Number 5 – Ability to Trade Both Sides of The Market
You can trade the market up and trade the market down. Most traders who buy stock don’t know how to trade the market to the downside. With Options it is easy. You just buy a put option and with the power of leverage, you can get into large positions with little capital.
Number 4 – The Power Of Leverage
Options are highly leveraged instruments and as such, you can trade big size with little capital. For retail traders who are starting out a few thousand dollars to control hundreds of shares of Facebook is pretty amazing. It allows small traders to act big and trade with the leverage.
Number 3 – Ability To Be Flexible With Your Trades
If the market goes down and against your position in stock all you can really do is take the loss or buy more stock. But why would anyone want to increase their position size on a bad trade? With options, you can change your position to be favorable even if the underlying stock continues to go down. You can adjust and move with the markets.
Number 2 – Defined Risk Trades
With stock, you purely enter in a directional position and you are at the mercy of the markets. If the market goes up you make money. If it goes down you lose money. If the market goes sideways you make nothing. You have no ability to adjust and with stop losses you can lose when markets close. With defined risk positions you lock in your max loss on any given trade and you are protected 24/7, unlike stock. When markets close you have competing positions that lock you in.
And the Number 1 Reason is…..
Freedom!! Freedom to do what you want to do when you want to do it. Freedom to be your own captain of your own ship. You control your own destiny. No dependency on other people or organizations. Trading you can take anywhere in the world as long as there is an internet connection. You can trade on a remote tropical island, or you can trade in a coffee shop. Kind of like green eggs and ham you can trade anywhere, anytime in any place.
By trading only stock you can miss out on some of these benefits. But trading options can be simple and you do get these benefits.
Every day on Options Trading Signals we do defined risk trades that protect us from black swan events 24/7. Many may think that is what stop losses are for. Well, remember the markets are only open about 1/3 of the hours in a day. Therefore, a stop loss only protects you for 1/3 of each day. Stocks can gap up or down. With options, you are always protected because we do defined risk in a spread. We cover with multiple legs which are always on once you own.
My team and I have been building and developing fully systematic algorithmic trading strategies for many years and can tell you that unless you have a solid foundation related to knowing when and where opportunities exist in market trends, you are likely churning your money in and out of failed trades. I will be presenting my two favorite strategies at the July Wealth365 Summit on July 13th at 4 pm and July 16th at 12 pm. The Summit is free to attend and offers unparalleled opportunities for learning…plus a potential prize or two!
Who doesn’t want to be rich? Money can afford you all manner of luxuries, including the best one of all: quitting your day job for a carefree and financially independent lifestyle. There are plenty of reliable ways to get rich slowly. Consistently adding to a diversified, passive portfolio is probably the most reliable way, but this can take years and years and years. What’s more, you could see your portfolio get set back a decade or so when the market inevitably melts down. This is where the get rich quick scheme comes into play. I’m sure you’ve seen advertisements say something like this:
“How to build wealth fast with these easy steps.”
“This one simple trick will make you millions.”
“Get out of the rat race today and follow my wealth building advice.”
What is a Get Rich Quick Scheme and Why People Find them Appealing?
These are examples of the classic get rich quick scheme. Many suspect “marketeers” have been selling hopes and dreams to the uninformed for years, and it’s the same story over and over again. The promise of huge returns on only a small initial investment. These incredible, easy to achieve returns will turn your life around, make everything ok, and fill the hole in your soul. Or so they say.
Throughout history, people young and old have fallen for these advertisements and as such, get rich quick schemes have been around for at least a few hundred years. Once upon a time, in 1821 to be precise, there was a Scottish explorer that famously scammed hopeful investors with the newly discovered rich and bountiful land of Poyais. The country was filled with gold and fertile soil, or so he said. UK investors were taken in by the prospect and promise of this new land and quickly lined the pockets of the Scottish explorer with their hard-earned money. There was only one problem – Poyais didn’t exist. Get rich quick schemes like this are a time-honored tale.
Why options are not a get rich quick scheme
Unless you have been hiding under a rock, retail traders today have been publicly sharing immense returns on the internet for the last few years – sometimes posting returns in the 1000s of percent over the course of just a few days. These lucky few primarily buy short-dated out-of-the-money options hoping for a big move in the underlying. When they win big they post their returns on the internet. Many traders might think: “well why couldn’t I do that?”. This guy managed to make one million dollars and can quit his job! He got rich quick!”
