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    Trading Using Probabilities with Alex Coffey I Twitch #7

    October 13, 2019


    [MUSIC PLAYING] Hello, and welcome once again
    to TD Ameritrade on Twitch. I am your co-host, Anthony
    Panzeca, always joined by– Bill Ruby. How’s it going, guys? Good. How you doing, Bill? I’m doing well? I’m doing well. Yeah. Pretty good. We’ve had a couple
    wild days, but– Yeah. Seems like I say
    that every week. It’s we’ve had wild
    days for a while now. There’s been a ton of
    volatility in the market. I know. Yesterday, big swings in
    the underlying indexes. Just kind of like– But how have you
    been feeling, Bill? I want to know
    about your feelings and how you’re
    feeling in general. Rested. I’ve felt rested. OK, that’s good, because a lot
    of people are getting sick now. Yeah, I was. I had a little something
    after TwitchCon. Like when the kids
    go back to school, the germs just do
    their thing, and then they give it to everybody,
    and then we all get sick, and we’re not even in school. I know, I know. I think I had a little
    something after TwitchCon, and– Did you? Yeah, no, a couple emergencies
    and I’m good to go. Maybe it’s all your fault, then. You’re bringing stuff
    back from San Diego, spreading it out through
    the [INAUDIBLE] all over River North. I don’t think it was really
    a patient zero scenario. You don’t think so? Yeah, I think was
    pretty standard. My niece is actually in
    the hospital right now. She’s got pneumonia. Oh, that’s terrible. Yeah, so I might
    go visit her today. They’re thinking they’re
    going to let her go today. She should be fine, but I might
    have to go visit her today. So hopefully, she’ll be OK. Hopefully, she’s watching. You’d better be
    watching, Giovanna. So yeah, we’ve got
    another day today. We’ve had some movement. We’re up 26. And we have a few new followers. That’s right, we’ve
    got BronsonVonLux, Kingbill900, 4CBlue,
    AlexMCoffey– hmm. Hmm. AlexMCoffey– that
    sounds very familiar. It sure does. We might have to get
    some clarity on who that is a little later in the show. Iamtherealcarrot, rollonyou
    ebaker, tDan, that’s Evelyn. Obie says Hi, how’s it going? We’ve got jackknife, Gilgamesh,
    Marinyr, lyrikin, epikelen, murletoft? Merloft. Oh, I thought you
    were saying mazel tov. No, no, not quite. Isn’t what what they say
    at the Jewish wedding when they get married? It is, it is. It’s a sign of
    congratulations, I believe. Evelyn says, Hi, Obie. Najgaming, withaltshift,
    AdricWhetstone, MrFMGeez, ChuckJones, luckstwitch,
    deadDrazen, gamesandsynth, slytied25, egolith,
    ohsnowdog, spiritspade, returnxr, CarlosKelly RoJohn,
    and JakeonQuest are on a quest. Obie also says hi there. Thanks for coming in. Yeah. Thanks for the follow. Thanks for the follows. rollingonchrome says he’s
    gunning for your job, Bill. That’s a tough task. Just that comment alone, I
    don’t know if you could be mic. Well, I don’t know. I don’t know. You know, I’m open
    to challengers. You know, heavy is the
    head that wears the crown. We’ll see how it goes. I love your sayings. They’re just so great. I feel like that was facetious. Thanks for tuning in, guys. Thanks for tuning in, guys. Make sure you tune in every
    Wednesday, 1:00 to 2:00 PM. We are live on Twitch. We’re discussing markets. We’re putting on all kinds of
    trade strategies in our paper money account. So you can look
    below and actually create– there should be a link
    there to create a paper money account, as always. So if you want to play
    along, throw your questions in the chat. We’ll be more than
    happy to address some of those questions. So look at that, tisgreen
    and fiatisforfailures. [LAUGHS] Two more
    followers there. Yeah, thanks for the follow. Yeah, so one of the things
    that we like to do– I mean, obviously, Bill
    and I traded on the floor, and we want to bring you that
    environment that we lived in. And now, that
    environment, really, it exists a lot on the trade desk. And our first guest today– or only guest today– he actually worked on
    the trade desk with us. So it’s just a really
    cool environment. I’m so happy to work here
    and to be here every day. The people that we work
    with are just so awesome. Yeah, we’ve got a good
    bunch here, for sure. Smart bunch, a lot of fun. Yeah. Yeah. And you know, a lot of what
    happens on the trade desk, we talk about everyday
    stuff, and then trading is intermittently
    sprinkled out there. And so we kind of
    want to give you that. So if you ever have
    questions or anything like that about what
    goes on, I mean, it’s such a fun place
    to work, and we hope we bring that to you guys– so OK. Yeah. We can bring on– do you want to do our first? Do you want to do–
    do our MES trade here. Yeah, let’s pop
    something in there. OK. Well, we got the ES off already. All right, so we’ll do /mes. And as you all know, Bill and
    I do a breakfast sandwich bet every week. I believe- are you up one now? I am up one right now. We’ve been trading
    back and forth. He is. At some point, we’re
    going to have to cut it, and it’s like there
    has to be a deadline, and then there has
    to be a payout. Mm-hmm. Right? So what do you want to
    do, like end of the year? Yeah, let’s do month-to-month. How about that? Month-to-month? OK, well, we’ve kind
    of missed that cut-off. We could go to the
    end of October. Yeah. Yeah. I’m pretty sure we’ll still
    have our jobs by then. Well, I think so. I hope so. Is that optimistic? Is that just hopeful? Well, I think it’s
    not optimistic. Yeah. It’s hopefully practical. If it’s optimistic, we might
    have something to worry about. Well, I know I’m OK,
    but rollingonchrome is coming for your job, so– Yeah, rollingonchrome
    is coming in hot here. Yeah, he is. So and he says– I don’t even know
    what that says. All right, so let’s
    put on our first trade, and we’re going to
    throw it to the chat. And so you guys
    can see right here on our screen what the
    S&P 500 is doing today. So we’re just going to
    bring up the intraday. Here’s what’s going on. We’re up 26.75, almost 1%. We’re definitely
    higher than the open. I mean, if you guys want
    to go long in the chat, what, throw a bull in there? Do we have bullish emotes yet? No bull emotes. Oh, yeah, our producer’s
    looking at me like, shut up, don’t bring up– But no bull– but
    they’re coming. They’re coming soon. Throw “bull” in the
    chat if you want to see us go long and
    “bear” in the chat if you want to see
    us put on a short. What are you thinking, Bill? Well, it is kind of a little
    bit of an up day, coming off the back. I mean, I think– Let’s look at this guy. Yeah, so this is
    the set of studies that we were using last week to
    try and take control of this. Now, if you see this breakout
    here, if you– here, let me– Yeah, you control that, buddy. Just this right here. I still see, when I learned
    how to do handwriting in first grade,
    when I look at this. I just have no idea, so
    you’ll have to explain it. You know, the journey of a
    million– is it 1,000 miles, begins with a single step? If you say so. You’re the one with
    all the sayings. I [INAUDIBLE]. Yeah, I’m whipping out a bunch
    of them today, for some reason. So if we look at this one
    here, we’ve got this breakout and come back. So theoretically,
    based on the strategy that we were looking
    at last week, we would have wanted
    to sell up there. Yeah. So we’d be coming into it– it seems like we’re
    kind of range-bound. You know– Are we looking at resistance
    with that dotted green line there? Yeah? Yeah, I think so. OK, OK. I think so. And on that front, I think I’d– going off this, too, I think
    I would have to go short. You’re going to sell it. OK. Yeah. Well, you know what? That’s fine, because I don’t
    understand what any of that says. So I’m going to go– I’m going to say
    long, all right? OK. OK, that sounds good. So it’s– So chat, what do
    you– oh. well, we have a few votes in
    the chat already. Oh, we’ve got all
    bears, pretty much. Yet, [INAUDIBLE] bears. Ah, bears. Yeah, they’re going
    with you, buddy. Well, I hope so. And you know, rollingonchrome
    is probably pretty unhappy to hear that. But I think we should–
    let’s pop this baby in. He says he’s gunna
    for you, Bill. OK, well, that’s great. Because “gunning” is
    apparently too long of a word to put out in there. Well, no, that’s– to
    each their own, but– And somebody just
    went short your job. [LAUGHS] Well– [LAUGHS] Why are they bagging
    on you bad today? I don’t understand. I don’t know. It’s all the little
    tidbits of wisdom, I guess. Bill, can I just say that you’re
    the best co-host I’ve ever had? Oh, you’re the only
    co-host I’ve ever had. There you go. Well, I guess you’re, in that
    scenario, the worst, as well. OK. So, you know– Well, OK, so let’s go over
    to the active trade layer, and let’s pop this in. OK, so we’ll get
    that out of there. Do you want to take it,
    or do you want me to? You can go ahead. Come on, prove your worth, Bill. Ah, I see. So now you’re goading me. Is that what we’re doing? Prove your worth. Show them how good you are at
    this, and then they’ll be– now you can’t screw it up. Well, we’re going to do a
    five-aught again, correct? Five is good. I like five. And then we’re going
    to do a $5 target. So we’re going short. OK Bill, where’s my semi at? We’re going to do a short here. All right, I’m going
    to pop this baby in. And then, so we’re going to
    have a target five points below and a stop five points above. Yep, so in. We got filled on that. Let’s check our fill
    price real quick. $2919.50. I kind of don’t
    appreciate that comment. I remind you of your dad? Can’t hate on him? I mean, I guess that’s
    a backhanded compliment if I ever heard one. No, I think it’s great. Well– You have a nurturing
    soul, that means. I don’t know what
    I’m going to do. The only thing left to do
    is bring on our next guest. Yes. OK? He is a senior specialist of
    client and market structure insights at TD Ameritrade. He is 27 years old,
    host of Fast Market, and contributor on
    the TDA Network. Let’s give it up
    for Alex Coffey. Welcome to the show, Alex. Thanks for having me. Excited to be here. Great to see you, buddy. Great to see you. Anthony, your intros are
    getting very boisterous. I feel like I should
    be clapping afterwards. Boisterous– hang on. You’re a hype man. Can I look up– I have to look that up
    in the dictionary first. [LAUGHS] OK, so markets is your
    strong suit, not vocabulary. So that’s good or bad? It’s good, I think. OK, well, I reminded
    of somebody’s dad? I don’t know. They’re bagging on all
    of us here in the chat. Tell us a little about
    your background, Alex. Yeah. Yeah, I mean, let’s
    see, where to start. I mean, I grew up in Omaha. So corporate headquarters–
    TD Ameritrade is in Omaha. Yeah. And so when you
    think about where I was maybe 5, 10 years
    ago before starting here at TD Ameritrade, I know
    Larry Beebe was on here and I caught his. He said he was kind of a lost
    soul when he was in college. I wouldn’t say I
    was a lost soul, but I didn’t have
    it all figured out. Yeah. There was always–
    the late Steve Jobs had a quote at the
    Stanford commencement that always resonated
    with me, the idea behind, you can always connect the
    dots looking backwards, but you can’t connect
    them looking forwards. Yeah, I like that. And I think that really,
    really does tie into my career thus far. Yeah. When I go back to being in
    school, I studied finance, I studied accounting
    as my majors. I had minors in
    economics and in math. Yeah. I went to the
    University of Nebraska. So you have a double
    minor and a double major. Double minor, double major. Good for you, man. But I didn’t really have an
    idea of what I wanted to do. I wanted to go to law
    school, at least I thought. And then, as I got older,
    I started thinking about, is that just stalling? And do I even really want
    to go to more school? Do I want to be an attorney? Do I want to go to that? Right, yeah. Ultimately, I did not do that. Yeah. And so I graduate May 2014. I did some traveling
    throughout the rest of 2014. But towards the end of the
    year, I was thinking to myself, it’s probably time to start
    getting started with my career. I thought to myself, I
    don’t love accounting, but I like the pay. Oh, really? I love the finance stuff. I think it’s a very specific
    breed that loves accounting. I know, there is,
    and they do love it. There’s nothing against it. And I did not love it, yeah. There’s nothing against it, it
    just didn’t resonate with me. I wasn’t excited. I didn’t love the classes. The stock market was
    always intriguing to me. Yeah. And I thought to myself,
    OK, well, TD Ameritrade’s here in Omaha. They’re a big company with
    the stock market and finance. Right. And so I applied for a financial
    services representative job. Yeah. We call it investor
    services now. So basically, worked on the
    front lines of client service support. Did that for a year. Yeah. But throughout the
    training process, when we go through the
    licensing stage, in that role, you spend some time
    in a classroom, and you get to know
    some of the systems while you’re studying as well. And we spent a lot of
    time on Thinkorswim, and I basically fell in love
    from day one with options, and trading, and really
    the platform in general. And from there, you
    start thinking, like, how did I not learn about
    any of this stuff in school? Right. And I can’t speak to where
    modern-day academics are, where those classes are. I’m sure that there’s been
    strides towards learning more about this side of
    the business, more of the active side of the
    business and the derivatives trading. But I spent a lot of time using
    the limited resources that were available in 2015 for
    free education around options and trading. So you just did your own,
    kind of like us, yeah. And I scoured this stuff. And I spent a lot of time
    with different companies that we were affiliated
    with, or even some of our internal education
    products that we had back then. Of course, you
    fast-forward to now, TD Ameritrade offers
    an incredible amount of content and
    educational resources, which I’m sure we’ll talk about
    a lot throughout this show. But you know, then, after
    I start the real job and I become more and
    more adept with trading, the logical step was then
    to join our trade desk, which we have all
    across our locations. At that point, I
    was in Omaha still. Yeah. Ultimately, a year after that,
    most of our active trading, Thinkorswim stuff, is
    actually based out of here, in our Chicago offices. Yeah. And so I ultimately moved here
    to Chicago at the end of 2016 and continued working
    on the trade desk before ultimately, now, I
    work for our active trader group underneath JJ
    Kinahan, which I’m not sure if your viewers are
    familiar with who that is, but he’s our chief
    market strategist here at TD Ameritrade. Yeah. And then, as you mentioned, the
    media affiliate, TD Ameritrade Network, I also host
    now, or co-host, the Fast Market program from
    10:00 to 11:00 AM Central each day. So it’s crazy to think how
    far I’ve come, I guess, in my career. And in such a short
    period of time. Right, but– Yeah. It’s exciting, and– Well, they’re going long coffee
    futures in the chat right now. Whoa, coffee futures? But they’re
    definitely impressed. They like it. Yeah and I– But I guess the real
    thing I want to say is how grateful I am to
    have an opportunity to– I love the markets, and
    to be around and have half of my day talking
    about the markets, and the other half
    looking, and researching, and doing stuff for JJ– I’m really fortunate
    to be in that spot. Yeah. Well, and yeah, I think,
    honestly, TD Ameritrade has been pretty good to
    work for in a lot of ways. Yeah. And we wanted to
    touch on the fact that you were on
    the trade desk, too. So we’ve all been on
    the trade desk here, and I think it’s a great rundown
    of just a learning experience. When he first
    started, I was like– well, not when he first started. When he actually started,
    he’d sit right by me for– I think there was another guy
    I was really good friends with. We call him Sugar Bear
    in the desk, right? And he used to sit
    five feet from me. And they move him, and
    they put you there. And I didn’t know who
    were, so I was like, who is this young hunk coming in? Hey! Hey! He’s younger than me. He’s on the PCS team, so he
    probably makes more than me. I’m like, who is this guy? Right? You can attest to that, Uncle
    Moneybags over there, right? Oh, right, yeah. Uncle Moneybags,
    that’s a new one. But the more I got
    to know you, I mean, it’s amazing how much you
    know about the markets in, like you said, this
    short period of time. And I was 27. I knew a fair amount, but
    to be honest with you, I worked on the floor,
    and I didn’t really understand the full concept
    behind vertical strategies, and Iron condors, and
    all of that stuff. We never really traded
    those on the floors. Nobody really sent orders
    in for iron condors when I was on the floor. Yeah, and obviously, there’s
    a ton of self-study that was involved in some of that. And obviously, well, we’ll
    get into it, like I said. The resources that are available
    now if you are just getting started, there’s so many
    out there now that– it’s such a better place,
    the industry, for a beginner now than it was even five
    years ago when I was starting. Yeah. But the trade desk,
    another huge part of that, is the fact that we were
    learning, as representatives, alongside the client. So the day I started
    on the trade desk, I was not as, maybe, up to
    speed with all of this stuff that I am now. Right. And so it was always a
    constant learning process, and you’re learning
    alongside the clients, and working things together. So it really was an awesome
    experience and definitely something that I’m very
    grateful to have been a part of. Yeah, well, one
    thing that we always like to do on the trade
    desk and we talked about is we like to mess around
    people a little bit. And so I did I did a
    little digging on you, and I came up with
    this fantastic– I don’t know if you could
    see that, or zoom in on it, but it’s a very– it’s an
    article from ThinkMoney Magazine that you did. And it’s actually
    a great article. It talks a lot about, obviously,
    what your background there, and you’re quoting
    Marcus Aurelius. It says, I don’t like to get
    hung up on little things. So they have you dressed
    up as a gladiator. I would love some
    context behind– Tons of gravitas. –behind [INAUDIBLE]. I’m a pretty avid
    reader, and at the time, I was pretty deep into reading
    some of the Stoic stuff. And they caught me at a time
    when I was really into that, and I quoted that, and I think
    it does have a lot of, I guess, principles that you can apply
    to trading that are pretty– Yeah. I guess the idea of
    taking emotions out of it, which I’m sure we’ll elaborate
    a little bit more on it throughout this. But yeah, it is a
    pretty funny thing how they take an interview,
    and they chop it up, and that’s what ends up with. But– Well, not only that, look
    at that picture in there. That is epic. Look at that. I don’t know. That looks like it
    should be framed over a fireplace somewhere. I told you I wouldn’t
    make you look bad, Alex. That makes you look good, man. That is just– if they could
    put me in a gladiator outfit, boy, that would be scary. Yeah, I just wish it
    wasn’t just a drawing. If I was actually a gladiator,
    it’d be pretty cool. Oh, come on, you have that
    up all over your apartment, I’m sure. It’s probably everywhere. I can’t confirm or deny that. [LAUGHING] A wise move. You know what? They did one on Phil Caravo,
    and we had him in there, and I was in his
    apartment in the bathroom, and then you just see the
    face staring at you, the one that they have on ThinkMoney. And it looks surprisingly
    a lot like Paul Rudd. And so I did give him the
    business for that, but– That’s funny. Well, let’s take a look
    at the markets real quick. I’m going to pop this baby open. Check on the markets. Right now, we got the
    Dow up 200 to 26,364. We’ve got the NASDAQ
    composite up 87 to 7,911, and we’ve got the
    SPX up 28 to 2,291. So we’re holding the
    up day pretty well. Doesn’t seem to be as much
    of a swinging day as we had yesterday, but we also had some
    announcements, so that could– you know– [INAUDIBLE] Well, let’s take a look at
    this General Mills trade. Maybe you can help
    us out with that. We’ve had it on for a while. One of the stock guys actually
    suggested that symbol to us. We’ve been floating
    around on this one. Let’s go back. Let’s go back to
    our monitor page. So here’s what we have
    on in General Mills. Mr. Ruby, I know
    you’re on Twitch here, but please go buy
    William or Bill II. I mean King Bill has been
    tenacious with that message. I don’t know. I think– They are all over you. –we can share the Bill
    name, as far as I know. They’re all over you. You’re handling it quite
    well, sir, I will say. Yeah. Well, you know, there’s going
    to be more than one Bills. And King Bill, like
    I said earlier, heavy is the head that
    wears the crown. There you go. So we’ll see how it goes. But so this thing was– we were
    in kind of a sweet spot last week, and we’re still kind of– Kind of right there. Yeah, we’re still kind
    of lingering in there. But looks like we’re
    down in it, though. What’s going on there? Is it there we’re seeing
    some bad marks or something? I don’t know. I mean, the stock’s
    up $0.41, so we should be down on
    it a little bit today because it is
    kind of a bearish trade. So what we did was we sold a
    call spread on General Mills because we felt maybe it had– you know, it had a great run. And we sold a call spread,
    and we bought a put spread. And obviously, the call spread
    financed the put spread. Yeah, we could use a
    little bit of a break here, trying to get it. We’ve got nine days. I don’t believe we
    laid out much for this. Let’s take a look. No, I think we did
    it for a credit. Right, so– I think we were
    surprised to get it, too. Even if it doesn’t pan out,
    we’re still looking good. We just want to avoid the rally. We’re approaching
    the top end of that. Yeah. Do you think there’s any
    maintenance here, Alex, that you’d be seeing? I mean, you look at
    this trade, you’ve got nine days to duration. Obviously, you said you
    put it on last week, so it was a fairly short
    timeframe to begin with. But you have 10 of them on. I think your P&L open was $35
    or somewhere around that line. It means you’re out like
    $0.03 on this trade right now for each contract. You’re basically unchanged
    on this particular trade at this point. M-hmm. Unless your fundamental
    directional bias or, I guess, outlook on the
    stock has changed, I don’t see that there’s much
    that can be done at this point. Obviously, if
    something has changed, you have an opportunity to
    get off or take this trade off for a $0.03 loss at
    this point, if you’re able to get filled
    at that point. Yeah, well, I think right now,
    I mean, time’s in our favorite. We’re short theta, right? So as we get closer and
    closer to expiration, that’s going to actually–
    time is on our side. Right, collecting some. So actually, we’ll be
    up 60 bucks as long as it stays below 55. Yeah, and you did it for
    an overall net credit. Yeah. So by doing that, you
    don’t need a move. Right. A move down is going to
    further benefit this trade, but because you were able
    to finance that long put vertical by selling that
    short call vertical, time is on your side. Yeah. We talked about
    this earlier, too. One of the things that intrigued
    you about options trading is that you can have a
    no-move strategy where, if the stock
    doesn’t do anything, then you still can just sit
    back and collect that premium. Right [INAUDIBLE]
    beta to work for you. The idea of selling premium
    resonated with me strongly, and especially just options
    in general, the idea of– I know what we’re
    going to talk about is the probabilities behind it. Yeah. As being someone who always
    felt they were decent at math, I liked the idea of
    putting math to this because, if you’re
    thinking about just buying stock ABC, or GIS in this case,
    or wanting to get short it, you needed a move to happen. And in my mind, it’s like, OK
    this is a 50-50 speculation. Right. And with a 50-50 speculation,
    that, to me, it was like, I have to do all this
    research, and all this. And it’s like, what makes me
    any better than anybody else at this? Right. And the idea of putting
    the odds in my favor by selling a put, even, or
    something like that really resonated strongly with me. But of course, there’s
    trade-offs to that. I’m sure you guys
    have spent time talking about limited upside,
    things of that nature that make that different. But that’s what
    resonated with me. Right, and
    potentially more risk. Especially if you’re not
    doing it as part of a spread, you’re definitely
