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

Hey everyone, Kirk here again at Option Alpha and welcome back to the daily call. Today, we are answering the question, “How can options have traded volume, but no open interest?” This one is one that I think really trips people up and sometimes I even have to slow down and think about this when I see this because it catches you off guard when you see this and it’s not oftentimes in highly liquid securities. It’s more often in underlyings and securities that are thinly traded or have low liquidity. But you might be looking at your options pricing table and you see that there’s some volume for those contracts, but no open interest and this could be really the cause of one or two different things. That’s really what I want to talk about here today. The first thing you have to understand about open interest is that it really is just this running account of contracts that are still open in the market. If for instance, somebody buys to open or sells to open a contract in the open market, then open interest goes up

Hey everyone, Kirk here again at Option Alpha and welcome back to the daily call. Today, I want to show you where to get reliable historical market data. This is going to be for options data and also for general stock or equity data. I think the first thing I’ll say with this is the keyword here is “reliable.” There’s a lot of data providers out there and a lot of data sources. One thing that we learned in building our back-testing software and our trade optimization software on Option Alpha is that not all data is the same. Even though two people or two different data providers might say that they’re providing the same data, we’ve often found that lots of inconsistencies, it's not like millions and millions of inconsistencies, but a lot of inconsistencies among different data providers on end of day versus open of the day versus middle of the today, tick intervals, volatility metrics and volatility numbers, Deltas, Thetas and sometimes just flat out missing data or incomplete data. I think the key here is th

Hey everyone, Kirk here again from Option Alpha and welcome back to the daily call. Today, I just want to describe why I’ve never run a live trading room and why honestly I have no intentions ever in my life to run a live trading room. Now, live trading rooms are insanely popular. I see them all over the place and I probably literally get maybe five or six request every single week to run a live trading room of some kind. Basically, what is a live trading room if you’ve never heard of it or if you don’t know exactly how it works, but it would work basically like a live chat board. In most cases, I think that’s mostly how they work, the ones that I’ve seen. But basically, people are in there live and they’re trading and they’re either showing their trades or they’re commenting on their trades in chat back and forth to each other and it’s just this big rolodex and board of talking back and forth and effectively sharing ideas. And why I like the idea on the outside of a trading room and what goes with a trading

Hey everyone, Kirk here again and welcome back to the daily call. On today’s daily call, I want to talk about passive drip investing with high dividend yield REITs. This is something I guess near and dear to my heart because I used to be in the REIT industry. I was a REIT analyst outside Washington DC for a little while. And so, for REITs, I understand the business emphatically. I was in the business, I used to cover that business as a research analyst and I think it’s a good business when you want to get into some sort of stable or corporate bond type real estate investing. Why do I say that? Because in most cases, REITs… And although there’s a lot of variety of REITs… REITs by the way are Real Estate Investment Trust. In most cases with REITs, you can get into what are called triple net REITs which are basically REITs where all of the assumption of risk as far as taxes and maintenance and upkeep on the property is handled by the tenants. An example of this might be that a real estate investment trust or a R

Hey everyone, it's Kirk here again and welcome back to the daily call. Today, we are going to be looking at the Dow Jones Industrial Average, commonly referred to as the Dow and trying to answer the question, “Is this a broken index or still something worth following?” I think the first thing obviously is just understanding what is the Dow. If you're never heard of the Dow… I'm sure if you've traded for a while or if you've been in the markets, you've undoubtedly heard of the Dow Jones or somebody call it the Dow or people even just refer it honestly as the market, even though it's not the only measure of the market. But the Dow Jones is basically a price weighted average of the top or the biggest 30 largest American publicly traded company. It's usually done by market cap or by size, not necessarily by stock price. But what we mean by price weighted is that it also means that the higher priced stocks sometimes have more influence on the index performance versus lower priced stocks. There's oftentimes where t

Hey everyone, Kirk here again and welcome back to the daily call. On today’s daily call, we are going to talk about the Chicago Board of Options Exchange, more formerly known as the CBOE. You probably hear these terms or these letters thrown out all the time, but I want to let you guys know what their role is in the market, what they do and also, why we need them and the products that they offer. I think the first thing to know is that it is the largest options exchange in the world. The CBOE was started back in 1973 and really, the role of the CBOE is to be just a medium of exchange. They we’re probably one of the first and probably if not, the foremost in standardizing contracts with options. When they started, option contracts had no standard size. Now, we have generally standard sizes, 100 shares per contract, etcetera, standard expiration dates. And so, the CBOE was probably a big part of that in the early days. A lot of the contracts that they trade now are tons and tons of ETF options, stock options, l

Hey everyone and welcome back to the daily call. This is Kirk here again from Option Alpha and on today’s daily call, we’re going to talk about candlestick patterns, more specifically, answering the question, “Can options traders use these for better entries and exits?” What are candlestick patterns? Well, look. They’ve been around for generations, decades and it’s basically just a way to visually or graphically represent price movement or price trend in particular markets. Now, these can be done on a daily basis, intraday, weekly, monthly basis. Where you often see them obviously is in a lot of stock charting software and it’s become honestly the standard, not anything else in the investing space. For the last call it two decades or so, you see pretty much every stock chart has candlestick patterns. The reason they call them candlestick pattern is because they look like candles in some cases. They have these wicks and they have these main bodies. The idea is that visually looking at these wicks and main bodi

