How Options Work | Zac Hartley | Skillshare
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24 Lessons (2h 38m)
    • 1. Options Intro

      5:12
    • 2. Types of Options

      8:40
    • 3. Terminology

      5:55
    • 4. Math behind Options

      6:38
    • 5. Managing Your Risk

      8:19
    • 6. Options Pricing

      8:33
    • 7. Buying AAPL Options

      6:00
    • 8. Selling a Call Option

      2:54
    • 9. Selling AAPL Options

      3:53
    • 10. Implementing a Stop Loss

      5:36
    • 11. Greeks

      11:20
    • 12. Taking Profit

      8:45
    • 13. Hedging

      11:43
    • 14. Mentality

      7:14
    • 15. Buying Air Canada Options

      8:32
    • 16. Selling Air Canada Options

      3:31
    • 17. Buying Shopify Options

      4:28
    • 18. Selling Shopify Options

      1:04
    • 19. Buying Aphria Options

      4:49
    • 20. Technical Analysis and Options

      5:23
    • 21. Selling Premium

      10:09
    • 22. Selling Premium Trade

      3:46
    • 23. Trade Risks

      7:39
    • 24. Day Trading Options

      7:47
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About This Class

In this class I am going to walk you through how Options work, and I am going to show my actual options trades as I make them! This course is designed to be information and provide you the knowledge to understand how options work and how they are valued.

I am going to share with you, everything I have learned in my degree, my options experience, and 7 years of trading so that you are aware of the risks and ready to make your first trades!

By the end of this course you should feel confident in understanding how options work and how to integrate them into your trading