This kind of return is not so dissimilar to your typical run of the mill get rich quick scheme. Everyone needs to keep in mind that buying options contracts in this way is intensely risky, and the probability that you’ll win big is very small. Most people that buy options – especially these short-dated OTM options – will lose. In this way, for every person you see scoring huge returns, there are a thousand others that lost everything.
Options contracts can be used for a huge multitude of different reasons, and gambling can be one of them. I’ll leave you with this: always be skeptical of those that claim you can get rich quick buying “just” options contracts. If you fall for that, you’ll likely end up no different than the investors of Poyais – empty-handed. We at The Technical Traders OTS teach methods that are not get-rich-quick and we do both selling and buying of options. Stay small and profit while minimizing risk is our goal.
If you want to learn more about how to trade options, about how to take all factors of options pricing into consideration, and about how to account for volatility in your options trading, please look into our Options Trading Signals. We send trade alerts out weekly and do daily updates on our positions as to why we got in and out along with the factors to our strategies. We trade proprietary strategies you will not find anywhere else. Our goal is to make the market work for us and not try to work the market like everyone else.
You owe it to yourself to have the best tools and subject matter experts on had to ensure you are set up for ultimate success. Don’t trade with one hand behind your back. Rather, expedite your learning curve with the Options Trading newsletter service.
– Volatility is the most common way to measure risk in the financial markets. While there are a plethora of methods, calculations, and derivatives to calculate volatility, they are all trying to accomplish the same goal: what is the price of a security going to do in the future? Without a crystal ball, there’s no perfect answer, but let’s go through a few common ways that we can estimate future volatility.
Let’s Talk Volatility
Generally speaking, there are two types of volatility that traders and investors use in an effort to understand risk – historical volatility and implied volatility. Each of these can be used in different ways for different types of trades. Today we’re going to go through the basics of implied volatility, starting with the VIX. First proposed as the Sigma Index in 1987, the VIX got its start in 1993 when the CBOE reported implied volatility in real time using at-the-money options data from the S&P 100. While updates have been made to the VIX over time, it’s used as a “fear gauge” or a measure of the market’s expectations of future price action. As the VIX increases, the market expects more risk ahead.
Take a look at the most recent recession in 2020 – where we saw the VIX climb as high as 85. At that price, the market is expecting extreme risk. Ultimately, the VIX is the industry standard to help traders and investors have a standardized view of market risk through implied volatility.
The VIX is useful because it can give us a hint at what the market is expecting since it is an example of implied volatility. Typically, IV is derived using an options pricing model, such as the Black–Scholes. Using these models, the theoretical value of an option can help guide us to the measurement of implied volatility at a particular point in time.
Traders and investors can use IV to find attractive options trades to hedge, enter or exit a position, or to speculate on a future outcome in the market.
Historical Volatility
While the VIX is a measure of implied volatility, there are many historical measures of volatility that can be useful. One common example is the beta coefficient. This is a historical calculation measured by taking the returns associated with a security and comparing the price action of the market over the same time period. A security with a beta less than 1 implies that the security is theoretically less volatile than the market as a whole. A security with a beta greater than 1 would be more volatile than the market.
For those that want to have a full picture of the risk of a security, the beta coefficient can help separate market risk from individual security risk. These types of measures can help you diversify properly with respect to your individual risk tolerance.
A historical volatility calculation like beta gives you a basic understanding of what the price of a security has done in the past. While past performance is not indicative of future results, historical volatility calculations can be used to help measure risk and ultimately help determine if a security is right for you.
The Volatility of the Volatility – VVIX
To further confuse new traders there is such a thing called the volatility of the volatility – AKA the VIX of the VIX (VVIX). No this is not an exercise in doublespeak. If you are a subscriber you will have heard me talk about this before. The VVIX is simply a measure of the change of volatility in the VIX volatility index. The VVIX is the VIX of the VIX like the VIX is the VIX of stocks. Ok, if you are not thoroughly confused by now then congrats because this stuff can get pretty mind-bending! Another way to put it is, the VVIX measures how rapidly S&P 500 volatility changes, and is thus a measure of the volatility of the index. Investors can use the VVIX and its derivatives to hedge against volatility swings on changes in the VIX options market. You can hedge the hedge!
