3 Important Concepts Options Traders Should Know | Options Trading Concepts
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- Опубликовано: 13 июл 2024
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Past performance is not indicative of future results. Performance is not presented net of all commissions, fees, and expenses. Multi-leg option strategies incur higher transaction costs than single leg trades as they involve multiple commission charges. Examples provided are for illustrative, informational, and educational purposes only and are not intended to be reflective of results you can expect to achieve. Supporting documentation for any claims (including claims made on behalf of options programs), comparisons, statistics, or other technical data, if applicable, will be supplied upon request.
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starts @ 3:50
Great Content, Awesome work guys, this channel worth more but very underrated
Love your series Mike!!! Couldn't have built wealth the way I did without it!!
Thank you so much! I'm glad you enjoy it!
Excellent content, most excellent. I’ll be watching the archives and the new show!
Thanks Mike and Whiteboard! Very helpful.
light-bulb moment when breaking down the vertical spread. I finally get it now...it took watching tons of videos and now i see how it operates. thank you
Thanks Mike for making these videos
Love your series Mike thank you i am at your 19th episode of this playlist foundation is set
love the videos but this is best intro video to options. Thank you.
Good stuff - thx!
You're too good teacher and salute to you!
Very good contents. 👍🏽
What is a good amount of volume and open interest in order to consider an option liquid? Is there a minimum value like 1,000, 500, 250 or something?
HI Irwin!
Here is a video we have on the parameters we look at to define a liquid underlying/market. ontt.tv/1rnvHVM Hope this helps!
Hi Mike,
I am new to options and i have watched all your "Mike and the white board" videos. All the videos are priceless. i have one question, while trading different strategies on different stocks , do you recommend keeping the universe of stocks limited? Because i would pick any look at the IVP, few technical parameters, option chain and decide ok this one looks will be going down slowly and take a credit call spread. So is this the right way or should i focus on 4-5 stocks?
We typically stick to liquid stocks, which is about 200 underlyings at the moment - trading illiquid stocks is where you can get into trouble with slippage and the inability to get in and out at a fair price.
Do you guys have a video or a manual that can provide a combination of all the scenarios @ 7:02. Thank you!
What do you mean by this? Shoot an email to support@tastytrade.com and we can help!
Do you take a point ot point measure over the year to measure actual Volatility, regarless of the Swing in the stock price over the course of the year? ie A stock price in Jan is $100, in June $200 and down to $120 by end of December, next January Is the Volatility 20% or 100%?
The realized volatility would be 20% for the year, but implied volatility is forward looking. IV is a reflection of option prices, so the option prices would determine what IV% would be for the future.
Question about an Iron Butterfly. There are gaps in the strike prices, these gaps are what make the spread, otherwise one is going to break even in a neutral position. I get the math when the stock breaks above the Buy Call Strike, I get the math when the stock goes below the Buy Put Strike, But when the stock fall between the Sell Put, Sell Call but below the Buy Call and Above the Buy Put, I cannot figure the math. What happens in these narrow ranges?
Check out this blog post - it will help! - www.dough.com/blog/long-butterfly-spreads
Whole series has helped me so much, but i had a question if anyone has an answer. So if I'm long a call option, just one single option, and I wait until the underlying rises so I can sell the option for a profit, won't I now be selling somebody the right to exercise the option against me? In other words is it the last person in the chains responsibility to provide or take the shares if the contract is exercised? Thanks
Glad it was helpful!
Basically, if you are long the option, you and only you have the right to exercise. If you are short the option, the opposing party has the right to exercise, and you would be obligated to provide long or short shares if they exercise.
If you are long the call option, you have the right to turn it into shares, or you can sell it for a profit if it is profitable.
If you were short the call option and it went in the money, you would now be at risk of getting assigned.
I hope this helps!
+tastytrade oh ok so only the original option writer has the risk of being exercised on, thank you!
Hi Mike, Great series; how do i watch your series from day 1?
You can go all the way to the back of the archives here if you want to watch all segments, but most of them are on this youtube channel!
www.tastytrade.com/tt/shows/mike-and-his-whiteboard
@@tastyliveshow Thanks Mike, you guys have so much stuff. I have been trading options for the past two months, where do you recommend that i start?
does trends start on a smaller time frame then appears on larger or does it start on a larger time frame and appears on the smaller?
What trends are you referring to? Implied Volatility? If so, it's impossible to tell when looking forward, but what we have found is that when we look back at implied volatility levels, REAL volatility tends to be less than the implied volatility. This means option prices can be overpriced compared to actual movement!
Say you look at the same symbol but different time frames they all tend to have different trends some may be rising moving sideways or falling. I'm not sure whether the short term tends to follow the trend of the bigger timeframe or does the smaller time frames grow into the larger timeframe. I've seen both during back test so this is all a matter of subjectivity?
Price trends of the underlying assets shown with a chart I watch forex
Over all good info but vague as to option interest, for me I see it as how many people are trading at this position. So more people say 112 is safer to enter than say 12.
Open Interest is very important as well, we agree!
ok so if I buy 9 contracts for 1.91 and they are now after a month valued at 3.82 and I want to sell them ... dont I just sell and keep the profit I made?
William Nunn you sell 9 contracts and buy them back.
How can you concentrate on naked options as a new trader? From my understanding you can't even get approved for that form of options trading with most brokers until you've had a couple years trading or you have an account large enough to cover the losses that you may incur if the trade goes bad on you. You can't just open an account with $500 and expect to sell a naked put and have money magically appear in your account.
You should give examples of how these concepts work.
