Yes. Pace was good. Just yesterday I was asking people who know more than me about the market what’s the point of waiting for earnings? Some companies report better than expected earnings and their stock still dropped; for example CI. Now, I have a reason to follow weekly earnings and buying a potentially profitable option the same week.
Noob here. So, let me get this straight... the more ITM the call option is, the lower the extrinsic value which would equate to the most money I can lose when my option expires? I use Schwab and ETrade and I don't see the Extrinsic Value column in the option chains. Any idea why? Great vid! Thanks!
Nice video Chis, but you might want to (quickly) explain the higher price/cost associated with buying ITM options. Buying ITM eats up more of your capital per option purchased and also puts you at risk of losing more money, if the trade turns against you. There is no free lunch. Removing theta decay increases total capital loss risk per option. Like one of the other commenters stated, I'd rather buy longer dated options and take advantage of the theta decay "plateau" portion of the curve. But still, good video! and food for thought all the same.
As a new options trader, I have learned a huge amount from your videos. Thank you for such precise detailed instructions. I tell everyone to study your videos because you explain it so simple. Keep your videos coming.
Wow, I usually avoid any trading related content on youtube like the plague but this is the third video I'm watching on this channel and this guy didn't even try to grift me on buying a course.
You understand options very deeply. And the clarity of the explanation is second to none. The internship at tastyworks, I bet, was a life changing event. You worked hard and learnt well.
@@charleewayne5164 Abso.freaking -lutely YES!!! I want the content to be just as good if not better than the project option content. These videos are dope. I will start listening and following closely! All the best on the new adventure!
Hello Chris I do nearly 80 of all my spreads as Debit Spreads für max 10-14 DTE. These are the most profitable trades regarding daily profit. In my opionen I thank you so much for this video. I learnt how to play with extrinsic and intrinsic Value which will make my debit spreads fare more profitable Thank you so much!!
Regarding the spread price(s) . . . Example: FB @ $249.29 Spread Price = $5.80. How is that obtained when the ask-bid difference is 5.95 ? Did you make different offers that aren't shown? Short 250 = $11.50 (bid) Buy 240 = $17.45 (ask) Great videos! Thanks!
Would have mentioned buying later expiration dates and included the max p/l with various price actions on the debit spreads, but besides that it was clear and concise! Liked and subbed.
For debit spreads, the sweet spot I have found is the long option one strike ITM and the short option half the delta of the long. Reasonable protection against theta decay and still a reasonable profit potential on the spread.
you can also buy long expiration options like at least 150-180 days. theta decay is slow burning then. it gets bigger when you get down to 60-40 days to expiry though
But conversely, the further out the expiration, the lower your Delta and the smaller your changes in option premium will be based on movement in share price :|
not necessarily - you can buy a high delta option. Also, you can reduce the cost base by selling shorter term options against it - a.k.a. poor man's covered call/put.
Hi Chris, I enjoy your videos for their content and depth of information. Thank you. This video made me think of calendar spreads and then selling shorts against the long option, a PMCC. Can you speak to your ideal structure... 1. length of the long option, say calls. 2. the ideal setups. 3. the advantages vs disadvantages. Thank you. I appreciate it.
Excellent video. I would mention however, that first strategy works the best with liquid stocks, because bid/ask is not that wide for the deep in the money and for far out of the money options.
Brilliant video as always! Your answers to the questions in the comment section are sometimes much more useful for me than the video itself (in a good way). Thank you for the highest quality videos!
Learning alot everytime I watch your video. Thank you very much Chris! One newbie question, i did a vertical spread and both are in the money at the moment. Does it mean that i have to exercise it (the long option) before market close on the day of expiry? Or will Tastywork automatically net the spread for me and i take just the pre-determined loss?
Haha yeah I got REALLY busy all of the sudden with other engagements and a family visit. I should be more consistent in the near future, especially on my other channel. Thanks for watching the new vid!
