I've noticed that these SMB videos tend to minimize the downside risk of options trading. It's possible to lose most of your money very quickly if things go the wrong way. Also, spreads that include a sold put or call can (due to a quick spike or drop outside of normal trading hours) end up with only one leg executed and leave you on the hook for thousands.
@@kesannwalrond-mcclean9781 true, if you do nothing as it turns against you...but you have to know how to manage your positions...roll out, roll down, roll out and down, or just close the position and take a loss. 5 outcomes to any position: 1. win big 2. win small 3. break even 4. lose small 5. lose big You just have to avoid #5.
I really like your explanations. I have paid some big bucks for programs that were not nearly as good as what you are providing on TH-cam for free. Thanks for making these available in such a good, precise, detailed fashion.
Thanks for the video! I like how this is basically a synthetic wheel strategy where you switch to a PMCC instead of taking actual assignment in order to keep your capital requirements low.
Now, I Just realized that the secret to making a million is saving for better trades. I always tell myself you don't need that new Maserati or that vacation just yet. That mindset helped me make more money trading. For example last year I Traded with 10k in Crypto and made about $146k,but guess what? I put it all back and traded again and now I am rounding up close to a million
This is superb! Information, as a noob it gets quite difficult to handle all of this, and staying informed is a major cause, how do you go about this are you a pro investor?
Good idea! You can also use the micro futures option chain to reduce cost, and another idea would be to switch between puts and calls when 50 day SMA changes direction
Effective personal finance management is more important than the amount of money saved, regardless of whether income is earned through job or investment. Individuals can seek counsel from a certified financial advisor to optimize financial outcomes, who can provide specialized advice and methods to decrease expenses and maximize income.
I agree! That's why it is advisable that you have to invest while you still have a regular job or earning a regular income, and do it constantly. You still need to have something that will keep you going even if you're investing. Good financial planning and money allocation is the key.
The best course of action if you lack market knowledge is to ask a consultant or investing coach for guidance or assistance. Speaking with a consultant helped me stay afloat in the market and grow my portfolio to about 65% since January, even though I know it sounds obvious or generic. I believe that is the most effective way to enter the business at the moment.
'Carol Vivian Constable, a highly respected figure in her field. I suggest delving deeper into her credentials, as she possesses extensive experience and serves as a valuable resource for individuals seeking guidance in navigating the financial market.
Read "One Good Trade." SMB Capital traders have been successfully trading the market for years. Otherwise, they would not be in business. Personally, I am a small potatoes, scalp trader with one stock. Been fortunate enough to earn $5k+ per month. Establish your entry and exit rules and keep to them. Focus on the progress of your trades moment to moment. Some days I don't trade, some days I trade frequently until I run out of settled funds. You also have to be passionate and confident. SMB Capital has posted a lot of free, beneficial content to learn by. Wish you the best of good buys.
The short strike selection hovers around 2.5% OTM. But jumps to 3.6% some weeks. So must be using some volatility indication to sell further OTM like VWAP bands or Bollinger. Switching to call side with a 6 month calendar spread when things turn bearish is interesting. Psychologically, it's kinda degenerate gambling with inflation on your side because the capital requirement balloons so high. It creates a business model that's bent on not taking a loss.
Interesting strategy! We personally prefer to take 100% advantage of the high gamma sensitivity of short-term options instead of the gamma working against us in short positions or only working for us to a limited extent in debit spreads. We only buy naked options and manage to generate a constant flow of income. This also has the advantage for small accounts that the PDT rule does not apply because this strategy can be traded in a cash account.
Crypto is risky as many would say but I think the actual risk in Crypto is not investing, buying the capitulation isn't a tough call, but it is a very tough call to figure out what to do aside holding. I remember when I just got into crypto back in 2019 but later in 2020 I ended up selling it because I was dumb and I didn't understand it. I studied and learned and now I know how it works. Got back into crypto early in 2023 with 10k and I’m up with 128k in a short period of time
I'm new to cryptocurrency and don't understand how it really works. how Can someone know the right approach to investing and making good profits from cryptocurrency investments?
As a beginner investor, it’s essential for you to have a mentor to keep you accountable. Myself, I’m guided by Alex Gomez. A widely known crypto consultant
I started working with Alex Gomez back in June, and my financial goals have never been clearer. It’s like having a strategic partner for my money with a solid track record.
@Ianlord, the reason that it's not really ultimately risky (although it is in the short term) is that if a sell off were to occur you would revert to the call buying/call selling process we showed in the video until the profit was ultimately restored assuming the QQQs ultimately bounced to their all time highs, which has always happened in history. Do you understand why?
@@sethfreudberg4750 , the main problem that I see with the trade is that it is done with a "small" account. So before anything we need to define what a small account is . If we accept a 25k as a small account and do the trade with that level of funds then I find the risk absolutely unacceptable. While I agree that in the long run QQQ is very likely to keep its general upward trajectory that historical upward bias would be of little consolation to a trader who loses his account because he risks everything on a single trade, every single week. It would take just one large downward move of the QQQ to wipe out the account. In the video, the first loss is 470 $ but what if that loss is 2,000 or 5,000 or 20,000 $ or more ? Is that impossible to happen? I don't think so. Yes, it is unlikely but it could happen. The trader has almost no defense against that sort of a adverse move in the underlying because the total risk built in the trade is just too high. And any sufficiently large loss will prevent the trader from executing the call side of the strategy. If the trader loses even 5k on the trade then they will be unable to do the call side in the same proportion as the original put trade because they will not have sufficient funds to do so. Another point that I think is important to make is that while the QQQ is generally moving higher over time that does not mean there are no prolonged periods of downward movement. If the trader is caught in such a period, even if they have the ability to do the call side as in the video example, that will make matters even worse. Now, after losing on the put credit spread position, they are losing on the long call as well. The short call will not bring much relief especially if it is always executed on the initial SP strike which is now deeper and deeper OTM. So, it would be very important to be aware of the stage that the general market and the specific underlying, say QQQ in this case, are. A basic technical analysis will go a long way of preventing a trader to get on the wrong side of the market. IMHO, this strategy is more suited for a larger account but even then I wouldn't do such wide spreads.
@@sethfreudberg4750What if it takes 5 years to bounce back just like in 2008??? Your Long Call is WORTHLESS by then. You'll be forced to sell calls under your long strike and your margin requirement will soar. This strategy only works in hindsight.
@@sethfreudberg4750 Could you share in which scenario would this strategy work against us? From the top of my head, if we were to encounter a volatile market which suddenly whipsaws around, this strategy wouldnt work right? Also how do we calculate that scenario to perhaps move away until the market resettles?
Thanks a lot four video. Personnaly thats the point I dont get. When you lost the 490 why you just don t stop and continue the process normally? Thanks in advance four your help@@sethfreudberg4750
You fail to mention the worst case scenario, where the underlying reaches the long put. The trade is barely hedged by the long put since you want to make money each week and in practice what you would need to do would be to get out of the trade early if the market even approached these levels. In practice, all the long put is doing is limiting the margin you have to put up.
Thanks for this explanation. I ran into this issue in paper trading and lost thousands. I was like WTH. What you said makes sense. Get out of the trade early the minute you think there is a remote chance it will hit the strike price.
The safest way to play these are if you get to 100% loss, close the trade. Therefore, if you take in $50 per contract, once you are down $100 per contract, close the trade. It's a great strategy with the puts being so far OTM, but it does come with a high risk/reward...are risking $2400 to make $55 +/-, or 2.5%.
Very dangerous advice as this chief option strategist in front of his midtown manhattan poster does not recognize the the risk involved in his trades. The reason why you have to put up thousands in margin capital is that you may loose these thousands, and,nif the market tanks overnight, you are unable to react and you loose many thousands more
I'm really proud every of your episode of crypto analysis here on TH-cam, despite the fluctuations in price I keep earning 37k dollars every single week thanks for knowledge and recommendations
At 9:14, why do you go to the call options side of the chain? Why not just stay with the Put side? Yes, you lost money but tomorrow is another day. Did you switch to calls because you assumed the market turned bearish?
