Rank #1: Options Boot Camp Episode 3: Buying Options
BASIC TRAINING - BUYING OPTIONS
- Buying Options, with special guest Joe Burgoyne from the Options Industry Council.
- Benefits & Downsides of buying options.
- The Greeks most relevant to novice options buyers.
- Bullish Example: Buying a call
- Bearish/Defensive Example: Buying a put.
- Common options buying mistakes: Buying OTM options vs ATM/ITM options, Intrinsic vs. Extrinsic value, Loading up before earnings.
ROLL CALL Mark and Dan sit down with this episode's guest Benny Joseph to discuss the Zecco mobile app. They cover a wide range of topics including:
- Can it execute options orders?
- Can you access the greeks of your position via the mobile app?
- Can you execute complex, multi-leg spreads via the mobile app?
- What features of the Zecco mobile app set it apart from the rest of the pack?
- What has the feedback been since launching this new app?
MAIL CALL Mark and Dan answer questions from Zecco's Facebook community including:
- From Arsalan: If I buy a call option and when it is time to exercise it, will that be done automatically (from the strike price or by the cost basis price, which would be the premium+strike?) or will I need to do something, as well as if I don't have the buying power to exercise the option, what happens, can I just have it buy and sell the stock right then and there and just have the profit.
- From Mike: Is Delta a measure of how much the option moves in relation to the stock? Example. A delta of 0.7 would mean if the stock moves 10%, the option would move 7%?
Apr 19 2012
Rank #2: Options Bootcamp 4: Selling Options
Basic Training: Turning to the dark side! It's time to learn how to sell options. Why sell options? Time decay and theta. Collecting theta, instead of paying theta, turning an enemy into a powerful ally.Example: The Naked Call The Naked Short PutOptions Drills: The Covered Call
Roll Call: Mark and Dan sit down with this Zecco Trading's President Michael Feser, to discuss Zecco in 2012. Given the difficulty for new retail traders in the last year, what can we see now, a full quarter into the new year? What issues may investors need to be cognizant of before coming into the market this year? Explaining the success of Zecco Share.
Mail Call: Facebook questions from the Zecco community.From Chad: What is the difference between a married put and a covered call? From Austin: I have an IRA account which is approved for basic options strategies. My investment objective is to preserve capital and generate additional income while remaining risk adverse. What basic strategies can I use in this situation?
May 07 2012
Rank #3: Options Bootcamp 63: The Proper Way to Trade Covered Calls
Options 101: Our topic today was inspired by a listener question.
- Question from Mark Davis: Hello, I am a new listener to options bootcamp and am currently on Ep. 4. There was a mention of using covered calls to generate a "dividend." I am having trouble tracking down more information on this. Being still new to all of this I am hoping to get a clearer picture of how it works. How far out on expiration should I look and how do I figure the strike price? Thanks!
Mail Call: Even more listener questions and comments
- Question from Robert Kornacki: I would like to use strategy regarding naked puts. If the naked put is far out of money what strategy could I use to protect myself. Could I use some type of order in case it was getting close to naked put strike price. Thanks
- Question from Dmitry Shesterin: What happens to LEAPs for tickers that get delisted before expiration?
- Question from Fred: I read Natenberg options volatility and pricing twice now and I have also set up paper trading accounts. But I am stuck going forward in my options progression. I do not want to trade using the greeks formula. But I want to spec on crude futures intraday using options. What should I do? Should I make more SIM trades until I figure it out? Or am I just too ignorant to trade options?
- Question from Jack Rieger: Do you have any specific strategies near or on expiration to profit from theta decay?
- Question from Bobby: How long did it take you to become comfortable trading credit spreads? Also what is my max loss when trading a credit spread?
- Question from from Tor: Hello. I am (restarting) my options trading on a shoestring; any thoughts on mini-options? Thanks.
- Question from Fred (#2): Is it my imagination or do options traders trade more markets than futures traders do? Is that a good practice? Is it good to look for multiple markets when trading options? Should I expand my horizons?
