, what is more interesting is can you make any money with iron condors and why
Ima start watching all your option trading vids
Trading is the best option for accumulating but if done wrong can be disastrous so be careful or follow an expert with a known success rate+1 469 409 6480
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Very informative thank you!
You're welcome!
Great vid. for begginners.Thx
Great video & explanation...thank you so much for sharing the information. Still trying to understand it though 😁
Very good teacher......could you talk about scalping..
I’m more like a conservative trader. I started with covered calls. But I only do it on my long hold positions as an income generating strategy. But the downside is that I make pretty less as I set 7d expiry.
So does this mean iron condor will give me 2x profit compared to covered calls?
Nice video, easy to understand.Thumbs up!
Thanks for the comment, Harry!
I have FB bull put position right now and the the price is close to sell Put price ($5 to sell Put price) what should I do? close position? eventhough I already put Bear Call spread to off set the floating loss
Hi Harry,
Could you give me more information on your position?
1) Strike prices / expiration
2) Your entry price(s) on the spread(s)
With more information, I can be more specific with my response.
-Chris
I have FB Bull Put Nov155/135 (floatins loss 214%) and FB Bear Call Nov200/205 (floating profit 46%), I was going to add more Bear Call to off set the loss.What do you think ?
I have FB Nov Bull Put 155/135 (floating loss 214%) and FB Bear Call Nov 200/205 (floating profit 46%). I was going to add more Bear Call to offsett the loss.What do you think?
All these 3 strategies, am I able to sell options before expiration date?
Yes, you can close all of these positions before expiration.
-Chris
@@projectfinance how can we calculate PL if we close before expiration? Is there any disadvantages or benefits if we sell earlier?
@@keshav567 The P/L of any options trade is equal to the difference between your sale price and purchase price, multiplied by the number of contracts and then 100.
If you sold 5x puts for $7.50 and bought back (closed) the puts for $3.00, your profit would be:
($7.50 Sale Price - $3.00 Purchase Price) x 5 Contracts x 100 = $3.50 x 500 = $1,750.
@@satoshiorange thank you for the reply.
@@satoshiorange Thank you for the nice video first, now, $7.5 - $3.00 = $4.5, in the calculation is the other $1 for commission or something else. And also what is typically the strategy to close before expiration, reading in some forums people use the option like day trading does it make sense
What do you guys think about Raging bull ?
Nice vid, i have a question here, if i sell an option do i need to wait till its expiration to make money? Or i can close that positions at anytime?
Hi Carlos!
No, you don't have to wait to expiration to close out an option position. If you sell/short an option, you can buy it back (close it) at any time to secure the profit or loss at that moment.
If you buy back the option for a lower price than you sold it for, you'll realize a profit on the position. If you buy back the option for a price higher than you sold it for, you'll realize a loss on the position.
-Chris
Where can I find best practices for exit strategies for these techniques?
I know this is a good video. I'm still confused, though. 😆
Edit: Every time I watch it, it sinks in more. Thank you for this video. It's exactly what I need!
Hi Chris, your videos are awesome. In your opinion, is it profitable to sell credit spread in low IV environment (IVR 30 or lower) instead of buying debit spread?
Hi Ricez,
Thanks for the video feedback! I appreciate it.
Unfortunately, I can't say that selling/buying spreads is profitable in any IV environment. You can have a profitable spread buying/selling strategy in low OR high IV environments. The IV environment itself doesn't guarantee a profitable strategy.
What's more important is your plan for when to enter trades, how to size the trades, and when to exit, which you have to develop on your own over time and as you gain more experience.
-Chris
Bro, u r awsm , God Bless U
Question: For the Iron Condor strategy, why do you purchase a call and put above the short call/put positions? Are the long call/put positions meant to be loss protection against the share price moving beyond the short call/put positions?
Thanks!
Yes. They act as insurance. Picture them as buffers or extra armor in a video game.
Its a good rule of thumb to never sell anything "naked". No matter how sure the direction is moving.
Any comments on the risks and collateral
This probably wont get answered but im gonna shoot my shot. Trading spreads still exposes you for the risk of getting assigned at anytime...is there anyway to avoid this? Like do you recommend i take the loss and close the spread if my short is ITM for the buyer to avoid getting assigned?
