Options Boot Camp

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 g

Basic Training: Short Puts Revisited Want a complete overview of selling puts? Check out Options Boot Camp episode 4 from May 7, 2012. New study: "An Analysis of Index Option Writing with Monthly and Weekly Rollover," written by Oleg Bondarenko, professor of finance at the University of Illinois at Chicago, and sponsored by CBOE. It is.the first comprehensive study to examine strategy benchmark with traditional stock, bond indexes incorporating weeklys options. CBOE Russell study "Analyzing Russell 2000 Index Options-Based Benchmark Indexes Designed to Provide Enhanced Yields and Risk-Adjusted Returns." CBOE announced the release of a new study that examines six benchmark indexes that invest in Russell 2000 Index (RUT) options and compares their performances with those of traditional benchmark stock and bond indexes. This is the first comprehensive study that examines the performance of multiple options-strategy benchmark indexes that incorporate Russell 2000 Index options. Written by Mark Shore, an adjunct

Options Questions of the Week: How do you prefer to trade options? 19% - Long premium 15% - Short premium 56% - I avoid earnings 10% - Other, explain below How many U.S. options exchanges do we need? 5% - 14 is perfect! 29% - The more the merrier 62% - Make it stop! 4% - Other, explain below Should options trade after hours? 53% - Heck Yes! 15% - Only in Major Names 15% - No, poor liquify 17% - No, other Question from Alfy - Is it possible to be a day trader using options, or do you gave to take a longer term view? Question from Alex - Insider Trading, What are your thoughts on Shorting 1Y 25 Delta Puts on LNKD midday today (LNKD is at 105 as I write this message). Puts are quite juicy right now with quite acceptable break even points. I am very interested in hearing your feedback. Cheers, Big Options Trading Podcast fan, Alex. Question from Michael - $15 put Twitter drops off the map; yet the premium still has been declining. Can you explain? Question from FuturesMD - Is there a directional options st

Basic Training: Theta. A review of Theta and its impact on income trading. New Study: An analysis of index option writing with monthly and weekly rollover - First comprehensive study to examine strategy benchmark with traditional stock, bond indexes incorporating weeklys options. Mail Call: Listener questions and comments. Question from KDDiddy - I want to protect a stock position with puts at a strike 2% below market but there is not a strike there. I thought of dividing my purchase between two different strikes to get an average of 2% but I do not want all the guys to call me stupid. Mom always said I was a genius but it is hard to feel like one when buying something called a Put Stupid. What should I do instead? Regards, Mr. Smart Question from LATom - Can the drill squad explain covered strangles vs. covered calls? What is the difference?

Basic Trading: Second Order Greeks Question from Brian F. - My question is for Dan. I listened to the Boot Camp shows, and recently had a question about gamma. Imagine my surprise when I learned there are other secondary greeks and even tertiary greeks. What this? Are you holding some greeks up your sleeve Mr. Black hat? So my question is what are these greeks, but more importantly, who uses them and why? Does a retail mope like me need to know about these greeks? Question from Charlie C. - Do second order greeks have any relevance for retail traders? Mail Call: Listener questions and comments Question from AV56 - When is a good time to start trading options - is there any certain time of the week or year that options traders are focused on? Question from 777: How do you adjust your options trading for cheap stocks below $10 Comment from Brian F. - I went through the Options Bootcamp shows twice, and read a few books, and now have the bug for options. Have you perused the options videos on Youtube? Is it m

Options 101: Today we are joined by Dan Cook from Nadex. He walks us through the following: What is a binary option? How does the pricing work vs. standard options pricing? How do the ticks work? Is there a multiplier? Does the price represent the pure probability of an option expiring in-the-money? How does expiration work? What about the final minutes around expiration? What is the farthest out you can trade a binary on Nadex? The Greeks: Binaries vs. Standard options Which underlyings offer binaries? How can you trade binaries? What is a typical binary use case? Mail Call: Get your questions answered by the team. Question from Jeb16 - I have seen a number of sports books online offering products that appear to be sports derivatives. Is it possible to trade actual products based on sports outcomes or other event-type derivatives in a legal exchange-traded form in the U.S.? Question from Amelia G. - Do you notice anything different in the options trading in higher volume products vs. lower volume products

Mail Call: The drill instructors will take your questions now. Question from TennisGr8t - Can you give examples of managing positions using Greeks and is it a good strategy? Your show is awesome. Question from Pedro Indio - Discovered podcast within the last week and I am up to episode 8. I understand how overall market and industry direction might influence a stock direction. Is there something similar, regarding volatility that can be observed, where an overall sentiment might influence or work with an option's implied volatility? As a new recruit, wonderful educational basic training, SIR! Question from TopStep - Why would we use options in lieu of futures or other underlyings? Question from Steamboat Willie: What would you say is the best buy and hold strategy using options? I am interested in using some options in my retirement account but I do not have the time to manage them on a daily basis. I would like to put something on and only check on it every few weeks or months. I am mostly interested in lar

Options Bootcamp 56: Options Trade Tags Demystified Basic Training: Today’s guest is Andrew Giovinazzi, of Option Pit, Option Block, and Options Oddities fame. Mark, Dan and Andrew discuss options trade tags, including: Regular Spread Block Trade Inter-market Sweep Combo Cancel SoldLast Price Variation Buy Write Mail Call: Listener questions and comments Question from Vegan - What oil products do airlines use to hedge their crude exposure? Question from Alan - Why is rolling a position so prominent? Is that not just averaging into a losing trade? Question from Angus - Maybe this is a basic question, but where do the names call and put come from? What about straddle and strangle?