    taking on more risk. Touching on what
    you said, I think the way I like to think about
    it is, if you’re selling premium and you’re putting on a short
    put spread or a short call spread, you don’t
    necessarily have to be right; you just have to be not wrong. Just can’t be wrong, yeah. I was going to say that, yeah. Yeah, it can stay where it
    is; it can go the other way; it just can’t go towards you. And I think there’s something
    to be said about that, because I mean, you’re going to
    be wrong, probably, most of the time when
    it comes to any trade, but it’s how you manage it. And something like that,
    you can be wrong and maybe still make some money. That’s something that my co-host
    Kevin Hanks really stresses on our show quite a
    bit, is the idea of, if you sell a put vertical,
    you have three scenarios where you could potentially
    make money on that put vertical. It can go against you
    slightly, as long as it’s before your short strike. It can be unchanged,
    or it can go up. And if you’re just
    buying stock outright, you can’t say the same. Right. That’s pretty cut and dry. It’s very black and white–
    either you made money or you didn’t, you were
    wrong or you weren’t. Yeah, for sure. Well, speaking of
    probabilities, maybe we should– I mean, Thinkorswim has
    a great tool on there for taking a look at
    probabilities in the options chain. It does. Do you want to look at that one? Yeah. Yeah, let’s pop over there. Do you to pop over, too? Because one of the
    symbols that we’re going to look at today when
    we can look at General Mills. Do you want to look
    at it in Delta? No, let’s take a look at DAL. OK, Delta Airlines, that’s–
    they have earnings coming out, I believe– Tomorrow morning. Tomorrow morning,
    he’s right on it. I was going to show him
    in the Market Watch tab where you find that. So here, you go in here, you
    go into Market Watch calendar. I always keep it on Month. You click on it,
    and there it is– Before The Market. Mm-hmm. OK? So here’s the options
    chain, and we’re going to go through a
    probability analysis. Where do you guys want to start? Well, let’s pop open one
    of these expirations. OK. And right now, we don’t
    have probability on there. Let’s do this one– so
    probability out of the money. Now, so this column
    here is going to tell you the
    probability that it’s going to end up out of the money. Now Alex, there’s
    another tool that you said that you use sometimes. What was that one? Yeah, I’ll walk you through it. If you want to set this up so
    that it’s a delta, as you have there already,
    probability you actually do– probability
    of in the money, just because it’s
    going to illustrate this a little bit better, and
    then probability of touching. OK. And I just want to show the
    relationship between these and then explain what they are. You can leave– Do we need OTM in there? You don’t necessarily
    need it, no. Yeah, [INAUDIBLE]. So you can take that
    and implied volatility off, probably, unless you
    want to leave it in there. No, that’s fine. Well, this is– Well, actually, I may want
    to make a comparison there. Let’s take a look. OK, so really what
    you’re looking at this is the second to last column
    there is a probability of it expiring in the money. So when you’re looking at
    that, that’s basically saying, OK, you can almost correspond
    this with your probability of, if you’re selling a put
    spread, or a put vertical, or even just a put,
    that that’s going to be your probability
    of success, in a way, at expiration. Because that’s saying,
    this is the probability in one standard deviation,
    all else equal, based off current option prices– OK. –this will expire out of–
    or, this will basically expire in the money. Because shortSPX
    had that question. He said, how is the
    probability calculated? And I think you just
    touched on that, right? Yeah, it’s going to factor
    in current option prices, and there’s, obviously, an
    option model that the platform is running it through. I don’t have that math
    on that at this point. Yeah, that math is pretty–
    there’s Black-Scholes, there’s [INAUDIBLE],, but I
    think the platform uses– there’s binomial,
    there’s Whaley, there’s a bunch of
    different models, and they’re pretty extensive. But basically, it’s based
    on the implied volatility of the stock, the individual
    option, the strike that you’re at, the time to expiration,
    all those kinds of things. Right, and so when you look
    at this, you’re going to see– let’s say the 52 and
    1/2 on this November 15 expiration for the put side. So you see the current
    bid-ask is 169-172, and you see that’s roughly
    a 40 delta at 39 negative, 39 delta, there. Right. So I then skip the column
    with implied volatility and I look probability
    of in the money, and you’re seeing that’s 43%. So it’s not perfectly
    the same, but it kind of corresponds to that. And so I always use
    it as a loose thing, is your delta is
    going to roughly be your probability of
    that expiring in the money. For sure. But then the last
    column is the one that you were alluding
    to here, Bill, that I want to talk
    about that I don’t think gets enough love
    on the platform. It’s probability of touching. I’ve never looked
    at this before. So this is, you see– [INAUDIBLE] –it’s roughly twice the
    delta and roughly twice the probability of
    expiring in the money. So what is it? This is your probability that,
    at any time over the next 37 days, 52 and 1/2 is a strike
    that’s breached or touched by the stock price. Yeah. So that illustrates
    that, although you have, maybe, a 40% chance of
    losing on the trade or 43% chance of that expiring
    in the money at expiration over the next 37 days,
    you have an 82.9% chance of maybe
    taking some heat, is how I would describe that. So I think that’s
    one of the things that we don’t always
    realize, is although I have a really high
    probability of success, it doesn’t mean that it’s just
    going to be a smooth ride all the way there. Sure, absolutely. And that’s– That’s so important. Yeah, you’ve got to you’ve got
    to realize that sometimes, it’s going to be– it’s wrong
    right after you put it on, but it still could
    be right eventually, and sometimes, you’ve
    got to take that heat. And that’s the judgment call. That’s where– it’s where your mettle
    is going to get tested. Yeah, absolutely. And that’s where
    trading becomes an art, is to know when, OK, this
    is the wrong decision, and I’ve got to get out
    now, and/or to hang in there and be like, all right,
    well, these are bad days; let’s ride them out
    and see what happens. Yeah, for sure. And that comes into
    effect so much when you’re in the middle of a trade. It could go against you
    almost immediately or sometime in the interim, and then
    you get out of it, right? And then you’ve
    figured, oh my gosh, I just bought the high in
    this, and now it’s back. If I would have
    just done nothing, if I would have laid in
    bed for the next week, this trade would’ve been fine. But you took it off because
    you didn’t really [INAUDIBLE].. I think you’re
    describing right now is how difficult it is at times. And this is where it
    goes to that article that you’ve so shamelessly
    shown me of as Marcus Aurelius, is the idea of taking
    emotions out of trading as much as you can and being
    a stoic individual when you’re dealing with this,
    it’s near impossible. But when you start
    dealing with real money and real decision-making
    and it’s all real-time and you have access to
    the marketplace the way that we do now, where you just
    click a couple times and all of a sudden, you
    can make a trade, that really makes those
    emotional decisions that much more of something
    you have to deal with. And that’s why I think it’s
    important to stress the idea of having a plan all along. And that’s not even just
    getting into the trade. It’s getting out of
    the trade as well. Whether that’s a loss point that
    you want to stop yourself out of, or an area where, this is
    where I’m comfortable taking a profit in this trade, too. Yeah, OK. Yeah, that sounds good. So I mean, with
    that in mind, maybe we should try and go
    through that process with a trade on this. Yeah. So you said there’s
    earnings tomorrow. How do you how do you
    think this could be played? So I think one of the major
    misconceptions with earnings is that you think, OK– of course, there’s
    some of this, too– is the company doing well, or
    is the company doing poorly? I need to pick up or down. But really, what you’re playing
    whenever you’re trading around earnings is the
    expectation of the move. So Thinkorswim does
    a beautiful job of painting the
    market maker move up at the top-middle
    of the platform there where you see that 197. Right. That’s the expectation of
    what this one-day move is going to be around this
    earnings announcement. So you’re looking
    for about a $2 move. You’re really
    playing, do I think this is going to move
    more or less than $2? Yeah. That’s the first decision that
    you have to really think about. Yeah, that’s true. And there’s some great comments
    coming from the chat right now. Yeah, I know. Bill number two from the
    chat wanted me to [INAUDIBLE] call Bill number two. Chat, we’re not ignoring you. Just put something intelligent
    so we can answer it. You guys are just joking around. We love that. OK, we know coffee needs
    milk, and Bill actually used to trade in the
    milk futures pit. I did. I’m a milk man. A milk man all the way. I used to trade milk
    futures, butter futures– Good stuff. –nonfat futures, nonfat
    skim milk, dry whey. I’m a milk man. Yeah, that’s right. We could throw something– OK, we could get them
    all out of the way. Butter, we can’t
    believe it’s not butter. We can’t believe
    it’s not you, Bill. I don’t know where
    that one’s going to go. Wow, uh– So yeah, put some
    stuff in there, guys. We love it. I mean, we’re sitting here– it’s definitely good stuff. But when you guys ask a
    serious question, I promise, we’ll give you a
    serious answer, OK? All right. All right, well, OK, so
    let’s take a look at– we’ve got earnings
    coming out tomorrow, so we’re probably– look, we’re
    getting an implied val bump up in the front. We got 60.5. So– Alex, can you see
    these comments? They’re actually pretty funny. I can. I got my phone
    loaded up here, so– [LAUGHING] It seems like a
    lot a lot of stuff that maybe I don’t
    fully understand, but I’m trying my best. Yeah, and neither do
    we, but that’s OK. I don’t know if they
    fully understand it. Good stuff, nonetheless. Let’s put out a trade using
    this probability of touching. Yeah. OK, guys. Yep, we get it. I mean, how would
    you look at that? If you were going
    to use that tool, and you were going to possibly
    get into an earnings plan delta, how would you use
    that tool and put it on? So I think earnings is
    a little bit different than a typical trade, because
    earnings, like I said, it really comes out of
    that market maker move. Yeah. So that almost supersedes
    everything else in terms of what
    you’re thinking about. OK. But if you think about delta,
    and you look at it on a chart, I think that’s a good
    launching point to– no pun intended on
    the delta launch, but when you look at
    where this stock is in terms of its
    trading, it doesn’t have any exposure to the
    737 Max story with Boeing. Obviously, that’s been a
    tailwind for the stock, but it also pre-released some
    numbers that we’re not great, and that’s why you’ve seen the
    stock pull back a little bit. That wasn’t on their inventory? What? 737 Max, they do not
    have exposure to it. OK, wow. So one of the only
    airlines that didn’t. But when you look at it, it’s
    kind of middle of the range Yeah. It pre-released some
    numbers that were not great, and it also has the
    tailwinds of maybe– so maybe you’re not– I guess what I’m trying to
    say is maybe you don’t know– [INAUDIBLE] –what way this
    stock’s going to go. And you’re starting to think
    about, OK, maybe it just isn’t going to move all that much. Maybe $2 is too much
    of a move priced in. You can start building
    strategies around that. And that’s where I really
    think options can do something that just stock trading
    can’t as you can play for that unchanged move. Yeah. So what kind of strategies would
    you recommend in that scenario? Well, I’m never going
    to recommend a strategy, because it’s always
    going to come down to– Well, not recommended,
    yeah, but you– That’s laying the
    trap there, Bill. Yeah, what can I say? Watch out for the bear trap. Let’s say that you
    follow the logic of, I don’t see a major
    move one way or another, or at least I don’t
    feel like there’s going to be a major move one way
    or another because of whatever reason. If that’s the area
    that you landed at, you see this $2 move,
    and now you’re thinking, OK, it might move, but
    is it going to move $2? Or is there a strategy
    that I can set up around this that
    maybe it’ll benefit if it doesn’t move the full $2? Yeah. And so maybe you start
    with, OK, a strategy that’s fairly common that people look
    at is selling the straddle, OK? Yeah. Right. The difference between just
    selling a straddle and what I’m ultimately going to end up
    here is it’s undefined risk. Right. Right. So if you sell the 54
    straddle, let’s say, that’s the closest
    strike that you can do. This gives you a little
    bit more upside room, too. You’re going to see it’s 2.18. That’s outside
    the expected move. But you have undefined
    risk to the upside, and of course, it’s
    pretty capital-intensive because you have naked
    options, essentially. Right. Do you ever use
    this feature, guys? It’s– where is it? Earnings, [INAUDIBLE] here? Hey, we just get
    dirtywillyandtheboys and JaredLetofan follow us. And then we got mythicalcryo,
    lemurking, itswags, daytradergamer. Thanks for the
    follow, by the way. Thanks for the follow, guys. Love it. So I don’t necessarily look
    at this tool a ton, Anthony, but I think the one
    thing that it really does illustrate is what we’re
    trying to take advantage of. And what this shows is it
    shows that implied volatility collapsing after earnings. A strategy like selling a
    straddle, or ultimately what I’m going to do is
    just iron butterfly, it takes advantage of that
    implied volatility coming into more normal levels
    from this elevated state that they’re in around this
    binary earnings release where there’s an
    expectation for a move because there’s new
    information that’s going to be given to the marketplace. I use it sometimes just to
    see what a past move was. Like for fiscal fourth quarter
    2017, it went from 55.86, and then, when their earnings
    were released, 58.52. So that’s a pretty sizable move. That’s over 2 bucks. Here, 51.47 up to 52.98. What Is that? About a buck 50-ish. We’ve gotten, let’s
    see, another, maybe, $0.90 there on that
    move, this one here. I don’t know, sometimes
    I go through that, and just to see, what has
    this done relative to where it’s trading now? We’ve got a $2 straddle,
    $2 market maker move. How many $2 moves has
    it made on earnings? I don’t know. No, I think that’s a
    powerful use of that screen. I think everyone does
    that, but maybe you look at the actual chart and do it. Yeah. That does the hard work for
    you and isolates those events. So that I think that’s really,
    really a powerful tool. But let’s say that you had
    that 54 straddle built out, and maybe you only
    have spread approval within the options
    account, or you’re not comfortable with undefined risk. You then can buy
    wings, as I like to refer to them as, and maybe
    buy the 51 put and the 57 call, $3 wide, and define that risk. It makes a lot less
    capital-intensive, and it also allows you to create
    a very similar risk profile, but you’re going to see that
    it’s very different here because you do have that leveled
    off max loss in both ways. One question I want
    to touch on, though, in the chat that I thought
    was kind of interesting, is how do lower
    oil prices affect airline stocks like Delta? I would think it
    would help them, because that’s less cost of– That’s right, but something
    I want to think about is that big companies like
    that, you have cruise liners and stuff like that, they’re
    going to be using futures, and they’re going to
    be largely hedged. So a lot of times,
    it will help them out or something like
    that, but you may not see the effects
    for a little while because they have a lot of their
    position– knowing that they’re going to be a large buyer of
    that, they’re going to they’re going to a lot of their
    position already hedged in the current market. So– I feel like if there’s
    a big spike in oil, you will see that right away
    when you do go to travel. Yeah. But when there’s a large
    downward spike in oil, it takes a while
    for ticket prices to really come back
    into equilibrium. Which is actually
    beneficial for the company as they’re maybe
    spending less money. It makes those margins
    a little bit better. Yeah. But I think– what I thought
    you were going to say there, which I think is important,
    too, is when you see sharp moves in crude oil, you
    do typically see– not always, but you see a
    reaction in the airliner stocks as well. Right, yeah. When crude oil spiked
    on the Saudi Arabia attacks that we saw, what
    is it, two, three weeks ago, all the airlines, whether
    that was United, Delta, Southwest, and American, they
    were all down pretty sizably initially on that
    reactionary kind of trade. So you do see a little bit
    of an inverse relationship. I think that’s broken
    down, as Bill points out, as they’ve gotten a little bit
    better at hedging those risks. Yeah. Absolutely. This is an interesting
    trade here. So I mean, this chart, this
    graph that we’re looking at, looks pretty typical
    to an iron condor, except for it comes to a peak. Yeah. And the reason why
    it’s coming into a peak is because both of your short
    strikes are at the same strike. So it’s going to look more like
    a teepee kind of shape there with the max profit at
    your short strikes, 54, and then you have your
    defined risk at 51, because that’s your
    long put, and then defined risk at the 57 strike. So you’re really trying to take
    advantage of that market maker move. $1.75 credit? Not bad. Yeah, I think that
    there’s expectations that need to be set when
    you’re still selling a straddle, or an
    iron butterfly, or really any type of a
    premium-selling strategy. Especially when it’s a
    straddle or an Iron butterfly, though, it’s going to be
    very difficult to capture this full credit
    that you received. Almost impossible, right? Exactly. So this is a trade
    that, you know, you’re seeing that we’re doing
    the October 11 cycle here, so we only have until Friday. But this is one that you’re
    looking to potentially take this off tomorrow morning. Yeah. If Delta opens up anywhere
    between 53 and 55, and you had the opportunity
    to buy this back for less than $1.75, a shrewd
    trader may look to do that, at least– in whole or in
    part, because you’re really just trading this
    event, and you’re trying to take advantage
    of that premium coming in. And as you said, it’s going
    to be really hard to capture the full amount, and so– It has dependent 54. Right, very rare. [INAUDIBLE] I mean, you’ve got to be– Not only that, you have to
    buy both of those wings back, the short wings back, for a
    penny, or let [INAUDIBLE]—- yeah, I mean, you’re not
    expecting the full boat on this one, but you’re definitely
    trying to get something. Right. Even if it’s 50%, that
    would be fantastic. And sometimes, when you
    have an oscillating stock, sometimes you can take
    off a short in the body, If it rallies up
    and you think it’s going to come back down,
    a reactionary move, that maybe faded later. But that’s also– if you
    have a winning trade on, sometimes it’s just
    good to cut and run. Yeah. Let’s take that money and
    go on to the next idea. Yeah. I mean, we can think about it
    in terms of return on capital, too. Right now, you’re
    basically only going to set aside $125 for
    each one of these spreads. If you could buy
    this back for $1– and I’m by no means guaranteeing
    that you can or anything like that; I have no idea
    what’s going to happen– but if you could return
    $75 on $125 in one day– Huge win. –that’s a huge percentage
    gain on that capital risk. But it’s not a guarantee. And so you’ve got to look
    at things in terms of that, sometimes, too. But you also have to
    be conscious, too, this is much more of a– not necessary risky trade,
    but with one day to go, and it’s this
    earnings play, this becomes much more a win or a
    lose trade in terms of this is either going to be
    within that expectation or it’s going to be without– or outside of. And that that’s going
    to make this a lot more of a risky trade, I guess. Yeah. Absolutely. Risking 125 on the
    upside, and the downside beyond the 51 and 57 strike. We can go ahead and put this
    on, but before we do that, how would you manage this? Because what we do is,
    week to week– well– and we’ll probably talk to
    you about it in the office, but our viewers won’t see. What’s a good exit
    strategy on this? What are you look for? Are you trying to get
    it back for a buck? Is that what you’re saying? I mean, what if this goes
    drastically against you? What if we get a
    move to 50 bucks? So I think every trader
    is a little bit different, but let’s put it this way. If you’re doing a lot of
    these kind of earnings trades where you’re doing
    similar strategies on a lot of different names,
    I think the easiest way to not beat yourself up from
    trying to time one thing or another is to do it
    the same way every time. And so that’s not always going
    to be the best, most optimal way to do it, but if you’re
    trading a lot of earnings, maybe you take them off at
    the market open each day. Maybe you look at– the more you try to finesse
    your way on each strategy, it potentially opens
    it up for more losses, but it also opens it up
    to put emotions into it and beat yourself up. Yeah. So to me, this is one where,
    if you have an opportunity tomorrow morning to take this
    off for any profit at all, assuming that you’re making
    this trade around earnings, I don’t see why you wouldn’t
    stick to that plan going in once you have that earnings
    announcement come out. So any profit that we
    have in the morning, we should just take it out. Yeah, that could be– I mean if this is
    what we’re playing, we’re playing the event,
    let’s play the event, and let’s see what happens. Can we bet on you in a three– what? Three in a foot race? Oh, he wants us to foot race. We could do that. Yeah. We talked about doing some
    stuff outside of the studio. Yeah. We could definitely
    do some stuff. Maybe– I mean, it’d be a waste of money
    because I would take that one. I want to– they think– [INTERPOSING VOICES] I think Anthony is pretty fast. Yeah, he’s– I’m scrappy, but– But I’ve got a long stride. He’s got– yeah. [LAUGHS] I’ve got a long stride. He does, he does. It could be like
    that Seinfeld episode with Jerry– who did
    his race against? Oh, yeah, the guy– What was his name? Obie, come on,
    you’ve got to know. He said he cheated. What’s his name? Yeah, well, whatever. If you know the name
    that we’re talking about, throw it in the chat. Maybe we’ll send you
    a breakfast sandwich– There’s the Superman music
    going in the background. –wherever you’re at. Yeah, but let’s go and
    throw this baby on. Let’s get this baby on. All right, how many times do
    we want to put it on, guys? Well, that’s the question. What quantity are
    we looking at here? Well, our max– OK, so I’m going to bring
    up our order ticket, and we’re going to open that up. We’re looking at
    $1.75 in the mid. So size here? I mean, how confident
    are we in this? I mean, I think it’s
    a good risk-reward. We’re only going to
    put it on for one day, hopefully manage it tomorrow. I think we could do more
    than a one lot here. I think– What do you think, Alex? Because you were
    talking this morning that you like to keep
    trades to a certain dollar amount sometimes. And then, obviously–
    and then there’s how confident you
    are in a trade. So that brings up a whole
    ‘nother can of worms about size and how much we
    would possibly do. Maybe I’m a little
    pessimistic, but I always think of things in
    worst-case scenario. And if I– Note, this is not
    real money, guys. Paper money, paper money. And if I’m not comfortable
    in the worst-case scenario, then I shouldn’t be putting
    myself in that situation. So if I’m not comfortable losing
    much more than $125 in case this goes completely
    against me, then I’m not going to do
    this one more than once. Yeah. But it just comes down to
    the size of the account. I mean, we’re playing
    with, one, virtual money, and it’s also a million
    dollars in virtual money. I think you could you can
