Master Credit Spread Class Flashcards
(300 cards)
1
Q
Premium - where is the money coming from?
A
The premium is the current market price of an option contract.
income received by the seller. ln the money premiums are composed of extrinsic and intrinsic value
2
Q
Theta
A
the rate of decline in the value of an option over time. its our best friend if we are selling and our worst enemy if we are buying
3
Q
vertical spread
A
buying or selling a call or put and simultaniously selling or buying at a different strike price but with the same expiration
4
Q
Expiration Date
A
the date on which the options contract expires
5
Q
Strike Price
A
the price at which an option or other derivative contract can be exercised
6
Q
how much per month can you expect to earn on credit spreads. %
A
5-10%. 15K can bring in 750 to 1500
7
Q
How do I avoid max loss?
A
never hold to day of expiration
8
Q
He risks max loss of?
A
16% of account. 10K = max loss 1600. so with his plan 480 is true risk. 4.8%. From class but I think he’s going to let me risk more
9
Q
What is a vertical spread/credit spread? Where is the risk in the strategy?
A
Entering 2 options at the same time. Buying and selling each leg. Your risk is the difference between the two strikes.
10
Q
Discuss how expiration date and premium and theta work.
A
The farther away the expiration the more premium you could recieve AND
the further away you can sell your spread from the stock price,
But theta does less work until closer to expiration, and you have more time for the trade to lose.
11
Q
Benefits of Spreads (4)
A
1 Dont have to have perfect entry timing
2 consistent income
3 you don’t tie up much buying power
4 pre determined ultimate risk
12
Q
cons of spreads
A
risking more than you are making
easy to mess up in the broker
13
Q
What is a bull put spread and how do you win it?
A
you are using buying and selling puts but you win if the stock stays above your sold strikes.
14
Q
How do you use puts for a bull put spread and how do you win?
A
You buy a put and sell a put. and as long as the price of stock stays above your sold put you win.
15
Q
What does selling a put mean?
A
What does selling a put mean?
If it closes in the money at exp. you have to buy 100 shares of that stock at the strike. Its a bullish move.
If it expires worthless then, you just keep the premium and leave.
When you sell a put, you agree to buy a stock at an agreed-upon price. It’s also known as shorting a put. … That’s because the buyer must buy the stock at the strike price but can only sell it at a lower price than the current. Seller makes money if the stock price rises because the buyer won’t exercise the option.
16
Q
In a bull put spread do you receive a premium? why or why not?
A
You are selling a put and receiving a credit. You are agreeing to purchase the stock at a strike that you sold the put at. You will get paid to enter into that agreement.
17
Q
Why do you buy and sell a put in a BPS?
A
Buying a put is like buying insurance. It will kick in when the stock price moves below the strike of your put. This way you lock in a max loss.
18
Q
How are the expiration dates handled in a Bull Put Spread?
A
They are always at the exact same time
19
Q
How much money does the broker put aside for a bull put spread?
A
The difference between your short and long put
20
Q
Where is the value in the Bull Put Spread?
A
The Premium. Thats why we get out before expiration
21
Q
What stock action are BPS best used on
A
stocks in a bull trend that are having a pullback to support
22
Q
How do you win a bull put spread
A
You sell and receive money and then buy it back to get out.
This costs money.
So the money collected for the selling is larger than the money you spend to buy to get out.
23
Q
How does the winning strategy work when the stock is moving farther away from the credit spread?
A
If the price moves away from your spread the options will be worth less and thus you can buy back for less.
24
Q
How does winning strategy work when stock doesn’t move much in a BPS
A
theta - time decay. The closer to expiration the trade gets the less it’s worth.
25
What is the most money you can make in a credit spread?
The amount you make from selling the spread. short put - long put = profit.
26
What is your "limit" price in a BPS
The combination of both legs in the spread.
27
What if you start losing on trades?
The market changes a few times a year. When this happens wait two weeks, reassess plan and make sure youre doing the plan right also
28
What is the only way you can loose max loss?
ON the day of expiration
29
He's only lost more than 35% how many times in 4 years.
twice.
30
How often does he lose 30% loss
Always a chance and happens a couple times after you are on a 10-30 win roll.
In 7 he might also lose on 2-4 of those at the most.
If in three then you will lose on maybe 1.
It's hard to tell really but overall 92% win rate minimum.
31
What is the max loss risk he likes to take?
16%. 1600 per trade max loss for a 10,000. But with his plan you lose about 30% max rarely
only if you lose $480 or 4.8% of max loss.
32
explain drawdowns
I lose when the markets change sentiment. On average 2-4 spreads at once. So drawdowns on average will be about 10% of his account.
Maybe happens once a year where you lose on your account (max loss?). But account will be bigger than now so its fine.
33
He wants to get paid what percentage of what he's risking?
10%
34
for a vertical spread you pick two things...
The strike and the expiration. strike is different (I think) expiration is the same.
35
Where should you set the limit order
Mid price is good. The price between the ask and bid. or the price you are hoping to get filled at.
36
If you aren't getting filled within the first ten minutes
bump the price a bit 2 to 5 cents lower than the bid . Never market in or out of an credit spread. The lower the number the less you get paid
37
What will cost more in a credit spread. What will cost less?
The sold price will give you more than the buy price. The buy price is what you pay to get out.
38
What to check before placing an order?
| 6 items
1. You are receiving a credit for the spread and and not paying a debit for it.
2. You have the correct strike prices, expirations date, correct limit order
3, Hedging game plan
4. not selling over earnings or other major news announcement
5. You have the correct # of contracts
.....
6. You put your target in as soon as you are filled.
39
A monthly credit spread is what kind of trade?
swing
40
How long are we in a monthly credit spread
5-15 days or 5-8?
41
What is the win rate with a monthly credit spread
92%
42
What is his average profit on a monthly credit spread
75$
43
What does IV mean to a monthly credit spread?
1. Low IV (big moves are not expected)
| 2. High IV (big moves are expected)
44
How many average daily contracts do we want a stock to have to consider a credit spread?
Minimum of 5000 total average. https://marketchameleon.com/Home/Dashboard
45
Monthly Credit Spread Plan General Beginning Rules
7 of them
These are broader than the #1 #2 rules
1. Minimum of 5000 total daily contracts
2. Do not sell over earnings
3. Sell the monthly spreads around 30 days out
4. Stock must be above the weekly 60 ema for bull put spread
5. And below the 60 ema on the weekly for a bear call spread (go with trend)
6. Check 3 news sources to make sure no big event is coming out during the time of your spread. You don't want to sell a spread if has unusually high IV = gaps are death to spreads.
7. Close the spread, no matter what, the day before expiration. Max loss occurs on the day of expiration!
46
How many days out do you sell monthly spreads.
Also talk about time, premium and expiration and how they are inter-related
Sell monthly spreads about 30 days out.
the shorter the time to expiration the better, but the shorter the expiration time the less premium you will receive.
need to get paid 10%.
47
Low IV means?
Big moves are not expected
48
The average daily volume on options is what? how many minium should we be dealing with.
All calls, puts, strikes, expirations, volume traded needs to be above 5000. Below 5000 is not super liquid and will be hard to get out of and hit profit target.
49
How do we deal with earnings
Do not sell over earnings. If the earnings are over any time of our spread you can not do. How do we know for sure when earnings are?
50
How many days out do we do a monthly spread
around 30 days.
could be 20 or 40.
but the shorter the time frame the better.
Less time to not go against you. quicker you can get premium capture. But have to sell closer.
51
What EMA do we deal with on a BCS
60 ema above for a bull and below 60 for a bear call spread.
52
Watch 3 news sources before entering into a spread? why?