Hi Chris I waswondering if it’s more convenient to buy call in the money or out of the money with the underlying moving in a clear uptrend and with strong momentum? Thanks
Hi Chris thank you for creating this channel. I am new in option and I use Tastyworks that why I found this channel. Very imformative. When you trading that spread do you place that two trade (Buy a Call and Sell a Call) in the same day or I can place a Sell Call in two weeks after my Buy Call?
This is so relevant to what I've been trying to do and I'm so happy I saw this. I've had a really frustrating summer trade wise. Thank you dude. Please put out more content. I always share your vids. Be well.
A side note to that would be I was noticing sometimes I would buy myself a little bit more time on long options in order to see what would happen after earnings or an FDA approval (if the news was lackluster)... I could never figure out why, even if stock price movement would eventually rectify, I'd still be losing money because of extrinsic decay. Very helpful...
Hello Chris! Love your channel, subscribed and watching. Obviously that I'm a beginner. Today is 11/19/2020 and I want to ask you about NIO ($47.49) stock option that I have an unpleasant experience with. So, If I may, I've purchased the call option in the money ($46), the stock moved further up to 48.09 tomorrow it supposed to expire, so I sold it, but got no gains at all. Please explain this situation. Kind regards
I really recommended signing up with WilliamsJames, he so far more the best platform broker in my opinion and he will help you out with anything you want.
I still need the beginner courses on call options. I generally only sell puts. I still can't grasp calls although I do get an understanding of covered calls. Which means your 100 shares can get called away. As I see it call buying is mostly meant for big money option players generally and call selling is for those wanting to sell (unload) their shares more favorably if the stock takes a dramatic nose dive when they least expect it. Are these observations correct?
Great video, thank you! Can you make a video similar to this one but show the payout (or loss) if the price of the stock rises above the call or falls below the put?
Hey Chris... Great video as usual! For the first technique (deep ITM calls), is there a significant difference in the deltas of the deep ITM calls and the ATM or OTM calls?
@@yyzcaptain thanks. Actually, after I watched this video, I went back to my trading platform and checked the deltas for different combinations of atm/ itm and near and far off expiries, and I concluded that deep itm and far off expiry options are the best to invest in. High deltas and low thetas, plus some time buffer in case the price goes against you. They are a bit more expensive but the options retain that value, unless the price really goes against you.
what is the best way to profit from a quick change in stock price aside from a single call or put buy? I've been doing spreads and they dont really change the spread price that much with stock price moving in my favor. is there any other strategy that can quickly profit from a fast large stock price swing?
What's the catch for the last method? I think buying a Spread of a Long ITM Call & a Short ATM Call has the same risk & profit as selling a Spread of a Short ATM Put & Long OTM Put (Credit Put Spread), right?
So, to find the break even price, when it's a vertical spread, we add the price of the spread to the current stock price? Is this how we calculate the break even for a spread, generally?
Great video Chris! I am subscribed and learning from your videos. My question is this: if you put on one of those call debit spreads that you showed do you have to close the position before expiration in order to not get assigned 100 shares?
Hi Chris, I Iike your videos very much. Im new to the game and will like to learn so much more. I was thinking about taking your course but I want to know if for a person that does not know much about trading options this will be suitable. I literally decided I wanted to learn a few weeks ago and have been seeing a lot of youtube videos, but I want to focus on trading options. Out of all the videos I have watch I like how you explain and go over everything. Thanks
Great topic, great channel. Congrats on your vid Options Trading for Beginners getting 1 mill views; it is one of the best out there no question bout it. Now can you do a vid on how to find the next Kodak trade upon initial volume spike and how to time long puts as it fizzles out a few days later? Lol.
Does this strategy only work on stocks moving sideways? what if the stock price moves above the strike price of the call option you shorted? letting the shorted call option run to the expiry date would run the risk of the shares being assigned to you.
