Hey everyone. Thank you for watching! 🙌 You can get the Options strike price calculator in the video here. docs.google.com/spreadsheets/d/1JpJf71pgEuc0oz6zsi7sBW6U9IkFmWg8ImPud7vP470/edit?usp=sharing Once the spreadsheet is open, go "File" and choose either "Make a Copy" or "Download" to starting using it yourself. 👍
Excellent video! : ) Would be nice to explain your strategy if you get assigned :) because those 2 options would have required a ton of money :) Things are fun when you sell put options and it never reaches your stike price but what if ? Maybe a part 2 of this video. I love it :)
That's a great idea. I had considered expanding on what to do in the unlikely event that a option expires in the money. This video was already getting too long so I decided to explain that topic in a follow up future video. 🙂 In the case my option gets assigned, I would probably sell a covered call option against my new long position. The strike price will be higher than the that of the original Put I sold. If my new call option gets called away I would start from the beginning and sell puts again. Rinse and repeat. ✌ Some people call this the wheel strategy. It's also known as the triple income because you make money 3 times throughout the cycle: first from the put option premium, then from the call option premium, and finally from buying the underlying stock low and selling high. That's the basic idea anyway. I will talk about all the details in a sequel to this video. :)
Great video! You explain concepts in a easy to understand way. Would love to see content on credit spreads and strangles and how you pick your options strategies. Also, would love to see an IBKR set up tutorial. I have been hesitant to switch but I know they have the cheapest fees.
Thank you for the feedback and idea suggestions. I pick my options primarily based on low risk, sustainable strategies that take advantage of time decay. I'll certainly make mistakes along the way, but I hope to fine tune and improve my methods over time. I will certainly make videos about strangles and IBKR set up tutorial in the future. For options trading I've been quite happy with IB so far. 🙂
I think the commission for trading options is around $10 at Questrade so it's kind of expensive. Maybe it can work out if you have high volumes, but I wouldn't recommend it. As far as I know IB has the lowest cost for options trading. 🙂
Are you referring to the segment starting from 14:31? It's an activity statement found under "Performance & Reports" -> "Statements" after logging into IBKR's web portal.
I usually use margin. So for these 2 trades in the video, the assignment value would have been $60,000 if the trades had gone south. The maintenance margin requirement for these options is 15%, so I used up $9,000 of available liquidity from my account. I like to maintain over $100,000 of excess liquidity as a buffer, just in case of a market correction. Selling cash-secured put options would be lower risk. I have considered it before, but I prefer the benefits of leverage when interest rates are low, lol. 😅 IB has a useful stress test tool that I sometimes use. It reveals how vulnerable my portfolio is, and how my margin requirements would be affected during a broad market crash.
You'll have to excuse my ignorance but I don't get it. You choose a good stock that you expect the price to go up but sell a put option (basically saying you think the price will go down) and as long as the price does not go below the strike price then you automatically make money (minus any commissions of course)? It sounds almost too easy. Please help me understand the concept.
You have the right idea. You start with a stock or ETF that you believe will move higher in price. When you sell a put option you are betting that the underlying stock will either move sideways or up. If that happens the price of the option will go down, which is what you want. An option seller is essentially shorting the option. For example, a stock is trading at $100/share today. You can sell a put option with a strike of $90 expiring next month. In this situation you would prefer the stock to move either higher, or stay around $100. As long as it doesn't fall below $90, you have no risk of the option being exercised. Assuming the stock price stays above $90/share and doesn't change much, the option's price will deteriorate every day as it gets closer to expiration, until its value drops to $0 and the option expires worthless. The stock could be worth $95 or $120 at this time. The risk is overpaying for a stock if the stock price drops a lot. Because if the stock falls to $80 when the option expires, then you will essentially have to buy the stock at the strike price of $90/share. Hope that makes sense. Let me know if I can help clarify anything else. 🙂
Thanks for the video. I'm still trying to wrap my head around selling puts. You mentioned that you'd want to be "bullish" if you are selling puts but in the 2 stocks you demonstrated, would you not have made more money buying the calls instead of selling the puts?