It WILL get answered! Yes, trading spreads still leaves the potential for assignment on the short option. The only way to completely avoid assignment is to close the short option when it's in-the-money.
However, assignment is rare unless the short in-the-money option has very little extrinsic value. The reason for this is because any option that is exercised is converted to stock immediately and any extrinsic value in that option is sacrificed by the trader who exercises the option. So, if an option's value has $200 of extrinsic value, the trader exercising the option would essentially burn $200. This is why it's not common for options to get exercised.
I've been trading for 6 years and I've only been assigned 2-3 times. Even then, it doesn't change your position's risk and you can close out right after being assigned.
I'd recommend watching our video on exercise/assignment: ua-cam.com/video/jFGzRCze-ds/v-deo.html
I hope this helps! Let me know if you have any other questions.
-Chris
@@projectfinance THank you
Quick question: What software do you use to simulate your market actions? Asking so that I can suggest the same to my professor to use it in class and explain this. And possibly for me to play around with it too. Thanks!
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This might sound dumb, but how can you sell a contract that you never had then buy another one? It doesnt make sense to me, im very new into this. Thanks
Hi Chris,
Great question. In options/stock trading, selling something without owning it is called 'shorting.' In the context of stock, 'shorting' is essentially borrowing shares that you plan on returning (buying back) at a lower price.
When shorting stocks/options, you want the price of whatever you're selling to decrease. The idea is to sell high and buy low instead of buy low and sell high.
Be careful shorting stocks/options, as the risk is typically significantly more when compared to buying stocks/options. If you do sell options, it's a good idea to limit the risk by purchasing another option against the option you've sold.
It's confusing, I know, but you'll get the hang of it as you're exposed to various options strategies and begin trading them.
I hope this helps.
-Chris
projectoption hey i would just like to say that since i have left this comment i really took the time to try to understand options and now im even confident in understanding strategies. Im very grateful for your channel and the others here on youtube for helping me and opening new doors for me to supplement my income in the future. I just wanna say thanks!!
Glad I read through the comments. This was exactly my confusion. I knew what shorting a stock was, but didn't quite understand what selling an option was. Now I know it's the same concept. Thanks to Chris for the question I also had, and a strong thanks to Chris at projectoption for all the effort you put into this channel to help all us newbs. Projectoption is by far leaps and bounds above the rest of the options guys on YT, you are greatly appreciated by so many.
so on SSE platform to do a vertical put option it always defaults to a sell to open price lower than the buy to open price, and if you do it the other way around the max loss is relatively high. If you do it the other way around (sell higher price than buy to open) then it seems to give you a max loss lesss than your profit. Whats the disadvantage of doing the buy to open price slightly higher than the sell to open price?
So on your netflix example whats your maximum loss
On your first two examples. You need to address what 's your potential maximum loss against your potential maximum gain. If the risk reward is not conducive in your favor. The reward ratio wouldn't make sense. Example: To make $150.00 for max gain versus to $600.00 of possible loss.
Hi Kerry,
That's a good point. With that said, everything in options trading ties into probabilities. With $150 max gain and $600 max loss, the probability of the trade making money is higher than 50%, in theory, because the loss potential is greater than the profit potential. Such risk/reward ratios are common when selling options/spreads.
On the other hand, if a trader bought an option and had $500 of max loss but unlimited profit potential, that trade would have a less than 50% probability of making money, in theory.
In my opinion, the strategy being traded doesn't matter as much as the trading plan the trader is following (how they manage and size the position, etc).
I hope this helps!
-Chris
Excellent explanation on setting up the trade, but how about exiting it? You're only teaching half of the setup or am I missing something?
Thanks for the comment! To exit any of these trades, execute the opposite trade as the entry.
For instance, if you sell a put spread (example: short the 100 put and buy the 90 put), you can close the trade by purchasing the put spread (buy the 100 put and sell the 90 put).
The P/L will be the difference between your sale (entry) price and purchase (exit) price.
It's just like trading stocks. When you buy a stock and later go to close it, you sell the shares (opposite transaction as your entry).