Why You Shouldn’t Be Afraid of Volatility
All told, volatility is just a measurement that can give you insight into the potential risk of a security. It’s important to remember that actual volatility is almost always less than implied volatility. No measure of risk is going to be totally accurate, anything can happen in the financial markets. Even so, volatility measurements can offer a clear view of risk the market expects.
If you want to learn more about how to trade options, about how to take all factors of options pricing into consideration, and about how to account for volatility in your options trading, please look into our Options Trading Signals. We send trade alerts out weekly and do daily updates on our positions as to why we got in and out along with the factors to our strategies. We trade proprietary strategies you will not find anywhere else. Our goal is to make the market work for us and not try to work the market like everyone else.
You owe it to yourself to have the best tools and subject matter experts on had to ensure you are set up for ultimate success. Don’t trade with one hand behind your back. Rather, expedite your learning curve with the Options Trading newsletter service.
– Have you ever heard someone say “90% of people that trade options lose money.”? I certainly have. Looking at an options chain can be a dizzying exercise for the uninformed. Delta, Gamma, Theta, Rho, Vega – and let’s not forget – implied volatility? Single, spread, butterfly, condor. What does it all mean?
So what is an option from a high level view?
At the end of the day, an options contract is just a derivative like any other stock, bond, ETF, or other tradable security based on an underlying asset. Most people will look at these other forms of derivatives and have an understanding of why the price fluctuates. For example, if a company posts a strong earnings report and the price of the stock goes up, it is easy to understand what is going on. In the case of options contracts, however, things do get a bit more complicated. Let’s break things down a little bit to start to get an idea of why many investors are afraid to trade options.
Simple and Straight Forward Options Basics
There are two forms of options contracts, Puts and Calls, and two things you can do with each type. For each of these, I can either buy or sell them. Buying a call option gives me the right to buy the underlying security at an agreed price or “strike” price. Selling a call option gives me the obligation to sell the underlying security at the strike price. On the other hand, buying a put option gives me the right to sell a stock at the strike price, while selling a put option obligates me to buy a stock at the strike price. Here is a diagram:
Seems simple enough right? In fact, if you think about it, it might seem similar to your car insurance. You give your insurance company premiums every month, and they are obligated to cover you in the event of damage to your car. So in many ways, you are correct, it is like insurance. The price of an option is even called the “premium!” As you can imagine, the price of the premium would have a big impact on whether or not you decided to trade it. Taking insurance as an example, why would you want to pay $500 dollars per month to your insurance company if they only cover you up to $1000 in damage? Many beginners don’t understand what is really being exchanged in the options market and how the prices are calculated.
In simple terms, options prices are generally broken out into two different components: intrinsic and time value. These two values combined make up the option premium. The intrinsic value of a call option is calculated as the difference in the current price of the underlying security and the strike price of the option.
For example, if I buy a call option with a strike price of 100 when the underlying is 100, the difference between the two numbers is 0, thus the call option has no intrinsic value. If the price of the underlying goes up to 105 dollars, my call option now has 5 dollars of intrinsic value. Put options are reversed – their intrinsic value is the difference between the price of the put option minus the price of the underlying security.
Time value is calculated by taking the price of the option and subtracting the intrinsic value. This will tell you how much the option writer is compensated for taking on the obligation to buy or sell the underlying for the pre-determined amount of time.
The price of an option is typically calculated using a few industry standard models. These models use historical data and many variables to calculate the price of an option including the current stock price, the strike price of the option, the risk-free rate and the option expiration. All of these variables are plugged into the mathematical models such as the Black-Scholes and ultimately a price is calculated. This is typically where people get bogged down by the complexity. Each of these variables can make a big difference in the price of an option, and when looking at an options chain, most people simply don’t have the knowledge to make an educated decision about what sort of trade they should make.
In reality, options can be used in so many different ways. They can be used to hedge, speculate, or make a profit all on their own. Having a basic understanding of the options market can help you enhance your existing positions and allow you to reduce your risk. Or you can trade options as their own individual positions which is what we teach and provide at Options Trading Signals. Once you have a complete understanding of options, the possibilities are endless.
If you are just starting out on trading options and want to learn more about the different strategies, follow me on https://www.thetechnicaltraders.com/ots/ and look out for more articles where we’ll take you step by step through real live options trades with members.