For whatever reason always get uncomfortable selling call spreads or even call calendar spreads unless i own the qqq's so normally i just sell puts every three to 5 days and adjust accordingly. Also own a put leap as a hedge. Doing 10 sales is beyond the scope of my tiny brain and the width of the spreads is also scary (to me). if you get assigned the q's and you're just selling one put spread turn around and sell the atm call. I like to think of the q's as an apartment I own and the option sales as rental income...my campaigns will last until I go to my heavenly reward. Chances are the q's will also apprciate in value over time so there is that too
Excellent explanation (always). I'm off to look for a resource that shows me how to calculate the capital required for a given ETF + put credit spread combination so that I know how much capital I need in my "Small" account. Thank you.
Thanks for the explanation of the strategy! Just wondering with the market moving will the amount of capital required change? And when buying the in the money calls do you go out to December or a certain amount of months?
Scale it down to fit however much capital you have. Instead of 10 contracts do 5 or 4 or 3. Stack up profits and slowly increase bet size as you earn. I'd increase 10% weekly
I cannot begin to express how impressed with the time and effort your team expends to assist virtually anyone whom has shown an interest in options trading. Good work and thank you once again for the invaluable advice and guidance!
Except he forgot to mention that these trades work differently in a different market cycle. 25 points wide with 1week expiration is extremely risky. One single overnight gap in price and your entire account is gone!
That depends on what your trading. With the Q's you don't get huge gaps more then maybe $5 or so. Your initial entry is between $10 and $13 otm around a 12 to 14 delta. With the 25 point wide spread it's only there for protection and to make it as if the position was naked while providing some protection. It has to make a huge move to really mess your account up.
How is your account "gone" if you got assigned $24k worth of QQQ? Sounds like you have zero idea of what you're talking about. So what if you get assigned 600 shares of QQQ? Just keep selling calls on it and it will rebound eventually.
@@alextsukanov3536 What about when it falls below your cost basis? Just sell CC and roll if it gets close? In a down turn you might be waiting a year for it to "rebound eventually".
@@alextsukanov3536because if your trading a small account you don’t have the capital to take assignment of 1000 shares. This is a strategy than can go wrong very fast and wipe out all or huge chunk of an account. It’s all good until it’s not.
I am so happy that I made productive decisions about my finances that changed my life forever. I am a single mother and I live in Spain, I bought my second house in September and I hope to retire next year at 40 if all goes well. thanks to Louise O'Brien for helping me achieve this
I'm a total beginner, but I've watched multiple videos over the past couple of months internalizing put, calls, covered calls, etc. I'm interested in messing with this strategy in a paper trade account over the rest of this year just to see what I can do with it with no risk to my money. I have two questions: 1. What happens on a short week. E.g. if the expiration must end on a Thurs. because Fri. of the following week is a trading holiday? 2. Why sell at a near .60 cent? What is the significance of .60 cents and the ensuing 25 points below it? Thanks for this and your other videos. They've made me think about stocks and options in ways I never would have considered. I'm still a very long way off of putting money on anything like this, but it's fun to learn in a PT account.
1) just Sell the Thursday. 2) aim is not 60c but 10~ delta. Therefor theoretically 90% PoP. Watch out if you do this. Big sudden drop and all required $ is gone. 5%~ drop in QQQ washes away $25k
You need to explain the risk involved in this which is plenty. If there is a huge slide in the QQQ, you would have lost a ton of money on selling the puts. So you sold 10 contracts then end the next week,with high gamma and delta which carries huge risk. 10 contracts at a 25 point spread can equate to loss of 25k on the put side (less than that but i'm not counting premiums). When you reversed and bought your 24k 10x contracts on the call side, you can also lose that theoretically. So you are close to 50k loss (yes, i'm not counting premiums and letting the calls expire worthless)
The thing im struggling to get my head around emotionally is risking ~24k worst case to make 500. I understand that this is a high probability setup but this risk vs reward would play on my mind. Would be good to see this back tested over 5+ years of data to understand the frequently of drawdown etc to help give confidence in this approach. Thanks for sharing this strategy
It's the old picking pennies in front of a steamroller strategy. Works great in retrospect when the market went up in a straight line, but when you put money to it, you wipe out your gains on just one loss. Do the math, 500/24000 is 2%, you need to be right 98% of the time just to break even. If you exit at a smaller loss, say the short strike, your winning percent goes down to closer to 50% even in an uptrending market.
I would add a collar specifically a naked put with a cost roughly 1/5th of the initial credit. You lose weekly gains but protect yourself from significant loss to a degree
Ive been burned bad twice doing this. As others have said it works great when the market is on the rise but with such a big gap in risk/reward one bad trade will ruin your progress. Id stick with CC/CSP where there really is not "total loss". Something else that you need to note is those greeks dont follow stats like you think. They dont take into account market news which can and will cause big movement. Once again thats how i got burned twice.
You would not lose the 24k. Worst case you would have it tied up in qqq via assignment until it rebounds. Before that happens you should 'buy to close' on the puts to close the position for maybe a few hundreds in loss. That's made clear in the video
This credit spread strategy is very interesting and I will test it. I just want your confirmation that one can let the contract expire at the the day of expiration without any problems. Or would it be better to close it on the last day just to be on the sage side.
Great video. I will be forever grateful to you, you changed my whole life and I will continue to preach on your behalf for the whole world to hear you saved me from huge financial debt with just a small investment, thank you katrina susan
Wow. I'm a bit perplexed seeing her been mentioned here also Didn’t know she has been good to so many people too this is wonderful, I'm in my fifth trade with her and it has been super.
She is my family's personal broker and also a personal broker in many families I'm United States, she's a licensed broker and a FINRA AGENT in United states.
(asking seriously) Can someone please explain how is it not a 100% way to loss all the money? You trade the "put credit spread" and make your $500/week. Eventually, you will have a lossing trade and switch to the calls strategy, which includes buying the super expensive call options with EOY exp date for the cost of ~$25K. In the scenario that the market just picked and from this point it will go down for the rest of the year (which is a perfectly logical scenario) -- you are stuck with a worthless $25K call lossing you all the money.. Also, when buying the $25K call, is it always end of year (Dec) or should it be at least X months ahead? what if we are trading on Nov? What am I getting wrong?
Any large overnight movement will crush your account. Try this in 2022 and then try it again in 2017 and again in 2008. I dont understand why SMB doesn't make a big point of talking option risks and make sure viewers know to cut losses quickly.
I'm an aspiring trader who would rather learn from other traders' experience than investing in the market myself, in anticipation of the next bull run. What are your thoughts on copy trading as well? Do individuals actually earn a living? Just trying to get some reassurance. I want to have a healthy portfolio worth at least $850,000. Reliable inputs please.
The strategies are quite rigorous for the regular. As a matter of fact, they are mostly successfully carried out by pros who have had a great deal of skillset/knowledge to pull such trades off.
Having an adviser is the smartest approach in today's market, especially for those nearing retirement. I personally gained over $270K, which highlighted that there's valuable insight the average individual may not be aware of.
Having an investment advisor is the best way to go about the stock market right now. I used to depend on TH-cam videos but it wasn't working. I’ve been in touch with an advisor for a while now, and just last year, I made over 80% capital growth minus dividends.
I'm confused. If the initial credit spread had a max loss potential of 24,470 (25,000 strike spread, less 530 of income) then how did you arrive at closing near the end of the losing trade at only a $470 loss? If the price of QQQ drops below the Short Strike and continues down towards the long strike then the losses will become huge compared to the income received. Surely you have some sort of stop loss set so that the loss doesn't reach 24,470, a 46x loss?!!! Did I miss that in the video? Just holding and waiting until market close on Friday to buy-to-close the credit spread could be disasterous.
He skates by the fact that the short put ended up less than $1 in-the-money, so it didn't cost much to buy back. Every time you open that put spread, you're risking $1000 for every dollar it moves past the short strike, up to a max loss of almost $25,000. This is the kind of strategy where you can make a lot of money as long as there isn't a black swan event, but the "risk management" consists of nothing more than counting on that black swan not happening... and the longer you do this, the more likely that black swan is.
The risk adjusted reward looks bad, if you have one bad crash in the market you blow 24k, then you’re going to need 45 to 50ish positive trades to make up for it.