Jul 29 2016
Rank #4: Options Bootcamp 38: Triple Income Trading
Basic Training: The Wheel Trade
A great trade for novice options traders. Our friends at RCM call this the "triple income trade" or "the wheel of fun."
What is it? Write a put to get long equity, then immediately write a call to sell equity. When should you use it? When should you not use it?
This is a great way to add some extra bang to your covered call trades.
Mail Call: Fabulous questions, insightful answers.
- Question from Bit Tim: You recommend closing out your shorts when they go your way. Do you advise factoring the closing price of the trade in to your calculations when writing options? For example - write a put for $.30, but know at the onset that you will only collect $.25, because you will close it out for $.05. If more people did that at the outset, they might be less reluctant to close out their winner for a profit.
- Question from Jack - I know you guys are not tax advisors, and so nothing you say can be taken as certain in any answer to this question. I am a small time trader, and at the moment cannot afford a CPA with trading expertise in options to do my taxes. So I am wondering if you can talk about the potential tax consequences of front spreads, especially when used as covered call replacements? I have had good success with this strategy, and I would like to move it into my margin account this year, instead of just using it in the IRA to avoid the tax headache.
- Question from Alejandro Garcia, NYC - Given Wang's experience in the Chinese market, I would be interested to hear John's take on the impending launch of listed options in China in April. Does he think it will be a success? What will the popular strats will be with Chinese options traders?
Jan 24 2014
Rank #5: Options Bootcamp 5: Spread Trading
Options Bootcamp 5: Spread Trading Basic Training: Today we're going to dive into spreads. Spreads are really the defining characteristics of options. What is a spread? Why would you do a spread vs. trading an option outright? Max value of a spread is the differential between the two strike prices. Long call spread, aka vertical, examples with everyone's favorite stock XYZ. Spreads have components called legs - they are the individual parts of the spread.
Roll Call: Mark and Dan sit down with Christopher Newman, the Zecco Trading Vice President of Customer Service, and run him through a few questions:
- A big part of the brokerage experience is support. What are some of the things Zecco does to ensure the customer has a great experience when they need support?
- If I'm a Zecco customer, or a potential Zecco customer, how can I reach out to get support?What methods of communication does Zecco offer?
- If I'm an options trader, will Zecco go the extra mile for me on the phone? Explain what options traders can expect in terms of phone support.
- Twitter question from DSCHWARTZ- You said buying options before earning was bad. What about spreads (verticals, etc)?
- Email from Stephen Maxes, Des Moines, IA- I'm interested in trading options spread. Do I need a special options account to do this or does the regular option account work for spreads as well? Thanks and please keep doing the show. It has been very helpful for me.
May 17 2012
Rank #6: Options Bootcamp 32: Volatility and Skew
Basic Training: Let's talk fundamentals
- What is Implied Volatility and how it is derived? Why is understanding implied volatility is so important?
- Historical volatility versus implied volatility.
- What is skew? Why does skew exist?
- What is the put wing? What is the call wing?
- What is investment skew? What are other types of skew?
- #1 Options question from newcomers - I bought a call option then the stock rallied and my call lost value. Why?
- How do you evaluate skew? How is skew measured?
- What is reverse skew? What does reverse skew sometimes indicate?
- What is term structure?
Mail Call: You have questions. We have answers.
- Question from Nick D. - I am a covered call seller. I have some people recommend that I should sell in-the-money covered calls instead of my usual 5%-10% out-of-the-money calls because of volatility. But why would I want to sell a call that is going to inevitably be called away? What is your thought on this strategy?
- Question from Charles Midler, Santa Fe, NM - I am thinking about hedging my short stock positions with short put positions. How do the drill instructors view this strategy? Am I on the right track? Can John discuss the margin requirements of such a strategy?
- Question from Nomad 6 - What are flex options?
Oct 24 2013
Rank #7: Options Bootcamp 70: Mistakes to Avoid When Trading Options
In this episode, Mark, Dan Passarelli and Jill Malandrino take on listener questions.
Options Drills: Today's topic was inspired by this listener question:
Question from MarkLitwin: How do you lose money in options in the most effective way?
