The "Daily Call" From Option Alpha

Latest Episodes:

#550 - What Pre-Market Analysis Should You Be Doing? Mar 26, 2019

Show notes

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 premarket analysis should you be doing?" This is often a question I get many, many times during the week. People are always wondering – "Kirk. What are you doing before the markets open? Do you have a ritual, a routine? What are you checking? What are you not checking? What type of premarket analysis and thought processes should we be going through?" And the reality is I don't do that much and that should come hopefully as a breath of fresh air because I think oftentimes, people can get down a rabbit hole of new stories and market-breaking coverage, all these things that [Unintelligible] talk about on TV. And so, I try to keep my morning routine very, very small, focused and minimal at best. Usually, what I do in the morning is simply track premarket futures. There's an easy way to do that. You can do it through your brokerage account. You can do it through Bloomberg or Wall Street Journal, Market Watch. I mean, any of these major sites will show you where the futures are trading. And so, the futures contracts give us potentially a little bit of an indication of where at least stocks are going to open. It doesn't mean that stocks are going to end the day there. But if the premarket futures are down, I know that potentially, there's going to be some selling, so I just mentally prepare for that. If the premarket futures are up, I know that there's going to be generally buying in the market at the open, so I mentally prepare for that. It's not necessarily where the futures are. It's just – Are they generally in an acceptable regular range? Are they down half a percent or are they down 5%? If they're down 5% in premarket trading, something major has happened and maybe something major overnight overseas that I missed and now, I'm waking up and I should figure out what's going on. Again, it's not to say that if they're down, we should do anything different or if they're up. It's just really the extremes that we're looking for.

The second thing I usually do is I just glance through headlines and I'm telling you right now, I never read any of the stories. I glance through headlines. Headlines can tell you everything you need to know about what's going on, on a surface level. "Did so and so do this? Google got fined." Okay. I don't need to read the whole story. I just know that Google got fined. "Okay. That's interesting." But what I'm looking for is just the major headlines that again, could move the market. If somebody starts a war with somebody else, that's a major headline. If the FED does something or somebody gets elected president, those are major headlines. Those are the things that I'm really looking for. I'm looking for market-moving dramatic events in both directions, good or bad. "Trump and China signed a tariff deal." Major things that can move the market, that's what I'm looking for. And it's not that these will then create a situation where I'm going to re-shift my portfolio. I just need to be prepared for a big move in advance. I don't want to come into the market with the market open and then see this big move and say, "Well, what happened? What was the cause of this?" Rather, know generally what the headline is that drove the market in either direction. And from there, I really then turn myself off from it. I usually check all these things in the morning when I get up. Have some coffee, go through Option Alpha emails, but after that, I disconnect from the markets in general. I don't watch any news, I don't read any newspapers, I don't do any of that stuff and I simply just wait until the market opens, come in maybe 15, 20 minutes after that and start monitoring positions and going through my daily routine when the markets are open. As far as premarket analysis stuff, it's actually pretty simple. I think if you're building out a systematic portfolio that's based on odds and probabilities, then you realize that a lot of that market stuff is just to understand more so than to be reactionary. And so, I feel like a lot of people, they read a lot of these headlines and then they get reactionary and they immediately do something on the market open and then stocks reverse and a new, new story comes out and they end up digging themselves deeper into a hole. My thought process is I just want to understand generally what's going on and just be aware of big moves if big moves are coming, so that I can prepare myself appropriately. Hopefully this helps out. As always, if you have any questions, let me know and until next time, happy trading.