Meet Your Teacher

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Zac Hartley

Entrepreneur and Day Trader

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Transcripts

1. Options Intro: What's going on, everybody? My name is Zachary Hartley, and welcome to my course on options trading. I've got a couple of things to go through before we get started. So jump into my screen and let's get going, OK, Options, trading. What are you gonna learn in this course? Well, there's a couple different things you're gonna learn. Number one is what is an option. I'm gonna walk you through everything you need to know about the basics of options trading such as the different types, how to use them and how to manage your risk when you're trading options or how you can use options to manage your risk when you're trading stocks, multiple different options here. But the big thing is there a little bit riskier than stocks. So you need to be well aware of that. And you need to have the right mindset going into these trades because they are a little bit more complicated. So your mindset and your self discipline becoming to play much, much more than they do in a regular stock trade. This the last thing that you're going to see in this course is me making live trades. I've been trading options for a couple of years now. And what you're going to see in this course is me filming my actual trades. Based on my actual technical analysis, I make several trades throughout this course, and I'm gonna show you all of the details all of the way through so that you have a real life example of what it's like to trade an option. My name is Zachary Hartley, and I've been trading the markets for about seven years and trading options for four of those years. I'm a graduate of the Mount Royal Business School, and I've taught over 3000 students and counting. That means that 3000 students have actively gone through and completed my courses, such as the one called Stock Market Fundamentals. Now, if you're new to the stock market or you don't fully understand some of the concepts that I'm gonna be talking about here or you just want a refresher on the stocks, definitely check out that course It is on this platform and it is accessible to you almost for free. So definitely check that out. But before we get going, I want to show you that I'm not just some Internet guy talking out his ass. I am actually here to show you. So this is my portfolio. As of right now, you can see as of July 14th 2020 at 2 48 And it is currently 12 59. These air on different time zones. But that's OK, so pm Eastern time. And I am in Calgary, Alberta, and it is 12 59. So I took this screenshot about 10 minutes ago. This is my actual portfolio today. As you can see, I own Air Canada here. I own eight contracts of it and I'm up $2000 or 15,000%. The reason I am up that far is because I bought a $5000 position in options in Air Canada and it went up to about $10,000. I took out my entire initial investment, and now it's sitting at about $2200 off pure profit in that account. I also just made a trade earlier today for Africa ink. It's a Canadian cannabis company. It's down 15% cause I paid a pretty large commission on it. But these options are fairly volatile, so that is completely expected on that entire portfolio him up $2000 or 165%. So we're doing very well. That's my Canadian portfolio. And if you go down to my US portfolio were doing even better. So I bought Shopify options. I'm gonna show you that video in this lesson so you can see the entire thing all the way through. But I bought these Shopify options, and as of right now, they are up $14,000 or 142% and we're doing extremely well. So this is my life portfolio today. I only have three trades that are active right now. I'm actively monitoring them every day, and you will see all three of these traits throughout this course. So we're going to get more into that later on. But before we get started, there's a couple of things that you should know. Number one is you need to have a basic understanding of the stock market. You need to know how to buy and sell shares and how the basic market works. If you don't have that or you need a refresher or you just want a little bit more knowledge , check on my core stock market fundamentals. It is on this platform, and it is fully accessible to you. And it's a great wealth of knowledge for that beginner trader. Secondly, is options or risky and options or volatile. You can lose all of your money. You can gain an exorbitant amount of money, and they move drastically from day to day. You saw that I had invested into Africa options earlier today, and I'm already down 15%. That is because it is a very, very volatile option. I'm planning toe hold it for 2 to 3 weeks. So if I lose 15 2030% today, I'm not going to worry about it cause it's a small position with a very large upside and a very small downside. So that is part of the game. It is a different risk reward profile than buying a single stock. The last thing is, you will not win every trade. You will not win 100% of your trades. You need to be able to accept and acknowledge that you made a mistake. You need to take that los like a champ and you need to move onto the next one with a better and more refined strategy. You cannot let one position or two positions that lose dictate your mind set for the next week. It really doesn't work that way. The last thing is this has huge potential, but it also has huge risk. This is a one way that a lot of people make a lot of money. And options are also something that gets given out within companies very, very often, especially to management team. So there are very common tool and the better that you are using them and knowing how to use them, the better off you will be in trading or if you get over, offered them in your position one day. So with all of that being said, we've got a lot to cover. We've got a lot of different topics that we need to hit on, and I've got a lot of videos that I need to show you of some of my life trades, So let's get right into it. Thank you for listening to me, and I hope you'll join us on the rest of the course. 2. Types of Options: What's going on, everybody? My name is Zak Hartley. Welcome toe lesson to in this video. I'm going to give you the most simple possible explanation of what an option is and when you may want to use it. So, first of all, let's get started. What is an option while the option is the right to buy or sell a stock at a specific price on or before a specific day. So just like a stock, you can buy and sell it whenever you want and options the exact same thing you can buy to tell it whenever you want all the way up to, ah, specific date. So here's an example of how this could work. We're going to talk about Apple Stock ticker AP out, and if you're doing your technical analysis on it, let's say you come across this situation where you think it's gonna go up for easy math. We're going to say it's gonna go from $10 to $20 by the end of the month. Well, you have a couple of different options on my screen here. I've got an option on the left. An option on the right, the one on the right is to buy the stock. This is real simple. Just execute the trade and by the stock and on the left. Here is a situation I have put together where you can buy an option. So you would buy the option to purchase Apple shares at a specific price of $14 and sell it on or up to a specific date of July 28th And that option. The price toe by that option is going to cost you $1. So the situation here is I'm gonna spend $1 in order to purchase a contract that says I have the option to buy Apple off at $14 up to or on July 28th. So if the price gets above $20 I can still buy it at $14 then I can sell it at $20 make the difference. That's the ideal with an option. So let's just walk this through as an example. If you bought the stock, you and you were right to the stock did go from $10 to $20 you'd have an initial investment of $10. You would then sell the price sell the stock at the end of the month at a price of $20 you had profit $10 giving you an R A Y of 100%. You basically doubled your money. If you had bought the option, this is what it would look like. You would make that initial investment of $1 that gives you the right to purchase Apple stock at $14 on or before July 28th. And then at the end of the month if you executed that option and you said yes, I want to buy those shares and Apple was at $20 like the example that we're using you would . Then, on July 28 on the exact same day you would buy the stock for $14 and two minutes later, one minute later, you turn around and you would sell that stock for $20 giving you a profit of $6 on that specific trade. Now you paid $1 in orderto by that option at the beginning of the month that gave you the right to make that trade. Therefore, when you go six minus $1 you get a total profit of $5. Now your initial investment at the beginning of the month was just $1 in order to purchase that option and at the end of the month, you executed that option and you paid $14 to buy that off by that share of Apple, you turned around on the market instantly and you flipped it for $20 giving you a profit of $6. You're an initial investment was only that $1 as long as you had some cash left over at the end of the month, you were able to buy those shares at 14 and flipped them for 20 instantly. Therefore, your money was never at risk and it was never really invested. So at the end of the day ended this situation You had initial investment of $1 you came away with a profit of $5. That gives you a return on your investment of 500%. Now the total profit of $5 was lower than the $10 profit that you made on the stock trade. However, you only invested $1 upfront for that option, whereas you had to buy the stock for $10 when you actually purchased the share. Therefore, the return on your investment was 500%. If you had spent the same $10 buying the options, you would have made much, much more money than you would have executing this share. So that is the situation if you actually execute the option at the end of the month. Now, like I said, you can buy and sell these shares as much as you want prior to that end date, such as July 28th in this situation. So in that case where you sold the option, you just went any. You sold it on July 21st on July 25th on July 27th and not share was at $20. This is what the transaction would look like. He would have your same initial investment for $1 but because the share price on that day is at $20 you have the right to purchase it at 14 that option that you purchased for $1 is really worth $6. Therefore, when you go to the market, you will notice in your bank account or at the market price, the rough and approximate price of that option will be $6. It will change depending on how far out you are from that July 28th deadline, but it will be roughly $6 depending on market conditions. Therefore, when you execute it and you sell it for $6 you subtract your initial investment of $1. You make a $5 profit and you get the same r A Y of 500%. Now, tiring plays a little bit of an important role in this. I'm gonna talk about that a little bit more on the other videos. But the idea here is your buying an option so that you have the right to purchase a share at a specific price up to or on a specific day, hoping that the price on that day is going to be higher and you can profit the difference. That's the concept here with options. So when we compare these two different things, if you had bought the stock, you would have made 100% our ally, whereas if you had bought the options, you would have made it 500% r A y on the exact same price movement of Apple going from $10 to $20. Now these air numbers that I'm using for easy math. But concept is the exact same in the marketplace, and you'll see that as you watch me trade. So let's look at a different scenario. Where Apple goes from $10 toe only $12 at the end of the month. If you had bought the shares, you would have made a $2 profit. You would have spent $10. You would