The "daily Call" From Option Alpha: Options Trading | Stock Options | Stock Trading | Trading Online

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 trading big stock moves with options the right way. This really comes down to what we've seen just in the last couple of months. It could be individual ticker symbols like SLV or GDX or TLT. They’ve had really big moves in the last couple of months. And what people tend to default to do when they expect a big move in a stock is they tend to want to buy options and they think that buying options leads to potentially the biggest payout because they have limited risk and all this upside potential. What they fail to remember is that in all cases long-term, the buying power that options provides prices in the expected move that should happen in the stock. And so, what we see is that when stocks are about to make a big move or have already made a big move, all of that stuff is priced in and long-term, stocks underperform their expectation. Now, this doesn't mean that you couldn’t find y

Hey everyone. This is Kirk here again from Option Alpha and welcome back to the daily call. Today, we’re finishing up our little miniseries here with options trading golden rule number 11 which is non-emotional expected outcomes. Hopefully you guys have enjoyed this little miniseries. If you are new to Option Alpha and you want to go back and re-listen to it again, I highly encourage you to do so. If you thought it was helpful, please let me know. Share it with somebody out there online. Share it with a friend, a family member, a coworker, somebody that you trade with, a trading buddy. Help spread the word about what we’re trying to do here at Option Alpha. Today's rule is the most important one and I think the most important one because it ties in everything that we’ve talked about from position-sizing, to being a net seller of options, to understanding probabilities, not using stop-losses. All of these things that we have talked about in the previous 10 rules now kind of come to this peak, to this apex here

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 options trading golden rule number 10, adjust to reduce risk. This is one that I’ve had as kind of a rule for myself here for the last five or six years and it’s this idea that when we make adjustments, we need to adjust to reduce risk and increase the probability of saving the position or losing less money. And this is really important because I see a lot of people are fearful of taking a loss. I don't care if I take a loss on a trade. I know that losses are part of the game. It’s part of what I expect to happen every single month. I’m not going to be 100% profitable on every single trade. But what I should do as an active trader is I should look to take trades that are going to lose money and figure out ways to lose less money and this means that sometimes we adjust positions and we roll positions in order to give ourselves more time and more premium to reduce risk. But I will n

Hey everyone. This is Kirk here again at Option Alpha and welcome back to the daily call. Today, we’re going to be talking about options trading golden rule number nine which is reduce commissions and fees. I think generally, a lot of people when they get started in options trading and open up a brokerage account are surprised that you could actually go in and negotiate with your broker or find brokers that offer cheaper fees. Now, I publicly said a little while ago that I think all brokers at some point will be going towards a zero-commission, zero-fee structure. I think it’s the inevitable trajectory of this entire market. And although we are not there yet, I think many brokers are starting to gravitate towards no commissions and no fees for trading. And so, this is good for consumers and good for traders alike because commissions and fees are a cost of doing business. Now, I tell people all the time, even though commissions and fees might seem like they hurt, it’s actually just a cost of doing business and

Hey everyone. This is Kirk here again at Option Alpha and welcome back to the daily call. Today, we’re going to be talking about options trading golden rule number eight which is ample cash reserve. This one again, is something that not a lot of people really understand and even if you understand it, you probably don't practice it and it really comes down to a simple factor of greed. A lot of people when they get started in options trading, they realize that options trading has the potential to generate money quickly for them and it's because we’re using leveraged products that are leveraged against stock. And so, it's a little bit more risky, but they see a potential trade that they put $50 in generate $100 and so, now, they want to scale up and they want to throw a bunch of cash at it, but that's the wrong approach. And so, what we suggest here is that you definitely have ample cash reserves in your account. Somewhere between 50%, 60% of your account should be in cash pretty much at all times. Now, this doe

Hey everyone. This is Kirk here again at Option Alpha and welcome back to the daily call. Today, we’re going to be talking about options trading golden rule number seven which is called opportunistic profit-taking. Opportunistic profit-taking is a little bit different style of trading and we’ve been doing this for a long time, actually before many people who are popular for talking about options trading and taking profits early actually started to come on the scene. And what we realized earlier on is that when you start taking profits early and you start being opportunistic with your trades, you actually end up reducing the volatility in your account and reducing the risk that the stock moves against you. Now, this means that sometimes you have to wait all the way until the end of expiration to take profits. Sometimes they might come early in the expiration cycle. But the reality is that rarely does holding all the way to expiration lead to the most profits. Now, what we have seen recently in our research las

