The "daily Call" From Option Alpha: Options Trading | Stock Options | Stock Trading | Trading Online

Hey everyone. This is Kirk here again from Option Alpha and welcome back to the daily call. Today, we’re going to be answering the question, “What is historical volatility?” Historical volatility is simply the volatility that has happened historically in the past for a particular security at any given time or during any given time period. Now, most people actually honestly still confuse this with implied volatility. But implied volatility is forward-looking. Implied volatility looks at the possible or projected or expected volatility that a stock might exhibit moving forward into the future. Historical volatility is easy to figure out. We know historically that Apple might have been volatile with a 20% up or down move in any given time period. That’s something that we can look at retroactively or retrospectively and figure out what the historical volatility is of Apple. Now, the reality is that historical volatility has sometimes very little to do with what their projection of future implied volatility could

Hey everyone. This is Kirk here again from Option Alpha and welcome back to the daily call. Today, we’re going to be talking about why great swimmers can't beat strong currents. And this topic comes in the face of potentially a declining market in what we've seen over the last couple of months, is definitely the markets having a little bit more volatility. And what I think is particularly interesting about this market downturn is that you could even say that some of the tech sector stocks including most of the FENG stocks have really kind of led the decline. In fact, some of the FENG stocks are actually technically in a bear market or at least intraday, we’re in bear markets this last week. It's interesting to me because I think a lot of people have this misconception that great companies have this ability to circumvent the broad economy, the broad market dynamics and I always think about this line in that great swimmers can't beat strong currents. No matter how good a swimmer is, no matter how good a company

Hey everyone. This is Kirk here again from Option Alpha and welcome back to the daily call. Today, we’re going to answer the question, “How do you find weekly options contracts?” If you are interested in trading weekly contracts or if you have an interest in trading the nonstandard monthly contracts, then the easiest way to find these weekly contracts is most likely to go into your broker platform and just simply look at the date of the options expiration and what you're looking for is you’re looking for the expiration date to be not the third Friday in the month and that's a very simple way of saying basically, you’re looking for every expiration date that does not line up with a regular or traditional expiration dates for monthly contracts which is the third Friday in the month. For example, heading into December this year because we’re doing the podcast right now in December, the December contracts that would be the monthly contracts would expire on the 21st of December. That would be the third Friday in D

Hey everyone. This is Kirk here again from Option Alpha and welcome back to the daily call. Today, we’re going to be talking about why investing styles do not exist. Now again, I know this might be a little bit controversial and I want it to be. I want to get your opinion on this. I want you guys to hear my opinion on this. But I've often seen and people actually just sent me an article the other day which kind of prompted this quiz as to – “Kirk. Take this quiz and see what investing style you are.” And I thought to myself – There are no investing styles. I totally do not believe in this ideology that there are investing styles that exist in a vacuum and that everybody no matter what style you are could eventually get to the same point because it doesn't happen that way. In investing, there are things that are and are factual-based investment decisions and things that are not and you have to differentiate between those and there's no style that one style would then get to the exact same point as potentially

Hey everyone. This is Kirk here again from Option Alpha and welcome back to the daily call. Today, we’re going to be talking about why financial markets often do what we least expect. This is a really interesting topic and I think one that I really wanted to drive home today in the daily podcast, is this idea of taking the contrarian or opposing view with respect to where financial markets are and where financial markets might be going. Now, it’s hard to do because we are so bombarded by media and what we hear and what we read and influences of others that we often get pigeonholed into an ideology or a thought process that can be completely backwards from what actually might happen in the markets. And so, what I try to do often is try to remove myself from all of the noise and the chatter and try to figure out what do most people expect the market to do and then assume that the market does the complete opposite because what I know to be true is that the market is a very difficult thing to manage and I’m not t

Hey everyone. This is Kirk here again from Option Alpha and welcome back to the daily call. Today, I want to go through the only two reasons why I believe optionsellers.com blew up their hedge fund. If you’re listening to this podcast or if you clicked on it from Google or somebody shared it with you, hopefully this will give you a little bit of insight and understanding as to why this hedge fund that was shorting naked calls and puts in the market blew up and I think that the reasoning behind this is a little bit different than what most people would assume. I think the problem that I see with optionsellers.com is twofold and then at the end, what I want to talk about is why they were basically doing things completely wrong. You'll see as we go through the number one and two reasons here, but again, you'll see why these things are completely wrong and backwards even probably based on their own logic and in-house risk management system which they probably just failed to follow. But the number one reason why t

Hey everyone. This is Kirk here again from Option Alpha and welcome back to the daily call. Today, we’re going to be talking about how to manage a fat finger trade. What is a fat finger trade? A fat finger trade is basically this idea that you just mistype something on a keyboard or your finger just kind of slipped or you hit two zeros instead of having one zero and so, you ended up trading 100 contracts and wanted to trade 10 contracts or you just incorrectly typed the ticker symbol or miscalculated something, any combination of that, but you basically just entered a trade you did not mean to enter. Now, look. I've done this all the time and in fact, the reason I’m doing this podcast is because I just did this like literally about a week ago where I exited a trade that I should not have exited, but I just didn't catch it. I didn't think through the process. I thought I was looking at one thing. I meant to look at something else and I executed a closing trade on something that we had literally just entered th

