This content introduces options trading as a potentially less complex and more accessible alternative to traditional equity trading, especially for those with smaller accounts, by focusing on a "small account challenge" and explaining fundamental concepts with practical examples.
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It looks like most of you are new to
options. So that's great. This is going
to be a great place to start. Um I'm
going to try to make it as easy as
possible to understand. Uh and try not
to use any any uh any jargon that uh can
confuse. So um that's the whole point of
why I wanted to get into options. one of
the reasons and we'll talk about it a
little bit more but I wanted to get into um
um
you know really if someone like me could
learn it I wanted to be able to teach
other people and show them that maybe
it's not as complicated as it needs to
be. So um most of you are new to options
uh you either have nothing you don't
know nothing about them or you're fairly
new and then there are 6% professionals.
So for the professionals in here some of
this will be um just a little bit of an
overview um but you'll get an idea of
kind of what I've been doing um for the
past few months. So, let's dig into it.
Um, all right. So, first things first,
I'm Megan. Um, and this is your
presentation for this evening. So, uh,
disclaimer, of course, we like to throw
it in here. Um, read it very quickly.
I'm going to click by and one, two,
three, go. Okay, so this is me. Most of
you know who I am, but just in case you
don't, um, I never want to assume that
everybody does. Just a quick quick a
quick a quick little background. Um, so
my history prior to trading, uh,
professional chef, plant-based
professional chef, um, certified in
sports nutrition, um, and I was a
product manager at a record label. So,
absolutely nothing to do with trading.
So, um, if if I can trade options, I
promise you can trade options because
everything I did in the past had
absolutely nothing to do with trading or
options at all.
Uh, my trading history is I've been
trading roughly three and a half years.
Um, so not that long, but you know, a
good amount of time full-time. I did
dabble a bit before that, but full-time
like all day long, three and a half years.
years.
There we go. Yeah, that's the vibes,
Ryland. Um, so my trading edges are
higher time frame levels, as most of you
know. I am your higher time frame gal. I
like to trade ranges and now more
recently intraday options, which is what
this course is going to be about. And
then I've got some fun hobbies like
trail running, rock climbing, nerdy
non-fiction books, and uh ice baths and
cold plunges. So, let's just uh most of
you probably knew all of that already,
but just in case you didn't, that's
who's presenting tonight. This girl
right here. All right. So, what we're
going to get into tonight
[clears throat] is um we're going to
talk about a small account challenge. Um
what my initial plan was and why I
decided to do it. Um we're going to talk
about what are options, right? So,
there's a lot of newbies in here. So,
we're going to, you know, go over what
they are and kind of how they work so
that you have a general idea um of of,
you know, just how the wheels run. And
then we're going to talk about options
contracts. And I'm going to explain them
with explain them to you with pizza
because everybody likes a good analogy.
And I feel like it's a lot more helpful
uh when you can understand options like
that. And then, [laughter] thanks Paris.
Appreciate it. [gasps] Um we're going to
talk about option pricing.
We're going to talk about small account
advantages to options
uh options versus equities, the capital required,
required,
risk management using percent and
thinking in RS. So this one will um this
one will be good for a lot of you to
understand kind of the difference and
correlation between equities and
options. Um nice [laughter] Peter
the small account challenge the plan
that I revised after I learned what I
needed to learn about options. um the
best strategies for intraday directional
positions, the small account challenge
results, and then day trading,
transitioning from equities to options.
So, we've got a lot to ground to cover.
There is a chance that we go over a
little bit tonight, but I'm here to just
teach and hang out with you for as long
as necessary. So, um this is what we're
going to cover. So, before we get
started, this is a gift that I like to
send to Jared pretty much every single
day while we talk about options because
this is how I still feel a lot of the
time. So if any of you are looking um at
options and are just like what is even
happening this GIF is probably inside my
brain most days and you are not alone.
There is a lot to know about options and
they take a little while to understand
and to learn. Um so knowing that go into
it with a little bit of patience. Um and
if you feel like this it's okay. I still
feel like this sometimes. I run the
options room with Jared and there are
still moments where I'm like, "Jared,
what did you just say?" So, you're
you're gonna be all right. I promise.
Just stick with me and you'll be okay.
All right. So, the small account
challenge. Here's what my initial plan
was and why I decided to do it. So, the
initial plan, I wanted to grow a $1,000
account to $5,000 in approximately three
months. Now, this might not seem like a
lot of money, right? But when you do it
with the right amount of risk, um,
you're using a very small risk size. And
we'll get into what that looks like.
But, you know, just to give you kind of
a brief idea, I'd be growing a $1,000
account on like $15 risk, growing it up
to $5,000, and then adding on as we go.
So, compounded interest. And I, you
know, options are new, right? So, I
didn't want to go into it and just like
be spending $25,000 in in an options um
account. I wanted to learn it with a
small amount and see if it was actually
possible to grow it and what it felt
like and just kind of the nuances of it.
Um, and I obviously I knew I wanted to
try to do it with options. And then I
wanted to use it I wanted to figure out
a way to trade similar setups, the same
setup um that I used in my equities
account because I spent a lot of years
building out my equities style and my
setups. Um, I wanted to use that or just
a slightly modified version of what that
might look like.
So why this challenge? Like why go spend
a bunch of years trading equities and
then decide to do something like this?
First of all, I like a challenge. I
really like to learn. I like to
understand different things. I get bored
very easily. Um I like to keep my brain
active. So that's number one. But the
second was I started to wonder about all
the meme traders, right? How was it
possible that all of these kids, all
these young people could have $25,000 in
an account to trade, right? How do all
these like how how is this happening
right and the truth is you know that
they don't and a lot of it comes from
options and you can trade those with um
a small account and we'll get into that.
Second was I was, you know, or third, I
was finding myself stuck in positions
for longer than I wanted to be in
positions, and I was flip-flopping
between wanting to scout my longer holds
or letting them play out. And I wanted
to figure out a way that I could play
the same strategy, get um a good return
for a smaller move and still play the
bigger move if I wanted to.
So, I wanted a way to play my levels
without always needing to be right at my
level or get the timing exactly right.
And what I mean by this is with options,
you have a um what we call the options
chain where you can pick any price to
buy the option contract at. Now when I
get into a position, let's say Tesla is
at 190, right? When I get into a
position on Tesla and I want to play my
level at 190, I have to um I want to get
it as close to 190 as possible. In
options, I still want to get as close as
possible. But if if the price leaves
that 190 and never comes back to touch
it, but just kind of like hangs out near
it, I can still buy the 190 contract. I
do not have to be exactly at the price.
And I liked the idea of this. I liked
that I could technically play my level
but not have to be at my level every
single time.
And I liked the idea of more defined
risk. So, um, we'll get into that, but
this was a big one for me as well. All
right. So, those of you who are new,
what are options? So, an option contract
is a so a single contract is a 100
shares, right? So, every time you own
one contract of an option, you
technically own a 100 shares um of that
of that ticker of that stock. Um, a
contract allows you to buy or sell the
stock at a specific price. This is
what's called the strike price. Now, you
don't really need to be concerned with
that per se because you're not actually
going to be dealing with the equity
side. This is more so if you are
actually going to um uh exercise the
contract and take on the actual shares
of the position. Don't let this
overwhelm you. It's no big deal. I just
want to like tell you kind of what it
means. Um just know that you're focusing
on contracts, right? So, you're stepping
kind of away from shares and you're
focusing on contracts.
Now, there are two types of options.
