Hey everyone. This is Kirk here again from Option Alpha and welcome back to the daily call. Today, we're going to be talking about how to manage a fat finger trade. What is a fat finger trade? A fat finger trade is basically this idea that you just mistype something on a keyboard or your finger just kind of slipped or you hit two zeros instead of having one zero and so, you ended up trading 100 contracts and wanted to trade 10 contracts or you just incorrectly typed the ticker symbol or miscalculated something, any combination of that, but you basically just entered a trade you did not mean to enter. Now, look. I've done this all the time and in fact, the reason I'm doing this podcast is because I just did this like literally about a week ago where I exited a trade that I should not have exited, but I just didn't catch it. I didn't think through the process. I thought I was looking at one thing. I meant to look at something else and I executed a closing trade on something that we had literally just entered the day before. It caused a lot of confusion, obviously, a lot of emails, but again, it proves that one, I'm human in doing this for real in my real account and then two, it can happen to anybody. I've been doing this now over 10 years and this is still something that happens to me on occasion. Though not as often, but it's a good reminder that it does happen. But the idea behind fat finger trades is again, that it was a trade that you did not need to make.

What do you do or how do you manage them if you made the trade? Well, number one, if it's a closing trade, it's pretty easy because you just close it and if it's an early close of a position, if it was profitable, most of the time, you just let it go. In this case, the fat finger trade that we made was a closing position. We closed it for a whopping $4 profit. That was great because it closed literally the next day. We just let the position go. We didn't try to rush or reenter it. If it's an opening trade that you made and maybe you made a trade in the wrong contract month or you did the wrong number of contracts, the best thing you can do, honestly, is just quickly reverse the trade and that means even if it cost you a couple of pennies in pricing or it cost you a little bit in commissions, the idea is that if you didn't want to be in the position to begin with, then just get right back out of the position and I've done this before myself too where I've made a trade and I just literally typed in the wrong ticker symbol, one extra wrong letter, built the whole trade, etcetera, but it was on the completely wrong stock that I was trying to target and I just reversed the trades very quickly. Sometimes I take a $20 or a $30 haircut because I take basically the next available pricing, get the trade off. I didn't want to be in that trade to begin with, so I want to remove the risk and the exposure and it's just a cost of doing business. We try to minimize these always in trading and this is part of the human error element to trading which I think is interesting, but again, if you have a fat finger trade or you just do something wrong, just quickly reverse it. Catch your breath, walk away for 10 minutes, whatever you need to do and then come back and just reanalyze things and go from there. Hopefully this helps out. As always, if you have any questions, let me know and until next time, happy trading.

Hey everyone. This is Kirk here again from Option Alpha and welcome back to the daily call. Today, we're going to answer the question, "Why enter uneven or skewed iron butterflies?" There's probably two reasons why you would want to enter an uneven or skewed iron butterfly. The first reason why you might enter one of these is because you have some sort of expectation that the market is more likely to go in one direction versus the other. For example, if you thought that a stock had a higher chance of moving up after a move down, then you might enter a skewed iron butterfly that reduces some of the upside risk should the stock actually move up from the price point that it's at right now. Again, one of the reasons why you could enter one of these skewed positions is basically the assumption of where the underlying security is going to go after your trade entry. Maybe you have some technicals that you're going to use. Maybe you have some sort of charting patterns that you see developing. Well, whatever the case is, you have this assumption that the stock is going to move maybe in one direction at a greater likelihood than the other direction and so, you'd create a skewed iron butterfly for that scenario.

Another scenario or the second scenario where you might use an uneven or skewed iron butterfly is just purely because of pricing and this is something that I see often with the trades that I make here at Option Alpha, is that we end up generating or building skewed iron butterflies not necessarily because we think that the stock is going to move up or down or has a higher propensity to move up or down. We're pretty much neutral traders across the board, but because of the option pricing on one side or the other, suggest or just basically allows us to make a more narrow spread on one side. What do I mean by this? Well, let me give you an example. Let's say a stock is trading at $100 and we sell the at the money strikes to create this center of our iron butterfly position. We sell the 100 strike call and the 100 strike put. Well, if we are looking at this stock that actually has had a huge move lower or maybe has increased implied volatility, we might find that there's a lot of put skew in this particular underlying. In order for us to buy some sort of cheap long option protection on the put side, we might have to go out say $10. We buy the 90 strike puts for say $1 or $.10, some low amount to buy those options. Well, there's a lot of put skew because the stock is going down, but that doesn't mean that there's a lot of activity and volume on the call side. When we look at option pricing on the call side, what we might find is that if we go out just $5 on the call side, we end up seeing that it's the same price as going out $10 on the put side. And so, this might again, lead us to maybe generating a skewed iron butterfly where we buy the 90 strike puts, but on the call side, we only buy the 105 strike call options because going out to the 110 strike call options could be effectively the same price as the 105 strike call options, so why would we add an additional $5 of risk on the call side for exactly the same option premium? We're not getting any benefit necessarily by going further out in strike and reducing the option premium.