Options Bootcamp 55: Going Naked in IRAs Basic Training: Using Options in an IRA Account. Can you trade options in a retirement account? What are the limitations? What strategies can you utilize? What are the benefits of writing covered straddle vs calls? What is a stock replacement strategy? When should someone consider this strategy? Using options as an investment tool. What are any other investment strategy? Mail Call: Listener questions and comments Question from Hector - Can I still trade mini options or are they no longer available? Question from Neil Cerone - What are the most common mistakes you see from "stock guys" who try to become "options guys?" Question from Steve: First off, I love ALL the shows. They fill my daily commute with wit AND wisdom. Thanks! Also, better late than never, it was great meeting you all at Benny’s Chophouse back in Sept. I am one of the Lobster and Meatballs trainees (thanks to your shows). I had the pleasure of sitting right next to you and across from Uncle Mike as we

Mail Call: Listener questions and comments Comment from Max_p24 - One of the best podcast for option trading. They have amazing Bootcamp for option beginners. Question from Brian Collamer - Back in October I sent this question and I see you ran with it in a couple of other shows: “You mentioned that when selling options the fastest theta decay occurs in the 45-30 day range. I thought that was only true for ATM options? Do OTM options decay the fastest at 60-70 days and then kind of flatten out?” In each show you had asked where I had seen/heard this. LiveVol blog and forum. Thanks for the great content! PS: Futures Roundtable needs to be twice a month IMHO. Question from Imbroglio - If I exercise a call option what happens - do I just hit a button and the stock hits my account? Or does it take some time? When do I actually get the stock? If I want to collect a dividend do I need to exercise a few days early in order to get the stock in time to collect the dividend? Question from Angry Bunny - What the hell i

Options 101: Income Trade Adjustments An overview of income trades: Covered call, short put, short straddle, etc. What do we mean by adjustments? When to or not to adjust? Previous episodes that will be helpful: Options Bootcamp 41: Advanced Adjustments & Options Bootcamp 40: Trade Adjustments. Basic adjustments, partial adjustments and adjusting into spreads. Mail Call: Listener questions and comments Comment from Dmitry Shesterin - @Options There is no V in the Greek alphabet, so how come Vega is considered a "Greek"? Who started this madness? Question from Brian Collamer - Do OTM options decay the fastest at 60-70 days and then kind of flatten out?? Great show, wish it was longer! Thanks, Brian Question from Charles Patterson - Is it accurate to describe delta as the probability of an option expiring in the money? Question from Rohan - Do you think it is viable for an active retail trader to become a professional retail trader using primarily the freely available tools from OX and other retail broke

Basic Training: 2014 Year-in-Review/2015 Preview What option strategies worked in 2014: put credit spreads, IV overpriced throughout the year, "Wheel of fun." Things to learn from 2014 - Do not get married to a single strategy. Misperceptions of 2014 - VOL/VIX was cheap. Despite "low volatility" options volume was still very strong in 2014. Tempting to believe that OTM call buyer did well in this extended market. Fed tapering - When is it likely to happen? What is likely to happen in the market when the Fed tapers? Things to keep in mind for 2015 - It might be time for a smart hedge. The return of Rho. Volatility has a volatility. Exchange fragmentation will continue. Expand your horizons.

Basic Training: Futures Options vs. Equity Options We've talked about how to use options to mitigate your portfolio risk, but many traders also rely on commodities diversification as a way to mitigate portfolio risk. Futures options strategies: All of the options strategies we've discussed on this program in the past are applicable to futures options as well with a few exceptions Covered call & protective puts both require underlying futures positions - something most traders prefer to avoid. Most traders looking for diversification typically want bullish exposure to the underlying. Some great options strategies for this include: Stock/futures replacement strategy Vertical call spread Spreads with wings Futures are useful for traders who want to establish sizable positions with a minimum of outlay Options on futures can be useful for traders and asset managers who want exposure to alternative asset classes but can't or won't trade futures. You'll need a futures account to trade futures options - but if