    afford to do more than one on this particular trade. OK. Want to just put on our 10? We could do that. Yeah, lets do a 10 lot. Let’s see how it goes. But they also think,
    Coffey, that if you stay up in the wind, that you
    might win that footrace. And I agree with
    that because if he gets a good, nice
    breeze in front of him, he’s got broad shoulders. Yeah, he does. So the wind could possibly– for me, there’s not as much
    aerodynamics going on there. I’ve also got the long strike,
    but I’m going to be honest. I don’t know ,that hair
    says otherwise, Anthony. I’m not that fast. That’s pretty aerodynamic. I don’t know. [LAUGHS] All right, let’s put this
    thing on for a 10 lot. How about that? Is that OK? Yeah, that sounds good. Yeah. All right, we’re
    going to do a 10. We’re going to put it
    in the mid and then consider commissions there. Now everybody sits
    at, what, $0.65. I’m not sure our
    paper money account is– it looks like it is now. Yep, and you’ve always got to– always, with these, is
    options, multi-leg options. This could be pretty
    commission-intensive sometimes, so that’s something
    to keep in mind. 40 of them. There is 40 of them. We did get filled
    at $1.76, I believe. Let’s go back and check. And we did, indeed,
    get filled at $1.76. So that means the
    most we could lose on this trade, the difference
    between the two strikes here, right? We’ve got three on both ends. 3 minus $1.26 is $1.24. Right. I’m good at math too, Alex. Well, keep in mind, also. So like we said, we’re
    in a paper money account. We’ve got a 176
    we went in at 175 we got price and prove it
    that might not necessarily be the case in a real
    money trade, right? We may– Probably not. They might fade you on those. Well, that could be, too. Yeah, all right. Well I’m still obsessed
    with this probability of touch thing. Would Disney be a
    better one to look at? [INAUDIBLE] Yeah, I think it would be. I think one thing, if we could
    quickly kind of touch base on, is just because I know
    that Twitch skews primarily to a younger demographic. I feel that you know I’m
    representative of a younger demographic, at least in
    this industry, at least here at TD Ameritrade. You saying I’m old? I wasn’t. I wasn’t fully saying– Wow– [INTERPOSING VOICES] –on blast. I’m 33 years young,
    according to some, but to others, I might be older. So we’ll just let you
    guys keep the chat guess. I guess what I was
    trying to get at, though, is you talked a little
    bit about how commission structures have
    changed, and obviously, the move towards zero
    on equity trades, $0.65 for each option contract. And when I got started
    this more in 2015, we are still at $10 a
    trade and the $0.75, and it made it a little bit more
    difficult for a younger person to try to learn this stuff
    that you’re reading about and you’re studying about. And let alone the fact
    that we’ve already talked about the resources
    that are available to you now, whether that’s Twitch, whether
    that’s the TD Ameritrade network, whether that’s
    other educational resources on tdameritrade.com,
    all the pieces are in place that if you’re wanting
    to learn more about this and get more involved,
    are there now to make this easier,
    and easier, and easier. And until you actually step on– we were making the
    golf analogy off air. You can watch as many
    videos about golf, you can read as many books
    about golf as you want. You can even take
    practice swings. But– and t that’s kind
    of like paper money is taking a practice swing. Until you hit a
    golf ball, you don’t know what that feeling’s
    like until you try. So true. And that’s the same way. And it’s different in the range
    than it is on the course, too. Yeah, even more so. Yeah. And that could be
    your volatility in terms of different type of
    environments in the market. But I guess the point
    I’m trying to make is, until you actually
    jump in and try to do it, it’s really hard to learn this. We have all the stuff there
    to give you the resources, but you have to
    go out and do it. And given where the climate
    is now, with the technology and commission
    structures where they are, the earlier you
    can get involved and try to learn this stuff,
    I think the better you’re going to set yourself up. That being said, let’s
    take a look at Disney. Yeah, let’s take
    a look at Disney. And you know what, too? Now that I’m completely
    neurotic– thank you, Alex Coffey– I want everybody to chat in– Now? That’s now? That’s just
    happening now, right? All right, well, [INAUDIBLE],,
    how old do you think I am? And maybe I’ll tell you
    by the end of the show. How old do I look? How old do you think I am? We’ll throw that in there. I know the answer. I won’t ruin it for everyone. Because some of the
    other stuff in there is not pleasing to my eyes,
    so we’ll talk about my age, thank you very little. OK, so here’s a one-year
    chart on Disney. Yeah. OK? And we have a low
    of 100, high of 147. So is there another chart
    you want to look at, Alex? No, I think this gives you a
    decent idea of the last year. But I think if you
    pull this back to maybe a five-year weekly
    chart, it’s going to paint more of a
    picture about how Disney’s performed as a stock. Maybe three years
    would work, too. Three years, yeah. But really, I guess the
    point I’m trying to make is Disney is traditionally
    more of a blue chip Dow name. It doesn’t
    necessarily– it’s more of a dividend-paying stock. It’s kind of steady as
    she goes, traditionally. And in its price
    action, you see it kind of oscillate up and down,
    but really, a lot of sideways. Then they announced Disney Plus. They announced that
    they’re going to step into the streaming space. And all of a sudden, you
    see the stock basically move three years worth
    of movement in a week. Yeah. As that’s new, potentially,
    excitement around this move. Huge name. Absolutely. The move you’re talking
    about is right here, right? Right. And you see that they’ve
    kind of established– Yeah, big move, massive. But now it’s
    established a new range, and now that that
    information’s been processed and we have more of an idea
    of what Disney Plus is maybe going to mean for Disney, is
    it– and this is a question that we don’t necessarily
    know the answer to– is it important to think
    about how it was in the past? Is it going to be more
    of a blue chip stock now with this new
    piece of information that’s been processed,
    or is this now a growth stock that is going to
    the moon, or whatever. Right, sure. But basically, I
    guess my point is that the history tells us this
    is more of a blue chip name. The market processed this
    new piece of information, and now maybe this new range
    is being established higher up above the market, or
    where it was before. rollingonchrome, I am not
    12, but I do act like it and have been accused
    of it more than once. Yeah, I did that last week. But I’m not 12. But I love the
    other guesses, too. 36, 32, 39, and something said,
    hey, “evelen” That’s not 11. That’s– Wow, we have Anthony
    focusing in on his age here. I told you, I’m becoming
    more neurotic by the second. [LAUGHING] All right. So I’m not surprised. Let’s go to the trade
    tab and take a look at some of these probabilities. Mm-hmm. And so if we’re looking at it,
    I think we might want to with– By the way, KingBill, we
    can’t really talk about AMTD. Yeah, can’t do it. Can’t do that. Sorry, buddy. Yep. Yeah, it’s confidential. But when you’re
    looking at Disney, we’re not making an
    earnings play with this one. They don’t have earnings, I
    don’t think, until sometime in November. Let’s check it out. So we can– it’s
    November 7, I believe, but yeah, you can pull
    it up here real quick. You’re a machine. I got it written down. Yes it is, November 7,
    after the market closes. But– AMD we can talk about. –let’s pull back to
    the trading [INAUDIBLE] We can definitely
    talk about AMD. Let’s talk about them next. If we can go back
    to the Trade tab, it wouldn’t make a lot
    of sense, I don’t think, at this point to look at a
    two-date expiration option. I agree. I think we can go
    all the way out, even, to November
    1 or so to give us all the way out to that
    expiration before the earnings release. OK, so we said the 7th,
    so I think the– right? Was it the 7th in earnings? Yeah, [INAUDIBLE]. So you go all the
    way out to Nov 1. Nov 1, then, yep. And so one thing
    that I really like to use these
    probabilities for is trying to get an idea of setting
    an expectation about where the stock may or may not be
    throughout that time period. And if you look at the
    implied volatility, that’s just for the overall option
    chain, in the parentheses, there’s also an expected move. Guys, if you don’t mind, I’m
    going to out the last in here because it’s just
    taking up a little bit too much real estate. Yeah, go for it There. Yeah, you got it? There you go. I don’t think we
    can take out last. No, last is– No, last price you can. Last ex, you can take that out. We don’t need that. I don’t think you can, actually. Yeah, you can. See you have it there? Oh, you’re right. Yep. What was that, Bill? Yeah, yeah, you’re right. I’m sorry, I missed that. You’re right. The bid/ask you can’t take out. I don’t hear so well
    in this left ear. I’m sorry. Yeah. I’m sorry. OK. But you’re going
    to see, I guess, on the side of that option
    chain for the November 1s that there’s basically a plus or
    minus $5.79, round that to 80, in terms of a one
    standard deviation. So like 68% chance
    that it’s going to be you know up within– up $5.80 and down $5.80. Right. And so you start
    thinking about that the same way that you look
    at the market maker move, or whatever that might be. Yeah. But when you start
    thinking about strategies, let’s say that you look at
    Disney and you love Disney. You’re like, oh, Disney
    Plus is going to be great. It’s still got this
    great parks thing, whatever you might want to do. You look at the company profile. Even on the company, you see
    an idea of what the company’s revenue streams are. It’s kind of a low end of
    an intermediate range, too, to be honest with you, right? That’s right. We looked at an 180-day here,
    and it’s starting to come– I mean, obviously, after
    this pop, if we just look at this particular shot
    right here, kind of coming back down to the 130-ish level. So may be a bull trade here. I don’t know. Right, but let’s say that
    you’re setting that up– or whatever it might be. But anyway, let’s just say
    that you start with the one– let’s even say
    that you want to be a little bit more
    aggressive, and you’re like the 128 put strike. Yeah. You’re pretty close, and you’re
    basically right at the money. You’re going to see– you
    have a 38 delta on that, so that’s going to correspond
    to roughly a 38% chance of that expiring in the money. And the big piece, though,
    is that probability of touching that we
    were talking about. 80%. You have an 80% chance
    over the next 23 days that Disney is going
    to touch that strike. Yeah. You’re right. So if you put a trade on
    with that strike in mind, there’s a– Be prepared. You might be tested. There’s an eight
    out of 10 chance that you’re going to be tested. Your emotions are
    going to be tested more than anything, really, right? Right, and so you still
    have a 60% chance, if you’re taking the
    inverse of that delta, that you’re going to
    expire out of the money or be profitable at
    that expiration date. Yeah. But you have an 80% chance of
    taking some heat along the way. Yeah. And so I think that sets
    expectations around it. But maybe you’re not
    comfortable with 80% heat and you want to make
    that closer to 50-50. Maybe you go down
    to the $1.25 strike, and you see that that’s
    roughly a dollar there. Maybe you start by selling
    that, and maybe you– [INAUDIBLE] have a
    good day at the gym. You start setting up a
    strategy similar to what we did in Delta Airlines, or
    whatever you might want to do, depending on what
    that bias might be. Pony boys. Pony boys. Yeah, I mean– I like the 1.25 level,
    too, because it’s a psychological number, too. Right. Right. And plus, if we
    were to spread that, too, we’d be collecting, what? Something like $0.80
    right now, too? If we did what? If we spread the 1.28, 1.25? On this guy right here. Are you– that’s going
    to be fairly aggressive. And I think– Look at that number, right? We’re looking at, what, 80%? Oh, we just got filled on MES. Oh, we just got filled. The chat was right once again. Don’t fade the chat. Don’t fade that chat. Anthony wrong once again. Two breakfast
    sandwiches to none. But we still have
    a few more shows. I think the payable date
    of that is November 1. No, no. Yeah, but yeah, so that is a
    little bit more aggressive, and if we were to move out,
    we’d have a little bit safer– a little bit more breathing
    room, let’s just say. Not necessarily safer. I think because looking at
    the 1.25 strike, [INAUDIBLE].. I think that it’s worth
    talking about either way, because I think if you’re
    going to be a little bit more biased directionally, you
    can afford to potentially be a little bit more aggressive. So if you’re bullish
    Disney, inherently, you’re not as worried
    about the downside. You can be closer on that end
    because you have that bias, and you want to set
    it up so you’re going to make money if you’re right. Yeah. And of course, conversely, if
    you’re more bearish Disney, maybe you’d be more
    aggressive on the call side. Yeah. But if you’re going to
    take more of a neutral or play the
    range-bound, or the fact that Disney has isolated
    in a range historically, you’re going to
    have the opportunity to collect both sides, so you
    can be a little bit farther away. Yeah, that’s great. Let’s put some on here, and then
    we’ll look at AMD real quick and wrap it up. So we could put on a
    vertical, put vertical here. Yeah, well, the
    question is, do we want to take advantage
    of the downside, or both sides with
    some sort of condor? Hmm, I don’t know. What do you think, Alex? What do you think? I think that you can make
    an argument for either one. You mentioned that’s at
    the lower end of the range, so maybe you kind of
    combine the strategies. Maybe you do an iron
    condor, but you’re a little bit more
    aggressive on where you set that put vertical so
    that you can still even take a neutral strategy, skew it a
    little bit so that it reflects your, maybe, directional
    bias to the upside. What we could do, too,
    you know what we could do? I mean, we could
    build something here. We get a lot of
    time to expiration. We could put on a short
    put vertical, obviously, a bull spread. If we get a rally, maybe we
    sell an upside call spread to hedge that a little bit. [INAUDIBLE] Hedge some of those deltas. Maybe we can go ahead
    and do some of that. Which is, now that you have
    the commission schedule where it is, I think that that
    becomes more and more economical nowadays to do things that
    way and leg into those trades. Right. [INAUDIBLE] now, you don’t
    worry about that ticket charge. All right, let’s
    put one on here. What would it be? Like maybe, like I
    said, if we’re not that afraid of the
    downside, we could do the 1.28, 1.25 put vertical. Right, and then
    maybe do a condor on the other side a little
    bit higher, further away. But I’m saying, maybe we
    could wait on that one and do it later. If we get a rally on
    it, then we could, boom. Yeah, I don’t mind that. I don’t mind that. I don’t think that’s
    out of the question for a strategy like this. You guys OK with
    a 1.28, 1.25 put? Yeah. Alex? Yeah, works for me. You good? All right. 1.28, 1.25. Well, how many times do we
    want to put this thing on? This one. So we’ve got $3 wide, 82, 2.18– And remember, we’re going
    to scale into this position, too, so we don’t
    have to put 10 on. Right. We can use some bullets. We can put four or five on
    now, maybe put four or five on later, and build a position
    from now until earnings. I think that’s a great point. We have the opportunity, without
    the ticket cost, to scale in. So maybe let’s try a
    five lot, and if we still like it next week,
    we’ll do another five. Five lot it is. Selling the put vertical, $0.82. Yeah, perfect. Then we get $0.65, 10 contracts
    on five [INAUDIBLE] spreads. That gets us 6.50 in commission. Disney movie that can best be
    improved with more milk– go! I don’t know, Cars? Cars? Yeah. I don’t think there’s
    any milk in that. [LAUGHING] Disney, someone says–
    rollingonchrome says, Disney doesn’t really rally, it
    fills you with hope and misery. I don’t know if that
    chart indicates that. No. I mean– That’s actually
    looking pretty good. –it depends on when
    you got on, I guess. AMD, we’re going to look
    at AMD real quick before we close this thing out. Who brought up AMD? I think rollingonchrome
    did, DarkSuperman did. What you guys want
    to look at there? We could look at a
    few different things. Well, let’s start by
    looking at a chart. We always start there, right? Right? All right, AMD’s chart. 16, I mean, a
    couple of years ago. Coming off the top end of the
    range, slowly trending down. That’s even more interesting. Kind of a similar
    chart to Disney, except with the exception of the
    large breakout that Disney had. Yeah. When– I think those off
    good earnings and guidance that it popped off that. Yeah, this three-year
    chart is definitely impressive to the upside there. 6.22 on the three-year low. Mm-hmm. And now we’re sitting up at 35. They’ve had a lot of
    new chips coming out, all kinds of good
    products, basically, in their pipeline
    competing with Intel. So I know that’s part of
    some of the news there. This is a one here– This is also one of
    the most widely traded, widely watched
    names on the street. Very much, yeah. You look at the amount
    of volume of shares, I think it was over 28
    million already on the day. It’s a lower price point stock. A lot of strategies come
    into play with that. It’s higher implied volatility. There’s a lot to be
    interested in with this name, but as you mentioned it, you’re
    also talking about a start to went from beginning the
    year 16, to 35, back to 28. So it’s not really
    for the faint. That’s true. Right, right. That’s true. This is one where any
    sort of market news– I think this is a
    very high beta stock, so any market news
    is going to move. It if you take a
    look– yeah, 2.94. That’s a very big beta
    on there, so that’s going to move quite a
    bit when the market does. So what do you think
    would be a good move here? Maybe if we’re thinking– It has earnings fairly soon. Yeah. Yeah, it looks like there’s
    a little intermediate triple bottom there, too. I know it’s– I do
    watch this quite often. I’ve been a follower
    of AMD for years, and I’ve really kind of
    see it come from nothing, to something, and nothing. I’ve seen it go from rags
    to riches several times. This one could be a sustained
    move to the upside here, but like I said, there’s
    a triple bottom here. Do you see this, guys? It’s putting in one, two, three. I do. The question is, does that hold? Does that hold? That’s the question. Triple bottoms have a
    hard time doing that. Chat, we can put something
    out if you guys want. Yeah, which direction
    do you guys thinking? You guys bull? We could put in a bull vertical. We could put in a– we
    could buy a call spread, sell a put spread. We can go out to– when
    are their earnings? 23rd, 23rd. Of? This month. October, OK. Mm-hmm. OK, so I mean, we probably
    want that, the earnings, to play into it. I don’t know, do we? Or do we want to get
    out before the earning? Oh, it depends. That’s two weeks out. Do we want to hold on that long? rollingonchrome is saying
    he wants to go bull. ShortSPX saying it’s going down. Any third votes in there,
    because that’s going to be– well somebody’s saying strangle,
    trading a classic milk spread. Wow, a lot of activity. They’re going after
    your background, buddy. Bear and bull, bear and bull. Bull, real money. We don’t do real money
    here, buddy, sorry. Well? Want to do bull? Let’s do bull. Let’s see how it goes. All right, buying a call spread? Selling a put spread? You know, I’m not– sometimes when there’s a
    high implied volatility, sometimes it’s not as
    advantageous to buy a call spread. It’s true. But we could try it
    out on this one to see. No, I’m OK with that. You’re actually
    right about that. I mean, if we have a lot of
    implied volatility baked in, and we’re going to see
    some of that bleed out, why would we buy it, right? We’re going to
    want to sell that. Plus, from now until
    expiration, might get a little more of a
    pump in those options, too, so maybe don’t
    put on the full 10 lot. Maybe we scale into this. And again, because of the zero
    commission, $0.65 a contract, no ticket charge, you can scale
    in and out of strategies now, and it doesn’t cost
    anything extra. Right, so taking a
    look at this chart, where are we
    thinking strike-wise? Maybe if we’re doing a long
    call spread, what are we doing? On the upside? Yeah. I think maybe we go along
    the 30 and then short, maybe, the 32-ish? Yeah I think that may
    be able to work out. We’ll pop that in
    there and take a look. We are short the 32. This one’s 67. $2 wide. 1 to 4– no, that’s
    roughly 1 to 4. So if we do 67– I often think of it
    in how many times we can double our
    initial investment. So three times? rollingonchrome, I’m
    not sure where you’re going to send your resume. Did you try tdameritrade.com? tdameritrade.com. We’re always hiring. Well, so just like
    you said, Anthony, I think also we should try
    and scale into this, maybe. Yeah, but this guy is trying
    to steal your job, man. I don’t like it. I think he’s trying
    to get, like, he wants to put in an
    application for your job. Wow, well, good. Yeah, let’s see. We’ll try it out. I don’t know. [LAUGHS] I love you, man. [LAUGHS] But you know what? We’re going to be moving
    up to the eighth floor. We might add somebody,
    so who knows? But I don’t know. He seemed a little bit
    stalker-ish, rollingonchrome. I don’t know. All right, well– all right,
    let’s take a look at this and get this baby on here. Let’s do it. So 67, we’ll scale into it. Maybe if we like it more, we’ll
    put something else on and take another look next week. I like it. 67, we’ll try and get
    it in at the midpoint. Paper money account, so I would
    imagine we get filled there. And you’re filled. And we’re filled. We’ve got three. This, on the CBOE floor,
    Matt, you’re filled. I don’t know, did you
    guys do that on the CME? Did you do, like, a broker
    when they would say whatever? I don’t know. I know some of the arm
    symbols, but we never really had to use that. I was in a really small pit. I was in the milk pit. See, we didn’t use
    arm symbols, no. We didn’t, no. I know, but– All right. All right, well– I have one more request– and this is again, somebody,
    from the trade desk. And this right here is not mine. This magazine is not mine. It’s actually Puffer’s. He wanted your
    autograph, and he wanted you to sign it live on stream. So if you could do that, Puffer
    would be forever grateful. Why am I not surprised
    by that in the least? Because it’s
    trading desk banter. Oh, I’m sorry buddy. There you go. Oh, there we go. There you go. So there it is, Puffer. I had him do it for you. All right. He’s signing it live on stream. You have video evidence of that. There can only be one. To PFR, love, Alex. See, now the more
    that I’m thinking about this, that’s very– There we go. I like that you put PFR
    on it, because now he can’t sell it, right? If you put– Right? Yeah, that’s what. That’s why. If you put the
    person’s name on it, then it can never
    be worth any more. All right, well, we
    appreciate you coming on. Yeah, thanks, Alex. It’s definitely awesome. Yeah. It’s definitely fun. I had never really
    seen that tool before, and I think that’s
    pretty helpful. I’m going to start looking
    at that from now on. Yeah, me, too. Me, too, for sure. Yeah, that is
    definitely very cool. The probability of touching. Well, thanks for
    having me, guys. It was fun. Yeah, for sure. Oh, yeah, absolutely. All right, guys,
    thanks for joining us. Don’t forget to catch
    us every Wednesday live at twitch.tv/tdameritrade. Every Wednesday, 1:00
    to 2:00 PM, we are live, we are streaming,
    we’re here for you. Remember, guys, this
    is always your show. Make sure you check out all
    of our great education content at YouTube because we are going
    to archive this after the show, and go to tdameritrade.com
    under the Education tab. A lot of great stuff there. Cafeaulait. Cafeaulait? Oh, thanks for the
    follow, Cafeaulait. Yeah, and Harlequinfollow. Did we see that? Harlequinfollow, we didn’t. What’s your Twitter handle? Follow Bill on Twitter. @wruby_tda. Follow Alex on Twitter. What is yours? alexcoffey_tda. Awesome. Mine is @apanzeca_tda. ‘Til next week, I’m Anthony
    Panzeca along with– I’m Bill Ruby. –and Alex Coffey
    saying, so long, guys. Happy trading. Happy trading people. Thanks for watching. Thanks for coming in. [WHOOSH] [MUSIC PLAYING]

