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, “How do you not lose money in the stock market?” Well, it’s basically impossible not to go through some potential drawdown over a long period of time. Even cash loses money. When you think about investing, you think to yourself, “Well, if I’m not going to lose…” The only way not to lose is just not to be even involved in the market, but that would mean that most of your money is sitting idle in cash and you’re going to lose purchasing power just due to inflation. If you accept now the possibility that anything you do has risk, even cash, even gold, even just money under your mattress, then you should be willing to accept risk that aligns with your overall goals. We know that we’re going to go through periods where we lose and where we have drawdowns. I think Charlie Munger famously said in the 2008-2009 crash, “If you didn’t lose 30% or 40% of your account, you didn’t know what you were doing.”

And while I agree to that to some degree, I think that in many cases, it’s probably an over-exaggeration that many people should blindly just follow where the indexes and markets go. I think you have to take calculated risk. I think with options, especially the leverage and the risk management controls that options allow you to have, you’re going to go through periods of drawdowns, but you can keep those drawdowns to a very minimal amount and you can control risk much better. That doesn’t mean you can’t avoid risk. It doesn’t mean that you definitely will not lose money in the markets. It means that you can control how much money you lose and how much money you’re risking and have a better position, so that if the inevitable black swan happens which it will again and again in the future after that, you have the ability to keep the lights on and to keep enough capital available to keep trading. Hopefully that helps out. As always, if you guys have any questions, let me know and again, never forget, your life should have options because options give you freedom. 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, “Is day trading a viable career?” The short answer to this for me is no. I don’t think it’s a viable career because I don’t think honestly a lot of people have the stomach, nor the account size to actually do it. I know a lot of people get sucked into day trading because they like the idea, they like the hustle, the grind, the market fluctuations, all the stuff that’s wrapped up in this ideal persona of somebody who can day trade for a living, but the reality is it probably takes a lot more skill than most people actually have. I think that there’s definitely people who are profitable as day traders and I think they are the exception, not the rule. There’s definitely people who are really, really good at day trading. I am not one of those people by any stretch, nor do I think many people are. And so, to me, when I think about day trading as a career, while it sounds so cool on paper and maybe in the media or what you see online, I think the reality is it’s a very, very stressful environment. This idea that you have to be in and out of positions so quickly and you have to watch things so closely on an ongoing basis leaves very little time for everything else.

Discounting the fact that I don’t think many people could actually do it, nor do I think there’s a real statistical edge behind it for the masses. Not saying people who have skill don’t have skill. They do, but it’s not really a mathematical edge that we can find in day trading. And so, I think the alternative to that is you have to do some sort of position or monthly portfolio trading. At the very, very least, something that allows you to more actively manage positions without the need to do it on a daily basis. Do I think it’s a viable career? I don’t think so. I think you need a large account to do it. You’re going to go through a lot of ups and downs. I don’t think many people have the stomach for it, nor do they have the patience or the time to actually watch it and it probably takes more skill in that particular area than probably any other type of investing I know. Hopefully this helps out. As always, if you guys have any questions, let us know and never forget, your life should have options because options give you freedom. 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 cannot predict implied volatility. This actually came from a question from a user. He basically sent me a message through Facebook and they said, “Kirk, can you actually predict where implied volatility is going to go?” And I thought to myself – It’s an interesting question, but the answer is you cannot predict where implied volatility is going to go because implied volatility is the prediction itself. The fact that market participants, you, me and everybody else out there that’s trading options and buying and selling underlying securities are actively engaging in the market therefore creates a prediction based on our actions of where we think the market’s going to go, but that is the essence of what implied volatility is, an estimation, an assumption of where the volatility is or how volatile a stock will be moving forward into the future. I think their question wasn’t necessarily on implied volatility as a number and as a prediction, but on predicting implied volatility’s movement. If implied volatility right now is 20%, i.e. that we expect the stock to move 20% over the next year, can we predict if 20% is low or high in a relative range? And again, the short answer to this is no because it’s just right now’s assumption. Tomorrow, some new news could come out that could dramatically shift that prediction up or down.

