A comprehensive and well-structured guide that covers all the bases of options trading. It's packed with insightful tips and strategies that are crucial for anyone looking to navigate the options market successfully. The clarity and depth of information provided here are truly impressive. It's a valuable addition to any trader's learning toolkit.
Seth stands out as the finest I've encountered. It communicates with the audience in a clear and straightforward manner, completely free of any complicated terminology or technical lingo. PatrickTyler, you also did well with your comment..
If you're worried about a stock you own tanking, but still hopeful it might go up, this is like having a safety net. You buy a put option to protect against losses and sell a call option to pay for the put.
This video can be summarized quickly as such: when you do one day options you have an extreme amount of theta decay with long calls.. on the other hand when you sell puts you do not suffer from theta decay..
Implied volitility usually goes down when the price of a stock goes up. So what I do for daily and weekly trading is SETUP A 9 MONTH POOR MAN COVER CALL POISITON, Buy a leap call in the money and with atleast 9 months of time on it, you sell a short call out of the money enough to allow you long call room to go up between 4 to 6 weeks out. If I.V. drops you short call will go up alot faster then the long leap goes down. You exit the position when you make your goals, usually around %10-%20 return. This can happen in a day or it might take 3 months.
I put in 20k into options last year and flipped into six figures within a few months and still going. I've always been an advocate of trading because it has been rather rewarding. I hope to attain financial freedom soon. One more thing, great content brother.
Greater Fool Theory. Who the heck is holding a 0dte through to expiration lol. In any of those “losses” those call options are green if the price move happens quickly and early. Sell it when price moves
For new traders seeking mentorship, sir Ronal’ guidance and supportive style creates an optimal learning environment to foster growth and success in trading. what a man with people’s interest.
On the scenario given, if you buy Call options At-The-Money (50 Delta) it would have worked out and you would have made money. Granted the options will cost more, so you don't buy as many contracts; but buying out of the money options rarely works out even if you're right on its direction. The average daily range of the SPY is only 4.18 points. Buying an out of the money options greater than that is a fools errand.
Yeah, I thought the same thing as soon as he said "20 Delta". Cherry-picked backtest set up to fail in order to make the put credit spread look better than it actually is. Comparing apples to Volkswagens.
@@bayesian2007because he had an agenda to make the spreads look better than they are. Even a total noob would stop buying those 20 Delta calls after about day three and reassess the strategy
It is good when we review this put credit spread strategy based on the backtesting. However, I have to raise my two question, 1) does call credit spread work good on the same situation? 2) why you short 40 Delta and but 2 more wide(wings) put?
But the SPY 506C calls bought on the first day would have gone 5 or 6 x, at least 3.00 when it hit over $508.19, if you closed them out mid day, why would you not close them out midday? .59 to at least 3.00.
Comparing stocks options to futures is nuts if you ask me haha. Over the years, I've been part of numerous investment programs, sifting through a barrage of information. Yet, none comes close to the sheer clarity, depth, and precision of Lora's instructions and insights. It's akin to finding a diamond in the dirt.
Nobody would have kept those Call options until expiry. As the SPY was rising their value would have risen a lot more and you could sell for a lot more profit than those Put spreads.
Yeah, and most noob traders know exactly where the top for the day is and sell accordingly. And they know ahead time the market will go up for the day, at some point.
@@cagirl2220 True, and it was overlooked in the video. As others have noted, April 2024 would've been tragic with the technique. I personally prefer atm spreads, or itm if I'm looking for leverage, though the market can be risky no matter what strategy is used.
@@cagirl2220 True the single daily loss would be more than simply losing on a single call option. However, I think the goal of the video is to show that if you have conviction of a direction the market will go, Put credit spreads could be a great alternative to simply buying.
Can you explain how you made money the two profitable days in your Call examples - i.e. did the Call expire in the money and the broker just credits your account or did you have to sell the Calls just before closing to realize the profit? I've always assumed a Call expiring in the money just granted the right to buy shares at the strike price and nothing more. Thanks
$6 is a big move for SPY, and those contracts were at 220% ($650) profit with the extra gamma pump in the afternoon that offsets the theta on zero days. The price hung up there for 50 minutes. Why did they not get sold somewhere in the 200% profit range, and left to expire as a losing trade?
Any time you buy options you really need to pay attention to the options quotes for that strike price. Typically a zero dte option you want to capture a move through market structure. You have to know exactly what you are doing 💯.
Does anyone who knows what they're doing repeatedly buy 0dte 20 Delta calls? That entire backtest was ridiculous, because mathematically that strategy was total dog shit from the beginning.
What is the probability of this long positive streak to happen again? With the puts credit spread strategy you mentioned, one loss would've easily wipe out 3 wins. No value added in the regular volatile market environment we usually trade in.
Wait for 30-60 minutes after market open to apply this strategy using the low of the day at the time as the target for the 5 puts you sell. I'm going to research the number of times the SPY closes lower than the initial move down (if it does) or the open if it is is the low after the market opens to calculate a win rate.
Here’s a very important piece that’s being left out. If you sell credit spreads with a 40 delta, only 2 points wide, you’re going to open the trade immediately down 200-300% (because your downside protection aka your long position, is so close to your strike price). Trust me, I’ve been burned plenty of times because of this. Solution? Open 20-25 wide and you’ll open the trade at break even or down only -12% for example and let theta decay work in your favor. The ride throughout the day will be so much smoother and more forgiving. It’s not a sexy return and requires a bit more capital (since the wings are wider), but will yield far more consistent results. If you do a 2 point wide SPY credit spread position however, I guarantee you’ll be stopped out of almost every trade.