#549 - What Are Junk Bonds? Mar 25, 2019

Show notes

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 are junk bonds?" In the world of bond investing, there is a rating scale for the value or the security of the underlying bond that you might be interested in. And so, we typically look at these rating agencies, though you can always take it with a grain of salt because there's a lot of corruption in rating agencies during the 2007, 2008 market collapse, but many of the rating agencies I think have probably cleaned up themselves just a little bit, but they offer these ratings for different bonds that are being issued in the market and the ratings are just a way for investors to look at potentially, the amount of risk or return or fees that are associated with every bond that gets issued. If you're starting to invest and you hear the term "investment grade" or "junk bonds" or "midgrade bonds", this is what we're talking about. It's this rating scale. You've got Moody's and S&P and Fitch and all these other ones and most of the rating scales are about the same and they generally go from a grade level rating scale of say a D, a C, a B, double Bs, triple Bs, As, double As, triple As, etcetera. Obviously, the higher investment-grade bonds are the triple A type bonds and these triple A type bonds have the lowest risk, but they also carry the lowest returns and potentially, the lowest fees. They consider them investment-grade because typically, anybody can trade them and there's a very low likelihood or almost no likelihood of losing your entire principal balance. You could have some fluctuation, but to lose your entire principal is very unlikely to happen.

Investment-grade, as a general rule, basically encompasses anything triple B and above. Anything that's triple B, A, double A or triple A ends up being grouped into this category of so-called investment-grade and that means institutions and endowments and things like that can end up trading these. It's only when you start getting into these lower grade levels, the double Bs, the single Bs, triple Cs and Ds that we group these into what are called junk bonds. I don't think this is a bad way to group them because I think it's highly speculative just calling them junk bonds. It gives them a bad connotation right off the bat, but that's what they are. They're junk bonds. They're basically bonds that have much higher risk and as a result, could offer potentially much higher returns with higher additional fees. Does this mean that you should avoid trading these? No. I think it's a risk-adjusted way to look at a position. If you're willing to take potentially a little bit higher risk in exchange for maybe a higher return, then maybe adding some junk bonds to your portfolio of bond trading or whatever you're trading in is potentially good. Sometimes what we've seen is people like to do a lot of investment-grade bonds and then they sprinkle in a couple of junk bonds to improve returns. The idea here is that you just have to understand that junk bonds carry higher returns, but also have dramatically higher risk and so, as a result, you just have to be careful and cautious about how you invest in trading them. I would say that most people listening to this podcast right now have no idea if they're invested in junk bonds or not and so, I would encourage you, if you have any type of investment, mutual funds, any type of ETF portfolio, anything that your financial planner or your employer has put you in, check and see what type of bond portfolio they're putting you into and what those bonds are holding because many times, you're probably holding some sort of junk bond or something close to a junk bond already and again, it's just a way to understand a little bit more about how you're structured and where your potential risk could be. I don't think that junk bonds are inherently bad. I think you just have to understand them as always with any investment vehicle. Hopefully this helps out. As always, if you have any questions, let me know and until next time, happy trading.

#548 - How To Use An Insider Trading Report Mar 24, 2019

Show notes

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 how to use an insider trading report. We're not talking about the illegal version of insider trading reports which is really bad, where you can go to jail if you're distributing insider information, but we're talking about the insider trading information that we can garner from SEC form number four and this is basically a form that many people who are insiders or have a significant equity stake in different publicly traded companies have to file any of their distributions, sales, options exercise, purchase, any of that stuff, they have to file with the SEC. And so, it's really cool because what you can actually see is you can see what insiders in the company are doing. In particular, I like to glance at this if I'm ever invested in a stock or if I'm ever looking at a particular stock. I would definitely be interested in seeing what insiders are doing. Are the CEO and the chairman and senior vice presidents, are they buying stock on a reoccurring basis or are they starting to dump stock for some reason? Now, in many cases, there could be ulterior motives to people doing this. Somebody might get their compensation through stock. They might sell stock, but that doesn't mean that they have a negative bias or bearish bias on their underlying company. They just need to sell some stock to get payments, to make the bills and that could be potentially the case. I think it's tough to always say that if somebody's buying, that that means that they're bullish and if somebody's selling, that means that they're super bearish and they think things are going to go down. You have to look at it potentially with options exercises if you start going down this rabbit hole.