Early assignment is unlikely unless the short call gets so far ITM that it has almost no extrinsic value. It remains a bullish strategy as an increase in the stock price will result in less extrinsic value in both options, allowing the spread to get closer to the max value / spread width. Just keep an eye on the extrinsic of the short call. If it's over $1.00 of the price then it's highly unlikely to be exercised, unless the stock is paying out a dividend more than $1.00 while you hold the trade.
@@projectfinance thank you for clarifying. great videos by the way. i've been trading options a few months now and your videos have been exceptional. will try the covered calls and this debit spread in my paper-trading account.
Thanks for making those amazing contents for us. Recently, I've been discussing a question with a friend of mine who works for Tesla now. He joined Tesla late last year as a software developer, now, the stock price has 10x+ed during the last few months, he wants to make sure he profits from this stock rises regardless of the future price changes. Is it wise for him to purchase naked put option at current price until a part of his stock gets vested early next year?
Hey man do you have a video on selling cash covered puts? I am confused on a few things like do you collect the total premium upon expiration? Even if say you only made 20% return a day before expiration if you just let it expire would you collect the full premium or just the 20%? Love your stuff btw man super helpful in helping me to branch out and try my hand at options.
I can update a video on that, and thanks for checking out my videos! When you trade options, you pay/collect the option value at trade entry. As the option value changes through time, your P/L also changes. So if you short a put option, you collect the option value at trade entry. If the put value falls, you'll have a profit. If you want to close the position, you pay out the current put value, and your overall profit is the difference between what you collected initially and what you paid out to close the trade. It's not an all-or-nothing situation where you get all of the premium at expiration. People say that because if the option is worthless at expiration, that means the option price is $0, in which case your profit is the entire put premium you collected at entry. It's a fluid P/L change from trade entry to expiration. It doesn't all happen at one moment.
Chris - how are profits from options taxed? I know it's smart to hold shares of stock for at least a year, but is the duration of the option contract the determining factor of tax on any profit?
Thanks! I do have a video on LEAPS (recent upload) but not specifically in low IV. But in that video, I looked at a long-term SPY call option that experienced virtually no IV decrease in the long-term expiration while the short-term IV (the VIX) went from 90 to 60. The longer-term options have much more stable IV/prices.
Calendar debit spread is the best strategy: Sell a call (w/ higher strike) that expires 1 week before a call that you buy. You get positive theta decay!!!
What if I'm a $500 Robinhood instant account trying to trade SPY credit spreads, usually shorting an OTM put ($330 strike) while buying an OTM put at a lower strike ($329 strike). Usually this would yield around 5-10% profit while only requiring $100 or less buying power per spread. My question are: 1. what happens if the spread I short expires in the money & I am auto exercised? Will my broker pump $33K cash into my account super quick (I definitely don't have that much by myself) to buy the shares and sell them right back? 2. Also, my Robinhood instant is not a standard margin account, so I don't think I can short. If my long put expires in the money & I am unable to find anyone to buy the put before then, will Robinhood make me auto exercise the put? Will it make me sell $32.9K shares worth of SPY that I don't own & then immediately but them back for me? I wanna make sure I don't accidentally blow my account up trying to trade an affordable credit spread. Also, can you buy options on the day they will expire? Like in the morning?
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Bitcoins spike can’t be compared to YFIs, many argue on this two assets. I have more faith in bitcoins though. Btw Jacob Lowery is the best to trade with
you should check out the guy who I'm sure must be his brother, or cousin or something, Mike on TastyTrade... that guy is RIPPED... when I say "check out", I don't mean... I'm not saying... I just mean "look at"... you know what I mean... I'll shut up.
Subscriber here. Thank you for refraining from using music in your videos. It was completely distracting and caused a reduction in value and effectiveness of what you are teaching. I am able to absorb much more without the music. Music off=learning up. Should I show you a chart?
Thanks for the sub! And I don't need to see a chart! I agree the music was distracting, which is why I stopped using music during the explanations. Maybe I could use "music" like coffee shop lounge music that isn't very intrusive. For now I won't be using any music.
