Fixing a broken trade depends on wether favorable options are available at the price required to remain profitable in the trade. A stock falling well below a put option strike price for example, may not be able to be profitably rolled- either by rolling the calendar, strike, or both. It's great if there is a profitable trade if the stock stops at previous resistance levels. Stocks breaking through previously tested resistance levels will not usually have a viable option premium to save the trade
Dan the best way to look at it is that you could at any time be assigned the shares at 3,250 on the first put sale mentioned in the video which require you to pony up $325,000 so it's safe to say you need to have that much buying power to enter into a trade like this. Of course the same approach can work for much smaller stocks if picked carefully.
Hmmm, @10:47 rolling for two months aiming that "support will EVENTUALLY hold" does not equate 'Effective' to me... Imagine doing it w/o portfolio margin ;-) Good academic example nonetheless!
It’s not wrong to suggest that a support level will hold .. that’s why it’s a support level after all. If it doesn’t hold .. in theory you just roll it again - you can do this infinitely until you lose it I guess .. but at some point if it’s not a major crash or a terrible stock, it will hold.
Dumb question here, because I’m confused, and not all that intelligent: In order to trade options on a particular stock, one must already own enough shares of that stock to support the number of contracts they plan to trade?
Is there any way to fix a call or a debit spread that is at loss or does it only work when you sell something perhaps a credit spread. Do you have videos on this. ? Also how do you handle a debit spread when the stock price has already passed the short leg other than sell the spread and buy another one further out. Thanks
@@smbcapital This was great, thanks, I've been looking for "trading options at expiration pdf" for a while now, and I think this has helped. Ever heard of - Winoorfa Option Olegroson - (do a search on google ) ? Ive heard some great things about it and my co-worker got great results with it.
Thank you Seth. These trades seem to me that they are just short puts but why do you call them diagonal spreads which would involve long put also. Kindly clarify please.
I am really curious to know if we can do the same math with a short call ( like during a bearish market ) because the max risk can be "infinite" ( for example, we all know that the SPX or the NDX can't go to the moon but who knows...). If I understand well, we just have to "buyback" and go up ( short call ) and sell another strike until we reach our goal. Is it correct to think like this Seth? And in this video, you made a profit but is it possible to "lose" after, like, 3-4 times you "sell-buyback" the short put? Your videos are really helpful, thanks.
my only issue with rolling down and out of a put position, is that you are already closing the position. So opening it out further to conceptually 'not lose' on the original is not any different than just opening a completely new position on a different stock. It's a just a psychological thing, aside from the time you spent researching the original position, in which you are still bullish. But again.. it's just a psychological pat on the back. Might as well consider other opportunities as well in which you might get more on your collateral.
That's an interesting point Roy and I actually slightly mentioned that in the video, but could have elaborated further. in the final few minutes of the video I mentioned that rolling down makes sense IF it is still the best use of your capital.
@@sethfreudberg4750 yes I noticed as I was writing the reply :) I'll take this opportunity to thank you, Seth, and SMB in general for being so educational with the public. I have learned a lot, and have improved my strategies immensely since following this channel 👍
@@soulkick1 That's great Roy. I've been trading options for 16 years and I still honestly learn something new every day. That's why I enjoy it so much.
Thank you Seth for showing us this! Such a fantastic example of how positions can be salvaged when gone against you. All your videos are super appreciated.
There are several questions that need to be asked before that can be answered. The main one is: When is the expiration on that long call? Also, as a general rule of thumb, you shouldn't buy long calls unless you are going to use them as an asset to back another position. There are exceptions of course.
@@sheilasomewhere635 Generally speaking, long option positions result in losses 80% of the time. This is due to the fact that when you buy an option (call OR put), you are paying a premium that has EXTRINSIC value. Now, you can go long on options and mimick the underlying stock price if the option has a high delta. Almost all of the premium would then be INTRINSIC. Not ALL of it though. Think of it this way: When you SELL an option, time is your FRIEND. When you BUY an option, time is your enemy.
I call this strategy the "Proud Mary". I do this every week because I tend to set my short strangles pretty tight to collect more premium. It doesn't bother me because I've already become pretty adept at countering when one side is breached. Sometimes the price moves so much that it is very difficult to do this strategy unless you go out very long in expiration date. But I have a counter-trade for this situation also...;-)
AAPL has been my little cash cow for the last 8 weeks. I've been making roughly 4% trading CSPs and CCs, along with some long calls that I use as the asset to trade some "poor man's covered calls".
