Options Boot Camp

Basic Training: How to protect your profits. Easiest method: 1st buy a 2-3- month put ATM or slightly OTM put. Purchase an ATM put spread with the short leg at your break-even point. Easiest to do in a single stock or underlying. What to do if you have a broad equity portfolio? Its a little more complicated. Determine the effective beta of your portfolio an how many effective shares of that index you own. Rule of thumb - Expect to spend about 2% of your portfolio for effective 3-6 month protectionHow to reduce the cost of protection. Buy a spread instead of an outright put. Set up a collar. Set up a collar with a kicker. Mail Call: Listener Questions and Comments Question from Big Charlie - Hey guys. What is your take on the OH/Monster merger? What does this mean for the options landscape going forward? Question from Brian Collamer - Hi Mark, If I have a short call in $SPY on the ex-dividend date that is OTM, I will not owe the dividend correct? Thanks, Brian Comment from Justin - Hi Mark, Just heard my qu

Roll Call: Bringing in the Big Guns Our guest today is Jim Bittman, Senior Instructor at The Options Institute. He discusses: What sort of content/classes our listeners can access at The Options Institute What the number one options question is that he receives from students What is the number one options mistake and/or misperception students may have about the options market? What changes did he make in your recent renovation at The Options Institute, and what can our listeners expect from your new facilities? Mail Call: Listener questions and comments Question from Kevin Duggan - Hi Mark, Great show! I have been listening to episodes for months but it was only recently that I saw Dan’s picture- shocking! In my mind I have always pictured Walter White, as they sound exactly alike and, you always refer to his black hat. You can imagine my surprise when I saw Dan’s pretty face and those curly brown locks. Shave that bean, Heisenberg! Re: short puts (I'm already long calls) If I am certain the stock will mov

Basic Training: The world of mini options What are Mini Options? (Just celebrated first birthday last month) Where do they trade? Which underlying names trade? What is the use case? When should you use them? When should you not use them? Pros vs. Cons: Unfortunately we cannot give many pros for mini options as of now. Mail Call: Listener questions and comments. Question from Maximus - Hi Mark, Hope you have been doing well. Following up in connection with my question in the email below, since I haven't seen a new episode of Options Bootcamp come out for the past several weeks, and have been waiting with baited breath for your expert comments on my question. :) Hope I didn't overwhelm you and the panel with my frighteningly complicated question, and the insanely large account balances I am referring to (sarcasm alert! :)) I did notice a mention of "Maximizing a ROTH IRA" in episode 331 of Option Block, which came out on April 21st. However, for some reason, this episode seems to end abruptly at just under 3

Mail Call: All mail. All day Question from David Medley - I have listened to about half of the 40+ episodes. I do not recall hearing anything about how to get started professionally. I am a 38 year old software developer looking to change industries. The positions that seem to be open to me are commission-only and require a significant cash "Capital Contribution". I am actually OK with this. Some positions have hefty training and/or desk fees, which seems a bit scammy to me. Either way, it's not something I want to go into blind. If you have covered this, I would love to read or listen to it. Thanks! Question from Jay - Hi Mark, Options Bootcamp is a phenomenal program. I have learned so much it’s unbelievable. I do still have one question, and it stems from the fact that I am not a convert from the equity world. I am new to the investing world, but I could never wrap my head around equity trading because it seemed too haphazard. It was not until I learned about the flexibility of options that I really thoug

Basic Training: Options & Dividends How do option holders collect dividends? How do derivatives impact options? What happens to call and put prices when dividends enter the equation? If you are an options holder what must you do to collect a dividend? What are dividend plays and how do they work? Mail Call: International trades, closing positions, and more Question from Glenn Baker - Question for Options Boot Camp I've been listening to Options Boot Camp since the first episode & have been listening to the Option Block for about 2.5 years. I currently have a Schwab account where I primarily buy mining stocks. I would be interested in possibly switching to Sogotrade for the lower commissions. Does Sogotrade allow you to buy stocks on Canadian exchanges? Thanks and I really enjoy the show." Question from Nick Snow - Hello. First, thanks for all the shows. I used to listen to options insider years ago. Somehow lost the podcast and recently found it again. Good news there is I have been listening nonst

Basic Training: Legging and Protecting Gains What is legging? How do you leg into a vertical call spread? When should you leg a spread? When should you not leg a spread? How do you protect you gains? How do you lock in a gain? Buy a protective put, but watch out for the cost. Do I write a call ITM, OTM, or ATM? Remember, a covered call is no a defensive play. How do you leg into a collar? How do you create a collar plus? How does your strategy change during a crisis? Mail Call: Hey Recruits, it seems you have some questions! Question from TelStorm: This question is for Options Boot Camp. Please do discuss when to adjust long protective put with stock. When to sell put vs. just close the position? Do you roll to a lower strike or to a put spread? Thx. Question from Alexander Samuels, Chicago - You would never know you guys are Chicagoans from the way you complain about the weather! But seriously, can you discuss which options tools you guys prefer for analytics and trading? Do you have certain products you