Also to sell 5 contracts at where spy is today June 10th is 533 aka you need 266,500 dollars to write 5 put contracts as cashed secured and if you buy the insurance AKA buying a call 2 point below you still come out with a net credit but the most important factor in this whole video that this is great in a bull market. Guess what happens to your trade if it drops and drops and drops. Well you will consistently loose money. Everything thinks they’re a genius in a bull market. You’re probably better off just selling puts and if assigned then sell calls and just being an option seller not a buyer. If spy drops and you puts are excessive than you got them at a cheaper price and you might just have to hold on till they recovered with it a downwards trending market overtime till the price returns to where you can sell call again above your cost basis.
@@pauliusmatiusovas4102 your comment about being 200+% down makes no sense. If you open the trade at the mid price (and not the ask) you wont be down anything. You could immediately sell the trade back to the market at the mid price. Your idea of trading 25 wide will have you in a much riskier trade since any unexpected market move against you has your long option much further away leading to a greater loss. The whole point of a narrow spread is controlling your risk. Another point on narrow spreads that most people don’t understand is they are more efficient. Your profit is higher trading 5 contracts at a 2 point spread than 1 contract at a 10 point spread. Look carefully at a live option chain and that basic math will be obvious and is the main reason to trade narrow spreads.
I've more than 25 years of experience in trading options, and this is actually a good video if you are first time trading options but said that the video is missing explaining the concept of expected daily movement and if you have no idea of those, well you should not trade options
@@joshuademmers4947 Sure, it's surelly a good strategy , specially on boring stocks with low volatility , but don't forget that sometimes a stock can goes down a lot and all the calls you sold may not be enough to have a positive return, fo example Intel or Hello Fresh in then last months , here patience is the key. Another problem is cost specially if the call get exercised, you need a very cost effective brookers
I need to see markets open and watch this to analyze it. I dont have records from Friday. But just as an ex, you would buy a -40 delta put option at open? And would close with higher premium? Even doe we closed green?
With current market volatility, I've noticed that if you have a good entry and start trimming after your option increases at 30% and all out by 50% you can stay consistently profitable day after day. Hold and hope doesn't pay. Small base hits everyday PAY.
This is really great content. Very grateful. Noobie question: when you buy back the ITM puts, how does that work? Do you only buy back the short position, or do you close out both legs of the trade?
Both. Your short option could cost you more than the premium you collected, and the long option may still have some value left. If stock drops deep and both go ITM, then your max loss will be realized by selling both. If you do not buy the long one, you are leaving money on the table.
@@pauliusmatiusovas4102 Extremely helpful response, thanks! Now what happens if both are ITM 5 mins before close? In that case, I do nothing and let the brokerage net them out?
@@pauliusmatiusovas4102 If the short is ITM, and the long is OTM, couldn't the broker just debit me the different between the current price and the short's strike price automatically? I'm looking at a paper trade right now where closing the short position costs more than the difference between the current price and the strike price. Granted there's still extrinsic value remaining, but in theory, I could be assigned at any moment, and I want to be confident my loss won't be astonishingly large, b/c I'm doing a Call Credit Spread on QQQ.
Good, but not complete picture. As others have pointed out, to get the full perspective on this trade you have to look at all 3 pillars of: risk, reward, and probability. As Seth shows, OTM credit put spreads have very nice probability, where you win by keeping your opening credit, because you can win going up, sideway, or a tiny bit down. BUT, the risk is higher if it goes down a lot, and you lose more than you opened with. So, look at the whole picture.
Put credit spread half spy half qqq....well that wont work well lol 40 delta credit spread versus 20 delta calls. I have a feeling the 40 delta calls would have turned out way different here. Probably flipping the script.
Yeah, doing a month to month analysis, would highlight the more-often-than-not-true fact that there are no simple techniques that work in every market, every day. Elite trading skill might overcome this shortfall, with skilled use of techinque(s), but results may vary.
I've been trying to watch videos and learn about call options and spreads. I followed along with this video on yesterdays market, when trying to sell a put option, it would not allow me to since I did not have enough capital in my account. You say that you would estimate a 2000$ account, which is almost exactly what I have, it seems to me this is a little misleading or am I doing something wrong. Do I have to do this as a specific put option spread or can I open the sell put and buy put seperately?
The concept of a put debit spread is explained very well but I don't get the max loss calculation at 11:49. The difference between the two strike prices = 20 (500 - 480). Each contract represents 100 shares. Multiplying 20 x 100 = 2,000 potential loss for each spread, and 2,000 x 5 spreads = 10,000. In that case, isn't the max loss = 10,000 - 300 premium collected = 9,700 max loss?
You are absolutely right, and your calculations are correct. It is simply a typo in the slide presented. It should be showing the 500 and 498 strikes. 2 x 100 = 200 x 5 = 1000 max loss -- less the credit received of 300.
If you buy a call for only a week you have to remember that every day it’s going to lose value with time. Time eats up profit if your doing a one week call
This happened to me with Nvidia and SPY because it was too close to expiration because I was trying to risk less money and buy cheaper contracts. That doesn’t work
Fairly easy mistake to make, but also an easy one to avoid by taking a bit more time to understand the mechanics of options. The second he said "20 Delta" every single experienced options trader rolled their eyes because his examples were selected to fail. No serious options trader expects 0dte 20 Delta calls to pay
@@aaron6806I am not even a pro at options but can see that the strategy to buy 0dte options with 20 delta makes 0 sense… why would he give this example? I don’t think even newbies take this route
Quick question on these. With these being 0 DTE, most of the short put spreads in your example expire except for 2 of them (May 13 and May 16). How would this work with the 25k requirement for day trading? If I sold the vertical on may 13th and had to buy it back before market close the same day (0DTE), wouldn't this be considered a day trade?
