Options Boot Camp

Latest Episodes:

Options Bootcamp 16: Avoid Earnings Pitfalls with Options Feb 06, 2013

Show notes

Options Drills: How to play earnings through options plays. There are two basic approaches to earnings trading: long premium and short premium.

Long Premium - PROS: Advantageous because you essentially receive free or dramatically reduced gamma with little decay in the weeks leading up to earnings. CONS: All of that decay comes out, and more, after the announcement. Also, much of the movement in the underlying occurs after-hours and is unavailable to options traders.
Short Premium - PROS: Higher probability of success, need a substantial move post-earnings to lose money. CONS: Doesn't collect decay until earnings event, potentially losses can be catastrophic can make it hard to sleep at night.
How to analyze Greeks during earnings week.
Different strategies to employ during earnings: Calendars, Straddles, Strangles & Butterflies

Mail Call: Our drill Sergeants show their softer side.

Question from Stock Doctor: Why can't I trade options after hours? I'm missing most of the stock movement if I wait until the next open.
Question from Timothy Stephens, Tulsa, OK: If I buy a 3-month ATM calendar spread prior to earnings, am I correct in saying that I'm net long vega and short gamma? If so, what type of earnings announcement would benefit me the most - an as-expected announcement where the stock stays at the ATM strike for my short gamma or a wildly unexpected announcement where the stock moves dramatically for my long vega? Which risk metric is king in the time spread equation - gamma or vega? Thank you very much for you insight and for producing this informative program.
Question from Rich T: Does Sogo offer reduced commissions to close out short options trading for a nickel or less?

Options Bootcamp 15: Secrets of Exercise and Assignment Jan 23, 2013

Show notes

Basic Training: Exercise, Assignment, and Settlement.

There are two styles of options you will encounter -- American and European style. What's the process when your exercises and assignments are determined? When do those contracts settle? How do I determine if my options are going to be exercised or assigned against me? What is pin risk? What is a dividend trade?

Mail Bag: Even options recruits get mail privileges. Send those letters in.

Email question from Alan P - Michigan: You guys have talked about the difficulties of executing multi-leg spreads in the past. What should I, as a retail options trader, be aware of when executing my spreads to guarantee better execution?
Tweet from Riley: Are there any plans to speed up exercise and settlement in the options market?
Facebook question from Dan Thomas: Isn't it a good thing for my call that aren't in the money to be exercised against me? Doesn't that mean that I'm locking in a profit by buying or selling stock at a more favorable price then where it's currently trading?

Options Bootcamp 14: Advanced Spreads Jan 10, 2013

Show notes

Basic Training: Spreads with wings.

What is a butterfly? Iron butterfly? What is a condor? Iron condor?

Mail Call: Even bootcampers get mail privileges

Email from Alan Rick: What makes a spread "iron?" What is the difference between an iron butterfly and a regular butterfly, iron condor, etc. Thanks and please keep up the show; I'm learning a ton!
Email from Alan Charter: If I think a stock's volatility is elevated going into earnings, should I write an iron condor or an iron butterfly? Which is the better trade?
Tweet from Mr. Dockerson: AAPL! AAPL! AAPL! What are your favorite Apple spreads right now?

Options Bootcamp 13: Spreads, Part One Dec 28, 2012

Show notes

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?

Options Bootcamp 12: Weekly Options Dec 05, 2012

Show notes

Options Bootcamp 12: Weekly Options

Basic Training: What are weekly options? How do the Greeks differ in the weeklies? How are the weeklies traded?

Option Drills: Selling strategies for weekly options. Diagonal and vertical spreads, straddles, ratios, etc. What are some strategies for selling weeklies around earnings?

Mail Call: Taking on your questions.

Tweet from @JJacks: Does Sogo trade offer weekly options? What approval level do I need to trade them?
Email from Theodore in Houston, TX: How long does it really take to learn options and become a good options trader?
Email from Alex S. in Tusla, OK: My financial advisor doesn't know anything about options and doesn't seem inclined to learn. Should I fire him? If so, where do I find an advisor who uses options?

Options Bootcamp 11: Busting Myths and Taking Names Nov 28, 2012

Show notes

Basic Training: Busting Options Myths:

1) Market makers know where the stops are, therefore market makers who take the other side of trades are taking advantage of retail customers.

2) The only way to trade profitably is to be a dark side short premium seller. Plus, credit spreads are better than debit spreads.

3) I only need to be good at one trading strategy.

4) Option trades and spreads in particular are difficult to execute and should only be handled by professionals with years of experience.