– Over the past year, the world we live in has drastically changed. In the covid era, we have lived in the midst of a pandemic requiring limited personal interactions with people outside our households and seemingly endless precautions in an effort to slow the spread. In short, the world we live in today is radically different than the way things were less than two years ago. Since we have all be locked away in our homes, working remotely or not working at all, we have had to take on learning new skills. One skill everyone has been flocking to is trading.
According to a recent Charles Swab survey, fifteen percent of current retail investors began investing in 2020. This is a big number. Many of those investors cling to stock options as a way to leverage small money and trade big. With all the new traders trading, the markets have changed along with everything else. Many refer to these new traders as the “dumb” money while the historical institutional investors as the “smart” money.
Many of these new traders trade options before having any idea of how the price of an option is really constructed. They believe they can buy the option and only time and the price of the underlying stock matters in the price movement of the option. This is not the case. So, what are they missing?
The number one most overlooked factor in options pricing that most traders ignore is………drum roll……..Volatility! Yes, that’s right I said volatility. Volatility arguably could be the most important factor in option pricing. But before I explain, we must first understand what is meant by Volatility in options pricing. With volatility, you have two types – historical volatility and implied volatility. Historical volatility is what price volatility was historically, while implied is what the future volatility is expected to be. To sum in simple terms: The higher the volatility of the underlying asset, the higher the price is for both call and put options. This happens because higher volatility increases the price range of the underlying asset.
The most overlooked factor that most traders ignore…Volatility
So back to the most overlooked factor that most traders ignore – why volatility? In options trading, volatility will move up and down as the price of the underlying asset range increases. This can make a trade, where you have direction and time right, a losing trade and make a trade, where you miss the direction and time, yet still make a profit. That is the power of volatility that most traders, especially new ones, overlook. In many cases this can lead to catastrophic losses in trading options. In many cases, the script goes like this:
The euphoria of trading options sets in as new traders just walk up and trade options.
They will start with one lot and go small and may get a few wins.
They then start to increase their size as they have been winning.
Then the market teaches them a lesson and they lose (because their size was larger overall, they are at a net loss).
So, if one trades options, why should they care about volatility? One should care because arguably, this can affect options pricing the most and can turn winning trades into losing ones.
If you are one of these new options traders and would like to learn more about how to trade options and take all factors of options pricing into consideration, learn how to account for volatility in your options trading at Options Trading Signals. We send trade alerts out weekly and do daily updates on our positions as to why we got in and out along with the factors to our strategies. We trade proprietary strategies you will not find anywhere else. Our goal is to make the market work for us and not try to work the market like everyone else.
You owe it to yourself to have the best tools and subject matter experts on had to ensure you are set up for ultimate success. Don’t trade with one hand behind your back. Rather, expedite your learning curve with the Options Trading newsletter service.
– Hi everyone, it’s me Neil Szczepanski again and I’m back to finish off telling you why I love to trade options! If you missed the first half of this article entitled “5 Reasons Why People Prefer To Trade Options Over Stocks” then click on the title to revisit it. In this second and final installment, I will walk through how adjustments and risk management of options can help give you better control of your trades and profits. I hope everyone enjoys the information and I look forward to helping everyone win with options trading!
REDUCE RISK
Everyone has heard a story about someone who mischaracterized or misunderstood their options trade, then having their account blow up when the underlying stock goes the wrong way. This happened recently with a Robinhood trader who woke up one morning to see his account at -$730,165. In this tragic event the kid took his life because he thought he had lost $730,165 and couldn’t reach his brokerage to understand his account. We learned later that the negative balance did not represent uncollateralized indebtedness at all, but rather his temporary balance until the stocks underlying his assigned options actually settled into his account. In short it was a delay in processing of the options contracts in his account, and not the actual trade that went awry. This is why it is very important that in this game of trading you get the proper training so you understand your risk. The risk is real.
So how can options be less risky? Simple: because you can define your risk right at the outset of the trade. Further, you can adjust your risk/reward ratio 24/7, and not just during market hours with a stop loss like stocks. In very volatile markets risk management becomes even more important and your exposure to unlimited risk can destroy your account very quickly. Think back to the tech bubble in 2002, or the subprime mortgage crisis, and don’t forget the consequneces of the great recession. Or even the Covid-19 pandemic of 2020! The most successful traders are good at maximizing their winners, but more importantly, they are even better at minimizing their losses on losing trades. This includes making sure you prepare for black swan events.