What brokerage can you sell put contracts on the spy with a $1000, do you have to have backing on that sale of puts aside from buying the put contracts? Maybe you have a different options level and enough $ too cover the put sale. Can you elaborate @SMB. I've lost my @$$ selling nakedness puts.
Buying calls when the IV is high as the stock drops quickly. Hmm... Usually better to buy puts at the top, when the IV tends to be on the low side, but buying puts in a bull market can be very risky.
If you buy calls when the stock is going down you're going to be in a bad trade. That's probably the opposite of what you want to do. Never ever bet against the trend.
In the stock market you can sell something first and then buy it later vs the usual buy it first and sell it later. Think of a business that sells you something but it ends up on back order. They've sold it to you first but then they actually have to buy/make later. To make a profit you always want to buy it at lower price and sell it at a higher price - no matter which order you do the buying or selling.
Good question because there is risks of assignment after hours. Knowing this proves you are getting advanced with options. Unless the market is going very much in your favor then stay. Otherwise if you are not sure then close the trade early before the bell. Best advice for options
Unless you buy an ATM or ITM option, short-dated OTM options are best for scalping. Timing is everything and you have to get in before the breakout starts and sell into momentum before IV tanks again. You're essentially trading vol in that instance rather than price.
Using a cash account, you have unlimited day trades. You're limited to the cash you have on hand and once it is used, you have to wait for that cash to settle. I use Webull and my cash settles overnight and is available the next day.
With a cash account you and day trade as long as you have money available. The only difference is with a cash account once you spend it on a buy and sell it, you can’t use that money again the same day like you can with a margin account.
Great video Seth, once again SMB is creating great content you can learn from. I get the main thesis of buying at the open and let it run till the close. I think this would apply to those traders that don't watch the market the entire day and this would definitely work out in their favor if they wanted to play 0 dte options. The only flaw I saw was when you adjusted those 2 days on the credit spreads and did not let them go till the EOD. That would also apply to the calls which in your first example proves the point, that if you are actually watching your trade and using proper risk management you would have never let that call go to 0 and more active traders would actually use setups that could take advantage of these 0 dte options and not just buy at the open and let it run to the close, whether it's a quick scalp or a day trade, there are always lots of opportunities to be had if you find a very active stock with very liquid options. I would definitely not recommend using 0 dte options unless you are a very active trader or can use credit/debit spreads or covered calls in a more defined environment as Seth has given such a great example of.
And to be completely transparent, I actually went back in TOS and took the trades I would have potentially taken on these days and my trades would have made out better by just a bit with more stress that scalping and day trading can bring, lol.
Who on God's green earth buys a 0dte option and just walks away hoping it works out? Oh, I know, SMB Capital, because somehow they test trades that literally nobody other than a complete moron would take, then make a video showing how dumb the trades are, and how they can "fix" it for you.
Why would you buy calls that are so far out of the money? Buy calls that are $1-2 out of the money then when they come into the money they explode in value
Buying options at beginning of day when premium is the highest doesn’t make sense. Need to buy options based on technical set up during day and not based on 20 delta
Comparing the performance of 20 Delta Calls with 40 Delta Put Credit Spread is such an uneven story that it seems this example was rigged up for the contrast. Lesser quantities of 70 or 80 Delta Calls would fail way lesser obviously than the 20 Delta ones. So, the long only options traders better stick with in the money calls and go for Bull Call credit spreads to insure against the probable price pullbacks to a decent extent.
Why did he buy 20 deltas? There is something missing in the explanation. What is magical about choosing 20 deltas? The one big black hole in most option videos are clear explanations of how to choose an option based on multiple factors delta, IV (avoiding crunch) volume open interest. That being said it’s still helpful to watch the put option strategy. I want to run this in a swing situation.
Buying the 20 deltas with 0 DTE is a poor strategy. Buying a higher delta has a higher probability of success, but those options are going to cost you more money.
@@TheOriginalPickleRick Yes it would, because you would be buying closer to the money, thus reducing the amount that the SPY has to move in order to make the option profitable.
Not really. You would have ended up losing way more money. The closer to the underlying price you are, the more premium you have to pay and therefore the farther away is the breakeven price. Check for yourself. Go back to video at 5:07 for May 1, the 40 delta strike price is 503 and premium to pay is 1.48, totaling 1.48 x 100 x 5 = 740$. So, your loss would be 740$ rather the 295$ of 20 delta. On May 2nd, 40 delta strike is 504 and call price is 1.10 but even though this option is ITM since SPY close at 505.02, you are still losing money because your breakeven price is higher at 505.10!
So you are really comparing 40 delta credit spreads to 20 delta call options? That’s disingenuous comparison. You should have compared them with the same deltas instead of.
People trying to buy the cheap calls too far out of the money lose. You have to buy in the money or within a few dollars to in the money. Also odte aren't meant to be held the whole day bc of decay. I get in and scale out then leave one or two runners. I have never had the stock go up and my options be down lol. Its easy to over complicate trading.
