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, "Is using a protective put as a hedge for ETFs worth the cost?" Now, there's a lot to unpack here, so we're going to try to do it in a couple of minutes. But the key points that we have to realize about using a protective put to hedge an existing ETF position is that using any sort of long option strategy requires an outlay of cash from our account. And so, the rub that I always have and the data confirms this across the board as well, is that when you outlay cash as means of buying insurance, that insurance is a net cost on the portfolio. This means that sometimes the insurance might kick in and it might help. Consistently buying a protective put as a hedge for an ETF position or a stock position that you have might work in some cases, meaning the market might go down at just the right time that you bought the protective put. But keeping and maintaining that constant insurance or that constant protective put as a hedge is going to be very costly to the portfolio in the long run. And so, the end result is I don't think that it's generally worth buying puts as a means to protect the portfolio. In fact, if you just wanted to protect it for one major systematic event that you are just really concerned about, okay, fine, maybe do it for that one time. But the problem is that even at that one time, what we're trying to do is we're trying to pick and choose when the market is going to peak and trough and that's very, very hard to do. In fact, we've seen this multiple times before in history, most recently like a couple of years ago with the Trump election. Everyone thought that the Trump election was going to be bad for the markets. It ended up being good for the markets. Everyone who bought put protection against the markets ended up getting totally wiped out with that cost. Now, of course, the cost could be embedded into your strategy, so you could choose to figure out a different way, an alternative way using maybe a synthetic collar or some other strategy to pay for or reduce the cost of the put insurance. But as long as you're outlaying money from your account, it's going to be a drag on your returns over the long run. Hopefully that helps answer the question. As always, if you guys have any other questions, please let me know. Head on over to optionalpha.com/ask and leave me a voicemail with your question. We'll get it queued up here for the daily call 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 how to calculate options profit and loss as a percentage. And the reason I want to talk about this is because I'm seeing a lot of people who are confused on how to calculate the amount of money that they're making on a trade as a percentage of the trade itself. Now, I'm not talking about calculating this as a percentage of the overall account. That should be actually pretty intuitive and pretty easy to calculate. Just figure out how much you make and divide that by the account balance that you have and you figure out how much you're gaining on the whole account. But the end result here is that I do see a lot of people and also companies misrepresent what they're making because they're calculating everything based off of the option profit for the individual strategy or contracts that they're trading, not necessarily the whole account.

There's only two ways that you can calculate… Two basic I guess broad ways that you can calculate the profit or loss of a position as a percentage of the trade itself. The first is based on max risk and the second is based on margin that's required to hold the position. The first way is pretty easy because all you have to do is figure out what the maximum risk is for any particular trade that you get into. Now, this is going to be a little bit different depending on what strategy you choose. If you choose an option buying strategy versus a spread versus a multi-leg spread, the max risk is going to be a little bit different to calculate. But in any case, you should be able to figure out for any spread trading that you're doing where you have defined risk, the maximum amount of risk that's in that position or how much you could lose if the position goes sideways. That's going to be the basic number that we're going to use as our kind of core position size or how much we're allocating towards that position because we could potentially lose it, so that's money at risk. And so, on top of that, what you would figure out is how much you made on the option strategy. If you are long options, how much you gain in option premium. If you're short options, how much you collected an option premium back at the end of the day and figure out how much you made on that contract and divide that number by the amount of max risk that you had in the position. So, to use a very simple analogy or a very simple example here, let's say that we did a $1 wide spread and we sold let's say a 101 call, we bought a 102 call and we collected $.30 of premium and as an option seller, we have $.70 of potential risk in this trade. If the trade goes sideways and becomes a full loser, we'll lose $.70. If we have the trade become a full winner, we win $.30 in our premium that we collected. And so, what we would do is simply take 30, divide it by 70 and that gives us a 42% return on our money if the position wins. Now, again, that's a really high return. That's the whole point of trading options, is that we're going to use a highly leveraged product like options and use it on a smaller portion of our account, keeping a lot of our account still in cash as a reserve and kind of rainy day fund. In this case, we could generate a 42% return on this position if it went all the way to expiration.

