Can you do a video on, assignment of a option. That option takes off within days of assignment. So how do maximise the full potential of your good fortune? King regards, Ray UK.
One thing i cant rationalize in my head (for buying calls): You say if the stock price is above the strike price+premium (lets say on the last day before expiration), then you make $ (stock price - strike price+premium). But then where does theta come in? Wouldn't you make more or less depending on which day you closed the contract (assuming all else is same) ??
Theta refers to the amount of premium lost per day, if all things were equal (ie the stock market was closed). I wouldn’t worry about theta so much at the beginning- rather, focus on your chances of success. Ps: if you use discord, feel free to join us! rickorford.com/discord
Hi Rick - really enjoy your videos. On this one though, wouldn't you subtract the $8.06 from the $9.94 that you paid for the option with the 426 strike price? (time mark 20:41) So your profit wouldn't be $8.06 it would in fact only be $1.88 so a person wouldn't make $806.00. Is my thinking correct?
Hi Rick! I was used to buying Calls for a strike above the strike price, because if not it would be a put. I got confused. Why a long call ( strategy) advices you buy below the strike price instead that above ? Thank you
ok, I saw the video again and as far asI understand you said, for example, to buy a call, strike 426 when the SPY is trading above strike 134? In the chain isnt that below the strike price? I am so confused . Please advice
Hi, if you’re looking to buy a call (long call) it’s more conservative (safe) to buy one that’s ITM. Example, say you like XYZ shares. Current price is $50. You could buy a call with a $40 strike. This is already in the money and has value. Many traders suggest buying OTM options, ie over $50- but these do not have intrinsic value- so the stock will have to go over $50 (plus the premium) to get a profit. My preference is to buy ITM and sell OTM options. Maybe I should record a video about it!
Calls and puts are completely different! Selling a call means agreeing (if the holder assigns) to sell 100 of the underlying. Selling a put means agreeing (if the holder assigns) to buy 100 of the underlying… all at the strike price, and at any point up to expiration.
Hi! I just saw this and thanks for much for watching. Yes, I can- however, I couldn’t show it live on a brokerage as there’s 1000’s of brokerages out there. That said, I could present the lingo.
1. I wouldn't want to use delta if I want to sell a covered call option, because in this case I want the option to expire worthless, is this correct? 2. Is a Poor Man's Covered Call Option the same as a Vertical Spread or Diagonal Spread? 3. Is it true that 80% of option contracts expire worthless, which is why it's better to sell options instead of buying them and holding something that's has a very high chance of becoming worthless?
1. No. Delta is a useful measure whenever looking at any options trade. 2. Diagonal spread. But PMCCs are very risky. If things go south on a covered call, you can sit on the stock as long as you want. On a PMCC, your long call becomes worthless and you lose you entire investment except for the short call premium. 3. Probably. Buying calls and puts can be a very powerful investment tool when done right in a larger investment portfolio. If you’re ONLY buying options with ALL of your portfolio, you’re going to end up poor. I sell covered calls and cssh secured puts on stocks I wouldn’t mind owning for years, in case there’s a market correction.
Delta is important anytime you buy or sell options. If you’re selling an out of they money covered call, a 20 delta means ~80% chance of it expiring worthless… which is exactly what you want!
Hello Rick, very nice video. I have a question for you, if a person just wants a single strategy to use what would you recommend? I suffered a stroke 3 years ago and my mental strength has diminished. I think I can handle a single strategy. Right now I am leaning on the covered call strategy. What are your thoughts? Thanks.
Thanks for the kind words, and I’m sorry about the stroke. I love covered calls in a sideways to downward market. If you have a portfolio of stocks that isn’t about to “pop” or become “high-flyers”, then it could be a good way to earn a little extra income on stocks you already own. Be aware that the stocks could be called away if assigned- so you need to be comfortable with that. Last- I can’t stress enough how important it is to know the chances of profitability- or in this case, the chance the option will expire worthless. As a trader, you want the option to expire worthless. You can find it using delta, or using a scanner as I described in the video. Hope this helps- I rambled a bit. Do feel free to reach out with other questions.
With a butterfly, if you pick the target correctly, you’ll reach the maximum profit potential. Low volatility is certainly needed for that. Of course, I’m not a fan of Iron butterflies as the precision is too much of a wildcard for me. You didn’t ask, but, my preference is always the condor.
🔥 Join me on Discord: rickorford.com/discord
I get a lot out of all your videos I watch most of them several times!!!! Thanks RICK
Thank you so much for the support!!
This is a great video!
Thank you!!
Amazing tutorial!!!👍🏼👍🏼
Thanks! Any particular key takeaway??
The best education !!!
Can you do a video on, assignment of a option.
That option takes off within days of assignment.
So how do maximise the full potential of your good fortune?
King regards,
Ray
UK.
What to do if you’re facing assignment? 👍 stay tuned!
One thing i cant rationalize in my head (for buying calls): You say if the stock price is above the strike price+premium (lets say on the last day before expiration), then you make $ (stock price - strike price+premium). But then where does theta come in? Wouldn't you make more or less depending on which day you closed the contract (assuming all else is same) ??