One place that I think is really a great place to look at these filings in one simple place (and it's totally free, it's open and available to everybody) is through Finviz, finviz.com and they have this tab called "insider" which basically lists all the most recent insider trading activity for many of the publicly traded companies, especially the large companies. What I can see right now, actually just going to Finviz, is that yesterday, the CEO of Netflix actually exercised an option and sold then 52,000 shares of stock. That value was about $19 million, so I don't know if that was his quarterly or monthly payment for his job as CEO, but in any case, he did end up exercising his option position and selling 52,000 shares of stock which is again, interesting because if this becomes a pattern, if you're somebody who's interested in Netflix and you start following what insiders are doing in Netflix and you start to see a pattern of people at high levels, particularly the CEO start dumping a lot of their shares and not repurchasing shares later on, that might lead you to believe that they think that Netflix is overvalued or potentially fairly valued in the market. Again, I think you have to take all this with a grain of salt. I don't think there's any clear definable edge. I think it's just another tool in your toolbox when you start going down the path of analyzing securities or stocks that you are either forced to be invested in or have to invest in for some reason or if you can't trade options and you have to trade stocks, this is something I would definitely take a look at if you have a chance. Hopefully this helps out. As always, if you have any questions, let me know and until next time, happy trading.

#547 - The Ultimate "Quick" Guide To Margin Buying Mar 23, 2019

Show notes

Hey everyone. This is Kirk here again from Option Alpha and welcome back to the daily call. Today, we're going to be going through our ultimate quick guide to margin buying. When we talk about margin buying, we're specifically referring to buying stocks on margin with your brokers and obviously, this requires a margin account to do this. You can't do this in an IRA or a retirement account. But all margin buying is and it should really be renamed as just borrowing with a loan to purchase stocks and it's all it is. You are actually using a loan to thereby, increase the capacity in which you have to purchase stocks. Now, obviously, this comes at a cost and so, margin rates can be pretty high in some cases for many brokers, but brokers do allow you to purchase stock by borrowing funds from the brokerage to increase your trading capacity. For example, if you have a $10,000 account, you could purchase obviously $10,000 worth of stock because you have $10,000 in cash, but in many cases, the broker will give you basically a 1X value for margin buying on top of your $10,000 which means that you have an additional $10,000 of margin buying power that you could use up. If you have $10,000 and you purchase a stock and use up all of your $10,000 and you want to purchase more of that stock because you're really convinced that it could go higher, you could then borrow an additional $10,000 on margin, so $20,000 now totally invested in the market, hoping that the stock obviously generates a high enough return to both pay the margin cost that the broker is charging you and just your capital cost, your asset cost from the stock that you're holding or the cash that you're holding in your account.

Again, this works in two ways in the sense that leverage can help and hurt. When you use margin and you buy on margin, you obviously increase the capacity to trade and that can enhance returns, but it can work in the opposite direction where the stock starts to go down in value and you need to start redeploying more and more capital through margin calls or through investments back into your brokerage account to keep your buying power intact and those margin balances at reasonable levels for different brokers. Just be careful as you're starting to venture out into the world of stock trading and stock buying because margin is something that you can use, but I would say you should be highly cautious of how you use it, when you use it or if you use it at all. I think you can do much better obviously using an option selling or options trading strategy that replicates stock with a fraction of the investment, but if you are going to go out and you are going to start using margin, just make sure you understand the risk on both sides. Hopefully this helps out. As always, if you have any questions, let me know and until next time, happy trading.

#546 - What Is A Breakout When Trading Stocks? Mar 22, 2019

Show notes

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 breakout when trading stocks?" A breakout is just simply on a stock chart, where it looks like the stock is now moving into a new territory, a new level (if you will) and it's starting to move there quickly. And so, typically, what people look for is they look for a trigger or a confirmation that something has changed dramatically in the stock price. Now, these breakouts can occur in either direction. You could have a bullish breakout where a stock has a large move higher or you could have a bearish breakout where a stock has a large move lower. But visually on the stock chart and specifically, if you use candlestick charts, you can see this more often than not. You'll see a string of days where the stock is generally range bound and you have these small candles and small wicks and then you have this one massive day that just engulfs or encompasses many other days and we have this breakout type move.

