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Ep 75: Trading Options: The Real Way Money is Made from Options

March 10th, 2016

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Hey this is Sasha Evdakov and thank you for joining me for another episode of let’s talk stocks.

In this episode, number 75, what I’d really like to do is go into some basics and just give you some more insight, some ideas about how options are traded.

Over the last couple of weeks I’ve been busy filming an options course, and I’m still working on that course, there’s a lot of material that I’ve been working on but, I do realize that I haven’t really focused a lot on sharing some insight and wisdom at least on the Thursdays lessons here on the webcast that we do, about options

And there’s a few different reasons for that really. One of the reasons for that is because options are very different from trading stock.

Trading options is different than trading stocks

They are a little bit more complicated, in fact quite a bit more complicated if you don’t know or don’t understand what you’re doing. So the risks can become much greater if you are unknowledgeable and if you are unaware of the consequences and the risks.

There are of course great upsides, so options really were invented for risk management and proper risk management with options, can actually give you a lot of advantages if you know and understand what you’re doing.

The problem with options, with most people is that they don’t know what they’re doing, and when you don’t know what you’re doing, then that’s really when you can burn your account and blow your account up and have a lot of damaging consequences when you don’t know and understand what happens when trading options.

Don’t read this if you’re a beginner

If you are just joining me, if this is the first time you’re listening to these let’s talk stocks sessions, or the lessons then I highly recommend you actually don’t watch this lesson, don’t listen to this lesson, go and get the basics, go to the website and just go to the training section and get some of the basics and fundamentals.

Once you’re in this training section, when you get there, there’s going to be a lot of different lessons in here that you can just go and browse to, such as the wall street basics and terms. Even the trading basics and fundamentals, technical analysis basics, money and risk management basics. All these things will help get you started on the basics and fundamental level.

Once you do get into some core material and you’re starting to understand things and you want to trade options, what you could do is go through some of the videos that I’ve already created such as these little shorter videos, and go through them and learn some of the basics behind trading options.

Just search for “trading options”, or “options” and you’ll see a lot of different videos that I’ve already created, so I won’t be covering exactly all these basics in the sense of going through the basics of these option videos, I’m not going to go in detail about every single one of these things that I’ve already covered in these videos.

My goal for today is to share with you just some insight of different varieties and ways to trade options and how really you should be trading options if you’re trading options, because a lot of people have misconceptions about the proper way of trading.

Here when you’re looking at this panel, I like using the think or swim platform from TD Ameritrade, and the platform and panel that you’re looking at is actually the simulated money, so this is paper money, it’s fake money, it’s not real, it is monopoly money, and this is what I’m using right now to record the courses in fact.


Some of these trades right now that you’re looking at are actually trades that I’ve put on for the course. There’s no way to really fake that or backdate it, so this is actual profits that we have made in the course that I’m working on, so don’t stress too much about these, because we’re not going to get into detail about these trades that are on screen. These are just simply trades that I have going on right now to do lessons for one of the modules within the courses that I’m shooting and that’s what those are all about.

My goal for today is to share with you how to trade basics of options and how they’re traded.

I’m not going to go into the needy greedy of really the risk management, the money management behind it, we’re not going to go into detail about the proper way to make adjustments, the proper way to do the hedging, I want to give you a big overview from a big Google map. I want to give you an overview from an airplane, if you’re flying overhead, I want to share with you how to trade this things in the right way that you should be trading these things. If you’re trading these incorrectly, then it can lead to disaster.

The base level behind options is, if you look at any stock, any given stock, and let’s just take amazon for example, is that you do have these option contracts here in this module and this panel.


This panel is set up very similar to many other panels, again, this is the think or swim platform and I have multiple brokers in fact, and the panel is very similar to this and I like using this one to teach because it’s very friendly and there is a lot of things that you can do with it. So for this example we’re using the think or swim platform, but most of these platform that you use they’re going to be set up very similar.

Calls and Puts

On the left you have the calls, on the right you have the puts. The calls, if you don’t know this, it’ll be a quick refresher. The calls in theory, if you’re buying a single call, well right click analyze the trade, you’re looking for that stock to move to the upside. So you’re putting a bet on this stock or this equity.