Theta refers to the amount of premium lost per day, if all things were equal (ie the stock market was closed). I wouldn’t worry about theta so much at the beginning- rather, focus on your chances of success.
Ps: if you use discord, feel free to join us! rickorford.com/discord
Hi Rick - really enjoy your videos. On this one though, wouldn't you subtract the $8.06 from the $9.94 that you paid for the option with the 426 strike price? (time mark 20:41) So your profit wouldn't be $8.06 it would in fact only be $1.88 so a person wouldn't make $806.00. Is my thinking correct?
The breakeven price already accounts for that.
Another great video Rick
Thanks again!
Thanks
Hi Rick! I was used to buying Calls for a strike above the strike price, because if not it would be a put. I got confused. Why a long call ( strategy) advices you buy below the strike price instead that above ? Thank you
ok, I saw the video again and as far asI understand you said, for example, to buy a call, strike 426 when the SPY is trading above strike 134? In the chain isnt that below the strike price? I am so confused . Please advice
Hi, if you’re looking to buy a call (long call) it’s more conservative (safe) to buy one that’s ITM. Example, say you like XYZ shares. Current price is $50. You could buy a call with a $40 strike. This is already in the money and has value. Many traders suggest buying OTM options, ie over $50- but these do not have intrinsic value- so the stock will have to go over $50 (plus the premium) to get a profit.
My preference is to buy ITM and sell OTM options.
Maybe I should record a video about it!
Also, when selling a put option being assigned out of normal trading hours.
Ray.
UK.
Expect one in 2-3 weeks!
Is a short call and selling put , the same thing ? Or what’s the difference
Thx
Calls and puts are completely different! Selling a call means agreeing (if the holder assigns) to sell 100 of the underlying. Selling a put means agreeing (if the holder assigns) to buy 100 of the underlying… all at the strike price, and at any point up to expiration.
thanks for the video and well detailed information. Can you show how to perform your first trade .
Hi! I just saw this and thanks for much for watching. Yes, I can- however, I couldn’t show it live on a brokerage as there’s 1000’s of brokerages out there. That said, I could present the lingo.
Thank you again, Rick
Very welcome
love your videos thank you for making this, but your voice is so familiar, were you ever a voice actor? Shannon in Home Movies?
Thanks for the kind words. Sadly nope- not me!
1. I wouldn't want to use delta if I want to sell a covered call option, because in this case I want the option to expire worthless, is this correct? 2. Is a Poor Man's Covered Call Option the same as a Vertical Spread or Diagonal Spread? 3. Is it true that 80% of option contracts expire worthless, which is why it's better to sell options instead of buying them and holding something that's has a very high chance of becoming worthless?
1. No. Delta is a useful measure whenever looking at any options trade. 2. Diagonal spread. But PMCCs are very risky. If things go south on a covered call, you can sit on the stock as long as you want. On a PMCC, your long call becomes worthless and you lose you entire investment except for the short call premium. 3. Probably. Buying calls and puts can be a very powerful investment tool when done right in a larger investment portfolio. If you’re ONLY buying options with ALL of your portfolio, you’re going to end up poor. I sell covered calls and cssh secured puts on stocks I wouldn’t mind owning for years, in case there’s a market correction.
Delta is important anytime you buy or sell options. If you’re selling an out of they money covered call, a 20 delta means ~80% chance of it expiring worthless… which is exactly what you want!
Hello Rick, very nice video. I have a question for you, if a person just wants a single strategy to use what would you recommend? I suffered a stroke 3 years ago and my mental strength has diminished. I think I can handle a single strategy. Right now I am leaning on the covered call strategy. What are your thoughts? Thanks.
Thanks for the kind words, and I’m sorry about the stroke. I love covered calls in a sideways to downward market. If you have a portfolio of stocks that isn’t about to “pop” or become “high-flyers”, then it could be a good way to earn a little extra income on stocks you already own. Be aware that the stocks could be called away if assigned- so you need to be comfortable with that. Last- I can’t stress enough how important it is to know the chances of profitability- or in this case, the chance the option will expire worthless. As a trader, you want the option to expire worthless. You can find it using delta, or using a scanner as I described in the video.
Hope this helps- I rambled a bit. Do feel free to reach out with other questions.
Thanks
How do you make higher numbers ($4k/week) when each transaction is for such a small amount of money?
Sell multiple contracts!
14:30 Delta = chances option will expire in the money 27:30 bear call spread = poor man's covered call
But my understanding is initial investment of 900$ (premium paid ) for buy call turned into 800$ in above example which is loss , please clarify .
Sorry, I’m not getting you. If you buy a call, and the stock ends above the breakeven point (strike + premium paid), you’ll have made a profit.
Question: Which is better for a low volatility stock Iron Condor or iron butterfly ? Thanks
With a butterfly, if you pick the target correctly, you’ll reach the maximum profit potential. Low volatility is certainly needed for that.
Of course, I’m not a fan of Iron butterflies as the precision is too much of a wildcard for me. You didn’t ask, but, my preference is always the condor.
Thanks for your thoughts.@@RickOrford
What is the rate for samurai after the trial ?
There’s a discount applied- can’t remember how much. But I know they are running a pretty good deal on the annual plan right now.
I have a few questions!
How can I help??
Martin Short teaches options.