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 is a very special daily call because it is our 300th episode. That’s right. We have done nonstop every single day from start to finish, 300 daily call episodes in a row which is actually pretty crazy and I feel like we've gotten to show number 300 here pretty quick. It seemed like 100 came quick, 200 came quicker and now, 300 is here really fast. But I got a couple of things that I want to talk about as we maybe outline and think forward here on the next couple of hundred episodes that we've got coming in the future for the podcast roadmap. Obviously, we’ll be dissecting more options trading topics, more topics around psychology and mindset and building habits, etcetera. There's a couple of things that I want to go through with you guys here, so it’s definitely one that you want to listen to at least briefly because it is really important to kind of set the foundation for where we go from here. There are four thi

Hey everyone. This is Kirk here again at Option Alpha and welcome back to the daily call. Today, we’re going to be talking about broker commissions and in particular, the difference between ticket charges and per contract charges. When many people sign up with a brokerage, they are usually looking at the per contract charge. In fact, that's what I’ve generally seen over the past couple of years, is that brokers actually show their per contract fees. Their per contract charge might be $.65 or $.30 or $.50 and that's what people see. I’m not downing the brokers or faulting them for doing it. It’s just that’s the way that they promote their services on a per contract basis. But what many brokers actually have is what’s called a ticket charge and so, when they have a ticket charge, what they will do is they will charge you a fee per trade that you do in addition to the per contract fees that they charge you. Let's say you are trading any option contract, it doesn’t really matter, but you're going to trade two con

Hey everyone. This is Kirk here again at optionalpha.com and welcome back to the daily call. Today, we’re going to be talking about why new habits are lost after only three days. And you heard me right. It only takes three days to lose a new habit which is incredible. Most research suggests that it takes maybe even a little bit less than that, but I'm being generous in saying – Look. It takes probably about three days for you to lose a new habit which means that you really have to fight, like you have to deliberately fight against a habit that you currently have that you want to change and remove the routine that you have and replace it with a new routine before that habit will start to become automatic. And the problem is that your brain has no idea how to differentiate between good and bad habits and that's really the most challenging part about the psychology of developing habits and even changing habits, is that your brain is not hardwired to make rational decisions like that. Your brain is put in place t

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, “How do you convert an iron condor into an iron butterfly?” Let's start off with the basics of the iron condor. An iron condor is when you’re selling two credit spreads, one on either side, the call spread and the put spread to create this iron condor payoff diagram. For example, if a stock was trading at $100, you might sell the 105/110 call option spread and you might sell the 95/90 put option spread. On either side, you’re doing a $5 wide spread, about $5 from the market, very simple concept that we can use for our purposes here today. When you start converting an iron condor into an iron butterfly, what we want to get to is we want to get to that iron butterfly payoff diagram which looks more like a pyramid type shape on your P&L graph and that's where you have your short strikes at the exact same strike on the call and the put side. With an iron butterfly, you w

Hey everyone. This is Kirk here again at optionalpha.com and welcome back to the daily call. Today, we’re going to be answering the question, “Are continuation gaps and exhaustion gaps really reliable indicators for charting and trading?” A lot of the information that we get here today is really coming from thepatternsite.com and in particular, a lot of the research that Thomas Bulkowski has done before on patterns. He's got a book on patterns called “Encyclopedia of Chart Patterns.” There’s a first edition, second, I think there's even a third edition, but you can go out and check it out. But again, a lot of these results are coming from his continuational research and back-testing of gaps and trying to understand what gaps actually do in markets, do they actually work in markets or not and I think it’s pretty interesting. Really, what gaps are and in many cases, these two examples, we’ll go over here in a second, but gaps are really just these breakaways that happen in chart patterns. It's where the high, t

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 that has to do with short selling basics and how you can sell stock that you don't even own. When people start trading options and start trading stocks, they undoubtedly run across the concept of going short or short selling. And so, it’s really confusing at first because the idea is, “Well, how do I sell something that I don't even own?” And that’d be like selling a car without even having a car. How do you do this? Well, the concept is actually really easy and I'll try to explain it very simply for you guys here today on the show because I want you to understand just the basics of it. We’re not going to get into the nitty-gritty and the actual behind the scenes of who's doing what, but just the basic concept of how short selling works is actually really easy. If you think about option buying or stock buying just to use the other side of it here real quickly, you would b

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, “How do I keep my covered call stock from being assigned?” And so, the short answer to this is that since you are an option seller, you really don't have the choice. It's the choice of the option buyer, whoever bought that option contract from you, as to whether they want to assign the contract or not. Now, it’s not the direct person, obviously. It goes through a whole random process, through the OCC and then down to the broker. It is a random process, but I’m saying anybody who bought the other opposing side to that. They ultimately have the choice as the option buyer. But there's a couple of things you have to know about assignment and I think this will help out as to understanding if your option contract is at risk of assignment, so if your covered call is at risk of assignment. The first thing is how much time you have until expiration. Now again, most option assignmen

