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 commodity trading through futures contracts. This is a topic which we don't often cover and we're doing kind of a couple of little episodes here because I'm on the topic of futures trading and futures contracts. But I wanted to bring up this idea of trading with commodity contracts not necessarily because I think people should be trading commodity contracts, though you can if you want to. It's not something that we do here at Option Alpha. But just as an understanding of why it's out there and really, what the importance of having these futures contracts are in the market. I feel like the market for futures contracts and commodity trading gets a really bad rap from people who are not in the industry or people who don't understand the industry. And so, I want people to understand why we have it and why it's important and I hopefully want to use a really quick simple example here to prove the point. But when it comes to futures contracts, we can actually trade if you wanted to, a lot of different commodities out there and trade their future value or future worth and hedge or speculate on where that price is going to be in the future. Things like coco futures and crude oil and cotton and corn and soybeans and all of these things have futures contracts which you can trade and you can speculate on these commodities and assets and their future value going up or down or staying the same. But the real utility of these contracts actually comes when people need to hedge or buy, sell these underlying utilities at some point in the future, but not right now.

So, to use a very simple example, hopefully to prove this point, let's say that I'm a farmer and I'm farming corn. That's my main source of income, is I farm corn and I know I'm going to sell X number of million bushels or whatever per year. Well, if I'm early in the growing season and the price of corn has been rising and now, I see that the price of corn is really, really high, it's been going crazy high for some reason, but I'm not yet at a point in which I can sell my corn. I mean, the corn still has to grow. I still have to harvest it. We still have to deliver it to the market. I mean, there's a big lag time between now and some future date. Well, if I was smart about how I could hedge my risk in my portfolio, I could go into the market and sell futures contracts for corn in the market as a trader and as an individual or a corporation. And when I do that, I'm setting my predetermined sale price at some future date in a couple of months or a year from now and the reason people would want to do that is because if the prices are up and if they're acceptable saying, "You know what? I think that corn prices should be X number in the future and I'm okay with that." Well, you can sell futures contracts that basically lock in that price in the future. Now, if the corn futures go down in value, well, then you're going to make money on your futures contracts because you've already preset a sale price. As the futures contracts go down, meaning that when you actually start to deliver your corn to the market, you may have to deliver it at whatever future price less some factors, say 10%. You'll have to actually deliver the value of your corn to the market at that price, but you would've made up the difference by selling short those future contracts earlier in the growing season.

Now, on the other side of it, let's say that I'm some sort of industrial producer and corn is a big input for me. And so, I might take the opposite side of that trade and say, "Well, you know, corn is going up really fast. I want to lock in the price of corn right now. I'm going to buy some futures contracts on corn and lock in that price, so that if the price goes down, then I'm not losing a ton of money on that investment because if the price goes down, then I can actually buy raw material in the future for much cheaper and I would've just basically lost or made that difference in the contract. But if the price goes up, well, I'm locked in. I have to buy actual raw corn material at a higher price, but my futures contract also went up at the same rate." So, it still evens out to be wherever I ended up pinning that pricing. Now, a lot of companies, a lot of very big companies, a lot of industrial companies and production companies use futures contracts as a way to hedge and protect the cyclicality of their business and they'll use these in regular daily operations. That's really the underlying utility of it. I mean, a lot of people speculate and trade back and forth, but this is really where commodities trading kind of comes from, is that core understanding of how people can actually use these contracts to benefit and reduce volatility and improve margins and improve the stability of their business. Hopefully it helps out. As always, if you guys 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 are going to be talking about the easy guide to understanding E-mini S&P 500 futures contracts and basically just trying to walk you through a little bit of understanding of how these contracts work, how they're structured and what you need to know about them if you're going to start using them for trading purposes, not only on the futures side, but also on the option side. Again, it's going to be a very basic introduction to these E-mini futures just so you have a little bit of understanding of the history behind them, why they're available and kind of the specifics of the contract. Again, the reason that these eventually came out and I think they came out in like late 90s or something like that. I'm not sure exactly the exact time, but around the late 90s or so. The contract size of the regular S&P 500 contract just got to be a little bit too big, so what we ended up seeing is we ended up seeing these E-mini contracts, so these electronically traded mini versions of broader indexes and markets. And now, the E-mini has become one of the most liquid and most highly traded contracts out there, but there's also E-minis for the Russell and for the Dow and for bonds, etcetera. There's a lot of different E-mini contracts that you can trade, but when people typically talk about the E-minis, they're talking about the S&P 500 futures contracts.