@@projectfinance awesome, thank you! I realize that's a simple step, but an important one for those learning. Thanks for doing what you do.
Hi I've been watching your videos for a few days and subscribed to your channel great info...but I still cant decide on what to do on my acct... I own 100 shares of a stock, my cost basis is $42 after covid19 and the shutdown the stock fell to $24 per share... I'm still holding and dont want to sell.... the covered call option that's going to pay the highest premiums are in the money... but if I write one of those doesn't it mean that someone can just ex excersise it from me? I'm confused on what to do?
I am a regular viewer with like buttons. Are these doable for a small cash acct newbie ? I want to start with small amt with options til i get more experienced. Thank u for ur good contents. Mahalo. From. Hawaii.....😁
Limited risk strategies such as buying/selling spreads (or combining them into iron condors or butterflies) can be implemented in small accounts, but you will need the privileges to trade spreads. I'm not sure you will be able to trade option spreads with a cash account.
@@projectfinance so i guess i need to talk to different brokers who is willing to do business cause they make commissions i do enjoy ur intelligent channel. Mahalo from Hawaii.
Thank You Very Much
Nothing beats knowing your profit is on the increase. Don't be a victim to gamblers out there, ask the right questions, if you get a reliable pro-trader to assist please treasure it. Trade wisely and stay safe.
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Mindblowing, thank you
I wish he would address what would happen if the stock price goes against the strategy
Wow I love it! very interesting, what software do you use to analyze these?
Thanks! I have a bunch of historical options data stored in a database. I use Python to analyze/simulate trading strategies and also create data visualizations.
really helpful, thanks
You're welcome. I'm glad the video was helpful, Alex!
-Chris
I scrolled around thinking your pic was a hair on my screen
Are there any adverse effects to closing an iron condor before expiration? Even if the stock price is within the two spreads? (i.e paying commissions on manually closing the trade, getting debited for the premium that I collected at the open of the trade?) ... BTW I have TD Ameritrade
Closing an iron condor before expiration costs commissions but you will guarantee profits if you buy back the iron condor for a price cheaper than you initially sold it for.
Of course, by closing the trade you remove the potential for earning the maximum profit potential when the stock price is in-between the short call and short put strike prices at expiration.
If you trade a lot of iron condors, I'd check out the tastyworks commission structure to see if it makes sense for you: www.projectoption.com/tastyworks/.
I hope this helps! Let me know if you have any other questions.
-Chris
Awesome Chris, I appreciate it. I indeed have an account with tastyworks and I am a current user. They have a great commission structure but their software (both mobile and desktop) is still in its infancy and I feel isn't up to par with thinkorswim. Which I've been a long time user of...
Hi Thank you for this very informative content. Can you tell me what platform you are using?
Thank you!
In this video, I was using thinkorswim. However, I've since switched to tastyworks for their commission rates: www.projectoption.com/tastyworks/
Don't mind me, just a comment and like to help u get into recommended
Which option trading platform do you use ?
I use tastyworks.
great video man - love the content
Hi JF,
Thanks for the comment! Glad you're enjoying the videos.
-Chris
U sale a put then u buy one ...how u buy first one
thanks for everything
You're welcome!
Hey Chris, this video is AFU! Starts w/ Strikes of 210 + 205; then demonstrates strikes of 135 + 130; WTF?! Did you confuse two trades while editing?
Hi I will like to know if you have a video for a butterfly option strategy? And what you think about it.....thanks
Hi Jonathan, here are the links for our butterfly strategy videos:
Long Butterfly (Buying a Call or Put Butterfly): ua-cam.com/video/tmDBN5of89U/v-deo.html
Short Iron Butterfly (Selling an Iron Butterfly -- an Iron Condor with the same short strikes): ua-cam.com/video/7CBW_Oidsd0/v-deo.html
Actually, I love the butterfly strategies and use them every single month. It's one of my go-to strategies on the S&P 500. I use the short iron butterfly and long butterfly interchangeably.
on current market, what would be the contrary deal, making money when stocks fall
Strategies that make money when the stock falls:
1) Buying puts/put spreads
2) Selling call spreads
3) Buying calls on volatility products (VIX, VXX, UVXY)