@@projectfinance If your objective is to create an optimal leaning environment so that people will come to you when they want to actually learn, do not use any music. It adds nothing. It takes away focus. If what you are attempting to add is quality and elegance, do so with the intention of creating an optimal learning environment and do so with your slides (which are good the way they are). And you do not use useless filler words when you speak, which is perfect. Sometimes you speak a bit fast. But, it isn't terrible because we always have the rewind button!
Create something "academia" level. Ask yourself "Does Khan Academy use music?" Ask yourself, "If I take an online course at a college or university are they going to play music?" (the answer is no, BTW) If i did'nt mention it, your slides are great. Simple. Uncluttered. You can use a soft background (or a different font color) to separate different concepts, for the viewer to easily, and at-a-glance, separate the concept in their mind, if you like. Remember the easier you make it for people to learn these super-complex ideas, the higher the quality of your work.
I can't believe I didn't talk about buying longer-term options in this video! That would have been a nice addition. I'm a fan of buying long-term calls as well (1.5 - 2 years out).
@@projectfinance LEAP options are awesome! I made money on couple of them when IV jumped higher even when the price moved against the direction of my options.
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Finally a new video out! What did you think? Did you learn something new? How was the pace? Let me know and thanks for watching.
-Chris
Yes. Pace was good. Just yesterday I was asking people who know more than me about the market what’s the point of waiting for earnings? Some companies report better than expected earnings and their stock still dropped; for example CI. Now, I have a reason to follow weekly earnings and buying a potentially profitable option the same week.
Thanks Chris. Question - I heard someone say they’d never buy an ITM option. Why would that be?
Noob here. So, let me get this straight... the more ITM the call option is, the lower the extrinsic value which would equate to the most money I can lose when my option expires? I use Schwab and ETrade and I don't see the Extrinsic Value column in the option chains. Any idea why? Great vid! Thanks!
I got whacked by ATVI earning and i wondered why value drop drastically, now i know why , thanks a lot boss.
If you SELL OTM lot TWICE THAN ITM BUY VALUE IT COULD BALANCE AND GET MORE MONEY A DOUBT PLEASE CLARIFY
Absolutely the best teacher of options out there! Thankyou again Mike! So clear and understandable and well articulated. These are gems!
Nice video Chis, but you might want to (quickly) explain the higher price/cost associated with buying ITM options. Buying ITM eats up more of your capital per option purchased and also puts you at risk of losing more money, if the trade turns against you.
There is no free lunch. Removing theta decay increases total capital loss risk per option. Like one of the other commenters stated, I'd rather buy longer dated options and take advantage of the theta decay "plateau" portion of the curve. But still, good video! and food for thought all the same.
As a new options trader, I have learned a huge amount from your videos. Thank you for such precise detailed instructions. I tell everyone to study your videos because you explain it so simple. Keep your videos coming.
Great video but I need to re-watch a couple of times to fully absorb! Thanks, Chris!
God Bless You. It's the first time I truly understand what it means to do spreads. Thanks
thanks for the video.
Wow, I usually avoid any trading related content on youtube like the plague but this is the third video I'm watching on this channel and this guy didn't even try to grift me on buying a course.
You understand options very deeply. And the clarity of the explanation is second to none. The internship at tastyworks, I bet, was a life changing event. You worked hard and learnt well.
@@charleewayne5164 Abso.freaking -lutely YES!!! I want the content to be just as good if not better than the project option content. These videos are dope. I will start listening and following closely! All the best on the new adventure!
Hello Chris
I do nearly 80 of all my spreads as Debit Spreads für max 10-14 DTE. These are the most profitable trades regarding daily profit. In my opionen I thank you so much for this video. I learnt how to play with extrinsic and intrinsic Value which will make my debit spreads fare more profitable
Thank you so much!!
Thank you. I'll be using this for the upcoming NIO earnings
thank you, Chris. this is super helpful. if YT would allow, i would “like” this video several times.
Thank you Randy :D
Legendary options content creator, learning so much from you Chris. Much appreciated for keeping it 💯
Very nice. Deep thoughts! Thank you!