And so, the key thing that you have to understand about all of these E-minis is that they do have some very, very specific differentiators when it comes to contract sizes and tick sizes and months that they're available that are different from literally different index to index. The S&P is different than the NASDAQ which is different than the Russell which could be different than something else. When it comes to the E-minis, the one thing you have to remember is that the contract size for E-minis is $50 times the S&P 500 index value. That determines the actual contract size that ends up getting traded or that value of that contract that's traded. They still trade basically with last prices around wherever the S&P 500 index is. At the time I'm recording this podcast, I'm looking at the September E-minis and they're trading at $27.91 and the market right now is trading at $27.90. It means literally like within a tick of it and it's going back and forth. But when you actually get into contract size, if the market's trading at $27.91 and we multiply that by $50, that means that the actual value of that contract is $139,550. Now, before you freak out and get really scared, that doesn't mean that you have to have $139,550 to actually trade those contracts. It's just that's the actual underlying notional value of those contracts. When it comes to actually then trading those contracts, you'll have to have a certain margin amount to then cover that trade. It's not always going to be that you have to have the full amount in your account. If I click on these… And I'm actually doing this as I'm recording this daily call podcast with you guys here today. But if I click on those and I'm just trying to simulate buying one of these contracts, the actual buying power effect that I see in my account is only $7,700. If I actually wanted to get into it, yes, I still need to have a lot of capital available to trade these contracts, but I don't need to have the full notional value of those contracts in my account.

Now, when it comes to actually trading anything other than the individual futures contracts themselves like the options contracts, it actually again, becomes just a little bit more complicated and it's not that it's overly complicated that you can't understand it. You just have to literally take one step back and slow down in your thinking and thought process. But the contracts for options have one extra denominator that you have to factor into when it comes to the printed value versus the, I guess notional or true value of that contract. When we're used to trading options contracts, if we see that an option contract is listed at $2.00 on the pricing table, then we know that that contract is worth $200. It's going to cost $200 to get into it or we're going to get a $200 credit. It's pretty straightforward. But when it comes to some of these other ones like the E-mini contracts, you also have to use that kind of like multiplier or factor to then break down the value of these option contracts. To give you guys an example, right now, I'm looking at the $27.70 put options which are just below the market, but again, for the September expiration at the time I'm doing this recording and those contracts are trading for $40. That's the mark, $40.00. But when you actually go in to buy those contracts, say I was going to be an option buyer and wanted to buy those contracts for some reason, the actual value of that contract is basically half of what's printed on the option pricing table. That value gets reduced by a factor of 50 which is the same factor that we talked about earlier in kind of the tick or contract multiplier. The actual value of that contract is not $4,000 which is what it would be had it been printed any other place out there, regular stock, regular ETF, but the actual value, the notional value of that is only $2,000. That's really what it would cost to get into that trade or that's how much you would get. It looks like things are always overinflated. That's what people always see when they get into these futures options and they start looking at them. They see all these prices and they're like, "Wow! This thing is so, so expensive. I can get some great premium by selling it." But then you actually start using those contract multipliers or denominators and start breaking these things down and you can see that sometimes it's not what the actual printed price is. Again, it seems like it's a little bit more complicated than it actually is, but you'll get used to it if you end up starting to trade these a little bit more.