One of the questions I always get is how do you control and/or manage your risk with options? In the following diagram, you can see that if you use options around your existing positions you can cap your max loss at about $7. To achieve this, the trade-off is to cap your upside at about $13. In this scenario, we own stock the orange line represents this. Let’s assume the price is $110 so the profit is about $3. We sell a call to pay for a put that we buy. So the max profit in the line created by selling the call and the max loss is defined by the buying of the put. This is called collaring your stock position using stock options. As I mentioned this trade is on 24/7 and not just during market hours like a stop for stocks.
FLEXIBILITY TO REACT TO MARKET VOLATILITY
You don’t need to always be right on direction. With options, you can put on a position and adjust and move with the market minimizing your losses or turning a losing trade into a winning trade. You can sell premium with options and make money even when the underline stock goes nowhere. You get paid for the time by selling the rights to the stock that you can either own or not own. With stocks it is more limiting, you can either buy more or sell and take your loss if the price goes against you, that’s it.
If you are trading options you have way more flexibility than stock. With stock you can buy, sell short and buy more. I hate adding to a losing position and quite frankly not sure why anyone would do that. With options you can roll out of a leg in your option spread and adjust to where the market is going. Think of this as steering a boat through a series of rocks rather than just running them over and damaging the ship. You control where you want to go and avoid the disasters. You can also turn losing positions into winning ones by adjusting. With my new Options Trading Signals newsletter (“OTS”) we will go through these steps and show how you can create winning positions or minimize your losses in ways that is simply not possible with stocks.
CONSISTENT RETURNS WITH less severe DRAWDOWNS
Consistent returns and less dramatic drawdowns can be achieved with an options strategy rather than a just buying stock strategy. I usually only allocate 50% or less of my overall account into options positions yet achieve better returns than if I were to invest 100% into stocks. I also don’t have nearly the same levels of drawdowns, or the sudden trend reversal risk, that one would take by being 100% in stocks. Holding cash also allows me to capitalize on opportunities like if a black swan event. When such an event does eventually hit, I have cash available to buy in while all stocks are on sale. So, I can still get a better return, with fewer drawdowns, and with cash to be ready to jump on buying opportunities. One can get all of the best of all worlds!
I am really excited about sharing my knowledge and strategies with you. I will be writing another article this week that walks you through my simple strategy to consistently generate profits from the market. I will be walking through a few trades with you so make sure you don’t miss out.
Selling options is the best way to get consistent returns that are undeniable and consistent. Nothing in the market is guaranteed except the premium you sell on an options contract. The best part about selling premium is the stock can go against you, with you, or do nothing and you can profit on any of those scenarios. Today’s current market conditions are RIPE for selling premium since there are many new options traders piling into the market, buying options, and inflating the premium on options. This is a supply and demand game and because the demand is high and the supply is low this is creating a premium price skew to the upside.
This is clearly an edge we can take advantage of but in order to do so, you must understand how the market works and more importantly how options work. My new OTS service will detail our weekly trades and walk you through how to take advantage of this edge.
To further my point that options can simply provide better returns, let us look at the below Silver chart to see why buy and hold is a tough game to play. If you entered Silver in August 2020 at roughly $25, then you would have zero gains 7 months later if you had bought the stock. However had you sold a Put Option at $24 for 7 months it would have expired worthless and paid you the entire premium that you sold it for. Currently, an option contract 7 months out on Silver is trading at $296 at the time of this article being written, so, this trade would have netted a $256 gain even though the underlying SLV stock went absolutely nowhere.
If you want to learn more about options, then join me in March when I will start teaching basic options trading, as well as offering courses on more advanced strategies. Anyone can learn how options work but the most important thing is what strategy you use. You also need to know how and when to use the right strategy. I love teaching people how to trade options and live by two principles when doing so: “Trading can be simple but it is not easy” and “I want EVERYONE to win not just me and in fact, I have no desire to win if everyone else loses.”. I am really excited to get to know some of you soon when I launch my LIVE options courses and get you on the path to winning trades!
I will also be running The Technical Traders’ new service – Options Trading Signals – where I will share my knowledge, model portfolio, a weekly trade, and opportunities report, and trade alerts with subscribers. Look for the launch of my newsletter and courses at the end of February! Make sure you sign up to keep informed of the launch of my newsletter and courses. You can sign up now at www.thetechnicaltraders.com/options-trading.