Basic Training: Advanced Adjustments Spread adjustments When should you adjust a spread? Vertical spreads. Long and short straddles. Long and short butterfly adjustments When should you adjust your flies? Iron butterflies and iron condors. Calendar spread adjustments When should you adjust basic horizontal one-month calendars? Mail Call: The drill instructors will now take your questions Question from Dr. Anthony - I enjoyed you episode on the wheel trade. I would like to know more about your typical use case for wheel trades, particularly when it comes to the second leg. Do you write an ITM or ATM call, hoping for the stock to be called away quickly, thereby allowing you to begin the process again? Or do you prefer to write an OTM call and attempt to capture some appreciation in the underlying, while risking losses in the stock? Question from Nik_Miner - How much money should I keep in my account for adjustments? Does 10-15% seem reasonable in case I need to roll or trade stock against my options?

Basic Training: The topic of the show today comes to us courtesy of a listener question. Question from Dr. Toboggan: Love the podcasts. Would like to see an episode (maybe options bootcamp) that covers trade adjustments. This was been the most difficult aspect of learning to trade options for me, and would be useful now that you've covered most of the basics on this program. Specifically, would like to hear a discussion on how to adjust trades when the stock moves against you (i.e. price hits the short strike in a condor/credit spread, or the wings of a butterfly). Thanks Adjustments are where the rubber meets the road from an options perspective. What are adjustments? Why have an adjustment strategy? When do you make the adjustment? Basic Adjustments: Close positions and close portions the of trade. Adjusting into spreads. Good rolls vs bad rolls. Long premium vs short premium.

Options Drills: Options as an investment tool. Stock replacement strategy, Covered calls, Short puts, Collars, Covered strangles, Covered straddles and LEAPs Mail Call: Question from Charles Binder - Can you guys explain 60/40 tax treatment? What do I need to trade to qualify for this special consideration? Thanks for your help. Keep the show coming!

Basic Training: The Wheel Trade A great trade for novice options traders. Our friends at RCM call this the "triple income trade" or "the wheel of fun." What is it? Write a put to get long equity, then immediately write a call to sell equity. When should you use it? When should you not use it? This is a great way to add some extra bang to your covered call trades. Mail Call: Fabulous questions, insightful answers. Question from Bit Tim: You recommend closing out your shorts when they go your way. Do you advise factoring the closing price of the trade in to your calculations when writing options? For example - write a put for $.30, but know at the onset that you will only collect $.25, because you will close it out for $.05. If more people did that at the outset, they might be less reluctant to close out their winner for a profit. Question from Jack - I know you guys are not tax advisors, and so nothing you say can be taken as certain in any answer to this question. I am a small time trader, and at the moment

Options Bootcamp 37: Our Holiday Wish Lists Basic Training: Options Boot Camp Holiday Wish List John - Consolidation in the exchange market place. Mark - Better spread execution in the options market in 2014. Dan - Continued growth in the options business. Mark - Financial/mainstream media would abandon its perception that options are dangerous, complex risk-additive instruments. John - Customers close every expiring position. Dan - Continued growth in options education. Mark - Brokers would make it cheap or free to close out shorts below a nickel. John - Customers never (or almost never) trade inverse or leverage ETFs. Dan - I hope to be successful in guiding my students, and potential students' expectations of options. Mark - I wish more customers would break away from their fixation with VIX. John - I would like to see an end to the day trading rules. I also wish more customers had a trading strategy firmly in place before they put a trade on. Dan - I would like to see no crazy blow-ups like PFG, etc. Li

Basic Training: Here is a rundown of the major topics from the show over the past year: Greeks Pros/cons of buying premium Pros/cons of selling premium Speculating with an ATM/OTM call Hedging with a protective put Stock replacement strategy Pros/cons of basic vertical spreads Ratio spreads Front spreads/back spreads Stock repair strategy Straddles/strangles Spreads with wings: Condors, Flies, etc. Volatility skew Basic calendar and diagonal spreads

Basic Training: Lessons from the Trading Floor Paper flow rules all - Go with the flow! Being obstinate and refusing to adjust to changing market conditions will only cost you money. Don't step in front of the train! When in doubt, palms out!! There is such a thing as an upside crash. Calls are puts and puts are calls. Mail Call: Schooling traders, one question at a time. Question from George: Why were puts so expensive when TWTR options launched? Question from Niles F., Montgomery, AL - I saw an article recently touting a "synthetic covered call strategy" that essentially involved buying an ITM call and selling an OTM call against it. It was really just a vertical call spread. What am I missing? How is this a synthetic covered call? Question from Mr. Gif - Great show on volatility skew. What do you guys think of this piece? Should I, as an investor, avoid these volatility ETFs? Question from Buckeye - A question from John - Can I buy a stock on margin then write covered calls against it? Or does a broker