For buying the long call there is no margin requirement. For the long put / short put version your margin requirement will be based on spread of the strike difference between the long/short puts. The larger the difference the larger the margin requirement. The long put acts as a security for the short put. The exact requirement can vary based on your account type, broker, and country.
If you are day trading youre not holding all day. So the moment when the stock pumps in your favor you would take the profit. You wouldnt buy in the morning and only sell in the afternoon. That is dumb.
I lost over $80k when everything started to tank. Not because I was in an exchange that went belly up. I was just stupid to hold and because that's what everyone said. I'm still responsible. It just taught me to be a better investor now that I understand more of what could go wrong. It took me over two years of being in the market, I'm really grateful I found one source to recover my money, at least $10k profits weekly. Thanks Nicole Miller
This is very complex financial product, he is simplyfing the whole concept, if the underlying stock price goes against you, you get assigned and you have to fork out thousand of dollars to buy the stock 😅😅😅
But this is a cherry picked example. The market was bullish and you never had a 100% loss. With just 3 losses you could have been in red. Also in this bullish market buying a 40 delta call option would have a huge return but you decided to test 20 delta which has a very low probability of winning.
Most of your traders have to pass interviews and competitive selection proces but most don't last 6 months and barely make any money, so why are you recruiting traders online?
I like most SMB videos, but this one has a lot of misinformation. Long positions are always painted as the devil because that they always go to $0 at the end of the day, but you for sure would have made more money in Final Scorecard buying Long scenario if you just sold the positions before end of day. A lot of those trades went like 100%-800%+ on the day, but they just showed them expiring. Just don't be too greedy and take the profits when you have them. Selling premium is statistically better because the odds of winning are better, but you can easily have a losing trade that goes -400% or more and undo your whole week/month, whereas Long trades cant go below -100%
A comprehensive and well-structured guide that covers all the bases of options trading. It's packed with insightful tips and strategies that are crucial for anyone looking to navigate the options market successfully. The clarity and depth of information provided here are truly impressive. It's a valuable addition to any trader's learning toolkit.
Seth stands out as the finest I've encountered. It communicates with the audience in a clear and straightforward manner, completely free of any complicated terminology or technical lingo. PatrickTyler, you also did well with your comment..
If you're worried about a stock you own tanking, but still hopeful it might go up, this is like having a safety net. You buy a put option to protect against losses and sell a call option to pay for the put.
Put in put credit spread, market immediately starts to drop...
thanks! I've been doing this for about a week and won every single day
This is extremely helpful.
Thank you
I thought it was just me! Great video, thank you.
Fantastic, thank you for sharing this
This video can be summarized quickly as such: when you do one day options you have an extreme amount of theta decay with long calls.. on the other hand when you sell puts you do not suffer from theta decay..
Implied volitility usually goes down when the price of a stock goes up. So what I do for daily and weekly trading is SETUP A 9 MONTH POOR MAN COVER CALL POISITON, Buy a leap call in the money and with atleast 9 months of time on it, you sell a short call out of the money enough to allow you long call room to go up between 4 to 6 weeks out. If I.V. drops you short call will go up alot faster then the long leap goes down. You exit the position when you make your goals, usually around %10-%20 return. This can happen in a day or it might take 3 months.
Just a bunch of short-term diagonal trades.
Nice ! Thanks
How do you choose the strike for the cc?
I put in 20k into options last year and flipped into six figures within a few months and still going. I've always been an advocate of trading because it has been rather rewarding. I hope to attain financial freedom soon. One more thing, great content brother.
Good luck in June
What kind of strategy do you use, do you use iron condors etc?
Good Video!
Greater Fool Theory. Who the heck is holding a 0dte through to expiration lol. In any of those “losses” those call options are green if the price move happens quickly and early. Sell it when price moves
The whole call portion of this video is absurd
At 12:50 point in video your chart has a QQQ option instead of SPY.
excellent video
For new traders seeking mentorship, sir Ronal’ guidance and supportive style creates an optimal learning environment to foster growth and success in trading. what a man with people’s interest.
he’s mostly on Telegrams, using the user.
@R o n a l f x 2.
Sir Ronal’ has offered profits to investors who wish to recover losses including myself and it’s a great honor to be part of them 🥳
Thank you Ronal’ for your TA 💯. I’m excited how my trading is going so far. I’m on $1m challenge right now. Already earning $35k weekly
Ronal’ strategy has normalized winning trades for me and it’s a huge milestone for me looking back to how it all started.
On the scenario given, if you buy Call options At-The-Money (50 Delta) it would have worked out and you would have made money. Granted the options will cost more, so you don't buy as many contracts; but buying out of the money options rarely works out even if you're right on its direction. The average daily range of the SPY is only 4.18 points. Buying an out of the money options greater than that is a fools errand.
Right. I don’t know why he didn’t mention buying at a higher delta.
Yes it's a ludicrous example of a strategy. Who buys OTM calls day after day for a month.
Yeah, I thought the same thing as soon as he said "20 Delta". Cherry-picked backtest set up to fail in order to make the put credit spread look better than it actually is. Comparing apples to Volkswagens.
@@xwhite2020a guy running a shitty backtest designed from the get-go to look bad. Otherwise.....only WSB degens and multiple concussion victims
@@bayesian2007because he had an agenda to make the spreads look better than they are. Even a total noob would stop buying those 20 Delta calls after about day three and reassess the strategy
Never buy OTM calls or puts on 0 dte. Better odds with atm options
Better odds with Russian Roulette. His example here is stupid
What would the 40 delta call have costs? Would you have similar results?
Is this scenario considered apples to apples?