Now, the other way to calculate a profit and loss as a percentage is to use it based off of margin that's required. Now, this is only for positions that are naked or undefined risk. These would be straddles, strangles, short calls and short puts. Now, in this case, because when you're selling options, you don't have any way to define the maximum risk since the position can fluctuate, so what we would basically do is try to figure out some sort of initial margin or margin that's required on the position and base our percentage win or loss off of that initial margin. Now, again, this is going to fluctuate because the second you get into the position, the margin could change, it could expand, it could contract. There's no perfect way to do this, but again, we're just using kind of this as a guideline and as a guidepost. But let's say that we were to sell a strangle around the market at some ticker symbol and we were to potentially enter the position for $100 in credit. Well, if the strategy requires a $2,500 margin required for that position, we're looking at basically just a 4% return on our money for that trade. Now, not as great clearly as the spread trade, but the idea is that there is a trade-off here that generally, undefined risk positions like straddles and strangles, short calls, short puts make money faster. You're holding them for shorter periods of time. You can end up rolling them and adjusting them. They're more flexible. Don't look at it as a one-to-one. You also have to consider and weigh the options of the profile of the strategy in doing a risk defined versus an undefined risk trade. Now, I'm using a really extreme example. It's not always that extreme that selling strangles and selling straddles is a 4% return, but again, I'm just using that as an example to help you guys get a basis for how you can calculate these. As always, if you guys have any questions, let us know, but hopefully this helps out 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 do option contracts offer multiple strike prices and expiration dates?" And the simple answer here is variety. I could've said options, but that would be too simple because we're talking about options contracts, but the answer here is just variety. And I often relate this to either grocery stores or cars, but in our world, we see that there's hundreds, if not, thousands of different kinds and models and trim packages of cars out there, so if you want to get a car, there's no one standard car you could buy. You could buy this brand or that brand. You could get a truck, an SUV, a sports car, a convertible, a not convertible, whatever. And so, this variety allows people to choose based on their preference of what they want. They can choose to pay a higher amount of money to get a car that moves faster. They can choose to pay more money to get a car that's more reliable. It comes down to variety and preference.

And the same thing happens in the options market. When you have multiple strike prices either in the same contract month or in different expiration dates because you can also have multiple expiration dates, it allows traders to pinpoint their exact preference and use the variety of the options market to get them into the contract that they specifically want to be in for that time period at that price level. And potentially, no true traders are going to be exactly the same all the time. You might think, for example, if you're going to go out and buy a put option to try to hedge one of your stock positions, well, trader A might think that the stock is going to go down 10%, trader B might think that the stock is also going to go down 10%, but might think that that 10% move might happen in a year versus trader A thinks that move is going to happen in two weeks. And so, you have two different traders with two different preferences on what they want to trade. Maybe at the same strike price, maybe at different strike prices, but maybe at different expiration dates than somebody else might be trading. It all comes down to variety. It just allows the options market to be more robust, to be larger, to be more efficient because it allows people to get into the exact contracts that they want at the exact timeframe that they're looking to trade.

This is one of the things that I actually love about the options market in general, is that unlike stocks which just have one price and then you can choose from a lot of securities, but the stock price is the stock price. With options, you have the ability to choose where you're going to trade and on what timeline. And so, you have a lot more flexibility I think in creating and crafting and building strategies that ultimately end up paying out based on the market dynamics that you think are going to play out in the future. As always, hopefully this helps out. If you have any questions, let us 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 the differences between selling to close and writing an option contract. Now, there's a very subtle distinction between these two terms or phrases that you have to understand and it just comes down to understanding who's on what side and what action is being performed. With regard to selling to close, this would imply that you are first closing a position. If you sell to close something, that means that you might have had something to begin with and therefore, you're removing the position or closing it. When you see sell to close, that means that the trader had a buy to open as the original position. They were long option contracts. If you're long option contracts and you performed a buy to open, that means that to reverse that trade, you would have to perform a sell to close order which is just a really fancy way of just saying you removed and closed the position.