Mail Call: All Mail. All day long. Question from Benjammin - I am currently a law student and have always been interested in options. I have read about options and am now listening to all of the Options Bootcamp podcasts, which is a great show, to prepare to start trading options! SCENARIO: Assume I sell a naked put option and collected $500 in prem. 1 week prior to expiration the value of the underlying has increased and it looks like the option will expire worthless and I will get to keep the $500. Is there anything I can do other than waiting to expiration to lock in my profits by sacrificing a portion of that collected premium? Question from Richard D - Mark and the Team, The shows are consistently great! Thank you! You may remember me from "the mega question" early in the month. I will be a LITTLE more succinct in these posts. Also thank you for that bootcamp episode on vol and skew! I think expiration and settlement could be a good topic for a future Bootcamp show. Could you discuss a little on how Amer

Basic Training: Trading VIX and Volatility Products What is the VIX? How is the VIX calculated? How are VIX options priced? How do the Greeks work with VIX options? What is the difference between VIX cash and VIX futures? The VIX is NOT a perfect hedge that offers pure inverse correlation of the S&P? VIX can be used as a kicker for extreme events. Beware of VIX settlement process. Remember to understand the context with which the VIX is being represented. Mail Call: How may we be of assistance? Question from Bicycle My - So how do you become a better trader? I have been trading for a few years now and although I am profitable, I have not seen phenomenal returns. Question from Hawkeye6: Can you explain what Maker-Taker is? What is different about it from the traditional methods? Advantages? Disadvantages? Thanks.

Basic Training: Let's talk fundamentals What is Implied Volatility and how it is derived? Why is understanding implied volatility is so important? Historical volatility versus implied volatility. What is skew? Why does skew exist? What is the put wing? What is the call wing? What is investment skew? What are other types of skew? #1 Options question from newcomers - I bought a call option then the stock rallied and my call lost value. Why? How do you evaluate skew? How is skew measured? What is reverse skew? What does reverse skew sometimes indicate? What is term structure? Mail Call: You have questions. We have answers. Question from Nick D. - I am a covered call seller. I have some people recommend that I should sell in-the-money covered calls instead of my usual 5%-10% out-of-the-money calls because of volatility. But why would I want to sell a call that is going to inevitably be called away? What is your thought on this strategy? Question from Charles Midler, Santa Fe, NM - I am thinking about hedging m

Basic Training: Stock Repair Strategy Review Have a downturn in your account? Options can help make that money back. When do you use this? How does this differ from just holding the stock outright? Is there a better alternative to doubling down? Mail Call: Tell us what you want to know. Question from Nick - Can you explain the difference between a front spread and a back spread? Thank for the program. It has a regular spot on my podcast playlist. Question from Avalon 360 - I have heard a lot of talk about covered calls. They are in interesting income trade, but they seem to be leaving money on the table - namely the put. Why does no one talk about covered straddles? After all, if you are comfortable selling the vol or premium on one strike you should be comfortable selling both and collecting twice the income?

Basic Training: It's that time of the year again. The kids are back to school, so let's go back to school as well, and refresh our listeners on the options basics. What is an option? How do options work? What is a multiplier? What are the greeks: Delta, Gamma, Theta, Vega. Long premium vs short premium. Option Drills: A review of the basic positions: Long call - Short call - Covered call - Long put - Basic vertical spread - Collars. Others can be found in previous episodes. Mail Call: Question from Dave S. - In the Options Boot Camp podcast #28 and #20 you discussed buying deep in the money LEAPS and selling shorter term calls against them. If the calls you sold expire worthless everything is great. What happens if the underlying goes up and the calls you sold are in the money at expiration? Is it better to just buy back the calls or let them get exercised? Can you discuss the process if they are exercised? Do I need to sell the LEAP to cover the call that was exercised?

Basic Training: Trading Diagonals What is a diagonal? Why would you put it on? What adjustments need to be made? How is it performed? How does it differ from a typical horizontal calendar spread? Why would you use a calendar vs. a horizontal spread? How do the greeks differ? How do you choose the strikes? Mail Call: Fall in, recruits! Question from Richard D: I think a whole boot camp show on skew could be very helpful! Thanks! Question from Hawkeye6: Love the pair of calendar spread shows. Can you make it a hat trick and have a show on double diagonals and double calendars? I am especially interested in hearing about selection criteria -- what makes a good candidate, criteria for strike selection, when to pick DD/DC vs. Condor/Iron Condor, etc.

Basic Training: Pro Tips Swap LEAPS for stock when writing covered calls. Everyone, even pros, have losing trades. Never ever ever enter a market order in the options market place pre-market. Swap in-the-money calls for stock whenever possible to utilize trading capital more efficiently. Use implied volatility on all your option trades. Don't base a sale or purchase of an option based purely on the implied volatility levels without understanding the context on the implied. When looking at implied volatility, be very careful around expiration. Don't be a lemming and blindly follow "unusual activity". Often it's better to sell the strike where the unusual buying activity took place. Swap in-the-money calls for stock whenever possible to utilize trading capital more efficiently. Fit the strategy to the situation. When reverse skew flips, it's usual a big buy signal. Mail Call: Question from Ron Yuravich - I listened to the podcast on calendar spreads and would like to know what book do you recommend that is c