There's calls and there are puts. So a
call gives you the right to buy a stock
at the strike price and a put gives you
a right to sell the stock at the strike
price. So if you buy a call, you are
more bullish on the position. So if I
want to go long on Tesla, I want to buy
a call. If I want to go short on Tesla,
I'm not selling anything there. I want
to buy a put. I want to be bearish on
the position. So I want to buy a put um
if I want to be short on Tesla. This can
be confusing sometimes for newer traders
because um you know, you go into it
thinking, well, I want to go short, so I
want to sell because that's what I'm
used to on the equity side. But you're
still going to be buying. So calls,
you're going to be longing a position.
Um it'll be bullish. Puts it'll be
bearish. Now, there are nuances to
options. Um there's a lot more to these,
but this is the general concept of what
this means.
And the options have an expiration date.
So when you get into a share position,
um you can hold those for as long as you
want. You can bag hold those till you
die, baby. [laughter] I won't tell you
that from experience, but I also will.
Um but with options, you have an
expiration date. So they might expire
this week, they might expire next week,
next month, today, whatever. um just
know that you can't actually hold them
for ever and ever and ever unless you
bought it out, you know, forever and
ever and ever in the future.
So, here is options contracts explained
with pizza. So, [laughter]
um let's say that you are hungry and you
want to order a pizza, right? And so,
you call your favorite pizza place and
they tell you, "You know what? Pizza
right now it's 15 bucks. It's happy
hour. It's $15." And you're like, "All
right, cool. Pizza's 15 bucks." You hang
up the phone and you think to yourself,
"I don't really want pizza yet. I want
to wait for my friends to get here and
then I'm going to get pizza." And so you
call the restaurant back and you say,
"Yeah, there you go. Spicy sausage for
Peter." Um, so you call the restaurant
back and you say, "Look, if I give you $2
$2 to
to
give me that price for the pizza in the
future, let's do that." So this is
basically your contract. This would be
your option contract. So you call them,
you say, "I'm going to give you two
bucks. If I decide to order this pizza
in the future, it's always going to be
$15, no matter what you change the price
to." And they say, "Cool deal. This is
your insurance on it. Basically, you get
it for 15 bucks and you give us $2 now."
So 30 minutes, an hour passes by,
suddenly there's this huge rush of
people that want pizza, right? So they
show up, there's this huge line outside
the door, everybody wants pizza, and the
price gets jacked up to 20 bucks. And
you're like, "Ah, yes. I bought an
option contract on this pizza. I I can
still get it for $15. I gave them two
bucks. I can still get it for $15. So, I
order my pizza. The little man shows up.
I get pizza. Everyone's happy. So, I got
the pizza for $15, but I gave a $2 um
basically insurance or a contract that I
could still get this pizza for that
price. So, I technically saved $3,
right? So, if I had gone to the
restaurant an hour later and the price
had gone up to $20, I would have had to
pay 20 bucks. um and the fact that I
didn't have to pay 20 bucks and I got it
for a little bit less. Um I saved myself
$3. So now, how do you make money off
this when it comes to option contracts?
Let's say that you decide you get the
pizza, you spent $17 on it. You get the
pizza and you're like, "You know what? I
changed my mind. I don't want pizza." So
you go down to the restaurant and
there's a huge line out the door.
Everybody's waiting in line to get the
pizza for 20 bucks. You go to the guy in
the back and you say, "Man, you can skip
this line. I'll give you this pizza for
$20. It's the same price when you get to
the front. I but I'll give it to you for
20 bucks. They're like, "Cool, man. I'll
take this pizza off you. They give you
20 bucks. You spent $17 on it. You make
$3." So, that's how contracts work is
you get the item and you sell it back,
right? So, we never really um unless you
really want to own the shares, right?
Like unless you really want to own the
pizza, you're never actually going to um
need to worry about that. You'll give
the pizza back, you'll give the contract
back, and you'll make money off of it.
Hopefully that was somewhat of an easy
example to understand. I wanted this to
be as easy as humanly possible.
Now, if the pizza price does go down,
right, everyone [laughter] wants
Chinese. Well, that's a whole other
story. Um, if the pizza price does go
down, you do lose some of that money
that you spent to hold the insurance in
case it went up. You're really just like
it's it's insurance on it, right? You're
like, I'm going to buy this contract in
case it goes up so I can still get the
pizza for this price. Yeah. Well, Peter,
you can eat the pizza. That's fine. [laughter]
[laughter]
[gasps] Okay. All right. Cool. So, easy
peasy lemon squeezy. All right. So,
option pricing. Now, this is what trips
everybody up. So, I'm going to make this
as easy as possible. Um, yeah.
Biohacking with pizza. There we go. All
right. So, the Greeks, I'm not going to
dive into this too much. This is where
people read and then they leave options
forever and they never come back. I
don't want that to happen to you. Just
know that a lot of the pricing in
options does come from an underlying
amount of things, the Greeks, um, that
change the price of the contract. Um, so
you do not need to know all of the
details about them. Jared might argue me
on this, but that's okay. And Arty,
[laughter] he might argue me on this,
but just know that there's two things
that you really need to know about
options. One is volatility.
So, if the speed and the stock that
you're trying to trade is moving very
quickly, it will increase the volatility
of the option contract, which will jack
up the price on it. Um, so if it goes
against you, it can move very quickly in
the wrong direction. Um, and it can also
move very quickly in the right
direction. Um, so volatility is one
thing you want to pay attention to when
it comes to options. And the next thing
you want to pay attention to is time.
Like I mentioned, they have an
expiration date. So, you want the move
to happen as quickly as possible. And as
day traders, that's what we're looking
for anyways. So, you're in the right
environment as far as like if you want
to trade options um with a directional
bias on them.
So, there are three types of option
prices and I want to go through them
because um what happens often are people
see the cheap options and they think
that's what they should trade. So, let's
just talk about that really quick. So,
what you'll see here is we've got out of
the money contracts and what that means
is there are um this is this is an
option chain of Tesla today and Tesla
closed around 185. So, this is the put
side of the options chain. So, I just
have this highlighted here. This is what
we closed at um today or somewhere
around there. So, 185 would be
considered at the money on the option
chain um side of things. So, you're this
is going to be you know we're at the
money if we buy this strike because
that's where Tesla is sitting. Now, if
I'm in a put side, I'm in the money on
anything that is above 185, right? So,
um I this is this is kind of what I'm
focusing on mostly for my strategy. So,
pay attention to these right here. What
happens a lot of the time are traders
see out of the money, which would be
like Tesla's at 185 and I think it's
going to go lower and I could buy these
contracts here which are much much
cheaper. um I'm going to get into a
position and spend less money. When
you're looking at this in money context,
one contract equals 100 shares. So, this
right here says this is $2.88.
In reality, this is $288
for this one contract. So, anything up
here when you're seeing this, like we'll
look at this one right here. It says
that it's 6. This is actually a $6
contract. Now, that's very appealing,
right? I mean, people get into options
and they're like, "Wow, they're so
cheap. I can just trade them. um I can
just trade like a hundred of these and
it's going to be great. The problem is
is that these ones that are out of the
money, they tend to um
decay faster if it doesn't move in your
direction quickly enough. And what I've
found, and there are strategies around
this, and actually I've been working on
some different strategies of when to use
these types of option contracts, but
what I have found for smaller moves on
the intraday that seem to be the safest
um while getting into option contracts
and getting my feet wet has been to use
um at the money and in the money um
options. So, yes, they are a little bit
more expensive, and we'll go into how to
decide how many you can buy and what you
should buy. Um, but just know that um,
these ones carry intrinsic value,
meaning that they hold value as far as
they're in line with the fact that the
stock has already been in that price
area when it hasn't been in the price
area and you're just hoping it goes to
there. This is more of a gamble and that
is also why those prices are so cheap.