We see this a lot, actually. In fact, during low implied volatility markets, we see this actually more so than high implied volatility markets where the skew pricing on the call side suggest that we don't have to go out that for on the call side to buy very cheap protection. I always tell people – When you're building iron butterflies, don't just default to the same spread width on either side. That's a good starting point for sure, but use some rational logic and reasoning to look at the option pricing on the call side or even on the put side and ask yourself – Where can I get the best covered position on this iron butterfly? If I need to make a skewed position and generate a skewed or uneven iron butterfly, can I do that and will I be able to do that for effectively the same price on the put side? Now, we're not always looking for the exact same premium, but it's just a relative understanding of how options are priced on a call side and if they're very cheap, that means that you could bring in your long strike call option and potentially buy something a little bit closer which generates a little bit less risk on one side versus the other. Hopefully this helps out. As always, if you guys have any questions, let me know and until next time, happy trading.

Hey everyone. This is Kirk here again from Option Alpha and welcome back to the daily call. Today, I want to talk about some proof as to why the government doesn't want you to retire. This may be a little bit of a touchy subject, so I wanted to approach this subject with hopefully a little bit of different insight and different thought process. I've always thought about this in the back of my mind. When I started out in this business, I was actually working in New York. I had an employee-sponsored plan through Deutsche Bank when I worked in New York and I always thought to myself like why couldn't I contribute more to my retirement accounts, why were these limits in place, I mean, all of these things that you just actually kind of learn as you start getting into the workforce. And so, many people don't realize that these are in place until they actually start generating money and have a salary or an income, but regardless, I think it's an interesting conversation that we need to have and something that I always think about in the back of my mind.

The first thing that you have to understand is that... And honestly, I don't understand why this is in place and we'll talk about maybe what the reasoning is and the rationale is, but then I'll give you guys my insight and my opinion on this. But as you guys know, there are contribution limits to how much you can contribute for a retirement and this is why I say that the government really doesn't want you to retire. They want you to put money away for retirement, but by no means do they want you to actually retire or put a lot of money away. If they did, there'd be no contribution limits at all. It would just be unlimited, like save as much money. If you're a saver, save as much money as you want, put it back into the system, invest, save your money. That's what they say they want you to do, but I don't think that that's actually the case because what we see is we see a lot of contribution limits. Right now, the contribution limits for 401Ks is $18,000 or $24,000 if you're over 50 and then you can also deposit $5,500 into a ROTH or a traditional IRA. And again, the IRS if you're over 50, they allow you to do an extra $1,000. Woo! You can catch up with an extra $1,000. But this is mindboggling to me that these are the contribution limits that you see and these are on the broad plans that most people have. Why on earth would the government restrict the ability for somebody who has had a good year or maybe a couple of good years to save as much money as humanly possible? In my opinion, if you're going to save the money and you're going to put it into a 401K or an IRA, you know that it's going for retirement, you know that you're not going to be able to touch it until you're almost 60 years old, so why wouldn't they let you put as much money in?