We dont want a big news event to come out over the time of your spread. you do not want a high IV. They are the Death to spreads. gaps are the death of spreads.
53
What do we need to know about IV related to news. How many weeks is it an average of?
52 week average.
1. broker can tell you about it (trade station)
2. market chamelion can tell you
3. if it's unusually high IV, normally means they are expecting something big.
4. If the premium is too good to be true, believe it.
5. They may not have news but the weird IV is saying something for that particular stock.
54
Implied volitility IV
How high is something expected to move. If there is a high IV we get paid more but there is a chance it will gap and go against us. IT's stock dependent.
55
We will close the trade no matter what when.
Day before expiration. It DOESNT matter what you are gaining or losing. Just get out.
56
What are the focus steps for entry on monthly BPS. Short version
1. RSI
2. Barriers closest to stock price
3. Determine what set up to sell one or two
4. What you get paid minimum 10%
5. Create game plan if trade doesnt work.
57
First step (1) on Bull Put Spread Monthly
1. Oversold on the 4 hr RSI
(below 32 on the RSI)
BELOW 32
If not oversold - no set up.
Wait for it to be oversold!
If oversold - move to step two
58
Step two (2) for a Monthly Bull Put Spread. 3 parts to answer
1. Locate the next two weekly barriers
WEEKLY support, or
WEEKLY ema 10.20.30
2. find those closest to the current stock price and the sold strike that you're selling
3. We can sell anywhere below the second weekly barrier
59
Step three (3) for the Monthly Bull Spread
Determine if youre going to do setup #1 or #2
60
Step four (4) for Monthly Bull Put Spread
1. Make SURE you get paid a minimum of 10% of what you're risking if you are risking $500 the minimum you can get a pid is $50 for the spread.
If it does not pay at least 10% of what you are risking pass on the setup
If it pays more than 10% of what youre risking - move to step 5
61
Step 5 for a Monthly Bull Put Spread
Create a game plan if the trade does not work. If you cant figure out a hedging plan, do not take the trade
62
What setting do you want the RSI on for bull put spreads? and what about what chart to look at?
1. 14
2. extended hours OFF.
3. on a 4 hour.
It wont be oversold prob on a weekly. Doesn't matter. It's the 4 hour that matters.
63
Step #2 Monthly BPS - locate the next two barriers. how do we do this? and on what time frame? involved wicks
1. Weekly support, 3 or more interactions in the same zone or more.
You dont want these to be near where the price is at currently.
the barrier is a zone.
Three wicks at least or body closes in the support/resistance zone
2. 4 hour chart.
64
If a weekly support is near the price or even if the current price is sitting on an ema is this a good barrier?
No. If the current price is sitting on a barrier. Pass
65
The barrier has to be where as far as pricing?
Below the price of the stock and above the strike price for the BPS
66
With regards to barriers, where can we sell the monthly credit spread?
At the second barrier, which is the long put or below it.
67
How do I choose between set up #1 or #2 and what is the selling difference between them.
1. I will use if set up #2 is not available. Or if set up #2 doesn't pay the 10% ROI.
One 1# is when we sell right on top of a weely support. This would look like the neckline of a double bottom at the retrace of it in his example.
2. #2 requires a strong weekly support (if it was a strong resistance, it should be a strong support = needs two bear candles under support, check out example slide #13.
This is where sell below a higher low. (double bottom look on chart, sell if there is a second bottom or higher low, but below the first part of the double bottom or the first low of the support)
68
Which set up is easier to hedge. one or two
2
69
What does he consider a higher low
One bear candle on the weekly is not a higher low, two bear can be considered a higher low and then bounces above that, it can be a higher low. two or more. It's got to then bounce above those.
70
where do you want to sell it around the weekly support area? I think this is for #1
Right at the support or just below.
71
how do I hedge against set up #1?
Buy calls
They will make more than the spread is worth and when It bounces out of the area it will be a WIN in the end.
This is when the stock doesn't keep continuing up and looks like it's coming down to bounce off the support line. If it doesn't bounce and keeps going lower. you lose on the put spread and on the calls.
But hedging like this usually works (if youve picked your resistance and support lines well.
72
Location of set up #2
1. have barrier one and two
2. have higher low
3. Then look for the 10%
4. you will pass on most 4 hour oversold stock set ups
73
Dont forget to set up your EMAs like Tony
10.20.50
74
When does a weekly chart become bearish?
When we take out the higher low
75
Higher low sell Bull Put Spread below how far below higher low?
At least two percent away from alert level where you would short a stock. This gives you room to hedge with puts.
Higher low must have at least two bear candles in the pullback.
76
why do I have to get paid at least ten% of what Im risking
it's the ONLY way the math works for you to be profitable
77
What is the Math on 10 contracts with 4 spreads per month and three months
800 per month and 2400 in profits
78
What premium capture will you get in for the monthly BPS
Get in at 13-15% premium capture if can so you can exit at 10%
If he gets in at 10% he then will hold for 80-85% premium capture and walks with 8% premium capture
79
Always assume...
You are going to loose. have a plan if you will lost. Keep your emotions out of it. Follow the strategy.
80
on average how many loose?
1 out of ten
81
On average how long are you in monthly credit spreads?
5-8 days on average to win on these.
Ten on average overall.
1 1/2 weekly candles going sideways to win.
82
How to use the indicator start here for cards.
1. Money sign goes off
2. Use second barrier on it, orange line.
3. Decide set up #1 or #2. do you use the indicator?
There may be extra barriers there that the
indicator doesn't show.
*you can turn it to be more sensitive but he goes for the big supports. The sensitivity level is where he uses it.
83
What EMA do you want to be above on a BPS?
60
84
What do we want to see on a daily bullish chart for a BPS
Bear candles as it needs to be pulling back.
85
In the higher low pullback for a BPS how many bear candles
2
86
once % pay back gets into the ?, its getting into too good to be true
20s, you can get UPTO 20 but not more.
could be over earnings
look at the time frame,
don't trust anyone on earnings, give yourself room
87
watch youtube videos on
support levels
88
do not chase premium. what do you do. These are the steps for a spread
1. oversold 4 hour
2. 2 weekly barriers
3. what set up 1 or 2
4. where and why we will sell
5. then go to broker and see if your nice strike pays 10% of what your risking. if no go to set up 1 and see if it pays that. i
6. if does, then set up a hedge
89
he shows 50 ema on trading view b
but then types in 60 ema in the instructions and talks about 60 ema
90
bear call spread, trying to call the top
Dont do it. Hard to win on and even JAN sucks at it.
91
do not sell against...
the trend
92
set up #1 and #2. and barriers
set up 1 is AT the barrier and set up 2 is above the barrier.
93
what does an advanced set up entail as far as general principals that define it. Short term credit spreads. I think this is what Tony wants me to do?
more aggressive
set it closer
they come around more often
94
short term spreads are how long
two weeks or shorter
95
anything longer than two weeks is the ? credit plan
Monthly
96
advanced is almost always a set up #?
| Where are the barriers set up.
2
1. higher low
2. barriers on weekly.
97
Make sure you go to his charts used and....
put his weekly supports in
98
bull and bear markets quote
Someone told me once that bull markets open weak and close strong. Bear markets open strong and close weak.
99
for the advanced credit BPS plan what is the second setup meant to do
Its a trap set up
100
for the #2 trap set up. what do we want to see as far as action on the weekly candle
for the candle to break the support and then go back up in the same week.
If this happens. you put alerts above and below.
and the following week he will look to get into a spread on it
101
Managing the trade. First thing you do once you get filled
Profit target entry - Immediately enter into your broker your profit target.
(70% premium capture or more)
If you sold spread for 1000 set a target to spend 300 to buy it back
102
When he says playing it safe in credit spreads while managing the trade what does that mean?