Regarding the spread price(s) . . .
Example: FB @ $249.29
Spread Price = $5.80. How is that obtained when the ask-bid difference is 5.95
? Did you make different offers that aren't shown?
Short 250 = $11.50
(bid)
Buy 240 = $17.45 (ask)
Great videos! Thanks!
Would have mentioned buying later expiration dates and included the max p/l with various price actions on the debit spreads, but besides that it was clear and concise! Liked and subbed.
Your no b.s option strategy is a winner 🏆
For debit spreads, the sweet spot I have found is the long option one strike ITM and the short option half the delta of the long. Reasonable protection against theta decay and still a reasonable profit potential on the spread.
you can also buy long expiration options like at least 150-180 days. theta decay is slow burning then. it gets bigger when you get down to 60-40 days to expiry though
Theta decay is greatest near expiration. Another means of slowing decay is buying an expiration date further out.
Yep, I forgot to talk about buying longer-term options. Thanks for checking out the video
But conversely, the further out the expiration, the lower your Delta and the smaller your changes in option premium will be based on movement in share price :|
Been learning that the hard way... Staying away from weeklies....
not necessarily - you can buy a high delta option. Also, you can reduce the cost base by selling shorter term options against it - a.k.a. poor man's covered call/put.
@@MoltenMouseMetal i dont think delta has anything to do with date of expiration
Hey Chris! Thanks for this!
Thanks Chris! I definitely learned something new! I just started trading options and I have a learned a lot tips from you. Thank you for your time.
Thank you for all your free material. Can't express how much I've learned from you. Greatly appreciated 🙏
Hi. I visited you site, do you have a recommended order to watch the video... these videos are very good
Hi Chris,
I enjoy your videos for their content and depth of information. Thank you.
This video made me think of calendar spreads and then selling shorts against the long option, a PMCC. Can you speak to your ideal structure...
1. length of the long option, say calls.
2. the ideal setups.
3. the advantages vs disadvantages.
Thank you. I appreciate it.
Excellent video. I would mention however, that first strategy works the best with liquid stocks, because bid/ask is not that wide for the deep in the money and for far out of the money options.
Brilliant video as always! Your answers to the questions in the comment section are sometimes much more useful for me than the video itself (in a good way). Thank you for the highest quality videos!
Amazing presentation and no fluff either. Subscribed
Very nice! You have such an easy style of teaching. The rhythm and pace is perfect for me. Well done and thanks again!!
Thanks for the nice comment. I'm glad you liked the pacing/teaching. More to come!
Thanks you, I didn't have to slow down the video to better understand.
very clear explanation mate.Please post regular videos !
Very nicely explained. I believe, I need to practice more on my extrinsic value calculations but your explanation really helped. Thanks!
Good one! Very helpful for novice and beginners. Thanks!
Hey Chris,
Did you touch up on LEAPS? Wouldn't that be another strategy to employ here?
I never used to buy deep in the money, always at either side of the border line. Should try that now, it makes sense.
Learning alot everytime I watch your video. Thank you very much Chris! One newbie question, i did a vertical spread and both are in the money at the moment. Does it mean that i have to exercise it (the long option) before market close on the day of expiry? Or will Tastywork automatically net the spread for me and i take just the pre-determined loss?
You are the options real boss. Thank you for the video.
So excellent. I needed exactly this!! Lost do many calls to zero
Hi.. if we are bullish n expiry is close , so put spread is better or call spread is better
Isn’t the last call spread you went over the same as selling the put credit spread with the same strikes? Thanks for the great content!
Thanks a lot man, makes perfect sense the way you explain things. Much appreciated!
Chris kindly make a video on how to set our stoploss and target in option trading
Great video! I was just thinking today that it has been a while since your last video. Great slow pace 👍👍👍thank you 👏👏👏👏
Haha yeah I got REALLY busy all of the sudden with other engagements and a family visit. I should be more consistent in the near future, especially on my other channel. Thanks for watching the new vid!