Well, a lot of the reading that I've done on this suggests that it's because they're trying to level the playing field and they don't want to have this unfair advantage to people who are wealthy or rich as having an IRA or a retirement account as the tax haven or tax shelter. I completely disagree with that. I think that for anybody who's a regular person working a job, busting their butt every single day, you want to save as much money as humanly possible to even have the opportunity to be classified as rich or wealthy in the future and I think the reality is that they cut people off early in the cycle, they cut your legs off as you're trying to really get started here because they say, "Look. You can be sufficient and you can save for retirement, but just don't save too much. Save $5,500, but don't save anything more than that." And so, what happens with the extra money? Well, you end up in most cases, either spending the extra money or it goes into a taxable account which means that it's just that much harder to generate substantial income off of it because now, you have to fight not only the markets and all the fees which you have to fight anyway, but now, you got to fight taxes on top of that on an ongoing basis every single year, so it becomes very difficult I think for people to get to that point of retiring. And we know this is true because these plans have been in place for how many years now and still, most people over the age of 50 don't have too much money to their name. In fact, I think some of the most recent stats suggest that most people over the age of 50 have maybe less than $30,000 in net worth and that's the vast majority of Americans which is really sad. I think these plans need to be overhauled and I think that it's not working the way that it is right now. I don't think that they want you to get to that level. I think they want more people contributing and working and paying taxes on an ongoing basis and I think they have no incentive, honestly, to get you to retirement. Again, that's my opinion on this. Take it for what you will. I'd love to hear your opinion on this as well. Send me a tweet. Shoot me a message on Facebook. Let me know. In either case, thanks for listening in and happy trading.

Hey everyone. This is Kirk here again from Option Alpha and welcome back to the daily call. Today, we're going to be talking about emergency funds, in particular, what emergency funds are and if you should have one. Emergency funds I think are a great idea and concept in the sense that what you'd hear often is that we need to save up somewhere between three and six months of living expenses and put them aside into a liquid checking or savings account to be used in emergency situations. What classifies maybe as an emergency situation? A loss of a job, a car that is maybe wrecked or broke down or you need medical expenses. And I love the idea and the concept of emergency funds, but here's my only rub with emergency funds that I want to talk about today, is that emergency funds in and of themselves are okay, but when you look at them in context of the overall financial picture of most people, what often ends up happening is that people end up saving for these emergency funds which might take them a year, two years to save up for in some cases and they miss an opportunity to pay off non-preferred high interest debt or non-preferred high interest loans.

What do I mean by this? Well, let's say that for example and this probably is not out of the realm of possibility, but you have a family and your monthly expenses are $5,000. The typical emergency fund thought process would be is that you would need to save maybe six months of expenses, so that would be about $30,000. Now, a family of four that's living off of two incomes and paying bills and paying for food and trying to travel and doing all the things that we try to do as just regular humans is probably going to take a little bit of time to save up that $30,000. It might take you a year. It might take you two years or three years to save up that emergency fund kind of net. And so, in the process with just focusing on saving up the emergency fund because it's so important to have the emergency fund, you might forego or forget to maybe divert some of those funds to a high interest credit card or a high interest loan. Let's say you just had a credit card that was $30,000 on a credit card and it was at 12%. Well, you're paying basically $3,600 a year in interest on that credit card, so why not divert some of those funds to paying off the credit cards.

Look. I'm not a person that says like I totally don't agree with emergency funds. I like what they try to accomplish and I think there's good intentions, but I think for most people, emergency funds only serve as really kind of a backstop once you've tried to pay down a lot of these credit cards and the other bills that you have and then maybe set aside a little bit of money in an emergency fund, but ultimately, for me, I look at having lines of credit or the capacity to get credit as more of an emergency than actually having cash in the bank. That's the way I look at it. It's a little bit different of an approach, but I thought I'd introduce it today. As always, if you guys have any questions, let me know and until next time, happy trading.

Hey everyone. This is Kirk here again from Option Alpha and welcome back to the daily call. Today, we're going to be talking a little bit about financing 101 and hopefully, helping you understand how to leverage positive spreads and how to look for positive spreads in any type of investing that you do. Now, this again, like I said, is more of a financing 101 piece or topic, but in all reality, it's probably not something that's covered in most financial books or even in financial courses. But if you look around every single business, every single market, including the options market, what you'll notice is that any business that's going to be successful or any investment that's going to be successful has to have some sort of positive spread. And I'm not talking about option spreads although we love option spreads here at Option Alpha. I'm talking about positive spreads between basically, cost and what you can borrow or the cost of financing or the cost of the position and then what you can charge or what you can make on it. You have to have some sort of positive spread in order to generate long-term wealth and generate long-term income.