have sold it for $12 at the end of the month. You have profited $2. However, if you had bought the options that had a price, a specific price set at $14 a specific date, said in July 28th and the price was only $12 on that apple share, your shares would have expired worthless. They would have been worth absolutely zero or almost next to zero, depending on the time frame, and you would have lost your $1 investment. Therefore, the risk of buying the options is much higher than buying the stock. If you had bought the stock, he would have made 20%. If you had bought the options, you would have lost 100% of your investment. And that's why the risk reward ratio is so important to know about. And that's why you need to know how to mitigate your risk, which we're gonna talk about in the next few videos. So this is just a example, though. What I want to talk about next is the two types of options. They're very similar. The only difference is that one. You make money when the stock goes up and the other one you make money when the stock goes down. So a call option is the example that I just described to you. We're expecting the price to go up, and therefore we're buying an option at a specific price, hoping that this stock price on that day is higher than the strike price or the specific price that we're looking at. So the other option is a put option. A put option is the exact opposite thing of a call option, where you have the ability to sell it at a certain price. What it means is, if the price goes down, you will make money, sir. So in this example of apples at $10 today and you expect it to go down toe $5 by the end of the month. You could buy a put option at $8 if that put option cost you $1. And at the end of the month, the stock price was at $5 you would be able to buy the stock at $5 you would have the right to sell it at $8. Therefore, you would make a $3 difference on that trade. You would pay $1 for that option, and you would have a net increase of $2 profit on that trade, giving you a 200% or a Y instead of a 50% loss. So you can use call options to make money when the stock goes up. You can use put options to make money when the stock goes down, and you can use them together for different strategies that we're gonna talk about later on . So in the next video, I'm gonna talk about the terms and how we describe these options when we're actually making the trades. So follow along. And if you have any questions about what you just saw here, send me an email and I'm happy to talk about them further 3. Terminology: What's going on, you guys. My name is Zak Hartley, and in this video we're going to talk about the terminology that we use to describe and talk about. Our options trades. So in the last little video, we talked about three different things, and option is the right to buy or sell a stock at a set price on or before a set day. There, two types of options. The 1st 1 is a call option, and that is the right toe by that means that we think the stock is gonna go up and we want to make money when it goes up. So we're going to get the right to buy it at a certain price, hoping that the market price by expiry has increased. More than that, the other type of option is the put option that is the right to sell. It is the exact opposite of a call option, and it means that we're hoping that the press goes down because we're gonna make money when it goes down by being able to sell it at a specific price, meaning if the stock goes down to $5 and we have the option to sell it at $8 we can go into the market and buy it five and sell it a instantly and make her $3 difference. So that's how it put option works. Now. In order to describe these, we have a little bit more terminology. So that's what we're going to cover in this video. So contracts and options options or what we're talking about and they're sold in contracts . Each contract represents 100 shares, so you can buy a call option contract one contract, and it will represent 100 shares. That is your minimum investment. Now, this is a very, very important point because if you go in and you make a trade and you're you think you're buying individual shares and let's say you buy 10 or 15 of them. In reality, every single time you were actually going to be buying contracts worth 100 times the individual price, so you need to be very careful on this because you don't want to go into a trade with 100 times the size that you thought it waas. So any time you're trading options, they're going to be sold in contracts off 100 units and any time you need to get into it, your minimum investment is going to be 100 units and it's going to multiply in in units of 100. So really important note. Do not go into a trade with 100 times your initial investment because you bought that you thought you were buying the number of auctions, but instead you were buying a number of contracts. It will almost always be represented in the form of contracts. Next is the premium. The premium is the price that you pay for. That contract is usually represented on a per share basis. So if you are paying a $5 premium and really means that you're buying a $500 contract and that is going to be your minimum investment into that trade, so you need to make sure that you are OK investing $500 into that trade as you're basically entire position or more. So keep that in mind, because this contracts and options 100 multiple is very important for managing your cash. All right, next thing is the strike price. The strike price is the price at which you can buy yourself a stock on expiry. It does not include the cost of the contract or the premium, and it can be higher or lower than the current price in the market. So of Apple is training at $10 you can actually buy options at $5678 as well as 11 12 13 $14. And if you buy it below the current market price, that would be considered in the money. If you buy the option with a strike price above the current market price, that would be considered out of the money. That would mean that you need the price to increase before expiry to a certain level in order to be making money on it to get in the money. That's how that works, and that's how we describe that. Next thing is the expiry date. The expire date is the day on which the contract expires and your shares must be sold or executed on this date. So, for instance, when you have an auction, you can buy or sell it all the way up to the expiry date and then on the expiry date. If the market price has not hit the strike price your option will expire worthless if the market price is higher than the strike price, meaning there's a difference there and you're going to make some money. It means that your options are gonna convert into shares, and you need to have the cash ready in order to convert. I do not recommend that because usually it takes a large, large amount of capital. So I usually trade my options prior to the expiry date, and I never actually convert them so lots of different ways You can handle it. It's also a great way. Let's say you want to get into Apple and you do want to hold it long term. Getting an option and then converting It could be a great way to get into Apple shares at a lower price. It depends on your strategy. Me personally, I'm always buying and selling selling them prior to the expiry because it works better for my strategy. But it depends on your goals. Next thing we talk about is an example. So this is an example of how I would describe an option. I'm going to buy a call option option for Apple shares for a premium of $1 per share and expire Sept. 21st at a strike price of $14. So that means I now have the right to buy 100 shares of Apple at $14 on September 21st and I paid $1 for that. Therefore, if I buy it at 14 I paid $1 for that. My initial caught my total cost is gonna be $15 to get into Apple. And if Apple was trading at $20 that means I'm gonna make that $5 difference there. So this is how we would talk about basically this example now of Apple is at $10 today, and I buy it at a strike price of 14. That means that that option is out of the money. If I had bought the Apple option and the market price of Apple was $20 I bought it at a strike price of 14 that would be considered in the money. So that's how we talk about those different examples. And in the next video, we're going to talk about the math behind each options. So we're gonna talk very heavily about the break, even about what you need to know before you get into the trades and invoked it, finding different exit points based on the math and based on the risk return ratio that you're comfortable with. So stay tuned for the next video, and we're gonna jump right into it. 4. Math behind Options: What's going on, you guys. My name is Zak Hartley, and in this video we're gonna walk through the math behind a call option and a put option to find our break even point. So let's get right into it. Here's an example that I literally just pulled from my broker five minutes ago. It is looking at Ford Motor Company in the United States. It is a call option at a strike price of $7 for an expiry of August 21st. So this is what the quote looks like when I get it from my bank. This is what I look at when I say OK, do I want to buy or sell this? So let's start in the left. F since is the ticker symbol for Ford 08 2120. That's the expiry date. Seven is the strike price and C stands for call. So everything you know about what I just said you can get from basically these 10 or 11 digits right here underneath. You can see August 21st 2020. Call it $7. The last price, meaning the last actual exchange that happened was at 48 cents as of right now there's somebody that wants to sell it at 47 he wants to buy four contracts. There's also somebody that wants to buy it at 48 he's willing to buy 28 contracts so really interesting. This tells you basically what's happening right now, and the market price when it opened was 37 cents. So it has gone up a drastic amount today, almost 25% maybe a little bit less. But it's doing really well just today alone, and it's it's doing pretty good all together. So that is what the quote looks like right here. And as we go down, you can kind of see a little bit more about what we're going to focus on is break even. So I'm buying it at a strike price of $7. And if I buy this on the market right now, if I go in and I put in a market order, it is gonna execute at 48 cents, so that is what it is going to basically give it to me at. So when you go to the next side, we can see our break even on this specific option would be the strike price of $7. Plus, the premium of 48 cents would give us a break even of $7.48. Now, this particular stock is currently trading at $6.72. So, as of right now, we're out of the money. If my strike price was at $6 or $5 we would be considered in the money, and you can guarantee we would be paying a much higher premium for those options. So the next option is gonna be a put. It's pretty much the exact same trade. I'm still looking at Ford Motor Company, except on placing a put border at a strike price of $5 on August 21st. So the same expiry date, but the different trade. So this is the trade I would place if I thought Ford Motor Company was gonna go down and I wanted to make money on it. So if the Ford Motor Company traded below X dollars, I would make on money on it, and that's where we were going to calculate here. So the strike price is $5 the current bid is $9 or nine cents story, and the current ask is 10 cents. So to calculate, to break even, we have a strike price of $5 we're paying a 10 cent premium on it. But it is a put option, so that actually gets subtracted from the $5 here. And it means that our new break even price of Ford Motor Company is $4.90. Therefore, if the price of Ford Motors is $4 at my expiry date, it means that I will be up to go into the market and buy foreign right at the market price of $4 I will then be able to sell it at $5. And once I cover my 10 cent premium, I will make 90 cents on every single trade that I own. And it is a minimum basically purchase