Do you have a video where you show how to calculate intrinsic value?
When a stock is being pumped - is that similar to an earning announcement?
Thank you, I understood some of it.
Thank you so much for all the information you provide on your channel. I've learned so much from you!
Great thank you...are you not worried that with this very close in the MONEY spread for your short..that your contract could be exersised?
No. Early assignment risk is an irrational fear.
Hi Chris I waswondering if it’s more convenient to buy call in the money or out of the money with the underlying moving in a clear uptrend and with strong momentum? Thanks
Thanks for informing video. The pace was good and the explanations
were great. As always you explain the situations in ways that are easy to grasp.
Can you create a video talking about Covered Calls? The good the bad and risk. Thanks
It is a very informational video. Would like to learn more about writing debit and credit spreads. Thanks Chris!!
Well said , your explanation was great especially the view on the option chain.
awesome! your voice is so crystal clear and very good explanation! Keep coming
Thanks, will do!
Hi Chris thank you for creating this channel. I am new in option and I use Tastyworks that why I found this channel. Very imformative. When you trading that spread do you place that two trade (Buy a Call and Sell a Call) in the same day or I can place a Sell Call in two weeks after my Buy Call?
What do you think about calendars or PMCC ?
This is so relevant to what I've been trying to do and I'm so happy I saw this. I've had a really frustrating summer trade wise. Thank you dude. Please put out more content. I always share your vids. Be well.
A side note to that would be I was noticing sometimes I would buy myself a little bit more time on long options in order to see what would happen after earnings or an FDA approval (if the news was lackluster)... I could never figure out why, even if stock price movement would eventually rectify, I'd still be losing money because of extrinsic decay. Very helpful...
@@Roman_andtheprey Long Straddle - you win either way
@@calvinlong1321 A long straddle will lose money if the underlying doesn't move much or moves slowly.
@@herrickinman9303
Exactly ! What would happen after earnings or an FDA approval most likely is either up or down not moving sideway, isn't it?
Is a call spread the same as a bear call spread? Using Etrade plateform. Trying to learn the setups. Thanks
Spot on Chris! Well done!
The great part about spreads as well is just in that it helps with risk management.
Spreads are great ways to throw money away.
@@trixy8669 do explain
Hello Chris! Love your channel, subscribed and watching. Obviously that I'm a beginner.
Today is 11/19/2020 and I want to ask you about NIO ($47.49) stock option that I have an unpleasant experience with. So, If I may, I've purchased the call option in the money ($46), the stock moved further up to 48.09 tomorrow it supposed to expire, so I sold it, but got no gains at all. Please explain this situation. Kind regards
I'm indisposed now.
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His availability is on Whats-App.
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The Mr Meigee of options is back!
I still need the beginner courses on call options. I generally only sell puts. I still can't grasp calls although I do get an understanding of covered calls. Which means your 100 shares can get called away. As I see it call buying is mostly meant for big money option players generally and call selling is for those wanting to sell (unload) their shares more favorably if the stock takes a dramatic nose dive when they least expect it. Are these observations correct?
Well explanation!! Thank you. Could you please make a video on naked options.
Great video, thank you! Can you make a video similar to this one but show the payout (or loss) if the price of the stock rises above the call or falls below the put?
I needed this exact video a month ago😂 Thanks so much bro!
Hey Chris... Great video as usual! For the first technique (deep ITM calls), is there a significant difference in the deltas of the deep ITM calls and the ATM or OTM calls?
Deeper ITM calls have deltas closer to 1. ATM around .5 and decreases further OTM.
@@yyzcaptain thanks. Actually, after I watched this video, I went back to my trading platform and checked the deltas for different combinations of atm/ itm and near and far off expiries, and I concluded that deep itm and far off expiry options are the best to invest in. High deltas and low thetas, plus some time buffer in case the price goes against you. They are a bit more expensive but the options retain that value, unless the price really goes against you.
what is the best way to profit from a quick change in stock price aside from a single call or put buy? I've been doing spreads and they dont really change the spread price that much with stock price moving in my favor. is there any other strategy that can quickly profit from a fast large stock price swing?