What do I mean by this? Well, let's take banks, for example. Banks are probably the most clear example of a positive financial spread. Banks will pay you money on your savings and on your deposits. In many cases right now, at the time we're recording this, the interest rate for savings accounts in most banks is about 2%, so if you deposit $100,000 with a bank, they'll pay you 2% interest on that $100,000 that you deposit. Now, to them, that's a cost. They are going to pay that 2% regardless of what happens. And so, what they have to do is they have to figure out a way to create a positive spread and so, what do they do? They take the money that people deposit, me or you if we deposit money into a savings account, pool those resources together and basically loan that money to other borrowers, potentially even yourself included. They might loan you your money back if you want to loan from them or part of your money back and they charge you interest and they charge you an interest rate that's higher than the 2% and all the cost and fees associated with basically running the bank. They might charge you an interest rate of 6% and so, the gross spread on that then would be about 4%. They're charging you 6% to borrow money or charging someone 6% to borrow money and they're paying 2% to the person who has deposited money into their savings account, but that creates a positive financial spread.

And so, if you think about that concept and then extrapolate it across basically any business out there, any business, any investment on this entire planet has to have a positive spread over time for it to be a viable opportunity to generate wealth, generate income or increase in value. If you can't generate a positive spread, it will never work. And so, you look at a bank that let's say paid 2% interest on savings and then loaned out money at 1%, it would never work. It might work for a little bit, but until they went out of capital, the negative spread that they have in that business would never work. Again, where would you look for positive spreads? You can see this in retail stores. Retail stores buy wholesale. They buy products from a wholesaler, pay it at cheap prices and then they mark it up to charge retail prices and that mark up sometimes can be 20%, 30%, 40%, 50% in many cases, but again, this is what they're doing, is creating a positive spread. They buy wholesale, charge retail. You can see this a lot in real estate too. A lot of people… Real estate is a highly leveraged product as well, but people will borrow money at low interest rates and then invest that money into a real estate property or an investment property that has tenants and generates rental income that is more than the cost of borrowing or financing for that piece of real estate. Oftentimes, even people will say, "Well, should I use a credit card for real estate?" And my default answer would be no, but if your credit card is magically charging you 2% interest and you can invest that money in a piece of real estate for a 12% return, then you've got a positive 10% financial spread. And so, that positive spread over time should cover more than the interest charge on the cart.

Again, I think it's important that we understand these positive financial spreads because you have to look for them in every market. There has to be a discernible edge, a discernible positive financial spread in order for you to be willing to invest and I think this methodology helps out a lot too not only with just regular investments, but any side investments or businesses you start investing in, in the future. In the options market, this positive financial spread comes in the form of implied volatility expectation. We've talked about this at nausea before, but this idea that option pricing is inherently overpriced because of the future expectation of volatility and when we sell options, we are selling something that has high pricing compared to its realistic pricing once we get all the way to expiration and volatility starts to reveal itself, basically. This positive spread that we see in the options market is the same style of positive spread that insurance companies use where they write insurance assuming that somebody's going to crash their car or their house burn down or die earlier than they actually are. And so, insurance companies are basically writing option contracts just like we're doing in the financial markets, creating a positive spread between expectation and reality.

Hopefully this helps out. Again, this is a 101 topic, but it is a little bit more of an advanced topic which hopefully if you didn't understand today, you get a little bit better understanding of. As always, if you guys thought this was good, please help us spread the word here at Option Alpha. Share this with somebody you know. Send it out to them via Twitter, Facebook, social media, LinkedIn, etcetera and if you have any questions, let me know. Until next time, happy trading.

Hey everyone. This is Kirk here again from Option Alpha and welcome back to the daily call. Today, we're going to be giving you guys some simple tips for an amazing credit score. I actually have four simple tips for an amazing credit score today and the reason I want to continue talking about this is because we haven't really mentioned any of this stuff before on Option Alpha. Most of the time on Option Alpha, it's very focused on obviously investing and options trading, but I think part of the whole financial picture needs to be things like credit score, budgeting, making sure that you're not doing stupid things with your finances in the background before you even get to the point of options trading. As many of you guys know, I'm very much a student of the entire finance game and part of that is credit score. And so, I'm very much a student of understanding how credit scores are determined because I know that credit scores, having great credit scores can lead to potentially hundreds of thousands of dollars in saved interest if you do things like investing in real estate or have any other type of outside investing. I'm very much a student of the game in the sense that I want to understand what the best triggers are and levers to push when it comes to developing a credit score over time.

