Options Playbook Radio

Today we are going to look at a ratio spread with puts on FB.

In this episode:

• A review of last week's skip-strike butterfly in AMZN.
• What was the strategy? Expectation?
• Where is AMZN now?
• What about GOOGL?
• How do you want the market to move when you have a butterfly position?
• FB earnings are coming up. Let's look at a ratio spread.
• What is the outlook?
• Setting up the trade.
• Selecting strikes.
• What is the cost?
• What do we want to happen?
• What is the cost?
• Remember volatility.

This is probably the biggest week of earnings reporting, when the most valuable stocks report. There are things to take into account because of earnings:

• Remember that implied volatilities rise around earnings
• Why a skip strike butterfly?
• Setting up the trade to pay for itself
• Where is AMZN trading right now?
• What is the long straddle aka the expected move
• Using the long straddle to select strikes
• Earnings-related risks
• What is the expected move?
• Setting up the trade
• What is the upside? Downside?
• Nuances of options pricing
• Remember time premium

Mark and Brian are back to answer listener questions.

• Question from Ejh4isu - Let's say you're short naked a bunch of puts and the trade goes against you, and you don't have the money to pony up? What can your broker do?
• Question from LCB - This is a challenging time to sell options due to low volatility. So does it stand that the opposite is true? Is it a good time to buy options? Particularly protective puts?
• Question from Andrew Lane - I tried searching for options on the major advisor news sources including Pensions & Investments and Financial Advisors magazine and came up blank. Why do these mainstream outlets ignore this space? Where should I go to learn more about options for advisors?

It's time to tackle listener questions again on Options Playbook Radio. In this episode, Mark and Brian cover:

• Question from Albert Deckel - First, I want to thank you for all the effort you place into the options playbook. I find your lessons absolutely clear, understandable and instructive....a rare combination!! I bought your book and find that, also, clear and concise and very informative. Two questions: While I understand how to convert a "Delta" into meaning, I really don't understand what consists of a "high" vs. "low" Gamma, Theta or Vega. For example, when is theta so high that it makes the purchase of an contract dubious, or Vega so high that it makes the purchase of an OTM contract desirable? Also, if I were to write an ITM put, what combination of Delta, Gamma, Theta or Vega am I looking for? Thanks so much!! Al
• Question from Tim - Why isn't it standard or maybe required to let people close out shorts for free below $.10?

We are continuing the discussion of options pricing. This week we take a deep dive into pricing of a butterfly.

Specifically:

• Looking at a 10-day butterfly in AAPL
• Picking a five-point spread
• What strikes and expirations to choose?
• What will this cost?
• What is the maximum risk and reward?
• What do we want to happen?
• What impacts the pricing of butterflies?
• Managing expectations
• Looking at the same thing for a November 17 expiration
• What is the ideal scenario?

Today Brian is covering a short call spread (which is bearish) on AAPL. All of this applies on the put side, but in this episode, calls are being featured.

Specifically:

• What dynamics do you need to think about when trading short spreads?
• Look at the most at-the-money straddle to get an idea about pricing
• Example 1: November 17 expriation; 52 days out
  • Selecting strikes
  • What will this cost?
  • What is the max risk? Reward?
• Example 2: October 6 expiration; 10 days out
  • Selecting strikes
  • What will this cost?
  • What is the max risk? Reward?
• Which would you choose?
• How to close out the trade?
• How to roll the trade?

Do you have a question that you want answered on a future episode? Send them to Brian at [email protected], or to the Options Insider at [email protected].

In this episode, Brian explores long spreads. Specifically, long call spreads and long put spreads. These can be found on pages 60 and 62, respectively, of The Options Playbook. This is always available on OptionsPlaybook.com, in on the Amazon Kindle edition.

Details include:

• The dynamics of spread trading
• Using AAPL as an example
• What to consider regarding forecasting and timing
• The value of the spread does not provide quick rewards
• Selecting strikes
• What is the maximum risk?
• What is the maximum reward?
• Always look at how much time premium you have

Do you have a question that you want answered on a future episode? Send them to Brian at [email protected], or to the Options Insider at [email protected].

In this episode, Brian covers:

• Using a pricing calculator to review different scenarios
• Buying an out-of-the-money option
• What happens to delta?
• Looking at probability
• When time is your ally
• When to buy an out-of-the-money option
• How to get low time premium
• Closer to expiration = higher delta
• What about at-the-money options?
• When to buy, and when not to

Last week, we started the back to the basics with the Greeks. You can find an entire chapter on Greeks in The Options Playbook. This is always available on OptionsPlaybook.com, in on the Amazon Kindle edition.

In this episode, Brian discusses:

• Looking at probability using a 90-day option as an example
• What is the probability of an $8 move in a $60 stock in 90 days?
• Where do you think the option will be trading at in 90 days?

Do you have a question that you want answered on a future episode? Send them to Brian at [email protected], or to the Options Insider at [email protected].

Now that earnings season is over it's time to get back to basics: the Greeks. You can find an entire chapter on Greeks in The Options Playbook. This is always available on OptionsPlaybook.com, in on the Amazon Kindle edition.

In this episode:

• A review of last time
• Using the Greeks
• What does a delta do?
• Meet the Greeks in The Options Playbook
• As expiration approaches, what happens to delta? For that, you need gamma
• What about theta?
• Delta when a contract is in-, at- or out-of-the-mooney
• Delta moves slower than other Greeks
• You can't have slow time decay on a fast moving option

Do you have a question that you want answered on a future episode? Send them to Brian at [email protected], or to the Options Insider at [email protected].