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 answer the question, “Should you always have a GTC profit-taking order working in your account?” If you don't know what a GTC profit-taking order is, GTC stands for good till canceled and it’s basically an order type that you can put into the market in your brokerage account that basically stays in place every single day going forward in the future until the options either expire or until the contract is executed at your price. For example, if you sold a straddle for $500, you might have a GTC profit-taking order to buy back that straddle at say $300. Whenever the straddle price goes down to $300, it would automatically execute that order and take profits out of the position. My thought process on – Should you always have one? is that I don't think you should always have a GTC order working. I think they work for different accounts and different scenarios in your life and how you trade and how muc

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 JP Morgan's You Invest brokerage now offers 100 free trades, but answering the question, “What's the catch?” If you haven’t heard, recently, JP Morgan decided that it was going to get into the personal retail investing space with brokerage accounts through a new company called You Invest. And so, what they’re doing is they’re offering 100 free trades a year to all of the Chase customers and unlimited free trades to customers who maintain large account balances in their account. Now, obviously, this is insanely important and a huge pivotal shift in this industry that I called literally three months ago. I will definitely say I called this one out. I knew this was going to happen. We talked about it in my live stream which I called “the world is flat” and this idea that in the future, all brokerages are going to move to commission free trading. It’s not a matter of if. It's just

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, “Should you withdraw money from your investment account to pay monthly expenses?” In this case, I wanted to read actually a member email that I got. And as you guys know, I get a lot of these emails which serves as the basis for a lot of the questions and topics that come up on the daily call. If you want to get your question answered or if you have some topics that you haven’t heard us cover yet, please go ahead and shoot me an email, send me a tweet, Facebook message or submit your question at optionalpha.com/ask which is the best place to go. This person said, “Well, what are your thoughts on withdrawing money from your account to pay for expenses? I know that you prefer to take a standard monthly draw, but what percentage of your account is too high where you risk having to constantly decrease your account size? Obviously, in an ideal world, your monthly expenses would be

Hey everyone. This is Kirk here again from Option Alpha and welcome back to the daily call. Today, we’re going to talk about how Theta decay impacts straddles versus iron butterflies. It’s important to understand as we talk about the differences between Theta decay as it relates to different option strategies, what the basic building blocks or core elements of each strategy are. In this case, straddles and iron butterflies are effectively one in the same strategy. They are synthetic equivalents of each other, so long as you're buying options far out on iron butterflies. Iron butterflies core strategy is a short straddle at the money, selling the at the money call and the at the money put. It’s the same strategy that you would use if you were doing a short straddle. Now, the difference is that with iron butterflies, you end up going far out of the money on either end and buying cheap protection. Now, the idea behind Theta decay would impact iron butterflies a little bit differently than straddles depending on

Hey everyone. This is Kirk here again at Option Alpha and welcome back to the daily call. Today, we’re going to be answering the question, “What is option buying power?” In its most simple terms, option buying power is the amount of money or funds that is available for you to actually go out and start trading options. Now, I think this terminology should be switched and it should no longer be called option buying power, but actually be called option trading power because it's not just limited to the buying and purchasing of option contracts. Your option buying power just tells you how much funds you have available in your account for the purposes of options trading and this means that you can also sell option contracts and put option contracts on margin or sell spreads, buy spreads, you can sell complex strategies. You could do everything you want with options trading with this amount of capital. What typically happens is that when you have an account say $100,000, if you start investing that account and you

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, “What happens when you buy a put option contract?” I want to talk about the logistics of what actually happens when you buy a put option contract and the first thing to understand is that when you are an option buyer in this case of a single put option, you do have to pay money to get into that contract. Logistically, what happens is that the money that you paid for the contract or the option premium gets transferred over to the option seller and in this case, if you're a put option seller, you would then receive that option premium or that option contract value as income in your account. Now, when this happens now, you have this put option contract that you’ve now purchased from the option seller and it’s in your account valued at the value that you priced it at and it's immediately going to start changing in value based on time until expiration, volatility, the underlying st

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 earnings surprises, what they are and I want to share three examples with you. Now, the key thing to understand about earnings surprises is that they can happen in either direction and it doesn't necessarily always have to be this difference between what analysts or Wall Street expects the company to make and what they actually make. In fact, a lot of earnings surprises can come as a result of guidance that the company has or based on the underlying expectation of actual market participants. What do I mean by saying all this? Well, when a company announces earnings, typically what will happen is you will also have some of these big companies that are followed by research analysts. And so, a research analyst might publish their expectation of where the company's revenue and earnings and growth should be for this quarter. Now, all of these research analysts pull their numbers togeth