Mail Call: This episode is dedicated to our listeners. Question from Neil Filasco - What sets do you recommend to hedge my retirement accounts, in clouding my defined contribution plans? The pickings in these accounts are relatively slim and there are no options to speak of. As one of the newly enlightened options masses, I thank you for bringing me into the fold. Question from Chandra Bajpai - Hey Mark, I love the Radio show...I find myself wanting the next show because I something new every episode. My question is: How should a trader handle stop losses on a naked call/put and/or a vertical spread. When should you call it quits? IBD mentions 8% for stocks, but what is the level for options. Thanks. Question from Hedger - I am a bit flummoxed when it comes to spreads. I listen to a show like this, that tells me to use spreads. I read a few articles about spreads, and I think I have the gist of it. Lets say ABB is trading for $50, if its going to $55, I can buy the 50-55 spread for $1, if the underlying move

Basic Training: Covered Strangles/Covered Combo What is it? Long stock, covered call, short put. Why do it? Collect more income than a standard covered call or short put. Why not to do it? Increased margin requirement, you will increase your stock position to the downside. Example: XYZ trading at $50. Option 1 - Sell covered front month 55 strike call for $1 - collect 2% income. Option 2 - Sell both front month 55 call and 45 put for $1 each - collect $2 or 4% income. Rinse and repeat. Note: Call and put should only be sold on strikes where you are comfortable buying/selling the stock. Listener Mail: Listener questions and comments Question from Tony - Mark, love boot camp. I was lucky enough to have a fairly significant weekly put spread position in DIA this week (long puts at 166-167 and short at 161-162.5). I was making good money on Wednesday and ran into a problem. The bid ask spread on my long puts were so wide, I could not close out, roll or adjust the trade. I thought about buying futures contr

Mail Call: Your questions directed this episode. Question from Jason Kruse: Is there a Bootcamp episode that discusses OI and how it can affect expiration moves? I hear people talk about max pain and pinning like it’s a conspiracy. Would love to hear real info about how it works. Open Interest What is it? Why is it important? Why is it not important? Pin Risk What is it? How prevalent is it? When should you be concerned? Is there really a conspiracy? Question from Allen Manning:Hello everyone, I just started listening to the Options Bootcamp podcast, and I'm really enjoying it! I have a question about a strategy described in episode 20: Options in Lieu of Stocks. As a covered call alternative, I was interested in possibly buying a LEAPS with a 1 or 2 year expiration and selling monthly calls against it. When I looked up a few stocks and ran some preliminary numbers, I noticed that the cost to purchase a deep in the money LEAPS (about 80 Delta) option was usually higher than the total money I would make se

Basic Training: How to protect your profits. Easiest method: 1st buy a 2-3- month put ATM or slightly OTM put. Purchase an ATM put spread with the short leg at your break-even point. Easiest to do in a single stock or underlying. What to do if you have a broad equity portfolio? Its a little more complicated. Determine the effective beta of your portfolio an how many effective shares of that index you own. Rule of thumb - Expect to spend about 2% of your portfolio for effective 3-6 month protectionHow to reduce the cost of protection. Buy a spread instead of an outright put. Set up a collar. Set up a collar with a kicker. Mail Call: Listener Questions and Comments Question from Big Charlie - Hey guys. What is your take on the OH/Monster merger? What does this mean for the options landscape going forward? Question from Brian Collamer - Hi Mark, If I have a short call in $SPY on the ex-dividend date that is OTM, I will not owe the dividend correct? Thanks, Brian Comment from Justin - Hi Mark, Just heard my qu

Roll Call: Bringing in the Big Guns Our guest today is Jim Bittman, Senior Instructor at The Options Institute. He discusses: 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 mov

Basic Training: The world of mini options What are Mini Options? (Just celebrated first birthday last month) Where do they trade? Which underlying names trade? What is the use case? When should you use them? When should you not use them? Pros vs. Cons: Unfortunately we cannot give many pros for mini options as of now. Mail Call: Listener questions and comments. Question from Maximus - Hi Mark, Hope you have been doing well. Following up in connection with my question in the email below, since I haven't seen a new episode of Options Bootcamp come out for the past several weeks, and have been waiting with baited breath for your expert comments on my question. :) Hope I didn't overwhelm you and the panel with my frighteningly complicated question, and the insanely large account balances I am referring to (sarcasm alert! :)) I did notice a mention of "Maximizing a ROTH IRA" in episode 331 of Option Block, which came out on April 21st. However, for some reason, this episode seems to end abruptly at just under 3

Mail Call: All mail. All day Question from David Medley - I have listened to about half of the 40+ episodes. I do not recall hearing anything about how to get started professionally. I am a 38 year old software developer looking to change industries. The positions that seem to be open to me are commission-only and require a significant cash "Capital Contribution". I am actually OK with this. Some positions have hefty training and/or desk fees, which seems a bit scammy to me. Either way, it's not something I want to go into blind. If you have covered this, I would love to read or listen to it. Thanks! Question from Jay - Hi Mark, Options Bootcamp is a phenomenal program. I have learned so much it’s unbelievable. I do still have one question, and it stems from the fact that I am not a convert from the equity world. I am new to the investing world, but I could never wrap my head around equity trading because it seemed too haphazard. It was not until I learned about the flexibility of options that I really thoug