Options Trading Newsletter - Issue #89
NEVER STOP LEARNING OR YOU WILL GROW OLD...
NEVER STOP LEARNING OR YOU WILL GROW OLD......
People say when you grow old your brain cells start to die... okay, maybe some parts start to die but never the mind...
The mind is a powerful thing and when you feed it it will grow and stay healthy... Feed it as to continue learning and improve yourself...
You will never know everything and everyday you can learn something new...something that can help you become better...in anything you do, be it at work or at home in a relationship.
An investment in knowledge pays the best interest - BenjaminFranklin
So just soak in as much knowledge as you can as that will definitely keep your mind sound and most of all your pocket and heart full.
SPX - 4026
SPX is up 60 points (1.5%) for the week and is sitting at the key level at around the 4000 level. In the previous week, it reached the same levels and got kicked back down. Stochastics remains oversold for some time now and there is high chance it will take a breather anytime. What makes it stands higher is mostly coming from the Fed Meeting Minutes released last week showing some signs of reducing the velocity of the rate hike from 75 bps to 50 bps at the forthcoming 14 December meeting.
The daily 50 MA is just slightly above at 4050 another hurdle on the upside waiting.
This week's trading range is 3950 to 4100.
NDX - 11756
After the failed attempt to breach 12000 mark, NDX came down to 11500 finding some brief support and closed at 11756 on low volume trading half day Friday due to the holidays. Anyway we saw relative weakness in bigboys like AAPL, AMZN and not to say TSLA which has had a severe battering on its price since the Twitter deal went through.
Apparently AMZN sales for Black Friday was quite positive and we shall see if that will also stop the downtrend of AMZN. But it may be possible for NDX to comeback down to daily MA at around 11400 level.
This Wednesday is the GDP quarterly announcement and Fed J. Powell will also speak later that day. Likely a market mover depending on which direction and indications of Fed stance on forthcoming rate hike.
Futures opened down big on Monday. This week's trading range is between 11,500 and 12,050.
DELTA
Most of us know what the Greek Delta represents - ie. Delta is an amount an Option price is expected to move based on $1 change in the underlying price.
However, very little people know how to take Delta as a "Position Delta" on an underlying stock. What it means is we view our options positions as a substitute for a certain number of shares of the underlying stock, which is adding up the Deltas of all options in your position and estimate how many shares that position is acting like. This way, we can know how we should react when the stock makes a $1 price move in either direction.
Lets break it down in numbers:-
a call contract with a Delta 0.1 is a substitute of 1 shares because 1 option contract represents 100 shares.
Recall the Greek Delta represents change in option price with a $1 move in share price.
With 1.0 Delta, a $1 change in share price will result in a $1 change in option price = 100 shares, stock value change is $100 and 1.0 Delta will also result in $100 change in option price because 1 option controls 100 shares.
The same situation will be for Puts on the opposite side with negative Deltas.
Applications
As Options is a leveraged products, we use it as a substitute to control shares as it uses a lower buying power. So instead of paying directly for shares, we can use options to control the same amount of stock. Example we intend to buy 50 shares on SPY at $402 which will cost $20,100 we can instead pay $2146 to control the same shares with 3 months call option at strike 405 Delta 0.51. However, the downside is the option will expire to zero value at end of 3 months if the stock price does not move up above strike 405 plus the value of the extrinsic value loss during the holding period.
Say if we are willing to put in a stop loss of a share purchase at 5% of the invested value, ie. 5% x 20,100 = $1,005 then this is the same like putting a 50% stop loss level on the 405 Call we bought. ie. if we lose 50% of $2,146 of the Call value, we exit the trade. This would be the same effect as if we bought 50 Spy shares and share price drops down by $20 from current level to $382.
However, if the share price goes up by $20 say the next day, the option value will be $35.46, a $14 increase, or a ROI of 65% if we compared to a 50 share purchase, the profits would be $1000 giving a ROI of 5% ($1000/20,100).
With the same stop loss of $1,005 value, trading Options would give a 65% ROI vs shares a 5% ROI, 13x higher with the same capital risked.
Takeaway
That's why I like to trade options more than investing to be able to grow your capital faster. Nevertheless, balance out your portfolio between investing long term and short term trading. Depending on the size of your capital, the lower your capital the bigger portion going into trading would provide higher potential capital growth. But still manage within your risk management risking no more than 1-3% of your capital per trade.
Tik Tok Videos
We started another content channel off Tik Tok. Follow-us on the channel so you will get notified of any videos posted. Also, share it with your friends our new channel. Follow here.
Trade Digest On XLE using Iron Condor #optionstrading #optionsstrategies — www.tiktok.com TikTok video from mystylework.trade (@mystylework.trade): "Trade Digest On XLE using Iron Condor #optionstrading #optionsstrategies". Iron Condor on XLE | Trading in Range Use A Neutral strategy | Iron Condor | .... Lazy chill out, romance overseas celebrity, 10 minutes(1019319).
