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Options Trading Simplified - Stock Market Education

Options Trading Simplified - Stock Market Education

I want to talk about options and options are great because they solve a massive problem that many traders come across and I'm all about finding solutions to problems and options are exactly that, a solution to an issue and problem that many traders face. So let me just kinda illustrate what's going on here. First, we just have, you know, a bunch of little people up here.

Stock Market Education, Trading Simplified

This represents just traders. Traders in general. And as traders in general, you know we're always looking to find well, we think stocks are gonna go up or we think stocks might go down. So let's say you're looking at a stock that cost 200 dollars and you're saying you know, I think that stock's gonna go up.

However, you're also thinking, well the only way I can make money on that is if I what? The traditional way, if you buy shares. But what's the problem here that many traders have? Well, it's 200 dollars a share. Unless you have a massive account, being able to purchase enough shares to make it worth your time becomes very very difficult. Now sure maybe one of these traders up here is able to do that, to go the traditional route of buying shares and get involved in the trade.

But there's nothing worse than seeing that your idea was right, that 200 dollar stock did indeed fall, and that money could've been made. Pretty frustrating, almost a feeling of helplessness, your hands are cuffed, your accounts just not quite big enough in order to get down here. But this is where options come into play and why options are very very beneficial.

If only there was a way to kind of pull a maneuver like that and there is. And they're called options. Options are a way to bypass this step and let you still get involved. So keyword here, get involved. With options, you can get involved with essentially anything in the market. Doesn't matter the share price because of the way options function, they're gonna allow you to get involved, skip over the traditional step of having to buy shares, and they're still gonna allow you to make money off of the play. Remember you recognize that this 200 dollar stock, you thought you know what?

For whatever reason you're using, whatever strategy, or whatever your methodology was of determining you know what I think this 200 dollar stock is gonna go up, you were right. But the only thing that was holding you back was your account size just isn't enough to buy shares.

But you were right and that's the important part. And because you were right, now with options, you could've still made money from it. You could've got involved with it. And that is the power of options, that is how options function. So what I wanna do is talk about three real trades that I participated in and that way it can give you an example of how exactly options work relative to the actual stock. Now before I get into the three actual examples, I wanna point out that you're gonna notice that the stock price in each example actually goes down in price. However, I've done this for a very specific reason, to show that no matter whether the stock price goes up or down, options will still allow you to make money.

So a very powerful thing as it affords you just massive flexibility. Stock price goes up, great you can make money. Stock price goes down, great, with options the way they function, you can still make money. So for the first example, I noticed this chart and it was currently trading right around the area of 119.50. And at that time I thought you know what? I think the price is gonna go down.

So what I then did was went and I bought options for two dollars and three cents. Now as it turned out, the chart led me to a proper conclusion and the stock did fall down in price, in fact, it fell as far as 117.46. And this was a percentage of one point seven percent on the decline and now in order to get involved, remember, that's what options are allowing us to get involved with.

I would've needed what 119 dollars and 50 cents. The minimum needed, I could've bought one share. However, think about that. Making one point seven percent on 119 dollars and 50 cents and then you have all those commissions, I mean, it makes sense. That's just not a very rational, not a very logical thing to do because the commissions are gonna eat away at everything.

However, let's look at the options. By the time everything was said and done, the options had gone as high as three dollars and 55 cents. And that was a gain of 75 percent. So hopefully you're starting to see the difference now. And to get involved, what was the minimum you needed to get involved? 203 dollars. Sure a little bit more than here, but what is that a difference of about 80 some dollars? So for 80 dollars more to get involved, (chalk tapping), you could've had an opportunity at 75 percent gain on 203 dollars. Not too bad. Again look at it like this, making one point seven percent on 119 dollars and 50 cents, or making 75 percent on 203 dollars.

You know think about that. Options, very powerful, and all you needed was 203 dollars in your account. I really wanna drive that home because that really shows how options function. For our second example, once again I found a stock and I thought you know what, that chart looks like it wants to go down in price. So at the time when I saw it, the stock itself was trading for 146.