Very interesting videos thanks for the effort and explanation. I am a rookie so just a quick dumb question. Why do we need to buy a call way at the end of year to pair with the 373 Sell Call? It seems that the downside protection of this leg of Buy Call is very limited, so my guess is that only sell Call of 373 may incur unlimited downside risk and thus is just simply too risk and probably won't allowed by the broker? Also, given the winning streaks preceded this losing trade of Aug, wouldn't it make more sense to just recognize this loss and wait for price to revert back to the bullish trend and restart the Put Credit Spread? Many thanks in advance for your reply.
I just started with options, so it’s just my humble opinion. With Wheel strategy you are 100% covered. You sell csp - worst case you buy shares and get premium. Or CC - your shares a sold and you got premium. But with this one… we should keep in mind that option can be executed Any point of time , so , if it goes against you - owner of the option can execute you before expiration date. And you are obliged to buy for whole amount, which you don’t have probably. Is it right? Thank you
Thanks for the video. One thing I am struggling to understand. In your case you are lucky that price reverted back from 358 to 373. What would happen if this doesn't happen and price is keep falling till the expiration of Call buy option reached. In that case, your call buy option will become worthless, loosing 24k. Selling Calls at 370 every week during this time is sufficient enough to recover the loss of 24k?
YES, this exactly! This video is a classic cherry-picked example. This strategy works very well when the market is in an up-trend. The 373 strikes got tested but the market rallied back above them within a month so those long call options only lost 1 month of theta decay - no big deal. But you're exactly right, if the market hadn't recovered above 373 before the long call options expired in December, you would have lost every penny of that 24k premium you paid for them (minus credit received for the short calls). Maybe the short call credit would have covered the loss of the long calls, maybe not. It all depends on what the market does. This is an overall bullish strategy and you WILL loose money on it if the market turns bearish. If you had started this strategy in the beginning of 2022, for example, you'd loose a ton on your long calls.
@@skerby2 Hah! I said the same thing in my comment. June, Sep, and Oct of '22 had weeks that lost much more than his worst week here, too, he would've gotten socked with _much_ more than a $400 loss if he had short put spreads open on any of those weeks.
Always ask the question- What is the loss exposure? In this case of QQQ If the price goes below 346 say to 334, you will have a huge problem. Protection is set at 321. When it comes to investing there are no sure things..
This is really good, I'm brand new to options trading. What I don't seem to understand, what would happen if your calls/puts got assigned? I know you close out the position a few minutes before expiration on Friday, but theoretically, wouldn't it be possible for the person on the other side to exercise before that time?
That what I would wish to know. I think with a small margin account. Without having that much capital. Margin call would then kick in. Meaning you are forced to buy back the option at a negative earning but without forking out 100k+ capital. This is done by the system of the broker.
Credit spreads are very risky and can burn your capital very quickly if you are on the wrong side of the trade. You should use no more than 5% of your portfolio per spread.
@SPYspreads, they are risky, but in this context it is sort of a short term risk because if you, after a drop, buy those far in the future calls and sell calls against it, you should be restored eventually as long as the QQQs ultimately bounce to their all time highs, which they always. have.
Seth, I think you answer my question here but if they go pretty far against you, 10 lots can be many thousands in a loss... Do you have a stop loss or just let er go until expiration day? The follow on strategy does offer recoverability but not nearly as much as the initial loss risk...no?
I would start with 1 put credit spread and if the price moves down 0.5%, sell another put credit spread(with lower strikes) for another $0.60 credit. This way, you are averaging the price and reducing your risk. As they say, do not put all your eggs in 1 basket. or I would do a tranche by getting $0.60 credit for every week for the next 10 weeks.
Wouldn’t work on the call side of the trade since Selling calls and buying further-dated calls with only a 3 dollar price spread loses money due to unmatched deltas; the negative delta on the short calls is greater than the positive delta on the long calls as the underlying price moves up or down, leading to losses.
I would like to know your advice, if the ETF suddenly loses money, then what to do. After all, volatility will increase significantly and losses may be the size of the margin, and there will not be enough money to buy 10 contracts. After all, such a risk exists and you need to be prepared for it.
He shows it took 24K to cover the call calendar reversal strat to trade 10 contracts. So just trade 1 contract and aim for $50/week and you only need maybe 3000 in the account. Once you get to 6000, trade 2 contracts. At 12000, trade 6. Until you get to 24000 and there's your 10 contracts going for $500/week. Maybe it takes you 3 years of grinding it out, but you'll need to make all the mistakes early on, when the account is small. After you're confident, then the size happens quickly.
@@cbpuzzle He explains a plan for it only goes against you in a small enough way. A $35 spread can move much further against you than the 96¢ it went in-the-money here. And there's still a lot else that can go wrong that he doesn't mention at all.
@@cbpuzzleif the put spread goes $10 in the money almost the whole $25 k is gone. What you gonna use to call wheel then? PMCC needs another $25K that can go up in smoke just as fast.
Ooph, if this is easy then I'd hate to see difficult. I am struggling to wrap my head around it but I understand that it is necessary to have a strategy for if/when your options play turns against you. I appreciate you showing the downside also instead of just glamorizing the possible wins. I feel the need to take baby steps here until I truly understand.
This is all new to me and I am learning but a little confused. After the Q’s drop and you buy the contract back, you place the CALL at the same time (that makes sense) but on the 370 buy, the long call 6 months out, why does he do this? He buys the 10 calls for 24k and then he sells it off later for an additional loss. Why not skip this step? What does this step provide? Thanks Doug
I was surprised after the first call that you sold in August 11 I think, expired worthless and you had a capital gain of about 7X greater than the first loss that you took on the previous weeks put sale. Why wouldn’t you have closed out your synthetic covered call then and resume your put selling strategy?
Because the week closed lower than the previous. So the assumption is that the following week will be lower as well... until it isn't. Which is why there's the 373 line in the sand where the call goes ITM and that's when you switch to bull puts.
Could someone please explain: On the put credit spread example, why are are you buying a put 25 points below the strike price you sold the put at, rather that just buying 2-5 points below instead? (or one or two levels below) In which case you'd need far less capital to take the trade? This would seem to lower your max loss too? What am I missing?
Are any of these trades considered wash sales? If so wouldn't that further hurt the bottom line especially if you are having these larger losses that you can't technically use to lower your taxable income?
wide spreads are used to simulate a naked position while keeping buying power reasonable. Narrow spreads are binary in nature and develop much slower. A wide spread mimics a naked position in that there is a much wider range of outcomes.
@@robertcurtis1191 I understand that, effectively a naked position. That's a ton of risk for most portfolios; not sure that is for SMB's targeted audience.
It's trading naked options without having Level 4 broker requirements. The long strikes at what calculates to 9 to 10% OTM from the Friday close are basically 10% stop protection or friction on the trade. That leaves a 90% efficiency, but without having Level 4. Keep in mind that some brokers don't even have Level 4. They max at L3.
Basically you are kinda fucked…. Maybe have a stop loss at certain point but only near the expiry. But in worst case scenario you have to buy the shares at strike price(needs big capital) and wait for it to bounce back. Than you can sell and recover your money.
did you watch the entire video? you close your Put Credit Spread and buy calls expiring at end of the year. Each week you will sell calls expiring in one week. Then when the stock reaches back your initial Put Credit Spread amount you resume the PCS strategy
@@BoundMusic Yeah but if it drops too far past your short put it may cost so much to close that you can no longer afford the long calendar call spread. And if you can, there's no saying during a severe downturn it will ever reach high enough before the long call expiration, you could lose the entire value of the call. This is definitely a "fair weather" strategy only.
@@BoundMusic Run the numbers. If Qs break your long put your capital is effectively devoted to this trade and you will could be in "recovery mode" for a long long time.
In my opinion its a good strategy but 25k its not a small account. 25k i will sell put on amd or amzn make some money every month. I prefer 45 days away and closed 2 weeks before expire. Also 25k u can do iron comdor way otm money and make same 500
These are considered Margin account transactions and require a margin deposit before a broker dealer will allow a customer to trade this strategy. You will need more capital and hope you don't get assigned on the position, meaning if the QQQ's in this example drop in price, the customer will be required to buy the stock at the short leg of the option strike price. Although a good strategy for someone that has more experience in trading options and more capital. This is not a win - win trading strategy. Not so simple to make $500 a week. Take it from a person that has been trading options for almost 40 years.