Now, we use IV rank and IV percentile to get a general gauge and a sense of where volatility is in its historic range because we believe that volatility is generally mean-reverting or generally, it goes through periods of really high volatility and really low volatility, but that doesn’t mean that those periods can’t persist or that they can’t now change and become the new normal. It’s very hard to predict where implied volatility will go and therefore, try to profit off of that prediction. This is why as option sellers, we prefer to take the opposing side which is – Let the market challenge our assumptions and let us take the opposing trade which is to sell volatility knowing that in either direction, people have an overestimation of how high they think it’ll go or how low they think it’ll go relative to what actually happens. It’s this differential, this edge in implied volatility versus the actual move where we can actually get a nice little profit and edge in the market selling premium. We just have to be patient enough to let that premium and that edge realize or materialize. Hopefully this helps out. As always, if you guys have any questions at all, please let us know and never forget, your life should have options because options give you freedom. 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 answering the question, “What is the difference between a strangle and a straddle?” The difference between these two option strategies is actually very simple because they’re cousins of one another. The difference is that with a straddle, you are selling the at the money call option and the at the money put option effectively at the same price. If you have a stock that’s trading at $100, to do the straddle, you would sell the 100 strike call and the 100 strike put. A strangle is selling any other combination of out of the money options that are not at the same price or strike price. For example, if the stock is trading at $100, you might sell the 101 call option and the 99 put option. That would create a strangle. You could also sell the 99 put option and the 105 call option. Again, that could also create a strangle. The strangle is just simply selling options on both ends, so the put side and the call side at different strike prices. A straddle on the other hand is selling options effectively at the same strike price typically at the money or very close to where the stock is trading currently. As always, hopefully this helps out. If you have any other questions, let us know and never forget, your life should have options because options give you freedom. 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 answering the question, “How do you make money when stocks go down?” The topic of this question is not how do you avoid losses when stocks go down, but specifically, how do you potentially make money when stocks go down. And so, there’s a couple of ways you can do it. Obviously, timing is a really big important factor here. We’re not talking about necessarily a huge major bear market move or a huge correction, but we’re just talking about this idea that when stocks are going through a cyclical cycle and they have their ebbs and flows of ups and downs. How do we generally make money in those environments? And if we’re going to be trading options or we’re going to be trading the underlying stock security, how do we make money? The first and most obvious way to make money on a stock going down is to short the stock. Now, that requires a lot of capital and a lot of margin to do it, but it’s the easiest because people are very used to the one directional movement of a stock. You buy a stock and hope it goes up to make money. If you want to make money as the stock is going down, you simply short the stock.

Another alternative to this would be to buy option contracts. It would be things like buying a put option or a put option spread where you are directionally playing the bearish move in the underlying stock hoping that the stock goes down. Now, it’s a little bit better than actually shorting stock because you’re doing it in a leveraged cost-effective way and you can set your probabilities of success wherever you want to put them, but the alternative to that is to sell option contracts and this is where we would prefer to trade something that we assume might go down or we might have a hunch or a directional opinion that it might go down where we would sell option contracts against that, so sell a call option or sell a call option spread at or above where the stock is trading. That would also give us a margin of error and put the implied volatility edge on our side. Those are the three ways you can potentially make money when stocks go down. Again, you choose whatever works best for you. But hopefully this helps out. If you guys enjoyed this, let us know and if you have any questions, let us know as well. Never forget, your life should have options, so don’t trade, trade with a purpose because options give you freedom 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 answering the question, “Does option volatility (specifically Vega) change with time?” And of course, volatility and option volatility which is commonly referred to as a Greek letter Vega, does change with additional time until expiration for those contracts. Now, this concept makes complete sense when you think about it in the context of a flight or a plane that’s traveling either a short distance or a long distance before it arrives at its destination. For example, if a plane takes off from New York, then a very small and slight tweak in the direction of where the plane is going right after takeoff can have a dramatic impact on where the plane actually ends up. The plane takes off from New York and it’s facing Los Angeles and California, but then right after takeoff, it makes just even the slightest degree change in trajectory and that could end up leading the plane all the way to California or to Oregon or down to Mexico. Because the plane has so much distance to cover, i.e. time until expiration where it lands, then a slight change in direction or volatility in this case could have a dramatic impact later on.

For that reason, we see Vega values for option prices to be much, much higher the further we go out in time. The Vega of an option nine months out is typically higher than the Vega of an option that is closer in to where the stock is or closer in to expiration. And again, take that same example with the plane. If a plane is heading from New York to LA and 100 miles from LA, the plane makes a little bit of a change in direction, well, it’s still going to land generally in the vicinity of Los Angeles because it’s closer to expiration, so it didn’t have as much time to travel that new distance. The market is pretty efficient and sound in kind of pricing this out. Again, the longer that you have until expiration, the bigger the impact even small changes in volatility might have on those option contracts and so, as a result, it’s let’s say less sensitive, but it starts from a much bigger starting point. Hopefully this helps out. As always, if you guys have any questions, let us know, shoot us an email. We’re everywhere on social media @optionalpha and remember, never forget, your life should have options, so don’t trade, trade with a purpose because options give you freedom 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 you buy stocks on the weekend?” The simple answer to this question is no, you can’t buy stocks on the weekend. You have to buy stocks when the markets are open and that’s usually Monday through Friday for the regular equity markets specifically here in the US. If you want to trade stocks, you want to get into or out of positions, you have to trade them during normal regular market hours. Now, there’s some exceptions where you could get approval to do a little bit of afterhours trading, but that’s on the far end of the spectrums. For most retail investors, say the vast majority of retail investors, all you can do is buy and sell stocks during regular market hours. 9:30 AM Eastern Standard Time to 4:00 PM Eastern Standard Time, Monday through Friday is when you can start trading. As always, hopefully this helps out. If you guys have any other crazy questions you want to ask that you want to get queued up to the daily call podcast, as always, head on over to optionalpha.com/ask, leave us a voicemail. Hope you guys enjoyed this. If you have any questions, let us know. Remember and never forget, your life should have options, so don’t trade, trade with a purpose because options give you freedom. 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 difference between fee-based and commission-based trading costs. Really, the slight difference in variation here is really, how the commission or the fee is charged. When you look at most trading costs, they’re usually a fee-based trading cost which means that there’s a fixed fee associated with performing that transaction, but then you also have this commission or this variable element that layers on top of that which could be variable depending on how much of that particular security you’re trading. A good example of this might be a different brokerage that’s out there that charges not only a ticket charge which is a fee-based commission, ticket to actually just enter into the transaction regardless of how much or the quantity that you’re trading and they also might charge on top of that, a small notional amount for the quantity. They might be $5 per trade plus $.5 per contract or plus one penny per share.