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, “How long does it take to learn options trading the right way?” This is a tough one because I know there's a lot of options trading education out there and I would like to tell you that it takes literally no time at all to learn how to trade options, but it's just not the truth. You can't learn how to trade options overnight and you certainly can't learn how to trade options at a weekend or a multi-day seminar or a boot camp. It's just not going to get ingrained into your mind and you’re not going to understand and really believe in the concepts in that short amount of time as much cramming as you try to get in. I think that options trading is truly probably a six to eight week process to learn. I think there's concepts that you have to master and you have to give your subconscious and conscious mind time to basically absorb and learn some of these concepts and methodologies, th

Hey everyone. This is Kirk here again from Option Alpha and welcome back to the daily call. Today, we’re going to go answer the question, “What’s the difference between an iron butterfly and an iron condor?” Structurally, there's only one real difference between these strategies and I’m not going to get into the basics or to the pricing principles between them or how they interact in different markets. But as far as how they’re structured and how they’re built, iron butterflies are different than iron condors in that iron butterflies have the exact same short strike on both the call and put side and iron condors on the other hand, have different short strikes for calls and puts. For example, if we have a stock trading at $100, the iron butterfly strategy might sell the 100 strike call and the 100 strike put option and then buy options out on either end say at 105 on the call side and 95 on the put side. An iron condor on the other hand, might sell the 99 strike put and sell the 101 strike call option, so not

Hey everyone. This is Kirk here again from Option Alpha and welcome back to the daily call. Today, we’re going to go through the Thinkorswim Account Info Basics Guide which is basically my fancy way of just saying, “We’re going to tell you what all those numbers in the account info box on the top left-hand corner of your Thinkorswim platform actually means.” There’s a couple of different things inside of that box. It can be confusing because there’s a lot of numbers trailing around in there, buying power, day trading limit, cash and sweep. And so, what we want to do is help you understand what each of those boxes means. Again, if you're logged in to your Thinkorswim platform on your desktop or you can even see this I believe in your mobile platform, this is what you'll see in that top left-hand corner. It’s the account info box which you can toggle open and you can move around in your platform. The first box there is the option buying power box or at least it’s the first box for me because I actually have opt

Hey everyone. This is Kirk here again from Option Alpha and welcome back to the daily call. Today, we are going to be talking about maintenance margin requirement basics and specifically talking about how they relate to trading stocks. We’ll cover in a future podcast some maintenance margin requirements and how margin works for options trading, but I wanted to get back to basics, so you guys have a building block and a foundation of understanding first how maintenance margin works for traditional stock purchases. When you actually open up a margin account and most brokers require now at least $2,000 to open up a margin account, what that does is that allows you then to buy stock on margin and it’s just a fancy way for brokers and investors to basically say, “Buy stock with the help of a loan.” Now, you don't have to do this and I definitely don't suggest necessarily that people do this because it can amplify the gains, but it can also amplify the losses. But when you buy stock on margin, you are basically put

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 does BP effect in stocks mean or more specifically, what does buying power effect in stocks mean?” When you're actually trading, it’s actually pretty simple to understand. But when you’re trading, whether it’s stocks or underlying options, whether you're buying options, selling options, doing simple strategies or complex strategies, all that BP or buying power effect means is that is the amount of money that comes out of your account or gets set aside in your account to cover that position. Now, I say that it’s two of those because it's not necessarily both. That money is always coming out of your account. For example, if you buy stock, money would come out of your account for the purpose of purchasing shares of that stock. Now, you have stock that's valued at the same amount as where you purchased the shares, but you actually forfeited the right to the money by bu

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 now, “What is the difference between VXX and UVXY?” In yesterday’s daily call podcast, we talked about VIX versus VXX. Today, we’re going to be talking about the differences between VXX and UVXY. Now, there’s a lot that we could get into and we’ll try to narrow it down as much as possible, but the main difference between these two because they are both still ETNs and they do trade like ETFs and like ETNs, you can buy and sell them, you can trade options on them, etcetera, but the main difference is that UVXY is leveraged. This could work to your advantage, depending on which direction you’re trading it or it could work to your disadvantage. What happens with VXX is that VXX holds unleveraged positions in Vix futures. It would consider typically, sell the front month contracts that it’s long and then buy the back month contracts to replace. Well, in the case of UVXY, they hold a