It is good when we review this put credit spread strategy based on the backtesting. However, I have to raise my two question, 1) does call credit spread work good on the same situation? 2) why you short 40 Delta and but 2 more wide(wings) put?
But the SPY 506C calls bought on the first day would have gone 5 or 6 x, at least 3.00 when it hit over $508.19, if you closed them out mid day, why would you not close them out midday? .59 to at least 3.00.
Comparing stocks options to futures is nuts if you ask me haha. Over the years, I've been part of numerous investment programs, sifting through a barrage of information. Yet, none comes close to the sheer clarity, depth, and precision of Lora's instructions and insights. It's akin to finding a diamond in the dirt.
Nobody would have kept those Call options until expiry. As the SPY was rising their value would have risen a lot more and you could sell for a lot more profit than those Put spreads.
Yeah, and most noob traders know exactly where the top for the day is and sell accordingly. And they know ahead time the market will go up for the day, at some point.
@@LyricsQuest imagine if you get the direction wrong when you are selling Credit put spreads. The loss is way more than your call option.
@@cagirl2220 True, and it was overlooked in the video. As others have noted, April 2024 would've been tragic with the technique. I personally prefer atm spreads, or itm if I'm looking for leverage, though the market can be risky no matter what strategy is used.
But that's why he makes money and you don't.
@@cagirl2220 True the single daily loss would be more than simply losing on a single call option. However, I think the goal of the video is to show that if you have conviction of a direction the market will go, Put credit spreads could be a great alternative to simply buying.
Can you explain how you made money the two profitable days in your Call examples - i.e. did the Call expire in the money and the broker just credits your account or did you have to sell the Calls just before closing to realize the profit? I've always assumed a Call expiring in the money just granted the right to buy shares at the strike price and nothing more. Thanks
Just get out of that trade before expiration !Why you have to wait till it expire at loss?
$6 is a big move for SPY, and those contracts were at 220% ($650) profit with the extra gamma pump in the afternoon that offsets the theta on zero days. The price hung up there for 50 minutes. Why did they not get sold somewhere in the 200% profit range, and left to expire as a losing trade?
Any time you buy options you really need to pay attention to the options quotes for that strike price. Typically a zero dte option you want to capture a move through market structure. You have to know exactly what you are doing 💯.
Does anyone who knows what they're doing repeatedly buy 0dte 20 Delta calls? That entire backtest was ridiculous, because mathematically that strategy was total dog shit from the beginning.
Thanks Seth
What is the probability of this long positive streak to happen again? With the puts credit spread strategy you mentioned, one loss would've easily wipe out 3 wins. No value added in the regular volatile market environment we usually trade in.
How does it compare to just buying the SPY every day ?
Wait for 30-60 minutes after market open to apply this strategy using the low of the day at the time as the target for the 5 puts you sell. I'm going to research the number of times the SPY closes lower than the initial move down (if it does) or the open if it is is the low after the market opens to calculate a win rate.
Here’s a very important piece that’s being left out. If you sell credit spreads with a 40 delta, only 2 points wide, you’re going to open the trade immediately down 200-300% (because your downside protection aka your long position, is so close to your strike price). Trust me, I’ve been burned plenty of times because of this.
Solution? Open 20-25 wide and you’ll open the trade at break even or down only -12% for example and let theta decay work in your favor. The ride throughout the day will be so much smoother and more forgiving. It’s not a sexy return and requires a bit more capital (since the wings are wider), but will yield far more consistent results.
If you do a 2 point wide SPY credit spread position however, I guarantee you’ll be stopped out of almost every trade.
This is about Options trading, not directional
Yeah, unless the market dumps down, then youll be on a world of hurt.
@@user-qs2xd6cx3c of course, but that's why I ensure I have a 2x-3x stop loss in place.
Also to sell 5 contracts at where spy is today June 10th is 533 aka you need 266,500 dollars to write 5 put contracts as cashed secured and if you buy the insurance AKA buying a call 2 point below you still come out with a net credit but the most important factor in this whole video that this is great in a bull market. Guess what happens to your trade if it drops and drops and drops. Well you will consistently loose money. Everything thinks they’re a genius in a bull market. You’re probably better off just selling puts and if assigned then sell calls and just being an option seller not a buyer. If spy drops and you puts are excessive than you got them at a cheaper price and you might just have to hold on till they recovered with it a downwards trending market overtime till the price returns to where you can sell call again above your cost basis.
@@pauliusmatiusovas4102 your comment about being 200+% down makes no sense. If you open the trade at the mid price (and not the ask) you wont be down anything. You could immediately sell the trade back to the market at the mid price. Your idea of trading 25 wide will have you in a much riskier trade since any unexpected market move against you has your long option much further away leading to a greater loss. The whole point of a narrow spread is controlling your risk. Another point on narrow spreads that most people don’t understand is they are more efficient. Your profit is higher trading 5 contracts at a 2 point spread than 1 contract at a 10 point spread. Look carefully at a live option chain and that basic math will be obvious and is the main reason to trade narrow spreads.
I normally buy options with 40+delta 60+ is my sweet spot
Can you discuss selling single leg options for beginners please? I’m not ready for multi-leg options
Did they buy those options at open (don’t do that please) and who holds 0 dte options until close if the underlying isn’t rocketing
I've more than 25 years of experience in trading options, and this is actually a good video if you are first time trading options but said that the video is missing explaining the concept of expected daily movement and if you have no idea of those, well you should not trade options
What about basic selling covered calls for a small premium?