What's the catch for the last method?
I think buying a Spread of a Long ITM Call & a Short ATM Call has the same risk & profit as selling a Spread of a Short ATM Put & Long OTM Put (Credit Put Spread), right?
@@charleewayne5164 attention: this account has 1 subscriber
Nowhere better to learn than ProjectOption.
thanks! I appreciate that
So, to find the break even price, when it's a vertical spread, we add the price of the spread to the current stock price? Is this how we calculate the break even for a spread, generally?
Really insightful! 👍
Very well explained
Great video Chris! I am subscribed and learning from your videos. My question is this: if you put on one of those call debit spreads that you showed do you have to close the position before expiration in order to not get assigned 100 shares?
yes, one would close out the position
great videos ,it help me a lot ,thanks
Thanks for the comment! I'm glad it helped~
Great tutorial!!! What do you use to edit your videos?
Hi Chris, I Iike your videos very much. Im new to the game and will like to learn so much more. I was thinking about taking your course but I want to know if for a person that does not know much about trading options this will be suitable. I literally decided I wanted to learn a few weeks ago and have been seeing a lot of youtube videos, but I want to focus on trading options. Out of all the videos I have watch I like how you explain and go over everything. Thanks
Great topic, great channel. Congrats on your vid Options Trading for Beginners getting 1 mill views; it is one of the best out there no question bout it. Now can you do a vid on how to find the next Kodak trade upon initial volume spike and how to time long puts as it fizzles out a few days later? Lol.
does short call mean you buy it or sell it
Very informative.
Thanks Betty!
Great Video Chris !
Can I consider buying leaps as another way to reduce time decay? You talked about leaps a couple month ago and it was really helpful.
BA Sept.18exp 165 call theta is -0.481 , Feb 2021 165 call theta is -0.08
@@thegormlesstwit849 That's exactly what I meant and hence the question.
Thank you
Does this strategy only work on stocks moving sideways? what if the stock price moves above the strike price of the call option you shorted? letting the shorted call option run to the expiry date would run the risk of the shares being assigned to you.
Early assignment is unlikely unless the short call gets so far ITM that it has almost no extrinsic value. It remains a bullish strategy as an increase in the stock price will result in less extrinsic value in both options, allowing the spread to get closer to the max value / spread width. Just keep an eye on the extrinsic of the short call. If it's over $1.00 of the price then it's highly unlikely to be exercised, unless the stock is paying out a dividend more than $1.00 while you hold the trade.
@@projectfinance thank you for clarifying. great videos by the way. i've been trading options a few months now and your videos have been exceptional. will try the covered calls and this debit spread in my paper-trading account.
Thanks for making those amazing contents for us. Recently, I've been discussing a question with a friend of mine who works for Tesla now. He joined Tesla late last year as a software developer, now, the stock price has 10x+ed during the last few months, he wants to make sure he profits from this stock rises regardless of the future price changes. Is it wise for him to purchase naked put option at current price until a part of his stock gets vested early next year?
Hey man do you have a video on selling cash covered puts? I am confused on a few things like do you collect the total premium upon expiration? Even if say you only made 20% return a day before expiration if you just let it expire would you collect the full premium or just the 20%? Love your stuff btw man super helpful in helping me to branch out and try my hand at options.
I can update a video on that, and thanks for checking out my videos! When you trade options, you pay/collect the option value at trade entry. As the option value changes through time, your P/L also changes. So if you short a put option, you collect the option value at trade entry. If the put value falls, you'll have a profit. If you want to close the position, you pay out the current put value, and your overall profit is the difference between what you collected initially and what you paid out to close the trade. It's not an all-or-nothing situation where you get all of the premium at expiration. People say that because if the option is worthless at expiration, that means the option price is $0, in which case your profit is the entire put premium you collected at entry. It's a fluid P/L change from trade entry to expiration. It doesn't all happen at one moment.