The other thing that we want to talk about is obviously the contract months for the E-minis. E-minis and a lot of the other mini contracts trade only on the quarterlies, so that's March, June, September, December, etcetera. All of the option contracts do have many more expiration dates, not only the monthlies and quarterlies, but also weeklies. There's also talk of having even more weeklies and like by weekly contracts starting to come out. I think there's a lot of variation in those option contracts that are then driving their value from the E-mini contracts. The key takeaway for me just to kind of wrap this up is that the E-minis are a great trading vehicle because they do have the ability to trade basically like 24 hours a day, five days a week. There is some time period. It doesn't trade 24/7. But it trades 24 hours a day, generally five days a week and that does give you the ability to see where the markets are going and see how the markets react even if you're afterhours from regular trading time. Oftentimes, we'll see the futures or you'll hear the futures contracts are starting to rally or starting to fall when some news event happened or some market moving event happened and we're not actually in the market regular hour session. The E-mini contracts are a great way to look and see where the markets could open up and start to position yourself accordingly. I also know and we'll be doing more podcast on how other traders are using E-mini contracts to hedge their positions afterhours. There's a really good hedging strategy that you can use with E-mini contracts if you're trading some of these bigger S&P, RUT type index ETFs and options. There, you can use these contracts to hedge positions and give yourself some more time to get out of them or kind of wait for the regular market hours to come before you trade the actual contracts. I think there's a lot of good stuff that we can dive into. I've probably gone a little bit over today, but I wanted to give you guys a brief introduction and kind of a mini deep dive into these E-mini contracts which I think hopefully you enjoyed. As always, if you guys have any questions, let me know. Until next time, happy trading.

Hey everyone. This is Kirk here again at optionalpha.com and welcome back to the daily call. Today, we are going to be talking about intraday trading and answering the question, "Can it work for options traders too?" I think a lot of people are drawn to the idea of trading intraday, so day trading, if you will, entering a position, having this huge profit show up in 15 minutes or 20 minutes and then exiting the position. And in fact, as I've been watching a lot of communities and Facebook groups out there, particularly in the Robinhood space because people are getting in for no commissions, I'm seeing people posting all of their gains and profits and losers and winners on intraday trading and then everyone else is supporting them and saying "Keep at it. Intraday trading works." and people are starting with a $200 account and risking $100 per trade. I think the reality is that of course, it probably works for some people. I'm not going to say that it absolutely emphatically does not work. That'd be ignorant of me to say 100%, it doesn't work. I can tell you though, all the people I've ever coached before, all the research I've done, all the back-testing that we've done, all the technical analysis indicators that we've back-tested during intraday timeframes, it's really, really hard to make a case to say that it's going to be profitable long-term. You just can't get the moves in the underlyings that you need. You don't get the time decay that you need. You don't get the implied volatility edge to play out over time like it should.

The way that I think about options trading is I think about options trading in the sense of – You enter a position now when implied volatility is wherever it is and you have locked in your edge and your profit. It just takes all the way till expiration for you to actually be able to pull that money out of the bank. You've often heard the saying in real estate that you make your money when you buy. It's the same thing with options trading. You make your money when you sell when you're trading options. It's just that you realize your money after the expiration month has played out, the implied volatility edge has played out, time decay has eroded the value of those contracts and now, you can withdraw that money and hopefully take home some income with it. For that reason, intraday trading just is too short of a time period to profit from the things that we know to be edges in trading mainly implied volatility, time decay, etcetera. Intraday trading has no impact on that or very little impact on that which is why I don't think that it really works for many options traders. By all means, knock your socks off. Go try to do it. See if it works for you and then when it doesn't, then you can come on back to Option Alpha and we'll teach you how to do it on a monthly and income-based approach. As always, hopefully this helps out. Let me know if you guys have any questions. Until next time, happy trading.