Hey everyone, Kirk here again and welcome back to the daily call. Today, I’m going to answer a question from one of our users on Twitter who sent this in which I appreciate. Again, you can reach us through Facebook, Twitter, Instagram, however you want to get your question in. Just get it in, so we can get it added to the queue here. But the question was, “How do you monitor an option trade’s risk after making adjustments?” The idea was, “Okay. If I know that I have a 1% risk on entry, whether I'm doing it based on margin requirement or whether I’m doing it as a fixed defined risk spread, so the spread I know is $2 wide as an iron condor or $5 wide as an iron condor and that represents 1% of risk in my account. I know that on entry, but what happens after I start adjusting? How do I monitor that risk in the trade?” I think it’s actually pretty easy and I’ll talk about two concepts here in today's daily call because I want to touch on both of these. The first is that if you are trading defined risk strategies,

Hey everyone and welcome back, this is Kirk here again at Option Alpha and on today’s daily call, we are going to talk about the differences between long-term and short-term option contracts. Now again, this is going to be just really a high level discussion. Somebody submitted a question and said, “Basically, I just want to know… What are the main differences? What are just the broad strokes, things that we need to consider or think about as we start to think about trading shorter-term contracts, maybe weeklies versus longer-term contracts, a month or two months out?” Obviously, if you want more information on when to trade each or how far out to trade different strategies, check out our toolbox software which allows you to back-test different strategies, add different time periods, weekly contracts, monthly contracts. You can get a better idea of what works better in a given market environment or a given scenario and that’s available at optionalpha.com/toolbox. First, let’s start with long-term. Long-term o

Hey everyone, Kirk here again at Option Alpha and welcome back to the daily call. Today, I’m going to explain why I’ve never run a live trading room and honestly, why I never plan on running a live trading room, though have been asked an umpteen million times. I literally get asked every single week. “Can we run a live trading room? I want to see you trade live? I want to be able to ask questions live.” I get the concept of it and I understand why people want to do it. I understand the allure and the attraction to it. But there’s a couple of main reasons why I’ll never run one and haven’t run one before in the past. Number one is I think that it’s insanely inefficient, meaning that it’s an inefficient use of my time and your time for us to sit in a room together and just watch each other or comment amongst each other. I think it ends up bringing up things that aren’t really relevant. That’s the biggest thing for me. We end up talking about stocks just to fill time. We end up talking about indicators to fill t

Hey everyone, Kirk here again at Option Alpha and welcome back to the daily call. On today's call, we are going to talk about the AAII sentiment survey, basically what is it and should you care about it, should you follow it. This is something actually I've known about for a long time. If you're in the investing space, undoubtedly, you’ve probably come across AAII which is the American Association of Individual Investors. They have a huge following. They’ve been around since basically I think the early 1980s. They’ve been basically publishing this reading on sentiment survey of all of their members and basically what happens is that each week, AAII asks all of their members this simple question. They do it through online surveys and polling and they remind people to do it. Obviously, you have to take that with a grain of salt that it’s only from one community, but it’s probably a good breath of indication because most people who are part of AAII are probably wealthy, probably have some money to spend or proba

Hey everyone, welcome back. On today’s daily call, I want to encourage you to please stop paper trading unless you’re doing this one thing. This is a podcast for anyone out there who’s started to paper trade or you’re thinking about paper trading which is basically just simulated or fake options trading until you get comfortable with the markets and maybe your broker platform. Paper trading is actually very popular and I don’t obviously suggest that you start with paper trading unless you want to. It’s just a way for you to get more comfortable and familiar with a platform, but it’s not a requirement by any means to paper trade first before you start real money trading. But here’s the problem I see with people when they start paper trading. I like the concept of paper trading in the sense that people try to replicate their account. They try to do a paper trading account that’s $5,000 and try to make positions as if they were in the real market. Well, the problem is that you’re not in the real market. In most

Hey everyone, Kirk here again at Option Alpha and welcome back to the daily call. Today, I want to talk about choosing strike prices when buying options. Look. If you’re going to go out and you’re going to actually decide to buy options which is not the first thing that we would suggest to do and hopefully, you’ve recognized that by listening to this podcast and checking out our website at optionalpha.com. But if you are going to decide to go out and do some option buying, you have to understand the relationship that’s present between buying options and the price you pay and your probability of success or the amount of money that might make. Now, understand of course that the markets are pretty fair and efficient. If you trade something that’s highly liquid which we suggest you obviously do in any case, then the market is pretty fair and efficient in that you're not going to get a higher chance of winning by paying less money. It’s really what it comes down to. If you think about that as you start choosing di