What he doesn't emphasize is that it's a Bull put campaign. So he's STARTING on a breakout with gaps left behind and an inflationary expectation to keep going higher. The campaign can stop and turn bearish for apparently a 6 month expectation as the call calendar spread he reverses with implies. It's easy in a bull run. Once the campaign turns bearish though...
What would be the downside of only doing a 5 point spread vs the 25 point spread and just increasing the amount of contracts to hit the target weekly earnings goal? If I understand correctly, to open a trade with a 5 point spread with the contracts adjusted to hit the weekly earnings goal would require significantly less capital, only about 25%-30% of the capital needed to open the 25 point spread. Is the difference on the call side of the trade? I don’t know how to backest historical options to see how they would have panned out.
It’s like someone with a fishing pole trying to catch whales in the oceans. Some of us shouldn’t be trading options/stocks. For most us, that money should be used toward education or getting a better paying job.
I said the same thing in a comment...that a "small" account Is $2K, or maybe $5K. For someone to believe that $25K is a small account...I guess maybe to a trading firm like that or a millionaire it is...but not to some of us. However, my comment somehow was deleted, because I don't see it anywhere.
You aren’t risking 25k, that’s just how much capital is required, say you risk closer to 500 a trade, that would be a 50k account (if you follow 1%risk) or look to only make 50 a week, and then you only need a 5k account
When the Bull Put strategy needs to revert to the Call side, is the date of December (end of year) used due to it being: 1) end of year OR 2) Four months out?
@sethfreudberg What do you do in a long down market where the QQQ's drop so low that there is no premium available at the 373 level? Especially if the downtrend last through December, and the Dec 370 calls you own become worthless. THANKS!
You get f***ed! Your long calls expire worthless and you loose the $24k you paid for them. This strategy works just fine in a strong up-trending market. But anything like 2022 and you're going to loose a ton of money!
One thing I don't really understand is are you closing all trades before expiration? If you don't then you don't have any capital to you use to make another trade on the same day. If you do, then you would be spending money to close out the trades. So, if you place a trade on Friday you wouldn't be able to place your next trade until next Monday.
You can enter the orders like a roll... sell today's and buy next friday's in a single order, and just pay or receive the cost difference. Although nothing guarantees your order is going to get filled, that could make things difficult.
I am wondering if this a seasonal tactic as I feel that right now it is too risky to do this. I am wondering about the prerequisites for these trades. Where should the Qs be in relation to the 21 SMA?
I've tried to learn this stuff but I just have too many questions. I'll need to take a real live class for something like this to be confident enough to invest this way.
Small options account is at minimum 100000 dollars considering this video as you are taking a CoVAR of 25000 per trade and if this is small account it means this risk can be max 20% of total account which means your account size should be 25000 X 5 i.e. 125000 circa 100000. Else down size the trade to 1 contract and use QQQ mini means 100 time downsize i.e $1000 account but you will be making $5 a week
This would need to be emphasized indeed. Imo you need to monitor the market all along, not just before expiration (even though assignement more likely then because automated by broker), so as to close the losing position before being assigned and avoid the risk of your other securities/contracts being liquidated to make up margin for the underlying
If your account is small indeed, it is not possible to let the option expires on Friday and put on similar trade which require similar capital at the same time, right? One will need to close the expiring trade.
Sure but this is literally meant to be turning on the computer ONCE Every FRIDAY at 3pm Eastern, closing and opening trades, and turning the computer off at 4pm. Trading SPX 0DTE requires more time and analysis. Doing something for 1 hour every week is different than continually coming back to a chart every 15 minutes every day 5 days a week.
I understand this a lot better now. Here is the best way achieve a reliable options income stream: 1. Start a TH-cam channel and become an options furu.. 2. With a subscription-only Discord server. This way, you'll have some cash flow to help offset your options trading losses.
3:00 Put credit spread
8:30 Selling calls
11:50 Options income
16:10 No need for large account
Good
You dropped this 👑
How bout call debit spreads and put debit spreads . I've found the most success with these strats .
0:00 Start
17:53 End
Your explanations of these strategies are excellent, far more professional and quantitative than many other channels. Thank you.
I've noticed that these SMB videos tend to minimize the downside risk of options trading. It's possible to lose most of your money very quickly if things go the wrong way. Also, spreads that include a sold put or call can (due to a quick spike or drop outside of normal trading hours) end up with only one leg executed and leave you on the hook for thousands.
Aviod earnings and dividends and you shouldn't have to worry about a after hours exercise. Your long position would offset it anyways.
Also, learn how to watch and manage, learn how your broker treats things after hours.
Agree
This; this trade could destroy almost 25k in a sharp downturn
@@kesannwalrond-mcclean9781 true, if you do nothing as it turns against you...but you have to know how to manage your positions...roll out, roll down, roll out and down, or just close the position and take a loss. 5 outcomes to any position: 1. win big 2. win small 3. break even 4. lose small 5. lose big You just have to avoid #5.
I really like your explanations. I have paid some big bucks for programs that were not nearly as good as what you are providing on TH-cam for free. Thanks for making these available in such a good, precise, detailed fashion.
Thanks for the video! I like how this is basically a synthetic wheel strategy where you switch to a PMCC instead of taking actual assignment in order to keep your capital requirements low.
Now, I Just realized that the secret to making a million is saving for better trades. I always tell myself you don't need that new Maserati or that vacation just yet. That mindset helped me make more money trading. For example last year I Traded with 10k in Crypto and made about $146k,but guess what? I put it all back and traded again and now I am rounding up close to a million
This is superb! Information, as a noob it gets quite difficult to handle all of this, and staying informed is a major cause, how do you go about this are you a pro investor?
So you guys know him too?... he made me and I have our own house and car.
He is good. His success story is everywhere, his method surprise me honestly
Oh please, how can someone get to speak with Charles Tyson?
Thanks a lot for the recommendation.
His on WHATSPP
The best options trading channel on youtube, thank you so much for the excellent explanations and examples. This has been so helpful!
My three favorite channels: SMB Capital, Stock Brotha, & How Money Works. Make my week complete! 🔥 🔥 🔥
Good idea! You can also use the micro futures option chain to reduce cost, and another idea would be to switch between puts and calls when 50 day SMA changes direction
You could do that same thing with QQQ also.
Effective personal finance management is more important than the amount of money saved, regardless of whether income is earned through job or investment. Individuals can seek counsel from a certified financial advisor to optimize financial outcomes, who can provide specialized advice and methods to decrease expenses and maximize income.
I agree! That's why it is advisable that you have to invest while you still have a regular job or earning a regular income, and do it constantly. You still need to have something that will keep you going even if you're investing. Good financial planning and money allocation is the key.
The best course of action if you lack market knowledge is to ask a consultant or investing coach for guidance or assistance. Speaking with a consultant helped me stay afloat in the market and grow my portfolio to about 65% since January, even though I know it sounds obvious or generic. I believe that is the most effective way to enter the business at the moment.
please who is the consultant that assist you with your investment and if you don't mind, how do I get in touch with them?
'Carol Vivian Constable, a highly respected figure in her field. I suggest delving deeper into her credentials, as she possesses extensive experience and serves as a valuable resource for individuals seeking guidance in navigating the financial market.
She appears to be well-educated and well-read. I ran an online search on her name and came across her website; thank you for sharing.
This is what I call hindsight trading
So easy after you know where the market went. Hindsight 20-20
Exactly! You can sell $500.00 a week in credit, but just one loss can wipe you out. He didn't mention that 🤔
Read "One Good Trade." SMB Capital traders have been successfully trading the market for years. Otherwise, they would not be in business. Personally, I am a small potatoes, scalp trader with one stock. Been fortunate enough to earn $5k+ per month. Establish your entry and exit rules and keep to them. Focus on the progress of your trades moment to moment. Some days I don't trade, some days I trade frequently until I run out of settled funds. You also have to be passionate and confident. SMB Capital has posted a lot of free, beneficial content to learn by. Wish you the best of good buys.
@@zadokmotorfreight2423 you have to watch your trade he went over how to close the trade with minimum loss.
