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

Hey everyone. This is Kirk here again and welcome back to the daily call. Today, on Show #200 which is actually kind of crazy that we’re already at Show #200. I don’t feel like we've done 200 episodes, but clearly we have. But today, on Show #200, we are going to be talking about probably one of the coolest things that’s going to come out of our auto-trading software, a new platform that we’re going to be rolling out here soon and that is the crowd-sourcing of options trading ideas through these automated opportunities. That's a lot, right? You’re probably thinking to yourself like, “Okay, Kirk.” Well, let's break this down and see what this means. One of the things that I wanted to do for a really, really long time with Option Alpha is tap into the knowledgebase and pool of trading ideas that are present in our community. We've got thousands and thousands of members and we've got almost 100,000 now free members or registered members on our website which is insane. Once we launch the auto-trading software, ev

Hey everyone. This is Kirk here again at optionalpha.com and welcome back to the daily call. One of the things I’m very excited about with this new auto-trading platform that we’re rolling out soon is that we have basically been able to remove human error from the options market. Now, I won’t go as far as to say that there's totally error removed because there's error in building out a bot or strategy. If you build out the wrong bot or the wrong strategy, then that error is on the frontend. But what I'm talking about is the errors on the backend in the execution of a strategy and breaking of rules that so commonly happen when we’re trading as humans, as people, when we’re manually clicking and entering trades. What has happened for basically all of history in the options trading space, the entire time that options trading has been around for retail investors is that we've had to manually choose, pick and choose our entry points, manually pick and choose our exits in most cases and then manage our portfolio. W

Hey everyone. This is Kirk here again at optionalpha.com and in today's daily call, we are going to be talking about the difference between valuing the idea of options trading versus the actual execution. What I’ve definitely learned in life, not only in my own experience, but also in doing a lot of research in the space of success and mental fortitude, all these things which I geek out on, on the side besides options trading is I’ve definitely learned that people value the idea of something, like whatever it is, options trading, becoming wealthy, being a good parent, having kids, running a business. Everyone values the idea. It's all about the idea, the dream, the big picture, pie-in-the-sky type thing. But what everyone fails to recognize is that there's execution that's required to make it happen. Now, we know this subconsciously. We know that if we want to build a business, we actually have to build a business. If we want to be good parents, we actually have to be good parents. We have to work at that eve

Hey everyone. This is Kirk here again at optionalpha.com. Welcome back to the daily call. Today, we are going to be talking about quadruple witching, what it is and should you pay attention to it. Quadruple witching which is honestly the craziest term that options traders could’ve come up with, but I guess it makes sense for what it basically means and that is it refers to the third Friday of every March, June, September and December, basically the ends of quarters every year. And so, on these days, what ends up happening is you get four different styles of contracts that basically expire on the same Friday. That's why they call it the quadruple witching and more often, they refer to it as quadruple witching hour which is the last hour of these trading days, 3:00 to 4:00 Eastern Standard Time that generally sees that increase in volatility. But on these four days during the year, these four end of the quarter expiration days, you get market index futures, market index options, stock options and stock futures

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 recency bias is killing your potential to be successful. This one is a popular one for me and one that I am truly fascinated with. I continue to be fascinated the longer and longer I run Option Alpha with just the psychology of most investors and the psychology of trading, in particular, how it affects options trading and how people become successful or not trading. Recency bias I think is one of the true, true silent killers of options traders. The whole idea of recency bias is that recent events or past events are going to affect our new decisions that we make. The reality is that we all know and we’ve talked about before that we are creatures of habit. Our brains are hardwired to do things that require less cognitive strain on our brains. We get up in the morning and we tie our shoes the same way. We go to work the same way. We brush our teeth the same way. We are creatin

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 the basics of a reverse stock split. Yes, a reverse stock split which is a little bit different than a traditional stock split. It's important that you understand the difference between them and more importantly, how they generally will affect options if you are trading options in a company or an ETF because ETFs can go through reverse stock splits as well and what the impact is on options. First of all, on the basics – Why do companies do a reverse stock split? What is a reverse stock split? The basic premise of a reverse stock split is that the company or the owner of the ETF wants to reduce the number of outstanding shares or float that they have. They might do a reverse stock split by dividing the current shares by a number such as 5 or 10 or 4 or whatever they want to do. In that case, it would be generally called a 1 for 5 or 1 for 10 split, respective of how they want t

Hey everyone. This is Kirk here again at optionalpha.com and welcome back to the daily call. Today, we are going to talk about how you can increase long exposure of your portfolio very quickly. The first question here is always, “If you're needing long exposure, how much?” When I look at my portfolio and I Beta weight it to a market index like the S&P or the DOW or whatever you want to use for Beta weighting, the question I always ask is “Am I outside of my breakeven points for expiration?” That’s the main thing I’m really focused on, is “How unbalanced am I at this exact moment?” If the market is rallying, but I'm not outside of my breakeven points, okay, maybe I'll start doing some things that slowly start to improve the balance of my portfolio, but I don’t need to trip over myself and I don’t need to overextend or over-adjust my portfolio for the sake of balance. I’m fairly balanced. It’s always going to be a moving target. Balance is never something that’s absolutely emphatically perfect because the m