    Can You Get Rich by Following the “Smart Money”? / Follow institutional order flow Dark pool trading
    Articles, Blog

    Can You Get Rich by Following the “Smart Money”? / Follow institutional order flow Dark pool trading

    October 8, 2019


    Can You Get Rich by Following the “Smart Money”? // Follow institutional order flow, dark pool trading, block trades, on balance volume, on balance volume indicator, dark pool explained, stock market investing strategies welcome to looking at the markets with David Moadel today we’re going to try to answer the
    question can you get rich by following the smart
    money block trades institutional order flow these are some of the terms that vaguely
    lead us to the notion of smart money these evidently are powerful investors
    that make profitable trades before the dumb money or retail traders try to jump
    on the bandwagon but inevitably end up missing the boat often it is asked whether retail traders
    can trade alongside the smart money mirroring their trades and effectively
    piggybacking or riding their coattails – big profits who is the smart money
    anyway the term smart money generally refers to
    some or all of the following high-frequency traders hedge funds
    market makers large institutions algorithm-based investors and any person
    or institution that makes very large volume trades at any given time the
    vagueness of the term smart money makes it difficult for retail traders to
    follow them because it’s not exactly clear who they are besides the trades of large investors
    can be highly misleading and blindly following their moves might not benefit
    retail traders for all we know a seemingly bullish moved by the smart
    money might actually be short covering or a
    hedge against a bigger bearish position for example buying shares or calls of SP
    why as a hedge against a larger position in a vicks product or classic market
    manipulation using their big influence to drive up the price of a stock before
    retail gets in and then selling while retail is left holding the bag while a
    seemingly bearish moved by the smart money might actually be profit-taking or
    scaling out of a bigger foolish position or a deliberate attempt to take out retail stop losses before turning around
    and pushing the price higher besides some of the really big trades
    aren’t available for retail traders to view until hours later or even a day
    later by then it’s probably too late to do anything useful with the knowledge of
    those trades while retail trades are transparent the
    smart money has the privilege of making temporarily secret or hidden trades this is known as dark pole trading and
    while it might be controversial it’s currently legal in the United
    States Chartists might try to use obv or on balance volume as a proxy for smart
    money movement in order to predict where price action will go personally I find that on balance volume
    tends to move in tandem with price action rather than before it thus
    diminishing its predictive ability to conclude I would recommend against
    trying to follow the smart money as a get rich strategy instead focus on
    building a safe consistent plan for long-term growth in your trading account
    if you’d like more help with this or with anything having to do with finance
    stocks or options please feel free to contact me my name
    is David Modell you can reach me anytime at David Modell
    @ gmail.com I hope this was helpful and I hope to
    hear from you very soon

