I am still very new to trading, watched an almost 2 hour tutorial on how to trade options but I still don't really get it. I really want to learn how to properly do it and you seem so good at it. I have about $100k set aside to build a start up trading account when I finally know what i'm doing. Thanks a lot for this video SMB.
Well It's not really that hard. Maybe rigorous for newbies but are most successfully carried out by pros who have had a great deal of skillset/knowledge. and so a financiaI advsor often comes in very handy.
I had $50k to begin trading with when I started. While many people's portfolios collapsed during a crash, I persevered with my financial advisor and even earned a profit of almost $260,000 in just a few months of active sessions. Your trades are safer when you have a reliable strategist.
Whats not to get about options? They just give you profit rights above or below a given stock price in exchange for a premium paid now. In my experience i do much better using futures options to hedge futures trades than outright selling options, and with much less at risk
Start with 500 please. I made that mistake as well. Was lucky to start in 2019. Catch 2020/2021. Market hits back to reality and boom. Gone money. Should have started over with 500-2000.
this is gold really, you really covered what was missing in the other videos, kudos , would love to know historically what is the avg win per month going back 20~ years
When you do your first roll- How many days to you go out - Another 30 days? I assume you try and find the 10 delta to relocate the rolled options(?)- I really love your videos and have learned so much. I look forward to your answers so I can become a better trader~Thank you, Wendy
my understanding is that you keep the same day, you close the puts (long and short) that you had, and open new ones at what is the current/new 10 delta. But he suggests opening 15 lots instead of 10 which is what was originally sold/purchased
90% Chance of being right and making $400 vs. 10% of being wrong and losing $4600 means out of 10 of these trades you'd make $3600 (9*400) from 9 trades and lose one time of $4600 for a total net loss of $1000. Am I missing something?
Losing $4600 would only happen if you did nothing and let the position go to max loss. Before that happens, you could either roll down and out as shown in the video or you could just cut the position at a certain loss amount/(certain SPX price level) that would be much less than the max loss amount. So perhaps you cut if the trade is down 40% which could be a loss of 100 - 200 dollars instead.
Since you take -0,1f0 delta and you are ready to roll your position, why to use spreads instead of just selling a naked put? Is is a question of margin and capital requirement since by just selling 10naked puts the equivalent of assignment will be required by the broker? Thank you for your viedos.
I signed up for brokerage account but seem not to allow me to use these types of Options trades on a new account. They grant Level 1 Options access but spreads seem to be Level 3. Please advice. Thanks
I can follow everything that was taught in this video but I have a few questions that might explain a little more. Why go out 30 days and wait? Why not go 1 week out instead? Can you sell your contracts early and take a smaller profit or does this only work if you wait and let the contracts expire? I am going to practice with paper trading and I might be able to answer my own questions but I would welcome advice from someone with more experience doing this.
SMB, I have to say this is one of your better tutorials on Options Trading, specifically, with Spread Strategies. My head is not spinning as much, since this provides a clearer picture. Often get confused on what is Vertical Spreads, be it Credit, Debit, or is it a Bull or Bear Spreads. Quite the burden. I'll be looking at more vids for further learning. However, have one ques. At time 5:44mins, how did you come up with the Capitol Required of $4,600, labeled 'as worst cause scenerio' ? Any reply would be greatly appreciated. Thank U.
If you’re a newbie, you shouldn’t be watching this. They’re using leverage. They’re using borrowed money. They talked about using 10 contracts if you use the normal method without leverage that would cost you over $3 million . They’re not putting up their own capital very dangerous. Very advanced. If you don’t even know what I’m talking about then Go to the next video move on. Newbies don’t qualify for margin accounts with brokerage firms.
It’s great that they started to include analysis of the transaction when the price goes against us. But I think it will be very useful to include when you need to start rolling. In the example, why did they start rolling at a delta of 20? - I think this is not entirely clear. What to do if the price fell even lower and the delta became 30 or 40, or more...