– As technical traders, we know the importance of following the price charts using proven trading strategies and implementing risk and position management. Here at TheTechnicalTraders.com we are stepping things up a notch by adding options to our trading.
By using options, a trader can leverage, hedge positions, and generate income via selling premiums. There are basic options, strategies, and complex, and everything in between. Because of that, I have brought options trading specialist Neil Szczepanski to join our team. I will let Neil introduce himself.
Hi everyone! Neil Szczepanski here. In case you are wondering it is pronounced “Sus’ pan ski”. Yes, I have roots in eastern European ancestry and I’m first generation. I love options and have been trading them for many, many years. I like options because you have more ways to be profitable in your trading. I hate putting on a position and then waiting for the market to go your way. I want to be in control of my trades and options allows for that. Also, trading can equal freedom.
Think about this: imagine having a job that you can do from anywhere on the planet, work as much as you want, and make as much money as you want? Imagine having that same job that has no boss breathing down your neck and you call the shots. Well, that is what options trading can be like if you have the skills or access to someone who tells you what and when to buy and sell options contracts.
You control your own destiny and I have seen traders start with as little as $500. Options are especially attractive because they can cater to the small guy with smaller accounts via leverage, allowing them to take on big positions with little capital. On the flip side, the more wealthy sophisticated traders use options to protect and hedge positions and can do more complex strategies that provide even more consistent and lucrative returns with lower risk.
No matter what category of options trading you fall into, they work incredibly well, and I will teach you while providing professional trades to execute. Over my next few posts, I am going to explain some more about why trading options can be consistently profitable without having to take on huge risks. Today I am going to talk about why I love swing-trading options and the power of leverage that options provide us traders.
MAKE BIG MONEY WITH SMALL ACCOUNTS
As I alluded to above, options give the average trader ways to break into the trading world because of leverage. A little capital can go a long way, and if options trading is done properly you can have significantly less risk than buying the stock outright. You can start small, make smart bets that generate returns, and continue building your account through sound risk management techniques like position sizing, etc.
For example, when an underlying stock is super expensive, like Telsa for example, it can be prohibitive for the average person just starting out trading to own that stock… let alone 100 shares! Options give you the ability to control those shares for a specific period of time at a fraction of the price. Each individual options contract lets you control 100 shares of Tesla without having to buy the stock.
Sign up now to receive information on the launch of the Technical Traders’ options trading courses and newsletter!
Let us take a look at a simple example where you want to buy TELSA with an expectation that it will go up at least 5% in value in the next month. If you wanted to buy and hold 100 shares of TESLA, then you would need to spend $80,482 to own those shares. Since all we want to do is to be able to sell the shares and lock in the profit when they go up by 5% or more. We don’t need to own them but rather just have the right to control them within the options contract timeframe. When we hit our targets, we can sell the option contract and take profit (or take possession/delivery of the underlying shares on contract expiry). This is called option assignment.
Below is a sample of a Tesla options chain, where we can see that the price of the stock is $804.82. Let’s say you could allocate $2,000 to this trade – you would be able to buy almost 2.5 shares of TSLA. But with $2,000, you could buy an option contract at the money that would let you have the right to buy 100 TSLA shares anytime in the next 30 days at a price of $800/share. With options, you have the ability to take your $2,000 trade and have the same controlling interest in an underlying stock as the person that just spent over $80,000 to buy the stock.
So to continue with the TSLA example, let’s say on March 12th TSLA was trading for $844 (the 5% gain you were expecting). If you bought and sold the stock, you would have made a 5% return of $4,000. If you had bought the option, and then take on the assignment (let it expire) you would have the right to buy 100 TSLA shares at $800 and then turn around and sell them for $844. Your profit would be $4,400 (less the cost of the option contract), a little more profit than had you bought the shares outright. However, if you look at your return it is more than 225% using options!!!
Options enable the small players to trade stocks that would normally be outside of their price range, and this is one of the reasons we have seen an increase in options trading popularity over the last year. In fact, options trading volume has more than doubled since the start of the pandemic.
Of course, the above trade is a dream, but the reality can be quite scary. If you took the options trade and TSLA dropped below $800, then your liability starts mounting, however, the loss with owning the stock could be over $80,000 while the total loss with buying the options would be the price you paid for the option which is $1,950. A big reversal of the stock would be catastrophic in both cases but can be much worse for the stock owner. So it is important to make sure you trade with proper risk management and protections in place. While the adage “with great power there comes great responsibility” was popularized within a different context, I feel it applies to trading options.