Its ok to take .22 target instead of .20
| When you buy it back you make money if you buy it back cheaper than what you sold it for
103
For managing the trade why do you set an alert after you enter your target?
set it at the "concern" zone and your sold strike of your spread (set up #1) / your alert level (set up #2). In case the trade is looking weak
104
after setting up your alerts what do you do on your trade while its in action.
wait and do nothing until/dont lose cool
1. your profit target is hit
2. or one of your alerts are triggered, then follow the plan associated with that trigger.
105
How do you exit a BCS
exit together as a vertical spread in your broker, do not leg out, it can mess up your potential for a profit
106
How to handle the expiration date on a BCS
Do not let the spread expire worthless, always close out early
If you have made 600 in 4 does it make sense to wait another 20 to make 200? no. Close it out and spend that buying power to make another 600 in 4 days.
107
What is the concern zone and how to handle it.
The cz is a good way to determine strength of a spread before it hits your alert level.
Credit spreads will have a high win rate, but you are risking a lot to make a little. So if you can exit a spread (if it's not working like you planned), and save yourself a loss, it will elevate you above everyone else trading spreads.
so what is the sweet spot between exiting a CS at the right time and sitting and letting it work.
108
If you make what profit within the first two three days can you get out.
50%
109
what is the secret to being a great spread trader
"Shhhhhh"
knowing when to get out for a small win or loss when everyone else is taking max losses like a bunch of Noobs.
110
what is a concern zone
is usually in between one of your barriers and your alert level/ sold strike of the spread
The area that the stock should not get to (already broke one of your barriers
Gives you an early indication if your trade is working or not
111
what happens when your trade closes in your concern zone as far as what % you are trying to go for?
When it closes in your concern zone your no longer trying to make 70% profit target on the trade.
Just take the small win and wait for a better set up. If it is not working no need to be in it.
112
Concern zone rules. What do you need to be thinking if the CS gets in this area?
You have not lost on the spread yet, but it's showing signs of weakness
1. You can't hedge it yet because it has not met your requirements, but it's not looking strong
It must close IN THE CONCERN ZONE ON A DAILY CHART
2. if it enters the concern zone but does not close in it = you do nothing
113
what if your trade closes on a daily chart in your concern zone? (3)
1. if you are profitable - take the small win, exit the trade, look to get back in later on better set up. (take 3% win or whatever)
2. if you are not profitable - do nothing and wait until you are profitable and exit the trade for around break even
3. wait until your alert goes off, and then follow your hedging plan
114
He may have 20 entries in a week or 2 in a week
hes in most of his trades within a week or two each month. maybe a couple more set ups. feast or famine I guess
115
What are short term credit spreads. In general how do you describe them?
1. high risk because faster,
2. expiration in 2 weeks or less, 1-2 day swings, stock has to hang out for a fews days and you win,
3. have 2 sets of rules regarding expiration
116
Pros for short term CS (more aggressive) (4)
1. You can earn a month's worth of credit spreads profits in a few days
2. less exposure to time in the markets
3. easier to see where the stock could go over next few days
4. you can do with 10K trading account
117
Cons of shorter term credit spreads, (3)
1. you are selling your spread much closer to the stock price compared to monthly spreads (gaps are tough)
2. Your risk is the same as long term spreads, but win rate is less 80%-90% win rate and it fluctuates (92% with monthly)
3. Hard to find set ups in low IV markets
118
With regards to IV when do you take short and long credit spreads?
25 on VICS or lower is low IV - monthly
any time over 25 look for short term credit spreads,
30-50s play 100% short term credit spreads.
119
shorter term credit spreads. tickers (8)
```
AMZN, TSLA, SPY/SPX,
SHOP, CMG,
NFLX, AMD
if you use any other stock you will lose
you DONT want gaps
```
120
Same week credit spreads. (short term) same week expiration. (4). what are the main thoughts you need to have on them.
1. You can hit profit target in hours - 2 days after entry
2. Has 83% win rate
3. You are asking yourself "where is the stock not going to go in the next two days"
4. Entries will be based on skill of reading price action
121
where does the VIX need to be for short term credit spreads
above 25/ stock has high IV
122
For short term credit spreads you want to check three news sources to make sure no major events or company announcements. why?
you dont want gaps
123
Dont sell short term credit spreads over earnings. why? (3)
1. increasing IV offsets theta.
2. Now you are relying on the stock to make a big move away from your spread.
3. earnings bring gaps
124
What do you want the delta to be for short term credit spreads
.25 or lower
125
When is theta the strongest in an option?
the last week before expiration
126
How do you win with short term spreads with same week expiration
theta is the strongest
if the stock just hangs for a couple days you win
if it moves away from your spread you usually win the same day. 70% premium capture.
127
Delta
| How do we work with delta on credit spreads. What delta do we want to be selling?
The further out you go from the price the lower the delta is and your percent chance that that stock will be in the money.
If it's .10 there will be a 10% chance that that option will be in the money by expiration.
So you have a 90% chance it wont be. Thats how you win. We want out of the money. so we have a 75% chance to win. we want to sell the .25 delta
128
what percent does he always want to make on spreads
70% or more
129
how much of a distance between the alert level and where you sold your spread?
2% (of the stock price) minimum but it's too much on AMZN or othe super expensive stocks
130
hedging is different for the monthly spreads than the short term how?
The monthly has more confirmation. So if it's a month out he will be waiting for the daily close over alert level.
If its a couple weeks out he will look for buying calls.
131
What is the difference in the legs of a vertical BP spread? How do they work and how do you get paid?
The sold leg is closer to the price of the stock and pays. The long leg is a little further away from the price and costs you less.
132
To make 10% we need to get paid at least ? in monthly spreads?
.5
133
Set up #1 is where?
| Set up #2 is where?
AT the HL, while we wait to get the pullback further up on the S curve.
Set up 2 is below set up ones line and is using it as an alert.
134
When you find the HL you set up an alert where?
Waiting for the pullback on the S curve. When it pulls back He sells a spread. For one the set up is AT the higher low. This is where you look for premium. And for two,, your set up is below the HL and about 2% of the way down.
135
Prob OTM - what is it?
Delta in percentage form
136
pos - on the trade station app in options
expected move on strike prices of options. It is the IV
137
if we buy a call above the strike price, when do we go out of the money
Buying calls is a bullish behavior because the buyer only profits if the price of the shares rises.
138
further out of the money means what?
less of a chance of being in the money. And so the option is cheaper.
139
If I buy a put when the price is at a certain spot, how does it go more out of the money?
as it goes up
bearish play
An in the money put option is one where its strike price is greater than the market price of the underlying asset.
That means the put holder has the right to sell the underlying at a price that is greater than where it currently trades.
This allows for an immediate profit if they buy the shares back at the market price, therefore the price of an in the money put closely tracks changes in the underlying.
Buying a put option gives the buyer the right to sell the underlying asset at a price stated in the option, with the maximum loss being the premium paid for the option.
Traders buy a put option to magnify the profit from a stock's decline.
A trader can profit from stock prices below the strike price until the option expires. By buying a put, you usually expect the stock price to fall before the option expires.
140
for a bull put spread what legs and what direction do you go?
Buy a put, sell a put. Buy a put sell a call.
141
When you are placing a vertical order in TS and you see the two rows of strike prices. The price that is closest to the side you are looking to trade (put, call), is what side of the trade? And so the strike placed further away is the?
Short
| Long
142
1. How do you come to the 10% on a spread? give a numbers example from tonys lesson. 408/410.
2. Then what do you do with this number?
1. Take the difference between the two legs. Then figure 10% of that. and then Times X 100 for one contract. 408/410 = 2, X .10 = .2, X 100 = 20$.