Thanks for the question Michael. You're correct. In the examples I would have made more money buying call options rather than selling put options. With either strategy you should have a bullish sentiment, or at least a non-bearish outlook for the underlying stocks. Here are the differences between the two. Buying a call option has a smaller chance of success. In order to make a profit the option needs to expire in the money which usually doesn't happen. But when the trade is successful it's usually a huge win. Selling a put option has a higher chance to be profitable. But the gains are smaller by comparison. Rose Han made a great video recently explaining how buying options is more of a gamble, and selling options create a more consistent and reliable profits. She did some research into this. This link will take you to the short segment of the video where you can see the charts for a clearer visual comparison. th-cam.com/video/VlXwLcW9MNA/w-d-xo.html Here's what's funny though. Had I bought a call option on Mastercard, it's true that I would have probably made more money as the stock headed higher over the 42 day duration. It increased 6% in just 6 weeks. That was very hard to see coming. However if my option were to expire this week instead of last week, then all of my call options gains would have been wiped out in a single day as MA's stock price is down 6% so far today, haha. 😅 Of course today's major correction is an outlier and doesn't happen very often. But it shows how fickle the market can be, especially for individual stocks.
The problem with the option being so far out of the money is that you get a very little return. In the MA example you get $101, but have to have $31,000 held in your account. Which would be 0.33% in 42 days, which would be 2.8% annually. (less than a t-bill). To make decent money you need to sell closer and learn option management. (rolling techniques).
When you sell an option, there should always be a buyer on the other side. Theoretically the buyer can exercise their option at any time, although they would only benefit if they exercise it when the option is in the money. If the owner of the option forgets to exercise then that's their loss, lol. If you sell a put option, you can also buy it back to close your position and basically get out of the contract. Most options expire out of the money, but if you're worried of any sudden stock movements that could impact your options, you could buy to close any open options you've previously sold. This is true for both puts and calls.🙂
Hey everyone. Thank you for watching! 🙌
You can get the Options strike price calculator in the video here. docs.google.com/spreadsheets/d/1JpJf71pgEuc0oz6zsi7sBW6U9IkFmWg8ImPud7vP470/edit?usp=sharing
Once the spreadsheet is open, go "File" and choose either "Make a Copy" or "Download" to starting using it yourself. 👍
Excellent video! : )
Would be nice to explain your strategy if you get assigned :) because those 2 options would have required a ton of money :)
Things are fun when you sell put options and it never reaches your stike price but what if ? Maybe a part 2 of this video. I love it :)
That's a great idea. I had considered expanding on what to do in the unlikely event that a option expires in the money.
This video was already getting too long so I decided to explain that topic in a follow up future video. 🙂 In the case my option gets assigned, I would probably sell a covered call option against my new long position. The strike price will be higher than the that of the original Put I sold. If my new call option gets called away I would start from the beginning and sell puts again. Rinse and repeat. ✌
Some people call this the wheel strategy. It's also known as the triple income because you make money 3 times throughout the cycle: first from the put option premium, then from the call option premium, and finally from buying the underlying stock low and selling high.
That's the basic idea anyway. I will talk about all the details in a sequel to this video. :)
Thanks for sharing Liquid! Very helpful!
Glad it was helpful Jenny. I hope you're doing well.
Thanks for watching.
@@Freedomthirtyfiveblog I'm trying absorb all the knowledge before dipping my toes into options. still scared lol
Men there’s not many tutorial or people showing how to trade options with ibkr on youtube. Thanks 🙏
My pleasure Mathieu. 👍 I appreciate the comment and support.
Great video! You explain concepts in a easy to understand way. Would love to see content on credit spreads and strangles and how you pick your options strategies. Also, would love to see an IBKR set up tutorial. I have been hesitant to switch but I know they have the cheapest fees.
Thank you for the feedback and idea suggestions. I pick my options primarily based on low risk, sustainable strategies that take advantage of time decay. I'll certainly make mistakes along the way, but I hope to fine tune and improve my methods over time. I will certainly make videos about strangles and IBKR set up tutorial in the future. For options trading I've been quite happy with IB so far. 🙂
Excellent video!
Thank you. 🙂 I plan to create more videos on options soon.
Thanks buddy, I have Questrade would this be a good platform for options?