Hey everyone. This is Kirk here again at Option Alpha and welcome back to the daily call. Today, we are going to be talking about why being busy is a form of laziness. This I think is one of the most interesting things that I think about all the time. I mean, I literally geek out on this stuff all the time, on productivity and psychological hacks and just like how the mind works and how we as humans and investors, how we operate and how we think about things. And this one to me, I'll tell you a quick little story as to where this really kind of started. We always hear this, I think in many cases, but to me, I saw this firsthand and it really made an impression on me back when I was working for Deutsche Bank and I was in the M&A space, so I was in mergers acquisitions. And our director, like our global head of M&A worked on our floor, so we were in the building on Wall Street and he would come in later in the morning for sure, so he would not be there the same time that we were there. But he would come in later in the morning and I literally had my desk and office like across from his and I see him all the time, very nice guy, but he would literally sit in his chair for forever it seemed like and do nothing and just think and you could see that he was thinking. He wasn't sleeping, he wasn't reading a book, he wasn't listening to a podcast, he was just purely, purely thinking. And I remember at one point just asking somebody at that time, saying like, "What do you think he thinks about all the time?" And somebody said, "He's thinking about what to do next." And I really thought that that stuck with me because what he was doing that I didn't know at the time is that he was being super, super selective on what he was going to work on next. If that meant that he sat there for an hour and try to figure "Okay. What is the best next step that I can make?" then it ends up being a very effective and efficient way to go about his business and to work and manage the group. Because if he was just running all over the place and looking busy for the sake of looking busy, then we may not have gotten the ultra-selective, ultra-important work done. And so, what I have definitely found is that when people look really, really busy, it's probably because they're not doing the right things.

People have often asked me and they say, "Kirk. How do you do all the stuff that you do on Option Alpha?" Like I get it probably every single day. I'll get an email from people saying, "I can't imagine that you've done all this. I can't imagine that you've put together all these trainings and you do all these podcasts and you do all these emails that you reply to people." But for me, it's really, really efficient because I'm hyper-focused on what I need to do. I don't watch the TV, I don't listen to the news, I read in the morning, I don't do anything else at night, I just am hyper focused on the activities that for me, create the most value for you guys and for myself. And so, I think that when people are busy, they're just lazy thinkers and they are indiscriminately acting on whatever kind of comes their way. They're just kind of catching snowballs as they're being thrown at them and so, for them, it's very easy to be overwhelmed and then feel unproductive because they feel like doing nothing means that they're not actually making progress, so they start doing a lot of things, but they start doing them half you know what. I'm not going to say that. I don't want to make this an explicit podcast, but you know what I mean. They start doing them 50% and it becomes very, very unpleasant and very unfulfilling. My suggestion to you guys is today, try to be ultra-selective, try to do less things, but do the important things and then forget about everything else that isn't important or it becomes busywork. Sit there and think about the next thing that you need to do and make sure that it's the best next step, it's the most important thing that you can do today and try to knock over that first domino. 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. Welcome back to the daily call. Today, we are answering another question from our community and that is "Should you hedge domestic currency risk by trading Forex?" A couple of episodes ago, we gave you a brief description of the Forex markets which you can go back to and listen, but now, the question from somebody is "Okay. If I have a lot of my assets denominated in Australian dollars or Canadian dollars or Euro, then should I hedge my domestic currency risk by trading Forex? Should I protect it in some cases?" And so, I think the natural answer to this or the easy answer to this would be yes, like people would assume yes. "Oh my gosh! Absolutely! You have to hedge your domestic currency risk." I think it can be hedged easily by just trading ETFs or trading currency pairs in other markets. We often trade a lot of the Forex currency type ETFs like FXE, FXY, etcetera, so that's an easy answer. But the easy answer being yes is not actually what we see in a lot of research. There's been a lot of research done recently on currency hedging risk and exposure and I think one of the best ones that came out of the market was a third-quarter report from GMO which basically said they went back and looked through the history from 1995 to 2015 and they looked at all of these emerging market funds and then they basically hedged the local domestic risk of the currency wherever they could. If they had a fund that was trading in Euros, then they tried to hedge the risk of Euros. If they had a fund that was trading in all Japanese industrial companies, they try to hedge all the risk of the Japanese Yen.