There was so much left out of this video that is potentially dangerous. First of all put credit spreads put you in danger of early assignment if the value of the short leg goes ITM. This will make the long leg worthless if it's between the short and long leg. This can be multiplied if you have margin and many contracts. This is a strategy that you need to keep focus on always and try to move quickly if it goes against you. Also, you need to keep in mind the how liquid the market makers are for that PCS position. It could be that in a fast deterioration of markets that you can get caught not able to roll the L/S positions quickly enough! Be careful out there traders.
You get a bit more credit, but you are increasing margin requirements to $1000 per contract spread minus credit received, with a 10 point spread. The risk in a credit spread is the difference between the strikes times the number of spreads, minus the credit received. That will determine how much cash your broker will hold in case of a worse case scenario.
You call this a “put credit spread”, are there other names? My Fidelity account doesn’t use this term, but it looks like a “ ratio put” in their terminology. Just curious. And thanks for sharing your knowledge! Ed
It’s other name is Bull put spread, you have a bullish outlook. You want the stock price to move up, so that it does not hit your put. Use the moving averages to choose your stock. All the moving averages must be in proper order!
I use tasty trade. There’s multiple names for the different types of spreads. Just make sure if you want to sell/buy options on the call/put side. When you sell, you will receive premium. When you buy, you pay premium. Theres a lot of moving pieces. Take it slow.
Two take aways for me from SMB is to keep the spread tighter and to do a roll out before the stock price gets too close to your strike price. My question is - what do you do if a stock moves huge during after hours when you cannot trade your position? This is when you wake up and at 9:30 est you are already in the money with a HUGE loss on that second sell to open leg. I lost a huge amount of money on netflix while in a bear call spread. The stock moved 45$ after hours !!! Then another $40 the next day. A roll out would not have helped me at all. I was also doing my spreads with a much larger span - like buy to open at $275 and sell to open at $340 any suggestions??
That's why most serious options income traders gravitate towards indexes or index ETFs to avoid outsized overnight moves which are much more likely with individual equities.
my sincere appreciation for the outstanding content you produce on your RU-vid channel. The attention to detail in your videos is truly remarkable, and it’s evident how much effort and passion goes into each one. Your work has not only been informative and engaging but has also added significant value to my understanding and enjoyment of option trading. Particularly, your clear presentation of options strategies, like the put credit spreads, is so well-explained that even as a German viewer, I find it easily understandable.Thank you for your dedication to quality and for sharing your knowledge. There is no other RU-vid channel that presents this topic as thoroughly and understandably as you do! Looking forward to your future content!
RU-vid options gurus remind me of nuclear energy, and how they used to tell us it was going to be "too cheap to meter". This strategy and others like it are dangerous. You may make some money for a while.. until you get whacked. I would like to see some strategy like this one that was safe to execute yet still has a decent return. So far I have found no options trade with these characteristics. Back to stocks and ETF's for me, thank you. Glad I didn't lose all our money trying this.
do a little research and buy some calls--which are bullish. I'd recommend calls on META tomorrow. Use a 2 week expiration date and select a strike price that is near whatever the current price of META is, or maybe one or two dollars less. Just one or two contracts, depending on how much you want to risk, usually a few hundred dollars. Then just watch it play out. Sell it at any time, you don't need to wait for the exp. date.
I like the point that waiting for the option to put and then selling the stock is disadvantageous compared to selling the option before close of market. Good reason to be online and ready on closing day!
Intermediate trade with million dollar account labeled as easy beginner trade. Click bait. 😮 come on guys. 10 contracts at 3775 strike? Am I missing something? Guys are using leverage because that’s what you do on Wall Street. I wanna tell you that’s not for beginners.
THANK YOU for putting together this video. Your content has been so great to watch. I look forward to the day when I can trade full-time. Education like this will help my dream come true. Thank you SMB Capital and Seth for sharing your knowledge.
At 4:14 mark, I think you may have contradictory statements for the 3775 put options. The white box says "10.02% change of expiring with no value" (which I think is the wrong one) and the red text to the bottom left says "10.02% expires with value". Just a typo? or am I missing something?
"10.02% expires with value" is correct, which means it has a 10.02 % chance of closing ITM, meaning the Spead will have value, (BAD) because if the value is greater than the premium you received, you will lose money on the trade.