2. Go to "mid" number and make sure it's paying more than that number (.2 ten % of the difference)
143
When do you use "analize sell vertical". Right click on your price next to the strike you want.
1. He uses this example to change the spread to a $5 spread, but still wants to sell the 410 strike price.
2. You want to go to bottom of TS and go to the buy 408 to a 5$ spread and buying 405 is the end result. Then you look at reward risk ratio and you need .10 (on the bottom to the right)
Whatever the distance is between the legs. You need .? (point. and whatever number it is. So if it's 2 bucks. You need . 2. If it's bucks you need .5
144
why do you want to do less contracts on TS?
Because it's less commissions
145
How do you set it up so you can have less contracts (and pay less commissions)?
1. First move the # of contracts so you can get to max loss. More contracts is also harder to get in and out of due to the larger number of them.
2. Max loss can be 10% of your account ( for 30K account 3K max loss)
Max profit: changes
$5 dollar spread
3. Wider spread for less contracts. The wider the spread the faster theta will act. Theta takes off dollars each day as it decays.
4. The bigger the account the wider you can go. But then when you do a wide spread it messes with your max loss. It gets much bigger.
146
What dollar spread should I always do right now in my account and why.
1. $5
2. Easy enough to get filled without too many contracts
3. Good theta but not risking too much of a percentage per trade.
147
What is your max loss on 30K
1. Max loss can be 10% of your account ( for 30K account 3K max loss) - 900$
2. $5 dollar spread
148
What is Tony's strategy max loss
30% of the max loss which for me will be 3,000 (max loss on TS). 9% of the original total. 30% of 30% out of 1000 is 9
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Is Buying a Call Bullish or Bearish?
Buying calls is a bullish behavior because the buyer only profits if the price of the shares rises
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Is selling a call bullish or bearish?
Selling call options is bearish. The seller profits if the shares do not rise.
Some investors use call options to achieve better selling prices on their stocks. They can sell calls on a stock they'd like to divest that is too cheap at the current price. If the price goes against the seller and rises above the call's strike, they can sell the stock and take the premium as a bonus on their sale
The purchaser of a call option pays a premium to the writer for the right to buy the underlying at an agreed upon price in the event that the price of the asset is above the strike price. In this case, the option seller would get to keep the premium if the price closed below the strike price.
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Is selling a Put bullish or bearish?
Bull
If the stock is below the strike price near exp. you will receive something for your option (intrinsic value).
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What position are you bull or bear if you are selling a call
selling call options is a bearish behavior, because the seller profits if the shares do not rise.
The purchaser of a call option pays a premium to the seller for the right to buy the underlying at an agreed upon price in the event that the price of the asset is above the strike price.
The option seller would get to keep the premium if the price closed below the strike price.
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How do put options work
A put option buyer grants the right—but not the obligation—to sell a specified quantity of the underlying security at a predetermined strike price on or before its expiration date.
On the other hand, the seller or writer of a put option is obligated to buy the underlying security at a predetermined strike price if the corresponding put option is exercised.
This is the opposite of a call option, which gives the option holder the right to buy an underlying security at a specified strike price, before expiration.
Put options are used as downside protection since if you own the underlying asset and you have the right to sell it at some price, it effectively gives you a guaranteed floor price. Put options can also be used to speculate on an underlying if you think that it will go down in price. Thus, a put can give short market exposure with limited risk if the underlying in fact rises.
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When Is a Put Option "In the Money?"
A put option is considered in the money (ITM) when the current market price of the underlying security is below the strike price of the put option. The put option is in the money because the put option holder has the right to sell the underlying security above its current market price. When there is a right to sell the underlying security above its current market price, the right to sell has value equal to at least the amount of the sale price less the current market price.
An in the money put option therefore is one where the strike price is above the current market price. An investor holding an ITM put option at expiry means the stock price is below the strike price and it's possible the option is worth exercising. A put option buyer is hoping the stock's price will fall far enough below the option's strike to at least cover the cost of the premium for buying the put.
The amount that a put option's strike price is greater than the current underlying security's price is known as intrinsic value because the put option is worth at least that amount.
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on set up two #2 where would you have your alert level
where you would short it
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what percentage do we have to get paid of what we are risking?
10
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Set up #1 where do you sell PBS
At the second barrier. right on or right above it
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set up #1 because you are selling it a bit closer to the current price you are probably going to get what percentage ROI
15% or higher return on Investment ROI
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set up #1 for a bear call spread. Where do we sell?
Right at the resistance or above. we need two or more barriers to come before it
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Where do you set up alerts on #1
2 alerts set
in the concern zone (first barrier is broken)
and sold strike of your spread which is on the support zone (or resistance)
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if you hit ?% at any time within the first three days of a spread you can get out. you dont have to but Tony does
50. The last days of the spread will just take a long time. You wont make much more and you could put the money somewhere else and make more
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For short term credit spreads, how close do you sell from the price of the stock generally. This means gaps are tough.
2-3%
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What are the cautions of short term credit spreads? (5)
1. Short term CS have a really high ROI, but also have a small cushion to be wrong, since you have to sell closer to the stock price.
2. "Every time I stepped outside of the plan I lost money."
3. More for the advanced traders that are good at reading price action.
4. You will need to hedge more often with short term spreads since you will be wrong more often.
5. Everything happens quicker - good and bad.
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Why use only those 8 stocks on a short term credit spread. Same week spread.
1. They have high Daily IV but dont gap a lot.
2. They are consistent trend following stocks.
So he can sell a good distance away from a couple days out expiration and win. Any other stock that is going to pay you with a high IV, there is prob news coming out and it will gap.
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What do you mean by .25 delta or lower?
The further away you go from the price of a stock, the lower the delta is.
It's your percent chance that your stock will be in the money by expiration.
So if you're selling the option you have to reverse that and think 90% chance it wont be in the money if it's a 10 percent delta.
with .25 it's 75% chance.
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When you set your targets to buy back on PBS, what percent must you not go below?
70% premium capture or more
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Entries for SAME WEEK expiration. (7) stocks. (7 steps). plus (2) other points. What are these things you have to know?
1. Only entering Monday or Tues
2. You dont have to wait for a bear day to sell a bull put.
3. Expiration is the current week's friday.
4. Sell with the daily trend
5. Need 1 DAILY and a WEEKLY barrier between sold strike and stock price
6. Set up #1 selling right at support or resistance. Better premium but harder to hedge
7. Set up #2 selling below a support/above a resistance. Allows you to use that support/resistance level as a place to hedge.
Other two points
8. Must get paid 10% ROI
9. Have a strong hedge plan in place before taking the trade. Sell at the correct location.
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For same week expiration, when is the time to get into trade. Why?
Only Monday or Tuesday.
Monday morning is the best time to enter the spreads.
That is when the expected move is the greatest for the week. You can sell farther away and still get paid, with greater chance of winning.
The first 30 minutes to an hour is the best time if the set ups are there.
and then when the stock picks a direction, the hope factor goes down.
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Dont forget to watch intro to options and the free advanced course - options
sldfkja
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Selling out of the money is selling what?
hope
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With regards to selling with the trend on same week spreads..what do you need to know about trend and candles?
Stay with the trend.
dont assume it will reverse just because it has a lot of candles.
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How do you handle barriers with the same week credit spread?
Need 1 daily barrier in between your sold strike and the stock price.
Daily support
Daily EMA (10,20,50,100)
Need 1 weekly barrier in between your sold strike and the stock price.
Weekly support
Weekly EMA (10,20,50,100)
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on short term credit spreads what ROI do you need
We need miniumum 10% ROI.
He prefers 15-17% of the risk you take.
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Main SET UP for same week expiration. #1. What is the set up on the chart.