The short strike selection hovers around 2.5% OTM. But jumps to 3.6% some weeks. So must be using some volatility indication to sell further OTM like VWAP bands or Bollinger. Switching to call side with a 6 month calendar spread when things turn bearish is interesting. Psychologically, it's kinda degenerate gambling with inflation on your side because the capital requirement balloons so high. It creates a business model that's bent on not taking a loss.
Interesting strategy! We personally prefer to take 100% advantage of the high gamma sensitivity of short-term options instead of the gamma working against us in short positions or only working for us to a limited extent in debit spreads. We only buy naked options and manage to generate a constant flow of income. This also has the advantage for small accounts that the PDT rule does not apply because this strategy can be traded in a cash account.
Crypto is risky as many would say but I think the actual risk in Crypto is not investing, buying the capitulation isn't a tough call, but it is a very tough call to figure out what to do aside holding. I remember when I just got into crypto back in 2019 but later in 2020 I ended up selling it because I was dumb and I didn't understand it. I studied and learned and now I know how it works. Got back into crypto early in 2023 with 10k and I’m up with 128k in a short period of time
I'm new to cryptocurrency and don't understand how it really works. how Can someone know the right approach to investing and making good profits from cryptocurrency investments?
As a beginner what do I need to do? How can I invest, on which platform? If you know any please share.
As a beginner investor, it’s essential for you to have a mentor to keep you accountable. Myself, I’m guided by Alex Gomez. A widely known crypto consultant
I'm surprised that this name is being mentioned here, I stumbled upon one of his clients testimonies on CNBC news last week...
I started working with Alex Gomez back in June, and my financial goals have never been clearer. It’s like having a strategic partner for my money with a solid track record.
25 point spread is extremely risky given how close the short side of the spread is to the current price of the underlying.
@Ianlord, the reason that it's not really ultimately risky (although it is in the short term) is that if a sell off were to occur you would revert to the call buying/call selling process we showed in the video until the profit was ultimately restored assuming the QQQs ultimately bounced to their all time highs, which has always happened in history. Do you understand why?
@@sethfreudberg4750 , the main problem that I see with the trade is that it is done with a "small" account. So before anything we need to define what a small account is . If we accept a 25k as a small account and do the trade with that level of funds then I find the risk absolutely unacceptable. While I agree that in the long run QQQ is very likely to keep its general upward trajectory that historical upward bias would be of little consolation to a trader who loses his account because he risks everything on a single trade, every single week. It would take just one large downward move of the QQQ to wipe out the account. In the video, the first loss is 470 $ but what if that loss is 2,000 or 5,000 or 20,000 $ or more ? Is that impossible to happen? I don't think so. Yes, it is unlikely but it could happen. The trader has almost no defense against that sort of a adverse move in the underlying because the total risk built in the trade is just too high. And any sufficiently large loss will prevent the trader from executing the call side of the strategy. If the trader loses even 5k on the trade then they will be unable to do the call side in the same proportion as the original put trade because they will not have sufficient funds to do so.
Another point that I think is important to make is that while the QQQ is generally moving higher over time that does not mean there are no prolonged periods of downward movement. If the trader is caught in such a period, even if they have the ability to do the call side as in the video example, that will make matters even worse. Now, after losing on the put credit spread position, they are losing on the long call as well. The short call will not bring much relief especially if it is always executed on the initial SP strike which is now deeper and deeper OTM. So, it would be very important to be aware of the stage that the general market and the specific underlying, say QQQ in this case, are. A basic technical analysis will go a long way of preventing a trader to get on the wrong side of the market.
IMHO, this strategy is more suited for a larger account but even then I wouldn't do such wide spreads.
@@sethfreudberg4750What if it takes 5 years to bounce back just like in 2008??? Your Long Call is WORTHLESS by then. You'll be forced to sell calls under your long strike and your margin requirement will soar. This strategy only works in hindsight.
@@sethfreudberg4750 Could you share in which scenario would this strategy work against us? From the top of my head, if we were to encounter a volatile market which suddenly whipsaws around, this strategy wouldnt work right? Also how do we calculate that scenario to perhaps move away until the market resettles?
Thanks a lot four video. Personnaly thats the point I dont get. When you lost the 490 why you just don t stop and continue the process normally? Thanks in advance four your help@@sethfreudberg4750
Thank you for the detailed strategy. This is something I will definitely try. Can you expalin why do you use a 25 point spread?
Just wanted to say the I have learned so much thru your video, you guys make the strategies so easy to understand. Thank You
You fail to mention the worst case scenario, where the underlying reaches the long put. The trade is barely hedged by the long put since you want to make money each week and in practice what you would need to do would be to get out of the trade early if the market even approached these levels. In practice, all the long put is doing is limiting the margin you have to put up.
Thanks for this explanation. I ran into this issue in paper trading and lost thousands. I was like WTH. What you said makes sense. Get out of the trade early the minute you think there is a remote chance it will hit the strike price.
The safest way to play these are if you get to 100% loss, close the trade. Therefore, if you take in $50 per contract, once you are down $100 per contract, close the trade. It's a great strategy with the puts being so far OTM, but it does come with a high risk/reward...are risking $2400 to make $55 +/-, or 2.5%.
Very dangerous advice as this chief option strategist in front of his midtown manhattan poster does not recognize the the risk involved in his trades. The reason why you have to put up thousands in margin capital is that you may loose these thousands, and,nif the market tanks overnight, you are unable to react and you loose many thousands more
@@Wmy9jy exactly the point
I'm really proud every of your episode of crypto analysis here on TH-cam, despite the fluctuations in price I keep earning 37k dollars every single week thanks for knowledge and recommendations
I'm guided by *DAVE BOOZER*
His platform is really safe and secured, i I joined his plaftorm not quiet long.
Sounds familiar, I have heard his name on several occasions.. And both his success stories on wall street journey!
After i raised upto 125k trading with him, I bought a new house here in the states also paid for my son's surgery (Noah) glory to God.
He’s my family personal Broker and also a Broker to many families here in the United States, he is a licensed Broker.
At 9:14, why do you go to the call options side of the chain? Why not just stay with the Put side? Yes, you lost money but tomorrow is another day. Did you switch to calls because you assumed the market turned bearish?
For whatever reason always get uncomfortable selling call spreads or even call calendar spreads unless i own the qqq's so normally i just sell puts every three to 5 days and adjust accordingly. Also own a put leap as a hedge. Doing 10 sales is beyond the scope of my tiny brain and the width of the spreads is also scary (to me). if you get assigned the q's and you're just selling one put spread turn around and sell the atm call. I like to think of the q's as an apartment I own and the option sales as rental income...my campaigns will last until I go to my heavenly reward. Chances are the q's will also apprciate in value over time so there is that too
Excellent explanation (always). I'm off to look for a resource that shows me how to calculate the capital required for a given ETF + put credit spread combination so that I know how much capital I need in my "Small" account. Thank you.
Width of the spread gives you capital requirement. $5 wide requires $500. $25 wide requires $2500. $1 wide requires $100
Thanks for the explanation of the strategy! Just wondering with the market moving will the amount of capital required change? And when buying the in the money calls do you go out to December or a certain amount of months?
Scale it down to fit however much capital you have. Instead of 10 contracts do 5 or 4 or 3. Stack up profits and slowly increase bet size as you earn. I'd increase 10% weekly
Don't chase the money, let it come to you
I cannot begin to express how impressed with the time and effort your team expends to assist virtually anyone whom has shown an interest in options trading. Good work and thank you once again for the invaluable advice and guidance!
Except he forgot to mention that these trades work differently in a different market cycle. 25 points wide with 1week expiration is extremely risky. One single overnight gap in price and your entire account is gone!
That depends on what your trading. With the Q's you don't get huge gaps more then maybe $5 or so. Your initial entry is between $10 and $13 otm around a 12 to 14 delta. With the 25 point wide spread it's only there for protection and to make it as if the position was naked while providing some protection. It has to make a huge move to really mess your account up.
How is your account "gone" if you got assigned $24k worth of QQQ? Sounds like you have zero idea of what you're talking about. So what if you get assigned 600 shares of QQQ? Just keep selling calls on it and it will rebound eventually.
@@alextsukanov3536 What about when it falls below your cost basis? Just sell CC and roll if it gets close? In a down turn you might be waiting a year for it to "rebound eventually".