Now, when it comes to writing an option contract, we often refer to or you might hear the terminology, writing which is synonymous with selling an option contract and in particular, selling to open an option contract. When you're an option seller, you would sell to open a contract to begin with or you would write an option contract, collect a premium which then obligates you at some point in the future if your option contract stays in the money at expiration to buy to close that contract back. You're just simply completing the trading loop and buying to close the contract back. Now, of course, as an option seller, you can choose to let the option contract expire and become worthless as long as it's out of the money by expiration. Again, a lot of these terminologies and phrases are thrown around and we just want to again, do another podcast here to help you understand the differences between these. If you have any questions at all...

Hey everyone. This is Kirk here again at Option Alpha and welcome back to the daily call. Today, we're going to be talking about the power of social influence on investing habits and in particular, I'm going to tell you why I'm super, super upset and frustrated with this entire industry and it all starts with a conversation that I had with a family member this weekend because we were going down and we were sitting down at dinner and we were going over kind of their investing stuff that they had and they wanted me to take a look at it. And so, I was looking at some of the things that they had in their 403B account and one thing I noticed right off the bat was that a lot of the mutual funds that this person, this family member have been placed into had really high expense ratios and not only that, they were also placed into basically an account that was managed by a seemingly fiduciary person who was also charging a 1% AUM fee. I'm not opposed to financial advisors charging that, but if that's the fee that you're charging for 1% of assets under management, but you're also placing people in this huge bucket of mutual funds with huge fees and in some cases, these fees on the expense ratios were 2%, 2.5%, it just like really put a sour taste in my mouth once again for this entire industry because this person who's a good family member of mine like has no idea that this is going on. I mean, they think 1% for financial advice and everything that they're getting is good, but they're not seeing all these hidden fees that are in there, these expense ratios and then also the mutual funds were these target date funds, so they readjust multiple times every year, every couple of years and then that causes transaction fees and load fees and it's just absolutely ridiculous what this entire industry has gotten to.

But the problem is not necessarily the industry. I'm sure there's problems with the industry, obviously, but the problem is that most of society still is in this mentality that all of the things that we're doing are the social norm. And so, I'm so upset with this industry because what we see not only in fees and mutual funds, but we also see just a lack of variety in investment products, this idea that there's only a couple of places that you should put your money and that things like options or REITs or any of these other things should not be considered. There's a pigeonhole of knowledge and data. It's all consolidated into a couple of sources and you got to almost pay for access and pay for information which I hate, but it's a social influence of decades of relentless marketing that have forced a lot of us and forced a lot of people to be scared to step outside of the investing norm and they fear being outcast, this idea that you're an options trader, so I need to put my hands up and make a cross like, "You're some sort of weirdo. You're doing that crazy thing called options trading or you're doing that crazy thing called swing trading or technical analysis." You basically replace whatever you want to replace options trading. But this idea that we're somehow different or outcast by everyone else is totally bogus and I think most people are just not even aware that this is going on, that this social influence of decades of marketing and decades of seemingly thoughtful smart associations to trading and investing are in many cases, frankly wrong. We see this time and time again and we've pointed this out numerous times. I'm just like here ranting about it again because I'm so passionate about this, but we've seen time and time again that even a small covered call position on the S&P outperforms the market. We've seen that stop loss orders which are meant to stop you from losing more money (stop the loss, that's the whole idea) end up being detrimental to your portfolio and damaging to returns. We've seen that closing trades early and letting probabilities work themselves out ends up being the better solution and focusing on just a few ETFs versus trading the entire universe of things.