- Don't by ATM straddles
- Don't load up on far OTM options because they're cheap
- Don't trade earnings
- Be careful with trading weeklies
- Watch out when selling options going into weekends or holidays
Mail Call: Listeners take over
- Question from ejh4isu: IF I buy/sell a vertical on SPX (or any equity stock for that matter) and hold until expiration, and SPX settles between the strikes, what happens? Example: sell 2395/2400 and SPX settles at 2397.
- Question from Darqane: Assigned on short SPX puts means getting long the underlying? But how does that work if it's cash settled?
- Question from Lesnod: How do you get out of the straddles? One side of a straddle is always a loss correct?
- Question from Bobster: Can you trade options outside of U.S. trading hours?
- Question from ejh4isu: Let's say you're short naked a bunch of puts and the trade goes against you, and you don't have the money to pony up? What can your broker do?
- Question from BULZEYE7: Are options worth it for day-traders? Or just for swing-traders?
Nov 28 2017
Rank #8: Options Bootcamp 40: Trade Adjustments
Basic Training: The topic of the show today comes to us courtesy of a listener question.
Question from Dr. Toboggan: Love the podcasts. Would like to see an episode (maybe options bootcamp) that covers trade adjustments. This was been the most difficult aspect of learning to trade options for me, and would be useful now that you've covered most of the basics on this program. Specifically, would like to hear a discussion on how to adjust trades when the stock moves against you (i.e. price hits the short strike in a condor/credit spread, or the wings of a butterfly). Thanks
- Adjustments are where the rubber meets the road from an options perspective.
- What are adjustments?
- Why have an adjustment strategy?
- When do you make the adjustment?
- Close positions and close portions the of trade.
- Adjusting into spreads.
- Good rolls vs bad rolls.
- Long premium vs short premium.
Feb 21 2014
Rank #9: Options Bootcamp 41: Advanced Adjustments
Basic Training: Advanced Adjustments
- Spread adjustments
- When should you adjust a spread?
- Vertical spreads. Long and short straddles.
- Long and short butterfly adjustments
- When should you adjust your flies?
- Iron butterflies and iron condors.
- Calendar spread adjustments
- When should you adjust basic horizontal one-month calendars?
Mail Call: The drill instructors will now take your questions
- Question from Dr. Anthony - I enjoyed you episode on the wheel trade. I would like to know more about your typical use case for wheel trades, particularly when it comes to the second leg. Do you write an ITM or ATM call, hoping for the stock to be called away quickly, thereby allowing you to begin the process again? Or do you prefer to write an OTM call and attempt to capture some appreciation in the underlying, while risking losses in the stock?
- Question from Nik_Miner - How much money should I keep in my account for adjustments? Does 10-15% seem reasonable in case I need to roll or trade stock against my options?
Mar 06 2014
Rank #10: Options Bootcamp 26: Calendar Spreads
Options Bootcamp 26: Calendar Spreads
Basic Training: Calendar Spreads
This builds on the knowledge from episode 13 "Basic Spreads" and episode 14 "Advanced Spreads" from December.
- What is a calendar spread?
- Why would you want to use a calendar?
- Calendars are much more complex that basic textbooks tell you.
- The delicate balance between gamma and volatility in a calendar trade.
- Can't use P&L diagrams
- How do you manage a calendar?
Jul 19 2013
Rank #11: Options Bootcamp 43: Options & Dividends
Basic Training: Options & Dividends
- How do option holders collect dividends?
- How do derivatives impact options?
- What happens to call and put prices when dividends enter the equation?
- If you are an options holder what must you do to collect a dividend?
- What are dividend plays and how do they work?
Mail Call: International trades, closing positions, and more
- Question from Glenn Baker - Question for Options Boot Camp I've been listening to Options Boot Camp since the first episode & have been listening to the Option Block for about 2.5 years. I currently have a Schwab account where I primarily buy mining stocks. I would be interested in possibly switching to Sogotrade for the lower commissions. Does Sogotrade allow you to buy stocks on Canadian exchanges? Thanks and I really enjoy the show."