@@joshuademmers4947 Sure, it's surelly a good strategy , specially on boring stocks with low volatility , but don't forget that sometimes a stock can goes down a lot and all the calls you sold may not be enough to have a positive return, fo example Intel or Hello Fresh in then last months , here patience is the key.
Another problem is cost specially if the call get exercised, you need a very cost effective brookers
How much profit you have earned in 25 years in trading options?Asking for knowledge gain purpose only.
@@ketann5139 Enough to retire
@@ketann5139 he said experience, not profit
Why did we not sell to close and collect the extrinsic value of the option?
I enjoy your videos. Funny how every time I hear your voice, I keep thinking about your economist Peter Schiff.
Great channel. Where can I DM you to ask about ways to be a part of SMB remotely
I need to see markets open and watch this to analyze it. I dont have records from Friday. But just as an ex, you would buy a -40 delta put option at open? And would close with higher premium? Even doe we closed green?
I think he meant, sell the Put at open.
You can't overlook the fact that it's paramount not to get greedy but to remain invested through careful study, if not you can lose it all.
Why not explain what happens when the SPY closes below your short put strike and above your long put strike?
With current market volatility, I've noticed that if you have a good entry and start trimming after your option increases at 30% and all out by 50% you can stay consistently profitable day after day. Hold and hope doesn't pay. Small base hits everyday PAY.
Thanks for the info. I myself just left her a message and I'm awaiting her response.
This is really great content. Very grateful. Noobie question: when you buy back the ITM puts, how does that work? Do you only buy back the short position, or do you close out both legs of the trade?
Both. Your short option could cost you more than the premium you collected, and the long option may still have some value left.
If stock drops deep and both go ITM, then your max loss will be realized by selling both. If you do not buy the long one, you are leaving money on the table.
You want both worthless or both in the money. Otherwise too risky to get assigned. If short is in the money 5 mins before market closes, close both
@@pauliusmatiusovas4102 Extremely helpful response, thanks! Now what happens if both are ITM 5 mins before close? In that case, I do nothing and let the brokerage net them out?
@@sumantc4419 So helpful. I'm really grateful for your response.
@@pauliusmatiusovas4102 If the short is ITM, and the long is OTM, couldn't the broker just debit me the different between the current price and the short's strike price automatically? I'm looking at a paper trade right now where closing the short position costs more than the difference between the current price and the strike price. Granted there's still extrinsic value remaining, but in theory, I could be assigned at any moment, and I want to be confident my loss won't be astonishingly large, b/c I'm doing a Call Credit Spread on QQQ.
Sell cash secure puts and use that premium to buy calls
Good, but not complete picture. As others have pointed out, to get the full perspective on this trade you have to look at all 3 pillars of: risk, reward, and probability. As Seth shows, OTM credit put spreads have very nice probability, where you win by keeping your opening credit, because you can win going up, sideway, or a tiny bit down. BUT, the risk is higher if it goes down a lot, and you lose more than you opened with. So, look at the whole picture.
Put credit spread half spy half qqq....well that wont work well lol
40 delta credit spread versus 20 delta calls.
I have a feeling the 40 delta calls would have turned out way different here.
Probably flipping the script.
What if you are a swing trader who wants to buy calls and ride the trend more than 1 day? Should I trade monthly options at the money?
If it does not rally very strong in your direction you will lose money every single day from time decay
What backtesting software do you use to test your options strategies?
I'm not sure what they use but you can use trade machine. CML.
TD Ameritrade
Would be more interesting and relevant to compare this to April 2024 results which would be a crushing loss to your portfolio.
Why not set up an example for us?
This doesn’t work when volatility is up. So plan accordingly
Yeah, doing a month to month analysis, would highlight the more-often-than-not-true fact that there are no simple techniques that work in every market, every day. Elite trading skill might overcome this shortfall, with skilled use of techinque(s), but results may vary.
What’s the most you could lose in this trade?
He states that when he shows how much you would need in your account. One of them was $740.
Why not Delta 40 Call long?
I've been trying to watch videos and learn about call options and spreads. I followed along with this video on yesterdays market, when trying to sell a put option, it would not allow me to since I did not have enough capital in my account. You say that you would estimate a 2000$ account, which is almost exactly what I have, it seems to me this is a little misleading or am I doing something wrong. Do I have to do this as a specific put option spread or can I open the sell put and buy put seperately?
The series narrated by Seth is the best I have come across. Speaks to the viewer without jargon.
The concept of a put debit spread is explained very well but I don't get the max loss calculation at 11:49. The difference between the two strike prices = 20 (500 - 480). Each contract represents 100 shares. Multiplying 20 x 100 = 2,000 potential loss for each spread, and 2,000 x 5 spreads = 10,000. In that case, isn't the max loss = 10,000 - 300 premium collected = 9,700 max loss?
You are absolutely right, and your calculations are correct. It is simply a typo in the slide presented. It should be showing the 500 and 498 strikes. 2 x 100 = 200 x 5 = 1000 max loss -- less the credit received of 300.
@@Christopher-rb4my Thanks for replying.
If you buy a call for only a week you have to remember that every day it’s going to lose value with time. Time eats up profit if your doing a one week call
This happened to me with Nvidia and SPY because it was too close to expiration because I was trying to risk less money and buy cheaper contracts. That doesn’t work
Fairly easy mistake to make, but also an easy one to avoid by taking a bit more time to understand the mechanics of options. The second he said "20 Delta" every single experienced options trader rolled their eyes because his examples were selected to fail. No serious options trader expects 0dte 20 Delta calls to pay
@@aaron6806I am not even a pro at options but can see that the strategy to buy 0dte options with 20 delta makes 0 sense… why would he give this example? I don’t think even newbies take this route
What is a recommended back testing software? I've searched Google but there were too many to know good vs bad.