of 100 units because I'm buying it in a contract, so we would make it least $90 on it. So, doing really well. That would be a great example if Ford hit $4 at the end of it. So a couple of things you need to know, though, before we go on here. That's how you calculate your break. Even that's how you figure out. At what point do I make money? And at what point am I happy with it? But some other things you might want to consider just from looking at this basically stock quote here is the volume. When you're training options, you want to make sure you have enough volume to get in and out. I chose Ford. I also looked at Apple earlier today. Both of those are very large companies, a lot of movement every single day, and because of that, they have volume in a meaning. A lot of people are trading options. Therefore, you can get in and out of them fairly easily, and the difference between the bid and the ask right now is only one cent. If the volume was much lower, that difference would be much higher, and that is called this spread. So when the spread is higher between the bid and the ask and means that you don't really know what price you're going to get in or out at with Ford, it's great because I can place a market order and I know exactly what price I'm gonna get in at based on basically one center, two cents different. So Ford Apple, the big companies were really great trade options on the smaller companies sometimes don't have enough volume and order for you to get in and out on a liquid basis very quickly, or at least at the price levels you want. So volume is very important. The bid ask spread is very important. If you're gonna place a market order, you're basically going to go at the bidder. The ask price, depending on what order you place and then volatilities the last one that I want to point out. Volatility has a big impact on the price of these options, because if a stock has a history of moving drastically from week to week, well, it is a more volatile, and it is more likely that you might get a big move in the direction of your trade. Therefore, it is riskier for the seller of that option. So when the implied volatilities higher like when we look at Ford Motor Company right now it's 68.92%. That means that it's a fairly volatile company right now. I looked at apple five minutes ago. Instead, about 36% volatilities. So Ah, much more steady, streamlined company with a little bit lower risk. And you'll probably get a better price on your premium going with that company compared to Ford Motor. But there could be less of an upside there, depending on your analysis. So you really need to do the math and figure out where do you want to get in? Where do you want to get out? And what risky willing to manage and looking at. The volatility can give you a little bit of a sense of that. The bid in the ass will give you a sense of how liquid it is and how easy it will be to place that market order and get in a price level you want. And then the volume will say Okay, A lot of people are training this. You will have liquidity consistently and ongoing so that you can hold this if you want, you can get out when you want and you don't. You aren't forced into any certain traits. So lots of different information that you can pull from this very simple stock quote right here. Now in the next video, we're going to talk about risk options are clearly rescue. So we're gonna talk about how to manage a risk. Kind of make sure you're doing things properly and how to basically calculate that risk return ratio on your trade. So let's get right into that. Thanks for watching. 5. Managing Your Risk: What's going on, everybody? My name is Zak Hartley, and in this video we're talking about the risks of trading options. This is definitely one of the most important lessons, and this entire course are highly recommend that you pay close attention and dive into some of the topics that I talk about in this video with a little bit more detail in your own research. So without any further ado, here we go just up front. I want to get this out there and say that options are much more riskier than buying and selling stocks. They're much more complicated and difficult to understand than buying and selling stocks, and they're much more volatile than buying and selling stocks. So there are a lot of challenges that come with options, and they could be quite complicated and quite overwhelming. There is a case where the gentleman, his name is on my screen, and if you're not aware of his name or the case surrounding him, you definitely need to look into it and do some research on it, because it is something that you need to be aware of, and you need to understand what you were doing because if you do this wrong or you make the wrong trade where you think you're buying options when instead you're buying contracts, you can really do some damage to your personal finances, your family situation and a lot of other cases as well. So definitely pay attention. And if you're not aware of that situation that I'm talking about, you definitely need to look it up next. Simple rules These air rules that I personally follow These are a couple of things that I would recommend you follow, and they're just there to help you mitigate your risk, not put too much money out there and to manage your own mental state, your personal finances and your real money. So simple rules that I follow is don't trade options if you cannot afford to lose it. Options are very risky. They're very volatile, and they will drive you nuts. If you are relying on that money for an income for food to put shelter over your head, you will go absolutely crazy trading options. So if you cannot afford to lose the $1000 that you're putting into this trade, buying options do not do it just straight up. Do not do it. Take 203 $100 putting caches and save it for yourself and by some Apple shares or some Wells Fargo shares or some Berkshire Hathaway by something steady and stable that has some value to it and save your money. Do not buy options if you're relying on it for income, for food, for shelter. For anything crucial, you will go absolutely crazy. Secondly, make sure you understand the trade. I have walked through a simple call option and a simple put option. They're the most basic options that you can buy. You can also combine them in a variety of different ways. But you need to make sure more so than anything that you understand the trade that you're getting into and you understand how that option works and how many you are buying. Because if you do not understand that trade and it goes the wrong way, it will frustrate the hell out of you. It will cost you an exorbitant amount of money. It will discourage you and will be extremely, extremely difficult to come back from that. And it is the last thing you want to have to deal with when you could have done a little bit more research and not made that exact mistake. Third rule. This is one that I strictly followed, especially for my options trading as I only put a 5% maximum position into any option. I have a diversified portfolio. I have a number of stocks, also have a number of other investments, and therefore, I only ever put 5% of my total holdings into one single option. That keeps my entire risk of that option very low. Keeps my total cash going into that option very low. But I trade options because it gives me a great return when I'm right. So Ah, little bit of both worlds there. But do not put 2030 40% of your portfolio into one single option or even two or three options because it is way too volatile. Way to risk in it is not the right way to invest your money. Second last thing. Second last thing. Focus on long auctions. Long options are the easiest to understand. They're the easiest and managed at the lowest risk in terms of your actual basically downside, and the market is usually going up 90% of the time the market is going up. So if you were buying short options, you were buying put options, you're going at least against the market, or at least against the stock, and so you need to be very certain of your position. If that is going to be the case or the position that you take and lastly, do not execute the options. This is this is my personal recommendation. I buy and sell the options, and I trade and usually sell them before the expiry. I'm usually almost always out of that position at least a couple days before the expiry, so that I do not have to outlay any cash in order to execute the option. That way, I don't have to pile up a big money, a big pile of cash. I don't have to worry about out flowing it, and I can get in and out of those shares as I want. The nice thing about auctions is that they're very sensitive to pricing, and if you're training that stock two or three days before the expiry date and you're already in the money in your up on it, you might as well just get out of it and start looking at the next one because you're going to save yourself some time and some cash on the transaction. So that is my personal recommendation when you were training options is to buy and sell them before the expiry date. Do not execute on them unless that is part of your strategy for getting into a company. Risk and return. This is something that's really important. You need to understand your upside versus your downside. You want to try and make sure that your upside is larger than your downside, or at least the multiple on it is bigger. But when you're going through your charts, you're doing your technical analysis. Figure out what is the maximum I'm I'm going to lose before I'm wrong compared to what is the upside look like on this stock. So I just bought a share in Africa and I had a stop loss in it. It's doing really well. I'm gonna walk you through that a little bit later, but my downside on it was only 5 to 10% and my upside was absolutely huge. So I really like that trade. Secondly, you should trade with a stop loss. If you're trading options and you have the option of training with the stop loss, you should probably do it to reduce your risk and make sure that you don't lose your entire position. Thirdly, you can head. You trade if there are other companies that you could head you trade with, or if there's another way to maybe short the company or buy it on the other side, you should consider hedging your trade to reduce your risk, especially if you're not gonna have a stop loss. Fourthly, set alerts. Every software out there has a way of sending you an alert. When a stock hits a certain price level or certain actions happen, you should make sure that you have alerts on that company or on that chart so that you are aware of what is happening. Fifth is take profits when you can. You need to take that money when you get it. If you train an auction in the next week. Later, Europe 102 103 100% Make sure you are taking at least a little bit of that profit so that you're securing some of those games. Do not try and hit a home run every single time. It is not worth it. You need to think of this as the long term gain and think about consistency. Last thing is, I just made a trade yesterday for Africa. Cannabis here in Canada, it is doing extremely well. So I want to show you a little demonstration of what options can really do for you to show you what my account looks like right now. So stay with him. Okay, so here's a power point. Let's go to my holdings. So I refresh this just so you can see everything. So as of right now, I've got Canadian and us holding. So in my Canadian holdings, I have Air Canada here I have eight contracts, and right now they're up $2500 or 16,000%. The reason that 16,000% is because actually took out my entire initial position, my entire initial investment, I got out and this is 100% pure profit. And then right below it, you can see here Africa Inc. This is the option that I purchased literally just yesterday. And as of right now is it is sitting up 68% or $852. So I'm doing extremely well on it. I bought 30 contracts at a price of 40 cents when I bought in the last press today was seventies, 70 