VIDEO: PART 1 - 9:28 MINUTES | PART 2 - 5:31 MINUTES
This session is an introduction to Options including:
This session is an introduction to Options including:
- Review of Options Advantages
- Introduction of Calls & Puts
- Understanding Trading Account Levels
- Buying Power of Account
PART 1
Review of Options Advantages
Account Levels
Retirement accounts such as IRA’s have restrictions of their own regardless of the Option level designated to the trader
An ideal account to use for our strategies is a pattern day trading margin account with the top level option designation. We may or may not use intraday trading in our business plan we will use the buying and selling of stock in our risk management.
The Pattern day trade account gives us the ability to buy and sell shares with no restrictions other than maintaining a minimum balance of $25,000 in case value at all times in the account.
An account balance of $30,000 enables you to employ all of our strategies with the ability to sustain realized cash drawn down of $5,000 which exceeds the percentage of drawn down expected even when fully invested.
Most brokerages allow buying power of 4:1 for intraday positions providing $120,000 in buying power for a $30,000 account or 2:1 ($60,000) buying power for equities held overnight
Options provide 5:1 to 10:1 (or more) leverage regardless of trade duration so a trader can enjoy $150,000 - $300,000 or more of overnight buying power for an account of only $30,000
**Start out small and grow as your learn and practice**
An account can be opened with as little as $2,500 at many brokerages and adding a little over that to buffer for some losses you can apply a variety of options strategies to build the account along with your knowledge.
Review of Options Advantages
- Why upside probabilities are on our side
- Risks for loss are defined / capped
- Superior use of capital
- Underlying - financial instruments
- Equity, Future, Commodity or Other
- Premiums (fee for obligation)
- Strike Price
- Obligation / Expiration Date
- Call Options
- Buyer right to buy – pays premium
- Seller obligation to sell – receives premium
- Put Options
- Buyer right to sell – pays premium
- Seller obligation to buy – receives premium
- Options of Options - Utilizing
- The Underlying
- The Strike Price
- Expiration Date
Account Levels
- Personal risk tolerance (applications), account size and experience
- Definition of level examples and activities allowed
- Retirement account restrictions
- Minimum account balance
- Buying power / leverage
- Covered Calls, Puts (Protective only, equal to shares owned in the account)
- Buy a Call or Put, See cash secured Puts
- Debit Spreads
- Credit Spreads, Sell naked Puts
- Sell naked Calls and Puts, Ratio Spreads
Retirement accounts such as IRA’s have restrictions of their own regardless of the Option level designated to the trader
An ideal account to use for our strategies is a pattern day trading margin account with the top level option designation. We may or may not use intraday trading in our business plan we will use the buying and selling of stock in our risk management.
The Pattern day trade account gives us the ability to buy and sell shares with no restrictions other than maintaining a minimum balance of $25,000 in case value at all times in the account.
An account balance of $30,000 enables you to employ all of our strategies with the ability to sustain realized cash drawn down of $5,000 which exceeds the percentage of drawn down expected even when fully invested.
Most brokerages allow buying power of 4:1 for intraday positions providing $120,000 in buying power for a $30,000 account or 2:1 ($60,000) buying power for equities held overnight
Options provide 5:1 to 10:1 (or more) leverage regardless of trade duration so a trader can enjoy $150,000 - $300,000 or more of overnight buying power for an account of only $30,000
**Start out small and grow as your learn and practice**
An account can be opened with as little as $2,500 at many brokerages and adding a little over that to buffer for some losses you can apply a variety of options strategies to build the account along with your knowledge.
PART 2
Module 2 - Session 1 - Part 2
This session covers Option Greeks - Delta:
There are 5 Greeks we use for our strategies with the 3 most important in bold:
DELTA
VEGA
THETA
GAMMA
RHO
Delta = Direction
Module 2 - Session 1 - Part 2
This session covers Option Greeks - Delta:
There are 5 Greeks we use for our strategies with the 3 most important in bold:
DELTA
VEGA
THETA
GAMMA
RHO
Delta = Direction
- Measures rate of change of value option in respect to asset’s price
- Delta value relation to length of call or put
- Long / Short Stock
- Defines directional risk
- The “Moneyness” of Delta
- Probability of Touch