Hey everyone. This is Kirk here again at optionalpha.com and welcome back to the daily call. Today, we are going to be talking a little bit more about our new auto-trading platform for options. As we've hinted to and alluded to many, many times before in the past, we are now in the final stages. We’re probably about 30 to 45 days out here from releasing our new auto-trading platform for traders. Again, this is revolutionary software that we’re going to be releasing. Nobody has this. No broker, no website, no hedge fund. Nobody has what we’re building. It's completely proprietary to us and I wanted to give you some of my thoughts on why we’re doing this and what it will look like in the future. Now, of course, we’re going to be adapting and changing this thing on-the-fly, on the move if you will with feedback that we get from our users. There’s kind of a core foundation to this platform and this technology that we’ve built and of course, we want to get a lot of feedback from users and once we start releasing t

Hey everyone, Kirk here again at optionalpha.com and welcome back to the daily call. Today, we are going to be answering another user question and basically, actually, it’s a question that we get all the time, but we just recently got it from a user and that is how to create an iron butterfly on Thinkorswim’s platform. Thinkorswim and TD Ameritrade, that’s the platform that we've used for a long time, still the platform that we are going to use when we roll out our auto-trading software. We’ll be connecting directly with TOS and TD Ameritrade, so if you have a brokerage account there, you'll be eligible I guess to do the auto-trading. If you don't, you want to get a brokerage account there, head on over to optionalpha.com/TOS. Inside of Thinkorswim though, they don't have the ability to directly do an iron butterfly the way that we typically define an iron butterfly which is basically short strikes at the same strike price like a straddle, so basically it’s a synthetic straddle and then long strikes out on ei

Hey everyone, Kirk here again and welcome back to the daily call. Today, we’re going to be talking about the only two things that you can control in the stock market. I will come out right away and tell you exactly what those two things are. The only two things you can control in the stock market is the underlying in which you trade or the security and the strategy or the technique in which you trade it. That's it. Now, this might come as actually a shock to some of you guys because many people still think that they can control the market. You either try to do it… I don’t know, like Jedi mind tricks or move the market with your mind. You stare at the screen so much until your eyes bleed because you want the stock to go up or down. But I have learned a long time ago that we have no control on price and direction. The only things that we can control are the underlyings in which we trade, the tickers in which we trade and the strategy in which we trade them. That’s it. Everything else is out of your control. The

Hey everyone, Kirk here again and welcome back to the daily call from Option Alpha. Today, we are going to be talking about why when you trade options, patience pays five times more over time. Now, I think the easy and simple way to describe this is to use the analogy of reaping what you sow. Basically, the concept here is when you plant or when you’re a farmer and you start to plant seeds or crops, it takes a long time for those crops to mature. You have to patiently wait for them. You plant, you water, you’re watering, you’re watering, you’re waiting, you're waiting and then boom! It’s like overnight, they pop. And then after they pop, then they just go bananas. We see this in our area where we live. There's a lot of cornfields. It’s truly like I didn't think I'd ever live in an area like this because I grew up in Northern Virginia and DC and lived in New York, so that was totally different to me. But now, there's a lot of cornfields and man, when you see the corn pop out of the ground, it literally feels l

Hey everyone. This is Kirk here again from Option Alpha and welcome back to the daily call. Today, I'm answering the question, “How much money do you need to start trading options for a living?” This a big topic that we get all the time. People want to know, “How can I start trading options? How can I generate a living, an income from trading options?” I think it's a challenging topic for me to broach with people because frankly, there's a lot of misconceptions out there and a lot of stuff online that you see that just really isn't that true. And so, when I unfortunately have to tell people how much money they need to generate whatever income they’re looking for, it’s kind of shock. Unfortunately, I don't always want to be that person that gives them the shock, but I’d rather be the person that tells them honestly and upfront where they are. In most cases, that leads a lot of people away from us, meaning that they just don't think they can ever get to that point or they’ll ever get to that point, so they just

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 why you shouldn't use your day job as an excuse for not trading options. I do see this a lot. I see people using… In this case, we’ll just say your day job or your regular job as an excuse for why you shouldn’t be trading options. But I don't think it's just that. I think there's other things that people use as excuses or crutches, if you will. They use kids, they use their wife, they use their basketball team. I've seen people use their kid’s swim practice as excuses. “I can’t trade because they have swim practice every day.” But ultimately, I think you should find time to trade if it's important to you and I think frankly, your money is important to you or it should be important to you. You work really hard for your money, as do I and I wouldn’t want you to just blow it and throw it into the market. I’m actually just fascinated by that whole concept that people have or just this