cents, about 35 or 45 or whatever it was. And right now we're up 68%. So we're doing extremely well in that. I also just sold my Shopify options at 130%. So I'm gonna try and put those videos in this course, But stay tuned because this is doing extremely well. And in the next couple videos, I'm gonna show you how to price the options. It was how to buy them, and swells have put that stock loss in so lots of different things coming up here. Definitely stay tuned and pay attention. But risk manager risk because it is the most important thing you can possibly do. And make sure you understand what you were getting into when you make these trades, because if you make the wrong trade to make the wrong quantity, it is gonna cost you dearly. And it's a simple mistake that you could have prevented by just knowing what you were doing . Talk to you soon 6. Options Pricing: What's going on, everybody? My name is Zak Hartley, and in this video, I'm going to talk about all the different factors that go into determining the price of your option. So let's get right into it, Okay? So when we look at pricing an option, there are six different factors to consider. The stock price, strike price, time to expiration, implied volatility, interest rates and dividends. These are basically listed in order based on the most important factor. So stock price, strike price, time to expiration. Very important factors when determining the price of your option. The other three not as important, or at least they don't have as large of an impact. So let's get into it. And I'm gonna give you an example of exactly the difference is that I'm talking about. So for this video, we're gonna use the call option of Apple at $400 with an expiry of August 21st 2020. So right here I'm just going to review quickly how to read this right here. You can see apple 08 2120 20. So that's the ticker of the month, the strike price, and then the C stands for call option. We can read that The last price that was traded for this option was 15 45. We have somebody that's willing to buy it. At 15. 25 we have somebody that's asking 15 65 for it and it opened at 16. 55. So what we can see here is that we have Apple trading is gonna cost us basically 15 45. Or at least that's what it costs. The last guy, if we want to buy it at the market price is gonna cost us 15 65 meaning that are break even on this option. It's $415.65. So that's just how you read this little chart that we're looking at here Now, Price is the number one factor when determining the price of your option. Now, what I mean by this is, I mean, the current market price of the security or the stock. So Apple Apple is currently training at $390.90. If Apple was at $395 you can imagine that this option was gonna cost at least $5 more if Apple was trading at $380 it would cost significantly less. And so the difference here is when your stock is moving up or down, that is the number one most powerful factor in how your option is going to perform and how well the price appreciates or depreciates over time. So that is just controlled by the market. And did you choose the right stock? Did you analyze it correctly? And did you make the right trade? So that is the number one factor. Okay, so the next most important variable to talk about is the strike price. The strike price is the level at which, if you take your option all the way to expiry, that is the level or the price level at which your shares air going to convert. Your option is going to convert into shares. So for the rest of this video, we're going to use the apple at $400 strike price call on expiry of August 21st 2020. That was the same one that we used in the last example. There were going to use it throughout the entire video, and right now I want to compare it to the exact same option, but with a strike price of $415. So when we look at this one in the bottom, you can see that the break even is $425 compared to foreigners. 15th. That means that we need the Apple stock to go even higher in order to make money. On this, however, it is a cheaper option for us to buy. The aspirin now is $10.25 so we could get into this for 2/3 of the price. But the option would only be worth something if Apple went up by an additional $10 so a little bit tricky on this one. But this is the impact of the strike price has. If you go from 400 to foreigner $15 you can see that your gains are a little bit further out, and therefore you don't have to pay as much for the option. That's the whole key. Here is the closer your strike prices to making money, the more expensive it will be in the exact same in the opposite direction. So the third most important factor is the time to expiration again. Got Apple August 21st 20 $2400 call. And when we compare it to a apple September 18th 20 $2400 call, you can see that there's a massive difference here as well. So the original one cost us $15.65 to get into. But the new one with the longer timeframe is going to cost us $20.5. Meaning are break even is gonna be for 20 and five cents, and therefore, the price is gonna be a little bit higher for us to get into it or for us to make money on it. However, you have much more time for that price level of Apple shares to reach your break even. For instance, in this case, you have an extra month. So from August 21st of September 18th you have an extra month and your break even only goes up by $5. So you have to ask yourself, Is that worth it to me? While it kind of depends. So that's the time to expiration. Those three factors right there off the current trading price, the strike price in the time to expiration those air your three largest factors that you need to be 100% of aware off going into every single trade you make. And you can tell right here that the time the strike price and the current price are gonna have drastic, drastically different price levels or have drastically different impacts on the price level of your option. So the next three are implied volatility. This is number four, and this is the little number right here. So when you look at Apple, you can see implied volatility. It's 38.9. That's basically a calculation off. How rapidly does apple move up and down in what direction? So it basically says, how volatile is this share? And therefore, if it's more volatile, you have a greater chance of getting in the money on your option, and therefore it's going to be priced a little bit higher. So, for instance, apples at 38.9%. When we look at Ford, it as at 80.29% it has a much higher volatility because the shares afford are moving much more rapidly on a day to day percentage basis. Then apple is, and therefore they have a much higher implied volatility, which will drive up the price of their shares. It is a little bit difficult to compare these two here because we really would like to compare Ford at 80% volatility now, compared to 60% volatilities two months going Look at the same time frame options. So I'm just pointing this out as an example of two different companies, and they're drastically different implied volatility, volatility. Okay, so the last two factors that we're gonna talk about our interest rates and dividends interest rates are important because the government, such as the United States or Canada, they're basically bonds you can buy from them are considered the risk free rate. And as those risk free rates go up, they become more appealing to investors, and they make options less appealing. They basically change that risk return portfolio because the government, Canada and the banks and different formats can give you a safer investment at a higher interest rate, making the risky options less appealing. So, luckily, these don't change very much. We're in a very low interest rate environment, and it's not really a factor to consider at least right now, and probably for at least one or two years. The last factor is dividends. If you're buying options in a dividend paying stock, you should know that they can declare any amount of dividend at any time. Therefore, company all of the sun declares a massive dividend from their cash reserve. It means that that money is flowing out of the company and into investor pockets. Therefore, it is making the company less valuable. You need to be aware of this because the company being less valuable at that point can have an impact on your auction strategy and how well you perform. If you're not aware of the company issuing a massive dividend and all of a sudden the stock price takes a hit because they don't have his large cash reserves. While that's something that you could have been well aware of that you didn't plan for and all you need to do is look it up. So one quick lesson to be learned there. But usually these two factors play very little role in the pricing of an options. Usually it's much more determined by the four other factors and the top three in particular so, in summary, the current price strike price and expiry of the largest impact on the press of your option . But there are multiple variables that control the press. All six of those can have an impact, as well as outside market news, earnings reports and a variety of other things. So the big thing you need to know, though, is everything is always changing. There is no formula that says, because X Y zed add up, for this is what the volatility should be. This is what the price should be. It doesn't work like that. We're dealing in market conditions where everything is changing on a daily basis. Sometimes it's overpriced. Sometimes it's under price and your job to try and figure that out and spot the differences . So we're gonna help you out with that a little bit more and stay tuned for the next videos . 7. Buying AAPL Options: What's going on, everybody? My name is Zak Hartley. In In this video, we're gonna purchase a call option on Apple's stock. So we're gonna go through the entire process. I'm actually gonna make the purchase, and you're going to see how I do it all the way through my system. So here we go. All right, I'm in my account right now. This is basically my holdings that says, here in the top left and I've got Air Canada, I've got Africa and I just sold Shopify after is up 80%. And I just thought that one yesterday air cannons up $3000 I bought that one, probably about a month ago, and I took out my entire nation position. So $3000 is pure profit on this trade. So we're doing extremely well, and I made 100 30% on Shopify, so I was great as well. But now it's time to buy another option. So all we're gonna do here, I'm using RBC. But you can use any broker. Some of them look a little bit different. It's fusing kind of day. Trading broker definitely looks different. I'm using my standard bank and tax free savings account. You can set this up in any basically system. The principles are all the exact same. So let's go into this type in apple ticker symbol and it's gonna pull up basically the regular stock price. So 3 90 right now is up 2.67% today, and it basically use me all this information and on the right hand side here, there's a section for options, and now it's always gonna be displayed the same way your calls on the left hand side, your puts are on the right hand side, and somewhere you need to select the date for the expiry that you want to choose. So for us, I'm gonna make it real simple. I'm gonna go with August 21st the third Friday in August. It's usually the busiest, and it's a great opportunity for us. So I scrolled down as you'll notice that a lot of different options for Apple. But they have highlighted the strike price that is as close to the actual ticker right now , so currently weakened by options for $390 if they're call options, they'll be in the money we can also buy call options at $395 that are out of the money. So as we go through this, we can say, OK, what do we want to look at now? If you go to the top here, you can see the different categories. So this is the last current transaction. This was the change in that transaction. This is the bid price. So what? Somebody is willing to pay for it. This is what somebody is willing to sell it for and the volume of them and the open interest right now. So here we go. When we look at this option right now, you see, it went up a dollar 35. It would cost us $17.80. That was the last transaction that went through. Somebody is willing to sell it to us for 18 05 and somebody is willing to buy it for 17 17 20 right now. And there's over 2000 shares that are available. So lots of opportunity lots of liquidity here in Apple's. So if we calculate the break even on this real quick, it would be 300 $395 strike price plus $17 an 80 cent premium. So when we add that up, what is that? 410 $412.80 in order to break even on this stock. So if by August 21st Apple crosses over $412 we will make $1 per share for every dollar that it increases. That would be a pretty amazing trade. So lots of opportunity there. Let's see what we want. Let's go. So if you notice this, this is interesting. You can buy 3 95 and it costs you $17 or you can buy the 400 it costs you $15.45. So let's keep it really simple. We're gonna by the 17 81. So I'm gonna buy it right here. So if you look at this, it will give you the same information that we just did all I was off. So it takes the ask number, So 18 05 to give you the break even number. And if you add that up, it would be $413.5. That would be your break even toe break even on this option by August 21st. So, like I mentioned, there are a couple different factors that play into this. So your bid your ask your open. So this is where it opened today. It's currently in 18. 