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 my personal consistency hack that I’ve been doing the last couple of weeks and it's been a huge difference and that is, “I never walk by another dirty sock ever again.” You might think to yourself that's totally random and totally weird, but here’s the idea. Well, we have out third kid now, Colin and he’s growing up really fast and it seems like every day, the house is a mess. I mean, like we work and live in the house. We do not go out to work. We work where we live and live where we play and the whole deal with three kids in a small house. And so, what I have found to be really annoying because I’m the type of person that wants everything very much organized, always clean, always put away, is that having three kids seems like I'm just chasing a dumpster all over the place every day. What I started to do awhile back was I started to ignore it. I said, “You know what? I just can’t

Hey everyone. This is Kirk here again from optionalpha.com and welcome back to the daily call. Today, we’re going to be discussing why doing a lot of things never substitutes for doing the right things. Now, this is a favorite topic of mine because as many of you guys know, I geek out on all of this efficiency, market psychology, personal psychology, personal development, all of that stuff. I really, really love this is topic and I think this is one of those ones that I really love this kind of thought process around doing the right things versus doing a lot of things because in this day and age, it seems like everybody's really busy and it seems like the person who looks busy ends up being the most successful. But I don't think that's obviously true. I think it's the person who just does the right things and focuses all of their time and energy on the right things ends up being the most successful. I would start off by saying this. We are all wasting a lot of time and we rationalize it with a lot of really s

Hey everyone. This is Kirk here again from optionalpha.com and welcome back to the daily call. Today, we’re going to be talking about how to convert a bear call spread into iron condors. The process is actually pretty easy to do. It’s actually probably one of the easier adjustments that you can make and it’s maybe one of the first adjustments that you make to a position as it’s starting to get challenged. Again, the starting position that we’re working with is a bear call spread. That's basically a credit call spread where you are selling a call option and then buying a call option at a higher strike hoping that the stock either stays the same or generally goes down. Now, of course, the stock can go up a little bit. As long as it stays below your strike prices, you’re good to go. You make all of that premium that you collected as a profit at expiration. But when the stock starts to move up against your bear call spread and starts to challenge you, then what you can do is you can convert the position into an i

Hey everyone. This is Kirk here again from Option Alpha. Again, welcome back to the daily call. Just to kind of dovetail on the podcast that we had yesterday, today, we’re going to be answering the question again that relates to option assignment and out of the money contracts and that is, “Is it possible for out of the money option contracts to get assigned?” The question really comes from a member who was wondering, “During an expiration month, if you have a contract that’s out of the money, typically, people would associate that contract with having very little to no risk of assignment.” But he was wondering, “Do they ever get assigned and if so, what would be the reason that somebody would then assign an out of the money option contract?” To back up a little bit, I would say that it's very unlikely that out of the money contracts get assigned. Again, if you listen to yesterday’s show, 289, you’ll understand why those out of the money contracts are very unlikely to get assigned and it's because there's no

Hey everyone. This is Kirk here again from Option Alpha and welcome back to the daily call. Today, we’re answering the question, “Why do all out of the money options expire worthless?” This is a common question that I get, honestly from newbies and the question is, “Well, why do these things expire worthless? Why don’t they have any value at expiration? Why do we, in many cases, leave these out of money option contracts on to expire worthless? Whether they’re long contracts or short contracts, why don't we just let them go through the expiration cycle or choose to exercise those contracts and deal with the shares?” I want to use an example which hopefully will illustrate this point very clearly as to why these option contracts expire worthless when they’re out of the money. Let's say that you have a stock that’s trading at $100 and you buy a 105 call option on that stock. You might buy that call option. Of course, since we’re at Option Alpha and we do option selling, we might be the person that sells you that

Hey everyone. This is Kirk here again from Option Alpha and welcome back to the daily call. Today, we’re going to discuss the only two absolute truths when it comes to time management. Time management is a favorite topic of mine because I'm always trying to manage my time a little bit better and now that we have three kids and a baby, it's becoming increasingly difficult. I have to get back to these hard truths about time management and it is hard. I mean, it's not easy to manage yourself and to manage your time at home and even if you have a job, it's hard to manage that free extra time that you have because we always want to just relax and chill out or have a drink or just sit outside. I mean, we want to do something besides actually doing work in many cases, so we have to motivate ourselves and we have to figure out what do we do and how do we do it, so that we make the most of our time, whatever time that we do have during the day. Two things that I get back to when I was actually reviewing a lot of notes