I mean, all of these things really kind of summarize what is now the new industry standard for investing, but people have not caught onto it and it's because we're all in this environment that we influence each other through our actions. We're afraid to talk about what we're doing besides just the regular – "Oh, just investing in the market." Like we're afraid to actually say, "I'm doing this, this and this and this is the reason why." But these conversations need to be had and I don't know what other way to start this conversation other than suggesting and basically like pleading with you to start talking about this openly with your friends, your family, your spouse, your coworkers, your family members. Start talking about these changes that we need to have in the industry. Help each other out. Look at each other's statements or figure out what ticker symbols people are in and just search and figure out what the expense ratios are. Figure out what you're paying your advisor, what you're not paying your advisor. Figure these things out, so you have a better understanding of where you're going to be in the future because a lot of these fees and a lot of these seemingly safe products are absolutely terrible investments for us to be making long-term. And even just investing a small portion of our account in say something like options trading and leaving the rest in cash dramatically outperforms everything else, so why do we still go down the path of thinking that things like index investing and mutual funds and all of these things that seemingly are good for us end up not being so good for us at the end?

Hopefully this again, just changes the dynamic. I want to push this conversation a little bit, but it starts with you guys, so if you're listening to this right now, just have an open conversation with somebody, the next person you talk to. I don't care who it is, a stranger on the street. Figure out how we can start this dialogue and start the snowball rolling in the investing space because what we're getting right now is not the best out of this industry. This industry is very smart. There's a lot of money, there's a lot of data behind this industry, but we're getting basically the garbage, the top level scraps and we need to be getting more information, we need to be getting this education and this knowledge out there. As always, happy investing.

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 selling short options positions and really, what does that mean. There's a big misconception out there with regard to the understanding of the difference between long and short option contracts. And so, what I want to try to do in this podcast is just quickly explain the short side of option contracts, basically what it means, what you're doing and what the eventual outcome should be or how you get out of the position. Selling short option contracts basically means that you are selling contracts that you do not own yet with the obligation that you will either repurchase those contracts at expiration or that they will expire out of the money and worthless. That's the assumption for most option selling strategies. It's very similar to insurance. Insurance is a contract that you would sell. If you're an insurance company, you sell somebody insurance on their house, collect in a premium and then at some point, you're hoping that that contract expires worthless, meaning that the house never burns down to the ground or the car never crashes or you'd have to buy back that contract from the person or pay them a settlement if there is damage or fire to the house.

You have to round out the trade and that's what I usually generally call it, is completing the trading loop. If you sell something that you do not own, you have the obligation to buy it back at some point because the brokers are allowing you to sell this contract in the market, you collect a credit from the option buyer, but you're still on the hook to buy back the contract or hopefully see the contract expire worthless at expiration and that's the way that you are able to complete the loop. Now, some people get confused because you wonder how can you sell something that you technically don't own and it's again, very much like insurance or like a homebuilder who is selling a contract to buy a house and they have this agreement and obligation to actually build the house for the person who's buying the house from the homebuilder. It's just this idea that the tradeoff is the premium that you collect and brokers hold margin, so that they know that you're able to cover that position or have the money in your account to cover that position if necessary, but it's actually a very simple process. Selling option contracts and selling short stock in many cases is actually a very simple process. You just have to complete the trading loop. Most people look at it in the traditional sense that you have to buy something first before you sell it, but it's just not the case in the market. Hopefully this helps out and as always, if you guys have any questions, let me know and until next time, happy trading.