05 So it did. OK, I'm going to buy it right here. All you have to do is click on that bun, and now we're actually going to make the trade. So last price was 17. 80. We're going to buy toe open. This is really important to have a couple of different options here when your trading options. Now, what we've talked about so far is buying, put or call options Really simple. But if you are interested, you can be on the other side of that transaction where you're selling, put and call options and you are getting the premium. So we're gonna talk about that later in the course. It's a fairly simple process, but we're not there yet, So what we're gonna do is we're gonna buy a call option and we're gonna buy it toe open. We're gonna buy one contract worth because they are fairly expensive. They're $18.5 because we're gonna buy them at the market. Were buying the call option on the symbol Apple were buying it on the US market because that's where it trades. We're looking for an expiry of August 21st 2020. It's the third Friday in August, so it has the most liquidity. We're looking for a strike price of 3 95 I'm willing to buy it at the market price because we still have over a month till expiration. So I'm not worried about a couple of cents. It's good for the day. I'm gonna buy it for any part. I'm gonna click, continue and then it's gonna ask me to confirm my trade and we're gonna go from there. So here we go. Okay, So I'm on the next page now. Here we go. And you can see basically my confirmation so by called open to call option on Apple August 21st 2020. Here is basically the breakdown of that. I'm buying on the US market at market prices. I'm not worried about it. It's good for the day and you can close any park. So I'm only selling one share, not a big deal of the entire option. Look at this. So my minimum investment on this was one contract in the entire options gonna cost me $1800 . I confirmed that. And we're gonna be all set. So gives me my confirmation. And here we go. Okay. So we now only call options that will be in our account as soon as that trade executes and we will own them. We can sell them at any point now, up until the expiration, and we will see how they do over the next little while. I will talk to you soon. 8. Selling a Call Option: What's going on, everybody? My name is Zak. Hardly. And in this video, I'm going to show you exactly how to sell a call option. And we're gonna take some profits, so it's gonna be very exciting. State tune, Jump into my screen. Okay, so this is my training account. My margin account right now where I'm holding my options. As you can see, I still own Air Canada. A $3000 profit position. I own Africa, which is the trade I executed two days ago. And now we're doing pretty good on it. And then I also had Apple call options in here. I sold them. I don't know why they're sitting there, but so far we're gonna focus on Africa for today. So Africa. I bought this 12 days ago. It has an August 21st expiry. I bought it at a $7 call option and has done phenomenally well for us. So right now it's up 92.39% and I'll show you why I'm going to sell it. So here is the chart that I'm looking at. As you can see, we bought in right here around this blue line and we've had 123 positive days of trading. But since then, we're starting to kind of hit this peak right at the $7 mark, which is coincidentally, exactly where we peaked on June 9th and 10th rate here. So I do think that there is a chance that that previous $7 mark will leave some resistance there and we might not be able to break through it. Secondly, we have done phenomenally well on this option in just two days. Were up 92.39%. So I'm extremely happy with that. So altogether there's a little bit of resistance coming up and the trade is executed phenomenally, while so far so I have decided I'm gonna get out of this. I'm gonna take my $1000.92 percent game. We're gonna call it a day on Africa. We're going to say we made a great trade. Now it's time to get out, So I'm gonna click on cell. I'm gonna walk you through exactly how I make this trade. Okay, so this is our order form, and basically all we need to do with this. Fill this out and we'll be all set. So, action, we're going to sell to close. We're going to sell 30 contracts, which is my entire position. It is a call option on the Canadian market. 8 21 August 21st to strike price of $7 sell it at the market price. And I'm going to sell any part of it. We're going to continue. We're gonna get out of this trade, and we're gonna lock in our gains. So here is the confirmation of the actual trade. So you can see 30 options, and it is gonna give me $2200 back. But I'm gonna pay $47 in commission. So confirm this. We will have locked in those gains. We will basically confirmed our profit on there. And just right there, we've sold it. And now we're up 93% on that trip. We've locked in those gains. We've taken the profit. We've executed that trade and weaken, basically, chalk it up for a good trade. So one more step to go. Okay, So the last thing that we have to do is check our order status. So that's what this page is here. And as you can see, we've got Africa rate at the top here on the top left, E and C. I sold 30 different contracts and this is the important part. You can see the action is filled. The status of my trade is build. That means that we have locked in those gains. We've taken that profit. We made over $1000 in two days on that trade, and it was extremely good. So I'm very, very happy with that trade. There's lots more to come in the next video, so please stay tuned. 9. Selling AAPL Options: What's going on, You guys, I hope you're enjoying the course so far. I just want a touch base on one of the trades that we made in one of the earlier videos. So, as you remember, I made a video about how to purchase a call option, and we bought Apple options at a strike price of $395. Well, today is July 31st and yesterday they announced their earnings. Those earnings worked out extremely well for the company. They made more money than analysts had projected. And therefore, the stock is now at an all time high and our options are doing extremely well. So let me walk you through it. First of all, let's just look at the stock charts. So this is Apple currently today. I'm just gonna refresh this real quick. So it is trading at $425.4. Right now, in July 31st you can see we had a major gap, up from about $380 yesterday, two for 25. And that is because they had an earnings beat. Meanings. They did better than analysts had projected. And so therefore, it has made our options very, very valuable. So this is my page. As you can see, we still own Air Canada. And here is the options that we own an apple. So this is that the trade that we made before Apple for August 21st 2020 at a $395 strike price. And it was a call option today. There up 92.49% over $1568 in unrealized gains. The market value on the mystery. $3265. And as of right now, I believe we're almost in the strike price or in the money. We're just We are in the money, but we're just a that break even range. And we still have about a month to go until these options actually expire. So what I'm gonna do is I'm going to sell these. I'm gonna lock in our 92% profit. We're gonna keep that money, we're gonna lock it in. We're gonna execute this trade on. We're gonna chalk it up. We're going to say Wow, We made a good trade. We climbed out one out. We did a good job on it. And that is how I make some money trading options. So let's sell this right now. Let's get out of it. We might make slightly less than that. 92 a half percent, because I am going to sell this at the market price, so we'll see exactly where we close. Okay, Seldom open one contract. Alcohol call market price execute. Okay, so here's my quote. It's given me everything that I needed there. It's gonna cost me $11.20 us to execute this trading commissions, and it's gonna give me $3100 in total proceeds. Confirm that. All right, you guys. So it just executed our trade. We're gonna bring in about $3100 making 90% profit on it. We have done extremely well on it, and this is just one way of actually trading in this instance. Apple jumped up because of the earnings. And so if you know a company is coming out and you think they're going to do very well, they're gonna beat expectations and maybe beat the analyst projections. And this could be a strategy that you used. You could buy long out of the money options with expirations a couple months out. When the earnings come released and hopefully there's jump up in the stock price, then you can cash out and hopefully make a little bit of money, just like we did here today. Now, the big thing that I want to emphasize on is we made our money when we sold the options. We made our money when we actually got out of the trade when we executed that trade. And so when I want to emphasize to you is follow your trading plan, follow your strategy. And when you see big gains like this, take out some of your position. Take out all of your position, or at least find a way toe locking some of those gains by putting in a stop loss or hedging your bet. Because when you see opportunities like this, you see 90% profit. Well, those are great opportunities, and you need to capitalize on those when they come up. So that is. My personal advice is, if you see 90% Hunter sent gains, at least take some of it out. But that's just my personal strategy. You need to figure out what works for you. So if you got any value out of this, please write a review. I would sincerely appreciate it. Let's keep going with the videos. Here we go. 10. Implementing a Stop Loss: What's up, you guys? My name is Zak Hartley, and in this video, I'm gonna show you how to place a stop loss on your options straight so that you can mitigate your risk. Okay, so these are my holdings here. Currently. Right now we own auctions in Air Canada and we also own options. And Apple. This is the example that I use to purchase show you guys how to purchase an option with about one contract. And right now it's down 23%. Not a big deal. It doesn't expire for a while, So we've still got a lot of time on that one. Now, on Air Canada, I've done extremely well. I bought eight contracts of Air Canada with an expiry of 10 16 2020 at $17. So, as of right now, they're worth $2.86 and my book costs on here. It shows negative $15.10. That's because I invested $5000 in it, went up by a large amount, and I actually took my entire initial investment back. Took actually $15 more than my initial