Through time this option contract does decay, and this option premium, the price of this is driven through multiple things, but in part of it is due to time value, so every day when you hold on to these, think of them like dead fish.

The longer you hold on to them, the more and longer they rot. So $30 per day is what you lose, so as I shift my time value over here, you can see that my profit goes into negative territory, so that is not what we want to do, we want to go back into standard time frame.

That’s what happens with options, the more time that you by, let’s say you go out to January 2017, and let’s see if we can do that. Let’s go to the 580s because I don’t believe the $5 spreads are being sold at the further out months. If we go out further out, you’re only losing $12 per day. So that’s your theta risk.


Keep in mind you have these additional things that happen. So this is a delta, gamma, theta and beta, that are completely different, and it could be a whole lesson all on its own, each individual one could be an hour on its own, just to discuss them.

But in general, most people, the way that hey trade options is they simply buy a call option like this.


Or if they believe the stock will go down, they will buy a put option. So you’ll go ahead, you’ll buy a put option and now you’re looking for this stock to head lower, so your risk is really just the price you pay for that option, which is $85.05, multiply that times 100, and you get your $8505.


Unlimited profit potential

Here you have unlimited upside, but one thing I’ve noticed over the years is, this unlimited upside looks great, especially if you live in the world of fictitious money that comes from the sky. And if you live in that world, then this unlimited upside is amazing, or unlimited profit potential, whether that’s a put or whether that’s a call.


The thing I’ve learned is that money doesn’t fall from the sky, and these unlimited profits for a stock to go that fast, that quick is usually rare to happen, and with options, since a lot of their value is driven from that time value, most of the time you want to run this like a business.

When you buy options, you lose money

In general, rather than buying product, think about this like if you’re at a grocery store, you’re typically buying products, you’re buying products and you’re spending money. If you go into an apple store, if you go to an amazon website, when you buy things, you are spending money, you are losing money.

In here, when you buy this option, you lose money, so you lose money when you’re buying options, get that into your mind, and understand that. When you’re buying options, you’re typically losing money if nothing happens and they stay still, because of this theta decay, which is your time value, because you have a negative time value when you buy time, because every day that stock stands still, it loses value. It’s like having a banana everyday it sits there, you have less time to eat it.

In the options business, rather than buying options, most people as far as professionals go, as far as I understand, most of the time, the right way or the more appropriate way to be profitable in this business when you’re trading options at least, is to go in and sell option premium.

Here we are buying one, but the reality is, if you sell option premium. So let’s just go ahead and sell one, and see what happens.

As I go to sell a single, and I analyze this trade, you can see that when I sell an option at let’s say $5.65, now everyday I make $31, if that option stands still, or that price of that stock stands still, and that is because of that time decay, because you’ve sold something


When you sell options, you make money

Think of it again like a business, if you are the business, if you are a grocery store, and you sell something, you are making money, right? You sell something, you’re making money, if you’re selling phones and you sell a phone, you’re making money. If you buy a telephone you are losing money, because you’ve bought one, you take money out of your pocket and you bought the phone, so maybe you have a tangible product, but that is basically how it works out.

In this scenario, this is how most professional traders make money when it comes to options, is that they sell options, they don’t typically buy options.

Selling naked

The problem with selling things like this or options is a lot of people don’t understand is that you get into this very large loss that you could incur that if the stock goes not in your right direction, a simple option is costing you right around… Not the buying power effect, but your profit potential is about $1960, but if you amazon goes to let’s say $1050, you’re loss is at around $50000.

You can do the same kind of scenario and situation that this position if we sell a call is positioned for me to make money to the downside or if it stands still.


If I do a similar situation but I do it on a put, and I go to let’s say $5.35, Now I‘m positioned to make money if that stock stands still or moves up.


But again, my loss here could be dramatic, this is considered selling naked, and when you sell naked without coverage or protection, this becomes extremely dangerous, you will lose your shirt, and this is how most people lose their shirt, is if they do this on a Biotech and it goes against them, about 30 grand. If the stock continues to go down, they’re down 40 grand.