1. Big pullback to weekly support
2. Strong break of an S-Curve
3. Trap and reverse
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the indicator was created for what time frame and trade type
monthly
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Entry on a one week spread. Pullback to weekly support. what does that look like?
where would you sell for #1?
How many does he get in?
What is a common occurrence for short term spreads?
On weekly and daily....you need a support. We want a pullback. Sell at weekly support for #1. goes up a little in price and we win. He gets in 2 or 3 a week in a good IV market.
You will have to hedge these more often. You will have to know price action well. More skilled. Need your hedge plan in place.
You make money on a little bounce
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For short term one week credit spreads. what does he do monday and tuesday to find trades? specifically on the charts?
He looks for potential breaks in S-curves and sets up alerts where that would be.
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What does he do on Fridays?
Takes time to look at weekly charts to see how they are about to close.
Looks at how trades might set up for monday and tuesday also.
Later as he got more experienced he doesn't need to take time to do that. Can do Monday morning
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How much time does he spend on his credit spread research?
30-40 min on monthly spreads, per week.
Short term spreads 1-2 hours on monday or tuesday.
3 hours a week to make a ton of money.
he spends most of his time on the golf course.
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What does breaking of an S curve look like?
Where the curve should continue it's trend, it doesn't and it goes the other way. That is where you get into short term spreads.
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Where do you get in (on the chart) on a weekly credit spread?
Below the daily and WEEKLY first support.
At or below the second DAILY support barrier 2.
They can be reversed. Dont have to be in that order
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How does an entry trap and reverse work on a weekly credit spread?
1. On a daily chart. The daily candle goes below the Daily support (barrier) and then closes above it by the end of the day.
**Best case: happens on a friday! And the example closed with a hammer.
He's only looking at those 8 stocks so it's easy to scan.
NFLX, SPY/SPX, AMZN, AMD, SPOT, TSLA
2. As it breaks out and opens above the hammer on monday. he's got his barriers and things figured out.
3. He then enters the trade and sells at the daily support barrier 2 and hopes it works a couple days later.
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How do we manage same week trades? (3)
1. Exit the spread, no matter what by end of day Thursday.
Expiration day Friday is the only time you can lose max loss.
2. Profit target is 70% or more premium capture
3. Have a game plan to hedge before you get filled on the trade.
Hedge plan is determined based off of entry #1 or entry #2
Entry #1 - selling right at support
Don't hedge, or do a reverse hedge for #1
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2 Week Expiration: (5) RULES
1. Can trade this strategy on any stock that meets the requirements
2. Enter on any day
3. Dont sell with stock that have inflated IV
with monthly spreads you can get away with it since the stock most likely wont gap to your spread. Selling 2 weeks out you are still too close to the stock price and gaps can easily take you out.
4. 5000 average daily option volume minimum
5. Must get paid minimum of 10% of your max loss
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2 week expiration general ideas
1. easier to trade than the same week exp
2. expect to win after 2-7 days
3. 87% win rate
4. Entries are based off of more rules than chart knowledge. (like roberts plan for credit spreads).
Your knowledge of price action doesn't have to be as skilled, but you will need to know how to read price action to get the most out of this strategy.
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Entry Location rules for 2 Week spreads (4)
1. Need 2 barriers in between your sold strike and the stock price. A weekly and a daily barrier.
2. RSI on the 2 hr chart needs to be extended in your spreads direction before you can take a trade (oversold (<30) for bull put spread, and overbought (>70) for bear call spreads)
3. SET UP#1 Selling right at support or resistance better premium but harder to hedge.
4. SET UP #2 Selling below a support/above a resistance allows you to use that support/resistance level as a place to hedge.
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Example of 2 week option trade. (3)
1. needs to be oversold on a 2 hour chart. can create a scan for that
2. delta .25 or lower
3. Go to a weekly and identify two weekly barriers. One of the barriers can be a daily. But on the monthly BOTH need to be weekly barriers.
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He keeps ?% of his total account for credit spreads.
16. not sure that is something I need to think about as my entire account will be used for that
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Concern zone for the two week credit spread. (how do you manage it?. (4)
Hedge plan based off of #1 or #2 entry.
1. #1 Selling right at support. Dont hedge, or do a reverse hedge
2. #2 sold spread below a support/above a resistance
3. Buy the hedge if it closes below the alert level with a 1 hr candle
4. Profit target = 70% premium capture
Exit the trade no matter what the day before expiration
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Dont's with short term spreads - 2 weeks
1. Do not sell against the trend even if you think it will go reverse a couple days.
2. if the premium is too good - don't take the trade.
** if you're getting paid more than 30% on your max loss and you're selling less than .25 delta = too good to be true.
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options rewind on TOS you can practice back trading options. Not sure I need to do that?
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?% of your total account do you put on each credit spread trade
16
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Gaps happen to him with his short term strategy that knock him out how many times out of how many trades.
3 out of 74 in a year
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He will do CS on more stocks on bi-weekly.
He can use any stock for the two week.
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if you have a good hedging plan youre going to make money no matter what? T or F
T
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Rules for hedging are the same for all Credit Spreads. But for the monthly what are you looking for before you hedge, and why is that different from a one or two week CS hedge?
You are going to make sure you have more confirmation. Wait for a daily close across your alert.
For the two week or the one week, he may wait for a one hour close instead.
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Rules for Hedging (4)
1. Only enter a hedge if your rules have been met. Not because a big scary candle has come in.
2. Only hedge if it makes sense
If your max loss is 5K, and you can buy puts, that turns your max loss into $1500 = great hedge
If your max loss is 1K, and you buy puts that cost $2K, max loss is now 1500 = not a good hedge.
3. Can only do 2 hedges on the same trade, don't get whipsawed.
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when you are in a losing CS and you want hedge more, what would you need to be doing to make another hedge worth it?
cut the loss at least in half.
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You can only do ? hedges on the same trade.
| Why?
2.
| You will likely get whipsawed and lose A LOT more than you would have originally.
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How to hedge #2
What is the key point?
What three supporting points do you need to remember?
The spread location where you sold is key to be able to hedge effectively.
1. If you sell too close to your alert level you'll need to buy a lot of puts/calls to hedge = the more you spend on your hedge the harder it is to lose small on the trade.
* *Sold strike of spread needs to be at least 2% away from the alert level. But he seems to have not been real good with them buying even that close.
2. Make sure there are no other major support levels in between your alert level and your spread.
** If you sold your spread below a support, but there is another strong support between your alert level and your spread = when you buy puts when it hits your alert level, goes lower, hits the next support level and then bounces and you lose on those puts.
3. When your alert level is triggered your no longer trying to make money on the spread, your goal is to lose small or break even and get out.
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Why is it easier to set up #2
because you have a clear zone where you are wrong. Your alert zone is actually where you would short it.
202
to hedge #2 you have to buy how much?
30% of your max loss. So you need to make room.
At your sold strike your spread is going to be down 30% of your max loss.
So at your alert you need to buy puts to cover this loss at break even or at a profit by the time it hits your sold strike.
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What percentage do you hedge most CS with and if you can't do that percent due to expense of stock (over 1K or more), how do you make sure the numbers work?
You don't want to spend more puts or $ than half of what your max loss is. If the space between your legs is too much to hedge properly. Dont do the trade.
for most stocks it's at least 2% of stock value. But for more expensive stocks that's too much (AMZN) so just make sure the math works.
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When your alert level on set up #2 goes off. what happens then. What is the rule.
you no longer want to be trying to make money. Your goal here is to lose small or break even and get out.
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rules for Set up #2 hedge
| (3). On all time frames
1. Do not start the hedge until your alert is triggered
2. Wait for a 1 hr candle close across your alert level (can be a daily candle)
3. Exit hedge and spread when the stock price hits your sold strike/or when break even if it has not gotten to your sold strike yet.