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’s the difference between VIX which is the Vix and VXX?” The first thing you have to understand is that these two things are not the same. I think actually, a lot of people interchangeably use VIX or VXX when they mean one or the other, but not the same. Now, they are different products, but they use the different, I guess underlying to track and trade. The first one is the Vix. The Vix in and of itself is not something that you can necessarily trade directly. You can trade options on it, you can trade futures on the Vix, but you can’t trade VIX itself. You can’t buy VIX in the open market. And what the Vix does is just simply track implied volatility on a 30-day basis for the S&P 500. You could think of it as the implied volatility reading or chart of the S&P 500. Now, the difference here is that VXX in an ETN. And so, VXX, you can trade, you can short, you

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 the first machine-learning AI technology for retail traders, one that we are coining, OTIS. It was hard to decide what I was going to follow up show number 365 which was our one-year review of the daily call podcast and I figured the best thing is to talk about this new technology which is truly the most exciting thing that I have been kind of working on with our team and something that I'm really excited to get out to you guys here in the next couple of months. But we've hinted at this in a couple of different areas, not only on the podcast, but also on our Facebook Live channel, also in the membership area and the forum. But our team has developed what I think is one of the coolest pieces of technology and that is a deep-learning AI technology for the stock market. Now, this is something that's not new to the stock market. If you’re thinking to yourself, “Well, I've heard of thi

Hey everyone. This is Kirk here again from Option Alpha and welcome back to the daily call. Today, we are reaching the one-year review and update for the daily call. First of all, I want to say thank you for those of you who’ve been with me this entire journey. It was a long 365 days, but a very much enjoyable process for me. I really like doing the daily call. I really like publishing them and hitting on different topics that we don't generally have an opportunity to touch on in some of our training and some of our content that we put out at Option Alpha. Now, in today's review, what I want to go through are some stats, some of the growth and some of the top shows that we've seen over the last year and also some themes that we might have moving forward on the podcast. Now, I am going to be continuing to do the daily call podcast, so it’s not going to be ending at all by any stretch and we hope to continue it for many years and I want to talk about some of the themes that we’re going to be going through as we

Hey everyone. This is Kirk here again at Option Alpha and welcome back to the daily call. Today, we’re going to be discussing why one day, all brokers will offer commission-free trading. I actually called this a couple of weeks ago. I did a Facebook Live where I said the world is flat and these are basically the three things that nobody sees coming, but this is where the world is going. The world is transitioning and it's changing and one of the things I said in there was that in the future, all brokers will be commission-free. I think Robinhood for sure was the first in this space and they’re going to be looked at historically as the leader in this space, but now, a lot of brokers are quickly transitioning to commission-free trading. In fact, just a couple of weeks ago, J.P. Morgan announced that they have their own free trading platform. And so, now, Robinhood has major competition with the likes of J.P. Morgan and I expect in the future and probably in the very near future, many brokers will start moving v

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, “Do you need to own 100 shares of stock before trading options?” The answer to this is absolutely and 100% no. You do not need to own shares of stock whether 100 or one share of stock. It doesn't matter. You do not need to own shares of stock before you can trade options. Now, what most people think about when they start transitioning between stock trading into options trading is they think about a covered call which a covered call does require that you own 100 shares per one call option that you sell. But in many respects, what you can do is you can trade options without owning the underlying stock or shares. Now, this is a really cool feature of options trading in my opinion because it reduces this high capital threshold to be able to get into different positions and different ticker symbols and it also allows you to more appropriately manage your risk and adjust your positi

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 are options sometimes called derivatives?” Derivatives are basically any financial instrument that derives its value from something else. And so, this is why options contracts are called derivatives because they derive their value from the underlying stock, ETF or index that they are trading on. Now, if you think about it, every insurance contract out there is also a derivative because any insurance contract is deriving its underlying price and value based on the property or person or car or business that it's trying to ensure. Almost conceivably, many insurance contracts are not always exactly the same because one insurance contract on your house may be different than an insurance contract on somebody else's house and it’s the same thing in the options market. Options derive their value from one stock versus one ETF versus another index. And so, that's why they're someti

Hey everyone. This is Kirk here again from Option Alpha. Welcome back to the daily call. Today, we’re going to answer the question, “How important is a stock’s closing price?” To me, a stock’s closing price every single day is vitally important to the potential expectation for the next day and I say this only on days that we see a huge move in the stock price because for me, the idea of people trading the stock during the open or afternoon sessions is important, but what's more important potentially is what people are willing to hold overnight because the risk that you hold overnight when you can't actually trade that security is very telling to me as to where the stock may or may not go in the future. For example, if we see a stock have a huge run-up early in the day, but everybody dumps the stock at the end of the day and nobody wants to hold it, well, what does that tell you? That tells you that maybe we might see some sort of reversal or move down the following couple of days. On the other hand, if we see