Hey everyone, Kirk here again and welcome come back to the daily call. Today, we are going to be answering a question that came in from one of our users which was “When do you cry uncle and give up on adjusting an options trade?” I think this is a fascinating topic because I like the idea of just crying uncle and giving in. I think actually, a lot of people give in too early. I’ll mention that when you make an adjustment to a trade or when a trade goes wrong, there's probably a lot of things that you can do either early on in the cycle or even late as you get towards expiration to reduce risk to some degree. You can roll strikes, you can roll the entire position, you can add corresponding legs if you're doing a one-sided trade, you can turn it into a neutral trade. There’s actually probably a lot of things that you can do to a trade that's going bad or going wrong early on. But when do you give up? I think this is really the topic of what this person was getting to. After you’ve done all of those things, assu

Hey everyone, Kirk here again from optionalpha.com and welcome back to the daily call. Today, I’m going to go over my top four reasons to sell straddles and strangles. Straddles and strangles for those of you who are not familiar with them are pure naked option selling strategies. Straddles are where you sell the same strike price on both sides. You sell the 100 call and the 100 put. With a strangle, you’d be moving further out from where the stock is trading. If the stock is trading at $100, you might sell the 105 call and the 95 put. But in either case, they’re both naked option selling strategies where you have undefined risk and you're not buying any strategies or creating any spreads. Now, to tell you honestly, these are two of my favorite strategies and we do very synthetic versions of these a lot. We trade a lot of iron butterflies, iron condors, but we also do a lot of straddles and strangles. I think it’ll be personally interesting. I'm interested to see what I do personally with myself. It’s like I’

Hey everyone. This is Kirk here again and welcome back to the daily call. Today, we are going to be talking about the difference between being broke and staying broke. This one's an interesting one for me because although I don't publicly talk about this all the time, I have very strong opinions about people's perception of money and wealth. Again, I'm a student of the game if you will. I read and I study and I love thinking about finance and thinking about wealth and returns. It’s just how my brain is wired. I'm just weird like that. But I have a really strong opinion about it because I've seen two different areas or many areas I guess in my short time on this earth and hopefully, I think those themes are going to present itself over time in where I live and the people that I interact with. I think there's a true difference between people who choose to be broke, that being broke at a certain time or a certain moment in their life and there's people who choose to stay broke and I think there's a difference be

Hey everyone. This is Kirk here again at Option Alpha and welcome to the daily call. Today, we are going to be taking things a little bit different here and talking about the theory of relativity as it relates to option pricing. I’ve always said and I continue to say I’m a student of basically everything and for whatever reason, I've dove into quantum mechanics lately and that's been a hot topic of mine for reading when I’m just cruising the internet, looking for articles and videos on it. I thought about this concert because I thought it was very similar to how we should think about options trading, so therefore, the daily call and talking about this. There basically two schools of thought I guess and you could simplify this down. I'm not a physicist by any stretch, but I’m trying to simplify it down the way I think about it, that there’s the theory of relativity or general relativity which I think is good for behavior of big things, like planetary orbits or stars movements, movements around suns. That's rea

Hey everyone, Kirk here again at optionalpha.com. Welcome back to the daily call. Today, we're going to answer a user question that was basically submitted which is “Are buying stocks for free via Robinhood easy or hard?” I do have a Robinhood account. I’m very familiar with the platform. We actually interviewed their cofounder, Baiju just a couple of weeks ago depending on when you’re listening to this podcast. You can listen to that over on our weekly show where we talked about the history of Robinhood and where they're going with their new free options trading that they’re going to be releasing. I still have not gotten the free options trading on my end, so I'm signed up on the wait list because I want to see what it looks like and how it functions. I still have not got any up, but maybe I will here in the future. But I think that buying stocks on Robinhood for free is actually very, very easy. I think they've nailed the stock side of what they do. It's incredibly easy, incredibly intuitive. There's not to

Hey everyone. This is Kirk here again at optionalpha.com and welcome back to the daily call. Today, we are going to be doing a quick guide to the AMEX which is the American Stock Exchange and just giving you a little history on what it is and what it's come to be and who owns it now, basically. I think it actually has a very cool history when you start digging into some of these stock exchanges. It's just absolutely fascinating how these things came about naturally or organically back in the late 18th century and through the early 19th century. It's amazing actually. Right now though, the AMEX is the third largest exchange I think still by volume. It was acquired about 10 years ago I think by NYSE. And so, now, NYSE basically owns it, but there's still a lot of things that are traded on the AMEX. It does a lot of small cap and mid cap, a lot of ETFs. A lot of derivatives still get traded on AMEX. When you actually route your orders through any broker platform like Thinkorswim or Tastyworks or Interactive Brok

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 the reliability of stock analyst recommendations. I know this might actually ruffle some feathers out there. I will tell you though that before I get into maybe not bashing people, but bashing the industry as a whole, I do think that there are very, very good, smart people in this industry. I don't think that it's full of people who are completely ignorant or dumb. I think the entire industry is full of people who are very smart, very well-educated, but I just have one major rub with the whole thing and that is basically conflict, the conflict of the people who write the recommendations, who basically sell the research, sell side analysts and then any conflict that an institution or bank might have with people who buy it. That's what I’ve talked about in Show 164. If you go back to the daily podcast right here, in Show 164, I talk about my short stint as a research analyst. I wa