Hey everyone. This is Kirk here again from optionalpha.com and welcome back to the daily call. Today, we’re answering the question, “Can you sell options without owning at least 100 shares of stock?” This is actually a really interesting one and a very common misconception that people just don't understand as they get started into options trading. Now, it’s not their fault that they don’t understand it. I don’t think anybody really explains it. That's why I’m trying to do this podcast about it, so that people understand what the risks are and what you actually need to do or what capital you need to have if you actually want to start selling or buying option contracts. A big common misconception is, “Well, I can’t sell options if I don't have 100 shares of stock.” And what I think the root origin of this misconception comes from is from when brokers initially approve people to start trading options, they usually approve people to trade covered calls and covered puts. And when you do a covered call or a covered

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 pros and cons, generally of Forex trading for the average investor. We did a little bit of a series a couple of weeks ago on Forex trading and I wanted to circle back and just go over some of the pros and cons, I guess for the average person who’s maybe considering it or thought about Forex trading. Look. Forex trading in general, I think is very attractive to a lot of people because of the liquidity, because of the 24/7 markets that you can trade Forex in. I think it draws a lot of people in because of the appeal and the size and just this connotation that Forex trading is awesome. But I think it carries a lot more risk than people are really ready for. And so, I think for the average investor, it's not something necessarily that they have to do or that they need to do to be successful. I think Forex markets serve a very definitive purpose as we talked about in other shows in

Hey everyone. This is Kirk here again at optionalpha.com and welcome back to the daily call. Today, we’re going to be talking about risk-free option trades. And yes, it is possible to have risk-free option trades, but I see a lot of crap being submitted out there online and people writing up articles about this and honestly, trying to bait and switch people into getting into programs that teach you how to do risk-free options trading. But I’ll show you how you can do it here. It is possible to do, but you can't do it right off the bat. You have to do a position that actually takes on risk before you basically convert an option trade into a risk-free potential trade. Now, we've done these a couple of times. It doesn't always work out perfectly, but we’ve done them a number of times and we have case studies on the website that you can check out. You can look up one that’s called risk-free DIA iron condor. That's a great little case study that we walk through and I’ll mention this as we go through today’s daily

Hey everyone. This is Kirk here again at Option Alpha and welcome back to the daily call. Today, we’re going to answer the question, “What’s the best timeframe for stock trading?” This is actually a user submitted question. Somebody submitted this question into us, again, which is a great way if you have questions about options trading, stock trading, the market, etcetera. Get those questions into us, so we can queue them up on the daily call. But somebody said, “Can you give us an idea of what the timeframes are for indicators in particular that are best and useful? On a month-to-month as you show in many of your examples or day-to-day or do they work just as well on three or one hour or five minute charts, etcetera?” Really, the idea here is when you're looking at charting and when you're looking at in particular, technical analysis indicators, what do you use? Do we use a one hour chart, a one day, a one month, a one year? I mean, there are many different chart formats you can use. I think for most of the

Hey everyone. This is Kirk here again from Option Alpha and welcome back to the daily call. Today, we’re going to talk about – Should you look at individual stock IV or VIX? The simple answer to this, I believe is you should be looking at both. The VIX in and of itself, I don't think is the only thing you should be looking at because remember, the VIX is measuring implied volatility on the S&P 500, so it's basically just a way to chart or to track volatility on the S&P. Now, we could obviously track individual volatility on every stock and ETF out there. It’s not that hard to do. Every individual stock and ETF could have its own VIX like ticker symbol if we had exchanges that wanted to trade these and products that were related around them. The VIX in and of itself, I don't think is the only thing you should be looking at. And case in point to use kind of some concrete examples and numbers right now, the VIX right now is trading in the low teens and the S&P 500 is rallying higher, so it’s up on th

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 we can apply Parkinson's Law to options traders. Parkinson's Law is probably something you’ve heard about before, whether it's in psychology class in college or high school or you just heard people talking about it. If you're a geek of success and understanding people who are successful and companies who are successful, you’d understand that Parkinson's Law is talking about generally, the idea that a task that you're trying to do or some activity that you’re trying to do is going to swell in perceived importance compared to the relation of time that you allocate for its completion. For example, if you said, “Okay. I'm going to build a shed in my backyard.” And you gave yourself a year to build the shed because you figured, “I need time to draw up the plans and do the base and the framing and the roofing and put the shingles on, the whole deal.” It's going to seem like this hug

Hey everyone. This is Kirk here again at optionalpha.com and welcome back to the daily call. Today, we’re going to be talking about why commissions are way less important when compared to this one thing. The reason I want to talk about this is because I get a lot of people who email me and always, the sob story is around commissions. Now, don't get me wrong. Commissions are a part of trading, but it's a cost to doing business. It's like emailing me and telling me that my commissions are too high on my electric bill. I get it. You can reduce the cost of your electric bill, you can reduce the cost of your commissions, but ultimately, it's a cost of doing business. Now, this even means it's a cost to doing business when it comes to free broker platforms like Robinhood. Now, I know I harp a little bit on Robinhood because I think that although it is a free broker platform and everyone likes to gravitate towards it, there is a cost to go towards the free type commission model and when it comes to speed and technol