this stuff is awesome I'm subscribing, I asked you some questions before when I had no idea about the terminology but kept goggling various terminology and I get this now.
thanks a lot....learnt a lot from this...i am an active options trader and initially lost a good amount of my capital..but now recovering slowly as mentioned in your video...by doing small trades and adding a little profit each day...good going...thanks a lot again for sharing this video.
Thank you so much for your time and effort. I find it very helpful. I have just decided to learn how to trade options, say I'm a baby in this :) please recommend me where to begin, what to read, what to watch as a beginner and I'll be so thankful to you. I already am but the volume of my thanks will grow. Thanks in advance. You're the best!!!
Thanks. I'm new to options and looking at some of the online presentations (especially the Greeks) just leaves me trying to figure out what the heck they're saying. I like your style - not cluttering up your points with sidebars off the sidebars that relate to something we haven't learned, but keeping the presentation clean, moving and building directly off the previous.
you need to upload more videos. that's not enough for us. it's very helpful. Thank you. btw, people keep saying they make 3-5% monthly income for options trading. that's impossible to figure out. is it possible?
Great info. I keep listening and reading options basics and each time I learn something new and helpful. Your teaching is simplistic and understandable. I have subscribed to your RUclips videos.
Great!! Simple and straight. No ads...Thanks. I wanna discuss on 4th principle. In some other website I read if IV is high its good to sell the options and to buy if it is less. But going by your 50$ scrip example, I feel, even if we buy low IV stocks, the chances of getting profit is also very low. Am I right?
You are explaining this in a very good way. I'm actually personally pretty used to working with simple statistical methods and probability calculations, but I've never thought of visualizing volatility and probability distributions by overlaying the distribution on a horizontal axis. Although on a completely different note, have you ever worked with Monte Carlo simulations for e.g. pricing of options or other options related models?
You are a Very Good Teacher,From one Teacher to another ,Thanks its been very helpful, and i am here to learn all i can,I like the monthly fee. I am here to Learn all I can .Thanks for Taking the Time out To Teach Us.Stephen
Great video, easy to follow and informative. What licenses are needed to solicit these types of trades? Is it a 7 and 65? How much are you paying in commissions per trade and how many of these trades do you need to make before you start making some money?
Danny Cieniewicz I pay $1.25 per option in commission (no ticket charge) and I generally make 8-10 trades a week. I used to have 4 different licenses but right now I don't have any and all of these trades are for education purposes only and not a solicitation to buy/sell any security.
Hey guys, I'm a huge fan of your videos and recognize that this may be beyond the scope of this introduction to options, but how do you respond to the assertion that markets generally exhibit significantly more randomness than a standard distribution implies? I've heard it espoused that a security has infinite variance, and that prices are not normally distributed.
Super explanations ! Thanks for all the videos. One thought I have is, for a non volatile and side ways moving stock, is it a good option to sell the call at current strike price and make money with the theta factor? Would that work most of the times?
Rakesh If volatility is low you'll want to avoid option selling overall. Instead, if you want to play the market a little sideways using a calendar spread might be a little better option (pun intended)
Thanks for your posts. I find your videos to be very helpful. You do a great job breaking down the material. I was interested in your thought on long calls extending over a year in BABA, APPL, AMZN. Stocks with great growth potential. If delta is above 560?
Hey Kirk one more Q. I am looking out for few options strategy in front of some big news (say like parliament election and its results). Here in India we have elections 7th April through May 17th. May 29th is the futures expiry day. In between there will be around 4-6 exit polls for different states. How to play safe and cash this the big event? Can you suggest any of your videos for this type of month long event? or can you present one new one? Am sure, there will be a lot many guys who are looking for such ideas. Thanks in advance!!
Hey Kirk - Thanks for the detail and explanation. Very helpful. I have a question regarding the direction of the decay you talk about in the 2 expiration cycles chart in your video. I'm sure I am missing something obvious but you show a 'DEC 10' and a 'JAN 11' and that the decay theta decays less in JAN 11 at 65 days out then in DEC 10 it is 30 days out. Based on your previous chart it would seem that it would decay faster at the 30 days out mark. How is DEC 10 less then JAN 11 the next year that still has 65 more days? Thanks again.