What you saw over that 20-year period is that when you actually tried to hedge out and remove the currency risk from each individual market, as a collective, you actually underperformed not doing anything at all. And I think to me, this is fascinating because what we often think about is we often think that we have to hedge currency risk, that "Oh my gosh. I have all this risk in this denomination of currency and so, I have to protect it by investing someplace else." And in some cases, maybe that might be true or if you're moving abroad, maybe you want to start moving your money there, like I can see instances where that happens. But as a framework for investing, it just didn't make sense because the problem was, as is the problem with every hedge that you try to do, is that hedges cost money. Insurance, again, something else happening, whether you do it for free or for a little bit of money or there's some hidden cost to it that shows itself later on in the expiration cycle, ends up costing money and ends up reducing returns. This is no different than people who try to hedge exposure in the US markets by buying put options that are out of the money. That insurance contract cost money and that cost of insurance has to be reduced by your overall gains. I think that this was a really, really interesting case study. There are a lot of other ones that are out there. The Brandeis Institute put together a really good one back in 2007 that you can look up as well. Like I said, the reality is that in many cases, it's probably not worth your time and effort to go through and hedge in many cases, like a smaller portfolio compared to like a large multinational company or an investment bank. It's not really worth it to go ahead and hedge for currency risk.

I thought this was a good question. Hopefully this helps out. If you guys find any other research out there, please let me know. I'd love to see it and like I said, I always geek out on reading other research in other markets as you guys are well aware and we try to bring this to you here in the daily call. Hopefully that helps out. If you guys have any questions, let me know. Until next time, happy trading.

Hey everyone. This is Kirk here again at Option Alpha and welcome back to the daily call. Today, we are going to be talking about how to invest in oil. Now, we're definitely not talking about buying oil rigs or investing in offshore drilling platforms, but we're talking about how you can invest in oil if you want to gain some exposure in your portfolio, whether that's directly with some ETFs and tickers or you want to gain some exposure with futures contracts, etcetera. Some of the ways that you can obviously invest in oil is you can invest directly in some of the major corporations that deal in oil, Exxon Mobil, ticker symbol XOP, Chevron, CVX, some of the other ones. There are big names out there you can just search. That's a very direct way to go about it. You can also invest in a lot of baskets of ETFs around the oil market. Some of the popular ones and ones that we actually trade options around as well are XOP which is the spider oil and gas exploration ETF. You have USO which is the United State oil find. You also have XLE which is just energy in general which also includes oil as one of its components and then finally, OIH which is the vectors oil services sector. Again, there's a lot of different ways that you can go about trading oil in your portfolio or oil denominated ETFs or oil focused ETFs.

The other way that you can trade oil if you want to trade it more of a direct fashion is through crude oil futures which is ticker symbol CL or in many broker platforms, /CL, so you can trade futures contracts. We don't trade the futures contracts here at Option Alpha. We have randomly traded some of the option contracts when implied volatility is really, really high in oil. But otherwise, we stick to some of the major ETFs. But futures are a good way if you really have for some reason, some major exposure to oil prices, maybe to a business or a company that you invest in. That would be a good way to hedge that with futures contracts. Hopefully this helps out. It was just a kind of off the wall question that we got from one of our members and figured we'd throw it in here into the daily call. As always, if you guys do have any questions that you want us to answer here on the call or live on Facebook as we've been doing here every single day, please let us know. Head on over to optionalpha.com/ask and just leave me a message. Until next time, happy trading.

Hey everyone. This is Kirk here again from Option Alpha and welcome back to the daily call. Today, we are going to be talking about how to setup an iron butterfly, so walking through some of the basic mechanics around how you can setup an iron butterfly strategy. Before I even talk about just a very simple example, as always, when we're setting up iron butterflies, we are mainly using our trade optimization and back-testing software to determine how far out to buy the wings of these iron butterflies based on whatever market situation or IV environment we find ourselves in. Oftentimes, if we are trading say 30 days out versus 60 days out and implied volatility is 50 IV rank versus 70 IV rank, that may have an impact on how wide and how we setup our iron butterflies. It's always I guess advised to go back through and make sure that you're using the trade optimizer for what it was built for, the purpose it was built for and that is to optimize positions for market scenarios. As far as a general setup goes, obviously, iron butterflies are the synthetic and risk defined cousin of short straddles. The very first thing that you do to setup an iron butterfly which is really no different across the board, this is the easiest part, is to sell your inside short strikes at the strike price that's closest to the at the money of where the stock is trading. For example, if a stock is trading at $40 a share, you would sell the 40 strike put, the 40 strike call. That sets the foundation of the iron butterfly, it sets the peak and that's the inside short straddle part, that's the synthetic part that you really want to go after.