- Question from Nick Snow - Hello. First, thanks for all the shows. I used to listen to options insider years ago. Somehow lost the podcast and recently found it again. Good news there is I have been listening nonstop for the last 2 weeks. Second, for the real reason. I have been trading for a while (retail only) and in listening into your shows, particularly Boot Camp. I have heard "close your credit positions, if I had a nickel for every time a person came to me and said this crazy event happened and it wiped me out". I do close my credit positions at $0.20-0.05 every time. But I have wondered if outside of the commission, has anyone ever done a risk reversal? Or roll down to a lottery ticket? E.g. I sell bull put or bear call spread. I go to close the position at 80% of my profit and there's a day or two left. If I just closed my short leg and left the long on, or even just swapped my short leg for a lower short now making my spread a debit albeit a supper cheap debit spread lottery ticket. I could capture those freak events that you always talk about. By my count in options boot camp I would have 128 nickels for those freak events mentioned. :) Any thoughts? Am I missing something? Sincerely yours.
- Question from Abe - Can you make an episode on how to repair losing options trades? I enjoy listening to your show, it keeps me going while I am slaving the night shift at work. Thank you!
- Question from Greg S. - I am looking for some advice from an experienced options professional regarding stock replacement using American-style calls. Really the question comes down to- for a higher dividend yielding stock, should I be buying a LEAP or rolling out approximately every three months after exercising very close to expiration and capturing each dividend? I get that the dividend lowers the price I pay the longer dated the options are, but does not reflect as much as if the options were available as European-style. It seems that if the dividend yield is high enough, the American style can't fully compensate the option holder for the missed dividends as the value can't drop below intrinsic value. Does this call for the shorter term options to capture each dividend? The caveat seems to be that the roll out should cost more extrinsic value on ex-dividend. Since I have a buy-and-hold objective, euro-style or warrants would be ideal to avoid transaction costs, but again, not available. So far, I have been rolling an ITM call option position on a relatively high dividend yielding (5-7%) stock I have wanted concentrated exposure in as part of my overall portfolio but limited risk. It makes regular scheduled quarterly dividend payments and the timing of the annual increases is known to occur in Q1 each year. Well just yesterday (day before ex-div for my stock), I figured I would skip the dividend capture and roll out the May contract to the August one cheaper than I could today because today it trades ex-dividend. I confirmed this using the CBOE calculator, holding price constant. It showed the time value paid to roll should have been more today due to trading without the dividend vs. yesterday. Though just eyeing the bid x ask spread it didn't appear to do so by much and implied volatility looked to be the same.
Apr 28 2014
Rank #12: Options Bootcamp: Exit Strategy
Options Bootcamp: Exit Strategy
- Why is it so important to have an exit strategy?
- What are the rules of thumb when closing out positions?
- Should you be more aggressive when closing out long or short positions?
- What are the rules of thumb regarding when to roll you positions vs. closing?
Mail Call: Boot campers have so many questions.
Question from Teddy Z: Mark - Love the show! I've listened to every episode. I think I'm getting a handle of this stuff now. Just wanted to ask - What do you guys think about ETF options? Are there any you prefer over others? Perhaps that's a good topic for a future show.
Question from Alexander Gustaffson, Stockholm, Sweden: Guys, just want to let you know that you have a big following in Sweden. Maybe you should plan a live show in Stockholm one of these days? My question regards single stock futures. They are very popular in Europe but don't appear to have caught on very much in the U.S. I wonder why that is? Can you discuss the hedging of option positions with single stock futures - the pros & cons? Thank you!
May 29 2013
Rank #13: Options Bootcamp 29: Diagonals
Basic Training: Trading Diagonals
- What is a diagonal?
- Why would you put it on?
- What adjustments need to be made?
- How is it performed?
- How does it differ from a typical horizontal calendar spread?
- Why would you use a calendar vs. a horizontal spread?
- How do the greeks differ?
- How do you choose the strikes?
Mail Call: Fall in, recruits!
- Question from Richard D: I think a whole boot camp show on skew could be very helpful! Thanks!