Hey everyone. This is Kirk here again from Option Alpha and welcome back to the daily call. Today, we’re going to answer the question, “Why enter uneven or skewed iron butterflies?” There's probably two reasons why you would want to enter an uneven or skewed iron butterfly. The first reason why you might enter one of these is because you have some sort of expectation that the market is more likely to go in one direction versus the other. For example, if you thought that a stock had a higher chance of moving up after a move down, then you might enter a skewed iron butterfly that reduces some of the upside risk should the stock actually move up from the price point that it's at right now. Again, one of the reasons why you could enter one of these skewed positions is basically the assumption of where the underlying security is going to go after your trade entry. Maybe you have some technicals that you’re going to use. Maybe you have some sort of charting patterns that you see developing. Well, whatever the case

Hey everyone. This is Kirk here again from Option Alpha and welcome back to the daily call. Today, I want to talk about some proof as to why the government doesn’t want you to retire. This may be a little bit of a touchy subject, so I wanted to approach this subject with hopefully a little bit of different insight and different thought process. I’ve always thought about this in the back of my mind. When I started out in this business, I was actually working in New York. I had an employee-sponsored plan through Deutsche Bank when I worked in New York and I always thought to myself like why couldn’t I contribute more to my retirement accounts, why were these limits in place, I mean, all of these things that you just actually kind of learn as you start getting into the workforce. And so, many people don’t realize that these are in place until they actually start generating money and have a salary or an income, but regardless, I think it’s an interesting conversation that we need to have and something that I alwa

Hey everyone. This is Kirk here again from Option Alpha and welcome back to the daily call. Today, we're going to be talking about emergency funds, in particular, what emergency funds are and if you should have one. Emergency funds I think are a great idea and concept in the sense that what you’d hear often is that we need to save up somewhere between three and six months of living expenses and put them aside into a liquid checking or savings account to be used in emergency situations. What classifies maybe as an emergency situation? A loss of a job, a car that is maybe wrecked or broke down or you need medical expenses. And I love the idea and the concept of emergency funds, but here's my only rub with emergency funds that I want to talk about today, is that emergency funds in and of themselves are okay, but when you look at them in context of the overall financial picture of most people, what often ends up happening is that people end up saving for these emergency funds which might take them a year, two yea

Hey everyone. This is Kirk here again from Option Alpha and welcome back to the daily call. Today, we're going to be talking a little bit about financing 101 and hopefully, helping you understand how to leverage positive spreads and how to look for positive spreads in any type of investing that you do. Now, this again, like I said, is more of a financing 101 piece or topic, but in all reality, it's probably not something that’s covered in most financial books or even in financial courses. But if you look around every single business, every single market, including the options market, what you'll notice is that any business that's going to be successful or any investment that's going to be successful has to have some sort of positive spread. And I’m not talking about option spreads although we love option spreads here at Option Alpha. I’m talking about positive spreads between basically, cost and what you can borrow or the cost of financing or the cost of the position and then what you can charge or what you c

Hey everyone. This is Kirk here again from Option Alpha and welcome back to the daily call. Today, we're going to be giving you guys some simple tips for an amazing credit score. I actually have four simple tips for an amazing credit score today and the reason I want to continue talking about this is because we haven't really mentioned any of this stuff before on Option Alpha. Most of the time on Option Alpha, it's very focused on obviously investing and options trading, but I think part of the whole financial picture needs to be things like credit score, budgeting, making sure that you're not doing stupid things with your finances in the background before you even get to the point of options trading. As many of you guys know, I'm very much a student of the entire finance game and part of that is credit score. And so, I’m very much a student of understanding how credit scores are determined because I know that credit scores, having great credit scores can lead to potentially hundreds of thousands of dollars i

Hey everyone. This is Kirk here again from Option Alpha and welcome back to the daily call. Today, we're going to be talking about why target date funds are a scam and I want to explain the reasoning behind that. The reason that I say target date funds are a scam is because what target date funds do in theory sounds rational and logical. They’re going to basically rebalance your portfolio on an ongoing basis as you approach some target date, potentially retirement, potentially the end of your employment of some target date in the future. For example, when my wife was a teacher and signed up for her benefits package, one of the things that the person who was suggesting benefits for her said, “You need to put yourself into one of these target date funds because you’re going to be retiring in 30 years, so when you retire in 30 years, (or 20 years, whatever it was) you’re going to want a different mix in your portfolio.” And again, this sounds logical and reasonable that that would happen. Her target date fund wo