Hey Ward! The theta decay in the chart I showed for DEC was higher than JAN and therefore happening much faster - I don't see where DEC is less than JAN?
Option Alpha I think it is a date stamp thing. The JAN and the DEC dates you are referencing are in a calendar year. I was thinking that the DEC '2010' and 'JAN 2011' were only 30 days apart. Thanks for setting me straight.
im having problem collecting enough premium. for instance any stock under $20 that i have looked at, all the one side credit spreads only generate 0.1-0.15 per contract with a max loss of $1. how do you suggest i deal with this?
Excellent explanations! Happy Holidays & thank you! When your in a spread, to get out (not letting it expire) you have to manually close the spread with another closing spread contract? I get confused since your opening a contract of a call/put (to open) & another on the other end to put/call (to close) - I thought this automatically closes the trade if the underlying stock or trade (asset/etf) reaches the direction your investing on (up for bullish / down for bearish)?
You mention liquid vs illiquid options: what would be a minimum acceptable liquidity to interest you in the option (do you have set minimums)? Do you focus more on volume vs open interest? Thanks in advance!
Hey Lee - I would look at both volume during the day and general open interest. I tend to stay with options at least 1,000 or so in open interest in multiple strikes. But I will go lower than that for trades and just scale down my position size.
I agree with most of the concepts in this video, but the market is not 100% random. If you can infer some bias in the market I think you could definitely skew the curve in your favor a bit more.
The market is 100% random Michael - show me 1 person who can prove otherwise with hard facts and data. The guys over at tastytrade did a massive study last year looking back more than 12 years and found an equal number of down days in the SPX as up days. No disputing that the market is random - sorry.
There is a conflict of interest because at the end of the day they are trying to sell their product. There is statistical data that proves seasonal effects in the stock market; the majority of the top performing hedge fund have a fundamental approach to the markets for a reason. I think you have great videos, I agree with mostly all of the options concepts you teach. I just personally do not think the markets are random, there is evidence to prove that.
Michael Shibilski I don't sell anything in this video and our "product" is education. Again show me where you find that data that proves the market is NOT random. That picking stocks is actually possible and predictable because it's not. Hedge funds don't make money picking stocks - they make money structuring companies and turning them around through cash flow and other highly leveraged investments. I worked in M&A and know how that works. Just because the market has gone up doesn't mean it's not random. In all seriousness I'm glad we are having this discussion because it's what everyone needs. Hopefully this helps everything make their own opinions.
+Jawahar Bhaya Yep we cover that here in our Options Pricing and Volatility module: optionalpha.com/members/video-tutorials/pricing-volatility it's 100% free course
So I just wanted to put in a call order since the stock was dropping anyway but ...... the trade kept showing substantial loss but huge gains if processed.The order couldn't be completed because technically I 'm not sure my portfolio could cover it . Oh yeah, and what's with the decimals?
So, im wondering what your credibility is. How much money have you made? how long have you been doing this? Average profit per month (begining and now)? Hope to get an answer, thanks!
Why do I need to show you an academic pedigree to prove I'm right? Shouldn't my argument be enough? You can see on our blog and site we've been doing this for more than 7 years now.
Option Alpha Thanks for the quick response but am having issues registering for some reason. Seems like it won't take my password. Do you have any suggestions? This is the message I am getting- "Sorry, This Content is Protected Not a Member? Sign Up for FREE. Already a Member? Simply Login Here".
Check out this post as I go through it in detail here: optionalpha.com/3-step-formula-to-easily-figure-out-how-many-options-contracts-you-can-trade-16094.html
The larger you get the smaller your trades should become anyway. If 5% can't buy you a bluechip stock (or anything for that matter) then your first goal should be saving money.
Trade small, trade often.....hmmmm. I like to sit in cash and wait for golden opportunities. Have a one year perspective on growing the account. You don't have to trade everyday.