I use Thinkorswim
Quick question on these. With these being 0 DTE, most of the short put spreads in your example expire except for 2 of them (May 13 and May 16). How would this work with the 25k requirement for day trading? If I sold the vertical on may 13th and had to buy it back before market close the same day (0DTE), wouldn't this be considered a day trade?
Cash account. You don't need $25,000 and PDT doesn't apply.
@@chrazyman77 would they release your 700 ish dollars they kept as collateral as well every day?
@@Trailrunningman-wo7mo It is released as the contract expires or the day after you close out the position.
I’m about to switch to selling calls to retail.. About Fourth of July
What brokerage can you sell put contracts on the spy with a $1000, do you have to have backing on that sale of puts aside from buying the put contracts? Maybe you have a different options level and enough $ too cover the put sale. Can you elaborate @SMB. I've lost my @$$ selling nakedness puts.
A friend of mine warned me of the dangers of trading options. How are you doing it, that you flipped 20k to 6figures? I'd like to know.
Seth, Is it necessary to set stop loss for iron condor?
why don't you just by calls at a lower strike price? Wait for the mkt to pullback
You gotta buy calls as the stock is going down, not when it's stabilizing or going up.
Buying calls when the IV is high as the stock drops quickly. Hmm... Usually better to buy puts at the top, when the IV tends to be on the low side, but buying puts in a bull market can be very risky.
If you buy calls when the stock is going down you're going to be in a bad trade. That's probably the opposite of what you want to do. Never ever bet against the trend.
I don't get it.. in order to sell the 500 put options for the credit spread strategy wouldn't you have needed to buy those first?
In the stock market you can sell something first and then buy it later vs the usual buy it first and sell it later. Think of a business that sells you something but it ends up on back order. They've sold it to you first but then they actually have to buy/make later. To make a profit you always want to buy it at lower price and sell it at a higher price - no matter which order you do the buying or selling.
What if you have an bull put spread at say 500/498 with 0 day expiration and the market close at 499, but then in after market drop till 497?
You'd lose the amount between the strikes. After market doesn't count unless you trade in it.
You need to close before market closes. Otherwise you will be assigned spy at 500
Good question because there is risks of assignment after hours. Knowing this proves you are getting advanced with options. Unless the market is going very much in your favor then stay. Otherwise if you are not sure then close the trade early before the bell. Best advice for options
The closing price is used. What happens in aftermarket, stays in aftermarket, until the open the next trading day.
there is the risk of afterhours assignment between 4pm and 5:30pm EST
Sumitomo Mitsui Banking?
Works great in a Bull market, but at .40 Delta, I'm guessing this will profit 40% of the time. Better have some good money management built in.
Unless you buy an ATM or ITM option, short-dated OTM options are best for scalping. Timing is everything and you have to get in before the breakout starts and sell into momentum before IV tanks again. You're essentially trading vol in that instance rather than price.
can you sell/buy credit spreads with a 2k account even with margin you cant trade everyday...pdt rules under 25k account most brokers require this...?
Using a cash account, you have unlimited day trades. You're limited to the cash you have on hand and once it is used, you have to wait for that cash to settle. I use Webull and my cash settles overnight and is available the next day.
With a cash account you and day trade as long as you have money available. The only difference is with a cash account once you spend it on a buy and sell it, you can’t use that money again the same day like you can with a margin account.
It is a popular short put strategy, but watch out the fat tail, which may implode your account.
Great video Seth, once again SMB is creating great content you can learn from. I get the main thesis of buying at the open and let it run till the close. I think this would apply to those traders that don't watch the market the entire day and this would definitely work out in their favor if they wanted to play 0 dte options. The only flaw I saw was when you adjusted those 2 days on the credit spreads and did not let them go till the EOD. That would also apply to the calls which in your first example proves the point, that if you are actually watching your trade and using proper risk management you would have never let that call go to 0 and more active traders would actually use setups that could take advantage of these 0 dte options and not just buy at the open and let it run to the close, whether it's a quick scalp or a day trade, there are always lots of opportunities to be had if you find a very active stock with very liquid options. I would definitely not recommend using 0 dte options unless you are a very active trader or can use credit/debit spreads or covered calls in a more defined environment as Seth has given such a great example of.
And to be completely transparent, I actually went back in TOS and took the trades I would have potentially taken on these days and my trades would have made out better by just a bit with more stress that scalping and day trading can bring, lol.
Who on God's green earth buys a 0dte option and just walks away hoping it works out? Oh, I know, SMB Capital, because somehow they test trades that literally nobody other than a complete moron would take, then make a video showing how dumb the trades are, and how they can "fix" it for you.
lol but why u have to wait F it r call to expire worthless.just showing half picture to make ur point
Why would you buy calls that are so far out of the money? Buy calls that are $1-2 out of the money then when they come into the money they explode in value
Exactly my thoughts. I would never buy OTM call options, especially with 0dte. I would typically buy ITM with at least a .55 delta.
He said 20 delta, I never seen 20 delta anywhere. Does he mean .20 delta?