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 options trading golden rule number six which is no stop losses. This one’s a little bit counterintuitive and it always seems to stir up a little bit of controversy, but the results are what the results are and the numbers speak for themselves. When we go back through and we back-test hundreds and thousands of option strategies using stop losses and not using stop losses, there’s no doubt that overall, not using a stop loss on your trade ends up generating more money. Yes, I said it. Do not use stop losses as a general course of business. What you should be doing is you should be properly position-sizing like we talked about in some of the previous golden rules, making sure that you allocate a small amount to whatever ticker symbol or sector you’re trading and then let the position on to work itself out, let the probabilities work themselves out. We know that we’re going to be chal

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 options trading golden rule number five which is that I believe you have to be a net option seller. There's no doubt that we have the most comprehensive research and database on option selling strategies and option buying strategies. In fact, when we released our profit matrix research which was arguably the most in-depth analysis of different option strategies, different variations and settings, tickers and industries, what we found is that most of the time when you are using an option selling strategy over an option buying strategy, you end up generating more money long-term. Now, this isn’t to say that option buying strategies can’t work in a vacuum. They could work in a particular month or a particular market event and I see people all the time touting these 75%, 50%, 100% returns as the baseline scenario for what you should do, but I highly doubt that they’re actually achievi

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 options trading golden rule number four which is having a balanced portfolio. As we have done over the last couple of days, we’re building on top of all these golden rules that we’ve started to develop. Number one, small positions, number two, trade count, number three, diverse tickers and now, number four is balanced portfolio. Again, this makes logical sense. If we started going through rules number one through three, the argument could’ve been made – “Okay. I can trade a bunch of small positions, I can do it a lot and I can do it in diverse tickers, but which direction do I choose? Do I always trade neutral? Do I always trade bearish? Do I always trade bullish?” And so, when you only trade in one direction or build a portfolio that is built in one direction, you dramatically increase the probability of success that a bad sequence of returns or a bad sequence of trades again, bl

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 options trading golden rule number three which is diverse tickers. Again, just building right on top of rule number one and rule number two from the last two days, our third rule here is you have to be trading a diverse set of tickers. Now, this again, is investing basics 101 in my opinion, but this idea that we should be super highly focused on a few set of tickers is absolutely nonsense. We should have a diverse set of tickers in our portfolio at all times. And I think where people maybe have missed the mark here over the last couple of years is that there's been a lot of talk about high implied volatility trading, only trading ticker symbols with high implied volatility. And while I definitely like doing that and subscribe to that methodology, what I’ve also said over the last couple of years is that we have found through our research that by adding in and by filtering for also

Hey everyone. This is Kirk here again from Option Alpha and welcome back to the daily call. Today, we’re getting into options trading golden rule number two which is high trade count. Today's rule builds on top of yesterday’s rule which is small positions. Now, we know that small positions are critically important to our success and once we understand that small positions are important, what we also have to understand is that a high trade count or high-frequency of trading is also critical to our success. Again, let's use a very simple example and use it on the broad ends of the spectrum, really high trade count possibility and a really low trade count possibility and walk through these different scenarios. Let's assume that we have small position sizes and we’re trading under 5% risk per ticker symbol, but on one end of the spectrum, we only make two trades per year. Let's say we just for whatever reason, don't have an opportunity, don't feel like we make the time to increase the trade frequency of our strat

Hey everyone. This is Kirk here again from Option Alpha and welcome back to the daily call. Today, we’re going to be starting the first of our little mini-series here at Option Alpha, getting back to basics and talking about some options trading golden rules and we’re starting off today with options trading golden rule number one which is small positions. Now, honestly, I’ve been harping on small positions for over 10 years. Before many people out there and many companies out there were talking about the importance of small positions, I knew that this was something that was critical to everyone’s success as an options trader when I first started and I’ve got blog posts and archives that show that we've been talking about this for over 10 years now. But the idea behind small positions is nothing groundbreaking. It's actually a very simple concept and the concept is that we don't know when our distribution of profits and losses are going to come. And so, when we don't know what the sequence of returns we’re goi

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 developing unwavering confidence with your options trading strategy. What do I mean by this? Well, unwavering confidence to me is confidence that no matter what market situation you get dealt, no matter what stock move you’re currently experiencing, you've got enough confidence to stick with it, to stick with the program and to see it out to the end because you know that the numbers are going to work out in your favor. This is something that I've learned over the last 10 plus years of trading, but I think over the last four or five months as the markets have become much more volatile especially towards the end of 2018, a lot of people's confidence has been shaken and they don't know if the strategies that they’re using are going to work anymore. They haven't seen market moves that take the Dow or the S&P up 5% and down 5% in the same day. And so, that can be difficult. That ca