From there, now it becomes a little bit more of a dynamic approach as to how wide you want to buy wings. Now, as a general rule, what I like to do is I like to buy wings that are far enough out to give us plenty of room to collect a big credit because that's the goal of doing iron butterfly, is just to collect a big net credit, but not too far out that there's no point in actually buying those contracts. Let me use hopefully an example just to prove the point. If we were to sell let's say the 40 strike calls and puts, I might then look to buy the 35 strike puts and buy the 45 strike calls, so doing a $5 wide iron butterfly. Now, if the 35 strike puts and the 45 strike calls are say each trading for say $.10, then I might look to use that trade as the basis for my iron butterfly setup. That's around what we generally like to pay. It depends on the underlying security. But generally, we like to pay $.10 to $.15 on each side and we feel that that's more than adequate for cheapness, but also not too cheap that it doesn't really serve us any purpose. But if we were looking at the same option pricing table now and let's say I looked at the 34 strike puts and the 46 strike calls, so just $1 further out, let's say that those option contracts then only cost me $9. For an extra dollar on each end that I am saving, so by moving the strike prices out one extra dollar, so buying the 34 puts, buying the 46 calls, I'm moving those strike prices out by a dollar, but the savings that I get by doing that is only an additional dollar on each side. If you think about the risk to reward of that change in the payoff diagram, you're basically saving a dollar, but taking on $100 or so of risk and so, for that, we would generally never do.

There's going to be a natural breakpoint when you start looking at iron butterflies. You see where the premium starts to tail off. It's not always that we want to sell the furthest contracts out because that's what Kirk said, to sell them as far out as you can. You want to sell them as far out as you can within reason, so that it still makes sense to do it and you start seeing the option pricing chain and as you go further out, the pricing might start looking something like $30, then $25, then $20, then $10 and then it just tails off and that's where you want to stop. Again, if we look at our trade optimizer, our trade optimizer says, "Hey. This market environment, you want to buy your strikes $10 out on either end, great. We'll go look at the option pricing table. We'll look to see "Okay, hey. Does $10 out on either end accomplish our goals?" Maybe we can actually come in a little bit closer and the $10 out strikes are the same price as the $8 out strikes." You have to be a little bit dynamic with your approach to it and just using the underlying stock pricing table to see where the best approach is. Again, you don't want to be too cheap. You don't want to buy everything for a dollar because it doesn't serve you any real purpose, but at the same time, you want to try to maximize your credit as much as possible. Hopefully this helps out. As always, if you guys have any questions or want to see more training on iron butterflies, see some of the live trades that we've done, just go ahead and search iron butterfly on the website. You'll get a bunch of content on there, including some live videos and some trainings that we've recorded for you. As always, hopefully this helps out. Let me know if you guys have any questions. Until next time, happy trading.

Hey everyone. This is Kirk here again at Option Alpha. Welcome back to the daily call. Today, we're going to be answering the question, "What are the best trade tools that you can use for options trading or for stock trading in general?" I think the best tools that you can use are first, a broker. A broker accomplishes most of the goals or checks most of the boxes when it comes to actually trading. You pair yourself up with the right broker that has great technology, great speed, great customer service, great commissions, etcetera, I think that accomplishes a lot of it. From there, you definitely want some charting software. If you're looking to start trading, you want to figure out how you can get charting software. If you don't get it through your broker, if you can't get good charting software through your broker, you want to use a third-party service provider. Something like tradingview.com is a good alternative. I know a lot of people who are now trading on Robinhood because of the free commissions, but Robinhood does not offer any technicals. It offers very, very minimal charting. It's basically just a line or one day, one week, one month, one year, etcetera for each stock, so really not too much information in there. It just kind of looks good, but it doesn't really give you any details that you might need to make a trade. We suggest people start using a third-party alternative like Trading View or stocktradingcharts.com, something like that that can help out with the charting software.