Hey everyone, this is Kirk here again at Option Alpha and welcome back to the daily call. On today’s call, we’re going to talk about the best websites for technical analysis software. I’ll actually begin this with two comments because I think it's important before we go through some of these sites and we’ll just briefly talk about them. They’re not all free sites, although some of them offer a lot of free services. Obviously, when you get more data and you get more access to features, in some of the cases, you might have to upgrade to a paid version. On that note, two quick comments on this. One, I think in general, you should just use your brokerage platform for your technical analysis because it's in most cases, already integrated to your broker platform, whoever you’re using. They’ll probably have some sort of charting feature already. They probably already have technical analysis and in most cases, it has a lot more customization options. You can change links, you can change average periods, you can chang

Hey everyone, Kirk here again from Option Alpha and welcome back to the daily call. Today, we’re going to answer the question, “Does open interest mean markets will go up or go down?” When it comes to options trading, the real question here is, “What does open interest tell us about the future direction of the market?” Now first, we need to define what open interest is. Really, it’s pretty simple when you think about open interest as opposed to volume. Volume in contract trading for options is just the number of contracts that were traded that day, so what is the volume, how many contracts changed hands. Open interest tells us how many contracts are still left open and working in the market. Now again, there’s got to be basically two parties to the transaction. There’s option buyers and option sellers. Both of these people would have net contracts open or still available in the market. Unlike stock which stock has a predefined amount of shares that you can trade or float, when those shares are traded, there’s

Hey everyone, welcome back. This is Kirk here again from Option Alpha and on today’s daily call, we’re going to be talking about trading options with a little bit of money and some best practices around this just as another reminder of things you can do. I really want to focus on five things in today’s call because I keep getting lots of emails from people on trading options with a little bit of money or they’re just starting out and maybe they’re just allocating a little bit of money to options trading just to see if it works before you allocate more money. But whatever the case, I think there’s a couple of best practices that you can follow, so make sure you're doing these five things. Number one is before you even start, try to reduce your commission cost. Now, look. This can be hard depending on what broker you’re at or where you’re at the country or the world. I get that. But try to go towards one of these lower cost brokerages. That's probably the easiest way. Yes, it might take some time to move your a

Hey everyone, Kirk here again and welcome back to the daily call. Today, we’re going to answer the question, “Will my broker automatically exercise options that are ITM or in the money?” The short answer to this is yes, they will if you let that contract go through the expiration date or process. If you’re trading a contract that's 30 days out from expiration and you’re long that contract, then your broker is not going to go ahead and automatically exercise your contract until you get through the expiration date. If you were to leave that long option contract on and in place and that option was in the money at expiration, meaning for call options that the stock is higher than your strike price, for put options, a stock is lower than your strike price, if your option contract is in the money at expiration, yes, your broker will assume that you want to get delivery of those long or short shares and they will automatically exercise your contracts. The good news here is in most cases, you have the choice of wheth

Hey everyone, Kirk here again at Option Alpha and in this daily call, I want to talk about the prisoner of war psychology lesson that options traders should learn. This really comes down to understanding how people get through being prisoners of war which I was never a prisoner of war and I respect people who have been in that situation because I can’t even imagine what that's like. But when researchers went back and looked at how people got through prisoner of war type situations, being actually a prisoner of war or situations in which they were confined or in solitude or any of those situations where they were abducted and didn’t see daylight for days and weeks, how they got through that situation, the psychology behind that, it’s actually interesting to learn about how they got through those situations because I think it can ultimately help us become better options traders and here's why. When researchers did all of this research around people who are POWs, you would think that people who had insane optimi

Hey everyone, Kirk here again. Welcome back to the daily call. Today’s call is a very important question that I want to answer and spend the time answering today which is, “Why do people buy options if option selling is more profitable?” Huge question that I get. I mean, really… Hopefully if you saw the title of this podcast, you’re like, “Yes! Finally, Kirk! Let’s answer this question.” Because we inevitably get this or I inevitably get this all the time. In fact, every week as we do our free onboarding webinars even with people who signed up for pro and elite membership, they start going through the trainings and the courses, they realize how profitable it can be to consistently and religiously sell options, but the question then becomes, “If it’s so profitable, why do people buy options? Why is there another side of the track?” And so, I want to answer that today in probably three parts because I think there’s three main areas or reasons why and then everything else kind of dumps into these three. These ar

Hey everyone, welcome back to the daily call. This is Kirk here again at Option Alpha and today, I want to share with you guys this hidden statistic about goal-setting that you’ve probably never heard of before. In fact, I didn’t even hear about it until I knew it was out there, but I didn’t hear what the research was on it or didn’t see actual concrete numbers on this until just recently and I was reading another book because I just read lots and lots of books and saw this and I was like, “Man, I got to share this with everyone because it’s so, so powerful.” I know we’re 20 or so days into January in 2018 here and so, you’ve probably hopefully already set some goals, but it might be better to do just this one thing as you get started this year and help out. I’ve realized even just listening to this and reading this statistic about goal-setting that I’m basically already doing this in a way and I’ll talk about that here in a second which I think now, looking back on it has really helped me out. It’s really al