    Articles

    Risk Management with Nick Theodorakos | Twitch #3

    September 24, 2019


    [MUSIC PLAYING] Hello, and welcome once again
    to TD Ameritrade on Twitch. I am your co-host Anthony
    Panzeca joined always with– Bill Ruby. How you doing? When I point at you, that
    means you’re supposed to talk. Well typically,
    I try to do that. And I think I did it just
    fine that time as well. Do or do not. There is no try. A, touche. Yoda. Yoda reference, starting strong. It’s the only way
    to start, baby. Yeah. We are going to be
    always streaming every Wednesday from 1:00
    to 2:00 PM central time. We’re going to be
    discussing markets, looking at our positions from last
    week, managing those positions. And always, we’re going to
    have a guest every week. We’re going to be showing
    you trade examples, showing you
    different strategies, showing you how to
    use the platform. All of that fun stuff. So if you ever want to chat
    in, if you have any questions, please feel free to do so. If you look below, where
    I’m pointing– hopefully. I probably got it right
    one of those times. There is a link there to open
    up a paper trading account, so you can follow along
    with us at your will. So let’s have fun and let’s look
    at where the markets are right now. Bill, where are they at? Well, right now, we’ve
    got the Dow up 132. We’re 27,041. Looks like the ES is up 15
    handles right now to 2,993. So we’re having a
    bit of an up day. Nothing crazy, but
    we are on the upside. Yeah. Just off the highs here,
    coming off a little bit. We have crude oil. Crude oil was down
    a little bit too. You looked up some news on that. What happened there? Yeah, Trump was talking about
    removing sanctions with Iran. So that kind of got
    hit in the after– that might have even
    been in the morning. So it was having
    kind of a mellow day, and decided to take a downturn. OK, well, I guess we needed a
    tweet to do something, right? Have some fun with it? Yeah, this is the market
    we’re in, I feel like. Speaking of having some fun,
    we have a few new viewers. Few new– what followers, right? Followers. Not necessarily subscribers. Hopefully viewers as well. Yeah. Well, there are a few watching. OK, who do we have there, Bill? We’ve got IAmTheFlash27,
    Schumer14. Is that Amy Schumer? Is it? It could be. Wow. We’ve got NinjaTrader079. Wait, wait. Oh, and MattRuby34, excuse me. I knew you were going to skip. I didn’t mean to skip. Is this another family remember? What is the? I don’t know. I do have a large family. It could be. My cousin is named Matt. I would guess that it’s Matt. Yeah. Well, Ruby’s like Smith,
    it’s a very common name. It could be anybody. Right. There’s lots of Rubys out there. We don’t necessarily
    know who that is. If there’s enough Rubys,
    I think we could just broadcast to your family. Won’t even need anybody else. Yeah, well we’d have
    about 100 people. That’s it. We’re going to need
    more than that, I think. I like the next one. TheNerdyWhiteBoy. I like that too. I like that. That’s very, very clever. No, I think that’s after
    a Weird Al song, right? I don’t know. (SINGING) White and nerdy. White and nerdy. No? No, don’t do that. No, we’re going to skip that. We got MarkyZB and JayCar8799. I think we saw a DadRuby
    followed last week. Yes, we did. Yes, we did. So two Rubys in the mix today. Yeah. DarkSuperman, just a real
    quick question out of the chat. Is that a simulated account
    that you guys are in? It sure is. Yep, that is. No, it’s all my money. Wow. You’re a lucky man. Let’s pop open and see
    just how Anthony’s doing. Wow, it’s close to a million. Yeah, close to– No, it is a simulated account. It is a simulated account. It’s definitely a
    simulated account. But it kind of mimics
    a real-money account. So it is a little bit special. It’s not quite
    going to be the one that you create with
    the paper money account that you see below. So we do have one that’s
    kind of a little bit special. But the one that you
    do open with the link that you see below is just as
    close to a real-money account as it gets, obviously
    without it being real money. Right. OK. So as promised, every week,
    we are going to have a guest. And this week, we
    are proud to be joined by Nick Theodorakos
    coming at us from our risk management department. Hello, Nick. How are you doing today? I’m awesome. How are you guys doing? We’re good. Thank you very much
    for being here. Yeah, I’m glad to be here. OK. So you traded at
    the CBOE, right? I did. I did. CBOE, and then board of
    trade a little bit too. Oh, nice. What did you trade down there? Mostly index stuff. You guys hit some of the names. So a lot of the ES futures
    against SPX options, against Dow options,
    Russell option. So kind of a big
    basket trade of index stuff, and then hedging all
    that against each other. Oh, nice. Did you trade in the SPX pit? I did. Yeah, I did. Yeah, I was down there
    from like 2001 until– actually, I started at
    really, really sad start date. But I started one week
    before September 11th. Oh, wow. 18 years ago. So it goes back a long way. Yeah. Wow. That’s quite a turbulent time. It was indeed. In a lot of ways. Now, you said that
    you were doing a bunch of different
    things versus each other. Were you managing
    all these positions, or how would that work out? Do you have a few
    different things you’d watch on the screen? Or how would that run usually? Yeah, it’s funny. When we were down there, there
    was much less information. So those of you guys that
    are watching and have done any of the floor tours
    and have been in Chicago, it’s shockingly
    stark on the floor. There’s just not a
    lot of information. And really, when I started,
    we were still on paper sheets. We had pieces of paper
    literally, and nothing else, in terms of computers. There was no real live
    feed like we have here. Paper? What’s that? Yeah right, exactly. So we still carded
    up trades by hand. So it was pretty manual. But it was fun. And basically what we were
    trying to do is find– and we’d always call it edge. We were trying to find edge
    in one index versus another. So you’d get these big
    groups that would come in, and you’d end up seeing
    some trade happen in some pit somewhere. And you’d kind of be trying
    to play that against– So if a big broker
    came in and said, hey, I got to buy SPX puts. Well, my chance to buy
    those somewhere else cheaper is short lived, but maybe
    I could buy NASDAQ puts and kind of play it
    against each other, seeing markets ratchet
    up, volatility ratchet up, and [INAUDIBLE] prices. Yeah. And it was kind of fun. We called it a basket
    trade or an index trade. And so that was when you
    were standing in which pit? The SPX, or for the ES? Yeah, we used to trade– so I was standing in the SPX. We used to trade that
    against the Dow options– so the DJX options. And I got to actually witness
    kind of the electronification of the Dow market. So the Dow options was a
    really fun pit to trade in. There was about 30
    of us or something. And that was in the
    corner of the OEX, right? That one corner there. Yeah, right. There was guy. There was one guy. His name was Dave. Full disclosure, Dave,
    if you’re watching. And he was the futures broker. And he was on a line over to the
    CME where the futures traded. And there was no electronic
    connection between the two. And literally one
    day we walked in, and there was a little
    screen up on the wall. And it was the electronic
    quote for the Dow future, the YM future that we have on
    the platform of the Dow Mini. And the markets in the DJX went
    from like $0.50 wide to $0.10 wide within two weeks. We’re like, this product’s dead. There’s nothing else to trade. It was amazing to see literally
    just the width of that spread get sucked out of it because
    of the electronic markets. We all get to benefit
    from that live now, right? Yeah. We get to see how tight NBBO
    is across the country and all these earnings. But to see that–
    to be standing there and basically see that
    happen in real time, disheartening at the time. But pretty cool the
    way things have gone. And DRKASuperman has a
    pretty interesting question. Says, look like taller guy. Did your height help
    in the pits at all? That’s a good
    question, actually. That is it is better question. It’s a little insightful there. Yeah. Well, we were joking
    before the show, they had to adjust
    cameras and microphones. Yeah, we did. We were going to have
    you sit on the floor. As guest three, I hold the
    record as tallest guest, which is great. It’s funny you ask
    that, because there was a lot of people
    that were hired because of like athletic prowess. Some firms would hire
    ex-basketball– college basketball players
    with a finance degree to go stand and
    take up more space. So it did help, honestly. And I was lucky. When we rearranged
    the Dow pit that I was in for a couple
    of years, I got to stand right next to a broker. So I was tall, and I got
    to stand right there. So you literally box people out. There was this amazing day when
    we had a new guy in the pit. His name was Ryan. And full disclosure,
    if you’re watching, we’re still good friends. And he was about 5′ 5″. Tiny little sawed off guy with
    kind of a tricky attitude. And he came in one day
    and stood in front of me. He’s like, well, if I
    can’t get around you, I’m going to stand
    in front of you. So there was no assigned spots. Anybody could stand
    wherever they wanted. He stood in front of me. And for two days, I rested my– we’d moved to handhelds–
    and I rested my computer on the back of his head. I’m like, well if you’re
    going to stand here, I’m going to use
    you like a desk. It’s just kind of the
    games that went on. So on the third day, he showed
    up in a football helmet, and brought it. And they’re like, you
    can’t wear that in the pit. You know, it was fun and games. But yeah, being taller
    certainly helped– long arms. The futures side of that
    trade helped a lot, honestly, being tall, because that
    guy was across the pit. And physically, it mattered. They kind of saw you first. I remember them hiring a lot
    of guys with like a presence. And not only a
    physical presence, but just to have a presence
    when you walk into a room, and not be afraid
    to open your mouth. And they really
    did look for that. And it was less of– I didn’t get my college
    degree till later on in life. But when I was a market
    maker at the CBU, I didn’t even have
    one at the time. But I kind of exemplified that
    person that was, I don’t know, outgoing and liked
    to talk a lot. Bombastic. I don’t know. Yeah, whatever. But yeah, that was a big– that was real important. The degree didn’t matter
    much on the floor. There was all walks of life. I stood next to a guy who– I went to a little tiny school
    in upstate New York called St. Bonaventure University. And I thought, this is
    the best place ever. And all 2,000 of us
    are going to love it. And the guy next
    to me went to MIT. And he was this amazing
    mechanical engineer, the nicest guy. He couldn’t trade his
    way out of a paper bag. So funny. You just kind of have
    to have a feel for it. All the smarts and
    degrees don’t really matter in that environment. Just a different world. There’s a lot of
    technical stuff, but it is kind of an art form. Yeah, it is. And especially around
    that time, in ’98 and ’99. I mean, there was
    the tech bubble and everything was
    just exploding. So there was so much
    opportunity down there. I mean, I started out as a
    runner when I was like 20. And I was a trader
    within like seven months. And I was like, what
    am I even doing here? Did this really just happen? It’s a trial by fire. I know. You know, one thing
    that I thought was interesting that you
    talked about in the SPX pit, and I’ve never heard before,
    is that you were cross-hedging with different indices. Yeah. How did that work? Did you have a
    computer monitor– I’m sorry, a computer model
    that maybe like was like, OK well, I sold x
    amount of SPX calls, and I could hedge with maybe
    like x amount of NASDAQ calls, or maybe NASDAQ futures. How did that work? I mean obviously,
    we can’t get too far into that, because it
    sounds complicated. Yeah. I mean, honestly, the way
    the TOS platform looks now on the Trade tab
    is not dissimilar. And I was kind of
    involved in a firm back then– to remain
    nameless, I guess. But we were building a
    platform to do basically that. So if you think,
    in TOS, you kind of do your Control-Click
    to build spreads. So you click something,
    you click the bid, then you Control
    and Click the ask. And you can build those spreads. We built kind of one of
    the first versions of that, so you could track and monitor
    a bunch of spread simultaneously and get real-time pricing. So things we totally take for
    granted and get for free in TOS now, we were kind of
    developing back then. And we had a really
    cool kind of mentality where we would show that thing,
    and then we would show it– what is akin now to our
    Analyze tab, the beta weight. So we’d say, if I’ve
    got 1,000 SPX deltas, you can’t go buy or sell an SPX. How many ES features do you
    need to do against that? And then similarly, if you
    were to put on NASDAQ or Dow against that, you’d be able
    to see that correlation. So if you were
    long Dow calls, you wanted to sell less SPX
    calls, because I think it’s a factor of 10 to one. So you’d be able to
    see that difference between your actual deltas,
    and say, look, I just know that I need to sell something. But it was a quick kind
    of reference of how many. And then at the end
    of the day for us, it all came back to ES futures. So I know we don’t
    recommend sort of anything here, how to hedge. But the ES future
    is such a bellwether for the broad market. And it’s open 24 hours a day. So we would view that when
    we were making markets as the ability to
    trade around the clock, even when other
    things were closed. I always go back to
    the Trump election, where the amount of movement
    that happened while he was sleeping was just epic. It was unbelievable. But if you didn’t
    have a futures account or you weren’t watching
    the futures market, you can’t participate in that. So that’s kind of interesting. Yeah. Now, there is something
    that you mentioned earlier. And not a lot of
    people understand it or may have heard of it. But you mentioned that
    everyone’s after edge. So how would you describe edge
    to someone who’s kind of new? Good question. That’s really what you were
    looking for when trading. And you also mentioned that
    when markets tightened, there was not as much. How would you describe that? Yeah, it’s kind
    of funny how when I came to the retail
    side of things, I had to really change
    your mentality, right? Anthony, I know you’re
    in the same boat, right? It was like the bid and the
    ask that we see on the platform here. So if you flip over to the
    Trade tab and put up– yeah, Apple’s perfectly fine. So you see, we don’t have
    the exchanges in there. You don’t have to add it. But you see the 222.5
    calls 1.61 by 1.62. There you go. They’re literally a penny
    or two wide in the letter– the x column. So bid x, ask x. I think everybody probably knows
    this, so shut me up here when– Yeah. But that’s the exchange that
    that quote is present on. So again, taken for granted now. But when you were standing
    on the floor, when you were thinking about where
    those markets were coming from, there was somebody
    that was standing on the AMEX or somebody
    standing on the PCOS back then, when
    that was a thing. And we were standing
    at the CBOE. And so there’s three or
    four exchanges out there. There’s like 13 or 14
    different option venues now where these
    quotes can come from. But what’s happening here is
    you’re seeing the National Best Bid and Offer– the NBBO. So as a retail
    client, in my opinion, we’ve never had it better. We’re a penny wide. So if you want to buy them
    or you want to sell them, it’s kind of a pick them market. If you’re wait two seconds,
    it’s going to be 63 bid. The market’s just oscillating
    so quickly and it’s so tight. So we take for granted that
    those things are just there, and we can buy and sell as
    we choose as a retail client. Our job as market makers
    are to produce those prices. So if you sort of envision this
    market being $1.60 to $1.65, if I were willing
    to make that market, my value is probably
    $1.62 and a half, right? We’re trying to just get
    a little bit of distance between what your value is on
    either side in that distance. Because a market maker’s job is
    to stand there, ready, willing to buy or sell. So you have to
    make a price that’s the equivalent of
    where you’ll make money on either side of the market. So that spread– you’re in
    the middle of the spread, or what we call the
    mid-market here on TOS– is what we think
    our value would be. So we were calculating
    that value down the middle, and then making the
    market around it. So that edge– the
    difference between where I’m willing to buy
    it and where I’m willing to sell it– is kind
    of how I think about what you want to capture to make
    it worthwhile doing any given trade. If you think about it, I
    mean, everything has that. I mean, you go to
    a car dealership, they have a price where they’re
    willing to buy your trade-in, and then they have
    a price that they’re going to sell it at retail. And so they’re basically
    doing the same thing. If you think about it,
    Walmart’s doing it. Everybody really does that. Everybody has a bid-ask spread. It’s what they buy it
    at, what they sell it at, and then there’s a fair
    value market in between. That’s exactly right. And then when everything went
    multiple– like you said, dual listing– it made it very, very tough
    for market makers on the floor to make their money, because
    your profit margins went from basically this to that. Well, it’s a $0.05, $0.10 to
    hedge it, then going down. More competition in
    the market place. That’s really what it does. And you’re paying commissions
    on both sides of it, right? As all of us, market
    maker or otherwise, it’s not some magical
    free land out there. There’s transaction
    costs involved. So in the example I
    was giving, you’re paying to trade your
    futures against that thing. You pay to hedge it with stock. It’s pretty interesting. So it’s funny. You say like, everybody
    has to make money, right? And I think there’s this
    fascinating thing going on– not to switch topics. But you look at
    Uber coming public. You look at Lyft coming public. We’re talking about WeWork
    potentially coming public. It kind of sounds
    like they delayed it because of some SoftBank stuff. But these companies have been
    able to stay private so long now, because there is so much
    money in the private market and private equity. They’ve been able
    to sustain business without being profitable. And it’s a really
    interesting phenomenon. Because they come
    public, and they say, well, now I’m on this exchange. You look at Uber’s stock
    price, and wow, they haven’t done well. And you look, wow, they’re
    making a ton of revenue. But they can’t get those
    costs under control. They the IPOed at 45, and
    they’re trading at 34 now. It’s just really
    interesting to see what the public market expects. And your comment makes
    me think of the fact that they’re not
    turning a profit. And the stock price
    is reflecting that. But interesting. I wonder what
    their earnings are. Let’s go over the
    chart and see what their previous earnings were. Yeah, minus 4.72 a share. That’s kind of rough. Yeah, they had the largest loss. I can’t remember the
    billions of dollars that they lost in
    that prior quarter. What was it, like $2.2
    billion or something they lost in the quarter. So it’s a crazy number. How long can the
    public market sustain that’s the question, right? I don’t know. Right, right. Well, that’s a tough question. I mean, everyone uses it,
    but maybe we’ll see how long. Check back in the markets. We have the Dow up
    133, the NASDAQ up 62, SPX off a little
    bit from the highs. It’s still up to about 13 there. As we always do every
    week, Bill and I like to put in a little
    bit of futures trade. We bet a breakfast
    sandwich on it every week. Last week, you won. Yes, I did. I had to redeem
    myself from week one. I’m a little more
    than bitter about it. Oh, really? Yeah. You know why? Because I feel like that
    was kind of put on me. You’re just like, yeah,
    what did you, go long? Ah yes, you’re a
    victim of circumstance. Yeah, this is how it goes. That’s OK, I’ll take it. I’ll take it. All right, maybe
    we’ll even the score. Well, the score is even. I mean maybe we’ll swing
    it in your direction again, I should say. Oh, thank you. You’re going to throw
    me a bone, Bill? Yeah. I appreciate that. Yeah, exactly. If I lose this one, it’s
    because I’m throwing you a bone. I’m not taking any of
    your charity here, OK? Just keep it to yourself. But let’s take a look
    at the chart here, and then we’ll try to
    see where we’re at, and then we’ll pick a
    side, and we’ll go with it. We’ll put in a trade. So right now, we’re sitting
    in the Micro 2,992.50. I don’t know, pick a side, Bill. I’m down on this one. Damn, so am I. Ah see, you’ve got
    to answer first. You need to get more aggressive. That’s what I get
    for being polite. Yeah, first takes it. Yeah, OK. That’s fine. You’re down as well. Nick, what are you thinking? You know, I’m looking
    at my other screen here, and it’s just shocking to
    me that we’re– all this turbulence and
    turmoil out there, and we’re so close to
    all-time highs, right? Your 3,029 all-time
    high in the Micro here. So if you expand your
    chart out just a touch, we’re so close to that. And there’s just not
    really full resolution on so many of the macro
    geopolitical things that are out there. But the rally back is
    kind of hard to argue. I mean, you see a
    pretty clear pattern. Every time we get
    that sell off December being kind of the
    biggest, we’ve had that pretty steep v-shaped
    rally back to trying to push all-time highs. And we’ve stalled, right? We’ve stalled every time kind
    of as we approach that 2,995 level. Can’t get back above 3,000. But I don’t know. It feels like there’s a little
    bit of stability out there. And if you guys are
    making me pick here, I think I’m probably
    on the long side of this one in the short term. Because I just don’t
    think with the way that the geopolitical
    stuff is playing out, I don’t see kind
    of that reaction before we do the show next week. Now, if you asked
    me 12 months out, I think I have a little bit
    of a different picture here. But I think by next
    week’s show maybe, since I don’t have to be on,
    I can call it either way. All right, fine. Then I’m going to
    go long with Nick. All right. Well yeah, I think that’s fair. I’m going to stick to my guns
    on the down for our short term. I don’t know if it’s fair. You got to go first. You’re like the dealer
    dealing me blackjack. You’ve got an edge. You know what they say, second
    mouse gets the cheese, Anthony. We were talking
    about edge earlier. You have that. You know, the first one
    isn’t always so lucky. So let’s take a look. Let’s pull something in. Do you want to do
    it in the ES or do you want to do it in the– The Micro? Yeah, let’s do the Micro. Well, we’ve been
    doing the Micro. We want to stick with it? Yeah, let’s do a five
    line on the Micro. OK, all right. So we’re going to
    pull up the dome here. Looks like we have
    it all set up. Now let’s expand that. So we’ve got the
    trigger with bracket on, but we’re only going
    one handle there. Let’s make it a little
    bit more than one handle. Right. So what do we want
    to do, like five? I think we’ve been doing five. You want to stick with five? Yeah, let’s stick with five. All right. Oh, boy. Yeah, it’s getting a
    little cut off there. We’re going to go five up. OK, our quantity is
    a little off there. We’re going to change
    that to a five lot. OK, and then we’ll go down five. And then we’ll see
    where we’re at. All right, these should
    be good till canceled. We’ll make those. OK, all right. How does that look
    for you, Bill? That looks good. All right, we’re
    just going to go in. And we were going
    to go on which way? I think we were going long. We were going to go the long? Yeah, OK. We’ll put it on the long. All right, let’s do it. OK. We are in. Going to go back
    to the Monitor tab. Again, this is
    where we’re always going to go to
    monitor our positions, monitor any trades
    that we have, monitor anything we have working. So we have a trigger
    stop five down. And then here’s
    our target five up. So we’re looking for 2,998,
    which I win a breakfast sandwich courtesy of Nick. I will definitely
    share with you. Actually, we’ll make
    him buy two if we win. I’m going smoothies. You guys are out of luck. Only healthy breakfast. Only healthy breakfast. Hey, that’s good. That’s a good move. I know, right? That’s a good move. I could go for a smoothie. Interesting question
    from the chat. DarkSuperman asking,
    what’s the craziest day you guys saw from
    a risk standpoint, where second-to-second you
    didn’t know what to expect? What you think, Nick? I think you actually already
    described one almost, with when Trump won the election. Yeah, I think there’s a
    couple that stand out to me. Not to go back to
    the floor, but– Please do. No, that’s OK. I think that’s good
    for our people. There’s some good internal ones
    and some market making days too. But I think for me, I’d been
    trading for a few months. But my first day in the new
    pit was right before September 11th, when things shut down. And really, it was the
    ultimate kind of confusion. And we actually use that kind
    of in the risk management world now. We look at scenario analysis. So we try to figure out what are
    the kind of crazy things that could happen in the marketplace? These sort of add-on
    effects– you know, a down day, plus
    a tweet comes out and another tweet comes out,
    and then something breaks. And so we try to kind
    of look at those. But that one, with a few days of
    being shut down type scenario, really is a scary
    thing for the markets. Because not only are the
    US markets the deepest and most liquid, but
    they’re always open– the futures. And it’s just such
    a stable thing. So to see a real shutdown
    caused by something like that was really scary. Yeah. I think it was shut down for
    like what, about six days straight? It closed on September 10th. Obviously, it did not open on
    the 11th, which was a Tuesday. Did not open until
    the following Monday. I believe it was the 17th. Yeah. So you have no liquidity
    during that time, and in a product that
    normally trades 24/5, right? The ES trades 24/5. That’s right. And now you have no liquidity. And I guess that itself is
    just going to scare people off. Yeah, exactly right. It really takes a little
    while to build that confidence back up. I would say that would probably
    be the number one for me that I saw as a trader. Yeah. And the other one that stands
    out to me since being here, being in risk management,
    was the February volatility we saw, where some of
    the ETN products kind of became decoupled. And the multiples that
    they were trading on just became unsustainable. And that was a really
    interesting event, just because– Was in all the Barclays? Yeah, the SVXY and
    those vol products were really, really interesting. Yeah, that was crazy. So you saw kind of a derivative
    product almost feeling like it was driving the underlying. So when those products
    have kind of other options built into them– the ETN, the
    notes that have kind of been callable feature–
    kind of get decoupled, I think those are dangerous. I guess it’s a good
    disclaimer out there of like, you really have
    to know if you’re going to get into some of
    these more obscure products kind of what the leverage
    is that’s built into those. Because they can be a
    leveraged product, and then have options on them. So then you’re talking kind
    of leverage on leverage. And that gets really
    tricky to understand. Really tricky to trade
    when markets get volatile. Yeah. I think Brexit was
    probably another one. Yeah, Brexit and the election
    we’re both pretty crazy. And now we’re back
    to this sort of– I think we all thought no-deal
    Brexit was off the table maybe 12 months ago. Felt like they’d kind of figured
    out how to have a path forward. And now it’s right back. And it feels like we’re
    used to that talk. But it’s crazy. And then the election,
    like I said before, was just wild overnight markets. I don’t know if
    you remember this, but what was interesting
    back after the September 11th attacks, we
    had a lot of times where we thought we
    caught bin Laden, and then the market would rally. Oh yeah, huge rally. And then there’d be
    another terrorist attack, and then it would come down. I remember that just
    being a wild ride, because you just didn’t
    know what to expect. Obviously, you have
    geopolitical issues going on, and you just had no idea
    what to expect, up or down. That was an interesting time. Yeah, it really was. Wild times. Well, I think we got to
    get out of this position from last week. Looks like a loser. Yeah, that one went
    all the way against us. OK. Well, let’s minimize this. Let’s get out of this guy. I think that we should
    just call that one quits. And let’s just get out. OK, so I don’t think we can. We have no value there. We’ve got no market there. Yeah. So there’s nothing
    you can really do. I mean, yeah. It’s a long put spread. It will likely
    roll off worthless. And if it doesn’t, that’s
    even better for us. But we would have
    to manage it to deal with exercise or assignment. So we’re 22 points out of the
    money with two days to go. Yeah, it’s not looking good. Whose idea was this? I would say Bill, but that’s
    just me playing the blame game, really. Yeah, I think it was me. But I think at that point, we
    were looking for a long put spread, to be fair. But yeah, I think
    this was my idea. I got another interesting
    question from the chat. DarkSuperman, our
    number one follower. Is that a Buffalo Bills cup? Yeah. Now, you’re originally
    from Chicago, right? I’m not. You are not. I’m Originally from outside
    of Buffalo, New York. Oh, that makes sense. The only way to be a Bills fan
    is to be born into it, I think. Well no, I have a friend
    who’s actually from Chicago. Big Bills fan. I think we all know him. Right? He’s from Chicago. He’s from Buffalo too. Then I just don’t know
    what I’m talking about. I know him from–
    yeah, there we go. Got the Bills cup. I don’t know. Can I show that on there? Oh, yeah. You can. That’s fine. It works for me. Possibly. We’ll find out if
    we can’t shortly. Is that fair? If the Bills start
    following us, I’ll be happy. There you go. Awesome. What do you think of
    their chances this year? You know, lots of high
    hopes as always this time of the year, before
    we’re statistically eliminated from the
    playoffs like in week four. So high hopes. Well, I’m a Bears fan,
    so I know how that feels. It can be a roller
    coaster of emotions. And at least you squeaked
    one out last week. We did, we did. We allowed the third most
    points in the league. I think the Bears
    were first in that. I’m a Bears fan too. But the defenses look great. Yeah. Well hopefully we
    score some points. We’ve got that in common. We’ve got that in common. Well, as long as we’re
    looking at Apple, there’s been some
    news in Apple lately. Nick, we were talking
    about it earlier. Why don’t you tell
    us about that. What’s been going on there? Yeah. Well, I mean, I think
    it’s an interesting trade. You guys are betting
    against Apple the week before an announcement. That’s why I asked. Not that I’m unbiased in
    any way, but typically– Well, we should have
    had you on last week. Typically, going into
    the announcement, they’re kind of flat to up. And then typically when
    they announce something, they tend to rally a bit. We kind of look at those
    long-term trends and stats just to see what clients
    are taking positions in and how we can be
    out in front of that, if there is any kind
    of risk out there. And they tend to rally after
    they announce some new product. And I think it was
    pretty well telegraphed that the announcement
    was yesterday. Yeah. To me, it was a really
    interesting announcement from yesterday kind of. I guess noon our
    time they came on. And they always end
    up talking iPhones. But it was not the
    highlight, to me, of their announcement yesterday. And it’s really