If you go ahead and leverage this, and you do it a couple of contracts, you can go down into some serious trouble, and let’s see if we can make this a little bit better adjusted, right here you’re own about $120000 on three contracts selling them naked, so you don’t want to do this until you really understand what you’re doing. That’s why the options business can be very dangerous.



How is it that most traders trade these options? What they do is, all these strategies are based off of selling a strangle, so a lot of strategies the core fundamental is based on selling a strangle.

What is a strangle? It is selling both a call and a put that we just went over. So if you go into it and you sell a strangle, so now we sell a call and we sell a put.


We could sell, let’s say this at $565, this is at $580, we’ll go ahead and we’ll analyze the trade, so now you can see you basically make money from option decay, $58 per day, but you have unlimited downside on both sides. So you’re losing money on both sides of these ranges if you sell a strangle.


Buying protection

What is it that you do? Well, in order to offset and minimize this risk, you do need to be a buyer of options, you need to buy protection, that way if something goes against you, you need to have that physical item in your hand, so if you’re selling a phone, but you’re not ready to deliver that phone yet, because this is what you’re doing, when you do this, you’re basically selling a cellphone to someone, but you don’t have it in your office, or you don’t have it in your warehouse ready to ship yet. You’re making sales, you’re making those preorder sales, but you don’t have it done, they are on a boat from china coming in and then they’ll be sold here shortly.

The problem is, if that boat gets lost or ta hurricane hits it, you are short, which is what we are here, we’re naked, we are short those phones. And all these people has paid money, so here is the $58, as time goes on these people has paid us money for these option contracts, or for those phones, so now we need to deliver if something goes against us, so that’s why you buy protection.

As an easy example, I guess to real world and real life situations, what you do is you buy cheap phones or old phones, somewhere over here, which would be at a $500 price level. So we’ll go ahead, we’ll buy a single, we’ll analyze that trade, so you can see that caps it right here.


What does that singe do? Remember, it puts it to the other direction, we did a put, we bought a put, so it helps protect me if the stock goes down.


If the stock goes down the other way, I was at risk with just the strangle, so this protects me, it caps it right there at a $500 level, I could get it at 490 and shift that, you can get it at whatever price you want.

Then you have the same problem at the upside for the call side. So what do you need to do?

You need to buy one on the call side, so you go ahead, buy a single on the call, you go ahead and you analyze the trade, so again, the problem here is where are you making the adjustment or the fix, well you can put it anywhere.

All these different things are all just option contracts creating a profit picture for you, so that’s what you’re looking at right now, and this creates a profit picture that’s either favorable for you or not favorable, and it’s all based right now, at least the current one that we have off of the strangle.


What you do is you start making adjustments to where you want protection on the upside, where you want protection on the downside, and that creates at least a limit on your risk, so here on this situation we have a protection and our risk here is $4000, and our max profit potential is of course $3458 which is at these highs or peaks right there, if this sits still and expires in that range.

What is it that happens, well you go ahead and as time decays and this stock amazon stays between this range, between this breakeven point of 614 and 530, then we collect premium and profits.

Of course, we could shift these around, we could shift these different points at these calls and puts that we sell, and this would create a slightly different profit picture, and you slowly start getting into an iron condor territory.

Remember, all these things are just names for variety of spreads and risks that you put on. Whether that’s an iron condor, whether that’s a butterfly, those of you that don’t know what I’m talking about just think of this picture as being called an iron condor.


If it’s a little tighter, without it, right here and without the protection, this in known as a strangle.


All these things, they have different names, but they capitalize and profit from this theta decay, and this theta decay is where you make your money, so as long as that stock stays between this range, you make your premium and you make your money.

There’s various ways that you can do this by selling premium. Now all of this happened in one month, but if you understand that premium decays quicker, because the premium decay happens on an accelerated curve, it decays faster, 0 to 30 days, and a little bit slower if you buy more time premium, such as 30 to 60 days, or of you buy a lot of time premium 90 day, 120 days, it decays even slower then.

If you look at it from just buying a single call, and let’s just say you buy a single call at, right now we’re at $558, so let’s just move this strike price, which is the price we agree on to buy the phone, to buy the house, to buy anything, It’s the price you agree on.