Um, so playing with at the money and in
the money I've found to be the safest
way to to do things. There are
strategies you can build around this,
but for now we're going to just focus on
these two right here. So we will focus
on those. All right.
So the small account advantages. So with
options, it requires way less capital.
We'll get into what the differences are
between if you were to buy the stock or
buy the option contract, but way less
capital required. Um, and that is a
huge, huge benefit, especially because I
don't know about you, but when I started
day trading, I did not have that much
money. I had $5,000 to day trade with.
Um, and for me, that meant going to an
offshore broker. Um, so less capital
required. Um, you don't need as much to
get into a position. Um, and again,
we'll go through that in a second.
So, limited um, and defined risk for
buying contracts. Um, that's mostly what
we're going to focus on is buying, not
selling. Um, so, uh, limited and defined
risk. This one is a big one because how
many new traders have moved a stop loss
and like blown their account or lost
like five or 10 times as much as you
were planning to lose that day on a
position. I mean, I'll say it, me, I
blew up my first account because of that
because I moved a stop-loss. Um, yeah,
exactly. Guilty is charged, right? Um,
it happens, right? We are literally
monkeys. Like, there's nothing we can do
about it. We are just here to push
buttons for the most part.
So, what I like about options, because
I'm still someone that I'm a little bit
risky person. I'll admit it. I I like
risk. It makes me feel alive. So, um,
what I like about options is that, um,
you go in with a very defined amount of
risk. Um, and we'll you'll understand
that in a second. But, um, what's great
about it is that if you have a day where
like your whole brain just goes offline
and you like trade like a like a silly
silly goose and you move your stop, if
that stock goes $1,000 in the wrong
direction, you're still only going to
lose how much you spent on that
contract. You won't lose anymore. you'll
lose like you might lose a little less
if you get out of it, but you'll never
lose more. So, if I spend a $100 in an
option contract and it goes a million
dollars in the wrong direction, I'm
still only going to lose $100. That's
it. That's it. That's my limit. Um, and
I freaking love that. Like, I'm just
going to be real with you guys right
now. Like, I love that. Love it. Okay,
so did I tell you I love it? Um,
leverage. So you can control a larger
position with a smaller amount of capital,
capital,
less commissions. Um, so this is
obviously depending on the amount of
contracts and your broker, but typically
one option contract is most brokers are
about 65 cents to get in and 65 cents to
get out. So we're looking at a buck 30
to get um in and out of the position at
round trip. But if you think about this,
um, when I was trading with, uh, CMEG,
so I'm offshore offshore broker, right?
The commissions for that, if I remember
correctly, are like 2.95 to get into the
position. It's 2.95 to partial and it's
2.95 to get out. Um, so that's $10 round
trip just to like have the position. And
yeah, so like three bucks now, right? So
we're looking at like 9 to 10 bucks to
just to do the position round trip. Um,
and usually when you're in a small
account, you're probably not trading
with like a huge amount of risk, right?
So, if you make $15 on the trade and you
spend $10 on commissions, like I mean,
your account is just going to get eaten
at, right? It's just going to get eaten
and and dissolved very quickly. Now, it
is possible, right? Like I did it for a
while, too. Um, but I like the idea that
there are less commissions here. Um, and
if you're trading, you know, you're
trading smaller size, too. So if you if
you are taking thousands of shares, um
you might have a little bit more
commissions than someone who's buying a
couple contracts, right? Um so I I do
like that part of it. And then there's
no PDT rule, guys. I didn't know this.
Like this is news to me. Like total
news. I had no idea about this until
earlier this year. Um no one said
anything to me. Uh maybe I would have
started with options. I have no idea.
But this is amazing, right? because it
gives those who are in the US who have
the PDT rule working against them. The
PDT rule is the pattern day trader rule.
And this states that you must have
$25,000 in your account at all times.
So, um, like I was saying earlier, I was
wondering, you know, what kind of
sparked some interest for me was how did
all of these traders who, um, you know,
are young or whatever, like how do all
these meme traders have $25,000 in their
account, right? like how like all of
these people that are trading GME have
$25,000 in their account. I absolutely
do not believe that. Um and this is part
of it, right? So there's no PDT rule to
trade options. Um so here's the kicker
though, and you have to make sure if you
do want to set up an options account on
cash that's smaller um or that's a
smaller account, it has to be for a cash
account. You cannot have a margin
account. Um, if you have a margin
account right now and then you try to um
change it over to a cash account, I
don't believe they'll let you. You have
to start a cash with a cash account. Um,
and then the cash is settled in one to
three days. Most um most people are
seeing the cash settled in like one day.
So um what that means is anything you
make on the position um that day, you're
not going to be able to trade that money
that you made that day. You but you'll
see it the next day when you when you
get up. Um they say one to three days
but typically it's about one day. So PDT
we get to bypass that and that's amazing right?
right?
All right so um okay so the risk as with
anything involved there's always risk
right so I did talk about volatility so
the price can move up and down much
faster than the stock price itself or
the or what we call the underlying
asset. So we have to be careful careful
of high volatility. What I find for some
of the best positions are um things that
are going to be volatile um that are
about ready to break and we'll talk
about that, but things that are about
ready to break where you can get them
before the volatility um increases too
much. Uh Demetrius, does PDT apply to
traders in the US or brokers based?
Yeah. So, in the US, yep, it's a US
rule. Those those darn US people, they
And then of course limited time which
I've already mentioned once but if it
doesn't move quickly um it can start
working against you right so theta decay
one of the Greeks or time decay is what
we can call it starts working against
you so when you're looking for a trade
intraday you want it to be in an area
where it can move quickly you do not
want to be in a rangebound environment
you don't want to get stuck in chop um
you want to be on the edges of things
and you want to be in a place where it
can move quickly
so here's options versus equities and
the capital required So this is just
kind of a breakdown so you can get a
general idea of what this looks like as
far as how much you end up spending on
the contracts versus equities and a
share position. So here's Tesla. It's an
in an equity position. The stock price
is $100. Okay. So if I want to buy a 100
shares of Tesla at $100,
I'm going to be spending $10,000 on the
position. So I need at least $10,000 in
my account just to get a 100 shares of Tesla.
Tesla.
So, when it comes to option contracts,
now we talked about what kind of strike
price I want to buy. So, I want to buy
at the money. So, as close to what the
actual stock is trading at. So, if if
Tesla is at $100, then the strike price
I want to buy for my contract is either
um at $100 or somewhere close to $100.
So, we're going to say the strike price
is $100. That's what I want to buy. The
premium for that one contract is $1.
100 share which is equals 100 shares. So
if I buy one contract, I'm going to be
spending $100 on that contract. So one
time 100, $100. So you get a 100 shares
in each contract. So um Tesla contracts
are usually closer to like $3 or so,
like you saw. I think it was like 288
that I just showed you. Um but just for
simple math purposes, um this just makes
it easier to understand and and read. So
to get into a Tesla equity position, I
would need $10,000 to be in control of
100 shares. And if I use one option
contract to get into a Tesla position at
the same price, I'm going to need $100.
The amount of capital required here is
ridiculous in difference. Am I right?
Like I mean that is a huge huge
difference. So if I lost my mind for
instance and let's say Tesla went to
zero, right? I lose $10,000 in this
instance. I'm playing with about the
same amount of shares, right? But if
Tesla goes a million dollars in the
wrong direction, I only lose a $100.
Like I just it just sounds much better
to me. I just feel safer, right? So I
don't have to tie up as much capital as
well. So, one other thing that's um this
is kind of a tangent, but um in that's
interesting is if you are someone who's
holding swing positions and they're
tying up um it's tying up capital in
your account on the equity side and
let's say that you know you've got let's
say you got a $30,000 account and you're
tying a lot of it up in swing positions,
you can use um you can trade with like a
little bit of money that's left on the
side, right? So like maybe you have like
$2,000 that's not being tied up. you
could use that in option contracts
instead. Um, you won't be able to get
like a big Tesla position with shares,
but you could definitely get a good
option contract position with that
little bit of money um that you have.