    the first time I’ve seen them really push the
    shift towards a services model. And they’re really becoming
    a subscription company, and much less about hardware. And that’s not that’s
    not outright true, right? We’re all still going to
    have watch, iPad, iPhone. There’s a lot of
    devices out there that they used to facilitate. But that device
    is their platform. So we have TOS that
    everybody’s looking at here, that is the
    platform that allows us to deliver all this content. Their platform is becoming
    the iPhone and the iPad, and to a lesser extent
    the watch and the Mac. But they have that ecosystem. And I think what really
    surprised people and why you see the stock up 3%-plus in two
    days was the pricing that they announced. So think back to Netflix
    going on a decade ago, and they came out, and
    they were $7.99 a month. That everybody said, oh my
    lord, that’s impossible, right? Cable costs– Subscription model. My cable bill is $200 a month. How can they do this? And it was such
    value for the price. And Apple kind of put this
    off long enough not only to get a bunch of
    content pre-built and get some big names
    in there, but that came out at less
    than $5– they were $4.99 for basically every
    service they announced. So to come out in a $5 price
    point, when everybody else has upped their price,
    I think is showing that they’re going to
    use this as a loss leader to say, hey, get on our
    platform, stay on our platform. And the other thing that was
    to me interesting news-wise, you get a year free– now, it’s not much
    revenue, right? But it’s $5 a month for them. You get a year free if
    you buy a new phone. So they’re trying
    to do everything they can to get devices
    in people’s hands, and then push services through. Is the service just for gaming? Is that what it is? Oh, chicagotrading
    just followed us. Hi, chicagotrading. chicagotrading, welcome. Welcome, welcome. We got more followers. Maybe more Bills fans out there. Or maybe just more
    Bill Ruby fans. It could be that too. Is that a cousin? Is that an aunt? There is about 14 of them. I don’t know, chicagotrading,
    that’s a little incognito. She’s being cryptic there. Awesome. But no, is their platform–
    is it all just arcade, or what is it? No, it’s a lot. They announced their
    streaming video service. So think Netflix-like. I think they announced
    about eight names. But they kind of blew up. I’m one of those nerds
    that watch the keynote. And they blew up and had
    maybe 25 shows or something like that kind of called up
    behind them, from kid shows to sitcoms. So I think it’s going to
    be interesting to see. What is definitely interesting– I use the term loss leader– that we know that they’ve
    sunk billions of dollars already into this. They’ve committed a billion. They’ve upped that
    number to $6 billion over the next couple of years. That’s a lot of money
    to produce content. And I think you have to ask,
    should they build it or buy it? And right now, they’re
    building and they’re doing it all their own way. But at $5 a month, you need
    an awful lot of subscribers to make that turn the corner. So when they announced
    Arcade, that was $4.99. Everything thought, OK, well
    you’re not getting a lot. But when they announced
    the subscription TV model– the Apple TV Plus for $4.99– I think that kind
    of wowed people. So to me, that was the
    surprise of the event. Well, they certainly
    do have the visibility to be able to get everyone
    involved, hopefully. We’ll see. Well, and I think you just
    put yourself in their shoes and say OK, I get a year
    free of all this stuff if I buy a new phone. So I buy a new phone. Are you going to shut off
    your service for $5 a month? Like, do you really care? I mean, that sounds terrible. I mean, everybody’s
    on a budget and cares. But it’s not big enough. It’s not $20 a month,
    where you’re like, OK, I’m going to cancel it. Even if you sort of use
    it, it’s interesting. And I also think it’s
    interesting they’re pushing that out right in
    front of the Disney time frame, right? Because we’ve heard the
    Disney service is coming, but I think timing is
    interesting on this one, as well as price. OK, well if we were to
    make a trade here, right? So obviously a lot of good
    news coming out of Apple. And then you’re also looking
    at this from a perspective too, like how much more can
    this thing really go up? Right now what do we have, about
    $1.1 trillion valuation-ish, somewhere around there? So someone that is a
    fundamentals trader might look at that and say,
    well, what is it going to be, a $2 trillion company? I mean, is that even possible? Do you go long? If you’re an Apple trader,
    do you go long here? Do you go short here? I mean, what do you do? Well, I think we’re in the
    business of talking risks and positioning, and
    not so much like, hey, go buy this stock right now. So I think this is a
    tricky one in a few ways. And I’ll talk out of both
    sides of my mouth for a second, and then we can go
    from there, I guess. And it depends on what
    you guys want to put on. For sure. But we’re about $12 off
    all-time highs from back in– I guess that was in early
    October that we hit that. So before the sell off
    of basically everything. And you see that
    really steep decline. I’m sure everybody watching
    is familiar with what happened in the markets then. And we saw kind of from
    October to December this ratcheting
    up of fears around not only the interest
    rate increases, but the trade deal with China. And I think Apple is considered
    to be one of the largest impacted companies, because
    the amount of devices they make there. So no surprise, big sell off. The question kind
    of was like, well, how low can this
    thing possibly go? There’s so much
    value in the hardware and the distribution
    model of the platform. Well, if you’re looking at
    going long here, you’re saying, well, A, I missed the
    move in the last two days because they’ve really rallied
    on kind of this announcement. So I think the pop,
    so to speak, is out of this for this
    particular announcement. So that’s one thing. And the next is if you’re
    buying something here with a $12 upside to all-time
    highs, you’re asking yourself, can this break through
    that level of resistance? Is it going to be the most
    valuable it’s ever been in the near term here? And I think the
    answer is, it depends. It depends on what happens
    with the trade war with China. If we see easing there and
    manufacturing becomes easier and the tariffs on some of
    the products that are supposed to come on in December
    don’t, I think there’s a bit of a path up. The other thing you’re betting
    on is their business model. Can they really turn the corner? Think Adobe did this. It was kind of a leader
    in the space, where they went from a
    hard kind of sales model of physical
    software packages to people, to being
    a subscription model. We’ve seen lots of
    companies do it. Apple’s always late to
    these types of things. They let other
    people figure it out, and then they come in and
    kind of try to perfect it. So if you believe they’re
    going to turn that corner, and the device is going to
    be really nicely supplemented by the services, then I
    think there is upside here. If you’re worried that the trade
    war is going to further ratchet up and we’re not going
    to see resolution, or that there’s not going
    to be this sort of– A lot of factors in play. Yeah. That type of stuff
    matters, right? So the other one I
    haven’t mentioned that I think is also factoring
    in here is what does Huawei do? Are we going to
    have ongoing tension and not allow people
    to buy phones? Or are they going to
    be allowed to enter the European and the US markets,
    and really undercut some of the pricing? So there’s a lot
    to consider here. They are very, very close,
    like I said, to all-time highs. Well, now I’m totally confused. I don’t know what to do. Well, I think there’s a lot of
    macro things going on there. And you’re doing to a
    long-term trade as an investor, these are things you have
    to think about for sure. I mean, this is
    all this big dance that you want to be considering. And coming off some big news–
    we’re obviously having a big day– maybe with all that
    uncertainty, maybe someone wouldn’t want to do something
    as long term at this point. I’m not necessarily saying that
    that couldn’t work out too. But maybe we could try and take
    a look at a shorter term chart and see if we’re getting
    any technical signals or something like that. Here’s the 10-day. So we’re at the high,
    obviously, in the last 10 days. It’s going to be the high of
    the last few months, obviously. Yeah, it’s like the
    highest since October. And it’s interesting, right? I mean, if you’re looking
    at a company of this size, you have to take those macro
    considerations into account. I hate to say have to,
    but I think that’s true. There’s just so many– it’s one of the largest
    companies in the world, and it has one of the
    largest distributions. And if the economy really
    slows in Europe, how do you– there’s a whole
    bunch of factors. And I really believe– I’m not just trying
    to talk both sides. I really believe, depending
    on what sort of slant– No, there’s a lot to consider. –you want to take, you can
    talk yourself into either way. In either position. So I guess if I were
    to make a stake here, I would say it feels like– until there is some
    big resolution, I don’t see a reason
    to make all-time highs, whether that be kind of
    global macro or something. I agree. And the product’s out. They didn’t while
    with some new iPhone that has a foldable screen
    or some crazy new technology. The news is out. They’re up. Yeah, fine. But they didn’t pop to the
    upside on the hardware. So I think there’s
    probably not likely to see another upside surprise
    here, unless something happens on the macro side. And I think from a
    sales perspective, we’re not going to know how
    these new products work– either services or phones and
    iPads– until after the holiday shopping season. So I think you’re pointing
    at a short-term trade here, and maybe calling a delta
    neutral makes sense. Because you could see
    this sort of being range bound now that the news is
    out, or after the initial pop. Right. And that’s one of the
    beauty of options. We don’t necessarily have
    to be right really quick, we just have to be
    not wrong essentially. So maybe something is giving
    us a cap to an upside. And I don’t know, maybe
    even a cap to the downside. What do you guys think? Well, sounds like
    a short vertical. Short vertical? Short vertical call. Maybe. I could work with that. Well, you want to go
    a week or two out? Obviously not this Friday,
    because there’s not going to be much premium there. We can go to the 20th,
    which is the monthly. derikideek, right? Yeah, derikideek. New follower. Thank you for joining us, Derik. Thank you for joining us, Derik. Do you want to go
    out to the monthly or do you want to
    go out to the 27th? No, I think this does have
    a lot of macro exposure, just like Nick was saying. I think we might want
    to keep it pretty short term, keep it tight. Not only that, because we
    have the Twitch convention that we are going to be at. So we might not be able
    to get out of that. Yeah, September 27th. Got to manage them, guys. Got to manage them. Yep. Got to be able to
    manage those positions. So we can go look, see what
    the 225, 227 looks like. I’m just going to
    price this out. That’s a $2.50 spread. Most it could ever
    be worth it’s $2.50. We’ll be getting $0.78
    on a credit there. Not too bad. Let’s see where the 22.50– do we want to give
    more breathing room? I don’t know. There’s the 22.50, 25. We’re almost getting
    $0.50 in the dollar there. I think we could give it a
    little more breathing room. What, we’re in September 20th? Yeah. Maybe even go out another week
    to get a little more premium. We just talked about this, Bill. We’re going to be at
    TwitchCon in San Diego, baby. Oh, I see. Well, I see what you meant. We have to revolve our whole
    trading life around Twitch. Yes, you never want to
    manage your position when you’re away from your computer. Right. No, you should always do that. I like being short
    the 225 strike. It’s a psychological
    number, I feel like. So I kind of like
    that for the top side. But no, I’m good either way,
    if you want to go 9 or 16 out. No, I think that’s good, 225. 225 I’m getting a
    little more premium. Yeah, OK. So you want to go to the 27th? Yeah. OK. Do you want to go $5 or $2.50? We’ll get a little more premium
    if we sell the 225, 230. Because the most that spread
    could ever be worth is $5. Right. OK, so let’s price that one out. We’ll look at the 225
    and 230 call spread. Shorting that one, we’d get
    $1.67, versus the 227.50. So we’re going to shrink
    those strikes down. We’re not going to be
    able to make as much, but we won’t lose
    as much either. There’s a $0.94 credit there. And yeah, you’re
    getting– so $2.50 wide, you’re going to $0.94. Versus the 230. I think I’d be pretty
    comfortable with either. But this one is
    about one by three versus how much we’re collecting
    premium versus the max loss. What do you think, Nick? I think that your
    short strike is fairly close for my kind of
    risk appetite– that close out. You want to go higher? So I’d go 27.50, if you’re
    looking at that trade. I think the other thing, if
    you’re watching and thinking about where is this going– in 15 days, I guess it is,
    you could be thinking, hey, we could really test that high. Even if we are kind
    of range bound, we could test that high
    without too much trouble. And you’re talking basically
    five points higher than the 27.50, or 33. So if you’re thinking
    we’re going to get there, you might even be going out to
    the monthly another cycle out– not to throw a wrench in it–
    and looking at maybe the 230s to be sure or 235s. Because short 235 here,
    you’re saying your mental line in the sand is that would
    be a new all-time high. Yeah. That’s what I was
    going to go back to. You mentioned before. So you’re going to have
    to go further out to get any kind of premium there. But that’s a little bit more
    of a line in the sand here, versus halfway
    there could easily be tested, in my
    opinion, just because you can see this sort
    of drifting higher on expectations of holidays
    and things like that. Yeah. And I mean, we’re up $5 today. It’s not unthinkable that
    we could do something like that again. Well, it’s a good point,
    though, to look at the call side on the up days. I tend to kind of be momentum
    trading a little bit like that. Yeah, sure. So if you’re going to put
    on an iron condor in this or pick a stock– if you kind of keep
    on a vol equal basis, so vol doesn’t collapse on the
    upside stuff and when we rally. Better day to sell
    calls is when there’s been that long delta move. Also a good day to buy your
    short puts then, too, right? Yeah, right. Exactly. Those are going to be cheaper. You can buy those guys back. What do you think
    of this spread here? 227, 232. We go to max loss if it
    reaches an all-time high. And that’s kind
    of where we’re at. Yeah, I’m more
    comfortable with that one. No, I totally agree. I think that could be a lot
    better covering our bases. You know, the risk
    guy, he’s probably got a pretty good feel for risk. Yeah, we’re going
    to listen to him. But the smoothies
    are more expensive than the unhealthy
    breakfast sandwiches. I’m on the hook for
    theoretically more here. No, you’re not on the hook. It’s actually us. You’re going to be the
    beneficiary either way. I’ll take it. I’ll take it. All right, so we’re
    looking at the 227. This is expiring in the 27th. So we’re looking at the
    227, 232 call spread. Yeah. Here we’re just going to go
    ahead and analyze that trade. We’re going to throw
    that in the Analyze tab. Oh, I think I have
    something goofy in there. Yeah, you’ve got a
    similar trade in there. We’re going to go ahead
    and do that again. No, we have that
    other spread in there. That’s what that is. Oh, that’s right. That’s OK, I’ll take it out. So we’ll go to the Analyze tab. We’re going to
    analyze that trade. Come right down here. If you ever want to take
    trades out of your Theo, you would just come down
    here, uncheck those boxes. And here’s what we’re looking
    at as far as our short call spread. Well, also go to– you’re
    in Portfolio Beta Weighted down there. Switch that to Single Symbol. Good boy. There you go. Much better. OK. This is our max profit. Obviously on the downside
    below the 227 strike, we’re looking to
    collect $1.23 times 10. That’s a $1,230
    possible profit there. On the upside, we realize
    maximum loss above our long. 232.50, that’s if the
    spread’s worth $5. We lose $3,770 on the upside. Of course, considering we’re
    not thinking in obviously the commissions and all that. Commissions, right. And we’re doing a time lap. There’s two different legs. So you’re likely going to be
    paying a per-option commission. All righty, let’s throw
    that one in there. We’re just going to throw it
    right in at the mid price. Actually, let’s stick to
    the $1.23 that we had. Hopefully it’ll
    rally right into us. $21.95 in commission. Yep, $21.95 for the
    commission there. And we’ve gone ahead and fired
    that one off to the exchange. We’ll let that one kind
    of cook for a little bit. So flip back. Analyze that one one more time. I want to throw two
    other things in there that I think are
    interesting to look at here. You can drag those
    price slices around. Let me make sure
    that gets in there. Oh, there it is. Now it’s going to be in there. Perfect. So you can drag– I’m sure you guys have
    already talked about this. But I always do this. So there’s a lot
    of other scenarios, especially on the
    risk side of things. There’s a lot of other scenarios
    to be aware of if you’re trading spreads. Everybody goes, oh, you can kind
    of just set it and forget it, because my loss is
    capped, my gain is known. And the rigid blue line looks– OK, that’s what
    can happen, right? But that slope down in
    the purple line really is a lot more realistic of what
    is going to happen between now and then. But that slope down is
    really the visualization of if the stock ends up
    in between those strikes. So what happens? Well, you guys decided
    to sell the 227.50 call. So what happens if
    we’re at 228, 229? Well, you’re going to end up– if that’s where expiration
    is and you do nothing as a trader– you’re going to end up having
    short stock in your account. So with the calls, you have the
    obligation to sell the stock. You have nothing
    else in the account. So you’ve got to really watch. It’s not just truly a set
    it and forget it type thing. That is true. You do have to manage this. The other thing I
    like to do is just drag one of those dotted lines. So pick any one of them. You’ve got your
    price slices there. So the vertical kind of orange
    or golden lines represent that. Where we at, Nick? Oh, here? Yeah. You can grab those
    and drag them. Click, hold, and
    drag on the screen. And drag it all the way
    over to the red line furthest to the right. So that’s your break-even price. I’m sure you guys
    talked about that. You got it. But you want to know, right? So again, you’re not
    going to just do nothing. But you’re really saying
    here for what you sold it for, you’re more like 228.50. 228.62 is the number on
    the screen that is where you can go to and break even. So you have a little bit of
    room above your short strike, which is obviously
    the premium you took. Especially be careful, I
    think, if you’re trading that. That’s called pin risk, right? So if we get pinned
    near our short strike– if you’re in an IRA, you
    don’t want to be short stock. You cannot be short stock. You cannot be. So you definitely want to
    be managing that position and closing that out,
    if you’re anywhere in between, or really anywhere
    close to that short strike by expiration. Because something can
    happen in the aftermarket. People still have an
    opportunity– a lot of people don’t know that you
    still have an opportunity to exercise– the
    longs obviously still have an opportunity to
    exercise their launched calls, even after the market is closed. If something happens in the
    aftermarket, you don’t know. It’s a good opportunity
    for me to plug my day job. But we set ranges in
    the risk department for all these stocks. And kind of the ones
    that are most common. So we have this pinners list. And we say, well, how much can– so we look at an account. We say, can the account have– so if you’re on the
    radar, we’re kind of watching behind the scenes. And we’re wanting to make sure
    that there’s not something that could over the weekend happen
    and make people lose lots in their account. So we look and make
    sure that pinners list has some range within it. So even if it’s slightly out
    of the money, we look at it. Depending on the
    stock, I think– Apple, we look at I think it’s
    like $0.50 out of the money that we look at. But then Amazon’s
    going to be what, $10? Yeah, it’s like $10. Exactly. So there’s different ranges
    based on how much the stock we expect to move in a day. Looking at expected price
    ranges and all that. And when we say
    pin, I mean, I just want to be a little
    bit blatantly clear. That means you’re
    floating right around– see, right now we’ve
    got the 2– what was it, the 227.50 call on? 227.50, if it’s floating right
    at 227.50 on the last few minutes of the close, then say
    that that may pin the 227.50 price. That’s right. And really, in Apple, I would
    say if you’re 227 and change– any change, you
    know, 0.01, 0.05– you’re close. Similarly, if you’re
    227.70, you’re pretty close. So you want to make sure
    you’re really aware of that and managing that short strike. Now, derikideek said
    somebody in the chat. He said, is there
    a trade or a move that sticks out in your mind
    that someone took that was incredibly high in risk? Did it work out for the trader? Well, I mean, I would say
    going short calls is probably the riskiest one. I’m not thinking of
    a specific instance. Now, that could be
    pretty high risk. It’s theoretically
    unlimited loss. if a stock goes
    to a million, then you’re losing money
    all the way up. Just being naked
    either way, right? And naked meaning you’re
    just short puts outright or you’re short
    calls outright, you have risk all the way to zero on
    the put side and the call side to infinity. Right. And we’ve been doing
    spreads predominantly. But if you’re doing
    just a naked one, yes, you collect more premium. But you do have that
    significantly increased risk. I love this question, because
    there’s always intentional. You’re not doing this
    and watching and trading if you’re not
    intending to take risk. You’re taking risk by
    definition by trading, right? Anthony knows it. We stood down there. You’re a risk taker. It doesn’t mean
    you’re gung ho going to drive a race car after work. But you’re taking some level of
    risk in every trade you make. And I think what’s
    a little bit scary– and a textbook example, guys. This is the riskiest, right? By definition,
    naked short options is the riskiest
    thing you can put on, because there are theoretically
    unlimited risk to the upside, and the stock or the index
    could go all the way to zero. It’s really the
    only trade where you can become unsecured
    in your account, meaning you can be negative. Yes and no. The sort of example we gave
    here of if the stock ends up in between your strike. So it’s really important
    to kind of think that next level of detail. I don’t want to
    over-complicate it. And one of the reasons we’ve got
    people here in the risk group and on the trade desk is to
    help explain all this stuff. One of the riskiest
    things I see that is outside of the nice
    blatant example you guys gave, people like
    to put on protection. They like to buy options
    that are way out of the money to kind of fool
    themselves into feeling like they’ve got protection. You mean like buying
    little penny puts or calls? Yeah, exactly. You can do in the SPX, but pull
    up Amazon as a great example. There’s so many
    strikes in Amazon. You look, it’s around
    a $2,000 stock. And you look at the
    strikes, the strikes go– yeah, go to a
    little bit further. Yeah, so you’ve
    got two-day options started, it was a
    1,300 strike price. So there’s a ton of
    strikes that you could buy. Well, if you go and sell
    the 1,820 puts right now– or let’s just say you sell
    the 1,815 puts right now, and you go buy the 1,300 puts– I mean, an extreme
    joking example here. you wouldn’t buy those puts. Well, your risk is that
    size of that spread. But especially in a
    portfolio margin account, you’ll get a risk reduction
    by saying, oh, you’re hedged. But you’re hedged so far
    out, you’re fooling yourself. It’s units, really. It’s a technicality, yeah. And we get this
    question all the time. And you guys are talking
    to clients all day long. Well, the market moved way down
    or the market moved way up. My protection didn’t move. And I think that’s the gamma
    side of option trading. So if your protection
    is too far away, you’re not going to get
    that thing kicking in. You’re still going to take– it’s going to mask the
    fact you’re naked short, but it kind of feels– It’s got to be somewhere– That’s right. It’s got to be somewhere within
    the realm of possibly actually happening. That’s right. Well, we’ll check back
    into the markets right now. Where are we at? It’s not going our way. We got the SPX at 2,990.95. So we’re looking
    at maybe getting stopped out at what, 88? Is that where we’re at? 88.25. So we’ll see what happens. Let’s take a look
    at another name. Did you want to look at Valero? Yeah, VLO. There was some news today. And let’s look at crude
    for a quick second. Yeah, we were looking
    at crude, and crude was taking a little dip due
    to some news coming out today. VLO, they’re an energy company. So they’re going
    to be theoretically following crude in some sense. And they’re up today. Maybe they could be feeling
    that hurt a little bit. So we could always
    take a look and see if that follows
    through into something that’s price contingent
    upon those kinds of things. I mean, looking at a chart,
    you’re still up today. T. Boone Pickens just
    passed away at 91. Well, he is a crude magnate. Yeah. Big name. Big name. Funny, we’re talking about
    that, and then it comes up. Well, here’s a very
    short-term chart. That’s our one hour. Let’s go down to a one minute. So this looks like
    it played resistance. So we’re coming up on this area. It’s maybe petering
    out due to some news. I mean, what are some
    ways we could play that? What, on the short
    side, you’re saying? Right, going into short side. Well, when we get buy
    out-of-the-money puts. We could buy put spreads. Yeah, we’ve got a
    short call spread on. So we’ve got some short premium. Maybe we’ll try and do– Want to do a long
    put spread there? A long put spread, yep. How far are you thinking
    you want to go out? Give it some time on this. It looks like we’re at
    30% implied volatility. And that’s a little– could be interpreted as
    being on the cheap side. And we could give it
    maybe a little longer, especially if we’re
    doing a spread to lighten up that price. And the stock is
    doing what today? OK. It’s up $0.57. So it’s up a little bit. Do you feel like it should
    be down relative to crude? Well, I think that the news
    on the day is looking– JP Morgan cut a price target
    to 83 from 96 on Valero today. So I think it’s
    interesting in general that they’re up on the day. You know, the target
    that they gave was still above current price. But it’s a pretty healthy
    cut from 96 to 83. I’m not sure this one’s
    as much of an Iran crude– kind of outright crude play as
    it is more news on sentiment from a rater. Well, we’ve got three minutes. What do you want to do? And then we’ll check
    on our ES trade that is going your way again. Yeah. I mean, maybe we’ll try some
    something like 30 days out, give it a month. And if it starts
    going against us, that gives us time to manage it. We can take a look
    at it next week. If it’s going with it,
    maybe we’ll let it run. If it’s going against
    us, we may have to take it off and
    cut our losses. Yeah, OK. OK, so let’s take a look. We’ve got 82, 82.50. Looking at a chart, do you
    have a price in mind there? A price target. Can you go back to the– go to like a three month. A three month? Yeah. How many do we– Let’s do– A 20 day. Yeah, so 20 day. Wow. That’s quite a run up. It is. Yeah. What are you thinking? I’m thinking around
    like the 77 or 75. Look at this drop here? Do you see this here? Right. Yeah. If you can break it down, that– Might be some support there, or
    possibly at the 80 maybe level. So somewhere between 77 and 80. 80 as well, yeah. So maybe we’ll try
    and start with an 80, and then go down to a 75. Yeah, just go long? Yeah. On the put side, 30 days out. $5 spread. $5 spread. We’re paying $1. So about 1 to 4, with
    a $5 [INAUDIBLE].. Yeah, no, you’re right. So we’ll throw
    that, try that on. Maybe a 10 lot. And go in at the mid? Sounds good. All right, 1.05 credit. Hit it. Let’s do it. I would think, yeah, we’d
    get filled at the mid there. Let’s go back to
    the Analyze tab. We’ll take a look at that. We’ll break it
    down a little bit. Yeah. I got to throw the
    disclaimer out there. I’m sure you know, we’re trading
    this in a simulated account. So mid’s a great– you look at the bid-ask
    spread and go back to the first thing we
    were talking about. I know we’re almost
    short on time here. But mid is a pretty likely– you’re in the game, as they say. It’s pretty likely,
    but we show those kind of real-time quick fills here
    in the simulated account. Don’t expect that. If you’re just
    thinking about trading, it doesn’t happen quite that– Yeah, it will not
    happen on the real side. Yeah, it doesn’t. And you know, likely
    to get filled. But you got to keep
    an eye on that price. Don’t just hit send and
    assume you’re filled. Because in simulation, we kind
    of do everything at the mark. Yeah. I mean, I like it. I mean, a lot people ask
    me, like, what should I do? Should I do the mid? Should I do the ask? Well, I mean, it kind of depends
    on how desperate you are. I mean, if it’s something that
    you’re willing to wait back on, if it’s a long-term trade,
    maybe you’re not so desperate. Goes back to
    tightness of market. And you can play around by
    a penny now, how it works. That’s a great point
    too, liquidity. So when he says
    tightness of market. I mean, if you could drive
    a truck through the market and it’s really wide, and
    you have to give up a lot, you might want to
    start at the mid. It’s like going to– I always use the car
    dealership scenario. Going to the car dealership,
    you negotiate with the guy. You start out a little bit low
    and you kind of test them out, and you see where you’re at. And that’s what going on in
    the midpoint pretty much does. Let’s do one last check
    of the markets here. Where are we at with our trade? OK, now. And it’s rallied a
    little bit there. We’ve got the SPX at up 13. So we’re kind of in between,
    a little bit closer to Bill having that breakfast sandwich. Yeah, this is a cliffhanger. You know the VIX is
    below 15 when you can’t get a $5 move in an hour show. I think that the Valero
    trade is interesting, and it’s the first
    one we all agree on. So you can bet we’re
    wrong on this one. We’re probably
    wrong, that’s right. If Iran sanctions are
    waning and supply is up, it feels like you could
    see a sell off there. But I’m interested to see
    how you guys manage this one. Well, thanks Nick
    for joining us. We really appreciate it. A lot of expertise
    with risk and all that. Really appreciate it. Thank you. Really do appreciate
    you coming on. Don’t forget to
    watch us every week. And that’s Wednesday live,
    1:00 PM to 2:00 PM central. It’s going to be
    www.twitch.tv/tdameritrade. That’s twitch.tv/tdameritrade. Also don’t forget to go to on
    the Education tab, on the TOS platform, tons of
    great material there. Also on the website. And there’s tons of links
    below the video player. And again, you can open up your
    own thinkorswim paper money account. Till next week. Thank you very much, Nick,
    for joining us again. Thank you, Nick. Appreciate it, guys. I’m Anthony Panzeca along with– I’m Bill Ruby. Thanks for watching. So long, guys. Thank you. [MUSIC PLAYING]

