Ratio Call Diagonal Option Trade Explained
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- Опубліковано 15 жов 2024
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My name is Erik, I'm a Marine veteran, options trader, real estate and angel investor. From 2007, I spent over 30,000 hours honing my skillset and became a first generation millionaire before 30. I'm is passionate about self-development, life experiences, human performance, and helping others grow. I launched the esInvests UA-cam channel and the Outlier community to share his experience and empower others to proactively craft their futures.
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Would you consider selling 5 covered call contracts on the same expiration date with 5 different strike prices?
Nothing wrong with that, I’ll often ladder strikes.
Hi Erik. Wanna say I love the content, as someone just getting into options as a way of managing about 10 % of my overall capital (rest being in reits, indexes, dividend stocks) I've been looking for valuable informative videos out there and you seem to be one of the only youtubers that actually knows what they're doing and understand all risks involved with very comprehensive strategies.
I like to educate myself thoroughly on all of my investment strategies and wondered if there are any books, education platforms, courses that you would recommend as someone who has been involved in this space for a long time ?
Cheers and keep up the good work
I can't speak to any courses or education platforms - I haven't used any myself (I only recommend things I personally would or have used). As far as books, the best for options trading is "Options as a Strategic Investment" by Lawrence McMillan.
with margin you have also the same leverage on shares like on options. same result more or less....
Not quite. You use your cash up first before going on margin and then pay interest on the margin used.
I traded AAPL with a bearish diagonal starting about a month ago, because my analysis told me that even good Q2 earnings/outlook would likely trigger profit taking. I bought a couple of Sep-15 200-strike (80-delta) puts, and sold weekly short puts against them until the week before earnings. I took a beating as the stock continued to rise, and you accrued your profits, but the short premiums were enough to keep it on. I was happy to close the position the day after earnings for a net 22% gain, including the short premium received.
You caught a BIG break there post earnings! AAPL hasn’t moved like this is a while and it’s just what you needed.
@@OutlierTradingthanks. even a blind pig gets a few acorns! this was not typical of my trading style - I rarely plan to hold positions through earnings - but my bearish sentiment was strong enough to act in this instance.
@@OutlierTrading it turns out all of the profit came from the short premiums. i took in $1008 in short put premiums, and despite the post-earnings drop in stock price (i sold near $184), i still took a loss of $326 on the long puts, for a net gain of $682. short premium to the rescue!
22.5% of the portfolio in your VAR calculation. yikes 😬😬😬
also what if there was slippage or a big gap down that blew through your stop.
were you hedged elsewhere in the portfolio? what is your risk model?
4 of these trades in a row and you’re done. if you’ve got 4 correlated positions on and it goes against you, you’re also done
I didn’t calculate VaR here - that’s a bit different. But this was no where near 20%+ of the portfolio, not sure how you’re calculating that.
Slippage is part of the game, it’s a long duration trade so I have fewer transactions. Big gaps are part of the market, our stops can always be violated. That’s why position sizing and portfolio risk management are paramount.
con man