- Question from Hawkeye6: Love the pair of calendar spread shows. Can you make it a hat trick and have a show on double diagonals and double calendars? I am especially interested in hearing about selection criteria -- what makes a good candidate, criteria for strike selection, when to pick DD/DC vs. Condor/Iron Condor, etc.
Sep 03 2013
Rank #14: Options Bootcamp 31: Stock Repair Strategy
Basic Training: Stock Repair Strategy Review
- Have a downturn in your account? Options can help make that money back.
- When do you use this?
- How does this differ from just holding the stock outright?
- Is there a better alternative to doubling down?
Mail Call: Tell us what you want to know.
- Question from Nick - Can you explain the difference between a front spread and a back spread? Thank for the program. It has a regular spot on my podcast playlist.
- Question from Avalon 360 - I have heard a lot of talk about covered calls. They are in interesting income trade, but they seem to be leaving money on the table - namely the put. Why does no one talk about covered straddles? After all, if you are comfortable selling the vol or premium on one strike you should be comfortable selling both and collecting twice the income?
Oct 03 2013
Rank #15: Options Bootcamp 23: Straddles
Basic Training: Getting to know the fundamentals
- What is a Straddle? Why would you want to use it?
- Straddle pros and cons.
- Iron Butterflies and Iron Condors are straddles and strangles with protection.
- Gamma scalping is the only way to really make long straddles profitable over the long run.
- Exiting straddle positions is difficult to do effectively. Using straddles pre-earnings
- Scammers love to pitch straddles, saying "Make money in any market condition." Be careful.
Mail Call: Even bootcampers get mail privileges.
- Question from Alan Utchins, Baltimore, MD - I read with great interest the recent article about options trading in the New York Times. The article seemed to contradict everything you've discussed on this fine program. They highlighted several studies that they claimed prove that most options traders lose money. What is your response to this? Is this essentially a hit piece on the options market or does this author have some valid points?
- Question from Optrader - What books would you recommend about options trading (aside from Mr. Passarelli's, of course)?
Jun 11 2013
Rank #16: Options Bootcamp 6: Complex Spreads
Basic Training: Today we're going to dive into complex spreads. What are complex spreads? We're usually talking multi-leg spreads. Calendars are when you buy and sell a call/put at the same strike price, but in a different month. Diagonals, a combination of a vertical and horizontal spread, can be a proxy to a covered call. The concept of the ratio, 1-to-1 on a simple spread, but you can play with the ratio. A stock repair strategy using diagonals, ratio risk reversals and collars.
Roll Call: Mark and Dan sit down with Craig Pinkston, Senior Director of Operations at Zecco.
Mail Call: Does the Theta decay occur just at open/close or is it a gradual decay throughout the day? (Via Facebook from Jason Cruz)
Jun 19 2012
Rank #17: Options Bootcamp 13: Spreads, Part One
Basic Training: A quick review of spreads.
What are spreads? Why should we use spreads? How do the Greeks work with spreads? How do you calculate, performance, etc? Why do I want to net reduce my delta and exposure in these elements? What are some of the downsides to spreads?
Options Drills: Vertical Spreads
Verticals - What are they? Long verticals vs. Short verticals. Credit spreads vs. debit spreads. You'll experience the maximum profit when the underlying moves to or sits at the short strike of that spread. What are collared spreads?
Mail Call: It's your turn to pick on the drill instructors.
TWEET FROM PHIL S: What's the deal with options spreads? Why can't my orders get filled? How do we fix this problem?
JOHN'S CUSTOMER QUESTION: How do I know if a spread is worth doing or has some "trade" value?
Dec 28 2012
Rank #18: Options Bootcamp 46: Building a Better Hedge
Roll Call: Bringing in the Big Guns
Our guest today is Jim Bittman, Senior Instructor at The Options Institute.
- What sort of content/classes our listeners can access at The Options Institute
- What the number one options question is that he receives from students
- What is the number one options mistake and/or misperception students may have about the options market?
- What changes did he make in your recent renovation at The Options Institute, and what can our listeners expect from your new facilities?