5) Options are too risky for the retail customers.

Mail Call: Our drill instructors answer your questions.

Email From Alan Donson: Your format is excellent. Please add more pure options trade/content and feature John Critchley. Your intense focus on real options information with a view to options profits, not tedious theory is highly appreciated.

TWEET FROM @ReallyG: You suggested put buy as an ASET to limit buy order? Certainly not in the gap below strike scenario your guests were discussing.

Options Bootcamp 10: Common Trading Mistakes Nov 08, 2012

Show notes

Options Bootcamp 10: Common Trading MistakesBasic Training: Your COs cover the most common options trading mistakes:

Writing long-term options for income.
Using market orders in illiquid options.
Not closing options offered at a nickel.
Buying worthless OTM "lottery ticket" options.
Selling when implied volatility is high buying when it's low.
Over-adjusting income trades.
Believing that sell stops are better than wasting premium on buying downside puts for protection.

Mail Call: Answering your options questions

Via email from John S. - Which is the better method of portfolio protection, a put option or a stop order?Via email from Phil K. - I’m very interested in weekly options. They appear to be a very popular product right now. Can you do a show about weekly options for those of us who are thinking about diving into these products? Perhaps common mistakes, misconceptions, myths, errors, etc. Thanks a million. I just discovered the show and I've already learned a ton. Tell John I'm on the SogoTrade site right now and about to pull the trigger.Via Twitter from @Exxav: What do you mean by implied volatility? What is the difference between implied vol and historical vol?

Options Boot Camp 9: Busting Options Myths Oct 16, 2012

Show notes

Basic Training: We're going to bust many of the myth and misconceptions the permeate through the options market, particularly to those new to retail options.

Somewhere between 75-80% (or even more) of options expire worthless every month, therefore you should be an options buyer.
Selling options is a risk-less, or near risk-less, endeavor.
All out of the money options have higher volatility than at the money or in the money options.
Calls go lower, stock goes higher - How could this possible be?

Mail Call: Listener questions and comments

Tweet from @UncleJessie - I love Bootcamp, it's transformed me into an options trader. I'm also new to Sogo trade, can John explain why his platform is the best for options traders - commissions aside.
Facebook question from Tim Stevens - As a new options trader, should I focus my efforts on maximizing delta or theta? I primarily buy calls/verticals.
Tweet from @Eddie66 - Hey drill instructors, I love the Bootcamp! I'm looking to hedge my portfolio - Spy puts or VIX calls?
Tweet from @Thessa - Sogo thanks fro bringing back Bootcamp, it's my favorite show. Do you offer portfolio margining over there at Sogo?
Tweet from @AstroX - What is your favorite options book for beginning/intermediate options traders?

Options Bootcamp 8: It's All Greek to Me Oct 02, 2012

Show notes

Options Bootcamp 8: It's All Greek to Me

Basic Training: Time to revisit the Greeks:

Delta - The chief Greek
Gamma - The rate of change of Delta, as the underlying stock changes, but sometimes overwhelming to beginners.
Theta - Time decay. The rate of change of an option given a change in the time to expiration.
Vega - The king of the Greeks. The rate of change of an option price, as a result of change in implied volatility.

What is the difference between a retail and professional options trader?

Mail Call: Reaching out for a bootcamp lifeline.

Tweet from Tex05: Mark, why do you always say that retail options traders trade Delta and professionals trade Vega?
Email question from Evan - Atlanta, GA: Can you guys explain the importance of dividends to an options trader? That seems particularly important given the recent snafu over SPY dividends. Why are dividends important to options traders and how should it affect my options trading?
Facebook question from Mike Debrasse: I'm hearing a lot about this being a "low volatility environment." Apparently, that makes it difficult for options traders. Why is that? Why does options volume drop so dramatically when volatility goes down? Should I wait to trade options before volatility/vega goes up? Thanks for your help.

Options Bootcamp Episode 7: Back to Basics Sep 12, 2012

Show notes

Roll Call: Mark and Dan introduce the newest Drill Instructor, John Critchley from SogoTrade. Find out more about SogoTrade, from its philosophy to its commission structure.

Basic Training: What you need to know

Why should someone trade options?
What's in it for different levels of traders?
Will you be able to drive a Maserati tomorrow?
How options work: the honest breakdown.
Believe it or not, options can actually reduce risk.
The negative connotation of derivatives.
The concept of the multiplier.
Why trade options?

Mail Call: Giving listeners a chance to steer the discussion.

Can you exercise options early?
What happens when options are exercised?
How options settlement works.
When is premium credited to an account?

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