4.)Options trading

Here you will see an example of analyzing different premiums for Square. You get to see the basics at work and the different choices you have when your option is in the money. Also you will understand that an option contract controls 100 shares. If you see a premium that is $2.00, your premium that you pay or receive is really $200. You will see how an options trade is conducted through the E-trade brokerage platform.

It is key to understand the statistical probabilities, so when you select your option, you have a better probability of profitability. Standard deviation is one of the major topics within statistics that is used when trading options. In addition, an options price is equal to intrinsic value + extrinsic value. Intrinsic value is determined by the difference in market price and strike price. Extrinsic value contains time and volatility.

You will see a probability analysis of different price levels and different time frames. You will see the bell curve, and the statistics play out into our decision-making when selecting our options trades. We use multiple brokerage platforms for their tools. You don't necessarily have to trade on multiple brokerage platforms. However, we feel that “think or swim” and tastytrade have excellent tools in helping us learn about the statistical probabilities. This makes our lives easier when placing trades.

Learn about one of the most critical topics in statistics. This is essential for portfolio management and option plays.

Here you will see an example of analyzing different premiums for Square. You get to see the basics at work and the different choices you have when your option is in the money. Also you will understand that an option contract controls 100 shares. If you see a premium that is $2.00, your premium that you pay or receive is really $200. You will see how an options trade is conducted through the E-trade brokerage platform.

Here is an overview of some details on options trading. There are different ways to use options to your advantage. They can be used for speculation, hedging, income, and other strategies as well. There are many factors to consider with options. Some of these include premiums, the Greeks, implied volatility, and volume. Bear in mind, options expire worthless 90% of the time.

The vertical option spread is when you buy and sell options with different strike prices but the same expiration date.Think up and down the same option chain. The horizontal option spread has different expiration dates for the option spread. You are buying and selling options at the same strike, but across different expiration dates.

There are many different types of spreads. Vertical Spreads, Horizontal Spreads, debit spreads, and credit spreads. When an options trader is going long, it is a debit spread. When an options trader says he is going short, it is a credit spread. A debit spread has a cash outflow at the initial transaction, while a credit spread has a cash inflow at the initial transaction. You will see a vertical spread in action being conducted on a brokerage platform.

The person writing the options is the one who collects a premium. If done correctly, you have a higher probability of collecting a premium. Some do this as a way to create income. However, if you sell a call, you face unlimited risk. Remember, you make more money when selling a contract closer to the money, but you run a higher risk of the contract being exercised. It is common to sell contracts several strikes away (possibly 2 or 3 standard deviations away from the current market price), which indicates that the probability of profit is significantly in your favor compared to something trading right at the money. Bear in mind, you will collect less in premium because it is less risky.

Here is a video lesson that goes over how to select an option’s expiration date and other basic ideas in shaping your decision to pick an option. It is important to evaluate why you want to purchase an option with a certain expiration date. If you are taking a fundamental approach, it probably wouldn't be smartest to select a near-term expiration date (weeklies). You will learn about how market makers shape short-term movement on stocks/options. It is a good idea to get 20 companies ( or more if you would like), and really understand how they trade/behave during certain market cycles, news, trends, to also help shape your options trades.

Average True Range (ATR) is derived from a 14 day simple moving average. It was made to allow traders more accurately measure the daily volatility of an asset. It does not indicate teh price direction. It is geared to measure volatility caused by gaps and limit up or down moves.

Learn about some of the basic mechanics of including options in your portfolio. Options are used for various reasons. Some people use it to strictly speculate, while other may use options to hedge against market movement. Some people will use options to create an income source by collecting premium.

These strategies are relatively similar. A straddle is when you are buying or selling a call and a put at the same strike price, while a strangle is when you are buying or selling a put and call at different strike prices. These strategies are typically used on a stock where you expect a significant move either up or down. In this video, you will get to view the risk profile and maximum returns with examples of these strategies.