The other thing that you would definitely need is you definitely need some analytical tools or back-testing tools. Now, of course, we've got our own here at Option Alpha. We've built our own suite of tools for finding, scanning, analyzing and back-testing trades. There are obviously service providers out there who also have their own tools. We think we've put together a pretty good suite of tools for you guys for one time price and kind of buy in to help us cover the cost of additional updates and releases to everyone in the future. Some other service providers charge monthly or charge one time buy ins plus monthly, so just do your homework on these. But you definitely need something to run tests through and to use for scanning purposes. It's not enough just to blindly cover your eyes and say, "Okay, I'm going to trade this today for this reason." You need to know why you're doing that. Is implied volatility high? Is the ticker symbol moving, having a big move up or down? And then from there, trying to figure out what the best strategy is for that market situation. We know there's no unicorn strategy that works best in every scenario. You have to be a little bit more dynamic with your options trading. Using tools that allow you to find the best strategy for whatever scenario you're in right now is really what we've been after for a long time.

And then finally, the last thing is auto-trading capability which practically nobody has, but us right now and I think we're definitely going to be and continue to be the leader in this space for many years and that's the ability to then if you wanted to, setup automated trading bots or machine learning bots that basically make trades on your behalf. They find, they scan, they analyze, they enter, they manage, they exit, they do the whole thing start to finish, A to Z and I think that's going to be the future of what this industry is going towards and we're definitely going to be the forefront leaders in that space. As always, hopefully this helps out. If you have any questions, let me know. Until next time, happy trading.

Hey everyone. This is Kirk here again from Option Alpha. Welcome back to the daily call. Today, we're going to be talking about how to adjust short straddle option strategies. Short straddles are probably one of our favorite strategies here whether we do them regular, I guess or naked short straddles or we do them synthetically with iron butterflies because sometimes we will sell a short straddle and then buy protective wings because they're really cheap during low implied volatility and basically create an iron butterfly. But a lot of people have confusion on how you should adjust these strategies or I guess there's a lot of confusion on how you should go about adjusting new strategies. Now, the first thing you have to understand is that with these strategies, whether you do them as a regular straddle or as an iron butterfly, is that because you're selling at the money strikes, your first style of adjustment is going to be to go inverted. We're not talking about rolling contracts to the next month. We're talking about simply making an adjustment in the existing month that you're trading and because you're already starting with at the money strikes on both sides, you know wiggle room to adjust these strikes and make them less at the money or make them more narrow without going inverted. The inversion process then is what I think trips everyone up. Inversion is actually really, really easy to understand if you just take a second to slow down and think through the process.

Let's assume that we have a stock that's trading at $50. We sell the 50 strike straddle, so the 50 call, the 50 put and let's say we take in a credit of $5. That means that our breakeven point is $5 above and $5 below our strike price. We're looking for the stock to trade in a range of about $10 in either direction, so up or down by $5, $10 range. Well, because we've taken in a credit of $5, we now have a little bit of wiggle room to make an adjustment where we go inverted on the short straddle by a width that is less than the credit that we took in. Again, I'll say it slower. I just want to make sure I get it right too. Because we took in a credit of $5, we now have the ability to invert the position by $5 or less, okay? Now, that's not assuming any additional credits that we take in. If by inverting, we take in another dollar of credit, we have $6 in total credit, now we can invert the position by $6, okay? It's all based on the credit that you take in. But now, let's say that the stock starts to go against you to the call side, so the stock starts to run up. It was trading at $50, now it starts to go up and now the stock is trading at say $55. It doesn't really matter, but it's trading high enough that you want to make an adjustment. To adjust these short straddles, all you would do is roll up your unchallenged side or the untested side by rolling up your short put and selling an option contract a little bit higher. In this case, if we originally sold the 50 strike puts, we might sell the 52 strike put options, we might roll it a little bit up higher and take in a bigger credit. Now, in this case, we have now gone inverted by $2. We have a short call at 50 and we have a short put at 52 and that $2 inversion is still okay. We still are leaving room to make money because we took in a credit that was more than the width of the inversion. The inversion is $2, the credit that we initially took in before the adjustment was $5, so even if the stock didn't go where we thought it was going to go and came back into the range, it still would leave us with about a $3 plus profit, okay?