But the real question is – "What really potentially defines a breakout when you're looking at a stock chart?" And so, in my opinion, I think it's got to be somewhere around a 3% move. Now, this could be different for different stocks, obviously and it doesn't have to be a hard line in the sand, but my opinion is a breakout type move has to be something significant. A 1% move on a daily stock chart is not actually that significant. It's actually within the statistical realm of just randomness. But a 2%, a 3% and even a 4% or a 5% move, now you start to get into the areas where the stock is making a huge dramatic change and shift that could potentially lead to different pricing structures in the future. If I were you and if you're looking for a breakout and if a breakout is part of your confirmations or signals, then you'd probably look for something at least around a 3% move in the underlying stock. Hopefully this helps out. As always, if you have any questions, let me know and until next time, happy trading.

#545 - Best Place to Invest Never Changes Mar 21, 2019

Show notes

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 the best place to invest never changes. This topic is something that's I'd say near and dear to my heart because I love learning about different investment vehicles. I'm a student of finance, history of finance and investment and markets and cycles and what I've learned over time and definitely over my experience not only trading, but also investing in private companies, real estate, stocks, everything, IPOs, I've learned that one thing really never changes when it comes to investing and it comes down to finding a place where you can get the highest risk-adjusted returns. And so, this is really a key because it's not just about getting the highest returns. I think many people would look at investing and say, "The best place to invest is where you can get the highest return." But it's not just about return. It's about the highest risk-adjusted return, factoring in components like potential drawdown and probability of success, sequencing risk, etcetera.

I want to give you an example which hopefully proves this point, but let's say you have two widget companies that you could potentially invest in and each widget company, we know for sure exactly what they're going to make at the end of the year. One widget company, let's say widget company A is going to generate a return of 10% this year if you were to invest in them and widget B company is going to generate a return of 9% if you were to invest in them. And so, on the outside, on the surface level, it looks like widget company A is the better investment, but it's only when we start digging deeper and we start learning about the risks involved in each of the different widget companies that we really truly find out which company has the better risk-adjusted returns. Widget company A, although it could potentially generate 10%, has a 20% chance of losing 50% of your investment. Widget company B has just a 5% chance of losing 20% of your investment, so dramatically different spectrum when it comes to the risk associated with each of these two different widget companies. And so, when you look at this again on the surface level, it might seem like widget company A that generates 10% is better than widget company B which generates 9%, but when you readjust the returns for how much risk you're actually taking on, it looks like widget company B is still the better choice over widget company A. Slightly lower returns, but dramatically less risk as a result. And so, when you're looking for places to invest your money, you have to look at risk-adjusted returns.

When it comes to the world of options trading, a lot of people do not drag out the probabilities and the statistical edge of options trading to many, many trades or many, many years. And so, the problem is that when they look at an options trade, they think to themselves, "Well, this looks like I'm picking up pennies in front of a steam roller. I'm trading these option selling strategies and I'm collecting $200, $300, but I could have this massive drawdown." And that's just not the case. When you actually drag out a lot of these mathematical formulas and expectancy models for many option selling strategies, (not all, but many option selling strategies) you end up finding that they generate positive expected returns which are higher than traditional stocks or indexes with dramatically less risk. And so, for me, that's why I love options trading because of the flexibility and the fact that we can still get higher risk-adjusted returns in the long run. And so, if you're investing or if you're looking to invest anywhere… And it doesn't even matter if it's options trading, the stock market. If could be real estate, a business, anything. Please continue to look for the highest risk-adjusted returns. Don't just go after the highest returning investment, but look at the investment's risk and see which one has the highest return per unit of risk that you're accepting. Hopefully this helps out. As always, if you have any questions, let me know and until next time, happy trading.