So, this is a kind of a way to um
whether you have a small account and you
start with a small account and use this
um sort of pricing or you have a larger
account but a lot of it's tied up and
you want to use a little bit for options
contracts. kind of gives you um kind of
just gives you flexibility in where you
can put your money and how much money
you need to have. So, with anything,
there's always um risk and position
management involved, right? So, we're
going to use percents, but we're going
to think in um ours. You know, the
easiest way to learn something new is to
take concepts that you understand from
something previous and then use it as a
foundation and build on it. So, um a lot
of the BBT family and community is very
familiar with thinking in ours. So, I'm
going to break this down for you so that
it's easy to understand in an R
mentality. You know, just like with
anything, like when I was um a chef, I
learned to peel potatoes and every time
I made a potato dish, I didn't relearn
how to peel potatoes, right? I peeled
potatoes and then I made the new dish.
So, this is very similar to that. We're
going to think in the same sort of risk
management way. Um but we're going to um
we're going to just like add a little
bit of a flare and pizzazz to it. So
again, the amount spent when buying
calls or puts is the most you can lose.
However, the goal is to never lose the
amount of capital used for the position.
Now, that is, you know, if you lost the
whole position, that's what you would
lose, right? Like we've been talking
about, but that is not the goal. We
don't want to lose the whole option
contract. We actually want to sell it
before that ever happens. So, how do we
think about this in terms of um RS or
percentages? So, let's say you have a
$1,000 cash account. Okay? So, what
we're going to do is we want to use 10%
of the uh 10% risk of this account right
here, which would give me $100 of buying
power for contracts. So, that means if
Apple is one contract is $100, then I
can spend $100 on one Apple contract,
right? So, this would look like on the
option chain, it would just look like a
dollar, right? But again, we're going to
times that by 100 because there's a 100
shares in it. Um, there is a little bit
of math involved. Again, the Winona
Rider gift shows up many times in this.
Um, but so you could get one Apple
contract, right? So 10% risk off of
$1,000,000 account equals $100 of buying
power. So you can spend $100 on one
Apple contract. Then bringing in the 2:1
ratio for thinking in RS. If this
contract here
goes down 10%,
you'll exit the position for $10 or 1 R.
So 10% is of this here, what you've
spent on the contract. But when you
think of it in terms of capital usage, 1%
1%
of $1,000
is $10. Same thing with equities, right?
So, if I have $1,000 in my equities
account and I let's say I take a trade
with that sort of risk, 1% of this,
which we use usually 1% per position, um
would be $10 of this entire account. So,
the way to get that with options is to
use 10% of this account to get into the
position. So, you might be using a
little bit more capital than you would
make. Um, so you would be using $100,
but your risk would only be 10. Then we
want a partial at 2R. So that would be
at a 20% gain or 2% of the full account
[clears throat and cough] position. Does
that make sense? I'm going to go into it
again on another example, but just is
everybody kind of following this sort of
scenario here? Okay, I've got a yes.
Okay, good.
Okay, cool.
So, I'm going to do it one more time
with another um example. So,
this here is a $30,000 margin account.
Now, those of you that are above PDT,
this is probably somewhere where your
account is sitting. I'm just going to
guess. We'll just pretend, right? So,
here's the thing about PDT, um we'll get
into all this in a second, but just a
little side note. When you have, let's
say, $30,000 in your account, you don't
actually want to risk off of $30,000,
your risk should be based off of
whatever is above PDT. Okay? So, the
reason being is that PDT is actually
your risk of ruin or your blowup. If you
go below PDT, you can no longer trade,
right? So, this is for a margin account.
We talked about cash account, but I'm
saying for you guys in a margin account,
giving kind of just like a general idea,
your risk should be $5,000. Okay, $5,000
is what is above PDT. So, when you have
a $30,000 account and you're in the US,
if you're trading on margin, even if
you're trading options, right? So, we're
just thinking about this in terms of
what should my risk be? You want to be
above PDT. So, this is um your $5,000
above PDT here. The risk you're going to
risk based off of that $5,000, right? So
10% risk of $5,000 is $500 worth of
buying power for contracts in an option
position. Now, if I get into the option
position, I can spend $500 on five Apple
contracts. Right up here, I only had
$100 to spend. So, I could buy one one
Apple contract. So, Apple contracts are
$100. I can get five of them and it'll
cost me $500. So, at $100 each. Now, if
I lose 10% on the position, the the
price goes down 10%. I'm going to lose
$50 or 1 R, 1% of $5,000.
Similar to the partial or an exit would
be at a 20% gain or 2% of the full
account here, which would be $100,
right? So, thinking in ours, but we're
using percentages and options. That's
how most options are um calculated.
They're calculated in terms of
contracts. So yeah. So Leila, so you
can't partial one contract. Um when you
get into options for the first time and
let's say you can only um buy one Apple
contract, you're going to have to exit
the full position at your 20% gain. I
had to do that for a while in the
beginning because I couldn't afford um
like a bunch of contracts when I was
starting off with the with the thousand
account. Um so yeah, you'll just have to
exit the full position.
All righty. So,
okay. So, small account challenge plan
revised. So, we know all this now,
right? So, we've learned a bunch of
stuff about options. I came into this
and I said, I want to grow a $1,000
account to $5,000 in approximately three
months. I'm going to use options to do
it and I'm going to trade the same setup
that I use an equities account or a
slightly modified version, right? Um,
but now I know all this other stuff,
right? We just talked all this other
stuff. So, what do I want the plan to
look like? I'm only going to buy. I'm
not going to sell because um Brian, Mr.
Diddly Douly, is the only one that's
allowed to sell naked option contracts.
So, we don't need to get into that. But,
um, we're only going to buy them.
Then we're going to use strike prices
that are the same or close to the equity
price when entering in a position. Now
again, that's because anything that's
out of the money or far away that's
cheap, you need it to go quickly in that
direction to that price or those um the
percentage gains and losses really move
a lot. Um there they don't move slowly.
They move very quickly um against you.
So, if you are at least close to the
strike price or um you know within you
know a few cents or you know 50 cents or
so of it, you're going to have a lot
easier time um managing the position.
So, we're going to use strike prices
that are the same or close to the equity
price when entering. Uh we're going to
use the same week expiration, right? So,
we are day traders. I really don't care
about a contract that's a month out from
now or two weeks out from now if I'm not
swinging the position. So, I'm going to
be in a day trading position. So, I'm
going to use the same week expiration.
Now, when you look at an options chain,
you'll notice that they are split up
into weeks in into weeks. Not the number
two, but into weeks. Um, unless you
unless it's a daily position like the
SPY, but for most equities like a
Netflix, a Tesla, things like that,
they're going to split be split up into
into separate weeks. And I want to trade
the same week expiration. Now, that I
will consider next week expiration when
we're on Friday because Friday is wild
and crazy. I will tell you that right
now. It's fun. you can make a lot of
money, but you can also lose a lot of
money really quickly um because the
contract expires that day. So, if you
want something that is a little bit
safer as you're starting out and when
you get to Fridays, um you could
consider using next week's expiration date.
date.