@@alextsukanov3536because if your trading a small account you don’t have the capital to take assignment of 1000 shares. This is a strategy than can go wrong very fast and wipe out all or huge chunk of an account. It’s all good until it’s not.
There is much more to this strategy which is not disclosed here. There are many ways this could go wrong and the adjustments are not discussed.
Дружище, связка отлично работает. Всем советую. Спасибо!
I am so happy that I made productive decisions about my finances that changed my life forever. I am a single mother and I live in Spain, I bought my second house in September and I hope to retire next year at 40 if all goes well. thanks to Louise O'Brien for helping me achieve this
SHE IS ON TELE GRAM.
@ATLouise55 ..that's it .
That’s her user-name
I'm a total beginner, but I've watched multiple videos over the past couple of months internalizing put, calls, covered calls, etc. I'm interested in messing with this strategy in a paper trade account over the rest of this year just to see what I can do with it with no risk to my money. I have two questions:
1. What happens on a short week. E.g. if the expiration must end on a Thurs. because Fri. of the following week is a trading holiday?
2. Why sell at a near .60 cent? What is the significance of .60 cents and the ensuing 25 points below it?
Thanks for this and your other videos. They've made me think about stocks and options in ways I never would have considered. I'm still a very long way off of putting money on anything like this, but it's fun to learn in a PT account.
1) just Sell the Thursday.
2) aim is not 60c but 10~ delta. Therefor theoretically 90% PoP.
Watch out if you do this. Big sudden drop and all required $ is gone. 5%~ drop in QQQ washes away $25k
@@Rockingstarsbest reply ever thank you ! You filled the gaps I had
You need to explain the risk involved in this which is plenty. If there is a huge slide in the QQQ, you would have lost a ton of money on selling the puts. So you sold 10 contracts then end the next week,with high gamma and delta which carries huge risk. 10 contracts at a 25 point spread can equate to loss of 25k on the put side (less than that but i'm not counting premiums). When you reversed and bought your 24k 10x contracts on the call side, you can also lose that theoretically. So you are close to 50k loss (yes, i'm not counting premiums and letting the calls expire worthless)
The thing im struggling to get my head around emotionally is risking ~24k worst case to make 500. I understand that this is a high probability setup but this risk vs reward would play on my mind.
Would be good to see this back tested over 5+ years of data to understand the frequently of drawdown etc to help give confidence in this approach.
Thanks for sharing this strategy
It's the old picking pennies in front of a steamroller strategy. Works great in retrospect when the market went up in a straight line, but when you put money to it, you wipe out your gains on just one loss. Do the math, 500/24000 is 2%, you need to be right 98% of the time just to break even. If you exit at a smaller loss, say the short strike, your winning percent goes down to closer to 50% even in an uptrending market.
@@jcastr57 it won't be quite that bad. Remember 24k is the worst case loss.
I would add a collar specifically a naked put with a cost roughly 1/5th of the initial credit. You lose weekly gains but protect yourself from significant loss to a degree
Ive been burned bad twice doing this. As others have said it works great when the market is on the rise but with such a big gap in risk/reward one bad trade will ruin your progress. Id stick with CC/CSP where there really is not "total loss". Something else that you need to note is those greeks dont follow stats like you think. They dont take into account market news which can and will cause big movement. Once again thats how i got burned twice.
You would not lose the 24k. Worst case you would have it tied up in qqq via assignment until it rebounds. Before that happens you should 'buy to close' on the puts to close the position for maybe a few hundreds in loss. That's made clear in the video
This credit spread strategy is very interesting and I will test it. I just want your confirmation that one can let the contract expire at the the day of expiration without any problems. Or would it be better to close it on the last day just to be on the sage side.
Great video. I will be forever grateful to you, you changed my whole life and I will continue to preach on your behalf for the whole world to hear you saved me from huge financial debt with just a small investment, thank you katrina susan
Wow. I'm a bit perplexed seeing her been mentioned here also Didn’t know she has been good to so many people too this is wonderful, I'm in my fifth trade with her and it has been super.
She is my family's personal broker and also a personal broker in many families I'm United States, she's a licensed broker and a FINRA AGENT in United states.
Really you people know her? I was even thinking that I'm the only one she has helped walk through the fears and falls of trading.
I'm new at this, please how can I reach her?.....
SHE'S MOSTLY ON TELEGRAMS, USING THE USERNAME
(asking seriously)
Can someone please explain how is it not a 100% way to loss all the money?
You trade the "put credit spread" and make your $500/week. Eventually, you will have a lossing trade and switch to the calls strategy, which includes buying the super expensive call options with EOY exp date for the cost of ~$25K.
In the scenario that the market just picked and from this point it will go down for the rest of the year (which is a perfectly logical scenario) -- you are stuck with a worthless $25K call lossing you all the money..
Also, when buying the $25K call, is it always end of year (Dec) or should it be at least X months ahead? what if we are trading on Nov?
What am I getting wrong?
Any large overnight movement will crush your account. Try this in 2022 and then try it again in 2017 and again in 2008. I dont understand why SMB doesn't make a big point of talking option risks and make sure viewers know to cut losses quickly.
A sustained down move that lasts longer than expected will also result in far poorer returns
Don't forget a spread is like having a stop loss incorporated
@@xgarp1872 the spread is 25k wide in this example. Does that make sense?
I'm an aspiring trader who would rather learn from other traders' experience than investing in the market myself, in anticipation of the next bull run. What are your thoughts on copy trading as well? Do individuals actually earn a living? Just trying to get some reassurance. I want to have a healthy portfolio worth at least $850,000. Reliable inputs please.
The strategies are quite rigorous for the regular. As a matter of fact, they are mostly successfully carried out by pros who have had a great deal of skillset/knowledge to pull such trades off.
Having an adviser is the smartest approach in today's market, especially for those nearing retirement. I personally gained over $270K, which highlighted that there's valuable insight the average individual may not be aware of.
Having an investment advisor is the best way to go about the stock market right now. I used to depend on TH-cam videos but it wasn't working. I’ve been in touch with an advisor for a while now, and just last year, I made over 80% capital growth minus dividends.
That's impressive ! I could really use the expertise of one of these advisors. Any chance you could recommend one?
Sharon Marissa Wolfe is the licensed advisor I use. Just search the name. You’d find necessary details to work with to set up an appointment.
I'm confused. If the initial credit spread had a max loss potential of 24,470 (25,000 strike spread, less 530 of income) then how did you arrive at closing near the end of the losing trade at only a $470 loss? If the price of QQQ drops below the Short Strike and continues down towards the long strike then the losses will become huge compared to the income received. Surely you have some sort of stop loss set so that the loss doesn't reach 24,470, a 46x loss?!!! Did I miss that in the video? Just holding and waiting until market close on Friday to buy-to-close the credit spread could be disasterous.
He skates by the fact that the short put ended up less than $1 in-the-money, so it didn't cost much to buy back. Every time you open that put spread, you're risking $1000 for every dollar it moves past the short strike, up to a max loss of almost $25,000. This is the kind of strategy where you can make a lot of money as long as there isn't a black swan event, but the "risk management" consists of nothing more than counting on that black swan not happening... and the longer you do this, the more likely that black swan is.
The risk adjusted reward looks bad, if you have one bad crash in the market you blow 24k, then you’re going to need 45 to 50ish positive trades to make up for it.
Risk management is based on denial and YOLO
If the QQQ never made it back above 370 by December it would have been a max loss
Very interesting videos thanks for the effort and explanation. I am a rookie so just a quick dumb question. Why do we need to buy a call way at the end of year to pair with the 373 Sell Call? It seems that the downside protection of this leg of Buy Call is very limited, so my guess is that only sell Call of 373 may incur unlimited downside risk and thus is just simply too risk and probably won't allowed by the broker? Also, given the winning streaks preceded this losing trade of Aug, wouldn't it make more sense to just recognize this loss and wait for price to revert back to the bullish trend and restart the Put Credit Spread? Many thanks in advance for your reply.