investment back. And so that's giving me a book cost of Negative 15 but the eight contracts that are still left in this position are worth 2300 and $3.10 and that's why we're getting a kind of skewed percentage rate. Here is because my book costs is negative 15 but they're worth 2300 so it's giving me a 15,000% gain. In reality, I just took out my initial investment and were up $2300 So it was a $5000 initial investment. I got all of that back, so really were up 123% right now. So doing extremely well, and I want to keep those gains. I wanna lock them in, and I want to make sure that I have secured those games. So what we're gonna do is we're gonna place a stock loss on our Air Canada options, so we're going to get into this right now, and it's really simple. It's pretty much the same process as when you buy the options. All we're gonna do is click on the sell button. I currently own eight contracts, so we're gonna sell at a limit price. OK, so here is my account right now. So what we're gonna do is sell to close. We're gonna sell eight contracts of it. It is a call option that we're selling. The symbol is a C. And it's on the Canadian markets. That's Air Canada. This is the expiry and the strike price. So it has to be the exact same as the shares that were as the options that we bought. I'm going to sell it at a limit price here. Now, this is the really important thing. Was trading at about $2.80 today. I want to walk in my gains at $2. So I'm gonna take this in here just like that. So that means that I don't eight contracts and I want to put a limit sell order on them at $2 a stop loss on them at $2. So if the price of the contracts trades down from $2.80 down to $2 it is going toe automatically execute my trade. That means that I will sell eight contracts worth of options for $2 each. That is going to give me $1600 worth of profit, and I have already taken out my entire initial investment, so my return on that will be a full 16%. Actually, it'll be more than that. It will be 32% on that trade. What which I have completely locked in using this stop loss, and I'm expecting it to go high over the next little while, especially their Canada starts to rebound the technicals. You're looking good. So stop loss set at $2. It's currently trading at about $2.80. Right now, it's gonna pull me out. It's good for. So this is the important part when you put in a stop loss regularly. If I'm placing a market trader, just go good for the day. But this is important. It needs to be good through. And then you need to set the date at which this trade is good until so I'm going to set it as long as far out as I can. So that's month 10 14. I think that's actually just the expiry date. Yeah, it is. It's just the two days before the expiry and it's gonna be good all the way till then. So if this auction trades at $2 at any point from now until expiration is just going to take me out and it's gonna execute my trade, and it's gonna lock in my $1600 worth of profit. So I'm very happy with that special instructions, Any part. It's got my number and they're all we're gonna do is click continue. It's gonna give me a confirmation page, you click confirm, and then we will have executed to trade. All right, so here's my confirmation page. You can basically see it to sell to close its eight units. It's a limit order at $2. This is a very important part right here. And it costs me $20 to execute this trade, and the estimated proceeds are gonna be $1580. So we're gonna confirm that, and I will have executed that trade. Okay, so here's the confirmation. You can see everything's the exact same. We got a limited $2. Now, what I'm gonna do is I'm gonna check the status of this trade, and it should say open. They should not say Phil, they should say open because I don't want it to close until the price actually hits $2. Okay, so here's my order. Screen. You can see Air Canada right here on the top section, left side here, and you can see that the status of it is pending. That is because the price has not hit $2 but when it does, it was execute that trade. So now we have done is we have an option that is worth $2.80 per share, and we have eight contracts of it. I have set a stop loss at $2 on it, and I've pulled up my initial investment already. So as soon as that stop loss hits $2 or the stock price, it's $2. My stop loss will execute. I will get out of that trade, and I will lock in my gains pretty close to that $2 mark. I'm meeting lose a couple of percent on the spread or if it opens at a different level. But I should get out with at least 15 14 maybe $1300 profit. Worst case scenario. But at least I've locked it down. I'm secured, and it's gonna be a good trade over. Also very happy with that. And that is how you basically mitigate your risk. So when you do this, you say Okay, I'm gonna walk in the profits. I'm going to mitigate my risk. And I'm not going to risk losing that entire position or losing some of the gains that I've made. So lots more to come lots different ways. You can mitigate your risk, but this is just one of them. More to come in the next videos. 11. Greeks: What's going on, everybody? My name is Zak Hartley, and in this video, we're gonna talk about option Greeks. All right, here we go. So an option. Greek is a Greek symbol that represents different attributes of the option. They're basically formulas that we use to help us understand that option. So when we look at the basically option quote that I have here, we've been looking at it for the last. A couple lessons we can see here, right in the middle. It says Delta, Gamma Theta and Vega, Those air traditional Greek symbols that have now being assigned a specific value that represents represents some feature of that option. So we're going to go through what all four of these means and how they work, but basically their formulas that spit out a four digit number like this that we can use to get a little bit more information about the option. So the 1st 1 we're gonna look at is Delta. Now Delta represents the change in the premium price for a $1 change in the stock price. So what it is is it's the value that your premium price is going to change if the stock goes up or down by $1. So let's look at an example. So the delta of this apple call right now is 0.3367 Got it highlighted here with green little circle, and the current price of the of the shares of Apple right now is to under $90.90. And the last price of the last trade that executed was at $10.5. So we're gonna use these variables to determine the new premium price. If the stock price goes up by $1 the math behind that is really simple. You take the current premium price and you add the delta to it to get the new premium price if the stock goes up by $1. So if tomorrow the new stock is during the $91.90 you add the Delta to the current price, and that's going to give us a new premium price of $10.39. So Delta represents the change in the value of your premium. If the stock price moves, that's what we're getting here Now. When you compare these, I've compared for toe apple again, and you can see that if Apple moves by $1 the value of your premium is gonna move much more , Then it Ford moves by $1. Very interesting, considering Apple shares are worth a lot more compared to Ford. But it does give you some insight so that if Ford or whatever, share your investing in, if the price is moved by consistently $123 you can get an idea of how much your option premium is going to appreciate or depreciate. That's how you use Delta. The next street that we're gonna talk about his Gamma Gamma reflects the change in the delta with a $1 movement in the stock price. It is not a very common Greek. We don't analyze it that much. It is not super important, and it's a little bit complicated. Gamma is used to figure out the new Delta after that $1 stock change. So what you do is you just add the gamma to the delta. To get the delta after a $1 increase or decrease all the gamma is therefore, is to help you figure out what the new delta is gonna be once that stock price changes. So, for instance, if the stock price goes down, you subtract a gamma from the delta to get the new delta. After that, $1 decrease was looking an example real quick. The current gamma of this apple quote 0.77 The current delta is 0.3367 If we see a $1 price increase in this in the stock, you can add the current gamma to the current delta to give you the new delta of 0.344 And then we would use that information the exact same way we would in the previous section where we looked at just the delta itself. So the next Greek that we're gonna look at this data data is the measurement of the options decay. And it is the rate at which the option loses value per day. This is an important Greek that you want to look at. It is one of the most important Greeks with Delta. Gamma is only used to help you figure out Delta. Therefore, it is not analysed as much. Data is very important and it has a couple good concepts behind it. So vain is a measurement of the options decay. It's the rate at which the option loses value per day. So, overtime at If you buy an out of the money call option, you're gonna lose value in that option, the closer you get to the expiry date if your prices and moving that's what they do represents is how much money you're gonna lose in that premium if the price doesn't move as each day passes. So basically, what it's telling you is how much money you're gonna lose from today to tomorrow. If that price doesn't change in that premium, it basically shows you how much does one day of holding that option really cost you. That's the idea with data now, long term options have a very low fada. When you buy an option that six months a year, two years out, the data is super low because you don't lose a ton of money leading up to that expiry on a per day basis. However, if you have a short term option where you're buying it out of the money and expires in 10 days, North data is going to be extremely high because the premium is gonna lose a drastic amount . Based on the time that you were holding it because you only have 10 days until expiry, and on expire, it's gonna be worth zero. So if it's worth 100 today and you have 10 days in order to get to expiry while you're thing is gonna be extremely high now, theatre increases closer to expiry, and it is always negative when you are buying options in this scenario. Therefore, the idea is, if you own a premium that $100 expires in one month, the negative number that is your theaters, how much money you were gonna lose each day, or at least on the next day basis, and what it really represents is your time decay. And I have a chart here to show you what it looks like. So it's a little expanded here, so excuse it if it's a little pixelated, but it doesn't really good job of representing what I'm trying to talk about here. So on the bottom, you have days until expiration. So on the far right side here is your expiry date, and it looks like we're buying a 180 days out. It has a value of 17 or $1600 at 180 days out. And what this is showing you is the time decay of the options. So as we move along and we get closer and closer to expiry, it doesn't lose a ton of value a ton of value. Then, as you get 60 days and 30 days out, it loses mawr and more value until you get to the kind of the last 15 days, and then it loses value very, very drastically. And that's what I'm trying to show you here. Is that the time decay on your option? If it's a very long option, kind of over the 50 60 day mark, it's not gonna lose a ton of value on a per day basis. As soon as you get below 60 days, 30 days, 15 days, it is going to lose more and more value on a per day basis. That's something that you need to be aware of, and you need to understand this concept because the value of your option will deteriorate over time as it comes closer to expiry. If we're talking about a long call option that is out of the money. So an example of this is the same apple quote that we've been looking at. The data is negative 0.2381 And today's price of this