Then, I want to be in and out of the
position in the same day ideally. Um I
have been swinging some stuff lately,
but um I want to be out most likely the
same day. I'm going to use max 10% of
the account to enter the position. I'm
at a partial at a 20% gain on the
position and I'm going to exit at a 10%
loss on the position. Now, these can be
kind of taken with a little bit of um
flexibility. They are a guide, but if
the contract moves very quickly and
suddenly goes to 30%. Um I'm not going
to be like, "Oh, I didn't partial have
my 20%." Same with you guys, right? Like
you're trading equities um and you're
not trying to you're not like, "I have
to take it here." Um, but that's where
you're looking in the general vicinity
to take the partial um or exit the
position. Same thing with the the loss.
There are times when I don't necessarily
wait for a 10% loss. Um, if the the
stock that I'm trading um, you know,
breaks a technical level or something, I
might say, you know what, there's no
point in holding this, so I'm going to
get out a little bit sooner.
But those are just kind of like a guide.
All right. So, what are the best setups
for intraday directional positions? And
when I say directional, I mean I'm I'm
saying it because there are different
ways to trade options. There are things
that you can do that are neutral where
the stock doesn't need to go anywhere.
But we're talking directional. We're
talking the price is going to move and
it's going to go somewhere. We're going
to have somewhere to go today. Um so the
best setups for intraday directional
plays on options are breakouts. This is
the number one thing that is an
incredible setup. Um most of my
positions are breakouts these days. I do
trade reversals. I find them a little
bit trickier, but breakouts are awesome.
So, we've got the high a day break, low
a day, previous day high, previous day
low, range breaks, trend breaks, channel
breaks. If it has the word break, you're
probably going to have a decent options
play in there. Um, so looking for any
kind of a break trade is ideal.
Gap fills are good, too, because again,
we want the option contract to be or the
price to be able to move. So, if there's
nothing in the way and there's a big gap
to fill and it starts to enter into that
gap and it's able to move through that
gap quickly, the option contract is
going to pick up pricing as the volat
volatility picks up and starts to fill
that gap.
Heavy bounces and rejections. So, we're
talking range extremes. Um, so anything
that's really far on the edge of
something. And you know, I love to trade
higher time frames. So, like this is my
jam, right? If we are stuck in a range
on a higher time frame and we get to the
extreme end of it, it's a great place to
play options for the move back down into
the range. Um, now it is a little bit
trickier because as you are um looking
for a reversal on something, it does
need to go quickly and sometimes what
happens in reversal plays is you get a
breakout and then you comes down and it
tests the level and then it and then it
kind of does this and then it goes and
in this moment right here it can eat
away a little bit of your your options
contract. So just be aware of that that
these do work but in the time that it
takes for it to break down sometimes it
can get a little bit tricky. So as you
are starting out in options trades
breakouts tend to be a little bit easier
to get going with. So keep kind of put
most of your focus on that if um if you
want to give this a shot.
And then patterns. So patterns are great
trades with this. I mean patterns are
great for day trading in general but
these give things momentum right. So,
for example, we have a trend down, we
start to get a oops, a bare flag. Um,
and then it breaks the bare flag and it
makes the continuation lower, right? Um,
bull flags, wedges, triangles, things
like that. Anything that's compressing
and might break out of compression area.
You don't want to be trapped in this
crap right here. That's going to kill
your contracts. So, you want to be on
the edges of things and right in the
All right. So, couple examples here as
we get into some things. So, um, Nvidia,
uh, those of you that have watched
Nvidia lately, um, before it started
that nice tear up to 300, it got stuck
in this range right here. This price
around here was about 280. We had two
days where this was great for option
contract plays. Um, so this initial
breakout day here was a great option
contract play. And this one here, I
actually like the second one better. And
the reason being is that not only do you
have a range break on this one, but you
have also this break here of a pullback.
And pullbacks are really fun and work
really well for options trades. They
work on the intraday, they work on the
bigger picture. Um, you know, a the
volatility that happens when you get
into an option contract. Um, if you get
in right on the break like this, like
let's pretend this is a five-minute
chart. If you get in right on the break,
sometimes you can catch like a good move
right on the break, right? Um but what
can happen is as it starts to break, the
volatility is really high and it kind of
um it can get a little bit hard to
manage sometimes. So these pullbacks
that are on low volume before it starts
to push again can be really nice ways
and like easier and less stressful ways
to get into things. Um, so I actually
like the second day that this happened a
lot better and I went a little bit
heavier than normal on this day just
because it had two things working out
for it where it was breaking a range and
it was breaking this trend line
pullback. So these are the types of
things we want to look for. So we want
to look for breakouts of ranges, trend
line pullbacks. Um, and if I bring this
over to a uh 60inut chart and I'm
looking at it here, this is it kind of
zoomed in, right? So, we have here's the
level of that range off of the daily
chart. And then on the second day that
this worked out, it pulled back like
this. And then as soon as it broke that
and got back above this range level, we
had a good I think it was like almost a
seven point move or something like that
that day. Um, so these types of setups
are what we're looking for, things that
can move, things that break, um, things
that I'm not going to sit around in for
too long. So these are these are the
trades that I took that day just to kind
of give you an idea of what was bought
and what I did. So um this was the
Nvidia trade that day. Um it was at 280
on the break. This is the first day.
Okay. So this is the first day that it
happened. Um Nvidia. So I bought the 280
calls. So I want to be as close to this
price as possible, right? Um if if the
if let's say this level is 281,
I'm still going to buy the 280 calls
because I want to be a little bit in the
money. Um, I know that like you can get
a quicker and faster return if there's a
little if they're more out of the money.
Um, but it's just a little bit riskier
when I'm trying to manage it based on
percentages. So, and you'll see that as
you start to trade them. Um, that it's
just going to give you a less of a
heartache um, if you can get a little
bit more at the money in the money um,
and allow it to kind of play itself out.
So, uh, yeah. So to to determine the
price of the that I buy the contract at
Yash, um I buy the contract as close to
what the stock price is sitting at. So
if my level's at 280 and I'm taking a
280 breakout here, I want to buy the
strike price of the contract at 280.
Okay? So um some contracts are um well
and let's say let's say this level was
at 28050,
right? So, you might ask yourself, okay,
well, I'm at 28050. Do I buy the 281?
Which Invid doesn't have a 281, but
that's a whole other story. Um, some
option contracts are in increments of
$25, uh, rather than one. And you'll
notice that on some of the higher price
stocks, but let's say that this level
was at 28050, right? So, we're just
going to say this is at 280
50. Okay, pretend that's what this level
is. What do I buy it at now? Well, I'm
going to buy it in the money at this
point. I'm going to buy it at 280. I
don't want to buy it at 281. I don't
want to buy it out of the money. And
like I said, there is a strategy for
that. And there are times to play that.
And there are ways to do it. But when
you're getting your feet wet with
options, you will have a much easier
time. I promise you, if you don't buy
the cheap stuff that's out of the money.
All right. So, that was that trade. Uh,
same trade. Just don't know why I have
double charts in this. This is the
second day. So, this is the day that I'm
talking about where it got up to that
range, right? Um, so we had the range
sitting right here. We had the
downtrend. Um, and then went into this
position here. So, similar almost the
same exact trade, right? I'm just
playing the level. I'm playing the level
breaks. Um, so these are both breakout
trades at specific levels. Um, and the
reason why I like to play them off of
the higher time frame. And for those of
you that know me, you know that that's
what I love to do. But I love it in
options because it's going to give it
more room to run. And for an option
contract to pick up pricing, uh, the
stock needs to be able to move
somewhere. So, I don't want to play this
on like a five minute level to another
five-minute level like right here.
That's not going to work for me. I could
I mean, you can do it. It's quick
scalping. You can make a quick buck out
of it. Um, but I prefer to trade it so
that it has f in a place where it has
further room to go. Um, so that's what
I'm personally looking for. Um, so if I
take like a break of high of day, I want
to make sure that it has a little bit of
room for it to go before it's going to
maybe turn around or reverse or stall
out. Um, because again, you don't want
it to stall too quickly. You want it to
be able to kind of keep going.