I know at this point you are probably thinking what the heck is he talking about and options are WAY too complicated for me. Don’t worry, I’m going to teach and show you in a very simple and easy way how to trade options. I am also going to provide trades that limit the max loss per trade, and reduce risk so get ready for some excitement!
SWING TRADING OPTIONS IS THE PERFECT SIDE-HUSTLE
I love teaching, technology, and trading. I knew early on that these were the things that would drive my career path. At the same time, I had kids to feed so I needed to supplement my income to support my growing family. I was able to achieve this through swing trading options. This allowed me to focus on my career and family while making modest yet consistent income, without having to be glued to my screen every day since swing trades last a few days or weeks.
We have all seen the traders with 10 monitors looking at charts all day, making trades, and watching and waiting on every single turn in the market. I can tell you this is NOT my idea of trading. I prefer swing trading, where I can set up trades to enter and exit every couple of days or even weeks. Swing trades are meant to be short duration, and they are not intra-day, so you can set up your trades and manage them when you have time to yourself.
I once got advice from a great old friend that sometimes it is wise to look at the animal kingdom to learn how we can improve and live our lives. There is a lot we can learn from the animal kingdom. Some of the necessities we need as a human being is food shelter, social acceptance, and security. As such, we should always have back up plans. Going back to the animal kingdom, if we look at say prairie dogs, for example, we know that they always have two holes. One is for the main entry and exit and the other is for emergency exits. Side hustles are just that and swing trading can be a really useful back-up/extra income plan. It is your second hole!
Swing trading is also a great way to gain entry into the world of trading. It is like dipping your toe in the water to test it before you jump in head first. With swing trading, you can learn all about options and other financial instruments like futures, CFD, and currencies. The best part about swing trading is it can eventually turn into a full-time job, replacing your regular job. Now, instead of trading during your free time, you can trade when you don’t have to be at work, leaving you with even more time to enjoy life and family. This is the ultimate freedom. That is what I have done using several strategies that generate consistent, low-risk gains for 20+ years.
One of my favorite strategies that I have developed is called the C-LEAP strategy. In this strategy, you enter and exit positions once every two weeks. It is one of the least risky strategies I have ever developed, and I use a simple checklist to follow it. I have had past students generate tens of thousands of dollars every month using this strategy, and I have found it to be easy to learn and very consistent.
As you may or may not know, I am preparing some options courses where I will teach basic options trading as well as more advanced strategies. Anyone can learn how options work but the most important thing is what strategy you use. You also need to know how and when to use the right strategy. I love teaching people how to trade options and live by two principles when doing so: “Trading can be simple but it is not easy” and “I want EVERYONE to win not just me and in fact, I have no desire to win if everyone else loses.”. I am really excited to get to know some of you soon when I launch my LIVE options courses and get you on the path to winning trades!
I will also be running The Technical Traders’ new service – Options Trading Signals – where I will share my knowledge, model portfolio, a weekly trade, and opportunities report, and trade alerts with subscribers. Look for the launch of my newsletter and courses at the end of February! Make sure you sign up now to keep informed of the launch of my newsletter and courses. You can sign up at www.thetechnicaltraders.com/options-trading.
In my next article I will keep giving you reasons to love trading options, including how you can trade options with less risk than stocks, how you can better react to volatility with options compared to stocks, and how you can attain consistent profits with lower drawdowns by trading options. So come along with me for the ride and change your life with a new skill trading options!
Hi everyone, it’s Chris Vermeulen here. Over the years, I have covered a lot about investing, swing trading, and technical analysis in these articles. Today I have exciting news and fresh trading content you are going to love. Many of you trade options around the free trades and setup articles I post, and today options trading will become a big part of the analysis and trading because so many readers keep asking for options.
I have partnered up with an options trading specialist, and it’s time you learn more about who he is and why you need to start trading options with us.
I will let Neil introduce himself, and show you why options are so exciting!
I am Neil Szczepanski and I am an options trader and coach that is teaming up with Chris Vermeulen and the Technical Traders to offer options courses and trading strategies. A little bit about me – I’m a native of Indiana but grew up in Colorado and I’m a big sports fan. When I’m not looking through charts, I’m probably watching a game or coaching sports teams. In addition to watching sports, I like to play them.