That’s why you buy the long dated call homie, now is limited risk since the long dated call protects the short dated call
I just started with options, so it’s just my humble opinion. With Wheel strategy you are 100% covered. You sell csp - worst case you buy shares and get premium. Or CC - your shares a sold and you got premium. But with this one… we should keep in mind that option can be executed Any point of time , so , if it goes against you - owner of the option can execute you before expiration date. And you are obliged to buy for whole amount, which you don’t have probably. Is it right? Thank you
That’s why you need a margin account. You can’t do this like a normal Call and Option
Thanks for the video. One thing I am struggling to understand. In your case you are lucky that price reverted back from 358 to 373. What would happen if this doesn't happen and price is keep falling till the expiration of Call buy option reached. In that case, your call buy option will become worthless, loosing 24k. Selling Calls at 370 every week during this time is sufficient enough to recover the loss of 24k?
YES, this exactly! This video is a classic cherry-picked example. This strategy works very well when the market is in an up-trend. The 373 strikes got tested but the market rallied back above them within a month so those long call options only lost 1 month of theta decay - no big deal. But you're exactly right, if the market hadn't recovered above 373 before the long call options expired in December, you would have lost every penny of that 24k premium you paid for them (minus credit received for the short calls). Maybe the short call credit would have covered the loss of the long calls, maybe not. It all depends on what the market does. This is an overall bullish strategy and you WILL loose money on it if the market turns bearish. If you had started this strategy in the beginning of 2022, for example, you'd loose a ton on your long calls.
@@skerby2 Hah! I said the same thing in my comment. June, Sep, and Oct of '22 had weeks that lost much more than his worst week here, too, he would've gotten socked with _much_ more than a $400 loss if he had short put spreads open on any of those weeks.
Always ask the question- What is the loss exposure? In this case of QQQ If the price goes below 346 say to 334, you will have a huge problem. Protection is set at 321.
When it comes to investing there are no sure things..
How would you manage this with selling bear call spreads? Would you buy a .20 delta leap put and then sell puts? Trying to understand the inverse thx!
This is really good, I'm brand new to options trading. What I don't seem to understand, what would happen if your calls/puts got assigned? I know you close out the position a few minutes before expiration on Friday, but theoretically, wouldn't it be possible for the person on the other side to exercise before that time?
That what I would wish to know. I think with a small margin account. Without having that much capital. Margin call would then kick in. Meaning you are forced to buy back the option at a negative earning but without forking out 100k+ capital. This is done by the system of the broker.
Credit spreads are very risky and can burn your capital very quickly if you are on the wrong side of the trade. You should use no more than 5% of your portfolio per spread.
5% sounds high. More like 1% - 3%
@SPYspreads, they are risky, but in this context it is sort of a short term risk because if you, after a drop, buy those far in the future calls and sell calls against it, you should be restored eventually as long as the QQQs ultimately bounce to their all time highs, which they always. have.
@@sethfreudberg4750 nothing is guaranteed , but ETFs tend to always go up so call spreads will outperform put spreads. 👌
Seth, I think you answer my question here but if they go pretty far against you, 10 lots can be many thousands in a loss... Do you have a stop loss or just let er go until expiration day? The follow on strategy does offer recoverability but not nearly as much as the initial loss risk...no?
@@jtyourinson8369roll over is best you can do if you are very close from expiration date.
I would start with 1 put credit spread and if the price moves down 0.5%, sell another put credit spread(with lower strikes) for another $0.60 credit. This way, you are averaging the price and reducing your risk. As they say, do not put all your eggs in 1 basket. or I would do a tranche by getting $0.60 credit for every week for the next 10 weeks.
Hey buddy. Above is my personal digits,
Thanks for explaining this stuff! Really helpful! 👌
Wouldn’t work on the call side of the trade since Selling calls and buying further-dated calls with only a 3 dollar price spread loses money due to unmatched deltas; the negative delta on the short calls is greater than the positive delta on the long calls as the underlying price moves up or down, leading to losses.
It’s very very useful video.. thanks for sharing such pro trading tips..
Отличная работа, Олег!
I would like to know your advice, if the ETF suddenly loses money, then what to do. After all, volatility will increase significantly and losses may be the size of the margin, and there will not be enough money to buy 10 contracts. After all, such a risk exists and you need to be prepared for it.
That's what the call buying process is for. Please see my answer to Ianlord77
He shows it took 24K to cover the call calendar reversal strat to trade 10 contracts. So just trade 1 contract and aim for $50/week and you only need maybe 3000 in the account. Once you get to 6000, trade 2 contracts. At 12000, trade 6. Until you get to 24000 and there's your 10 contracts going for $500/week. Maybe it takes you 3 years of grinding it out, but you'll need to make all the mistakes early on, when the account is small. After you're confident, then the size happens quickly.
Risk management? We don' need no steenking risk management!
SMB never explains how to manage a loosing trade. The credit spread can go awfully wrong if not managed properly.
Hey buddy. Above is my personal digits,
Did you watch the whole video? The plan is pretty clearly explained on the call side.
@@cbpuzzle He explains a plan for it only goes against you in a small enough way. A $35 spread can move much further against you than the 96¢ it went in-the-money here. And there's still a lot else that can go wrong that he doesn't mention at all.
@@cbpuzzleif the put spread goes $10 in the money almost the whole $25 k is gone. What you gonna use to call wheel then? PMCC needs another $25K that can go up in smoke just as fast.
Ooph, if this is easy then I'd hate to see difficult. I am struggling to wrap my head around it but I understand that it is necessary to have a strategy for if/when your options play turns against you. I appreciate you showing the downside also instead of just glamorizing the possible wins. I feel the need to take baby steps here until I truly understand.
This is all new to me and I am learning but a little confused.
After the Q’s drop and you buy the contract back, you place the CALL at the same time (that makes sense) but on the 370 buy, the long call 6 months out, why does he do this? He buys the 10 calls for 24k and then he sells it off later for an additional loss.
Why not skip this step? What does this step provide?
Thanks
Doug
Excellent education, I didn’t hear why 25 points away. Is this because of the ATR?
I was surprised after the first call that you sold in August 11 I think, expired worthless and you had a capital gain of about 7X greater than the first loss that you took on the previous weeks put sale. Why wouldn’t you have closed out your synthetic covered call then and resume your put selling strategy?
Because the week closed lower than the previous. So the assumption is that the following week will be lower as well... until it isn't. Which is why there's the 373 line in the sand where the call goes ITM and that's when you switch to bull puts.
Could someone please explain: On the put credit spread example, why are are you buying a put 25 points below the strike price you sold the put at, rather that just buying 2-5 points below instead? (or one or two levels below) In which case you'd need far less capital to take the trade? This would seem to lower your max loss too? What am I missing?
The wide spread is the reason he needed 25K in his account vs. 500.00 per spread.
Great strategy. I'm curious though, why not do this with 0DTE options instead of using the week long expirations
Very good, I start tomorow, I don't undersand anything but I believe your are right.
Did you actually start? It looks like this strategy would have been disastrous to start then.
Are any of these trades considered wash sales? If so wouldn't that further hurt the bottom line especially if you are having these larger losses that you can't technically use to lower your taxable income?
Изучу все, что у тебя есть в телеге, потому что это было полезно
25-Wide credit spread is just crazy, particularly given relatively close to market.
wide spreads are used to simulate a naked position while keeping buying power reasonable. Narrow spreads are binary in nature and develop much slower. A wide spread mimics a naked position in that there is a much wider range of outcomes.
@@robertcurtis1191 I understand that, effectively a naked position. That's a ton of risk for most portfolios; not sure that is for SMB's targeted audience.
@@robertcurtis1191 exactly Robert
That's a matter of capital size ct
It's trading naked options without having Level 4 broker requirements. The long strikes at what calculates to 9 to 10% OTM from the Friday close are basically 10% stop protection or friction on the trade. That leaves a 90% efficiency, but without having Level 4. Keep in mind that some brokers don't even have Level 4. They max at L3.
In your example of the first loss, the QQQ was at 372.04, but what if it was even lower like 365, then what can you do? Thanks
Basically you are kinda fucked…. Maybe have a stop loss at certain point but only near the expiry.