Here are four things and I think I'll start broadly with these four categories and if we have any other follow up kind of questions on this, please let me know and we'll get them added to future daily podcast episodes. But these four things I think hit a lot of the broad strokes of what makes up potentially a great credit score and increases your credit score over time. Number one is lines of credit. As with anything in life, too much of a good thing can be bad in the sense that what a lot of people do is they open up a lot of credit cards, but the reality is that the more lines of credit that you have, the potentially worse your score is going to be. And so, what the bureaus want to see is they want to see that you have a couple of the key lines, potentially a mortgage, a car or a student loan and then maybe one or two credit cards. There's no perfect formula, obviously, but something is better than nothing, but when you get too many lines of credit, then you start having a credit card for every department store, a credit card for every Amazon website, a credit card for every place that you shop, it starts to become this kind of like credit card soup in your profile and you have too much capacity and what it looks like is it looks like you're desperate for credit. You're opening up all these lines of credit everywhere and that actually could hurt your score. Again, have some of the key lines, be very selective on which credit cards you open, have a couple of credit cards. We have literally two for me and my wife. That's it. Two. That's it. And so, if we ever open another one, we have to be highly selective of what credit cards we open because we don't want to increase other lines. We have no store lines. We have no retail shop. We don't open a CVS or whatever, Amazon credit card. We don't do any of that. We have the main basic two and then we have obviously real estate lines and mortgages.

Number two here is variety of credit. As I briefly mentioned in the first one, what most of the bureaus want to see is that you are not a one trick pony, that you have the ability to manage multiple types of credit. Things like revolving credit which would be credit cards or secured lines of credit, unsecured lines of credit, but also things like installment loans, so that could be student loans, mortgages, auto loans at various lengths, at various sizes, they want to see a good variety in your credit. Now, again, that will come with times. You're not supposed to do this on purpose. You don't want to go out and just get a student loan because you want to see some variety in your credit, but I'm just helping you understand what's potentially going into the scoring model. Number three is utilization of credits. We talked about this on two podcast episodes ago, but one of the big scoring metrics for most of the bureaus is the amount of credit you are utilizing to your capacity. If you have $1,000 of potential credit capacity, what most bureaus want to see is that 30% of that is actually being used or less. Whenever you have a limit of $1,000 for say a credit card, you never want to max that out. You only want to go to about 30% of that limit. That also means that you should on a reoccurring basis, try to increase your credit limits even if you're not going to use it because you want to increase the difference between how much you use and how much credit capacity you have.

Number four here is length of credit and this is a big one. Most people know this intuitively, but the problem is that sometimes when you actually delete a card or you close out of a credit card, it can actually hurt your score more than you think it might impact or improve your score. And so, what I've seen people do and I've seen friends and family members do this, is they go through this period where they're getting rid of credit card debt, they're getting rid of their loans and liabilities and they start closing all of their credit cards. Well, they're basically deleting all of that history for the bureaus. And so, my suggestion would be generally to maybe delete or remove or close kind of those one-off cards that you open for a 15% discount that one day when you went to a store. We all know. We all get pitched that every single time we go into a store. But close those and keep the main ones. Keep the main companies, the main credit card offering providers and maybe keep two or three of those potentially open, so that you don't delete that history or keep the longest card that you've had open. My mom has a card and she's never closed this card. She's had a card literally for almost 25 years. I mean, she's had this card forever. And so, every month, she just spends $5 on it, buys a coffee or buys a little bit of gas just to keep it up and keep the history going because it really is helping her credit score just because she's had it so long.

Hopefully this helps out. I know that this is again, a little bit off-topic, but that's the purpose of the daily call podcast, is that sometimes we can address some of these one-off topics that we can't generally address through the rest of the website and training. If you guys like these, let me know. Shoot me an email over @Kirk at Option Alpha. Send us a tweet, Facebook message, whatever you need to do to get in touch with us. Let me know what you guys think about some of these personal finance topics or what other questions you might potentially have. As always, until next time, happy trading.