Here the data decay, if we look at it, this is $26 per day. In April, right now we’re looking at the April ones, April contracts, which are 36 days out, but if we close this up, you see that they also have July, October, January.


If we went into let’s say a little bit further, like October, you can see the decay is only $14 per day. If we went into January, it’s only $8 per day.

The more time premium that you buy, the less it decays on a day by day basis, so as the further out you go.

Most people goal as far as option traders, the big boys or people that trade options actively, their goal is to sell option premium. And in fact, this is what I like to do in my retirement account. Since it’s a lot safer to sell these premiums. So how is it that I do it? Well, I’ll show you another variation and I’ll show you another strategy.

If we look at, let’s say, let’s just take a look at Google, you can do this on any stock that has liquid options. So here in this variation, again, you go into your option, you look at your near month, 36 day out and we know that the 36 days out, they go ahead and decay fairly quickly, so I’ll go ahead and sell one of these, so when I sell one of these, I’m selling one right here, and I’m collecting the premium.


The problem here is again, I have unlimited down side risk. So I have unlimited risk over here, as that stock heads higher. So I need to protect it, what can I do?

I could go ahead and buy protection, buy another one further out. I could by one single over here. And this will cap it, this is called a vertical spread, and now I make money as that stock heads to the downside or stand stills.


The other scenario or situation that I could do is, if you don’t want to do it this way, one of the ways that I like to do it is you go out for the next month, because we know that 30-40 days, these options decay pretty quickly.

The 70 days, they decay slower. So what do I want to do? I want to go ahead and buy my protection further out. So I’ll go ahead and buy a single out here. So here we have a 715 so let me change it also to a 715, make it live price.


Now you can see what this does to my profit picture. And this is known as a calendar. So what does that single do? Well, remember. First you’re selling one, ok? You’re selling one contract at the April 2016 for $715 at the strike price, so this allows you to capture this $36 in theta.


That’s fantastic, but you have unlimited risk if that stock heads higher. Now, this buying this single call, at the $715, but a further out month, this decays $26 per day, ok? So that one decays a little bit less.


So look at it. We have $26 per day, and this one is $36 per day. So this one you’re making money on, when you sell it, but when you’re buying it, this one you’re losing money on.

The difference between the one you’re losing money on, remember we’re buying something here. You’re losing money on this one, and you want the stock go to the upside on this one.


Whereas on this one when you sell it, you want the stock to go to the downside or really stand still.


This one you have positive Theta, the other one when you buy it, you have negative theta, when you buy that option you have negative theta, so putting them together, first I start with selling one, then I go ahead and buy one, and now that creates a graph that looks kind of like this, so one of them is coming off the sell side, and the other one is buying the protection on the buying side.


Here that difference In that theta is a positive 10. So I’m making $10 per day, as that stock stands still and as we continue to move through time.

As you can see, as we move through time, that white line, which is the current line, that is today’s line based on the date that I set, as it moves closer to the green area, that is our expiration area, that is what creates and makes us money, an income.

Basically if you watch the white line, the white line is the current profit and loss for the options and right now they’re a little bit skewed because we’re after-market hours, so we started at negative, but in general, that white line goes closer and closer to that green line. And as it does, that’s how you make your money, that’s how you make your profits, and that’s how money is made. And you have a breakeven point, between 690 and 740.

If you look at Google, and if we go to the standard chart, so if we look at Google and we look at, let’s say, a weekly, can we predict that this stock can stay between, let’s say 740 to 690. So 690 would put us somewhere right around, I guess this level, so it’s not the greatest spreads, but I’m just showing you, and 740, within the next, let’s say, however many days, a week, two weeks, five weeks, it doesn’t matter.


You could keep this contract for five days, seven days, and you can get out of it when it’s like this, you don’t have to hold it to expiration when it goes all the way up. You can hold it for just a few days, right here when you make $90 and then you’re out. So you can do it something like this.

And the simple way to put in these trades, I think for the think or swim platform is, for any trade really that you do, let’s just take tesla for example, to do a different one, is you simply just go ahead and you just buy that calendar.