@@kanwaljitsingh432yes. .2 delta
@@kanwaljitsingh432 Yes, .20 delta
@@kanwaljitsingh432yeah that’s what he means. I agree it’s a weird way of saying it
Buying options at beginning of day when premium is the highest doesn’t make sense. Need to buy options based on technical set up during day and not based on 20 delta
Comparing the performance of 20 Delta Calls with 40 Delta Put Credit Spread is such an uneven story that it seems this example was rigged up for the contrast.
Lesser quantities of 70 or 80 Delta Calls would fail way lesser obviously than the 20 Delta ones. So, the long only options traders better stick with in the money calls and go for Bull Call credit spreads to insure against the probable price pullbacks to a decent extent.
Why did he buy 20 deltas? There is something missing in the explanation. What is magical about choosing 20 deltas? The one big black hole in most option videos are clear explanations of how to choose an option based on multiple factors delta, IV (avoiding crunch) volume open interest. That being said it’s still helpful to watch the put option strategy. I want to run this in a swing situation.
Buying the 20 deltas with 0 DTE is a poor strategy. Buying a higher delta has a higher probability of success, but those options are going to cost you more money.
The whole thing was absurd
Seth, if you buy Call at 40 delta instead of 20, would that improve its results? Thanks.
Good question.
@@TheOriginalPickleRick Yes it would, because you would be buying closer to the money, thus reducing the amount that the SPY has to move in order to make the option profitable.
@@Jeff-xy7fv So it's not a good comparison.
Not really. You would have ended up losing way more money. The closer to the underlying price you are, the more premium you have to pay and therefore the farther away is the breakeven price. Check for yourself. Go back to video at 5:07 for May 1, the 40 delta strike price is 503 and premium to pay is 1.48, totaling 1.48 x 100 x 5 = 740$. So, your loss would be 740$ rather the 295$ of 20 delta. On May 2nd, 40 delta strike is 504 and call price is 1.10 but even though this option is ITM since SPY close at 505.02, you are still losing money because your breakeven price is higher at 505.10!
You lose if you hold these contracts until expiration. Who'd do that?
So you are really comparing 40 delta credit spreads to 20 delta call options? That’s disingenuous comparison. You should have compared them with the same deltas instead of.
People trying to buy the cheap calls too far out of the money lose. You have to buy in the money or within a few dollars to in the money. Also odte aren't meant to be held the whole day bc of decay. I get in and scale out then leave one or two runners. I have never had the stock go up and my options be down lol. Its easy to over complicate trading.
Anyone ever get pinned in a put credit spread? What happened
Margin requirement?
For buying the long call there is no margin requirement. For the long put / short put version your margin requirement will be based on spread of the strike difference between the long/short puts. The larger the difference the larger the margin requirement. The long put acts as a security for the short put. The exact requirement can vary based on your account type, broker, and country.
@@davesplace144 Thanks. I suppose on the IRA I am trading in has limitations as well.
Why not just sell your calls when it’s up instead of sitting on them all day getting obliterated by the dreaded theta?
Because he designed the example to fail. It's an absurd comparison, made to make ol' Seth look smrt so people will sign up to trade with them
@@aaron6806 I hope not. I’m a fan of Mike Bellafiore. I’m reading his book “The Playbook.” Great read so far and learning so much.
I failed to set 90% profit closing trade.. waiting for 100% and market turned and end up with 50% or even 0
Use the 80 20 rule always when you are 80 percent get it and forget it
Same problem me
If you are day trading youre not holding all day. So the moment when the stock pumps in your favor you would take the profit. You wouldnt buy in the morning and only sell in the afternoon. That is dumb.
Why didn't they teach me this in school?
No
So, “cost basis” is a real thing? 😂😂😂😂
I lost over $80k when everything started to tank. Not because I was in an exchange that went belly up. I was just stupid to hold and because that's what everyone said. I'm still responsible. It just taught me to be a better investor now that I understand more of what could go wrong. It took me over two years of being in the market, I'm really grateful I found one source to recover my money, at least $10k profits weekly. Thanks Nicole Miller
I'm surprised that this name is being mentioned here, I stumbled upon one of her clients testimonies on CNBC news last week...
Nicole Miller strategy has normalised winning trades for me also. and it's a huge milestone for me looking back to how it all started
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 user name.
First !🎉
This is very complex financial product, he is simplyfing the whole concept, if the underlying stock price goes against you, you get assigned and you have to fork out thousand of dollars to buy the stock 😅😅😅
Never SELL any options. Period. Super high risk, low return.
Ive been doing leaps lately i have amzn 937dte $100 call, any tips on how to get the most out of these types of trades?
Trade Futures. The End
I rather go long and make over 100k .
But this is a cherry picked example. The market was bullish and you never had a 100% loss. With just 3 losses you could have been in red. Also in this bullish market buying a 40 delta call option would have a huge return but you decided to test 20 delta which has a very low probability of winning.
Math… I’m a genius, I was never good at mathematics. I’m doomed Seth!
Most of your traders have to pass interviews and competitive selection proces but most don't last 6 months and barely make any money, so why are you recruiting traders online?
I'm taken aback to hear this name mentioned here; I first came across her name in Forbes.
I like most SMB videos, but this one has a lot of misinformation. Long positions are always painted as the devil because that they always go to $0 at the end of the day, but you for sure would have made more money in Final Scorecard buying Long scenario if you just sold the positions before end of day. A lot of those trades went like 100%-800%+ on the day, but they just showed them expiring. Just don't be too greedy and take the profits when you have them. Selling premium is statistically better because the odds of winning are better, but you can easily have a losing trade that goes -400% or more and undo your whole week/month, whereas Long trades cant go below -100%