How to apply this to strategies?
Chris - how are profits from options taxed? I know it's smart to hold shares of stock for at least a year, but is the duration of the option contract the determining factor of tax on any profit?
Hey Chris, excellent content as usual!! Do you have a video of how to trade LEAPs with low implied vol?
Thanks! I do have a video on LEAPS (recent upload) but not specifically in low IV. But in that video, I looked at a long-term SPY call option that experienced virtually no IV decrease in the long-term expiration while the short-term IV (the VIX) went from 90 to 60. The longer-term options have much more stable IV/prices.
@@projectfinance Thanks!
thanks for this very helpful
Happy to see the Bitcoin Standard on your coffee table. Great book.
Good eye! :)
Calendar debit spread is the best strategy: Sell a call (w/ higher strike) that expires 1 week before a call that you buy. You get positive theta decay!!!
What if I'm a $500 Robinhood instant account trying to trade SPY credit spreads, usually shorting an OTM put ($330 strike) while buying an OTM put at a lower strike ($329 strike). Usually this would yield around 5-10% profit while only requiring $100 or less buying power per spread. My question are:
1. what happens if the spread I short expires in the money & I am auto exercised? Will my broker pump $33K cash into my account super quick (I definitely don't have that much by myself) to buy the shares and sell them right back?
2. Also, my Robinhood instant is not a standard margin account, so I don't think I can short. If my long put expires in the money & I am unable to find anyone to buy the put before then, will Robinhood make me auto exercise the put? Will it make me sell $32.9K shares worth of SPY that I don't own & then immediately but them back for me?
I wanna make sure I don't accidentally blow my account up trying to trade an affordable credit spread.
Also, can you buy options on the day they will expire? Like in the morning?
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Hey Chris, hitting gym lately huh? Arms look pumped up
Haha I've been a frequent gym-goer for almost 10 years now!
you should check out the guy who I'm sure must be his brother, or cousin or something, Mike on TastyTrade... that guy is RIPPED... when I say "check out", I don't mean... I'm not saying... I just mean "look at"... you know what I mean... I'll shut up.
@@projectfinance How much do you squat/bench/dead brah?
@@arupian666 Are you talking about that dude with the weird thing on his head?
"No BS" I like it
Options content with no bullshit 👍
Subscriber here. Thank you for refraining from using music in your videos. It was completely distracting and caused a reduction in value and effectiveness of what you are teaching. I am able to absorb much more without the music. Music off=learning up. Should I show you a chart?
Thanks for the sub! And I don't need to see a chart! I agree the music was distracting, which is why I stopped using music during the explanations. Maybe I could use "music" like coffee shop lounge music that isn't very intrusive. For now I won't be using any music.
@@projectfinance If your objective is to create an optimal leaning environment so that people will come to you when they want to actually learn, do not use any music. It adds nothing. It takes away focus. If what you are attempting to add is quality and elegance, do so with the intention of
creating an optimal learning environment and do so with your slides (which are good the way they are). And you do not use useless filler words when you speak, which is perfect. Sometimes you speak a bit fast. But, it isn't terrible because we always have the rewind button!
Create something "academia" level. Ask yourself "Does Khan Academy use music?" Ask yourself, "If I take an online course at a college or university are they going to play music?" (the answer is no, BTW) If i did'nt mention it, your slides are great. Simple. Uncluttered. You can use a soft background (or a different font color) to separate different concepts, for the viewer to easily, and at-a-glance, separate the concept in their mind, if you like. Remember the easier you make it for people to learn these super-complex ideas, the higher the quality of your work.
i like to buy my calls 2-3 months out and close to the money
I can't believe I didn't talk about buying longer-term options in this video! That would have been a nice addition. I'm a fan of buying long-term calls as well (1.5 - 2 years out).
@@projectfinance LEAP options are awesome! I made money on couple of them when IV jumped higher even when the price moved against the direction of my options.
Cool stuff!
Thanks!