Again, the key with adjusting short straddles (not to really belabor this too much longer in the daily call) is just to pay attention to the width of the spreads when you go inverted and the total credit that you took in. You always want to try to make sure that you collect a total credit that is worth more than the width of the inversion and again, always adjust by moving the unchallenged side of the position higher or lower depending on where the stock goes. As always, hopefully you guys enjoy this. If you have any other questions, let us know. We do have some additional training inside of the platform on adjustments in going through this process, so if you want to watch me walk through it on a video tutorial, just search straddle adjustments inside of the Option Alpha platform. Until next time, happy trading.

Hey everyone. This is Kirk here again from Option Alpha and welcome back to the daily call. Today, we are going to be talking about why I believe and I will try to subscribe myself to not spending your life avoiding failures. I'll tell you a quick little story which I think will help because it really helped me and I kind of (I don't know, for whatever reason) thought that it was impactful on my life which is why I wanted to bring it to your attention. But I was at mastermind event a couple of months ago, the only mastermind that I go to with a bunch of people and we had a chance to meet and speak and sit down and talk with Sara Blakely who is the founder and the woman who runs SPANX, multi-billion-dollar company and she's a billionaire by her own right, very interesting story. And what she said in her story which I think stuck out more than anything was that at their dinner table when they were their kids, her father would go around the table and ask each of them what they failed at that day and if you didn't have an answer, he would actually be mad. He'd be mad at them and say, "Why didn't you try? Why didn't you try something new? Why didn't you try to do something and go out on the limb and let it break?" For her, it was kind of very much normal course of business, I guess if you will to try something new every day and potentially fail at doing it and that was okay because you're pushing boundaries and you're trying to figure out what challenged you or what squeezed you or what tested you. And so, I thought this was really, really interesting because what I took away from this was – Hey, you know, we should stop avoiding all of the things that seem like they could be failures.

I think most people or like let's say average people probably only move forward when conditions are optimal. They look at a job change or they look at even investing in the market and trading. "Well, I'll start trading once I have some X amount of money or once my kids get out of school or once I move jobs." And it's always just looking for that perfect point or that perfect time to make a transition change or make a move, but we know it's never going to happen. The conditions are never going to be exactly conducive for us at that exact moment. The stars are never going to align, so why do we keep looking for this? And it's because we're truly trying to avoid being failures. I think for me and I did a podcast on this the other week on our weekly show, just talking about some of the mistakes that I think I've made and some of the things I've learned in the last couple of years trading and with all the data, is I'm okay recognizing where my downfalls are and where I think I have room for improvement, things that I've learned on the way that maybe I thought were true before and turned out not to be true. I have definitely found that the greatest rewards, I guess in doing all of this have been from the times where I really challenged myself and tried to push the boundaries, tried to do something that nobody else has done and that to me has been really rewarding because once you actually get there, it might take some time and some effort to go through it. I think once you actually get there, it's a great rewarding experience, you feel very successful, you feel very accomplished and I think a lot of people are just spending their entire life just avoiding failure when actually as Sara Blakely said or would say, you should try to go out there and fail a little bit every day and then learn from it. Hopefully it helps out. As always, if you guys have any questions or comments, let me know and until next time, happy trading.