Sorry, I stopped the video. Claiming stuff that is mathematically simply wrong is too much. If the changes for ups would be exactly the same as for downs you could stop trading and investing! All mathematical models wouldn't work any more.
Michael sorry you feel that way but that doesn't change the facts - the market has a 50/50 shot of going up or down every single day. There has been a lot of research to confirm this and while that doesn't mean it can't go higher (or lower) it just means you cannot pick the market direction on a daily basis. When you said I was "simply wrong" I would ask that you prove with hard data where you are getting your info that the market is nothing more than a 50/50 bet each day?
this stuff is awesome I'm subscribing, I asked you some questions before when I had no idea about the terminology but kept goggling various terminology and I get this now.
Darryl Lobo great to have you on board!
thanks a lot....learnt a lot from this...i am an active options trader and initially lost a good amount of my capital..but now recovering slowly as mentioned in your video...by doing small trades and adding a little profit each day...good going...thanks a lot again for sharing this video.
Thank you so much for your time and effort. I find it very helpful. I have just decided to learn how to trade options, say I'm a baby in this :) please recommend me where to begin, what to read, what to watch as a beginner and I'll be so thankful to you. I already am but the volume of my thanks will grow. Thanks in advance. You're the best!!!
Thanks. I'm new to options and looking at some of the online presentations (especially the Greeks) just leaves me trying to figure out what the heck they're saying. I like your style - not cluttering up your points with sidebars off the sidebars that relate to something we haven't learned, but keeping the presentation clean, moving and building directly off the previous.
Very glad you liked the video Jack!!!
you need to upload more videos. that's not enough for us. it's very helpful. Thank you. btw, people keep saying they make 3-5% monthly income for options trading. that's impossible to figure out. is it possible?
Great info. I keep listening and reading options basics and each time I learn something new and helpful. Your teaching is simplistic and understandable. I have subscribed to your RUclips videos.
Awesome thanks!
your videos are providing great insights .. excellent work..Thanks a ton for sharing your knowledge
Great!! Simple and straight. No ads...Thanks.
I wanna discuss on 4th principle. In some other website I read if IV is high its good to sell the options and to buy if it is less. But going by your 50$ scrip example, I feel, even if we buy low IV stocks, the chances of getting profit is also very low. Am I right?
Glad you like it! (please share :))
Yes correct even in Low IV times you should really minimize trades because it's still crappy to buy options.
You are explaining this in a very good way. I'm actually personally pretty used to working with simple statistical methods and probability calculations, but I've never thought of visualizing volatility and probability distributions by overlaying the distribution on a horizontal axis.
Although on a completely different note, have you ever worked with Monte Carlo simulations for e.g. pricing of options or other options related models?
Glad you like the video and I wish my crazy graphic was more accurate but I'm not a designer by any means haha. No I have not worked with Monte Carlo
You are a Very Good Teacher,From one Teacher to another ,Thanks its been very helpful, and i am here to learn all i can,I like the monthly fee. I am here to Learn all I can .Thanks for Taking the Time out To Teach Us.Stephen
Thanks for the kind words Stephen!
Great video, easy to follow and informative. What licenses are needed to solicit these types of trades? Is it a 7 and 65? How much are you paying in commissions per trade and how many of these trades do you need to make before you start making some money?
Danny Cieniewicz I pay $1.25 per option in commission (no ticket charge) and I generally make 8-10 trades a week. I used to have 4 different licenses but right now I don't have any and all of these trades are for education purposes only and not a solicitation to buy/sell any security.
Hey guys, I'm a huge fan of your videos and recognize that this may be beyond the scope of this introduction to options, but how do you respond to the assertion that markets generally exhibit significantly more randomness than a standard distribution implies? I've heard it espoused that a security has infinite variance, and that prices are not normally distributed.
We did a podcast on this here you might enjoy Charles: optionalpha.com/is-the-stock-market-random-19323.html
Super explanations ! Thanks for all the videos. One thought I have is, for a non volatile and side ways moving stock, is it a good option to sell the call at current strike price and make money with the theta factor? Would that work most of the times?