Mail Call: Listener questions and comments
- Question from Kevin Duggan - Hi Mark, Great show! I have been listening to episodes for months but it was only recently that I saw Dan’s picture- shocking! In my mind I have always pictured Walter White, as they sound exactly alike and, you always refer to his black hat. You can imagine my surprise when I saw Dan’s pretty face and those curly brown locks. Shave that bean, Heisenberg! Re: short puts (I'm already long calls) If I am certain the stock will move higher fairly quickly, wouldn't it be best to sell the big, meaty, long term puts? If I sell a weekly for .45 and then close it at .20, where's the fun? How do you balance term and premium in naked shorts? Thanks, Kev
- Question from Josh Norell - Hello everyone, enjoy the show, I am trying to work out the details with a diagonal collar, and its adjustments. I want to buy a stock, buy an OTM put several months out, and sell weekly OTM calls against it. If the stock rises, I get called away, all is well and good, and I can just buy the stock back next week and do it again. Where I am confused is when the stock drops below my put strike. What do I do? Because of the puts lower delta, for every dollar I lose on the stock, I am gaining less than 1 dollar on the put. So do I exercise the put and lose all its extrinsic value? Do I roll it down and hope for a retracement? Do I just blast out more calls? A little help, please. Josh
- Question from INC429 - VXX or VIX options? Which is the better hedge for a broad based equity portfolio?
- Question from Buckeye -I enjoyed the discussion about the percentage of a portfolio one should devote to hedging on the last episode. I do have a question about the 1.5%-2% figure discussed on the program. If that was for a three-month put, then you are talking about 6-8% on an annualized basis. Given that most funds only return about 7% a year, will that not eat up all of the profits in your portfolio? Or am I missing something? Thanks again for this excellent program. It truly is a unique source of options education. It makes my long train ride much more bearable.
Jun 16 2014
Rank #19: Options Bootcamp 42: Legging & Protecting Gains
Basic Training: Legging and Protecting Gains
- What is legging?
- How do you leg into a vertical call spread?
- When should you leg a spread? When should you not leg a spread?
- How do you protect you gains?
- How do you lock in a gain? Buy a protective put, but watch out for the cost.
- Do I write a call ITM, OTM, or ATM? Remember, a covered call is no a defensive play.
- How do you leg into a collar? How do you create a collar plus?
- How does your strategy change during a crisis?
Mail Call: Hey Recruits, it seems you have some questions!
- Question from TelStorm: This question is for Options Boot Camp. Please do discuss when to adjust long protective put with stock. When to sell put vs. just close the position? Do you roll to a lower strike or to a put spread? Thx.
- Question from Alexander Samuels, Chicago - You would never know you guys are Chicagoans from the way you complain about the weather! But seriously, can you discuss which options tools you guys prefer for analytics and trading? Do you have certain products you use every day? Are they in the price range of a basic options trader? I trade maybe 20 times a month, mostly income trades -short puts, wheels, covered calls, etc. What should a guy like me be using?
Mar 27 2014
Rank #20: Options Bootcamp 17: Should I Buy, or Should I Sell?
Options 101: The quintessential options debate -- buy options or sell them?
- Many options professionals lean toward "when in doubt palms out."
- Simplify the options universe into two segments of risk: directional risk and volatility risk.
- The use of delta and other Greeks when deciding or analyzing when to buy or sell options.
- Short premium pros and cons
- Long premium pros and cons
Mail Call: Recruits are asking a lot of questions.
- Question from Tim Nagerty:Mark and the other drill instructors have repeatedly stressed portfolio margin on this program, but I'm somewhat confused by this concept. Can the hosts explain the benefits of PM for an options trader? I have about $70k in my trading account right now. Is it worth it for me to transfer in the extra $30k to me the $100k limit to qualify for PM? Lastly, does SogoTrade/Wang Investments offer PM for its customers? Thanks, love the show!
- Question from Allison S., Spokane, WA: I thank you all for this wonderful program. Do you have any plans to take Options Bootcamp "on the road?" I'd love to meet you all in person.
- Question from Joey Beltran: I've heard the term "backspread" a few times. Where do it come from? What does it mean? How do you use them?
Feb 26 2013