Yes, I got plenty of value, this is the best educational video that I have watched. Direct-to-the-point information. I am looking forward to more from you just like this. Thank You so much, Jim.
Thnx for the vid. Now, regarding profit potential of a Diagonal mentioned @16:30, the width of the spread is only *one* component of that equation. If volatility spikes, your Diagonal will suddenly become worth massively more than that. Diagonals have the potential to balloon in value way beyond the constraints of Delta since they are highly Vega-positive.
Excellent summary! Lots of tactics but I make a lot of money with 6-9 tactics used over and over again. Your outlook determines the tactic, then adjust it from there.
This is one of the best go-to videos ever. Question on cutting your losses vs adjustments: If you've lost over 50% of your theoretical profit, should you cut your losses or do adjustments?
Thank you! Hmmm - you mean like you sold a strangle for $2, and you're now down $1 (50% of $2)...should you cut it there? No, that's too early...we usually don't consider managing losers until at least 2x of credit received. So that would mean you sold a strangle for $2, it's currently marking for $6, so you're down $4. Still might do nothing at that point, but that's when it becomes a consideration to cut it.
Great set of videos. I really appreciate your coupling of managing the trade along with the strategy. The only other thing I would love to see is your opinion as to when you would pick one strategy over the others. I suspect you could build a tree structure to help with this.
Thanks as always Doc. Can I get the best link / written bullet point on how to set up the trade/ find the opportunity in first place, using high iv, high traffic etc, Thanks
You're welcome! Yes, that is not in here, and definitely needs to be addressed at some point in the future. Those are tricky because they are hybrids between defined-risk and undefined-risk...
What would be a good reference point for delta on entry? Specifically for short verticals and iron condors. The 1/3 credit received would be dependent on this, right?
I'm still a bit confused about what to do if things go south with the short strangle (managing losers). As someone else noted, showing examples of each step using numbers would do a lot to help clarify things, IMO. Thanks, David
Agreed - an even more detailed walkthrough would be helpful. But the basic structure for a strangle is 1) do nothing if the stock is between your strikes 2) one side gets tested = roll other/untested side in such that position delta is lessened by 25-50% 3) one side tested = roll out in time...can do 2 + 3 at the same time, that frequently happens. If stock continues to move against you, that's when rolling into a straddle, and then into inverted strangle are next steps. Hope that helps at least a little!
If you have a short put that goes deep in the money, in addition to rolling it out, could it be a viable strategy to sell OTM short calls against the put? Since ITM short put is 'kind of' like a long stock
That should be 50% of max profit potential...not credit received. Careless error on my part. So if you buy a $5 vertical for $2.40...you have $2.60 in max profit, so it would be 50% of that for $1.30. Rolling for credit is still the same, yes.
Technically yes, but margin requirement will likely increase if stock has moved too much and you won't get necessarily get significant credits if the stock has moved too far from the strikes
@Brayness I agree. This is the reason I sell calls on overextended ETF's because the movement is much slower than equities and they're cyclical and revert to the mean quicker. What do you think of this?
@@kamran6336 a good strategy but ‘overextended’ is always subjective even with technical analysis and markets can often stay overextended for a very long time before reverting. Using the same strategy to sell puts when overextended to the downside is probably better because volatility will be higher so you’ll be paid more to take a similar amount of risk. When overextended to the upside, volatility is almost certain to be very low (like the current situation) and you won’t get paid very much for short option strategies
Yes, and theoretically you always do so for a credit, although when you get deeeep ITM, there is a difference when you From Theory to Practice...oftentimes there is no extrinsic value available on those rolls, they just become pure directional plays. Still, though this is a popular (and effective) long-term strategy with puts if you have a bullish bias because a deep ITM put is the same as long stock...but with short calls that are deep ITM, it's a much harder, and less effective, long-term strategy because you're battling against positive drift and market/economic growth over time.
Short spread - dance floor management: if IVR is low consider closing? I thought a low IVR is good for seller but bad for buyer. Did I misunderstand? Thank you.
From the perspective of putting on a short spread, I.E. you sold a short for a lot of money as a credit and bought another further down the chain to cap risk, Low IVR means that the market is less volatile so options should now be cheaper as there is less risk. This points to stability so as long as the strike price isn’t up or near your selling price, the option has dropped a lot in value, so you can now buy it back. So you made a good credit (example 200) when you put the position up, and bought the position back (example 20) then you can do the math 200-20=$180, so you made good money and in a shorter amount of time. In our case, it’s better for those closing as a buyer, and a seller is in a low IV environment which is not as profitable.