80. So because I thought you know what, I think that's gonna go down and I went and bought some options. And for these, I paid two dollars and 80 cents for the option. Now by the time everything was said and done, once again the chart led me and was right, the price did indeed fall. The stock had fallen all the way to 137.60. And a little side note with this one, I actually alerted it to our chatroom, so you know it kind of, other people had the opportunity at it, so this was an actual chat room alert too that I issued, but it dropped down to 137.60 so that was a decrease of six point three percent on the fall.

Now, how much money would you have needed to get involved? Again if you're just buying one share, you would've needed 146 dollars and 80 cents. So you know making six point three percent on 146.80, you know maybe you'd finally be able to cover your commissions depending on your broker, maybe just maybe you would've broken even. So again, not very ideal. However, let's look at the options. So by the time everything was said and done with the options, those had gone as high as seven dollars and 30 cents.

So looking at things from a percentage standpoint here, that was a 161 percent move. And again the money needed to get involved, 280 dollars. So sure a little bit more than that, but let's see, make six point three percent on 146 or make 161 percent on 280, I think that's pretty impressive, and also keep in mind that these were all-day trades. Meaning it happened on the same day. 75 percent in one day. 161 percent in one day. Actually, it was really just a few hours, but for argument's sake here, just know that this was all happening in one day. But now that leads to the question of well, I can't sit there and day trade stock so I'm not gonna be able to day trade options either.

Fair enough. It works for swing trading too and that's where we're leading for our third example. So again, I noticed this chart and I thought hey, that price looks like it wants to fall. So at that time, the stock was trading for 115.75. So because I thought the price would fall, I went and bought some options. And for these options, I paid 63 cents.

Now by the time all was said and done, the chart had once again had led me to a profitable decision in thinking you know what it looks like the price is gonna fall. It did fall and the stock itself fell down as low as 112.78. So this downwards move for the stock was two point five seven percent and again to be the minimum money to get involved, if we're just buying one share, was 115 dollars and 75 cents. Let's take a look at the options.

Now, this was a one-night hold. So I bought one day and then you know another day passed. And the next day, so a swing trade, we're not looking to buy and sell within the same day, the next day, the option had actually gone up as high as a dollar 76. So this led to an overnight swing trade presenting an opportunity window of 179 percent. Now the money to get involved here, 63 dollars.

If you don't have 63 dollars in your trading account, you probably shouldn't be trading. So again, in this case, it actually cost less, but yet you had 179 percent versus two point five seven percent. So keep all this in mind, you know this is how options work. Doesn't really matter anymore. And it doesn't matter at all really in terms of the price of the stock because with options, you're gonna get involved.

Now of course options, if you are a gambler and don't have a strategy, don't have a plan, can be very risky, there's no doubt about that at all. So just wanna give that upfront. But it's very real, it's very possible to make good-sized gains. I'm not saying you're gonna make 100 percent every time or anything like that, but just understand that options not only allow you to get involved, but they can present some very nice opportunities. I hope you enjoyed this video but more importantly, I hope it's at least opened your eyes to seeing just how options can help you get involved no matter what.

There's gonna be no more of this you've seen a stock that's trading for 350 dollars and you're thinking you know what I think that stocks gonna go down in price but then having to sit on the sideline because you can't get involved.

Now with options, you can get involved and that's where the true power is. It's not necessarily in the gains, while those are certainly nice, but it's nice because it allows you to get involved in anything. Remember, down here, all it took was 63 dollars to get involved into a stock that was trading for over 150 so think about that. What does it take to get involved?

 Not very much, and that's a very powerful thing and it really opens up your horizons. Opens up the choices that you have out there in the market. If you're interested in learning more about this and how you can put options in your trader toolbelt, I'd encourage you to check out my course Options Trading Simplified. It goes over everything necessary to understand options, understand what ones pertain to different situations. But after the course, you're gonna be able to sit there and say you know what?

I think this stock is gonna do this and then you're gonna be able to transition into the options and know what to do. So as long as you have a viable strategy, a viable formula to think you know what, I think that stock price is gonna go up or down, then options are something that should learn because options will allow you to get involved in your profitable decision.

Nothing worse than sitting there saying, that stock is gonna go up and then you see it go up and have to say well too bad I couldn't get involved. That exists no more cause with options you can get involved so stop missing out on those very profitable opportunities that you would've had, you knew were going to happen, but you just had to sit on the sidelines. Get yourself off the sidelines, start to learn about options.


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