I think the commission for trading options is around $10 at Questrade so it's kind of expensive. Maybe it can work out if you have high volumes, but I wouldn't recommend it. As far as I know IB has the lowest cost for options trading. 🙂
Thanks for this, very helpful. How do you get the nice layout in IB. Equities and then Equity and Index Options by currency
Are you referring to the segment starting from 14:31? It's an activity statement found under "Performance & Reports" -> "Statements" after logging into IBKR's web portal.
@@Freedomthirtyfiveblog Great! Thank you!
Nice clear tutorial! Are these cash-secured, or do you use margin?
I usually use margin. So for these 2 trades in the video, the assignment value would have been $60,000 if the trades had gone south. The maintenance margin requirement for these options is 15%, so I used up $9,000 of available liquidity from my account. I like to maintain over $100,000 of excess liquidity as a buffer, just in case of a market correction.
Selling cash-secured put options would be lower risk. I have considered it before, but I prefer the benefits of leverage when interest rates are low, lol. 😅
IB has a useful stress test tool that I sometimes use. It reveals how vulnerable my portfolio is, and how my margin requirements would be affected during a broad market crash.
You'll have to excuse my ignorance but I don't get it. You choose a good stock that you expect the price to go up but sell a put option (basically saying you think the price will go down) and as long as the price does not go below the strike price then you automatically make money (minus any commissions of course)? It sounds almost too easy. Please help me understand the concept.
You have the right idea. You start with a stock or ETF that you believe will move higher in price. When you sell a put option you are betting that the underlying stock will either move sideways or up. If that happens the price of the option will go down, which is what you want. An option seller is essentially shorting the option.
For example, a stock is trading at $100/share today. You can sell a put option with a strike of $90 expiring next month. In this situation you would prefer the stock to move either higher, or stay around $100. As long as it doesn't fall below $90, you have no risk of the option being exercised. Assuming the stock price stays above $90/share and doesn't change much, the option's price will deteriorate every day as it gets closer to expiration, until its value drops to $0 and the option expires worthless. The stock could be worth $95 or $120 at this time.
The risk is overpaying for a stock if the stock price drops a lot. Because if the stock falls to $80 when the option expires, then you will essentially have to buy the stock at the strike price of $90/share.
Hope that makes sense. Let me know if I can help clarify anything else. 🙂
Thanks for the video. I'm still trying to wrap my head around selling puts. You mentioned that you'd want to be "bullish" if you are selling puts but in the 2 stocks you demonstrated, would you not have made more money buying the calls instead of selling the puts?
Thanks for the question Michael.
You're correct. In the examples I would have made more money buying call options rather than selling put options.
With either strategy you should have a bullish sentiment, or at least a non-bearish outlook for the underlying stocks.
Here are the differences between the two.
Buying a call option has a smaller chance of success. In order to make a profit the option needs to expire in the money which usually doesn't happen. But when the trade is successful it's usually a huge win.
Selling a put option has a higher chance to be profitable. But the gains are smaller by comparison.
Rose Han made a great video recently explaining how buying options is more of a gamble, and selling options create a more consistent and reliable profits. She did some research into this.
This link will take you to the short segment of the video where you can see the charts for a clearer visual comparison. th-cam.com/video/VlXwLcW9MNA/w-d-xo.html
Here's what's funny though. Had I bought a call option on Mastercard, it's true that I would have probably made more money as the stock headed higher over the 42 day duration. It increased 6% in just 6 weeks. That was very hard to see coming.
However if my option were to expire this week instead of last week, then all of my call options gains would have been wiped out in a single day as MA's stock price is down 6% so far today, haha. 😅
Of course today's major correction is an outlier and doesn't happen very often. But it shows how fickle the market can be, especially for individual stocks.
The problem with the option being so far out of the money is that you get a very little return. In the MA example you get $101, but have to have $31,000 held in your account. Which would be 0.33% in 42 days, which would be 2.8% annually. (less than a t-bill). To make decent money you need to sell closer and learn option management. (rolling techniques).
What happens if nobody buys the put option before it expires?
When you sell an option, there should always be a buyer on the other side. Theoretically the buyer can exercise their option at any time, although they would only benefit if they exercise it when the option is in the money. If the owner of the option forgets to exercise then that's their loss, lol.
If you sell a put option, you can also buy it back to close your position and basically get out of the contract. Most options expire out of the money, but if you're worried of any sudden stock movements that could impact your options, you could buy to close any open options you've previously sold. This is true for both puts and calls.🙂