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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 every 18 years on average, investors lose half of their money. As we kind of wrap up 2019 and we start getting towards 2020, a brand-new decade, I think it’s important that we just remind ourselves of just how volatile markets can be moving forward in the future and how good we’ve really had it over the last 13 years as far as volatility, market shocks and black swans are concerned. We really haven’t had any major market movements in the last 13 years for US markets and that is a rare thing. And so, that would lead me to believe that in the future, potentially even the near future, the next couple of years, two years, three years or so, we’re going to have a significant move in the market in one fashion or another. And so, I want to revisit some of the things that we talked about actually in our weekly podcast show number 15 which is a really, really long time ago, we started

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 is the CBOE VIX calculated?” The VIX is actually a measure of 30-day expected volatility for the S&P 500. You could basically say that the VIX is a gauge for judging the implied or the expected movement in the S&P 500 over the next 30 days. And so, what they do is they have a bunch of formulas and ways that they do it which they have on their site, but it basically boils down to looking at at the money and out of the money puts and calls that are more than 23 days from expiration and less than 37 days from expiration for the SPX. And so, what they do is they take all of the AM settlement SPX options along with any PM settlement weekly options that expire and they basically weight this to somewhere around 30 days of expected volatility. And so, what happens is that each week, the contracts and the calculations roll to the next maturity. As one week falls off,

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, “Can I buy VIX stock?” No. You cannot buy VIX stock itself. It’s actually not anything that you can trade. It’s not an ETF. It’s not an underlying stock security. The VIX is an index, but you can trade options on it and you can trade derivative products that are based on the VIX. One of the derivative products that’s very popular to trade is VXX which is an ETN that tracks the rolling 30-day level of the VIX futures contracts. The problem with a lot of these is that sometimes they have little bit different pricing structures which you’ll want to investigate and learn more about. You can do that right here at Option Alpha as well. But you can’t buy the VIX directly. You can trade options on it. You can trade the VIX futures. You can trade VIX derivative products if you want. You just can’t go out and buy VIX itself. Hopefully this helps out. As always, if you guys have any ques

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 is back-testing important?” I actually get a lot of pushback on this and I think that many people look at back-testing as irrelevant and I think that back-testing has a lot of relevance if you use it correctly. Sure, back-testing is not perfect in the sense that a perfect back-test is not going to be the perfect expectation of what we should expect moving forward in the future. Obviously, what happened historically is not going to happen the same way in the future. We should all know this. This is a rational logical thought process that we should follow. But a lot of people think that when we say that something is going to back-test and win 70% of the time that it will exactly win 70% of the time in the future. We know this is not the case, that the future is still out there, it is unknowable, it is unpredictable, but for me, back-testing gives us parameters, bumper lanes

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 a very hot topic which is, “Do you allocate everything now in lump sum or do you allocate over time if you’re just getting started in investing?” The good news here is that I think that a lot of data and research has already been done on this and in particular, Vanguard did a bunch of research on this which you can find online on Vanguard’s website that has the performance of lump sum investing versus some deviation of dollar cost averaging or systematic investing in the future, basically this idea that if you have this lump sum of cash that you’re going to invest in the market, do you do it all just now and throw it into a diversified portfolio or however you build your portfolio with options or do you dollar cost average into this over time and start to average down in the market or wait for a market fall or a better entry? And what they found and what a lot of people have also

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, “Is VIX actually implied volatility?” The simple answer to this question is yes, it’s implied volatility, but only for the S&P 500. The VIX itself is basically derived off of the expected future S&P 500 move and the S&P 500 index options over the next 30 days. You could look at VIX as actually the implied volatility reading on the S&P 500. Now, people use the VIX as a broad barometer for market fear or market volatility because the S&P 500 ends up being one of the benchmarks that everyone uses. As a result, when we talk about having high general market volatility, we’re usually referring to either a high or low VIX level as an indication of where implied volatility is in the market. Hopefully this helps out. As always, if you guys have any questions, let us know and until next time, happy trading.