Same thing this day. Uh, same trade. Um,
this is another one that you could take.
Um, so this is a channel, right? Um,
once AMD broke this channel, um, you
could take it for the breakout this day.
Um, I unfortunately missed it. Uh, but
this is a way to take it. You can take
it on the intraday and you can take it
for a swing. Now, I'm showing you again.
I'm showing you on the higher time
frame, but within this area here, on a
lower time frame, you can find smaller
setups, smaller wedges, ranges, things
like that to take it as it breaks out of
this area here. Um, so channel breaks
are another one.
um ABCDs. So, those of you that have
trade ABCDs or high of day breaks, um
you can trade this in the in two areas
here. So, you can trade this as it pulls
back. So, let's say this is the level
that you're trying to break right here.
It breaks up through this level here,
right? It pulls back to the level and
then it breaks this trend down. So, it
breaks the pullback. And this sometimes
can be a little bit easier than trying
to catch this right here and have your
premium eat away at you while it does
the pullback. Um, letting it break out,
come back, and then catch it on this
downtrend break as it makes its
continuation can be a great way to get
in. Oops. Without um without too much
worry about what's going to happen to
your premium. Um, how long do I normally
hold it? So, I'm usually playing level
to level. Um, I will partial at key
areas of resistance and support. So, um,
I'll show you a Tesla trade today that,
um, I took that I ended up getting all
out of. Um, and I'll just kind of show
you where the levels were that I was
looking at. But, um, I usually am
holding it until the next, um, higher
time frame area. Um, I do partial
usually a little bit sooner and I never
used to partial soon on my trades. And
this is part of the reason why I started
to gravitate towards options because I
wanted something where I could actually
make a decent buck if I partialed early
and then I could decide if I want to
hold for longer. Um, and that's kind of
what I did on Tesla today. And I'll show
you um I'll explain to you kind of as my
equities position what I would have done
um in my equities trade versus what I
can now do in my options trade and still
make a decent return on it. Um, this is
what we don't want to see. Um, so, oh,
Raj, let's see. Option price is always
changing. Did you pick the price when it
breaks the level? Yeah. So, this is a
great question. So, you can break, you
can take the price when it breaks the
level. Just know that and and that's
definitely what I did. Um, but just know
that if it pulls back too much or it
comes back to retest the level that it
can sometimes be a little bit tricky to
hold through um the decline in your
premium. So what can be a little bit
easier is waiting for like a five minute
break out of that area. So you might get
like I'm just going to draw on this
chart, but you get a five minute break,
right? And then maybe a one or two
minute pullback and then the
continuation. Um you can take it right
as it breaks, but as we all know with
trading stocks in general is that it can
do this and it can do this and then it
goes and it might just get a little bit
hard to hold through that volatility.
So, I would my suggestion to you guys
would be utilize the five minute chart
right now as you're starting out. Let
the five minute um you you can use price
action, right? If you're a good tape
reader and you're a good L2 um trader,
use that. Sure. Because that will tell
you exactly when to get into the option
contract when the price is going to
actually start moving. But if you're
better at reading candles um and just
kind of price action in some more
lagging indicators, wait for the five
minute to tell you what's going on. Is
the five minute really bullish? Should
the five minute close above the level
that you're looking for it to break out
in? Then look at like a one minute and a
two-minute and see if it kind of pulls
back ever so slightly before it
continues because you're going to have a
little bit of drop in your premium in
your contract during that pullback, but
then you'll be able to get a better
price for the continuation.
Uh what time frame are you using using
during the using the chart during the
market? Like are you saying um what time
frame are you usually using to chart
during the market? So like during market
hours. So, um I before the open I do
everything on the higher time frame. So,
weekly, daily, and 60. Um intraday for
my trade positions, I'm using mostly the
five. Um that gives me an understanding
of how if we're going to break or not.
Um in a breakout kind of scenario, I'm
using the five and and tape and L2 for
that. Um and then I use the one or the
You are very very welcome. Okay. So,
what I was saying was this is not what
you want to see, right? On days like
this, this is not this is not what you
want to be in. And if you're going to
take an options position, you need to be
on the extremes of this because if you
enter into a trade like here for this
little itty bitty move here, you might
make 5 cents, you know, like it's you're
going to and then as it pulls back, it's
going to be gone in a heartbeat. So, you
want to be on the extremes. That's the
most important part. you want to be on
the breakouts of these areas or you
could you could take it for back into
the range, but it is a little bit
trickier. So, my advice to you is start
with breakouts. Um it'll be a little bit
easier as far as um what happens to your
to your position.
Um just to kind of show you um so this
was Google yesterday and Google had this
huge run, right? And you're like, "Oh my
god, I missed this whole freaking run
and now what?" Well, what's great about
options is so I have a level sitting up
here. What's great about options is that
just this tiny move right here, I think
it's about
uh like from 127 12587 down to like the
125 area we'll just say. So it's like 87
cents. It's not that much, right? Um so
I you could go into this for an 877 move
here and you know spend you know $12,000
on a on 100 shares or you can go into a
contract. This is the contract. So
you'll see this looks a little bit
different up here and you can go into
the contract at about you know like a
buck 50 when it starts to break that
level off of the um bigger picture and
you could write it to this is kind of
where it was um up to like maybe 210 or
so. So it's about a 60cent gain in your
contract, but that's $60, right? So you
could buy a couple contracts only
spending a couple hundred um versus
spending $12,000 and you can get a
similar if not better return a lot of
Um, okay. So, this is I'm going to show
you two trades that I took today. We are
I'm almost through all of these, so bear
with me. I knew it was going to be a lot
of ground to cover. Um, but so these are
two trades today. So, this is an example
of, um, a loss and a win. I had a loss
and a win on this position. So, um, this
is Tesla. This is my first trade on
Tesla today. Um, I did try to take a
short position. So, I bought a put on
this position, right? Um, I exited just
around 10% and I lost with commissions
about 40 bucks on the position. Right?
So, um, this is what it looks like as
far as I'm looking for a 10% loss. And
people are asking me, how do you how do
you know how much has changed, what's
going on? So, in my positions window on
DOS, I have the change column, change
percent column, and I'm watching that. I
do have hotkeys that I can set at 10%
loss. Um, and um, I could definitely
send that to you guys or I can put it up
in the room drive at least. Um, it'll be
in the room drive. I can have it in
there tomorrow. Um, so that you guys can
have it. But it's just, you know, you
can you can get in and you can set the
10% loss and they can just let you out
of the position um, at if you hit 10%. I
usually manage it manually. I'm usually
watching it. Um, I'll just hit to sell
the contract if it gets to 10%. Um, so
that's basically what I'm doing. So that
that's a loss on the position. So we're
looking at 10%, right? Um, and then the
next one was a win. And now I'm gonna
tell you kind of thought process-wise
the equities kind of side of things,
right? So, um, in an equities position,
this area down here was the next high
kind of level that Tesla could have gone
to. Um, so in my equities position, I
would have held most of it for this
move, right? and it would have taken me
all day and I would have had to sit
here. Um, and yeah, I could have
probably made more on this position,
right? But I'm going to tell you what, I
taught a PCT class this morning for two
hours and I was freaking hungry and I
was like, thank God for options because
I can still exit this position and get
almost 200 bucks out of it, right? And like
like
that's just one that's just one trade
here, right? So, um, I exited at 22%.