But in worst case scenario you have to buy the shares at strike price(needs big capital) and wait for it to bounce back. Than you can sell and recover your money.
did you watch the entire video? you close your Put Credit Spread and buy calls expiring at end of the year. Each week you will sell calls expiring in one week. Then when the stock reaches back your initial Put Credit Spread amount you resume the PCS strategy
@@BoundMusic Yeah but if it drops too far past your short put it may cost so much to close that you can no longer afford the long calendar call spread. And if you can, there's no saying during a severe downturn it will ever reach high enough before the long call expiration, you could lose the entire value of the call. This is definitely a "fair weather" strategy only.
@@BoundMusic Run the numbers. If Qs break your long put your capital is effectively devoted to this trade and you will could be in "recovery mode" for a long long time.
I would try to roll out the spread first before buying any calls.
I like this video and I know this is a stable strategy to gain profit. Keep doing more videos. Thanks.
Hey buddy. Above is my personal digits,
Get in touch
In my opinion its a good strategy but 25k its not a small account. 25k i will sell put on amd or amzn make some money every month. I prefer 45 days away and closed 2 weeks before expire. Also 25k u can do iron comdor way otm money and make same 500
How do you hedge the iron condor, with a spread on each side?
@@feedyourhead731 You manage the trade by moving the call or the put spread up or down depending where the market gets closer to.
So we're risking $25k to earn $500. Got it.
How’s your consistency going bud?
Good job explaining!
Glad it was helpful!
this is a great resource, thank you
These are considered Margin account transactions and require a margin deposit before a broker dealer will allow a customer to trade this strategy. You will need more capital and hope you don't get assigned on the position, meaning if the QQQ's in this example drop in price, the customer will be required to buy the stock at the short leg of the option strike price. Although a good strategy for someone that has more experience in trading options and more capital. This is not a win - win trading strategy. Not so simple to make $500 a week. Take it from a person that has been trading options for almost 40 years.
What he doesn't emphasize is that it's a Bull put campaign. So he's STARTING on a breakout with gaps left behind and an inflationary expectation to keep going higher. The campaign can stop and turn bearish for apparently a 6 month expectation as the call calendar spread he reverses with implies. It's easy in a bull run. Once the campaign turns bearish though...
What would be the downside of only doing a 5 point spread vs the 25 point spread and just increasing the amount of contracts to hit the target weekly earnings goal? If I understand correctly, to open a trade with a 5 point spread with the contracts adjusted to hit the weekly earnings goal would require significantly less capital, only about 25%-30% of the capital needed to open the 25 point spread. Is the difference on the call side of the trade? I don’t know how to backest historical options to see how they would have panned out.
Cap req is equal if you do
A) 1 25$ spread
B) 5 5$ spreads
Both require $2500
$25 spread has better PoP and BE point than $5 spread. All else equal.
You are correct. You could start at one spread with a small account and go from there. A 25K account is not a small account for most people.
Brother, I dont think you understand the definition of "small account" smh
🤣🤣🤣🤣🤣
25k in the world of trading is small
@@thedalehayes3 25k on a single trade, if using 5% of your account per trade is a $500k account. Sorry, but that is in no way a "small account"
It’s like someone with a fishing pole trying to catch whales in the oceans.
Some of us shouldn’t be trading options/stocks. For most us, that money should be used toward education or getting a better paying job.
I said the same thing in a comment...that a "small" account Is $2K, or maybe $5K. For someone to believe that $25K is a small account...I guess maybe to a trading firm like that or a millionaire it is...but not to some of us. However, my comment somehow was deleted, because I don't see it anywhere.
Связка топовая. Спасибо, бро!
When choosing short strike, what delta are you targeting?
Relatively small... If you risk 25000 only (as it is in your example), then probably you need just around 500 000 account, right?
You aren’t risking 25k, that’s just how much capital is required, say you risk closer to 500 a trade, that would be a 50k account (if you follow 1%risk) or look to only make 50 a week, and then you only need a 5k account
@@GamingOfPotus you mean you put SL at 1150?
Your broker will ask 25000 of margin anyway.
@@alexanderpetrenko79 i meant more in the example they showed 10 contract, that required 25k capital, so if you trade 1 contract you only need 2500
Short Iron Condors. Market ETF's, 16 Deltas 30-45 DTE. My opinion.
When the Bull Put strategy needs to revert to the Call side, is the date of December (end of year) used due to it being: 1) end of year OR 2) Four months out?
Thanks, I'm running this in sim. Do we let the puts expire worthless, or close them at 10% of cost like the $1k / week video?
how far out is way out? In this example you went from Aug to Dec, 4 months is good?
Same question here
Risk management is key. You don't want to blow up your account in drastic market reversals.
Разобраться без такой помощи непросто.
Хороооооош!) обещал бесплатную связку - дал ее. Кручу
@sethfreudberg What do you do in a long down market where the QQQ's drop so low that there is no premium available at the 373 level? Especially if the downtrend last through December, and the Dec 370 calls you own become worthless. THANKS!
Don't trade it is the answer. Find another stock or ETF that has a decent risk to reward ratio.
You get f***ed! Your long calls expire worthless and you loose the $24k you paid for them. This strategy works just fine in a strong up-trending market. But anything like 2022 and you're going to loose a ton of money!
You take a loss.
Thanks a lot! Very professional video
One thing I don't really understand is are you closing all trades before expiration? If you don't then you don't have any capital to you use to make another trade on the same day. If you do, then you would be spending money to close out the trades. So, if you place a trade on Friday you wouldn't be able to place your next trade until next Monday.
You can enter the orders like a roll... sell today's and buy next friday's in a single order, and just pay or receive the cost difference. Although nothing guarantees your order is going to get filled, that could make things difficult.
I am wondering if this a seasonal tactic as I feel that right now it is too risky to do this. I am wondering about the prerequisites for these trades. Where should the Qs be in relation to the 21 SMA?
I've tried to learn this stuff but I just have too many questions. I'll need to take a real live class for something like this to be confident enough to invest this way.
Some of yall are here complaining 25k is a lot cauee yall looking for easy money instead of trying to learn...
very insightful matter you have said.
How did you arrive at 3 months for the campaign? Early June to the end of December is 7 months.
@SMB Capital I think if you added a time decay on puts v calls this would have been perfect. Excellent content.
I think that's inherent in the content.
@@sethfreudberg4750 hence my subtlety directed towards the readers, and my genuine compliment to the content creator 👍🏼
Small options account is at minimum 100000 dollars considering this video as you are taking a CoVAR of 25000 per trade and if this is small account it means this risk can be max 20% of total account which means your account size should be 25000 X 5 i.e. 125000 circa 100000. Else down size the trade to 1 contract and use QQQ mini means 100 time downsize i.e $1000 account but you will be making $5 a week
The wheel meets PMCC... niiice.
Get in touch
How to avoid early assignment on the short calls needing to get a sell close on the long calls. One day before expiration?
This would need to be emphasized indeed. Imo you need to monitor the market all along, not just before expiration (even though assignement more likely then because automated by broker), so as to close the losing position before being assigned and avoid the risk of your other securities/contracts being liquidated to make up margin for the underlying
Good question
Yup. Smarter to do this on something with european-style options, like SPX.
If you trade this strategy with a $25,000 account you could get wiped out by one bad day in the market.
If your account is small indeed, it is not possible to let the option expires on Friday and put on similar trade which require similar capital at the same time, right? One will need to close the expiring trade.
Could we apply this strategy to the SPX? it operates daily, why wait a week with QQQ?
Hey buddy. Above is my personal digits,
Hey buddy. Above is my personal digits,
Sure but this is literally meant to be turning on the computer ONCE Every FRIDAY at 3pm Eastern, closing and opening trades, and turning the computer off at 4pm. Trading SPX 0DTE requires more time and analysis. Doing something for 1 hour every week is different than continually coming back to a chart every 15 minutes every day 5 days a week.
You can use the same strategy with QQQ on 2 or 3 day contracts as well.
How do you determine which long call to buy once you shift to the calls?
Hey buddy. Above is my personal digits,
I really wish they could discuss less risky strategies such as the butterfly and modified butterfly strategies.
How much capital do you need to start this ?
Do you need to own the shares off qqq or can you start. Trading put
Very informative training
I understand this a lot better now. Here is the best way achieve a reliable options income stream:
1. Start a TH-cam channel and become an options furu..
2. With a subscription-only Discord server.
This way, you'll have some cash flow to help offset your options trading losses.