#544 - Best Stocks to Buy Mar 20, 2019

Show notes

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 the best stocks to buy. Oftentimes, people always ask me or they're searching online and I see these results pop into the Option Alpha search bar, but everyone's looking for the best stocks to buy. And so, I wanted to offer at least my opinion when it comes to actually purchasing stock. I think the first thing I would say is that if you are going to purchase stock, it's okay to have really big convictions, but do it in small doses. Oftentimes, I think people get really wrapped up in a particular company or a particular sector and they're very bullish, they're very optimistic on them and that's okay. That's a big conviction. But just do it in small doses. Don't over-allocate. As always, as a general rule of thumb, don't over-allocate into any one particular sector or company or industry just in case the bad things that could happen, happen to that particular company or sector or industry. And so, I'm okay having people buy a stock because they love the company or they love the leadership or they love the space. That's fine. Just do it in small doses.

The second thing is if you are going to start buying stock on a more regular basis, I think you have to buy stocks that have value. And so, value can be measured in so many different ways. One of the ways you could do it is through cape ratios. You could also do it, just the regular PE ratios. But whatever metric you end up using, you want to buy stocks that have intrinsic value, that have some definable edge and value. I'm not a fan of buying stocks that have massively negative PE ratios which you see all the time with large growth, high tech companies that IPO. They have these massive expectations and they have to hit these massive expectations for anybody to potentially make money in the stock. I'm not all for that. I would rather see somebody… If you are going to buy stock, buy something with some sort of intrinsic value.

And then the third thing is if you are looking to buy a stock, why not use options to replicate a stock position without the capital requirement? My biggest hang up usually on stock purchases is that stock is inefficient. Any more, it's not efficient in my opinion to go out and spend the capital that would be required to buy 100 shares of stock. I think it's much more capital efficient and a smarter move to use an option strategy to replicate a stock position with a fraction of the capital outlay. We've talked about this a number of times on our weekly podcast inside of our courses and our training tracks, but it allows you then with this additional freed up capital to diversify into other areas or just frankly just leave a little bit of cash left over in case the worst happens. Again, my biggest hang up with stocks is not that I think stocks are terrible. I just think that stocks are inefficient compared to options. Options offer a much more attractive and much more efficient use of capital compared to stock. Hopefully this helps out. As always, if you have any questions, let me know and until next time, happy trading.

#543 - Trading Options In A Roth IRA The Right Way Mar 19, 2019

Show notes

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 how you can get started trading options in a Roth IRA the right way. A Roth IRA is just simply a retirement account which you've already pre-paid your taxes. And so, you basically cleared the tax hurdle pretty early in the process. And this is why I really like Roth IRAs, is that you pay taxes, you then contribute what's left over after taxes to this IRA account and as a result, now you have a vehicle that grows tax-free and the distributions later on are tax-free as well. When you get started trading options in your IRA, the first thing I think you have to understand is that you have to play the long-term math and the reality is that you're forced to do this anyway. The beautiful thing about trading options in an IRA account is that you might have to be trading for 20 years or 30 years or 40 years before you actually come to a point at which you can start taking distributions and that means you have to play the long-term math and you have to play the long game in these accounts and that actually works to your advantage. As an options trader, we should be doing this naturally, but oftentimes, people who are trading in margin accounts or cash accounts are trying to make a quick buck and end up doing things that are not beneficial to their portfolio long-term.