Andrew,
Here are some segments that give more detail on these concepts:
Call Options - ruclips.net/video/kmQ20J_3K7Q/видео.html
Put Options - ruclips.net/video/FAwDrUqpGUI/видео.html
Liquidity - ruclips.net/video/7K3navPkzlU/видео.html
Implied Volatility - ruclips.net/video/KvuQGqKBh2U/видео.html
What does "in the money" mean?
That just means that an option has intrinsic value:
If a call option is BELOW the stock price it is in the money (ITM) because it gives the owner the right to buy shares at a lower price than the market - it has real value.
If a put option is ABOVE the stock price it is in the money (ITM) because it gives the owner the right to sell shares at a higher price than the market - it has real value.
It has nothing to do with profitability - that's important to keep in mind!
I hope this helps!
Just curious.... being new to options, and still learning, all the information I'm coming across is its best to be an option seller. Which I get, IV overstated and all. Who are all these buyers buying what were selling. it seems to be common knowledge its better to be a seller than a buyer. DO they not know they are overpaying? And why are there so many buyers out there?
I would say most people are buying options to speculate / gamble, hedge their long stock fully, etc. I would also say that it seems like common knowledge to you, but that is far from the case. I don't think many option buyers really understand extrinsic value, and everything that is working against them when they are doing it.
Hello, very noob questions here. Does buy to open mean a long call? Does buy to close mean a long put? Does sell to open mean a short call? Does sell to close mean a short put? If not what does buy or sell to open or close mean? Thanks in advance!
Nick,
Options are unique in the sense that you can sell an option even if you have never owned it.
With that said, buy to open just means that you opened an option position, and you bought it to open. Buying a call, or buying a put both fall under this. If I then wanted to close this position, I would have to sell to close the call, and sell to close the put. Routing the opposite order on the same strike and expiration will close the trade.
Sell to open means you opened a position, and you sold the option to open it. selling a call or selling a put are examples of this. If you wanted to close the position, you would have to buy to close the call, and buy to close the put.
Confusing, but I hope this helps!
Oooh so if i'm understanding correctly,
Buy to open is to start an option trade on the long side,
Sell to open is to start an option trade on the short side,
and buy or sell to close is to end a trade?
Yep that's correct!
what is Do?
dough.com is our sister company - it is a trading platform that links with TD Ameritrade similar to thinkorswim. It is very visual and has a lot of cool features - you can check it out for free if you'd like!
I second how cool the Dough platform is... It gives a very cool graphic interface, you can play around with various strategies, seeing graphically how price changes affect your POP etc. I steered a beginner options trader to Dough to show how Iron Condors work when you play with the spread of short and long options. After literally a few minutes with Dough, she said "OK, I get it now..."
I'm not affiliated with Dough or tastytrade. I just think Dough is Uber cool.
I ONLY want the basics as a beginner...
Mikes Canadian right
I know what I'm about to say goes against the basic philosophy of tastytrade.com, but most (if not all) beginner traders have no business messing with options in any serious way, unless their money is growing on trees. There is as you said an absolutely massive amount of concepts and tricks of the trade to learn and master, and the learning curve is incredibly steep for most beginners. In short, the market deck is completely stacked against them. They will be facing a clear disadvantage (at a level which I would consider to be pure gambling by an uninitiated player) and the losses could be massive and devastating. Not unless a beginner has been adequately tutored, & in a real life trading environment, for some considerable amount of time by a highly experienced pro, should they even contemplate the idea of dealing with options. And by tutoring I do NOT mean attending those goofy courses given by a bunch of self-appointed gurus who charge an arm & a leg & claim that they do miracles.
I understand your concern, and it is a fair one! There are plenty of things to learn when it comes to trading options, but that doesn't mean a beginner can't have success with beginner strategies like covered calls and/or short puts, which have a lower max loss than buying stock outright. Of course to be able to maneuver around markets in all situations it takes a good amount of experience and market awareness, but everyone has to start somewhere if they want to learn on their own and for free, and we believe we are one of the best options out there.
+tastytrade Yes, what you are doing is quite admirable in so far as offering access to free quality training. I just question how many people will actually invest the necessary time and effort to watch your entire series (and hopefully more training) before dabbling in the option's trading world.
do it small and do it often and learn that way
NothingMaster, will you ask a baby to not learn walking because he or she may fall?
Market deck isn't stacked if you doing defined risk options selling... it's stacked in your favor...
Buying stock is a gamble... selling options is becoming the house...
Start at @3:18
Here is what I am not understanding. A person buys a call option, they expect the stock to rise, say the strike price is $50 and in 60 days the stock goes to $80. The call buyer paid a $200 premium and the contract is for 100 shares. After 60 days, the buyer collects $30 X 100 = $3000 minus $200 for the premium. That a $2800 return in 60 days.
WHO PAYS THE BUYER HIS $2800?
Is the person who SOLD him the option shelling out $2800 from their own trading acct?
Not necessarily - There doesn't have to be a direct link between a buyer and seller of a contract. Think of it more like a market maker taking hundreds or thousands of orders and matching them up randomly. If you wanted to close out of your contract, you would just place an order to sell the same call for a higher price, and once filled you would net the difference.
After reading about Volume, Liquidity, and IV ....it makes sense. TKS
In addition the seller of the call may have owned the 100 shares perhaps bought under $50/share. The call may be covered and seller may have done so to collect premium and shield somewhat to the downside.
If option prices are more expensive than they should be, why are there people that buy options? I mean, it doesn't make sense
Too many jargons for a beginner.