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

Hey everyone, Kirk here again from Option Alpha and welcome back to the daily call. Today, we’re going to be talking about what I believe to be the single biggest impact on your wealth and that is budgeting. Budgeting is one of those scary words I think for a lot of people. Some people don't feel like they need to budget. They feel like they're constrained by their budget, like if they have a budget, they can’t do the things they want to do or can’t take the trips they want to do. But the reality is that if you're focused on building wealth not only for your family, but multigenerational wealth, wealth that last for decades and decades and through your grandkids and their grandkids, then I do believe that the single biggest impact is your ability to properly budget. Now, budgeting doesn't mean that you have to cut out all the things that you want to do. If you want to do something, just factor it into the budget. But it means keeping expenses low. It means always reassessing how you're spending your money eac

Hey everyone. This is Kirk here again at optionalpha.com where we show you how to make smarter trades and welcome back to the daily call. Today, we are going to be talking about the bear market definition and why I think that it's a little bit flawed. First, let’s get it out of the way. Most people use bear market definitions as a drop in 20% of the underlying value of a security or a bond ETF, currency, whatever you want to use in there. A 20% drop from the 52-week high, so basically, a healthy pullback, if you will from the recent highs. And why I think that this is a little bit flawed is that in many cases, it could either lead to people being overly-panicked when they hear that something is in a bear market or it can lead to people not realizing that something is actually still in the midst of falling because they think once it reaches that magic 20% drop threshold that it actually might be a good opportunity to buy. We've seen in many cases, particularly in the bond market and the currency markets in thi

Hey everyone. This is Kirk here again at optionalpha.com and welcome back to the daily call. Today, we are going to be talking about how to setup a short straddle option strategy. A short straddle option strategy is probably one of the core and most aggressive option selling strategies that you can do and it's basically setup by selling at the money calls and at the money puts at the same strike price. For example, if a stock is trading at $100, you would go ahead and sell the 100 strike put option and the 100 strike call option. It's always setup using the at the money strikes or near at the money strikes, whatever strike prices you can get that are closest to where the stock is trading, so that you can try to build the strategy as neutral as possible. The idea with a short straddle is that even though you’re selling options where one contract is conceivably going to be in the money at all times, you are taking in the most amount of option premium by selling those at the money contracts, therefore, moving yo

Hey everyone. This is Kirk here again at optionalpha.com and welcome back to the daily call. Today, we’re answering the question, “What is a broker dealer and more importantly, do we still need them?” To quickly answer this question, broker dealers are a very important part of any financial system. In our financial system which is extremely complex, very large and in many cases, very efficient, broker dealers do serve a very important purpose. Now, to now backtrack a little bit and say what is a broker dealer, well, we have to break it down into two things. Well, first, there’s a broker. And so, a broker is just anybody who basically facilitates or helps you buy or sell securities. For example, right now, the best example maybe of this in its rawest format is maybe say Robinhood. Robinhood is a brand new brokerage and all they do is they help facilitate the actual transaction. They are basically if you want to call them, a middleman, they’re a security facilitator where if you want to go buy a stock, you woul

Hey everyone. This is Kirk here again at Option Alpha and welcome back to the daily call. Today, we’re answering the question, “How to invest in precious metals using diversified ETFs?” Look. Precious metals I think are an important part of the markets in general and they still are becoming a more important part of the global economy even as industrial nations start to continue to grow and new industrial nations start to grow things like silver and steel and precious metals. It all becomes really, really important. Do I think it's a major part of every market? Of course not. But is it tradable for us as options traders and investors? 100%. The question becomes, “How do you invest in these things if you want to do it from a nonphysical side? You do not want to physically own silver or physically own gold or any of these other metals or precious commodities. How do you do it from the ETF side?” But there's a lot of ETFs out there and so, I think the starting point for me would be if you want to trade them from

Hey everyone. This is Kirk here again at Option Alpha and welcome back to the daily call. Today, we're going to answer a question from one of our members which is basically, “Can black swan events occur in ETFs?” I think this is actually a really great question because a lot of the benefits of trading an ETF style contract, especially with options, is that you remove in many cases, the unsystematic risk that's in the market. When you’re trading an ETF, it's basically a collection of underlying securities or a tracking mechanism for other sectors or areas. And so, conceivably, not one particular company getting knocked out, in a given day is going to have a huge impact on that ETF. If you even think about just the broad-based indexes like the NASDAQ and the Qs, IWM, SPY, DIA, etcetera, it’s basically just an ETF that tracks the collection of underlying securities. If one stock in that particular collection, say the S&P 500 has an absolutely terrible day, it will impact the index, but not like that one stoc