    Articles

    When to Trade Long Call Verticals? | Cameron May | 9-5-19 | Selecting an Option Strategy

    September 22, 2019


    y
    name is Cameron may and I want to welcome you to this
    morning’s discussion of selecting an option strategy I
    can already see we have a great crowd this morning. As many as
    eighty people here just to kick us off so great to see everyone
    I see all you chime in and I think that’s the that that’s
    about the warmest welcome I’ve seen in a long time. So I’m
    looking forward to this we budgeted up to an hour to spend
    together today I don’t imagine we’ll be spending that long on
    the discussion but the topic is when might a trader select a
    long call vertical. Over the course of last several weeks
    we’ve been going through each of the individual option
    strategies and I expect to continue doing this we’re gonna
    be getting into some fairly. More exotic option strategies
    if you might apply that label to those as we get deeper in
    the weeks ahead. But today we’re talking about one of
    those it may be a little bit more common so long call
    verticals what Mike Mike Mike the market conditions be what
    might be the individual motivations of an investor. I’m
    looking forward to it let me say hello to everybody and then
    we’re going to. Set the stage with the consideration of the
    risks. Associated with investing we’ll- set an agenda
    and get to it also good morning Jerry Machel Brian bill Dave
    Landry. Edward hell that shot. Another Brian Jeffrey gene J.
    frost Gail act wallet Christie’s. Sixty three bass
    man Pablo Ashley Ricardo Sandeep Richard. Paul if I
    repeated anybody’s name. My apologies but really good to
    see you all this morning. And of course if you are new here I
    want to welcome you I always consider this to be time well
    spent if you’re listening in on the you to archive enjoyed the
    presentation you’re invited to join us. This class is always
    webcast live on Thursday mornings that said that nine
    thirty eastern standard time if you want to put that in your
    personal calendar and I’m also going to extend an invitation
    to all of you. If you’d like to follow me on Twitter if you
    have a Twitter account maybe jot this down at CMA underscore
    TDA is my handle. And I try to provide something personal
    something informational every day of the week so if you like
    to come and join me there like that kind of personal
    connection we can make on Twitter. But some important
    information. Reminder of the risks associated are investing
    options are not suitable for all investors spread straddles
    and other multi leg option strategies can entail
    substantial transaction costs. Any investment decision you
    make in your self directed account is solely your
    responsibility. Past performance of any security or
    strategy is not a does not guarantee future results or
    success all investing involves risks including risks of loss.
    There is an overview of your Greeks. We are going to be
    using real examples in today’s discussion please do not take
    that as a recommendation or endorsement of a particular
    security or strategy. All right so let’s go set. An agenda for
    the day three items on the agenda as there have been each
    of the weeks that we’ve been going through these different.
    Strategies the at different option strategies. Number one
    we talked about the market conditions that might be. More
    optimal for a long call verticals. Number two. We’re
    gonna go through the pros and cons of a long call vertical so
    whether you’re trading them or not a leash understand you have
    a well well rounded understanding of them. And
    finally. We’ll place an example long call vertical trade. So
    through the accomplishment those three agenda items. What
    I want you to walk away with is an understanding that and
    answer the question. When might a trader select. A long call
    vertical from all of those other options strategies it
    might be selected. All right am I missed anybody. Abi jeep good
    morning to stop all good morning. Really good active
    crew so. Let’s get right to it let’s talk about first of all
    what are the market conditions for a long call vertical also
    sometimes you’ll hear another name. For a long call vertical
    I’ve intentionally obscured that with long Kerr were a call
    vertical which in my view is a little bit more of a clinical
    name for the strategy. What is another name for a long call
    vertical. So we want to chat that in. Long call vertical
    also known as in this is where I need my jeopardy music. A
    bull call spread right right there in the title gives it
    away it’s a bullish strategy so what are the market conditions
    what are the stock conditions that may be more optimal. For a
    bull work for something called a bull call spread. Obviously
    bullish right. So yeah Alan email it. So now I have a I
    have a question here somebody’s chatting in and saying. That
    they’re getting choppy audio no video it sounds to me like
    everything else okay thank you Ricardo that’s what I wanted to
    see a confirmation that. That. It’s working for others so
    there might be. You know if you need to you might need to log
    out log back in if you having those sorts of issues. Let’s go
    look at market conditions. I agree took a look at the
    futures I think some of you did as well. If you’re not familiar
    with the futures at that basically is saying a what’s
    happening in the markets. What’s happening with the- with
    the major indices before. The markets opened as it looks like
    we’re gonna open higher or lower. And we’re certainly
    pointed toward up a bit of a strong start and you can see on
    the S. and P. five hundred. We got that strong start. So the
    last month this goes all the way. To the first week of
    August. And taking us all the way into the first week of
    September so that’s just about exactly a month. The S. and P.
    had been stuck in sort of trading range. Now we popped up
    out of that range is that guarantee that we’re going to
    continue going higher no. But as of this moment this is kind
    of setting the stage for discussion. Of a bullish
    strategy right. So V. isn’t this sort of market condition
    may be something that motivates a trader to look among the vast
    spectrum of potential options strategies. And I think that
    they’re they’re more than sixty different named options
    strategies at my last count we might narrow that by at least
    half. By eliminating the bearish strategies so let’s
    just say that the that a trader is outlook. Is bullish. All
    right so we would probably want to carry that through to an
    individual stock. So not just not just and like maybe what
    we’ll start to do here. Let’s out one these let’s call this
    like potential considerations. Dot dot dot for long call
    verticals right. Number one. Bullish market conditions. End
    bullish stock. There we go. All right so let’s find a bullish
    stock now quick question what sorts of stocks might an
    options trader be looking for how they there were twelve
    thousand stocks that trade on the US exchanges are they all
    appropriate for options trading no some of them don’t offer
    options. Even among those that do. Do we ever does a trader
    ever eliminate some from consideration. For reasons
    other than you know it’s not bullish enough for. Things like
    that. Yeah for some traders may look at the liquidity of the
    stock. And the subsequent liquidity of the options as a
    potential filter. Some stocks just aren’t heavily traded
    therefore their options are very heavily traded and what
    they might that might lead to is an unfavorable pricing of
    the options were we said see a very wide spread between the
    bid price and the ask price of options. Now find using
    language is not familiar to you I tried to go at a pace that
    everybody can follow but if you need a like let’s say a primer
    on. Options if you’re just new to options trading what I might
    suggest that after today’s discussion make in a note to go
    check out barb’s wrongs class and you can watch the archives
    you can watch it live. But it’s called getting started with
    options barb teaches that live eleven o’clock eastern standard
    time on Friday mornings. It’s available to everybody that’s
    here and in a tennis say it’s available everybody’s
    listening. In on the YouTube archives after the fact we just
    put it out there for public consumption. All right so
    there’s. One potential qualifier when selecting a long
    call vertical is a bullish trade we also might look for a
    bullish stock and among those stocks we might look for those
    that are quote unquote liquid now there could be varying
    degrees of liquidity but a quick indication might be to
    just check the option chain when we found a stock that
    appears to be what what a day that appears to be liquid maybe
    it’s heavily traded it’s getting good volume on the
    stock. We might still check to see that the spread between the
    bid and the ask on the options are fairly narrow but let’s
    have a look at a stock like Costco now how did I find
    Costco. Let me show you. A watch list here now this isn’t
    a recommendation half to go looking. For vertical spread
    candidates here. But I think or swim actually maintains and
    publishes public watch list for a number of different reasons
    they can serve whatever purpose a trader might use them for.
    But for example they have watchlists they consist of the
    five hundred companies that make up the S. and P. five
    hundred that might be helpful for a number of. Different
    things. But they also publish a watchlist that’s called penny
    increment options. So here’s a watchlist gadget here let’s use
    the heading I’m gonna click on that and I’m gonna go to think
    or swim is public watchlists. And I’m gonna go to the one.
    That’s titled penny increment options. What is that. Well
    those are stocks that have at least some of their options.
    Trading where the where the pricing of the options is
    changing in only penny increments not in full nickel
    or dime increments. And that might be an indication of
    greater liquidity. Okay Costco was among those so if I were to
    open up this watch list. I have this sorted from highest price
    lowest you can do that by clicking on the last and as I
    scroll down through these cosco was just one the first one to
    come up here there it is right there C. O. S. T. and if we
    look at Costco do you think a technician could make. An
    argument for bullishness here. Is this a bullish stock. Seems
    to have been at least historically and right now it’s
    pushing to ward and I believe these are all time highs on
    cosco let’s just quickly check that by come up to the time
    frame. Let’s go to a custom time frame maybe go out to ten
    years. Might be good enough let’s just click OK yep. Do you
    see cosco up there are those all time highs. And easy the
    boy that ten year trend. Has been up and up and up and up.
    And I think you can envision that if a if a trader a bullish
    options. Is just looking for maybe an exit another month of
    bullishness. This sort of stock may be what they might be
    looking for right so let’s go to that shorter time frame
    again. I am a switch this back to a six month you’ll. Now that
    we’ve seen that longer term view. And let’s start to talk
    about some of the other considerations were trying to
    narrow the field of potential candidates. Because there are a
    lot of potential strategies that might be employed when a
    trader is bullish. And as we discuss the strategy is one of
    the things that I think I probably should say. Right now
    it sometimes in my enthusiasm teach I may say the wrong
    things sometimes all say call. Well stay put when I mean this
    a call. Because in my mind I’m thinking well up a call is
    bullish and so as a short put. I know that you know that. If
    you catch me misstating something saying credit when I
    mean that debit saying long when I mean short thing but
    when I mean call if right if you see me write it out or
    whatever if you catch an error. Just let me know. All corrected.
    Always compare that to calling my kids by the wrong name. I
    was I just hope that you know what I’m talking about I try to
    be accurate as much as possible. In any case so here’s
    cosco. Three making higher highs and higher lows on a
    chart. And if that were to continue maybe a trader could
    start to structure a bullish trade. Similar until something
    like a long call vertical a bull call spread. But what’s
    another potential consideration when we close up my watch list
    here. We narrowed it down to stock market conditions I’m and
    the stock. Technical expression itself. But why would a trader
    choose let’s say a long call vertical over a long call
    because aren’t both of those bullish. And why would along
    well what what an options trader choose a long call
    vertical over a long call and over of let’s say a short put
    or some variation on that theme because aren’t those also
    bullish. Well another consideration is volatility.
    And I’m gonna use an index actually I’m not even a put the
    symbol in there for you you can just know what it is a- I’m
    gonna go up here. And look at the symbol B. I. X. that’s our
    volatility index for the S. and P. five hundred. Okay and as
    the S. and P. is volatility goes so typically you typically
    goes the pricing. Of options. So. When volatility is low and
    rising that you’ll sometimes hear that described as more of
    an options buyer’s market when volatility is high and falling
    you’ll hear that sometimes described as more of an option
    sellers market. Well when we’re doing a vertical spread. Which
    of those two are we. John says how can I say this YouTube
    video for later watching please advise John what you might want
    to do and what I’d suggest others do is subscribe. If
    you’re watching on YouTube you can actually not watching on
    YouTube right now might not feel like you joined it through
    our website this morning or whatever. You can subscribe to
    our YouTube channel is called trader talks from TD Ameritrade
    that would be the YouTube channel where this session will
    be archived so you can’t save it but we will. I have to say.
    The vast majority of our sessions are are ultimately
    archive to the to our channels we have the trader talks
    channel. The trader talks webcast will have also have our
    investor insights webcast from TD Ameritrade channel. And.
    Almost all of our websites are destined for one of those two
    channels this one is for the trader talks webcast channel.
    Some of the everyones while we can hit technical hick up. For
    some reason we- at that an archive is prevented from
    making it to the channel. In that case. It’s lost history
    okay. Other that that’s where you would find. Then you can
    also find these. On our website if they are archived you can
    just go to our webcasts. And then choose archived webcasts
    in fine in there too. All right but here’s a here’s a
    volatility index volatility index has been recently
    falling. And that’s typical when the markets are going up
    typically volatility drops because under normal market
    conditions we see. Markets tend to rise less rapidly than they
    fall. Okay but in whatever case when we’re doing a vertical
    spread are we a buyer or we a seller. Or actually buying a
    call and selling calls combination of both. So. The
    impact of volatility on a vertical spread is kind of
    interesting is a little bit unique and it’s subtle I think
    the frequently it can be it can be misconstrued unintentionally
    it can be taught in correctly unintentionally. But with the
    volatility what went when volatility is high. Let’s say
    that a trader is looking for higher probability out comes on
    their trades if we’re if we’re using this. Long call vertical
    for a higher probability trade where would we typically go in
    the money or out of the money. What probability as the
    emphasis Nambi so I’m not saying it always has to be and
    that’s just a theoretical. For this discussion. Where when
    doing a debit spread which a long call vertical is. If we go
    deeper in the money that in that improves the- the
    probability scenario of the trade. Now there’s a trade off
    for that. With vertical spreads is probably don’t probability
    of success goes up what happens to the reward for put at risk
    the reward for being successful. It goes down
    probability up reward down that’s the typical association
    reward reward goes up probability typically goes down.
    Well so when volatility is high. What you know what well a it
    seasoned vertical spread trader will will observe is that they
    will be able to push their vertical spread a little bit
    deeper in the money. And still maintain. Maybe at a reward
    that they would under lower volatility conditions they
    would only achieve if they already it closer to at the
    money where they’re taking maybe a little bit greater risk
    going closer to the current price so why is that because
    that volatility keeps at risk about equivalent right
    theoretically if the stock if a stock is moving just a little
    bit. And you put your vertical spread right closed at the
    money the risk. Is. It’s not zero but it’s minimized right.
    If a stock is moving around more and you go deeper. Still
    that additional movement could still put that vertical at risk
    so. The bottom line here is that when we have higher
    volatility. If that. Probability of success is the
    emphasis we might be able to go deeper in the money if reward
    potential is the emphasis we may still be able to get a
    large reward potential going even further out of the money
    the normal. Okay so volatility. Higher volatility might mean.
    Deeper in the money. That is for greater probability. I
    phrase it this way if probability. Success is the
    emphasis. All right what are some other considerations for
    when a trader might select a bull call spread or a long a
    long call vertical. Well if the emphasis let’s say how do I
    want to phrase this I think I outlined this if a defined
    reward and risk. Is desired. Okay. Let’s talk about just a
    long call. Actually there’s one out before I leave the
    discussion of volatility I hinted at one I didn’t I don’t
    think I circle back and answer this question so why would a
    trader choose a long call under some conditions a long call
    vertical. Over something like a short put. Well short put is a
    selling strategy. And a short put might be selected. One were
    bullish but also when volatility is high and falling
    and that might be the case right now. Right but a short
    put also carries with it some significant risk. I believe
    it’s just a cash secured put. Not come comfortable with that
    with the risk of a short but then again what I’d suggest you
    do is check out barb’s songs class on getting started with
    options I’d love to explore the pros and cons every strategy.
    But just know that a short put has significant risk even
    though it might meet the market conditions of bullishness and
    more of a seller’s market. A long call vertical work or
    verticals of any stripe. Might be chosen. Almost regardless of
    volatility position. What that may just influences where we
    position the long call vertical or whatever vertical that we
    choose to do in the money or out of the money. All right
    but- defined reward in risk. May be. A motivating factor for
    choosing a vertical spread including long call verticals.
    And I think what someone might. They might. Object to that say
    can hold on a second. Why would we just buy a long call doesn’t
    that have defined risk yes it does. But doesn’t have a
    defined reward. No okay Paul says he looking for higher
    return on risk with this spread to like eighty to a 100% All
    another good question. Vertical spreads and this is true of
    debit spreads and credit spreads. Are very flexible in
    that regard. They can be used to pursue high reward compared
    to risk. Now obviously if you’re getting high reward
    what’s happened the probability of actually achieving that
    reward. It’s going down in some cases wait out or a vertical
    spread might be customized to look for. A high probability of
    success with comparatively low reward and that’s true for.
    Long call verticals short call verticals long. Put verticals
    short put verticals it all comes down to the strike
    selection there’s nothing inherent to any of those
    strategies that makes one. High reward versus high risk. Or
    vice versa so I want to look at examples of those today. Okay
    however if a defined reward to risk is desired. And to define
    probabilities of success or failure. Then a vertical spread
    can hold an appeal to an investor so let’s start to get
    into that I’m gonna go back to Costco. And let’s start to
    outline. An example trade. So here’s our example long not
    long but long call vertical. So it starts with the purchase. Of
    an option at least conceptually these actually typically done
    at the same time they don’t have to be though. But let’s
    say that were bullish on Costco. We think it’s more
    likely to continue rising and falling right or wrong the only
    the only cost gold will know until that act alternately
    happens. Let’s say let’s go to the eighteenth of October
    options here. Let’s see I would says he also said that out of
    the money can be good if reward of risk is what is important
    reward reward on risk. Yes. Thought that was worth
    emphasizing yep very good point yeah if the reward is the-
    point of emphasis. Going out of the money with this strategy is
    actually look at more aggressive. Or sometimes some
    cases much more aggressive. It offers stronger reward but a
    lower probability of success. And maybe what we can do is due
    to example trades may what we’ll do. And in the money.
    Let’s go with an in the money. Long call vertical and we’ll
    compare that we’ll just call this example long call vertical
    a- okay. And we’ll compare that to example long call vertical
    be. So Hey let’s go in the money. And I know that for some
    for some traders for some reason there’s just an
    association they think okay credit spread we go out of the
    money spread we go in the money. That there’s nothing.
    That requires that that be the case so let’s illustrate that
    right now. Stock’s trading right now at two ninety six. If
    we were to put both of our strikes in the money what that
    will do is turn this mathematically into a high
    probability trade. And the deeper in the money we go the
    higher that probability rises ought but however the deeper in
    the money we go with positioning of our vertical
    spread. The lower the potential reward so I’m not going to go
    over multiple examples of that but how about we just pick. A
    couple of. Let’s go with two strikes how about we keep them.
    In that seventy delta range. So what does that mean. But when
    you have a delta of seventy it means there’s about a seventy
    percent chance of that option will expire in the money. And
    with a long vertical spread whether it’s a call spread or a
    put spread the ultimate objective for most traders is
    to see that thing expire in the money or to get to a maximum
    gain as quickly as possible which is typically associated
    with. Expiring in the money but let’s. Let’s say outline an
    example trade. So a long call vertical starts with the
    purchase of an option. Of a call. And I think you use that
    set how about we use a two eighty five in the two ninety
    strike pair. So we purchased a more expensive option so in
    this case that would be the two eighty five. And we sell a less
    expensive option the two ninety. So we’re going to buy
    the two eighty five. So this is the eighteenth of October. Two
    eighty five call. It looks like that’s trading between fourteen
    fifty. A fourteen fifteen and fourteen sixty let’s say causes
    fourteen dollars and forty cents. Hey. And then at the
    same moment to create the vertical. Then I get the right
    one nope I’m looking at the wrong one. That’s okay I’m just
    kick this down a line. And all change that. Let’s put our to
    eighty five up here. This was actually our two ninety that I
    was looking at. Okay the two eighty five looks like it’s
    trading between seventeen eighty five in eighteen thirty
    let’s say that we’re able to buy that for eighteen oh five.
    Somewhere right around. The midpoint obviously we’re not
    guaranteed that till the order fills. And then we’re going to
    sell. That two ninety call for fourteen forty so what we’ve
    done here what what we’ve done here is we have a net debit in
    this transaction if we paid eighteen oh five for one. Call
    and we sell another one for fourteen forty that’s gonna
    leave us with a net debit of what three dollars and sixty
    five cents. So the cost. Or other words the maximum loss of
    this trade. Is three dollars and sixty five cents. What’s
    the maximum gain them. Let’s talk through the logic of this
    trade by buying a call by buying the two eighty five call
    we have the right to buy shares for two eighty five. But then
    we’re also obligated to sell those shares for two ninety.
    Now if we can buy something for two eighty five and sell for
    two ninety do we want that to happen yeah wiper two eighty
    five silver to ninety that’s a five dollar profit. If this
    were a free trade. It’s not a free trade how much of this
    trade cost us. Three dollars and sixty five cents so the
    maximum profit of this trade. Sometimes described as a
    maximum gain. Is the five dollar width of the spread.
    Minus the three dollars sixty five. Sent cost. So that leaves
    us with a dollar thirty five. Yeah I checked but thirty five
    is the maximum profit on this trade so as we’re looking at
    the return on risk. Is this what someone who really
    emphasize reward might be looking for we have a reward
    potential dollar thirty five. A risk of three sixty five. Well
    that risk is nearly three times the reward potential. For some
    traders they say I’m not what I’m looking for others though.
    That’s not the point the point is the probability of success
    and I’ve already hinted at it what is the probability of
    making the maximum profit on this trade. How can we
    determine that. Well we know that we have the right to buy
    for two eighty five were obligated to sell for two
    ninety. If these contracts are exercised if assignment happens
    on the two ninety call. We’re going to have that maximum
    profit realized so under what conditions would that happen
    well at expiration. If the stock is above to not say the
    stock is worth three hundred Bucks there’s a trader have
    there who has the right to buy it from us for two ninety other
    gonna do it. Yep. In the money options with only rare
    exceptions. They’re sized. And then if we have the right to
    buy shares for two eighty five there were three hundred are we
    gonna do it yup so. If the stock is above two ninety. Both
    the contracts get. Exercised assignment at two ninety
    exercise to eighty five. We kept the five dollar profit
    minus the three sixty five investment we have our dollar
    thirty five game so we need this thing to be above two
    ninety at expiration. Let’s look at that to ninety. What’s
    the what’s the delta there. Our delta is about sixty six that
    means there’s about a 66% chance. That this is being at
    expiration. So is this a high probability trade yes. Using
    debit spread yes. So can we set up a low probability high
    reward trade if that’s what we want yep we just use different
    strikes. So let’s look at. The exact be someone a copy this.
    Let’s buyer sell some more space down here. Paste it there.
    Now let’s go back there we go. This is an example long call
    vertical be and we’re gonna call this one out of the money
    so in this case we’re going to go now that the visual cues
    here if you’re not terribly familiar with the layout of the
    thinkorswim platform. Is you’ll see it has a different color
    background. On my screen I have. Kind of a pale yellow for
    the in the money calls I have a white background for the out of
    the money calls. And since we went how far did we go in the
    money in this case the stock’s trading around three hundred
    dollars. We went taut ten dollars in the money for our
    example of a higher probability trade how about we go ten
    dollars out of the money for our example. Of a lower
    probability high reward trade so how about we go for the
    three ten and the three fifteen strike pair obviously. These
    are not the only ones that what might be considered. That’s
    what we’re gonna do today so in this case remember we buy the
    more expensive one. And then sell the lower price. So going
    to be by the three ten call. It looks like the three tenors
    trading between four fifty five and four ninety let’s say we
    can get it for four seventy. And we sell the three fifteen.
    At three fifteen is the. Fifty three fifteen is trading
    between three ten three forty let’s say. With the twenty th
    I’ve come on the sale of that. Now what do you notice about
    the net cost between these two trades as we moved out of the
    money spending for seventy receiving three twenty five
    it’s really costing us only about a block forty five. I do
    my math correctly. That’s the net cost of this trade
    obviously we’re setting transaction fees aside we’re
    not considering those in this equation even though they’re
    certainly a consideration when trading options right specially
    trading multi leg options and if we do multiple contracts of
    multi leg options I can have a multiplying effect on that.
    Transaction fees we want to stay aware of. Yeah this is a
    lower cost trade. It’s still a five dollar with on the spread
    between the bid the job the long call and the short call.
    So what does that do to the maximum gain of this trade. We
    have five or with. Minus not three sixty five but a Buck
    forty five. So what’s the maximum gain on this trade I
    believe that leaves us with three dollars and fifty five
    cents left over. So in this case it’s just about the exact
    opposite and that really makes sense because one. Ten dollars
    money. Yeah ten dollars out of the money so we’ve just flip
    flop the scenario. So. Now now a trader might be looking at
    this and they might their eyes might be getting big and saying
    cameras you telling me that I’m only risking a dollar forty
    five and if the trade goes. As hoped. We make three dollars
    fifty five cents yeah this is a matter of fact at expiration.
    If here’s a huge if. If the stock is above three fifteen at
    expiration. This will be with very rare. Exceptions that will
    be the outcome of that trade if we make it to expiration and if
    the stock is above three fifteen now are there some
    things again. And before that yes. Any time we’re in a short
    option included including a vertical spread. The risk of
    assignment before expiration can be very real in this case
    the. Under what conditions might that happen will really
    only if the stock is already gone if the price is already
    risen put that vertical spread in the money anyway and early
    assignment. Just might mean. We just got our maximum gain in
    less than forty three days instead of having to wait till
    expiration so it’s not necessarily negative outcome
    but something we want to be aware. All right Sandeep. Is
    connecting the next logical dot say yeah Cameron that’s nice.
    That we might make three dollars and fifty five cents on
    a dollar forty five risk investment. But what’s the what
    are the odds of that happening. Mathematically odds are this we
    need to be above three fifteen. Our delta is only twenty six.
    So we have about 26% chance that this is going to happen.
    All right can you see the scales are just tilting back
    and forth is there a perfect choice for every trader among
    these two now. Might there be. A better choice for some
    traders between like so he’s so here’s our out of the money
    spread that we set up as an example here’s our in the money
    spread that we set up as an example are there other
    potential strike pairings that could be done in between those
    or even above a for more aggressive. Even below for more
    conservative. So what are the potential consideration the
    going even higher out even further out of the money well
    the higher we go the lower the probability yeah the reward
    potential grows but the likelihood of that actually
    happening. Gets pretty nominal. As we go deeper in the money
    the certainty of success gross. Now we don’t ever get to an
    absolute guarantee. But as the likelihood of success increases
    what’s happening to the reward potential trade it can shrink
    down let’s not even covering transaction fees. That can
    definitely be the case if we get too far in the money. So.
    That’s the right answer for each individual investor if
    they’re trading long call verticals at all that’s up to
    them. Okay. Edward I mean to say in the money seems better.
    And again it’s all in the eye of the beholder now it’s the
    let me let me maybe give you a different point of view here.
    Mathematically this says we have a 26% chance what if we
    were to look at this on a chart what if a technician was was
    quite comfortable with their own technical analysis. And
    let’s see what was the date of expiration for these so these
    expire on the eighteenth of October again. Let’s bring that
    up on our chart so we can see that eighteenth of October now
    what we’re not seeing are the expiration dates. On our chart
    if you don’t see them what you can do is pop up here to the
    chart settings icon that’s this little gear icon. And click on
    that. I’m gonna go to the time axis which is now the data
    across the bottom the time. And a click on the time axis. To
    check the box for a show expiration Friday click apply.
    Click OK see what that just did. So we can see those this is for
    the third Friday the traditional monthly expirations.
    And we don’t quite have enough to capture that October off off
    here so let’s come down to this little double headed arrow
    that’s our expansion settings icon. I’m gonna click on that
    change the right expansion settings. We know that. That
    our expiration is forty three calendar days from today. This
    is the number of. Trading days so what if we were to crank
    this up to let’s say thirty five but that would be enough.
    We apply. Click OK yep there is that October expiration so
    where do we need to be. We need to be actually needs more space
    off the top of this chart. Watch this little technique if
    you click on the right side of the chart. And then drag down
    see what that’s doing. It’s giving me that space. So now if
    I wanted to I could draw a line for a visual reference point. I
    need the stock to be above this level. On that date. Now you
    look at that intersection look at where we are look at the
    current trajectory of things does that look on reasonable.
    Might a technical investors look at that and say you know
    what in my eyes there’s even a tool better than 26% chance of
    that happening they might come to that conclusion.
    Mathematically it’s still 26% chance. All right so what’s the
    right decision. It’s up to the investor. I think we already
    had a boat Edward for an in the money trade right. So we do
    that for a trade today let’s go back to our trade tab. I’m
    gonna go for this let’s go back up. And everybody did double
    check this for me. If you see anything wrong here let me know
    if I got anything wrong with our numbers. But for our
    example trade today I think I’m in I am gonna go with this in
    the money that’s where we got our first vote might as well do
    it. Eighty five two. So put to place that trade I’m a come
    here to where it says spread single. And I’m gonna change
    that to the vertical. And that just pairs up all of the
    strikes with the next strike so I can come down here and look
    at the Hey there’s my two eighty five and my two ninety.
    And to create a long call vertical. I’m a click on the
    ask price. There we go now this defaults to ten contracts on
    one contract and all that I have about three or sixty five
    dollars of risk so let’s say I wanted to risk about a thousand
    dollars that would be three contracts ten contracts would
    be more. Like thirty thirty three thirty five hundred
    dollars of risk but a debit let’s look at different to what
    we’re calculating at the current mid price. And it’s
    even going up a little bit higher you know I think I might
    do. I’m gonna dial this up just a little bit higher. Try to
    give us a better likelihood of a fill. All right but whenever
    we put in a limit order. There’s a wreck the order might
    not. Right and look at that it’s moving away from us. We’ll
    see if we get this filled. But I’m gonna click confirm and
    send. Do we want to three thousand yeah you know what on
    a four hundred thousand dollar account a three thousand dollar
    trade. Is less than 1% I’ll do that. So order were a buying
    these ten verdicts. Maximum gain is about twelve hundred
    Bucks maximum loss about thirty eight hundred a little bit
    different what we calculated because prices moved . Transactl
    certainly a consideration. And let’s send that order off see
    if we get a quick fill there is. Water for three seventy
    five. So we’re in yeah bill thank you yeah give me a
    reminder to check that quantity because it’s easy to overlook
    that kind of thing and we might actually make a commitment.
    That exceeded what we’re looking to do right that’s why.
    Could be a good practice to just read out loud what what
    we’re about to do. What I can say. I’ve been doing this for a
    long time I’ve been a I’ve been a coach. This my fifteenth year
    as a coach but before that I spent about six and a half
    years in various capacities on Wall Street. Many of those
    capacities requiring that I place trades for other people
    have done thousands of trades for other investors. And never
    had to have a trade backed out because a mistake I made. Never
    once. Now trading. That’s another story I’ve made
    mistakes and there was kind of selling them at actually wind
    up costing these as significant out of money but I think a lot
    of people can relate to this. That when you get. Placing
    trades and maybe you’re talking with your spouse or significant
    other or your distracted by the TV or whatever you’re confident
    that you’ve done this a million times. And you click send. He
    didn’t check the quantity maybe forgot. To put a stop order
    when you made a limit a limit order that kind of stuff
    happens really easily so. It can be helpful to just. Like I
    was required to do when I was a broker I had to read that trade
    back to get. A verbal confirmation. Reading out loud
    can be a good practice. Okay all right. There we go well
    we’ve got we’ve actually close the loop on what I wanted to do
    today. Here is our agenda discuss what market conditions
    might be appropriate for a long call verticals we weigh the
    pros and the cons the maximum gain the maximum loss of long
    call verticals even compared. To different. Constructions in
    the money versus out of the money and then we did an
    example long call vertical trade. But I want you to walk
    away with is an understanding a when a trader might select a
    long call vertical from that huge spectrum of strategies. So
    that’s been helpful for a time for me to set you loose we’re
    gonna take a little bit of break in our education
    broadcast day. Coming back at eleven o’clock eastern standard
    time going to Connie hill she talks about getting started
    with stock investing. On Thursday mornings. So we’re
    looking forward to that. If you do want to follow me on Twitter.
    And I can see what a good audience and some of you are
    new to my class. Summer you’re not yet following me on Twitter
    I just started tweeting like. Six weeks ago maybe. But I try
    to put out some market observations every day I try to
    put out something about my. Myself matter of fact the best
    engagement I’ve gotten with the tweet was. A picture of my son
    and his fiance are getting married fifteen days from
    today. So don’t expect to see me in the office on Friday the
    twentieth because I’m gonna be off having a really good day.
    Anyway at CMA underscore TDA. And if you have a moment
    subscribe to our trader talks webcast from TD Ameritrade
    channel that way you get notifications when new videos are are released Hey Sandeep thank you
    held I very much appreciate it. Edward Frank I’m not sure what
    that question is I’m sorry can you show line of option and-
    I’m always happy to help out it can. Louise says is there a
    place on the website where we can see investing plans yes in
    our in our courses in our courses. If you’re on our
    website you’re checking out any of our courses stocks options
    income whatever are investing plans. They’re right there
    under listed on the home page of each course under resources
    sample investing plans. Yeah all right that those the only
    places our house as far as I know though. All right next
    time we’re going to switch to put verticals and we’re gonna
    start off with. With short put verticals what are the
    conditions when a trader might select a short put right out of
    the dozens and dozens of. strategies and then over the
    course of what we’re going to get into some other strategies.
    That you may not have heard me talk about before. So I’m
    looking forward to it. Frank can’t we show in option cost on
    a charcoal can you do your trading of options of things
    yes I think what I’ll do. A map hold off. Fourteen able maybe a
    circle back to that one next week or you can pop into my
    trader Q. and a session on Tuesdays we can explore that
    Louise thank you. All right everybody. I’m going to get
    some practice with this if you haven’t ever done a long call
    vertical before find a stock that you consider to be bullish.
    Check this liquidity and maybe place a paper money trade. And
    you might want to weigh in the money versus out of the money.
    Does it feel a higher probability of success is more
    important to you or- is the reward potential for the trade.
    A more appropriate. Okay. All right everybody thanks for
    joining me today quick reminder of the risks associated through
    investing risks are real we use real examples in today’s
    discussion is not a recommendation or endorsement
    of those securities or those strategies. The course options
    are not suitable for everyone. All right thanks for joining me
    I look for to talking with you next week you’re invited to
    join me in the meantime in all my classes. That are sprinkled
    throughout the week between now and then. But whenever I see
    you again until that moment arrives on wish you the very
    best of luck happy investing. Bye bye