Rakesh If volatility is low you'll want to avoid option selling overall. Instead, if you want to play the market a little sideways using a calendar spread might be a little better option (pun intended)
Thanks for your posts. I find your videos to be very helpful. You do a great job breaking down the material. I was interested in your thought on long calls extending over a year in BABA, APPL, AMZN. Stocks with great growth potential. If delta is above 560?
Glad you like them. I would go with a long debit spread vs just a long call option which would have a much higher break-even price.
Great video! do you think its better to trade options 30 days out or more because of less time decay?
Yes it's ideal to trade around the 45 day mark.
Hey Kirk one more Q. I am looking out for few options strategy in front of some big news (say like parliament election and its results). Here in India we have elections 7th April through May 17th. May 29th is the futures expiry day. In between there will be around 4-6 exit polls for different states. How to play safe and cash this the big event?
Can you suggest any of your videos for this type of month long event? or can you present one new one? Am sure, there will be a lot many guys who are looking for such ideas.
Thanks in advance!!
I think if you are expecting a big move in either direction then I would use a long strangle or long straddle.
Awesome video. A must for anyone getting started in options.
Glad you found it helpful Bert!
Hey Kirk - Thanks for the detail and explanation. Very helpful.
I have a question regarding the direction of the decay you talk about in the 2 expiration cycles chart in your video. I'm sure I am missing something obvious but you show a 'DEC 10' and a 'JAN 11' and that the decay theta decays less in JAN 11 at 65 days out then in DEC 10 it is 30 days out. Based on your previous chart it would seem that it would decay faster at the 30 days out mark. How is DEC 10 less then JAN 11 the next year that still has 65 more days?
Thanks again.
Hey Ward! The theta decay in the chart I showed for DEC was higher than JAN and therefore happening much faster - I don't see where DEC is less than JAN?
Option Alpha
I think it is a date stamp thing. The JAN and the DEC dates you are referencing are in a calendar year. I was thinking that the DEC '2010' and 'JAN 2011' were only 30 days apart. Thanks for setting me straight.
im having problem collecting enough premium. for instance any stock under $20 that i have looked at, all the one side credit spreads only generate 0.1-0.15 per contract with a max loss of $1. how do you suggest i deal with this?
Stay out of trading individuals stock options and move to the stock indexes, SPX for example.
Excellent explanations! Happy Holidays & thank you! When your in a spread, to get out (not letting it expire) you have to manually close the spread with another closing spread contract? I get confused since your opening a contract of a call/put (to open) & another on the other end to put/call (to close) - I thought this automatically closes the trade if the underlying stock or trade (asset/etf) reaches the direction your investing on (up for bullish / down for bearish)?
Correct you'd have to place a closing order to reverse the current position. The trade will automatically expire worthless if the options are OTM.
Great video, cleared up a lot of questions I had about options, I appreciate it!
You mention liquid vs illiquid options: what would be a minimum acceptable liquidity to interest you in the option (do you have set minimums)? Do you focus more on volume vs open interest? Thanks in advance!
Hey Lee - I would look at both volume during the day and general open interest. I tend to stay with options at least 1,000 or so in open interest in multiple strikes. But I will go lower than that for trades and just scale down my position size.
Do you have to have to a certain amount of money in your account in order to trade naked options and vertical spreads?
I suggest at least having $25k before you start to think about trading naked options.
Tell me about Option Alpha. I just listened to the Top 7 video. I would like to learn more.
Should help you see all we do for free: optionalpha.com
This is a great video. Thanks.
I agree with most of the concepts in this video, but the market is not 100% random. If you can infer some bias in the market I think you could definitely skew the curve in your favor a bit more.
The market is 100% random Michael - show me 1 person who can prove otherwise with hard facts and data. The guys over at tastytrade did a massive study last year looking back more than 12 years and found an equal number of down days in the SPX as up days. No disputing that the market is random - sorry.
There is a conflict of interest because at the end of the day they are trying to sell their product.
There is statistical data that proves seasonal effects in the stock market; the majority of the top performing hedge fund have a fundamental approach to the markets for a reason.
I think you have great videos, I agree with mostly all of the options concepts you teach. I just personally do not think the markets are random, there is evidence to prove that.