When you just buy the calendar, you change your strike price, go ahead and you analyze that trade, if we go to more of the today’s date, you wouldn’t be starting out with a profit, the market doesn’t give you anything, so here, this trade right here would be more like what you’re starting out with, you just start with a calendar, an now as you change your strike prices, you can shift that calendar a little to the right if you want, you can shift it a little to the left, 190 over here

But the point being is that you’re theta positive on these trades and you’re making money from that decay on the options that you’re selling in the near month and you bought the protection in the further out month, so this is another way to trade it.

Butterfly strategy

There’s various ways to trade the markets. And with options, you have unlimited kinds of pictures and graphs that you can create. So for example, there’s another strategy that’s called a butterfly, which is a very popular strategy.

Remember that you can trade any strategy in any market condition that you want.

The only difference is that you wouldn’t trade a butterfly the same way in an upmarket as you would in a down market. You can tweak them.

Here, this strategy can be adjusted and fine-tuned, so what do you do in this situation? Well, you sell two right there at that center strike price, or the close strike price And then you buy your protection.


Again, it starts with this strangle, which is what? Selling two contracts, or selling those two contracts, they could be a call, they could be a put, it doesn’t really matter. And then you buy your protection and wings out.

The difference between a butterfly is that you have two right there in the same price point, In the same strike prices and that’s when you have a lot of decay that starts to kick in. So your theta, your day decay per day is 10 roughly. Of course this also depends on Vega, how the stock moves with the price and there’s a lot of other factor that go with it, but in general you’re making $10 per day as this time decay continues to move day by day.

And this continues to accelerate as you get closer to expiration. So as you get into a few days later, you can see it gets into $19 per day, and $20 per day. That’s really what happens, as that price bounces around and you just collect your premium.

You can adjust these into doing something, let’s say, positioning it more for the upside moves. So let me bring this date right back down to normal.

You can position these a little bit more to the upside, so let’s say, I drop one of these legs or wings as they’re called, down on one side, so now it allows me to capture a little more room to the upside.


Tweak things until you feel comfortable

I could bring this in a little tighter, I could make it look something like this, so there’s a lot of variations to what you could do with options, because it gives you options, or it gives you variations to creating spreads and profit pictures that you really can live with, or can look at and say “hey I’m comfortable with this”, maybe if you’re not comfortable with this, then you go ahead and tweak it. So you say “I want it a little bit lower, because I don’t like the risk on the down side. Maybe this down side risk looks a little too much. So I’ll go ahead and tweak it”

There we go, that curve looks a little bit better. So my current white line right there, that’s my profit picture.

And you get to tweak it and adjust it how you want it, if maybe you believe that stock has higher room for the upside, you could go ahead and shift this even further, you know, move that center point to maybe the 220s.

There are a lot of strategies you can use

You can shift these any way you want, there’s all kinds of strategies, if you look at the platform and the panel, if we do something, let me see if I can show you here… On the by side, you can see that there’s a single there’s a vertical.

Typically most beginners are trading singles, but, remember what I said about the singles, you’re losing money every day if you’re buying them.

If you’re selling them, and you’re selling singles, which is naked selling, typically most beginners aren’t allowed to do that, you have unlimited risks in those directions, which is also very different and very risky.

You could do verticals, which is something we just dabbled in, you have back ratios spreads, the calendars we talked about. The diagonals is like a calendar but it’s offset and you can skewed those calendars.

If we do a diagonal and we go ahead and let’s just say we do something on the 240 and this is you buy protection, a little bit on a different strike price, so let’s get rid of this butterfly.

Just look at the profit picture, don’t worry about what my mouse or where I’m clicking at the moment.


What happens is this can skew your profit picture, and what it does is it skews it to one direction, like this, so if let’s say our price is $204 and we go ahead and let’s say we’re at the 210, and we have a 240 for the protection, it’s skews that profit picture to look a little bit more bias for the downside.


If I do it the other way, and let’s just say I go and buy my protection at, let’s say, 195, now it goes to the bullish side, so you can see I can flip it however I want.


Or I can make it pretty much a calendar right here, there’s our calendars, they’re both the same 210 and 210, it’s a calendar, and if I want just a small tweak, I can do a 205 and a 210, which is the spread difference. And now it allows you to position to the upside just a little bit. Just a little bit to compensate for some of those Vegas.