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 makes a stock volatile?” The simple answer to this question is just changes in expectation and when changes and expectation are not in alignment with what people had thought previously, that’s what causes stocks to become volatile. If you really think about how stocks get really volatile particularly around earnings events, it’s only driven by the fact that we have new information that changes our future expectation of where the stock is going to go. And so, if that new information is really good for example for a stock and people have assumed that the stock was going to have a bad year and it turns out, the stock might have a good year, then we see a dramatic change in the stock’s price. We have lots of volatility as market participants re-price the stock into a new territory. The same thing happens in reverse. If a stock’s having a really good year and then we have thi

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 is implied volatility rank or what’s commonly referred to as IVR?” IVR is way for us to normalize implied volatility readings across different ticker symbols and ETFs to get basically an apples to apples comparison. When we are looking at a trade and we are searching for and scanning for high implied volatility setups, it’s not enough in our particular case to search just for the highest implied volatility securities because high implied volatility for one security could be low implied volatility for another. If I told you that a security’s implied volatility reading was 30%, that has no context whatsoever if I didn’t tell you where 30% laid in its historical range. For a company like Tesla, 30% implied volatility might be insanely low. For a company like ExxonMobil or GE, 30% implied volatility might be insanely high. What we do is we overlay implied volatility ranking

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, “Is TD Ameritrade’s Thinkorswim free?” The short answer is that yes, the platform is free to investors and traders. However, if you do want to have options trading privileges and get the ability to trade on margin, usually, they require a $2,000 deposit. Now, this is the time of this recording, so it may be different in the future and always check TD Ameritrade’s page and their website to see if that deposit requirement has been lowered or increased in the future. But the platform itself is free. They don’t charge any platform fees. As long as you’re a customer and you have a funded account, you can actually start trading and using the platform. I think it’s a great platform not only because I’ve used it for the last 10 plus years, but also because I truly think it’s one of the better platforms out there. Not every broker platform is perfect. There’s always different features

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 you cannot start trading options with $100. Now, I know that there’s a lot of people out there online who suggest that you can start trading options with a little bit of money. And while that’s true, we actually suggest that you start with somewhere around $3,000 to $5,000. Hopefully on the upper end of that range, around $5,000 is really where you start to get the benefits of diversifying positions and adding more ticker symbols and spreading your risk across more underlying asset classes. The real reason why you can’t start trading options with $100 is although you can buy some option contracts with $100 and you can do a very simple, very narrow $1 wide spread, it really doesn’t leave you open to doing much more than that. And so, theoretically, yes, you could trade options with $100. Is it really going to give you the best opportunity to start developing the skills and the

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 I believe you should trade on desktop and manage on mobile. I’ve said this a number of times, but actually, I think it’s a really good technique to use because as the brokerage industry continues to evolve and move towards more of a mobile friendly style and platform, I think it’s really important that you still make a lot of your trades on desktop especially if you’re a new trader. I don’t make that many trades on mobile. I like to manage a lot of my trades on my mobile phone using the Thinkorswim app or if you’re using a different broker, you can use their app. I think that managing on mobile is very, very easy. I can watch and monitor positions, enter and reenter GTC or closing orders. But when it comes to actually making trades that are added to the portfolio, I still prefer to do that on desktop and I think that in many cases, desktop allows you to get a better sense of w

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 is a good amount of money to start investing?” I think that honestly, you should start investing with whatever you have, so as much money as you can possibly sock away into an investing account or a retirement account, you should start doing that right away. In fact, it’s often been said that the best time to plant a tree is 100 years ago or today. And so, if you haven’t already started investing, then the next best time to start is today, right now. Literally today, start transferring money into a brokerage account, into a retirement account and start putting your money to work because we know that the power of compounding works in our favor the longer that we have that money invested in compounding. When it comes to trading and specifically, trading options, we do believe that you should have at least $5,000 to start. And we say $5,000 not because we just pulled random

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 fear comes from a loss of control. This is actually really interesting if you think about it, but we have this really strong primitive desire to control everything in our environment and really, the people and the things that we interact with. We see this all the time in markets because people will pay thousands of dollars for indicator signals and for forecast, for glimmers of hope into what the future might bring. This is why actually, analysts just really hang on this idea of future casting earnings or future pacing growth because everyone wants to know what’s going to happen in the future. If they know what’s going to happen in future or they have a good idea of it, then maybe they can control it or take advantage of it some way. We actually do this in our personal lives all the time in the sense that we always check the weather, right? You will always have an idea of what