You said you want to roll losers for a credit, but if rolling for a debit is the only option you wait? Does that mean don't roll and wait to see if it turns around in the next 21 days?
@jschultzf3 hello! I started to watch your videos but I still have questions. Is it possible to write to you privately by email? I don’t understand when you talk about managing losers what you mean with “sit and wait” and then you talk about “control risk on order entry”. What does it mean? Are there videos showing examples of real trades? Thank you
Wow! Great explanation! Definitely will save it as a reference video. Also like the less gloomy, high quality content.
I haven't even started trading and I've already gained a lot of value from this video ❤❤❤❤ tks so much for this class!!
Yes, I got plenty of value, this is the best educational video that I have watched. Direct-to-the-point information. I am looking forward to more from you just like this. Thank You so much, Jim.
Preciate you, brother!!
This is very valuable management of Options 101 style - great stuff for us beginners. thanks Jim.
Great video. Very informative and precise.
Thnx for the vid.
Now, regarding profit potential of a Diagonal mentioned @16:30, the width of the spread is only *one* component of that equation. If volatility spikes, your Diagonal will suddenly become worth massively more than that. Diagonals have the potential to balloon in value way beyond the constraints of Delta since they are highly Vega-positive.
Excellent summary! Lots of tactics but I make a lot of money with 6-9 tactics used over and over again. Your outlook determines the tactic, then adjust it from there.
Which 6-9 tacts are you talking about?
@@ricomajestic All of these plus synthetics for directional plays and would add butterflies for lots of neutral trades.
This is one of the best go-to videos ever. Question on cutting your losses vs adjustments: If you've lost over 50% of your theoretical profit, should you cut your losses or do adjustments?
Thank you! Hmmm - you mean like you sold a strangle for $2, and you're now down $1 (50% of $2)...should you cut it there? No, that's too early...we usually don't consider managing losers until at least 2x of credit received. So that would mean you sold a strangle for $2, it's currently marking for $6, so you're down $4. Still might do nothing at that point, but that's when it becomes a consideration to cut it.
Great set of videos. I really appreciate your coupling of managing the trade along with the strategy. The only other thing I would love to see is your opinion as to when you would pick one strategy over the others. I suspect you could build a tree structure to help with this.
Great suggestion here - might see this in a future crash course!
Nice work Doc! Thanks
Your videos are the best! Thank you!!
Preciate you so much!
Thanks as always Doc.
Can I get the best link / written bullet point on how to set up the trade/ find the opportunity in first place, using high iv, high traffic etc,
Thanks
Very well done! Can you suggest options screening and selection process? Do you have a video for that?
I would use the pre-populated tastytrade watchlists for this - start with "tasty default" and "tom's watchlist"
Really fantastic work ⭐️⭐️⭐️⭐️⭐️👏👏👏👏!!!!!
Thank you, brother!
Excellent information!
Thank you!
Jim, you know that selling naked strangles is a one way ticket to Crazy Town.😀 Full-time job! Good video though.👍
Crazy Town is my Home Town..!
Thank you for all the information. Was very helpful 👍
Thank you!
Thank you! Healthy! However, it is not clear what to do with the iron condor at strikes with a width of $10,15,20 if the trade results in a loss.
You're welcome! Yes, that is not in here, and definitely needs to be addressed at some point in the future. Those are tricky because they are hybrids between defined-risk and undefined-risk...
Great video.
What would be a good reference point for delta on entry? Specifically for short verticals and iron condors. The 1/3 credit received would be dependent on this, right?
I'm still a bit confused about what to do if things go south with the short strangle (managing losers). As someone else noted, showing examples of each step using numbers would do a lot to help clarify things, IMO. Thanks, David
Agreed - an even more detailed walkthrough would be helpful. But the basic structure for a strangle is 1) do nothing if the stock is between your strikes 2) one side gets tested = roll other/untested side in such that position delta is lessened by 25-50% 3) one side tested = roll out in time...can do 2 + 3 at the same time, that frequently happens. If stock continues to move against you, that's when rolling into a straddle, and then into inverted strangle are next steps. Hope that helps at least a little!
If you have a short put that goes deep in the money, in addition to rolling it out, could it be a viable strategy to sell OTM short calls against the put? Since ITM short put is 'kind of' like a long stock
@7:30 When would it ever be possible to roll a losing long vertical spread for a credit?