I graduated from Central Michigan University with a degree in Economics and Marketing and been a professional in technology for 20+ years. During this time as a professional, I loved to trade and always traded as a hobby. I learned to trade in the late 1980s in a Junior Achievement class in junior high school. In the 1990’s I learned how to trade options and started trading options in 2002. I became interested in options when I learned that I could leverage what small capital I had into large trading positions. I also learned that I could employ a great risk management strategy using a defined risk in options spreads. I discovered that I could sell the rights to stock I never owned and profit off it.
Most people who invest are taught to buy and hold and that can work but in a raging bull market like we have just seen it is hard to buy at what looks like a market top. This is yet another reason why the time is right to start trading stock options. Whether you are a beginner or experienced in trading options it can be simple in theory but not always easy. Some of the best options trading strategies are some of the simplest. I really like to trade the covered wheel strategy where you can get into long stock positions at discounts and get out of those same positions by selling your position for more than market price.
Over the next few weeks, I will be sharing with you some of my knowledge and strategies as we prepare to launch our first (of many) options courses and the Options Trading Signals newsletter. Sign up here to receive FREE options trading tips along with the special launch offers we have tailored just for you: Click Here. Don’t delay, only those that are on this special list will receive our special launch offer that will be happening at the end of this month!
The first question people always ask me when teaching options is ‘Why do you trade options?’. Here are the 5 reasons why I prefer to trade options over stocks:
MAKE BIG $$ WITH SMALL ACCOUNTS: Options give the average trader more ways to break into the trading world because of how much they are leveraged. A little investment can go a long way with less risk than buying the stock outright. For example, when an underline stock is over $2,000 or even $3,000 a share to control 100 shares becomes very expensive and for some not possible. Conversely, it is possible to control 100 shares for a specific period of time for dollars as opposed to thousands of dollars by leveraging options.
SWING TRADING OPTIONS, THE PERFECT SIDE-HUSTLE: I love teaching and technology and knew early on that these were the things that would drive my career path. At the same time, I have 6 kids to feed so I needed to supplement my income to support my family. I achieved this through swing trading options. This allows me to focus on my career and family while making consistent income without having to be glued to my screen every day as trades last a few days or weeks.
REDUCE RISK: Less risk – yes options can be far less risky than trading regular stock. You can define your risk 24/7, and not just during market hours with a stop loss like stocks. In very volatile markets risk management becomes even more important and your exposure to unlimited risk can destroy your account very quickly. The most successful traders are good at maximizing their winners, but more importantly, they are even better at minimizing their losses on losing trades. Trading options makes this easy.
FLEXIBILITY TO REACT TO MARKET VOLATILITY: You don’t need to always be right on direction. With options, you can put on a position and adjust and move with the market minimizing your losses or turning a losing trade into a winning trade. You can sell premium with options and make money even when the underline stock goes nowhere. You get paid for the time by selling the rights to the stock that you can either own or not own. With stocks it is more limiting, you can either buy more or sell and take your loss if the price goes against you, that’s it.
CONSISTENT RETURNS WITH LESS DRAWDOWNS: Consistent return and far less drawdowns can be achieved with options strategies rather than just buying stock strategy. I usually only allocate 50% or less of my overall account into options positions, yet achieve better returns than if I were to invest 100% into stocks. I also don’t have near the drawdowns or the risk that one would take by being 100% in the stock. Holding cash also allows me to pounce on opportunities like if a black swan event. Wehn such an event does eventually hit, I have cash available to buy in while all stocks are on sale. So I can still get a better return, with less drawdowns and with cash to be ready to pounce on buying opportunities. One can get all of the best of all worlds.
I am really excited about sharing my knowledge and strategies with you. I will be writing another article this week that walks you through my simple strategy to consistently generate profits from the market. I will be walking through a few trades with you so make sure you don’t miss out.
Thank you, Neil, for sharing this information. I am very excited to add proven options strategies to our trading accounts!
Well, that is all for now. We will share Neil’s next article and walk you through some winning strategies in our next post!
Sign up now to receive EXCLUSIVE information about all things options… and if you want to see how Neil can help you make money and answer all your questions, visit: https://www.thetechnicaltraders.com/ots-cyhuo/