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 is long volatility?” Long volatility can just be described as an options trading strategy or a trading strategy in general that profits from an increase in volatility. When someone says that they’re long volatility, that basically just means that they’ve bought into a volatility product that would profit if implied volatility in the underlying shares or the general market goes up in volatility. If I’m in a long volatility strategy that could be a long strangle, long straddle, it could be long calls, long puts as single option contract trades, these trades all profit from an increase in volatility in the market. One of our favorite long volatility strategies is to use a VIX hedging strategy whereby we use a couple of combinations of contracts to go long the VIX and that helps with our positions because we give ourselves some long volatility exposure in case we get into a

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 you should trade without technical analysis first. I’m a big proponent of using technical analysis, but I think that technical analysis is a secondary type of analysis that you should do when you’re trading. I do not think it’s a primary source of analysis. And what I mean by this is that a lot of people when they start trading, they get into technical analysis and it’s very easy to do because it’s visual, it makes sense, it’s intuitive, you use all these technical indicators, they tell you when to buy and when to sell and this is all great, but what we found in our research is that technical analysis is not as successful as just a high probability options trade. What I would rather see people do is I would rather see people use technical analysis as a secondary level of analysis and the primary level of analysis is going to be the probability of the option strategy winning, t

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, “How much do you need to start trading.” I think this is a two-part answer. I think the first part of this answer is if you’re going to start trading and just learning the mechanics, learning how brokers work, how order entry and position flow works, then you don’t need any money to do that. You can use a paper trading account at many of the brokerages that are out there and start to get a feel for the mechanics and the way that the markets work, how pricing works, how positions react to different news environments. That is all something that you can do for free. Now, we do suggest that people start paper trading and use paper trading for what it’s meant to be which is this mechanism by which to practice a lot of different repetitions in order entry and trade management and rolling, etcetera. When you start gravitating towards actually really trading, so starting to actually p

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, “How do I stop feeling impatient when trading options?” Now, look. I think this is a really important topic because a lot of traders feel like when they start trading options, they have this sense of anxiety that starts to swell up in their body where they get impatient waiting for trades to come around or for positions to come in after they’ve been waiting for weeks and weeks for something to happen and still nothing happens. But I think that we have to first understand two things first about impatience before we can move forward and start to conquer it in our trading. The first thing we have to understand is that impatience is not a lack of patience. It’s completely different. Impatience is basically a reaction to something happening and it gets triggered under very certain circumstances. It’s not that you are either patient or impatient. It’s that you can be patient, but yo

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, “Is trading really profitable?” I think the short answer to this question is of course, yes, trading is profitable, but it’s profitable for those people who frankly just stick with it and have a system in place. We hear all the time this quote that’s thrown around which is that 90% of traders lose money. I don’t think that’s actually true. I think that 90% of traders actually just quit before they’ve given it enough time to let the numbers work themselves out. We talk about this all the time here at Option Alpha, the fact that if you want to be successful trading, you can’t whimsically tiptoe into this. You have to treat trading like a business. You have to find an expected probability edge or an expected outcome that you can take advantage of in the market. In our case for Option Alpha, it’s premium selling, it’s implied volatility and the over-expectation that we see i

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 why you should go beyond outcomes and focus on the process. This is something that I talk about often with coaching clients and especially with our Pro and Elite members here at Option Alpha and it’s this idea of focusing really, really hard on the process and not so much the outcome. Now, this doesn’t mean that you totally reject the outcome of what you’re doing. It just means that the entire weight of what you’re looking at when you analyze your trading and your strategies, your mentality in trading should be more focused 80% I would say on the process of trading versus the outcome of what you see and this is true in pretty much every other discipline. I’ll use an example here which I think will help out, but if you’re looking to lose weight or be physically fit and healthy in the New Year, then you should focus on the process of eating right, of reducing the amount of processed f