Hey everyone. This is Kirk here again at Option Alpha and welcome back to the daily call. Today, we're going to be answering the question, "Is lack of preparation the leading cause of bankrupt investors?" Now, I would argue yes that it is. In fact, I would even argue that definitely, the leading cause of people who lose money is just absolutely a lack of understanding and preparation and just flying blind basically into this entire market and business. And so, I'll use a quote and regardless of whether you agree on his political views or not, this is a great quote and one that my coach back in college has often referred to, although it's not exactly the same as the way that he put it, but the quarterback Colin Caepernick before he was I guess done playing in the NFL said that pressure comes from a lack of preparation. And the whole idea is that when you get into a game situation and I'll use football as the analogy here. But when you get into a game situation, as a quarterback, you should understand everything that the defense can throw at you. You should understand in any scenario where your risk is coming from, who might blitz on one side or where they might shift the line. And so, if you understand what possible outcomes are, that there's only so many guys that can come after you at one given time and you go through in your head and you play through all these different scenarios time and time again, "If this person does this thing, then I do this thing. If this person does this thing, then I do this thing." You play through those scenarios time and time again in your head and you prepare for all of these different environments that might happen to you during a game and so, therefore when something happens, it's not seen as pressure because you have somewhat expected it. You thought that it was going to happen or maybe in a similar fashion was going to happen and you knew what to do moving forward. And so, our coach when I was playing in college would always talk about this. We would take mental reps all the time and I referred to this back on the podcast a million times before, but it's just this idea of playing through different scenarios in your head all the time and I don't think that investors do this. I think investors generally cross their fingers behind their back and hope and pray to whoever they hope and pray to that the markets continue to go up and everything looks good and then when things go bad, they look for a scapegoat instead of looking at themselves and asking themselves the hard questions about why they weren't prepared.

In the world of options trading, we do this every single week as the bare minimum in our weekly strategy call with elite members where we try to go through different scenarios in our portfolio. "What happens if the market goes down? How would we adjust? What happens if the market goes up? How would we adjust? What happens if this position that we're looking at right now that's dragging the rest of the portfolio, what if we take that position out? How would that rebalance the rest of the positions that we have?" And it's taking a lot of these mental reps and really preparing for the week in advance because what most people do is they just go into the week and walk through the doors of Monday and they say, "Okay, week. Give me your best shot, basically." And they take whatever the market gives them that week. Instead, what I like to do is I like to prepare for all of these different scenarios. Even during the recent selloff that we had which was great and we talked about it in a video update on YouTube, the big huge down day that the markets had a little while ago where the market was down 3%, 4% in one single day was a great day for us. We were well prepared for that event. In fact, we were semi-expecting that event. We were looking ahead prior to that week and we were thinking to ourselves, "Look. If the market does take a big nosedive, what do we have that can help save our portfolio? What do we have that can actually make money during those scenarios?" And I think a lot of people got caught "off guard" because they didn't know what was going on and it's just purely because they had a lack of preparation. Hopefully this helps out. Again, it's just an encouragement again today to take those mental reps with your account and your portfolio. Go through the hard questions and go through the different scenarios of all the things that could happen and don't think to yourself, "Oh, that would never happen." because generally, it does. We have this huge misconception that history doesn't necessarily repeat itself, but it does rhyme and so, we do see the same type of moves happen time and time again and especially in different markets. As always, hopefully this helps out 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 you should go for a run even when you are sick. Now, please don't misunderstand what I'm talking about here. I'm using this as an analogy and as a framework for understanding this discussion that we're going to have about subconscious trust signals. But the idea here is that if you are sick, you should still potentially go for a run and there's a reason behind this. Now, I'm not saying that if you're absolutely dead sick and you can't get off the couch… Obviously, stay at home, rest up, right? But if you're just a little bit sick, you have a little bit of a cough, maybe you just don't feel so good today, you ate too much last night, you should still probably go for a run and there's a reason behind this. Now, you can interchange run and sick here for whatever you want, but the idea is that we have what are called subconscious trust signals that build in our brain. And I know I'm going to get really deep on you guys here today, but this is really, really important stuff. And I've pre-warned you before in other podcast that I'm a student of understanding psychology and how the brain works and how we become more effective humans in general, but what you have to understand is that there are these subconscious trust signals that start to build up in our brain. And so, what happens is that whether you're aware of it or not, when we promise to ourselves, for example that we'll get up an hour early every day and meditate or read the newspaper or read a book and we are subconsciously sending ourselves signals that we should be doing this, but if we don't get up in the morning an hour early even though we told ourselves we're going to, what we do is we give our brain trust signals that we are not to be trusted and worse, we're then reinforcing the habit or the idea that we can't even achieve some sort of transformation.

