Options Boot Camp

Basic Training: It's that time of the year again. The kids are back to school, so let's go back to school as well, and refresh our listeners on the options basics. What is an option? How do options work? What is a multiplier? What are the greeks: Delta, Gamma, Theta, Vega. Long premium vs short premium. Option Drills: A review of the basic positions: Long call - Short call - Covered call - Long pu...

Basic Training: Trading Diagonals What is a diagonal? Why would you put it on? What adjustments need to be made? How is it performed? How does it differ from a typical horizontal calendar spread? Why would you use a calendar vs. a horizontal spread? How do the greeks differ? How do you choose the strikes? Mail Call: Fall in, recruits! Question from Richard D: I think a whole boot camp show on skew...

Basic Training: Pro Tips Swap LEAPS for stock when writing covered calls. Everyone, even pros, have losing trades. Never ever ever enter a market order in the options market place pre-market. Swap in-the-money calls for stock whenever possible to utilize trading capital more efficiently. Use implied volatility on all your option trades. Don't base a sale or purchase of an option based purely on th...

Options Bootcamp 27: Calendar Spreads, the Sequel Mail Call: So many questions, so many answers. Question from Alpha_Dog - Let's say I buy the Ford August Week 1 17 call, and then sell the July Week 4 17 call for a $.07 debit. How does that position make money? I don't get it. Don't both calls make/lose money as the stock goes up and down? Question from Nevin Pierce - What is more important when t...

Options Bootcamp 26: Calendar Spreads Basic Training: Calendar Spreads This builds on the knowledge from episode 13 "Basic Spreads" and episode 14 "Advanced Spreads" from December. What is a calendar spread? Why would you want to use a calendar? Calendars are much more complex that basic textbooks tell you. The delicate balance between gamma and volatility in a calendar trade. Can't use P&L diagra...

Options Bootcamp 25: Using Options in Retirement Accounts Basic Training: What can and can't you do with options in a retirement account. Retirements accounts do not let you use margin. Stick to the covered calls. Mail Call: Listener questions are filling up our inboxes Question from Aman16 - Where does the "Iron" part of Iron Fly and Condor originate from? Question from Tim Phillips, Boston, MA -...

Basic Training: Alternative Income Strategies: Writing covered straddles vs. covered calls. What are the benefits of writing covered straddle vs. calls? What are the drawbacks? Remember your synthetics: Covered straddle = short two puts. Some additional pros and cons of this strategy. Mail Call: Listeners Take the Mic Comment from Ronald Yuravich: I heard your podcast of the Option Boot Camp episo...

Basic Training: Getting to know the fundamentals What is a Straddle? Why would you want to use it? Straddle pros and cons. Iron Butterflies and Iron Condors are straddles and strangles with protection. Gamma scalping is the only way to really make long straddles profitable over the long run. Exiting straddle positions is difficult to do effectively. Using straddles pre-earnings Scammers love to pi...

Options Bootcamp: Exit Strategy Basic Training: Why is it so important to have an exit strategy? What are the rules of thumb when closing out positions? Should you be more aggressive when closing out long or short positions? What are the rules of thumb regarding when to roll you positions vs. closing? Mail Call: Boot campers have so many questions. Question from Teddy Z: Mark - Love the show! I've...

Options Bootcamp 21: Playing Defense Basic Training: Playing defense with options: it’s very important right now! Basic Defense: Protective Puts (full overview in Ep. 3) How do you hedge your position with protective puts? Intermediate Defense: Put Spreads and Ratio Put Spreads. Covered Calls - (full overview in Ep. 4) How do you generate income with a modest hedging impact? The Power of the Colla...

Basic Training: We present two choices for using options in lieu of stock: Stock Replacement Strategy. How does it work? Examples include: An ITM leaps call purchase - requires premium over parity payment Selling a one month ITM put - for the more options savvy trader. By swapping out a LEAPS for an underlying, you get a much more preferable position from a Greeks perspective. Stock Repair Strateg...

Basic Training: The topic this week is margin What is margin? If I have leverage in my options, why do I need margin? Is it possible to not qualify for margin? Why do you need a cash account? What can/cannot you do with a cash account? What are some of the most common risks, mistakes or problems customers run into when implementing margin in their account? What are the benefits of portfolio margin...