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 swing trading for options traders. Oftentimes, I will get emails from people around the topic of swing trading or using day trading type techniques in options trading and the thought process is always, “Well, Kirk, we can’t really use options trading because we’re trying to swing trade the stock or we’re trying to day trade the stock.” But I actually think that this marriage of swing trading or position trading around the market in options trading actually works really well and I’ll explain why. Whenever you do a regular swing type trade or let's call it a day type trade where you’re trying to actually trade the underlying position, so you’re swing trading Apple or day trading Apple, you are trading the actual physical stock of Apple. The problem with that is that you have to be right immediately in your directional assumption. If you buy Apple stock for say $500 a share, then if

Hey everyone. This is Kirk here again from optionalpha.com and welcome back to the daily call. Today, we are going to be talking about how you can get a free copy of our options trading eBook called, The Ultimate Options Strategy Guide. This thing has actually been downloaded more than 65,000 times in the last couple of years and it’s something that we wrote actually a while back and then we recently redid completely about two years ago and expanded it out. I think our first copy of this eBook and basically, this manual was about 40 pages or so and we recently redid the book about two years ago and expanded it out to 90 pages. The goal of which being to offer a lot more information on the why and the how and why you trade options versus stocks, why implied volatility is our edge, all of that stuff and I really went into a lot of detail in some different sections. Now, I know that some people actually charge a lot of money for books on options trading and they charge money for resources and guides. This is som

Hey everyone. This is Kirk here again at Option Alpha and welcome back to the daily call. Today, I want to answer the question, “What if 20 seconds was worth $218,759?” Now, where on earth did I come up with that number? Well, I was recently running a back-test with a guy during a coaching session and literally, one tweak that we made between one strategy and the other strategy, very small tweak to just the strike prices created a difference over 10 years for that back-test of $218,759. I am still dumbfounded, honestly by why people don't use more back-testing in their options trading when they start actually trading and putting their hard earned money at risk. Now, I honestly don't care if you use ours or try to use other people's out there. There are other services that do back-testing as well. We think we provide an insane value because it’s just a one-time investment with lifetime access. I think there are a lot of other services out there that don't have as much data as we do and also charge a monthly fe

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 the basics of a head and shoulders chart pattern. Some of you might be wondering why, Kirk, on earth are we talking about chart patterns on a podcast that's focused on options trading. It’s because I think when it comes to chart patterns, the head and shoulders pattern is probably a little bit, slightly more reliable than some of the other patterns out there and obviously, easier to spot. It's not as subjective, necessarily as some of the other patterns. My biggest rub or push with many chart patterns and using lines on charts, etcetera is that it’s very much subjective, meaning that you can give a chart to say 10 different people and I could tell them, draw support and resistance, draw trend lines, draw channels and you could potentially get 10 completely different things. Head and shoulders patterns in most cases are pretty easy to find and spot once they've mainly completed

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 how to actively trade the US markets from overseas. Now, it’s actually very interesting that we have over 42 different countries represented in our membership which is crazy and last year, we actually had a guy sign-up from Antarctica. He was a military member who was stationed in Antarctica. We actually now hit every single continent on the planet which is kind of crazy. There are a lot of people who want to trade options, but are overseas for some reason or you're living in a different country and you feel like you can't trade the US markets. Now, I'll say that in some cases, that is true. It just depends on the country that you’re in and obviously, we’re not going to go through the list of every single country on this short daily call podcast. But you want to check and make sure that you do have the ability to trade the US markets and in many cases, the best international broker

Hey everyone. This is Kirk here again from Option Alpha and welcome back to the daily call. Today, we’re answering the question, “Are engulfing candlestick patterns reliable for trend changes?” This is a question that was submitted by one of our members. I think it’s a valid question and we don't often talk about candlestick patterns, but it's something that I think I intuitively look at because I use candlestick charts. And so, I think there's a little bit of insight the can be gained by candlesticks. Again, it just gives you a broad context of where the market has performed on a given day. I think when we talk about a trend change though, that to me is more of a long-term trend change, so going from a bull market to a bear market or say a bullish run to a bearish run which could take many months. I don't necessarily believe that one single candlestick pattern could be insanely reliable for that type of market move and I definitely haven't seen any research that confirms this. But I think in a vacuum for a c

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 trade single options versus option spreads?” I think this question really boils down to a difference of risk and reward. When you trade single option contracts or you go naked and that's whether you buy a call or buy a put, sell a call, sell a put. In any case, whether you do a single option trade with no spread attached to it, you are sacrificing a little bit more capital potentially for the possibility of a higher return and for a shorter trade duration. For example, if we sell a call option, we are selling pure options, we don’t have to buy anything, so it doesn't reduce the credit that we took in from selling that call option, but we do have to put up a little bit more capital to do that (that's the trade-off, that's the risk and reward aspect) and we potentially could be holding the trade for a shorter duration because if the stock moves down or implied volatility mo