Now, this is all on the very, very deep subconscious level of the brain. You don't even know that this is happening. In fact, you're not even aware that this is potentially happening, but it happens all the time. You tell yourself that you're going to go outside and mow the lawn and then you don't and what you're telling yourself is "That person can't be trusted." You. You can't be trusted. You said you were going to do it and you didn't do it and you sent your brain these subconscious trust signals that you are not to be trusted and then it reinforced this habit or this idea. Even as small and stupid as just even mowing the lawn might be, it reinforced this idea that you cannot achieve some sort of transformation or you can't achieve some sort of goal that you're going after because next time when something else comes up, your brain is going to naturally default to "This person can't be trusted" or "I can't be trusted." And again, you don't even know that this is happening, but your brain is doing it automatically in the background. It's basically telling you in many different ways through synapse firing and all of these neurons that are in there moving around and all the different chemicals in your brain are telling you, "You can't do this. You don't have the ability to do or remember that you couldn't even go outside and mow the lawn?" What happens is that when we do this, we really get into a terrible habit of not doing what we say we're going to do. This is why this whole idea of going for a run when you're sick comes out of. Actually, I have a book that I read. It was either a Navy seal instructor or a Marine instructor, a drill sergeant, but he basically said, "I'm going to get up every day and I'm going to go run a mile no matter what happens." And a couple of days, he got up sick and even though he was sick, he still went for a run. And the idea is that even though something was deterring him from going for a run, he still did it because he wanted to reinforce in his mind subconsciously that he could do something even when faced with adversity, even when faced with maybe a little bit of a pushback.

Conversely, each time that we do fulfill our promises to ourselves… And remember, these can be as little as "I'm going to take out the trash. I'm going to mow the lawn. I'm going to get up an hour early. I'm going to go to bed an hour early." Every time that we fulfill a promise to ourselves, we are reminding our brain subconsciously that we are capable of doing something that we put our mind to, that we can say something and then put our mind to it and actually do it. What I would encourage you to do today and what I definitely have been trying to do for the last couple of weeks since I started reading more about this, is I would encourage you to try to set very small baby step type goals of things that you will be doing, that you're going to do no matter what and then actually do them no matter how small they are. If you think that you're going to wake up in the morning and read for just five minutes, just wake up and read for five minutes. If you're going to turn the phone off at dinner time with the kids, turn the phone off at dinner time with the kids. Anything you want to do in your life, it doesn't matter, but send your brain subconscious trust signals that build your confidence when you're not even aware of it and let yourself know that you can achieve something, that you can reach some sort of transformation that you didn't think was possible before. Hopefully this one really helps out. If it did, please let me know. Share it with me. I'd love to know. As always, 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, "Does moving the unchallenged leg of an option trade make the breakeven points wider or more narrow?" This is a common question that I get and it's always a point of confusion for many traders, is "How do we adjust or hedge a trade when the stock is moving against us?" Now, one of the techniques that we try to teach here at Option Alpha and you see this all over the web also, is that moving the unchallenged leg of an option trade or the untested side of an option trade closer to where the stock is trading ends up being a good technique to make the adjustment. For example, if we have a strangle and the stock starts moving lower, we would roll the call side of the position down and move that call strike to a closer strike. That is the unchallenged, untested, the side that the stock is moving away from. We move that side closer.

Now, the question here today is, "Well, what happens when we do that? Does that make our breakeven points wider or more narrow?" And the answer here is really both. It basically shifts the breakeven lower on the whole payoff diagram. What you end up doing is that when you move the unchallenged leg of an option trade, you end up shifting the breakeven point down by the amount of the credit on the challenged side. Again, using our strangle example, if the stock is moving lower towards our put strike and our put breakeven side, if we move the call strike down and take in a credit of say $1 on that roll down of the call strike, that would then move the breakeven point on the lower side of our strangle, the put side of our strangle lower by $1. Now, we didn't get this for free, obviously. We had to give up something and that's what people always forget, is that the market is a give and a take. There is risk and reward. You can't get a free lunch of $1, an additional potential breakeven point without giving up something else. And so, what you give up is you start to compress or you start to narrow the unchallenged breakeven point. Now, the stock market is moving down against your put strike. You move down your calls. Yes, you get some additional wider breakeven points on the put side, but you also move down your breakeven points on the call side in exchange for that. You basically shifted or picked up the payoff diagram and moved it over a little bit lower or to the left depending on how you're looking at it on a chart.