And you still get your theta, your $8 per day that you earn when this position, or this stock stands still, and as it continues to go higher you are also making profits and you can position these in all sorts of ways that you want.

Something like this, where if you want a little more room on the downside just in case, you have room to the upside, so as that stands still, that white line gets closer to the expiration line, which means the white line is the current date, or the current day line, gets closer to the expiring months time frame, which would be our closer month, here would be April, and then you collect your premium, your theta on a per day basis.


That’s how that works, and that’s what I wanted to share with you here, is the way that you really should be or could be trading options. If you’re the one that’s selling simply the calls or selling the puts, this is perfectly fine and t’s not a bad problem to do, or it’s not a bad strategy to do, so let’s say you’re trading tesla here, this is I guess the basic way to collect premium from what many people do in their retirement accounts.

If you have a stock, typically what you can do is simply sell a single call. So if you go ahead and sell a single right there, and we sell it and we look at it, here’s what it does, is I like doing this, even if you own stock, because remember, a stock to shoot up to the moon, is very unlikely, so if you sell something a little bit further out the likelihood of it getting to that price point is, I guess, slimmer.


The likelihood of tesla going to 200, right now we’re at 204 in tesla, so if you look at tesla, right now we’re at 204, 205, the likelihood of it getting to let’s say 295 or 300, what are the chances? Let’s say it gets to 300 within the next 40 days. Probably slim.


How about 250? Slim but possible. So, let’s just say t’s a 50/50 shot. Well, with the 50/50 shot, here what you can do is, remember, you sell this premium, just like here, but you’re not protected, because that means, if you sell this call, and the stock goes to 280, just like in one of my earlier videos, I talked about it, that if it goes to 280, you would be forced to deliver that stock at the 245 price range, but the stock is at 280, so you’d have to buy it at 280 and sell it for 240, so therefore that’s why that loss is created.


But if you’re already own the stock, let’s say you bought the stock right now, and you decide hey, I want to sell the calls right there, so I sell the calls, so now if that stock gets to 245, then I’m out of my stock, but I already have my stock, I bought my stock at 204, so that means that if this happens and the stock gets to 260, I would number one collect my $234 right here of premium, because I sold this contract, and I would also make the profit up till $245 on this stock.


I would make my $4000, now, if the stock gets to $270, I could’ve made $6525, but the likelihood of that is, well, you need to determine that. The likelihood to getting to let’s say 270, in the next 36 days, is slimmer.

If it gets to 270, I could’ve made 6500, but unfortunately if you sold that one contract, which is 100 shares. One contract is to 100 shares, if I had 200 shares, I would sell two contracts.

Therefore, if it gets to 260, I still only make at expiration, which is still only $8588 dollars, because I made the price value of stock appreciation, plus what I sold these contracts for.


At 260, I would make $8588, at 300 I would make $8588, at 340 I would make $8588. But if I had just this stock, I would at least, at 300 would’ve made $18000, so I would have nearly double or triple that amount.


The difference here is if you’re selling this upside call and you’re collecting your $468 from selling these calls, if that stock gets down and moves lower, let’s say it gets to 190, you’re losing $2594.


But if you didn’t sell that, and it gets to 190, you’re losing a little bit more $2700, because you’re still making money on this premium.

If you sold a single call and the stock goes to 170, you’re still making your $468, so in fact it limits your loses to some degree by collecting that premium of $468.

You can do the same thing kind of to the put side as well, and you can sell the puts, but that’s a whole different discussion.

My whole goal for you for this video, I wanted to keep it simple, to how you that there’s variety of ways to make money from the market, and when it comes to option trading, there’s a lot of complicated things that can happen on trading options, and you can do all sorts of things in a variety of strategies.

Options can be very complicated

Don’t be sucked in to just thinking you need to buy a single option or sell a single option, because that’s typically where a lot of loses happen. I wanted to just share this with you, jut to give you some basic insight, options on their own are very complicated and that’s why the course I’m working on right now is actually one of the largest courses I probably will ever release, we’re pushing a lot of hours into just the video recorded material, and we’re not even half way done.