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Bull Put Spread Hedging rules for set up #2. on Bull Put Spread - tips. (3)
This is after your alert is hit. What is the protocol?
1. buy puts when the stock closes with a 1 hour candle (or daily candle) below your alert level,
UNLESS you're oversold on the 1 hr rsi. (Below 30 on rsi)
if oversold on the 1 hr at the time of the 1 hr candle close below alert, WAIT 1 day before getting into hedge.
After waiting 1 day, get into hedge when the rsi is no longer oversold
Then wait for another 1 hr candle close below alert level, if not below it already.
2. Use the analysis tool to determine how many puts you will need to buy so that you will be at break even by the time the price gets to your sold strike.
3. If you get two 1 hr candle closes back above your alert level, after you entered the hedge, exit the hedge for a small loss.
Remember you are still going to make money from the spread so it's not that bad. Our goal is to lose small.
Bear Call Spread
same but inverted. (above 70 rsi)
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where are you going to choose your strike for your hedge?
Between your alert level and your sold strike of your spread
(too close to the price and it will cost a lot, too far from the price and it will lose value faster if the stock reverses)
You will plan ahead and know how many you will need to buy.
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If you only have a couple contracts
dont hedge. it's not worth it.
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on the analysis tool for Trade Station what do the colors mean?
yellow
green
purple
Blue on both ends
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gives you an estimate on those days
yellow is your p/l today
green is just a selected date so you can watch it as it progresses
Purple is close to the expiration
Blue is the expiration and is capped at max profit and loss
All of these can be adjusted and more or less addded and colors changed.
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On the Trade Station analysis tool where is the price of the stock
Where is your P/L
Where is your break even?
where do you know youre losing money on a Bull Put Spread
On the bottom of the graph moving from left to right. less to more
on the left
On the dotted line
Any line below the dotted line you are losing money on
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Why is the blue line flat on the Trade Station analysis tool?
Because that is the expiration date
There is a max profit on BPS. You can only make what you get paid. Your P/L is capped out what you made.
You also have a max loss which is also a flat line blue
212
What is a covered/married stock
shares hedged by options
213
In the vertical spread where you have two strike prices in front of you on trade station. Which is the short and which is the long?
The short is the one closest to the side of whatever type of option you are doing. (On the put side the strike price closest to the put side of the option choices is the short. The strike further away will be your long strike)
214
When looking at strike prices on the Trade Station options sheet. When do you choose the ask and when the bid?
Bid is red and ask is blue. If you are selling a put. You choose the red row because you are selling. The red row is the bid.
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When looking at the options sheet. Where do you look to compare the percentage you need for the trade (at or more than 10%).
The Mid price.
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Hi Lera! I hope you are able to learn all of this really fast! In two weeks we will be experts. LOL
yay!
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For two week spreads..look at the RSI on what chart? And what do you also need to remember about it?
What should the RSI be or BPS and for BCS
2. RSI on the 2 hr chart needs to be extended in your spreads direction before you can take a trade
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(oversold (<30) for bull put spread,
and overbought (>70) for bear call spreads)
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Where do we set up #1 for a Monthly bull put spread. (photo)
Monthly
219
Set up for Bull Put Spread #1
| Photo card
220
Set up for BPS #1 and 2# (photo Card)
221
Same week credit spread. Pull back to weekly Support entry. One of three types of entries.
222
Same week credit spread. Entry Break of S - Curve.
| One of three types of entries. Describe what it looks like.
Break of S-Curve
223
Same week Credit Spread
Entry Trap and Reverse
One of three types of entries.
224
two week expiration example of a credit spread
| Photo
225
Example of hedging BPS #2
226
Example of Hedging Bear Call #2
227
Example of Hedging Bull Put Spread Set up #1
This card is blurry and the original screen is blurry too. this is as good as it's going to get
h
228
Monthly spread rules. 15-60 days to Expiration (from Quick reference sheet) (3)
1. Minimum of 5000 average daily volume total (calls and puts)
2. Dont sell over earnings
3. Check news from 3 different sources to confirm major announcements
229
Entries on Monthly credit spreads: 15-60 days to expiration (5- from tonys sheet)
1. oversold on the 4 hr RSI
2. Locate the next closest 2 weekly barriers (Weekly EMA, or weekly support)
3. Determine if you will be selling set up #1 or #2
4. Once you determine your location on the chart, go to your broker check to see if that location pays at least 10% ROI
5. Make sure that location is easy to hedge
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Advanced Set Up Entries Monthly
1. Set Ups
Pullback to weekly support
Strong break of S curve
Trap and Reverse
2. Need to have 2 barriers (weekly chart)
3. Choose set up #1 or #2
4. That location must pay you 10% minimum ROI
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Manage the trade on the Monthly (quick reference)
When your filled...
Enter target for 70% premium capture, or more.
Set alerts at your concern zone, and alert level (spread zone?)
If stock closes with daily candle in concern zone...
If your profitable exit the trade, take the win
If your not profitable, wait until you are, then exit around break even/wait for your hedging plan to be triggered, then hedge it
232
Same week expiration spreads RULES. From quick sheet. (7)
1. Minimum of 5000 average daily volume total (calls and puts)
2. Dont sell over earnings
3. Check news from 3 different sources to confirm no major announcements
4. Best when VIX is above .25
5. Only trade these stocks: TSLA, AMZN, SPY/SPX, SHOP, NFLX, AMD
6. Sell .25 Delta or lower
7. Only enter trades on monday and tuesday
233
Entries on Same week Expiration
Set ups
Pullback to weekly support
Strong break of S Curve
Trap and Reverse
2 hour oversold
Need 2 barriers (weekly and Daily)
1. Choose set up #1 or #2
2. That location must pay you 10% min ROI
3. Hedge plan
234
Manage the trade on Same week expiration.
When you're filled...
enter target for 70% premium capture, or more.
Set alerts at your concern zone, and alert level
If stock closes with daily candle in concern zone...
If your profitable, exit the trade, take the win
If you're not profitable, wait until you are, then exit around break even, or wait for your hedging plan to be triggered, then hedge it.
235
2 Week Expiration Credit Spreads
Rules
1. Minimum of 5000 average daily volume total (calls and puts)
2. Dont sell over earnings
3. Check news from 3 different sources to confirm announcements
4. You can trade any stock that meets the rules
5. Sell .25 delta or lower
6. Entry can be on any day, but can't sell current weeks expiration
236
2 Week Expiration Entries
Set ups
Pullback to weekly support
Strong break of S curve
Trap and reverse
2 HR oversold
Need to 2 barriers (weekly and a daily)
Choose set up #1 or #2
That location must pay your 10% min ROI
Hedge plan
237
2 Week Expiration Credit Spreads
Manage the Trade
When you're filled
Enter target for 70% premium capture, or more
Set alerts at your concern zone, and alert level
if stock closes with daily candle in concern zone
If you're profitable exit the trade, take the win
If your not profitable , wait until you are, then break even/wait for your hedging plan to be triggered then hedge it.
238
What barriers do you look for on:
1. weekly entry
2. Two week entry
3. monthly
1. daily and weekly
2. daily and weekly
3. 2 weekly.
239
Same Week Expiration General Rules. (11)
1. Minimum 5000 average daily volume total (calls and puts)
2. Don’t sell over earnings
3. Check news 3 sources
4. Best when VIX is above .25
5. Only trade: TSLA, AMZN, SPY/SPX, SHOP, NFLX, AMD
6. .25 delta or lower
7. Only enter trades on Monday and Tuesday
Monday within the first half hour is best.