Right? So, um, you know, lo exited the
last one at a 10% loss.
took a partial around 20% on this one. I
had one more contract in it. I was going
to let it ride and then I was like, you
know what, I need to eat. I'm just going
to exit the whole thing at 22%. So, um
you know, just a small simple play. Um
and yeah, the next target was all the
way down here. And yes, it would have
been great. I think that ended up these
contracts down here. Um once I bought up
here, they ended up being like $7 or
something. And I bought them for four.
So each one of those contracts was um
worth about $300. So writing these both
of these to my this target down here
would have um given me about 600 bucks.
And that's just two contracts, right? So
I'm not spending a bunch of money. Um
I'm not a thousands of shares into
something to make, you know, five $600.
Um you do a couple of these every day, a
few of these every day, and just a
couple small moves and you're good to
go, right? Like I don't need a thing
that goes all day long and I don't need
a million shares to get into a position.
I just have a couple contracts and I'm
I've had I've had a good time. Um
Jarvis, this is um Trader Sync. So it is
um a journaling stat collection
software. So um I use it for options. Um
it does a great job. Um I've been
working with them on the side to bring
in different features and stuff and they
have been super great at um catering to
my every need and every email that I
send them all of the time. They're
probably sick of me, but that's okay.
All right, so [clears throat]
pop quiz. Um these contracts were same
day expiration trader uh or it's not
same day expiration same week
expiration. So these contracts were for
um this Friday, right? So tech uh Tesla
is weeklys. So they expire every Friday.
So these contracts were for Friday. So I
could have held this, right? Um I could
have held this for another day or two if
I really wanted to. Um because they
don't expire until Friday. Um but that's
not my that's not my strategy. Um, so
this is just same same week and exit the
same day. But what my point of this
though is that when I traded equities,
for me to feel like I got enough out of
the move for this the amount of capital
that I was putting in and the amount of
risk I was um risking, if it was a small
amount of risk, I really needed to wait
for the bigger move. And with options, I
can not I don't have to wait for the
bigger move. I can take a smaller move
and I can take a bigger move. So, it
kind of gives me a flexibility scenario
so that when I'm really hungry, I can
just go eat. [laughter]
All right, so pop quiz and see if you
guys have been following along. I only
have three slides left after this, so
we're almost done. Um, pop quiz. So,
Tesla is breaking a level long at 190.
Should I buy a call or a put at the 190
breakout area?
Hit me.
Great. All right, cool. So, you guys got
that. Great. You're gonna buy a call at
190 breakout area. All right. What
strike price do I want to purchase?
Look at that buzzer beater, Ryland. So
proud of you. Good. Great. 190. You're
close. Perfect. Great.
Great.
190. You're close. So, I want to be I
don't want it to be out of the money.
Um, for now, again, that's a strategy
and you can make a crapload of money off
of it. But for now, while you get your
feet wet, just try to be as close to the
op the um equity price as possible um
when you get into the position. Yeah.
So, close to 190.
What expiration date do I want for the contract?
Perfect. Yep. Same week. Same week. This
Friday. Excellent. You guys are just
doing a great job here. Cool. Current
week. Now, if it is Friday, there is a
caveat to that. Um, you could choose
next week's expiration. Um, but most
most often, yes, it's going to be the
same week.
All right. So, the Tesla 190 strike
option call contract is selling for $3.
What is the minimum I need in my account
to trade this? Not what I want, what I need.
need.
I love it. You guys are killing it. All
right, cool. So, yes, $300. So, you need
$300 in your account to be able to trade
this one contract.
Now, what is the minimum I want in my
Yep. Yep. Perfect. $3,000. So, I want to
have at least $3,000 in my account. I
buy one contract based on 10% risk off
of the 3,000. I spend $300. That's 10%
risk on my uh contract or Yeah. You get
what I'm saying? Um, how much will I
lose if it hits my 10% stop and I'm in
the position on one contract,
man. Just a bunch of math wizes up in
here. [laughter] Okay, cool. Great. You
guys are killing it. How much will I
make at my minimum 20% partial?
Boom. Shakaaga, you guys crushed it.
Look at that pop quiz. Just like flying
colors. I'm like the proudest teacher
ever. Cool. Awesome. You guys nailed it.
That's it. That was the quiz. So, you
paid attention very well tonight, which
is awesome. So, now everybody wants to
know, I'm sure, what are the results of
what you did for this $1,000 account
challenge, right? Um, so here are the
results. It was a bumpy ride, but the
the challenge was a,000 to 5,000. We
have surpassed that right now. You might
be looking at this, some of you, and
being like, "Wow, 6,000 bucks. Great
job, Megan." Um but listen, compounded
growth over time, right? So when I
started with option contracts,
um I started with about $1,300 in my
account, right? And I had a I had a
hiccup, right? I had a risk control
situation with DOSs and I lost everything that I had made after the
everything that I had made after the first almost, you know, two or three
first almost, you know, two or three weeks, which was unfortunate and I had
weeks, which was unfortunate and I had to start over. Um but think of it this
to start over. Um but think of it this way. When I started with $1,300 or
way. When I started with $1,300 or somewhere around there, my risk was $13,
somewhere around there, my risk was $13, right? 13 bucks. So, I could only spend
right? 13 bucks. So, I could only spend $130 on a position and my risk was 13
$130 on a position and my risk was 13 bucks. Now, each time this grows, right?
bucks. Now, each time this grows, right? So, you get up to like, let's say, well,
So, you get up to like, let's say, well, at 4K, right? Now, I can spend $400 on a
at 4K, right? Now, I can spend $400 on a position. So, I can get a few more
position. So, I can get a few more contracts or I can get more expensive
contracts or I can get more expensive stuff. When I was down here, I couldn't
stuff. When I was down here, I couldn't even trade Tesla, right? Tesla. I had to
even trade Tesla, right? Tesla. I had to pick stuff that wasn't Tesla unless it
pick stuff that wasn't Tesla unless it was like Thursday or Friday. Sometimes I
was like Thursday or Friday. Sometimes I could trade Tesla. Sometimes it would be
could trade Tesla. Sometimes it would be in this price range. But each time it
in this price range. But each time it grows, you get to change how many
grows, you get to change how many contracts you can buy. You get to change
contracts you can buy. You get to change um you know the strike prices that you
um you know the strike prices that you can buy the premium. Um and there's
can buy the premium. Um and there's compounded growth over time. So what's
compounded growth over time. So what's great is that you know looking at this
great is that you know looking at this going from you know one to six if you
going from you know one to six if you look at it in terms of percentages. So
look at it in terms of percentages. So that's the the count right now. We're
that's the the count right now. We're looking at a 484% gain on the account.
looking at a 484% gain on the account. Now, if you have your money in the S&P
Now, if you have your money in the S&P 500, you have made 10% this year, right?