Hey everyone. This is Kirk here again at Option Alpha and welcome back to the daily call. Today, we are going to be talking about options trading FAQs and the Option Alpha Answer Vault. Look. This is nothing more than a shameless push to get you guys into our Option Alpha Answer Vault which you can get to on the website or just by searching online, Answer Vault by Option Alpha. Now, the reason that I’m pushing this is because one, it's totally free and two, because we are constantly adding new questions to the Answer Vault. The reason that I actually built the Answer Vault I think almost 9 years ago now is because I started getting the same questions over and over and it was around the same types of topics. I’d get very much the same series of questions around options expiration or around options basics or exiting positions and portfolio management, so I built out this entire Option Alpha Answer Vault that has all kinds of different categories. I think we've got 12 or 13 different categories right now. And wi

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 the failure of speculation disguised as income trading. Let's call a spade a spade here. I see this all over the place, not only with people that I'm emailing or chatting with, but also on the boards and groups and forums that I literally just spent my time watching, reading and monitoring and seeing what people do. I’m kind of fascinated with the investor psychology, so I don't interact a lot, but I also just watch and see what people do, what questions they post, what trades they post, how other people respond. It's fascinating to me to see so many people who are so heavily invested in options trading and theoretically, for income. They are investing because they want to generate income and they want to quit their job or whatever the reason is, but their actions are more like speculators. In fact, it's more like gambling in many cases. And so, I often relate this actually to

Hey everyone. This is Kirk here again at optionalpha.com and welcome back to the daily call. Today, we’re going to answer the question, “What is opportunistic options trading?” I’ve started talking about a little bit more of it the last couple of months and I figured I’d do a daily call podcast on it because I think it’s really important. I've used the word, opportunistic a lot because that's what I think it is. I think it's taking advantage of opportunities when they present themselves, not necessarily when it's best for you to get into a position. I think honestly about people who were in the car business… I know this probably doesn’t make sense initially and you’re thinking to yourself, “What in the world does the car business have to do with options trading?” But if I was running a car business just theoretically… I think about just different business concepts all the time, but we can apply it to whatever. But if I was running a car business and say I was running like a used car business for some reason,

Hey everyone. This is Kirk here again at optionalpha.com and welcome back to the daily call. Today, we’re going to run through the basics very quickly of how to setup a short strangle. A short strangle is an option selling strategy. It’s one of the core strategies that we actually trade here at Option Alpha. I really believe in this strategy as the basic building blocks of a lot of different strategies that you can start to setup. But a short strangle is effectively created by selling an out of the money short put option and an out of the money short call option. Now, how far out you go, how many strikes out you go is up to determining the position that you are in and how often you want to win, what probability of success you want to see and also, how far out you go into expiration. There are a lot of factors and moving parts here. There's no one right answer. There's no unicorn strangle that always works in every market environment, so we encourage you to back-test your strangles and your setups and try to o

Hey everyone. This is Kirk here again at optionalpha.com and welcome back to the daily call. Today, I’m going to try to hopefully help you completely avoid pump and dump scams because I think they are still running rampant in the market and I can't believe these are still around. I can’t believe people are still getting sucked into these. Let's first describe what pump and dump is. I think actually, Timothy Sykes actually probably has been the best at making money from these in the opposite direction. I’m not saying he’s pump and dump. I’m saying he's probably totally the opposite of that. He’s trying to make money in the penny stock space by identifying which ones are pump and dump and then trying to trade the opposite side. But pump and dump is just this idea that you get a potential penny stock and it usually happens in penny stocks (not that it can't necessarily happen in regular stocks, but it's much easier to manipulate in penny stocks) where you get this huge run-up in the price because these promoters

Hey everyone. This is Kirk here again at optionalpha.com and welcome back to the daily call. Today, we are going to be talking about why the weekly close for stocks is always revealing for this one reason. The one reason for me is who's holding all the cards. I say this because when you get towards the end of the week and the global markets generally close down, people are left with the decision of what positions they want to hold through the weekend. Look. The weekends are not what they used to be. The weekends used to be calm and quiet and people used to go out to the park or fishing or whatever people do on the weekends now. But now, in this global economy, things still happen over the weekends. Businesses don't shut down, Amazon is still up, Facebook is still up and things can go really crazy over the weekend. People tend to not want to hold positions or take on undue risk in a potential situation where they can’t get out of a trade or unwind a trade over the course of the weekends. And so, for me, gettin

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 the unicorn option strategy theory destroys many portfolios. The unicorn option strategy is just this concept that there is one overarching strategy in the market, the best strategy, the ultimate strategy, whatever you want to label it as. There’s one option strategy that is the perfect strategy in every market environment. And so, if you could only find that one perfect option strategy or that one perfect indicator, then you wouldn’t need anything else. And the reality is that destroys a lot of portfolios because what people end up doing is they’re treating all market situations as exactly the same which is what we shouldn’t be doing. We should be more dynamic in our approach. We should change and adapt our strategy somewhat to different market situations. And so, I’ll use an analogy because I thought this… And this is really what sparked this idea today for the call, is I w