8. You don’t have to wait for a bear day to sell a bull put
9. Expiration is the current week's Friday.
10. Sell with the daily trend
11. Must get paid 10% ROI or higher
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Advanced Set up On Monthly. ***. (5 sheet)
1. Pullback to weekly support
2. break of S curve
3. and reverse
4. 2 barriers on the weekly chart
5. Choose set up #1 or #2 - must pay 10% ROI
241
Managing the advanced Trade on the Monthly*** (sheet)
When your filled (2)
If stock closes in concern zone (2)
When you’re filled
1. Enter your target for 70% premium capture, or more
2. Set alerts at your concern zone, and alert level
If stock closes with daily candle in concern zone
1. If you’re profitable exit the trade, take the win
2. you’re not profitable, wait until you are, then exit around break even/wait for your hedging plan to be triggered, then hedge it.
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Hedging Monthly for Set up #1 *** (sheet)
Option #1
Option #2
1. Option #1 - No Hedge
Don’t do any hedge. If you get two daily candle closes below your sold strike close the spread out for a loss. Usually give it a day and you will be able to see if any strength has come in or not.
Option #2 - Reverse Hedge Plan -
Since set up #1 has you selling at resistance/support level you can use that to your advantage. A stock that has made a big move lower and hits a weekly support, most of the time bounces off of that support for a short time. If you sold a bull put spread right on top of the weekly support you can wait for the stock to reach your sold strike (weekly support) then buy calls.
These calls will make money as the stock bounces off of the support, at the same time your spread value losses will decrease. The long calls will get you to break even very quickly so you can exit the spread avoiding the loss.
There are downsides to this hedge. If the stock does not bounce off of the support then you will lose a little more because the long calls will lose money also.
I keep a tight stop on these calls. Use a strong support to judge the strength. If we break below the support then you know to exit the long calls and lose small on them
Dont buy the calls far from the support that you sold your spread on (tip: sell your spread right at the support, not a few dollars above it, makes it much easier to hedge.) The closer you are to the support the faster you can determine if you’re wrong or not.
243
What are the rules for the Option #2 Reverse Hedge Plan #1 set up on the Monthly *** (7) Sheet info
1. Before you get filled on this spread you will plan to use the reverse hedge if the price gets to your spread.
2. Determine the next resistance level above your spread on a daily chart.
3. Then use the analysis chart to determine how many calls you will need to buy to be at break even by the time the price gets to that resistance.
4. When the price is close to your spread (less than .25%), you can start legging into the hedge. If you need to buy 4 calls you can leg into 2, then buy the other two when it hits your sold strike. Or just wait until it hits your sold strike and buy the 4 then. Up to you.
5. Buy around the .35 or .40 delta calls (just out of the money) with expiration no shorter than 2 weeks out, or longer if you want and the cost is reasonable.
6. Exit the hedge and your spread for a loss if it closes below the sold strike of your spread with a daily candle.
7. If the hedge works, exit the hedge and spread when you’re around break even (profits from the calls are more than what the spread is losing)
244
Before you submit your order verify that... (7)
1. You are receiving a credit for the spread and not paying a debit for it. If it's a bull put...
2. You have the correct strike prices
3. You have the correct expiration date
4. You have the correct limit order entered
5. You have a hedge plan.
6. You are not selling over earnings or other news
7. You have the correct amount of contracts
245
still have to make cards for how to handle overnight gaps. Then mostly done with making cards.
246
Bear Call Spread
A bear call spread is a two-part options strategy that involves selling a call option and collecting an upfront option premium, and then simultaneously purchasing a second call option with the same expiration date but a higher strike price. A bear call spread is one of the four basic vertical option spreads.
247
What to remember when looking for price action in deciding a lower high. 2
1/2% of the stock price close to the area is fine for a lower high.
If there a lot of body closes and then it just wicks up. That's fine too
248
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How are options priced? (3)
from class not second one from tony
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Extrinsic
Intrinsic
Implied volatility
249
set up 2 has to go under what?
2 barriers and a higher low
250
What is his concern zone. How does he identify it.
It's the second barrier from the price. It's never the first barrier. its where you dont want the stock to go
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What happens if you get a close in the concern zone in #1
You are taking your profits. Get out.
| If you are not profitable. Do nothing and wait for hedging plan to come into play.
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DTE
Date to expiration
253
for #1 if it goes against you how do you hedge
Buy calls for a BPS. If it doesn't bounce you have a very tight stop with the calls
A reverse hedge is: doubling down on our direction.
We just need for the calls to go up a couple days.
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News Sites
```
CNBC
Google: news on
releasings on
bloomberg.
just google the crap out of it.
```
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when do spread set ups happen the most?
sometimes its slow and sometimes its busy
with monthly he can scan all month and one week of the month he can get into all his spreads. But doesn't always happen
Sometimes he sees 5 set ups but earnings are coming up and he cant get paid properly or earnings are coming up
hit and miss especially with earnings coming up
Matter of what scanner is set up to and how much you want to look (what does he mean how much I want to look? I want to look as much as I possibly can)
his scanner is set up to 2 to 3 week with the big pullback to a strong support
scan that has 3 or 4 bear or bull candles in a row
how often does he scan?
oversold on a daily is a good scan
bullish stock that is getting beat up on a strong weekly support is one of his entries.
When the market is right you will have too many you wont even be able to do them all.
256
He really likes to get what percent most of all?
14%. so when he buys it back he gets 10%
257
How to put in your profit target on Trade Station. He gets paid 60$ on the spread.
1. Do we put in a 50% target first?
2. to put in 70% He looks at his "net profit" and takes 10% and multiplies that by 3. :) (what is 70% of 60$ = 18)
3. Take Net profit and subtract that number (30%) He wants a profit of 42$
4. On the Manage page, Right click on your spread (area) that you blended together, and click on "close position"
5. Watch the "max profit" area and adjust the "limit price" to get the max profit as close to the 70% profit target you calculated. (Net profit - 30%)
6. MAKE SURE it's GTC or you have to cancel it and redo after placing the order.
6. Press "place order".
7. Sometimes there is a delay. So just wait a minute or a few to make sure the trade gets in there. Dont redo it because you think it didn't work. (prob best not to do the last few minutes of the day then....)
258
How do you look on the analize chart to see what price the stock has to go to, to get to your 70%?
Look at where the yellow dot is over on pricing
259
how to tell if it pays enough based on your spread.
What is spread
how do you figure out on the options chart what it pays
What is your spread? 5$ for me right now
Multiply that by 10 = always… 500
What is 10% of this number? 50
Compare this to the mid, where you want to sell it. Multiply mid by 100. Move decimal over to the right twice. We are looking at .82 in the Mid price. So this one pays 82 dollars
Anything over .5 is always good. But make sure the spread IS 5.
So depending on the spread it's (point .?). 8 dollar spread needs to be .8
260
set up one is at next higher low down/ set up 2 at least 2% below that.
Sda
261
Concern Zone Rules. How to set it up
The concern zone is simply the area where it should not go. So if you go to a 1 hr chart and identify where the higher low is ( needs to be before the alert level) if we take that out it's not showing strength. So put your concern zone on a 1 hr a curve break
262
to make the S curve.....
| to break the S curve...
Can be a wick even or above the LH
| has to close above or below the lower high
263
he's in monthly credit spreads how long?
5-15 day
264
How do you enter an iron condor in the broker?
If you put in it as a iron condor it's hard to get filled. Do it separately. So get filled on the bull put spread part. Then get filled on the bear call spread part
265
if we need to hedge a BPS we need to? / if we need to hedge BCS we?
Buy puts
Buy Calls
You are correct, if it is a setup #2!
With a BPS:
Setup 1 would be calls because we are expecting a bounce off the support.