500, you have made 10% this year, right? 10%. That's it. That's all the the S&P
10%. That's it. That's all the the S&P has given you. So, this is the return on
has given you. So, this is the return on this portfolio right now. Um, and this
this portfolio right now. Um, and this is the best part.
is the best part. The win rate is not that high. Okay? So,
The win rate is not that high. Okay? So, but the reason why it works out so well
but the reason why it works out so well is because when you win on a position,
is because when you win on a position, it usually is a bit more than what you
it usually is a bit more than what you would lose. Option contracts really can
would lose. Option contracts really can pick up speed and momentum. There have
pick up speed and momentum. There have been contracts where I have hit 500% on
been contracts where I have hit 500% on them. There have been contracts where
them. There have been contracts where I've hit a 100. I've hit a 100 a lot. Um
I've hit a 100. I've hit a 100 a lot. Um 500 was a little bit of a stretch. Um
500 was a little bit of a stretch. Um so, you know, a lot of times I'll hit 50
so, you know, a lot of times I'll hit 50 or 80% on contracts. Um, so you don't
or 80% on contracts. Um, so you don't need like a huge win rate on this. Um,
need like a huge win rate on this. Um, the return is quite magical. I'm not
the return is quite magical. I'm not going to lie. Um, and to be completely
going to lie. Um, and to be completely frank with you guys, this used to be
frank with you guys, this used to be higher. And the reason why it's so low
higher. And the reason why it's so low is because I've started to try some
is because I've started to try some other stuff. Um, and my hit rate isn't
other stuff. Um, and my hit rate isn't quite as great. Um, I've started to play
quite as great. Um, I've started to play around. I've gotten a little bit more
around. I've gotten a little bit more comfortable and I've started to play
comfortable and I've started to play around. So, I'm just being transparent
around. So, I'm just being transparent and honest. When I did start this, um,
and honest. When I did start this, um, in the beginning, it was about 75. Um,
in the beginning, it was about 75. Um, so it has gone down because I've decided
so it has gone down because I've decided to dabble, but um, and I'm a little bit
to dabble, but um, and I'm a little bit wild. [laughter] It's not the smoothest
wild. [laughter] It's not the smoothest curve, but remember that over time this
curve, but remember that over time this gets stretched out and at some point
gets stretched out and at some point this is going to look like tiny little
this is going to look like tiny little like nothings, right? Because it's just,
like nothings, right? Because it's just, you know, you're zoomed in right now on
you know, you're zoomed in right now on a one to six six. So, um, yeah, it's
a one to six six. So, um, yeah, it's been it's been fun. I'm just going to
been it's been fun. I'm just going to keep growing it. It's great. Um, so last
keep growing it. It's great. Um, so last slide for you guys is transitioning from
slide for you guys is transitioning from equities to options, right? So, some of
equities to options, right? So, some of you might be thinking, all right, I want
you might be thinking, all right, I want to do this. So my question to you um so
to do this. So my question to you um so when you're asking should I switch to
when you're asking should I switch to options or stick with equities the
options or stick with equities the question is what is your account size?
question is what is your account size? So if you have a small account this
So if you have a small account this might be something that you want to do.
might be something that you want to do. Um it just does it does give you more
Um it just does it does give you more leverage um and um you're not as like
leverage um and um you're not as like boxed in on where your broker is and
boxed in on where your broker is and things like that. So account size um
things like that. So account size um what style of trading suits you best.
what style of trading suits you best. Um, if you are someone who is good with
Um, if you are someone who is good with momentum, this would actually suit you
momentum, this would actually suit you well. Um, if you are someone that really
well. Um, if you are someone that really needs to have um, a lot of partialing,
needs to have um, a lot of partialing, this might not be as good for you. Um,
this might not be as good for you. Um, if you're okay only taking one entry and
if you're okay only taking one entry and one exit or one entry, one partial, and
one exit or one entry, one partial, and one exit, this could work. Um, obviously
one exit, this could work. Um, obviously I'm saying that because you're going to
I'm saying that because you're going to go in with a minimal size of contract.
go in with a minimal size of contract. Um, and so you won't be able to be the
Um, and so you won't be able to be the Paris partialer that everybody wants to
Paris partialer that everybody wants to be. U, so Paris would have to have a lot
be. U, so Paris would have to have a lot of contracts for his charts to look like
of contracts for his charts to look like they do in um, in the options world
they do in um, in the options world based on his equity positions. Um, the
based on his equity positions. Um, the next question would be, are you
next question would be, are you switching from equities out of
switching from equities out of frustration [clears throat] or do you
frustration [clears throat] or do you have a strategy? If you're doing it out
have a strategy? If you're doing it out of frustration, I would advise you to
of frustration, I would advise you to find a strategy first. Like
find a strategy first. Like [clears throat] I said, I went into
[clears throat] I said, I went into options
options with a strategy that I already had,
with a strategy that I already had, right? I'm trading bigger picture,
right? I'm trading bigger picture, higher time frame breaks, reversals,
higher time frame breaks, reversals, things like that. Um, based off of price
things like that. Um, based off of price action, and I already understood it,
action, and I already understood it, right? So, if you're struggling as a
right? So, if you're struggling as a trader, don't just switch to options
trader, don't just switch to options thinking that's going to fix the
thinking that's going to fix the problem. Um, try to find a strategy
problem. Um, try to find a strategy first and then you can use options as
first and then you can use options as the vehicle. So, you have two vehicles
the vehicle. So, you have two vehicles in trading. You can use options or you
in trading. You can use options or you can use an equity position like share
can use an equity position like share size. Um, and they're they're just the
size. Um, and they're they're just the vehicle, right? So um have a strategy
vehicle, right? So um have a strategy first and then use the vehicle um that
first and then use the vehicle um that makes sense for you and your account
makes sense for you and your account size. Um learn obviously right so
size. Um learn obviously right so understand that there are different
understand that there are different types of options how they work and the
types of options how they work and the risk-to-reward involved. We have a book
risk-to-reward involved. We have a book recommendation here. We've mentioned it
recommendation here. We've mentioned it a few times in the options trading room.
a few times in the options trading room. This is the first book that I read. It
This is the first book that I read. It was super simple. Really helped me a
was super simple. Really helped me a lot. Um and then of course we have the
lot. Um and then of course we have the BBT options room every Monday,
BBT options room every Monday, Wednesday, and Friday with Jared and I.
Wednesday, and Friday with Jared and I. Um I put the book recommendation twice
Um I put the book recommendation twice because apparently I just love it so
because apparently I just love it so much. And uh start small, right? So I
much. And uh start small, right? So I started with $13 risk in the account. So
started with $13 risk in the account. So start small cuz you can lose a lot with
start small cuz you can lose a lot with options too if you go way too heavy.
options too if you go way too heavy. Trust me, I have done that before. I
Trust me, I have done that before. I started the small account and picked a
started the small account and picked a strategy and like decided what I was
strategy and like decided what I was going to do with all of this. I
going to do with all of this. I definitely lost a lot on a couple
definitely lost a lot on a couple options positions um in my bigger
options positions um in my bigger account before I decided I was going to
account before I decided I was going to do this little challenge. Um I didn't
do this little challenge. Um I didn't know what I was doing at all. Uh so
know what I was doing at all. Uh so please start small because you can lo
please start small because you can lo you can also lose a lot of money in
you can also lose a lot of money in options. They can be risky. Um identify
options. They can be risky. Um identify strategies that make sense to you.
strategies that make sense to you. Develop a trading plan. Review and
Develop a trading plan. Review and adjust just like anything, right? And
adjust just like anything, right? And just know that there are many different
just know that there are many different ways to trade options, different types
ways to trade options, different types of risk, different positions, different
of risk, different positions, different strategies. Um I'm trying, like I said,
strategies. Um I'm trying, like I said, I'm trying a few new ones. Um but the
I'm trying a few new ones. Um but the world of options, it can be
world of options, it can be overwhelming. And I found that, you
overwhelming. And I found that, you know, this is the easiest way to learn
know, this is the easiest way to learn by, you know, taking what I already knew
by, you know, taking what I already knew and using it as a foundation and
and using it as a foundation and bringing something in us in as the
bringing something in us in as the vehicle.
vehicle. And that's your webinar for this
And that's your webinar for this evening. I know that we have ran over.
evening. I know that we have ran over. Um we are 10 minutes over. I am happy to
Um we are 10 minutes over. I am happy to sit around and um answer questions for
sit around and um answer questions for you guys as well. Um yeah, and now
you guys as well. Um yeah, and now [laughter] pizza. Now we bring out the
[laughter] pizza. Now we bring out the pizza. It's the pizza party.
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