Hey everyone. This is Kirk here again from Option Alpha and welcome back to the daily call. Today, we're going to be talking about why I believe you should not pay off your credit cards. Why I believe you should not pay off your credit cards does not mean that you keep a massive credit card balance. I want to clear that up as we get started. And I’m definitely not saying that you leave these massive credit card balances and not make minimum payments if you don't have the funds to pay off most of your credit card. But what I am saying is that when you look at what factors affect your ability to generate a higher credit score, one of the key factors is credit utilization and basically, just the capacity to hold credit. And the reason I want to talk about this today is because we don't often talk about credit scores or credit cards, etcetera, but I think it's an important part of just your overall finances. And so, I want to start diving deeper into some of these financial, personal finance topics, I guess you c

Hey everyone. This is Kirk here again from Option Alpha and welcome back to the daily call. Today, we're going to be talking about why are SPX and ES different prices. If you are a trader and you start trading in the broad markets, you'll likely come across these two ticker symbols. SPX represents the S&P 500 index and ES represents the E-mini futures, also commonly referred to a /ES when you’re trading in your broker platform, but it represents the E-mini futures on the S&P 500 index. Many people get confused because they look at both of these and they think to themselves, “Okay. Well, you have the S&P 500 index, SPX and then you have the futures on the index, so why are there different prices? And more notably, why does the futures contract trade at a little bit of a “discount” compared to the SPX contract itself?” Here's what you have to understand. The SPX is an index. You can't actually trade it. There's no tradable security. Just like what we looked at yesterday with the VIX where you can’t

Hey everyone. This is Kirk here again from Option Alpha and welcome back to the daily call. Today, we're going to answer the question, “Can I buy the VIX?” And the short answer to this question is no. We cannot buy VIX itself. We have to trade either VIX futures or VIX options. The VIX in and of itself is just an index. It just tracks rolling 30-day implied volatility for S&P 500 option contracts and so, it's just one metric of measuring volatility in the market. And most people use it and gauge it as the fear index of the market because as people get more aggressive and buy put protection, the VIX option prices go up. And so, as a result, you can't actually trade VIX itself. There's no bid or ask spread. It's just an index. But you can trade VIX futures which is /VX if you’re in most broker platforms or you can trade options on the VIX itself. Now, we also like trading options on other volatility products like VXX and UVXY which we’ve talked about before on the podcast. But again, you can’t actually go o

Hey everyone. This is Kirk here again from Option Alpha and welcome back to the daily call. Today, we're going to answer a question, “Why did an option order get rejected?” And here are five possible reasons why that might have happened. We often get questions from our members and they’re frustrated because sometimes they place an option order and their broker might reject the order for some reason and they don't know why. Here are five possible reasons why your broker might reject your option order. The first is not enough money. It might sound intuitive, but sometimes people do not understand the risk that's associated with the trade that they’re making and they think they're making a defined risk trade when it turns out they’re making an undefined risk trade or they’re just toggling in too many contracts and they didn’t recognize it. But many times, the first line of defense is just the fact that you don't have enough money or enough trading capital in your account to make the trade. Double check that you’

Hey everyone. This is Kirk here again from Option Alpha and welcome back to the daily call. Today, we're going to talk about the impact of fees and taxes on investing performance. The impact of fees and taxes on your investing performance is so great that I don't think people really take the time to understand how much control you have in many cases, over fees and taxes and how cutting these and reducing fees and taxes before you do anything else can make some of the biggest differences in your returns over time. Now, we've all seen the charts of the investor’s portfolio that grew for 30 years with an advisor fee or without an advisor fee or with a hedge fund fee or without a hedge fund fee and we know the impact of fees over time. But we don't still understand how much we’re paying in fees because many times as we’ve said before, fees are hidden in products that we are trading or products that we’re investing in. In particular, the mutual fund space is very good about hiding the fees that they’re charging an

Hey everyone. This is Kirk here again from Option Alpha and welcome back to the daily call. Today, we're going to answer the question, “Is selling in the money or out of the money options safer?” And so, what do we mean by in the money or out of the money? Well, if you’re selling option contracts, we’re talking about the relationship between the strike price and the current stock price or current ETF price of the underlying. For example, if a stock is trading at $100, you could sell an out of the money call option at $105 or an out of the money put option at $95. Both of these strike prices would be out of the money on their respective ends. In the money contracts would be if you reverse the calls and puts. And so, if a stock is trading at $100, you might sell an in the money put option at $101 and you could sell an in the money call option at $99. Again, that's if the stock is trading at $100. So, to get back to the question, “Is it safer to sell in the money or out of the money?” Well, it’s all relative bas

Hey everyone. This is Kirk here again from Option Alpha and welcome back to the daily call. Today, we're going to answer a question which is, “Why do we use multiple savings accounts?” What I want to start to do is I want to start to (as we progress towards the end of the year) include every now and again, some of these personal-finance style podcast and the reason I want to do this is because I get a lot of questions from members in the community about how I manage my personal finances, how I think about or what I think about credit card debt versus auto loan debt versus mortgage or real estate debt, how I manage savings, investing, expenses, types of accounts that we have, budgets that we do, so I want to start doing some more of these types of shows. Again, this is going to be potentially the first of many of these styles, so if you have questions on like how I manage my personal finances and you want to add those to the potential roster for the daily calls, please shoot me an email, send me a tweet, go ov