This subject matter is very intense, and if this video was overwhelming for you already, you definitely want to go back then and just look at some of my older option videos right here, and just look through these option videos, search for them and go to the traders fly website and go to that category of options and it’ll give you all this insight about all these different strategies and about some more options basics, but here I just wanted to share with you some of the real ways that option traders trade options, rather than simple buy or sell an option.

Quick run through my course

You have to really look at it multi-dimensionally, and later as things happen, what you do is you start stacking multiple things on top of one another, and I’ll give you one quick little run down here, on this course that I’m working on right now.

We basically have a few variations here to this strategy, this is more of an iron condor we have some put selling and call selling here, the QQQ, we have a tweaked iron condor and this one also an iron condor.


Obviously this is for filming the iron condor section, but as you can see here, I’m going to show you what’s going on just a brief insight right here, in apple on this position we’re up $158 and basically about a week as I’ve been filming and recording this. We have 8 contracts on this side. On the left side, the put side, because we were expecting that stock to go higher and we skewed it a little bit.


We have 7 contracts on the other side, the call side, the right side. So to hedge that position to protect it, so as long as apple is in between here, you collect your money.

The QQQs again, we did a smaller spread here; this one is a skewed position that we started off a little bit differently. So again, we’re up $18 on this one, but you can see that you create this concoction of spreads.


And then you have the SPX right here, also starting to come into profitable territory, not yet but it’ll get there.


And when you start looking at this as a portfolio, this is where a portfolio really starts to look like a portfolio, so what I’ve done is put this on a portfolio beta waited on the SPX, and you can see it creates this kind of profit picture right there.


I think we have some simulations, I can hide those simulations and you’ll see it fixes all that, and this is our basic portfolio, so as far as our account and portfolio, we are up 153-158 dollars right there since we put it on and $39 per day, we’re making $35 per day just in theta plus whatever if we can get into the price of more favorable pricing then that will also help us as well.


But in general, since the markets didn’t do much today, we basically collected our theta right there, which was right around $35, but we got $39 just potential, due to the volatilities potential due to some Vegas and so forth.

Hopefully this gives you some insight on options, how they’re supposed to be traded, the more appropriate way to be trading options. I just wanted to share with you that insight, so you don’t get overwhelmed with options.

Take time to study

You definitely have to put some time and study into these kinds of tools and vehicles to trade. And if you’re brand new to the market, I would say less than 3 years, stay away from options from the time being, until you get more knowledge and more education, because that’s where the key is, it’s education, education, education.

Learn what you don’t know, learn what you need to know, so that way you can evolve your craft and you can simply take one simple strategy, whether that’s just having horizontal support and resistance lines and having that stock when it breaks that line, continue to go higher and you can just have one strategy and that could be all the trading you do, and that’s perfectly fine, you can simply just do one of the calendars that we talked about, and just do calendars all day long, o iron and condors, or do verticals, it’s up to you.

There’s many ways to trade in the market

There’s so many ways to trade the market. There’s so many ways and you can make money doing it in all kinds of different ways, it’s just a question of which method resonates with you and which one hits to your liking and which one fits your risk and reward profile.

Hopefully this was helpful. If you have questions about options, then I would rather you either send a very detailed question, if you’re doing a comment in YouTube or any comment somewhere on the websites, make sure it’s very detailed, because options can be confusing.

Otherwise I’ll try to keep it simple and get back to you when I can, because they can be confusing, if you have a profit picture, if you have a position that you want to look at, you might be better to send a screenshot or do it through email, because they are complicated, and sometimes they are just very difficult to explain or answer questions for these kind of things through the comments system so I might give just a short response, and that is simply because the complexity behind them. So try to keep your questions very simple, but to the point. If you have any questions, I’ll do my best to answer them.

Author: Sasha Evdakov

Sasha is the creator of the Tradersfly and Rise2Learn. He focuses on high-level education speaking at events, writing books, and publishing video courses on business development, internet marketing, finance, and personal growth.

I'm Sasha, an educational entrepreneur and a stock trader. In addition to running my own online businesses, I also enjoy trading stocks and helping the individual investor understand the stock market. Let me share with you some techniques & concepts that I used over the last 10+ years to give you that edge in the market. Learn More

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