What people don't understand though is that in my opinion and this is just my opinion of how this would work in the markets based on our testing and our research in this space, is that when you do this, it is more than good to make this tradeoff of making your challenged side strike and breakeven wider in exchange for narrowing the unchallenged breakeven because what would happen is that if the stock were to rebound, it would have to rebound through your potential profit window, leaving you an opportunity to hopefully take some money off the table. I'm a fan of moving down the unchallenged leg, of moving the untested side of a trade closer to where the stock is trading in exchange for moving out and widening that breakeven point, so that the stock has more potential room to come into a profit zone or if the stock is already outside the profit zone, has the opportunity to rebound or come back into our range and potentially give us an opportunity to make some money before it gets to the other side of the position. And so, that's why I favor this type of adjustment. It reduces risk. It does give us potentially a higher probability of making money on the trade overall and/or reducing risk on the trade overall, but you have to understand that it does do a little bit of both. It actually does both. It widens your breakevens on one side and it narrows it on 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 at Option Alpha and welcome back to the daily call. Today, we're going to try to answer the question, "What is the real reason why someone would trade stocks and options?" And what I want to get to is I want to get to the real motivation, not just to become rich or not just to talk about financial terminology and numbers all day. People like numbers or you might like money and terminology, but it's not the real reason why people would want to trade stocks and options. Now, I think and I would assume that many people who are listening to this right now, you didn't get here because you're on some magical ride and you want to just find out what the option market is about or learn a little bit about it. No. There's something that's driving you here. There were some catalyst or some trigger or some event that pushed you into the options market and specifically, maybe have pushed you to look online, on social media or on Google or wherever to learn about options trading or learn a different methodology of trying to generate income or stabilize your portfolio. There was something that happened to you, some triggering event, some catalyst that pushed you here.

And so, what I'm trying to figure out (and I've always asked this question on myself too) is what's the real reason why I do this. Now, for me, (and I can only answer this for me and I'm assuming that for many of you, it's very much same thing) it comes down on one thing and that one thing is control. If I were to basically summarize all of the reasons why I trade stocks and options, why I choose to do it, why I don't hand this off to somebody else, why I don't just blindly invest in indexes, it's because of control. I want to have control over what my financial future is and that's not some far-fetched thing. That's not some mystical thing that we should be cautious about, that we shouldn't tell other people about. I feel like people don't tell people that they trade options because they're afraid of what somebody else is going to say. But the reality is that we simply want to control our financial future. And for me, control then leads to freedom. If I have control over my finances and no market can knock me out, no world event, no political leader being elected or not elected, all of these things that people use as crutches for why they aren't successful, if I have control over that, then I have complete freedom. I'm free to do whatever I want or not. It's up to me. It's under my control. I can lead myself down the path to financial freedom or not, but I'm still in control. I'm in the driver seat. And once I have freedom then, it just frankly leads to happiness and I think that's really the logical approach for me, is like if I have control over my finances, my investments, then that leads to freedom. I'm free to choose what I want to do or who I want to spend my time with, how I want to behave with my wife and my kids and my family and my community and once I have that freedom, then that leads to happiness.

I think that's really why people start trading stocks and options. And again, I would encourage you to get back to the root potentially today of why did you come into this business, what was it for you. Like go back and review and think about what was the catalyst, the triggering event that pushed you into the options market and what are you really looking to get out of it because if you can figure out that it's about control or it's about income or whatever that thing is for you, then you can tailor your journey to making sure that you work towards that target, towards that destination or that goal. And so, that's my goal for you today, is make sure you understand again, really, why are you here and what are you looking to get out of this and then try to figure out what the best path is to take, so that you can ultimately accomplish your goal. As always, hopefully this helps and until next time, happy trading.