Options Bootcamp 18: The Joys of Synthetics Basic Training: Today's topic is Synthetics What is put/call parity? Example of put/call parity. What does it mean for your options trading? What are synthetics? What is a married put? Why knowledge of synthetics is important for successful options trading. Mail Call: Fall in for listener questions. Question from EonJ: Does portfolio margin matter if I a...

Options 101: The quintessential options debate -- buy options or sell them? Many options professionals lean toward "when in doubt palms out." Simplify the options universe into two segments of risk: directional risk and volatility risk. The use of delta and other Greeks when deciding or analyzing when to buy or sell options. Short premium pros and cons Long premium pros and cons Mail Call: Recruit...

Options Drills: How to play earnings through options plays. There are two basic approaches to earnings trading: long premium and short premium. Long Premium - PROS: Advantageous because you essentially receive free or dramatically reduced gamma with little decay in the weeks leading up to earnings. CONS: All of that decay comes out, and more, after the announcement. Also, much of the movement in t...

Basic Training: Exercise, Assignment, and Settlement. There are two styles of options you will encounter -- American and European style. What's the process when your exercises and assignments are determined? When do those contracts settle? How do I determine if my options are going to be exercised or assigned against me? What is pin risk? What is a dividend trade? Mail Bag: Even options recruits g...

Basic Training: Spreads with wings. What is a butterfly? Iron butterfly? What is a condor? Iron condor? Mail Call: Even bootcampers get mail privileges Email from Alan Rick: What makes a spread "iron?" What is the difference between an iron butterfly and a regular butterfly, iron condor, etc. Thanks and please keep up the show; I'm learning a ton! Email from Alan Charter: If I think a stock's vola...

Basic Training: A quick review of spreads. What are spreads? Why should we use spreads? How do the Greeks work with spreads? How do you calculate, performance, etc? Why do I want to net reduce my delta and exposure in these elements? What are some of the downsides to spreads? Options Drills: Vertical Spreads Verticals - What are they? Long verticals vs. Short verticals. Credit spreads vs. debit sp...

Options Bootcamp 12: Weekly Options Basic Training: What are weekly options? How do the Greeks differ in the weeklies? How are the weeklies traded? Option Drills: Selling strategies for weekly options. Diagonal and vertical spreads, straddles, ratios, etc. What are some strategies for selling weeklies around earnings? Mail Call: Taking on your questions. Tweet from @JJacks: Does Sogo trade offer w...

Basic Training: Busting Options Myths: 1) Market makers know where the stops are, therefore market makers who take the other side of trades are taking advantage of retail customers. 2) The only way to trade profitably is to be a dark side short premium seller. Plus, credit spreads are better than debit spreads. 3) I only need to be good at one trading strategy. 4) Option trades and spreads in part...

Options Bootcamp 10: Common Trading Mistakes Basic Training: Your COs cover the most common options trading mistakes: Writing long-term options for income. Using market orders in illiquid options. Not closing options offered at a nickel. Buying worthless OTM "lottery ticket" options. Selling when implied volatility is high buying when it's low. Over-adjusting income trades. Believing that sell sto...

Basic Training: We're going to bust many of the myth and misconceptions the permeate through the options market, particularly to those new to retail options. Somewhere between 75-80% (or even more) of options expire worthless every month, therefore you should be an options buyer. Selling options is a risk-less, or near risk-less, endeavor. All out of the money options have higher volatility than a...

Options Bootcamp 8: It's All Greek to Me Basic Training: Time to revisit the Greeks: Delta - The chief Greek Gamma - The rate of change of Delta, as the underlying stock changes, but sometimes overwhelming to beginners. Theta - Time decay. The rate of change of an option given a change in the time to expiration. Vega - The king of the Greeks. The rate of change of an option price, as a result of c...

Roll Call: Mark and Dan introduce the newest Drill Instructor, John Critchley from SogoTrade. Find out more about SogoTrade, from its philosophy to its commission structure. Basic Training: What you need to know Why should someone trade options? What's in it for different levels of traders? Will you be able to drive a Maserati tomorrow? How options work: the honest breakdown. Believe it or not, op...

Options Bootcamp 6: Complex Spreads Basic Training: Today we're going to dive into complex spreads. What are complex spreads? We're usually talking multi-leg spreads. Calendars are when you buy and sell a call/put at the same strike price, but in a different month. Diagonals, a combination of a vertical and horizontal spread, can be a proxy to a covered call. The concept of the ratio, 1-to-1 on a...