Hey everyone. This is Kirk here again from Option Alpha and welcome back to the daily call. Today, we're going to be talking about why target date funds are a scam and I want to explain the reasoning behind that. The reason that I say target date funds are a scam is because what target date funds do in theory sounds rational and logical. They're going to basically rebalance your portfolio on an ongoing basis as you approach some target date, potentially retirement, potentially the end of your employment of some target date in the future. For example, when my wife was a teacher and signed up for her benefits package, one of the things that the person who was suggesting benefits for her said, "You need to put yourself into one of these target date funds because you're going to be retiring in 30 years, so when you retire in 30 years, (or 20 years, whatever it was) you're going to want a different mix in your portfolio." And again, this sounds logical and reasonable that that would happen. Her target date fund would start investing most of the capital in her account in stocks and very little into bonds and then over time, it would start to change that allocation. Maybe the initial allocation is 90% stocks and 10% bonds and then after five years, it starts to adjust down to 80% stocks and 20% bonds, etcetera, etcetera until you reach the target date.

Now, the problem with these target date funds is that they generate massive, massive fees for trading and rebalancing the portfolio and that's something that people don't feel. You actually don't feel those fees, but they're actually attached to practically all of these target date funds. When you get into a target date fund, although it rationally makes sense, what they're basically doing is death by a thousand cuts. They have this ability to adjust the portfolio and remove and exit a position only because of the date, not because of some intrinsic value or some trend or momentum or quantifiable measurement as to why they should be exiting stocks and buying bonds or something like that. It's just purely a time and mechanical issue. And so, when they start exiting one position, they incur trading fees and reallocation fees and then load fees, front end load fees, backend load fees. All of these fees are just kind of wrapped up in this allocation of rebalancing the portfolio on an ongoing basis. And so, what you see is that not only do these target date funds charge an initial expense premium, but you have these underlying kind of not felt expenses through the reallocation of funds as you get closer to that target date.

It's my opinion that I don't think that people should do this. I think that target date funds are things that are going to be moving very quickly in the future to their eventual death in this industry and I think on the other hand, what people can do is just more appropriately manage their own portfolios or use an automation software to manage their own portfolios with low or no expense ETFs and then have the ability to buy and sell those low or no expense ETFs potentially in a brokerage that also charges low to no expenses as far as commissions and you can completely replicate this type of system and framework potentially on a better timing method versus just randomly buying or selling based on timeline and actually get better performance because of lower fees. Hopefully this helps out. Hopefully it helps you just reconsider potentially if you have these. I did not let my wife get put into a target date fund when she signed up for her ROTH 403B as a teacher. I was not definitely going to let that happen. But it was a good pitch by him and I wanted to talk about it here. Hopefully this helps out. As always, if you guys have any questions, let me know and until next time, happy trading.

Hey everyone. This is Kirk here again from Option Alpha and welcome back to the daily call. Today, we're going to be talking about why I believe you should not pay off your credit cards. Why I believe you should not pay off your credit cards does not mean that you keep a massive credit card balance. I want to clear that up as we get started. And I'm definitely not saying that you leave these massive credit card balances and not make minimum payments if you don't have the funds to pay off most of your credit card. But what I am saying is that when you look at what factors affect your ability to generate a higher credit score, one of the key factors is credit utilization and basically, just the capacity to hold credit. And the reason I want to talk about this today is because we don't often talk about credit scores or credit cards, etcetera, but I think it's an important part of just your overall finances. And so, I want to start diving deeper into some of these financial, personal finance topics, I guess you could say. And so, when it comes to credit cards, obviously, we want to have the right number of cards. We don't want to have too many cards. We can talk about that in later shows. But when it comes to paying off credit cards, I'm a fan of paying down your credit card every single month to just $1 and I'll tell you why. Again, it's part of credit utilization, the ability to utilize the appropriate amount of credit based on the capacity you have for credit. Usually, the utilization is around 30%. The credit rating agencies want to see that your ongoing reoccurring balances are under 30% of your total credit limit. This is important because they really don't care if you have a credit limit of $1 million or $1,000. What's important is the utilization of the credit that you have taken out on that credit card as it relates to the total balance that you have available or the total credit limit that you have available. This is also why you could get a quick boost in your credit score by just increasing the credit limit for a lot of cards and that would then reduce the credit utilization percentage.