Would not recommend carrying a short put through to expiration, even in a spread, unless you can afford assignment. "The mkt can do anything at any time."
Unless you are okay with taking assignment JW. Normally I would close a short put position at 10% of it's original value for a profit, but it would depend upon my goals.
Thanks Seth. You tie up $50-$60K of margin for 3 months to make $3,000. Very nice for a large account. Not so nice for a $200K and under account. If you like making 10-20% a year might be good. Seems more like an investment than a trade.
incredible video, about 6 months options experience. Down about 25% of my portfolio with gamestop But i've learned infinite strategies like this one to keep me in the game. Never settle, Thanks for the video Gentlemen
I am afraid this strategy might work in a bull market, but when the real bear market comes, it’s like averaging down until all margin is used, the final outcome is blowing account and losing all the profits made in the bull market
this is a pointless option trade. anyone can come up with this trade in hindsight. this is SMB. you should place and broadcast this trade on the day of earning before the options price at expiration are already known. almost if not all of your video are reconstruction after the facts Useless and misleading.
Fixing a broken trade depends on wether favorable options are available at the price required to remain profitable in the trade. A stock falling well below a put option strike price for example, may not be able to be profitably rolled- either by rolling the calendar, strike, or both. It's great if there is a profitable trade if the stock stops at previous resistance levels. Stocks breaking through previously tested resistance levels will not usually have a viable option premium to save the trade
Just for clarity... The initial trade requires a buying power (cash + margin) of close to $320,000, right? ($318,643 to be exact)
Dan the best way to look at it is that you could at any time be assigned the shares at 3,250 on the first put sale mentioned in the video which require you to pony up $325,000 so it's safe to say you need to have that much buying power to enter into a trade like this. Of course the same approach can work for much smaller stocks if picked carefully.
Not really. It depends what the margin requirement on TSLA is.
Hmmm, @10:47 rolling for two months aiming that "support will EVENTUALLY hold" does not equate 'Effective' to me... Imagine doing it w/o portfolio margin ;-) Good academic example nonetheless!
Not sure I understand your point Navi.
It’s not wrong to suggest that a support level will hold .. that’s why it’s a support level after all. If it doesn’t hold .. in theory you just roll it again - you can do this infinitely until you lose it I guess .. but at some point if it’s not a major crash or a terrible stock, it will hold.
Better than close it with a loss. A profit is a profit even 3 months later.
Dumb question here, because I’m confused, and not all that intelligent: In order to trade options on a particular stock, one must already own enough shares of that stock to support the number of contracts they plan to trade?
Depends on the strategy. This is not required for the strategy in this video.
Is there any way to fix a call or a debit spread that is at loss or does it only work when you sell something perhaps a credit spread. Do you have videos on this. ? Also how do you handle a debit spread when the stock price has already passed the short leg other than sell the spread and buy another one further out. Thanks
My main issue with this is the opportunity cost. Look at how much time and added capital this required.
Why can’t you just do an in the money butterfly and keep the shares you already have?
This is going in my Options playlist. Good stuff.
Awesome!
@@smbcapital This was great, thanks, I've been looking for "trading options at expiration pdf" for a while now, and I think this has helped. Ever heard of - Winoorfa Option Olegroson - (do a search on google ) ? Ive heard some great things about it and my co-worker got great results with it.
Video shows october but was November
Thank you Seth. These trades seem to me that they are just short puts but why do you call them diagonal spreads which would involve long put also. Kindly clarify please.
So basically you can roll put credit spreads as well (if needed) until they are profitable, or to minimize your loss...
That was pretty cool!
thx Dennis
I am really curious to know if we can do the same math with a short call ( like during a bearish market ) because the max risk can be "infinite" ( for example, we all know that the SPX or the NDX can't go to the moon but who knows...). If I understand well, we just have to "buyback" and go up ( short call ) and sell another strike until we reach our goal. Is it correct to think like this Seth? And in this video, you made a profit but is it possible to "lose" after, like, 3-4 times you "sell-buyback" the short put? Your videos are really helpful, thanks.
my only issue with rolling down and out of a put position, is that you are already closing the position. So opening it out further to conceptually 'not lose' on the original is not any different than just opening a completely new position on a different stock. It's a just a psychological thing, aside from the time you spent researching the original position, in which you are still bullish. But again.. it's just a psychological pat on the back. Might as well consider other opportunities as well in which you might get more on your collateral.