If it's just barely a loser, it's possible...but if it's fully ITM, it's nearly impossible to roll for a credit.
On the short vertical spread I didn't here you mention how far out the contract goes before you said to roll it at 21 days to the next monthly cycle?
Sorry. I'm new to this. When discussing strangles, Jim said the minimum premium amount was a dollar. Is that total or each leg?
if you added backtests for each strategy in this video, it would have been the wisdom of options universe
See the rest of the past/future tastytrade market measures series
If rolling position to next cycle means exiting current position and entering same strikes next cycle shouldn’t i always receive credit?
Not with vertical spreads that are in the money
@@Brayness is 100% correct here
This video is awesomeness
Long Vertical Spread:
7:01 Managing Winner = 50% of credit received??
7:30 Managing Loser = roll out for a credit??
That should be 50% of max profit potential...not credit received. Careless error on my part. So if you buy a $5 vertical for $2.40...you have $2.60 in max profit, so it would be 50% of that for $1.30. Rolling for credit is still the same, yes.
Are u talking about credit received (selling options) or debit paid buying options?????? Completely different casaes!!!!!
GREAT VIDEO THX
Do we submit both Short and long legs are one contract or two separate contracts ? and if no, why not ? Can you please help me understand? Thanks
Can we perpetually roll short calls and puts until the trade is profitable?
Technically yes, but margin requirement will likely increase if stock has moved too much and you won't get necessarily get significant credits if the stock has moved too far from the strikes
@Brayness I agree. This is the reason I sell calls on overextended ETF's because the movement is much slower than equities and they're cyclical and revert to the mean quicker. What do you think of this?
@@kamran6336 a good strategy but ‘overextended’ is always subjective even with technical analysis and markets can often stay overextended for a very long time before reverting. Using the same strategy to sell puts when overextended to the downside is probably better because volatility will be higher so you’ll be paid more to take a similar amount of risk. When overextended to the upside, volatility is almost certain to be very low (like the current situation) and you won’t get paid very much for short option strategies
no
Yes, and theoretically you always do so for a credit, although when you get deeeep ITM, there is a difference when you From Theory to Practice...oftentimes there is no extrinsic value available on those rolls, they just become pure directional plays. Still, though this is a popular (and effective) long-term strategy with puts if you have a bullish bias because a deep ITM put is the same as long stock...but with short calls that are deep ITM, it's a much harder, and less effective, long-term strategy because you're battling against positive drift and market/economic growth over time.
Damn, 50 minutes and we're going to learn everything.
Short spread - dance floor management: if IVR is low consider closing? I thought a low IVR is good for seller but bad for buyer. Did I misunderstand? Thank you.
From the perspective of putting on a short spread, I.E. you sold a short for a lot of money as a credit and bought another further down the chain to cap risk, Low IVR means that the market is less volatile so options should now be cheaper as there is less risk. This points to stability so as long as the strike price isn’t up or near your selling price, the option has dropped a lot in value, so you can now buy it back. So you made a good credit (example 200) when you put the position up, and bought the position back (example 20) then you can do the math 200-20=$180, so you made good money and in a shorter amount of time. In our case, it’s better for those closing as a buyer, and a seller is in a low IV environment which is not as profitable.
very good
Hi Dr Jim good day. I have been listening to you Options for beginners but I dont see it any longer. Has it been taken out?
You said you want to roll losers for a credit, but if rolling for a debit is the only option you wait? Does that mean don't roll and wait to see if it turns around in the next 21 days?
Correct - if the only option when you roll is a debit, then you sit and do nothing...the whole 21 days if that's what it takes.
ERROR? On the Long Vertical Strategy, you say profit target should be 50% of CREDIT, but a long trade will be a DEBIT, yes?
curious why you hided rest of videos in playlist?
please include math and possibly a whiteboard in each of your examples, I'm visual
Great suggestion for the future - thank you!
I don't know enough to even follow this video
you left out jade lizards, butterflies, and iron flies
Only wanted to focus on the top 8 in this video...maybe we'll hit those in the future
what >?@ChupraCumbra
Ghey
Gheiii
I wish all his explaination could be done visually.😅
A long vertical spread doesn't receive a credit. It's a debit trade
@jschultzf3 hello! I started to watch your videos but I still have questions. Is it possible to write to you privately by email? I don’t understand when you talk about managing losers what you mean with “sit and wait” and then you talk about “control risk on order entry”. What does it mean?
Are there videos showing examples of real trades?
Thank you