But one thing that we've heard from a person who does a lot of credit repair and this is somebody that I continuously go to for a lot of updates. They do a lot of credit repair for all the various companies and have a repair agency, but it just happens to be a friend of mine and it's that they see that when rating agencies are looking at credit scores and they're running through their algorithms, one of the things they look for is just the capacity to handle ongoing credit. Even though it might make sense to pay off your credit card all the way, sometimes what the agencies will do as you start to get into the higher tiers and higher brackets of ratings is they will look at your ability to manage an ongoing balance. "Can this person have an ongoing reoccurring balance that they have appropriate management of?" And one of the ways that they look at that is if you just carry a balance. In my opinion and what we've been suggested from this person and as a person I do trust as far as credit repair and credit utilization and increasing your credit scores to have an ongoing balance of just $1 on all of your credit cards every month. We pay down our credit cards every single month. We just use them for the purposes of groceries and gas, etcetera to get all the airline points and all the things that everyone else does with their credit cards. But we don't ever pay them off. We just pay them down to literally $1 and then we always carry a $1 balance and this has helped because we have gone back to lending for a lot of our commercial real estate and a lot of our investing real estate that we do and both of our credit scores over the last couple of years have gone into the upper tiers. We're talking the very higher echelons of potential credit scores. And I'm publicly very proud of this because we've been working very hard over the last 10 years to not have any auto loans, never have any student loans, never have any ongoing credit card bills. We really manage our credit very, very strict. And so, this has been something that I think has been helpful for us, is not paying off the cards, but paying them down to just $1. Hopefully this helps out, a little bit of a tip and trick today. As always, if you guys have any comments or questions, let me know and until next time, happy trading.

Hey everyone. This is Kirk here again from Option Alpha and welcome back to the daily call. Today, we're going to be talking about why are SPX and ES different prices. If you are a trader and you start trading in the broad markets, you'll likely come across these two ticker symbols. SPX represents the S&P 500 index and ES represents the E-mini futures, also commonly referred to a /ES when you're trading in your broker platform, but it represents the E-mini futures on the S&P 500 index. Many people get confused because they look at both of these and they think to themselves, "Okay. Well, you have the S&P 500 index, SPX and then you have the futures on the index, so why are there different prices? And more notably, why does the futures contract trade at a little bit of a "discount" compared to the SPX contract itself?"

Here's what you have to understand. The SPX is an index. You can't actually trade it. There's no tradable security. Just like what we looked at yesterday with the VIX where you can't actually trade VIX, you can only trade options on it, the same thing occurs with SPX. You can only trade options on SPX, but those option contracts are not priced to SPX. They're actually priced more to the futures which are then adjusted for dividends and interest. And so, that's why there's a disparity in pricing because the futures contracts have to be adjusted for the fact that it's going to collect dividends and interest over time and that's why it literally trades at a little bit of a discount to SPX. Now, most people think that you can exercise SPX early potentially and force some sort of arbitrage opportunity to force an early exercise of SPX and buy E-mini futures, but it's not the case because SPX contracts are European-style contracts which means that you can trade the contracts before expiration, but you can't actually force the exercise of SPX early. Only at expiration can you exercise your contracts in SPX.

That's why most people think there's probably an arbitrage opportunity to be gained here, but it's really not because you can't really do it on a synthetic basis with the option contracts since they'd be already factoring in the fact that the futures prices are adjusted for dividends and interest. Hopefully this helps out. As always, if you have any questions, let me know and until next time, happy trading.

Hey everyone. This is Kirk here again from Option Alpha and welcome back to the daily call. Today, we're going to answer the question, "Can I buy the VIX?" And the short answer to this question is no. We cannot buy VIX itself. We have to trade either VIX futures or VIX options. The VIX in and of itself is just an index. It just tracks rolling 30-day implied volatility for S&P 500 option contracts and so, it's just one metric of measuring volatility in the market. And most people use it and gauge it as the fear index of the market because as people get more aggressive and buy put protection, the VIX option prices go up. And so, as a result, you can't actually trade VIX itself. There's no bid or ask spread. It's just an index. But you can trade VIX futures which is /VX if you're in most broker platforms or you can trade options on the VIX itself. Now, we also like trading options on other volatility products like VXX and UVXY which we've talked about before on the podcast. But again, you can't actually go out and buy the VIX or sell the VIX outright. You have to trade it through a derivative contract. Hopefully this helps out. As always, if you have any questions, let me know and until next time, happy trading.