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 stock market predictions for 2019 and why it might resemble the 1929 crash. I want to go through a chart here on today's podcast as we start off the New Year and just potentially lay the groundwork for a possible scenario of where the markets could be going in 2019. Now, as many of you guys know and if you’ve traded through the end of 2018, the markets had quite a wild ride to the end of 2018 and we saw a lot of volatility in both directions as we closed out the last year. As we start to look towards 2019, the question becomes – Where does the market go from here? And this is just my opinion on it. Obviously, we have no idea where the market goes. But my opinion on it is that I think that we are at the top of a cyclical bear market and this is interesting because we don't have one major catalyst yet that is turning over the markets. In fact, it seems to be a lot of different thing

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 New Year and our new goals for Option Alpha. As I look forward to 2019, we’ve got a couple of pretty big goals that we want to try to hit this year and a lot of it surrounds our new auto-trading platform that we’re going to be rolling out in stages here in the next coming months. But that being said, we have these six categories really of goals that we’ve kind of put together and I think that it works best when we talk about them in kind of broad categories because I think about our goals as these categories and kind of touching on each of these and a lot of this is what you're going to see in everything that we do here at Option Alpha in 2019. The first category of goals that we have is all around experience and basically just improving the overall experience that you have interacting with Option Alpha and this is on all fronts. This is through support, through social media

Hey everyone. This is Kirk here again from Option Alpha and welcome back to the daily call. Today, we’re going to be discussing Option Alpha’s core values. I think this is really important as we wrap up 2018 and start moving forward into 2019 and beyond because Option Alpha in one shape or form has been around now for almost 10 years and that's pretty crazy to believe. And so, what I wanted to do is kind of revisit some of the core values that we’ve had and that we continue to have moving forward as a team and as a community for you guys and give you guys a little bit of transparency and insight into who we are and who we want to stay or become in the future. There’s a couple of these core key values that I think will really help out and again, give you guys a little bit of clarity for our side. Number one is pure motives. This is one that's been really big for me, is that I've always wanted to have pure motives and pure transparency in what we’re trying to do. We've often talked about how Option Alpha makes

Hey everyone. This is Kirk here again from Option Alpha and welcome back to the daily call. Today, we’re going to be discussing why great parents don't give up on children who struggle to read. Now, I know you’re probably wondering to yourself what in the world does this have to do with options trading and investing, but I will link up the two topics for you guys here together in one second. In our family, my oldest child is still learning how to read and still struggling a little bit with understanding and kind of like following along with words and sight words. And so, we’ve been practicing with sight word cards and trying to have her read very simple words and try to string them together, but she's really struggling in the sense that she's giving up on it too quickly. And she tries to read a word or a couple of words and she just throws up her hands and gives up very quickly and in my opinion, I think it's our responsibility as the parent to continue to teach her how to learn to fail and how to be good abo

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 turnaround in our EWZ short straddles. And actually, what I want to do is I want to try to point you to new podcast that we have coming out very shortly which is show 151 on the weekly podcast. If you're already subscribed to the weekly podcast, you’ll get the show. If not, go ahead and subscribe to the weekly podcast from Option Alpha because we walk through in basically 45 minutes to an hour, the entire case study in EWZ. But the quick highlights here are really interesting. We started trading EWZ many, many months ago back in I think early September or even early August when we start first selling premium and short straddles in EWZ mainly around the 33 and 35 strike prices. Then we saw EWZ have a massive move up to around $42 at its peak and at that point, we just continued to use some of the basic risk adjustment and rolling techniques that we teach here at Option Alpha, r

Hey everyone. This is Kirk here again from Option Alpha and welcome back to the daily call. Today’s call, we’re going to answer the question, “Should you trade options while in college?” And I know this can be a little bit of a hot topic, but here's my honest opinion on it. I think you should absolutely start trading options in college. I think there's no reason to wait to trade options later on. In fact, I think you can deploy some very simple, very controlled risk strategies and you can start trading in college because ultimately, what is on your side or what's in your favor when you start trading earlier is just frankly, time, time to make more positions, time to let the probabilities work themselves out, time to go through many different market scenarios and increase your trade count over long periods of time, decades even. When you start trading later on, even five or 10 years later, you really kind of start cutting down your timeline and you start potentially doing things that might be a little bit more

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 dividends fulfill this core human need. I think this is actually kind of interesting because I generally talk a lot with people about what their needs are and what they think about finance. As many of you guys know, I’m insanely interested and I geek out on just the psychology behind finance and what people want to do with wealth generation and what I consistently find is that the need for income fulfills a core human need which is why dividends and dividend paying stocks are really, really popular. In fact, just recently as we were celebrating the holidays and we were sitting around with family, we got on this discussion about dividends and somebody brought up – “Oh, this dividend stock pays this.” And “Oh, well, my dividend stock pays this and my dividend stock pays this.” And what I ultimately ended up learning from just watching and just kind of overseeing this conversatio