Number two is – Don't be afraid to trade more often. One of the beautiful things about trading in an IRA account is obviously, the ability to skip or to miss any short-term capital gains tax and this is something that a lot of people fear when trading in a margin or cash account. They don't want to trade too often or they don't want to exit positions too early because they fear these short-term capital gains. But in an IRA account, especially in a Roth account, you've already paid taxes or everything you do grows tax-free. And so, you can trade a little bit more often, you can be potentially a little bit more aggressive with your trading because again, it's in a tax-free growth scenario, so you can scale up the number of contracts that you trade or the frequency in which you trade as well. And number three is – IRA's are not a handicap. I see this all the time, but people always assume wrongly that IRA accounts give them some sort of handicap because they're limited in the types of strategies they can trade. The reality is that you're only limited in one type of strategy to trade and that's an undefined risk trade. Anything that's undefined risk which would be a short call, a short put, short straddles, short strangles, you can't trade in an IRA. Those are easily converted into their risk defined counterparts by just simply creating spreads. You take a short straddle and you create an iron butterfly. You take a short strangle and you create an iron condor. And so, it's not a handicap. It's not something that should limit your ability to trade and in some cases, trade aggressively when implied volatility is high. Hopefully this helps out. As always, if you have any questions, let me know and until next time, happy trading.

#542 - Which Option Strategy To Use And Why Mar 18, 2019

Show notes

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 which option strategy to use and why. I think one of the biggest challenges for most traders is the question of – Which option strategy do I use? And while many people would default to using the exact same strategy in every environment, I think that what you have to do is you have to choose the strategies that work best in whatever environment you are currently in and that sometimes can mean tweaking an existing strategy or using a different strategy altogether. What I see people doing more often than not is they use the exact same strategy no matter how far they are from expiration. For example, they would sell a 30 Delta strangle and it doesn't matter if implied volatility is low, it doesn't matter if implied volatility is high, it doesn't matter if they're 30 days from expiration or two days from expiration, they're selling a 30 Delta strangle. And while that might work over the long run, the question is – Is it the most optimal strategy? Are you using the most effective strategy for that particular environment?

The analogy I always use is weather. If you're going outside and it's raining outside, you can hold up your jacket over your head and that would probably get the job done, but it's not the most effective tool. You want to use an umbrella to protect yourself from the rain as opposed to just holding your jacket above your head. If you go outside and it's really, really sunny out, yes, you could wear a hat and that might protect your eyes, but a hat and sunglasses are going to work a little bit better. It's trying to figure out what strategy is the most effective one in the current environment that you're in. This is exactly why we started doing a lot of this research over the last two and three years and built technology and software to help you solve this problem. We wanted to know and I personally wanted to know when I was faced with the market environment what is the best strategy in this environment. We built our toolbox software to kind of help deliver that answer to you. It shows you all the back-tested data for that particular market environment and it ranks all the strategies and tells you – "Hey. This is the exact strategy that you want to start focusing on for this environment. 60 days from expiration and high implied volatility or if you're 30 days to expiration and implied volatility is low, these are the top 10 strategies you should be using."

I think as an options trader, you should be still using core option selling strategies, but you should mold and kind of evolve your strategy to fit the market environment that you're in and that doesn't mean the difference between selling and buying. It just means maybe you adjust the Deltas slightly if you're closer to expiration than not. Maybe you sell option contracts a little bit further away if you're further out from expiration or not. But it's trying to find this optimal set of indicators that work that we can then in the future, program into our upcoming auto-trading bots and our upcoming technology to make the right decisions in the right environment. Hopefully this helps answer the question. I guess there's no unicorn option strategy that works best in every environment. Every environment is a little bit different. It's like the weather. When you go outside and the weather is completely different here versus California versus Texas versus Canada, you need to have the right clothing to function in that environment and just like the markets, when the markets are a little bit different, you need to adapt and evolve your strategy just slightly to function correctly and to make the most of that environment with the optimal strategy. Hopefully this helps out. As always, if you have any questions, let me know and until next time, happy trading.