Setup 2 requires puts because we are expecting it to continue to move down because it broke through the support.
With a BCS:
Setup 1 would be buy puts because we are expecting a drop off of the resistance.
Setup 2 requires buy calls because we are expecting it to continue to move up because it broke through the resistance.
266
on a chart when the bears or bulls both get stopped out close together it's likely creating a ? And how do we trade that?
a channel.
| Only deal with the outsides of the channel.
267
on a massive run in a direction do not sell?
a spread in that direction because the trend will be broken eventually
268
When stocks are parabolic. What do we do?
be careful because it's the hardest and the most frustrating time to do credit spreads. Sell two higher lows back. sell 3 months spreads back. Earnings may be an issue. Ask Tony. But we may be able to sell over earnings with this strategy. The moves are so big that we can make money and get out in a week generally. it's really hard to hedge at all time highs too.
269
wait for the break
we want to make sure it's strong. two candles at least.
270
How are options priced? (3)
1. Time
2. Underlying Stock Price (strike)
3. Volitility
STV
271
Monthly: When he is selling a pullback to a weekly support on the advanced set up, he's usually going to do what set up?
A big weekly pullback into a weekly support (1 out of 3 set up for advanced #2 monthly credit spreads)
#2. You are selling a little bit closer and this one is more aggressive. But they come up more often.
They also require you to hedge more often.
Selling about three weeks out. Anything over 2 weeks he considers it his monthly plan.
272
What is a monthly trap entry? (advanced set up #2 (2 out of 3)
Weekly candle to break the support entry and will close above back above the support in the same weekly candle. Then he will get into the spread the following monday.
273
What is the 3rd point on advanced set up #2? (3 out of 3)
Break of an S-Curve. with a close above it. and then we wait for a retest.
All Set up #2 advanced need 2 barriers (in video)
274
What are the three monthly set ups for set up #2
1. Big weekly pullback to a STRONG weekly support. (sell three weeks out. Always wanting to be selling this #2 on this one for sure)
2. Trap set up. Weekly candle dips below support and then closes above it in the same week. (Get in the following Monday)
3. Break of an S-curve - (wait for the pullback of that to get in)
275
For set up #2 monthly. if you start getting a set up what does that mean for the future.
You will prob get more quickly, as one sets up others.
276
How long to do you hold a credit spread for?
Normally hold for 20% of the time. So if you sell it 1 month out normally youre in it for a week or so.
277
Must get paid how much?
10% of ROI
| so He goes for 14%
278
Hedge on #2
Alert on a #2 is at the spot where you would do a #1.
| If you get a 1 hr close over the alert and if it's not overbought on the RSI, hedge by buying calls.
279
What are you looking for when you get into a spread.
1. for the stock to simply have a pullback
2. that pays you enough to make money down where you want to sell it
3. try selling 30 days out to start with
4. Then choose your higher low on a weekly chart.
5. And look and see if it pays you 10% of what you are risking.
6. If you have a $5 spread, meaning you are selling a $100 and you're buying the 95, then you would need to get paid .5 or higher.
280
Iron Condor
selling a put spread (bull) and selling a call spread (bear) (neutral position) Want the stock to stay inside that range of the date you chose.
281
what is Nat and what is MId
Natural - pay the best available price and sold at the best available bid. selling everything on the bid and buying everything on the offer. no negotiation. This is the at market price?
Mid - the negotiated price. The average of all the bids and all of the offers. The middle of where everyone wants to buy it. Not just was is offered and asked for as in the natural.
282
Getting into spreads. So If i have a 5 dollar spread for credit spreads. How do I tell if it pays enough?
1. you need at least 10% payment (15% better) So 50$ on 500. 5 dollars times 100. 15% is 75, 14% is 70. Look for &75
2. If it's .82 mid price would be 82 dollars. It's over 50 bucks.
3. Make sure you see Reward/Risk. This gives you the percentage. So .19 is 19%
4. if the spread is higher than 5$ you need the payment to be higher. So if it's 8$ then you need .80 at least at a minimum.
283
So for a credit (spread) how do you move the limit price to get filled more quickly if you are not getting filled?
You move the price lower (you get paid less) because it's a credit. You are getting paid that, so you want to get more money for the mid price if you can. The mid price is what you are selling it for so you want to make more, rather than less.
284
delta for calls and puts. What are negative and positive. And what would be closest to nutral delta in the market and what does it mean?
Long calls are positive
short calls are negative delta
long puts are are negative delta
short puts are positive delta
zero and the closer to zero your account is the less it will be affected by big moves in the market. And the delta in your account is akin to one share. So if your delta is 5 it's like owning 5 shares in the market overall
285
What does beta weighted mean?
286
components of the volume profile are what? (8)
```
Value area
value area high
value area low
high of day
low of day
point of control (POC)
Low volume node
High volume node
```
287
when are we allowed to look to buy options on a weekly chart?
When it breaks a pivot point. It doesn't have to have two bear or bull, for some reason a pivot is enough.
288
You want to get into credit spreads when as far as sentiment?
When you dont have a clear edge. Maybe using all your chart reading skills to predict. But then he waits for the market for ten minutes to decide what to do. Confusing. Hes watcing the SPY open to see what it does on a one minute. Seeing if it takes a direciton. Hes looking to see how quickly we take out bottoms if it rolls. Ok so when you see it chopping that's good for credit spreads. You want it to kind of hang out. Theta eats it up and you make money.
289
with options which ones do we not need to move quick?
None of them. We need them all to move quick. Even leaps. short term can go sideways for a bit but only a couple days. Day trade only a couple hours.
290
Plan on the market doing what? This is the best way to make money thinking like this.
The rudest meanest thing possible.
291
When do spreads work best
When people are confused. When people know where the market is going, spreads aren't as good.
292
You could just do spreads and have a stupid consistent income
293
anything lower than the current price on an options chart is what?
Out of they money. When buying puts
294
Delta
how much will the price of an option move if the stock moves $1? That’s where “delta” comes in.
Delta is the amount an option price is expected to move based on a $1 change in the underlying stock.
Calls have positive delta, between 0 and 1. That means if the stock price goes up and no other pricing variables change, the price for the call will go up. Here’s an example. If a call has a delta of .50 and the stock goes up $1, in theory, the price of the call will go up about $.50. If the stock goes down $1, in theory, the price of the call will go down about $.50.
Puts have a negative delta, between 0 and -1. That means if the stock goes up and no other pricing variables change, the price of the option will go down. For example, if a put has a delta of -.50 and the stock goes up $1, in theory, the price of the put will go down $.50. If the stock goes down $1, in theory, the price of the put will go up $.50.
As a general rule, in-the-money options will move more than out-of-the-money options, and short-term options will react more than longer-term options to the same price change in the stock.
295
If my max loss is 3,000, what is my true loss?
30% 800 dollars
296
What delta does he buy and sell at
when hes buying he usually buys at 35 to 40 delta. Just out of the money. When he's selling it doesn't matter.
297
Anything lower than 50 Delta is ?
Out of the money
298
Anything lower than ? delta is out of the money
50
299
How do you use the pivots George?
What I typically do is get 1 put there then add if it pops a little more. If it fails that area strongly, I will try to get an add on if there is a second push to the pivot.
Depends on how strong it is. If it just blows through the pivot, then you want to be more cautious.
300
TZang. Three Best practices rules for 45 day credit spreads?
1. Exit with a profit of 50% max gain first day. Then move to 70%
2. Exit with a loss of 100% max gain.
3. Exit at 21 days to Expiration if you have not hit either 1 or 2.
A. You can exit or roll if you like how it's going
Example: Sell a 10$ wide credit spread for 4$ max profit. Take profits ar 2$ debit. Stop loss 8$ debit.