Those are the two differences. And many brokers might charge one or the other and in some cases, they might charge both depending on the pricing structure, so you really have to understand how this kind of works for your broker. Again, there’s free brokers out there, there’s commission brokers and that doesn’t necessarily mean they’re worse off because they have or do charge commissions. You should just understand the difference between a fee-based commission and just a flat commission or a variable-based trading cost. Hopefully this helps out. As always, hope you guys enjoyed this. If you have any questions at all, please let us know and never forget, your life should have options, so don’t just trade, trade with a purpose because options give you freedom. 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 answering the question, “Do you pay commission when you buy and sell a stock?” The short answer to this is you generally pay a commission with most brokers although there are some brokers now who are starting to not only remove the fees that you would pay for equity including stock, but also, there’s many brokers like Robinhood now that are starting to go commission free. It does depend on the broker. Some brokers like TD Ameritrade typically charge a very small ticket charge plus a per share charge or a flat fee. It depends on the brokerage pricing structure. Other brokers are now also rolling out commission free ETFs and commission free mutual funds or index funds, so it really depends not only on the broker, but also on the underlying products.

Generally though, most brokerages as a mass right now do charge a commission for getting into, buying and selling stock although as we’ve previously said, the entire industry in our opinion is gravitating toward zeros. There’s going to be a raise to the bottom. All brokers in the future will not charge any commission for buying or selling stock. It will be just a regular transaction that’s commission free with all the new technology and development that’s coming up, so I encourage you to pick and choose your broker and the technology you want to use wisely because eventually, commissions will go away. They are a big important component now and you should look at them and in the future, they’re not going to be here anymore. Hopefully this helps out. As always, if you guys enjoyed this or have any questions, let us know and never forget, your life should have options, so don’t just trade, trade with a purpose because options give you freedom. 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 have the life you are willing to accept. It’s probably hard to come off of show number 700, obviously one of our more longer episodes and if you didn’t listened to that yet, please go back and listen to that because I revealed in detail a lot of things that I would’ve normally never done before previously in the past and now, we’re starting to move forward and the one thing I want to start off with is this concept of having the life you’re willing to accept. And this is an interesting thing because I think naturally, we all know that this is happening on a conscious and even a subconscious level, but we’ve been conditioned slowly over time to just harden and accept the things that are, that “have always been.” And so, for us, it’s really hard to break out of that mold. It’s almost like you see times where people have this major traumatic or life-changing event and then they make this massive shift. Oftentimes, it comes in the form of pain. They have a pain from the loss of a loved one or a diagnosis or some accident that happens and that is enough of a jolt to the system to make a dramatic shift in their life. Now, I don’t wish that anybody has that happen to them, but whatever needs to happen to you to be the catalyst, it’s got to be big enough to allow you to not accept what you are currently accepting in your life. Right now, you and me and everyone else, we’re blaming outside circumstances or people or choices although everything is under our control. We have exactly the life that we’re willing to put up with. If you don’t like your job, but you’re willing to put up with your job, that’s on you. If you don’t like the relationship that you have with your family or your kids or your spouse or your coworkers, but you’re willing to put up with it and not make a dramatic shift in the opposite direction, that’s on you.

And so, today, I would encourage you to not only create a sense of willingness to do something else, but to verbally (whether it’s out loud or internally) tell yourself of the things that you’re unwilling to do anymore and I think that’s a more powerful statement, this idea that “I am unwilling to have a bad relationship with my spouse.” or “I’m unwilling to have a bad relationship at work with my coworkers.” or “I’m unwilling to accept this job anymore. I’m unwilling to accept the idea that I can skate by on my finances every month.” And to me personally, that’s a more powerful statement because it tells yourself subconsciously the things that you will no longer do, not “I hope I do this.” or “I’m working towards doing this.” No. Make it a declaration. Plant your flag and say, “Look. I’m unwilling to accept this type of a life anymore.” And I think that is what ultimately will create a new doorway, a new pathway for you. It will be enough of a motivation hopefully to dramatically shift and alter your life because what we’ve been doing so far is we’ve been slowly just turning up the heat and we’re just willing and accepting things as they come because it’s not a dramatic shift for us. We’ve just over time, just accumulated this acceptance and tolerance level of the things that are and the things that should be although it’s not really how we planned everything to go. I’m making that shift as well. I hope you guys are doing it at the same time. As always, I hope you guys enjoyed this. If you have any questions at all, please let us know and never forget, your life should have options. Until next time, happy trading.