#541 - Top 3 Benefits of Trading Mar 17, 2019

Show notes

Hey everyone. This is Kirk here again from Option Alpha and welcome back to the daily call. Today, I want to cover my top three benefits of trading. Now, when I talk about these three things and I'm talking about trading, I mean broadly speaking. This includes all types of trading. Whether you want to trade stocks, whether you want to trade options or futures or Forex, I think any trading capacity has these three things that become to me, what are some of the most critical benefits of trading. The first is agility. Agility is a lot of things wrapped up in one. It's the speed and the flexibility to move between different products very quickly. The ability in a trading environment to stop trading oil and immediately within two minutes, start trading natural gas or gold or silver or some index or tech company is unprecedented. There's no other place in the world as an investor where you can quickly move such a large chunk of capital and money from one industry sector or security to another in literally the snap of a finger. And so, that speed and flexibility, that agility to quickly move from one thing to another I think is one of the top benefits that trading has. If you think about probably the opposite end of the spectrum which would be real estate or businesses, commercial real estate property, if you wanted to move out of those securities or sell your position, it's going to take months or even years in some cases to liquidate and move that position. And so, the speed and the agility aspect of being able to quickly again, unwind something and move to a completely different industry or sector I think is again, just unprecedented. You don't find it anywhere else in the business or investing world.

Number two is diversification. Piggybacking right on top of the ability for traders to have some speed and flexibility and agility, the ability for a trader to diversify their portfolio quickly across a very broad range of investing sectors and industries is again, something that is only found in trading. If I was a real estate investor and I wanted to diversify my portfolio, I'd have to buy securities all over the place. I have to buy property in the Southeast and the Midwest and the Northeast. I might have to buy different types of properties and even if I did that, I don't know if I would have a lot of diversity because I'd still be tied to the real estate market or to a certain region of real estate. But as a trader, I can quickly trade anything around the world in the snap of a finger. I can trade crude oil, I can trade gold and silver, I can trade Russia or Brazil or the US or China or Japan, I can trade currencies, I can trade anything I want in the snap of a finger and moreover I guess, I could do all of those different global asset classes and global sectors in a single expiration month. I can trade Chinese stock markets and the euro and the US stock market all wrapped up in one single expiration month. If something happens in the US, but it doesn't affect China or it doesn't affect the euro, then I generally have a much more diversified portfolio.

The third top trading benefit for me is scale. Again, very much like everything that we've discussed, the ability to quickly scale in options trading is something that you don't find anywhere else in the investing world and this is true not only in options trading, but also in stocks and futures, Forex, etcetera. All trading kind of has the same characteristic and that's the ability to quickly scale. As soon as I make $10 for example, I can quickly redeploy that $10 into another trading vehicle or another option contract, a stock if you're trading stock, a futures or Forex contract. You can quickly redeploy capital that you make again, overnight. I mean, literally the next day, you can redeploy capital. Try doing that with real estate. You buy a piece of real estate and you make $1,000 of income, you can't go out and take $1,000 and buy another piece of real estate. It's probably going to require a lot more savings, a lot more accumulation of capital before you can redeploy and scale capital up. And so, for that reason again, trading gives us the ability to quickly move and scale higher and not only just quickly move and scale higher, but there's also a huge pool of investing capital out there. Again, I use real estate and businesses. If you own a small business and you wanted to buy every other little small business around, I mean, at some point, you're going to reach a threshold of just saturating your market or saturating your area and you're not going to be able to scale the same way you thought you would before. But if you're trading and you have $100 and you want to scale to $1,000 or $10,000, $100,000, $1 million, $100 million, $1 billion, you can quickly scale up that rank pretty fast.

Again, I think when you look at different asset vehicles and how the benefits and drawbacks kind of work, I think some of these things that we talked about, the agility, the diversification, the scale become really important as you continue down this path. Especially if you're a new trader or you've just been starting the last couple of years, these are critical, critical benefits that you can't find anywhere else. And so, for that reason, hopefully you guys stay engaged in trading and hopefully you are committed to understanding it and learning it and kind of mastering the craft. Hopefully this helps out. As always, if you have any questions, let me know and until next time, happy trading.

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The “Daily Call” From Option Alpha

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