5 ways to reduce cost of calls. The ultimate traders' guide. #optionstrading #optionsstrategies — www.tiktok.com TikTok video from mystylework.trade (@mystylework.trade): "5 ways to reduce cost of calls. The ultimate traders' guide. #optionstrading #optionsstrategies". 5 Ways To Reduce Cost Of Calls | options trading | traders | .... Lazy chill out, romance overseas celebrity, 10 minutes(1019319).
Trading options with 68.2% probability using Expected Move 😎 #optionstrading #trading101 — www.tiktok.com TikTok video from mystylework.trade (@mystylework.trade): "Trading options with 68.2% probability using Expected Move 😎 #optionstrading #trading101". Expected Move | How to trade options | trading options | .... Corporate Uplifting Inspirational Motivational Pop Rock Piano Violins Theme Song.
mystylework.trade (@mystylework.trade) on TikTok — www.tiktok.com TikTok video from mystylework.trade (@mystylework.trade). Butterfly Trade | How to setup low cost high returns options trade | Learn to trade options | .... Lazy chill out, romance overseas celebrity, 10 minutes(1019319).
Winning Options Strategies everyday. Creating high probability low risk trades 😎 #optionstrading #optionsstrategies #elonmusk @tastytrade — www.tiktok.com TikTok video from mystylework.trade (@mystylework.trade): "Winning Options Strategies everyday. Creating high probability low risk trades 😎 #optionstrading #optionsstrategies #elonmusk @tastytrade". Elon Musk | Stock trading | Another WIN 😎 | .... Sunrise.
Twitter shareholder's meeting for takeover by Elon Musk 13 Sep 22, 10am. Lets trade... #optionstrading #optionsstrategies @tastytrade — www.tiktok.com TikTok video from mystylework.trade (@mystylework.trade): "Twitter shareholder's meeting for takeover by Elon Musk 13 Sep 22, 10am. Lets trade... #optionstrading #optionsstrategies @tastytrade". select Nov 18 expiry | Sell ATM call strike 43 | recheck ATM price on open on Monday | .... TikTok's song-like tropical house(974524).
J.Powell's Message yesterday in 1 minute... @tastytrade #optionstrading #optionstrading #stockmarket — www.tiktok.com TikTok video from mystylework.trade (@mystylework.trade): "J.Powell's Message yesterday in 1 minute... @tastytrade #optionstrading #optionstrading #stockmarket". Fed Message??? 🏦 | Responsibility For Price Stability.... | Inflation Target | .... Suns.
What to expect for this week's market.. #optionstrading #optionsstrategies — www.tiktok.com TikTok video from mystylework.trade (@mystylework.trade): "What to expect for this week's market.. #optionstrading #optionsstrategies". SPX down 141 points (3.37%) last Friday after J.Powell speech | Monday another 27 points drop | but we see some slight support at 4000 level above daily 50 MA | .... Change My Mind.
Option Trade on JD - watchlist at last Traders Talk on 9 Aug. Closed today $922 profit 🤑 #optiontrading #tradingstrategy — www.tiktok.com TikTok video from mystylework.trade (@mystylework.trade): "Option Trade on JD - watchlist at last Traders Talk on 9 Aug. Closed today $922 profit 🤑 #optiontrading #tradingstrategy". Option Trade JD covered potential trade during 9 Aug Traders Talk Entry 9 Aug Exit 26 Aug Profit $922 | watch till end to see the trade we did 😉 | Option Trades Adjustments - Based on Price Actions | .... YOU'RE MY SUNSHINE.
Hawkish remarks by J Powell crushed the market - pullback expected until Next FOMC in Sept 21. Watch for key points raised #optionstrading #optionsstrategies — www.tiktok.com TikTok video from mystylework.trade (@mystylework.trade): "Hawkish remarks by J Powell crushed the market - pullback expected until Next FOMC in Sept 21. Watch for key points raised #optionstrading #optionsstrategies". Key Points For Traders | Here's what JP said.. | > rates will go up until inflation is down to 2% | .... Flip through.
TRADERS TALK
Send us an email @ support@mystlework.com if you have any questions and we can cover them during the show.
Review our past traders talk. Let more of your friends know about our show and let them benefit also. View Past Traders Talk here.
Follow-us so you will be notified when we go live! Follow and click on the notification button, so you will never miss a show.
Visit and follow us at our Facebook Page for more contents!
Access here >>Facebook Page<<
DISCLOSURES
Options involve risk and are not suitable for all investors. Please read Characteristics and Risks of Standardized Options before deciding to invest in options: https://www.theocc.com/components/docs/riskstoc.pdf
MYstyework is an Online Financial Literacy Educator and materials provided is solely by MYstylework and is for informational and educational purposes only. It is not, nor is it intended to be, trading or investment advice or a recommendation that any security, futures contract, transaction or investment strategy is suitable for any person. Trading securities can involve high risk and the loss of any funds invested. MYstylework, through its contents, does not provide investment or financial advice or make investment recommendations. Investment information provided may not be appropriate for all investors, and is provided without respect to individual investor financial sophistication, financial situation, investing time horizon or risk tolerance. MYstylework is not in the business of transacting securities trades or an investment adviser.