Michael Shibilski I don't sell anything in this video and our "product" is education. Again show me where you find that data that proves the market is NOT random. That picking stocks is actually possible and predictable because it's not. Hedge funds don't make money picking stocks - they make money structuring companies and turning them around through cash flow and other highly leveraged investments. I worked in M&A and know how that works. Just because the market has gone up doesn't mean it's not random.
In all seriousness I'm glad we are having this discussion because it's what everyone needs. Hopefully this helps everything make their own opinions.
KDH awesome thanks for sharing!
Hi Option Alpha
How much is the subscription or service?
$47 per month after the 7 day trial
Very Good!
Nice video, Kirk!
is there any thresh hold level which indicates if the implied vol is high or low?
+Jawahar Bhaya Yep we cover that here in our Options Pricing and Volatility module: optionalpha.com/members/video-tutorials/pricing-volatility it's 100% free course
hi iam a new trader i want to trade option what your indicator you use?
There's a lot we use but I prefer MACD and CCI.
So I just wanted to put in a call order since the stock was dropping anyway but ......
the trade kept showing substantial loss but huge gains if processed.The order couldn't be completed because technically I 'm not sure my portfolio could cover it . Oh yeah, and what's with the decimals?
Do you mean the trade size 5% of the capital or the max SL size 5% of the capital?
5% of your total equity capital.
I will be starting off with about 12000. Is that enough to get started.
Oh yes that's more than enough.
Good video
So, im wondering what your credibility is. How much money have you made? how long have you been doing this? Average profit per month (begining and now)?
Hope to get an answer, thanks!
Why do I need to show you an academic pedigree to prove I'm right? Shouldn't my argument be enough? You can see on our blog and site we've been doing this for more than 7 years now.
Option Alpha Agree!
Option Alpha it's this guy serious!
What is the online membersip?
+H3579A see more here: optionalpha.com
+Option Alpha Hey guy, just wanted to find out if your free course closed (The one with 12 parts)?
+Big Jay Nope it's always open and 100% free.
Option Alpha Thanks for the quick response but am having issues registering for some reason. Seems like it won't take my password. Do you have any suggestions? This is the message I am getting- "Sorry, This Content is Protected
Not a Member? Sign Up for FREE. Already a Member? Simply Login Here".
+Big Jay email me at kirk [at] option alpha [dot] com
Great video, yet you haven't described what exactly one should be doing to strike rich & fast :)
what does small trade mean to you
Check out this post as I go through it in detail here: optionalpha.com/3-step-formula-to-easily-figure-out-how-many-options-contracts-you-can-trade-16094.html
How did you calculate a 1 in 3.49 billion probability of going broke investing just 5% per trade? Is that assuming consecutive losses with no wins?
I think those are indeed the odds of getting 20 consecutive 3 sigma tail risk losses (at 5% of your starting capital per trade)
I am brand new to this and I have absolutely no idea how options work.....
Great to hear you are getting started - that's a step in the right direction. Just take your time and learn slowly. It won't happen overnight.
Okay thanks
Where do find option price
Inside your broker platform.
Wouldn't 5% depend on how big your bankroll is? If it's not very large you'll never be able to trade the bluechips; don't you agree?
The larger you get the smaller your trades should become anyway. If 5% can't buy you a bluechip stock (or anything for that matter) then your first goal should be saving money.
Trade small, trade often.....hmmmm. I like to sit in cash and wait for golden opportunities. Have a one year perspective on growing the account. You don't have to trade everyday.
Sorry, I stopped the video. Claiming stuff that is mathematically simply wrong is too much. If the changes for ups would be exactly the same as for downs you could stop trading and investing! All mathematical models wouldn't work any more.
Michael sorry you feel that way but that doesn't change the facts - the market has a 50/50 shot of going up or down every single day. There has been a lot of research to confirm this and while that doesn't mean it can't go higher (or lower) it just means you cannot pick the market direction on a daily basis. When you said I was "simply wrong" I would ask that you prove with hard data where you are getting your info that the market is nothing more than a 50/50 bet each day?