@@jonmoorhead7492 What is the difference between this strategy and what QQQY is doing? Other than the timeframe? QQQY seems too good to be true but I'm not experienced enough to spot where issues would arise.
Thanks for providing a potential way out of a losing trade this time. Question: Would you do the same increase by +5 contracts again if by the very unlikely chance the market tanks like crazy, and after that just calculate a break even to get out, preserve capital?
Protection…. If the stock significantly tanks your losses are offset from the put you bought also increasing in value… otherwise your losses are infinitely large
Well, not infinitely large, as the maximum theoretical loss is equal to the number of contracts times 100 times the strike price of the sold put and any brokerage fees and margin costs, but for that to happen the the value of the underlying equity would have to go to zero. And steadiness of income is a factor as well. However let's remember that the premise in the video is one of a beginning options trader with a relatively small account. So from a margin perspective, The amount of margin required for selling a naked put is that 100 times the strike per contract and unlikely to be the case for a smaller size trading account. Therefore in many cases such a trade would be impossible to begin with. Buying a put at a lower strike price limits the potential loss and therefore the margin to 100 times the difference between the two strike prices per contract. And that indeed represents a certain amount of protection. But yet another reason for using a credit spread rather than selling a naked put is leverage. The fairly small reduction in net premium compared to the slightly higher premium but massively larger margin being at risk means the return for a credit spread is usually orders of magnitude higher for the risk involved. The one practical reason for selling naked puts is a way to get a discount (via premium) for buying a stock you plan to own anyway at the price you desire.
Hey, have you guys been keeping an eye on the stock market lately? It's been pretty volatile,I lost almost $6m in my stock portfolio. but you know what they say - no fear, right?
Look for stocks that have paid steady, increasing dividends for years (or decades), and have not cut their dividends even during recessions. Alternatively speaking to a certified market strategist can help with pointers on equities to acquire
True, some folks employ hedging strategies or devote a portion of their portfolio to defensive assets that perform well during market downturns and such pointers are provided by engaging the services of market experts just like i did in 2019, amid rona-outbreak, and as of today, i can boost of a 45% enhancement on my $1m portfolio after acquiring assets recommended by my advisor.
Nicole Desiree Simon deserves credit as one of the finest portfolio managers in the industry. Her reputation precedes her, and I highly recommend looking her up to locate her online if you are internet-savvy
Thanks for the advice. The search for your coach was simple. I investigated her well before using her services. Considering her résumé, she appears competent
@@sethfreudberg4750 Why is that ? The 10 delta indicating the probability of achieving that level is valid for both sides I would think ? Moreover, you will collect more credit which will help offsetting your loss if one side is challenging a loss...
I don't think this rolling strategy shown at the end of the video is a good idea. I would rather take my loss and started again. If I receive a $400 credit and take a $950 loss for closing my put credit spread, then my total loss is $550. Given that is average credit received shown in this video is $337.50/month, I'd make my money back and be in profit in 2 months. For the sake of the argument, let's say that 10 delta would result in 2 losing months and 10 winning months in an average year. That would result in 47% profit in an average year on deployed capital. I think that is better than tying up 50% greater amount of capital to save a losing trade.
I agree as I would not like to add further capital into the trade. I would probably roll it down and instead of increasing to 15 lots, I would have maintained the same the same lot size (10). This would reduce the loss on the trade to $50 (as per the values shown on the slide).
Why do you lie without blushing? With high-probability trades, the number of losses may be smaller, but the amount of the loss is all the greater. In total, there can be no better result, otherwise the option premiums would be mispriced. You probably have to earn your money with fake seminars because you are unsuccessful with your own trading. Poor boy.
Weapons of mass destruction, these videos should be banned. In the UK, there is an epidemic of suicides among 18-25 year old males messing with options and spreads. Being 18 years old guarantees adulthood, but not financial literacy. How much does a moral bypass surgery cost in the US?
They are just teaching you about options trading in the market. It is your job to be smart with your money and manage risk with the knowledge you’ve gained. Same thing with buying an expensive house, expensive car, going to casino, etc