That's an interesting point Roy and I actually slightly mentioned that in the video, but could have elaborated further. in the final few minutes of the video I mentioned that rolling down makes sense IF it is still the best use of your capital.
@@sethfreudberg4750 yes I noticed as I was writing the reply :)
I'll take this opportunity to thank you, Seth, and SMB in general for being so educational with the public.
I have learned a lot, and have improved my strategies immensely since following this channel 👍
@@soulkick1 That's great Roy. I've been trading options for 16 years and I still honestly learn something new every day. That's why I enjoy it so much.
Thank you Seth for showing us this! Such a fantastic example of how positions can be salvaged when gone against you. All your videos are super appreciated.
Absolutely! glad it was helpful Jeff. We like to give the basic concepts so it can be used in your own unique way
Please do a video on fixing a trade when you buy a call that goes against you.
There are several questions that need to be asked before that can be answered. The main one is: When is the expiration on that long call? Also, as a general rule of thumb, you shouldn't buy long calls unless you are going to use them as an asset to back another position. There are exceptions of course.
@@johncalvo1743 You shouldn't buy long calls? I didn't know that. Is it because they are too risky?
@@sheilasomewhere635 Generally speaking, long option positions result in losses 80% of the time. This is due to the fact that when you buy an option (call OR put), you are paying a premium that has EXTRINSIC value. Now, you can go long on options and mimick the underlying stock price if the option has a high delta. Almost all of the premium would then be INTRINSIC. Not ALL of it though. Think of it this way: When you SELL an option, time is your FRIEND. When you BUY an option, time is your enemy.
Would have been nice to show the different profit % and how your capital requirements changed over this trade.
I can do that in future videos, thank you for the suggestion.
Excellent ad. I am ready to pay 12K to learn trading options from you, with a 1% chance of becoming a prop trader at your firm.
right.., these turds get their income from newbie traders rather than actually trading
I call this strategy the "Proud Mary". I do this every week because I tend to set my short strangles pretty tight to collect more premium. It doesn't bother me because I've already become pretty adept at countering when one side is breached. Sometimes the price moves so much that it is very difficult to do this strategy unless you go out very long in expiration date. But I have a counter-trade for this situation also...;-)
Great presentation. I do cash secured puts on FB, AAPL and Microsoft all the time. Tesla too rich for my account but it's on my scanner too.
nice! one day
AAPL has been my little cash cow for the last 8 weeks. I've been making roughly 4% trading CSPs and CCs, along with some long calls that I use as the asset to trade some "poor man's covered calls".
Would not recommend carrying a short put through to expiration, even in a spread, unless you can afford assignment. "The mkt can do anything at any time."
Unless you are okay with taking assignment JW. Normally I would close a short put position at 10% of it's original value for a profit, but it would depend upon my goals.
Great info to have and add to my trade plans. Thanks for the great content you put out that helps me and I'm sure many other traders Seth
Glad to help Bill!
Thanks Seth. You tie up $50-$60K of margin for 3 months to make $3,000. Very nice for a large account. Not so nice for a $200K and under account. If you like making 10-20% a year might be good. Seems more like an investment than a trade.
Hi Tim, this was an example of cash secured puts. Wasn't intended to apply to every size account. You'd need to adjust to smaller stocks.
1) a simpler rollover is not a smart way to adjust here 2) show the greeks, delta at least.
Alex this is really a repair strategy for a cash secured put program. It's not managed like an options income trade with heavy greek analysis.
incredible video, about 6 months options experience. Down about 25% of my portfolio with gamestop But i've learned infinite strategies like this one to keep me in the game. Never settle, Thanks for the video Gentlemen
I am afraid this strategy might work in a bull market, but when the real bear market comes, it’s like averaging down until all margin is used, the final outcome is blowing account and losing all the profits made in the bull market
Poor man here. I have a much, much smaller account size. Can you do this with a credit spread?
You could Taiga but the long would cut heavily into your profits. May or may not be worth it.
So basically just rolling. Lol
this is a pointless option trade. anyone can come up with this trade in hindsight. this is SMB. you should place and broadcast this trade on the day of earning before the options price at expiration are already known. almost if not all of your video are reconstruction after the facts Useless and misleading.