    St. Jude Medical collapses due to report by Muddy Waters
    Articles, Blog

    St. Jude Medical collapses due to report by Muddy Waters

    September 7, 2019


    yep sometimes trades that you miss hurt worse than losses let me tell you the story of St. Jude Medical Doing a seasonality study I first noticed that St. Jude Medical had a strong tendency to decline in August over the last 20 years only a quarter of them ended higher than they started in a facebook group that I am a part of I stated that one of the stocks I was watching to go short was STJ so I am watching it and it had been in a really big uptrend so I really wanted to see a trend change signal before I took a short position then this happened we broke down we rallied up and logic would dictate that we put a sell short entry right around here right around the $82.29 so my first mistake was I did not put a sell order in the next day this happened and I was busy with my family all day so I was not watching the market at all cause if I saw it break down below there the logical choice would be to well put a sell short order even if it is down here we broke below this support sell short then on Thursday MuddyWatersResearch.com releases this report and you can go to their website, link in description and download the report and read it for yourself but it is not good news about st.Jude medical now that doesn’t mean St.Jude is going to go down I am recording this on August 25th so it remains to be seen how well it is going to perform but Muddy Waters is famous for taking short positions on companies and they do very thorough research So if they post an article on this it is generally not a good sign and this is what happened the day of the release of that article Yup Missed trades make you want to cry sometimes

    Asia Update | Dragon Boats and JD.com
    Articles, Blog

    Asia Update | Dragon Boats and JD.com

    August 23, 2019


    hello again everyone this is Joe Hentges
    with Beyond the chart and in this asia update video I look at the Shanghai
    Composite index and the Hang Seng index and check in on a Chinese stock traded
    here in the US JD.com so stay tune all right let’s start off here with the
    shanghai composite and you can see we don’t have a whole heck of a lot of
    activity… this last day of trading was for wednesday so we had monday, tuesday,
    wednesday and today is Thursday June 9th and the stock market’s closed
    in China and it’s closed tomorrow so it’s closed Thursday and Friday for
    the…what is it…the dragon boat festival so in case you’re curious about that here’s
    the wikipedia entry about the dragon boat festival apparently it’s a
    traditional it’s been around or celebrated in various parts of the country
    for a long time and has various origins and things like that and apparently the
    thing to do is people like to eat, drink wine and race dragon boats so sounds
    like fun and you can see over here that there’s a
    lot of alternative names in here for this festival also. its celebrated on the
    fifth day of the fifth month of the traditional chinese calendar so that’s
    why it’s here on June 9th, today and so therefore you’re not going to see much
    activity here and so there really isn’t a
    whole lot of change in what’s going on… intermediate trend is still down here in
    terms of the 21 being below the 55. the 55 is kind of flattening out here on the chart
    we still are in a downtrend I still believe we’re in corrective mode and the
    Hang Seng index is going to be the same way because this festival, this holiday is celebrated in Hong Kong,
    Macau and China mainland and in Taiwan so all of those folks are having a one nice long weekend. so here’s the
    last day of trading here on the…for wednesday, on the Hang Seng and you can
    see it popped up on Tuesday and just kind of little doji candle in here and
    not really going anywhere yet hasn’t taken out this high so we’re a little bit of… you know…we’re still in the down trend here with the Hang Seng index but a little
    bit of no man’s land in that you know we kind of came down here did not take out
    this low ah, this high did not go above here and so
    are we going to take out this high or this low I mean that’s the thing…what’s the
    trend and right now again just like on the the other
    indice the Shanghai, the 21 is below the 55 in here so we just got that cross
    a couple weeks ago so it’s going to be interesting whether this is just a
    little counter trend of a downtrend move and that’s what i’ll be watching
    for. all right let’s take a look at JD.com today and let’s start off with the
    weekly chart this is all the trading on jd.com so here’s the all-time high here’s where it started trading in the
    United States in May 2014 here’s the all-time high June of last
    year kind of when the market peaked over
    there in China and so it’s been in corrective mode ever since and I’m
    labeling it A-B-C, (W) and then a clear (X) wave and it’s actually going to be even
    more clear on a daily chart this weekly chart and then it looks like we’re doing
    another zigzag so we had the first zigzag… this is a combination corrective mode
    here a combined zigzag and so this is A, B and now working a C down so I’ve
    got C down here at a 100% right here is where C will equal A so
    you see what I do is I stretch down go to the end of A, come back to the end
    of B, and then you project out where does C equal A and that would be right down
    here just about 18.5 -18.75 now in this move C actually went to
    just a little bit over a 138.2% which would be the next fibonacci number on here and if that would be the case that would
    be down here around 14.5 so right now my initial target on JD.com should this continue to do the pattern that I’m seeing is
    expecting it to be down here around 18.5 let’s take a look at the the daily chart so here’s the daily chart you can see
    the same pattern that i just looked at now this was look at this overlapping waves… i counted
    eleven overlapping waves… that clearly signals corrective mode so this is clearly a corrective wave in
    here labeling it (X) so we had a zigzag, pullback (X) wave…kind of the
    in-between wave and now we’re doing what looks like another zigzag so you can see how we’re breaking down
    continue to break down today we’re down just a little bit a few cents so not a whole lot of move…we’ve
    had a pretty big 2 day move in here so the short-term trend is still down
    alright so that’s the picture on JD.com will continue to watch that and if you
    found this video helpful hit the subscribe button here on the page and
    hit the YouTube thumbs up button if you liked the video and remember to share
    the video I appreciate it all right everyone will see you on the
    next video