option I'm just using the last market price that came out is $10.5. So when we look at tomorrow's price of that gentleman that just purchased this, if the price doesn't move and everything else remains the same human lose 24 cents off that premium value due to basically time and holding it, it cost him 24 cents toe hold at that time period. And as he goes longer and longer and he gets closer to expiry, it's gonna cost him or And Mawr, on a per day basis toe, hold that option. So that is the example here. We're using Fada to determine how much it's gonna cost us toe. Hold this on a per day basis, that number is gonna go up as you get closer to expiry, and it's gonna be a very small number if you're buying long term options. All right. The last week that we're gonna look at is Vega Vega is not as important. It is not a super important Greek, but it does give you a little bit of information. So Vega represents the change in the premium price for $1 change in volatility. So if your stock suddenly becomes more and more volatile and is moving more and more drastically, well, it means that you have a better chance of being in the money on your option, because you have a better chance of it swinging that way. Therefore, you're gonna pay more for that premium. So Vega represents the change in the volatility of that option, and the volatility makes the options more expensive. So let's see an example here in this example with Apple, the Vega is 0.4542 and we can see the volatility on the left hand side. Here I have a circled in a green circle. That's the implied volatility here. If you remember in a previous lesson, we compared implied volatility with Apple and Ford, and we could see a pretty drastic difference there. What this is measuring. It's a standard deviation of the stock movement over time. How drastically is this stock changing over time with Apple. It's not very large with Ford. It is very large. You're gonna pay a premium for that. So when we look at Apple, the implied volatility is 38.27 If that volatility increases by 1% the Vega shows us that we're going to see a 0.454 to a dollar figure, 45 cent increase in the value of our premiums. So what it's saying is, if the stock price becomes more volatile, gives us a better chance of landing in the money on her option. Therefore, that option that we're holding is going to increase in value by 45 cents for that first percent increase in the volatilities. So what it means is, the more volatility we have, the larger the increase that we're going to have in our share. And what venue represents is how large of that increase in your share you're going to see for every 1% increase in implied volatilities. So in summary, let's just talk about this real quick. Delta reflects the change in the option price for $1 change in the stock price. So how much does your option premium change for every dollar change in the stock price. Gamma recollects the change in the delta for a $1 change in the stock price. So if you want to figure out what the Delta is going to be, that's when you would use gamma. They measures the options decay with each passing day. So this is how much you're going to pay toe. Hold the stock till tomorrow, and apples instance it was 24 cents. And as you get closer to expiry, your data is going to increase, and it is going to cost you more to hold that stock. And what I mean by cost you more is your value of your principle is going to decrease on a daily basis. That's what I mean. They're now. Vega reflects the changing the option price for every 1% change in implied volatility. This is a tougher one to read and analyse, But basically what it's saying is, if your stock gets more volatile, it's going to give you a better return or a higher price on your premium. You need to be aware of that, depending on what type of position you take. So that's a summary for these ones. The big thing here is that you use the Greeks to better understand your options and to compare different variables. You can just use these to decide which option you want to take. Do you want to be very time dependent, or do you want to be very price dependent? You can basically use the Greeks to determine which method is gonna work best for you. We're gonna talk a little bit more about that as we start to get into some of the trading video. So please stay tuned. We got lots more videos to come. 12. Taking Profit: What's going on, you guys? My name is Zak. Hardly in this video, we're gonna talk about when to take your profits. Let's jump right into it. Okay, so taking profits, This is 100% mental. This literally comes down to when you make the decision to pull the trigger to sell your trade. It's a very simple process. It completely comes down to your decision making and it requires discipline. You can let the stock ride out. You can let it go. You can trade it too early. You can trade it too late. You traded just the right time, and it requires discipline and technique. But the key here is your better toe lock in profits than to lose money. You're much better toe lock in a 10% gain than to let it run out, have it drop and have to take a loss on that trade. You're much better off to walk in the trade in any time that you could make a return on your investment. You can make a good trade and take some profit on it. You should pat yourself on the back even if that stock continues to rise because that is just the nature of the game. You're not going to get it right every single time, and you need to understand that up front. So when do you take profits? Well, there's a lot of different techniques, is a lot of different strategies. There's a lot of different ideas and thought processes on this, so I'm gonna cover four of them. And the truth of the matter is, in my opinion, is you need to combine all four of them and understand all four of them, understand the forces at play, and then make a decision based on your intuition and how you are reading the market so all of these could be used on their own. My recommendation is no one Understand when I'm talking about here when I cover all four of these and use them by combining them to you the best of your knowledge to make the most informed decision you possibly can. That is my recommendation, and that is how I trade. So when we look at this, the 1st 1 is when you hate your price target. Second is the momentous changes. The 3rd 1 is to sell at a certain percent increase and the 4th 1 is when you need the money . So we're gonna talk about all these different things. Let's get right into it. Price Target is the idea of setting a price target and saying I'm gonna trade out at that price. The idea there is having a plan saying I'm buying in here. If I If it drops to hear place my stop loss, that's where I'm wrong. And if it hits to here, that's where I'm right, and that's where I'm gonna take my profits. That is a good way of trading. However, you may be able to improve it a little bit by looking at the next three techniques. The big thing here, though, is drawing up the price action of Here's where you get in. I think it's gonna go to here and possibly higher. But I'm gonna take my profits here, and I'm gonna set my stop loss here so that I have a risk return ratio. If you have the ability to gain $3 on that trade at your profit and you have a stop loss $1 underneath your buying, you have a 3 to 1 risk ratio, and that's what you can look at when you're buying and selling these options in these stocks, the next one is sanitary based on the technicals. When you're doing this, you need to set a target, and you use your technical indicators in order to figure out where that target should be, specifically price level resistance and support the horizontal lines that you can draw in those charts that indicate where support and resistance live. So when we talk about price target, it's basically having a plan and setting a target of where you want to get out of that trade. If your plan executes now, you may want to change that plan based on the mo mentum in that stock. So if the momentum in that stock changes and you have not hit your price target yet, you may want to consider selling that stock. For instance, if you were watching the price action and all of a sudden you have two or three days of lower trading and you are long on that stock and then you are indicators your Mac D or R s . I, your Bollinger bands, whatever you're using. If those indicators start to show some cell signals Well, that could be an indication that you should get out of that trade a little bit earlier than that price target that you had said earlier. So these are just some indications. And so here's some examples of where that could change if you own Boeing or you own a different airline, and all of a sudden you have a price target of $10. The stock is currently a seven or $8.3 planes crash. While the airline industry is probably gonna take a hit, your stock is going to take a hit, and you may never even hit that price target. But if you can understand when that momentum is changing, you may be able to get out of that stock. That's still a profit on that trade. So a good example of this is the Africa options that I purchased a little while ago there in this course, so definitely check him out. But it is me purchasing Africa options and selling them two days later because the Mo mentum just changed a little bit. It changed. It wasn't going as drastic as it was, and I made the call to sell those options prior to the strike price and only two days, and because the mo mentum was not go in the direction that I wanted, so that's a great example of me Trading based on momentum. The next one is a percentage increase, so this is a good one. This is completely based on price action, and it's basically when your stock that or your options that you buy when they had a certain percentage increase, that's when you're going to sell. Usually, traders will set a blanket limit at 25 50 75 100%. They sell certain amount of their positions. Some people, especially entry traders when they get to 50% gains or 100% gains, they basically take out their initial investment or half their initial investment. One great example of me doing this was with my Air Canada options. You can take a look at that also in this course, but the big thing here is this can change as well, so you need to be able to adapt to it and setting a specific percentage increases very similar descending of specific target increase, but it can help your portfolio balance out a little bit better. So it is an option that you can do. You can get your entire initial investment out so that all you're doing is leaving the profits that you have in that stock sitting in your account and sitting in the market. That's a great activity, and that's exactly what I did with Air Canada. Another option is to just slowly decrease your position in that stock as it goes up. That way, you're maintaining a balanced portfolio, but you're still locking in some profits. So lots of different techniques, it really depends on what you want to do. But the big key here is maybe if it goes up by 50% take out 25% of your your Richert your position. If you see the momentum changes, you take out 75% of your position. And if you had a specific price target, you take out 100% your position. The idea here is finding a strategy that is going to work for you, but understanding all of these different factors at play because if the stock goes up and you've made a 200% on your position, you can eliminate 100% of your risk by getting back your initial position, plus your commissions and maybe, ah, holding feet, leaving the rest of it in the market as pure profit. And you can deploy that capital elsewhere in the market, so it depends on your strategy and what you want to do. But the last one is when you need the money. So first thing is life. Life is more important. This then the stock market. If you need the money for medical bills to feed your family to cover your rent to do whatever you need in your life, you should sell your stocks that are profitable. You should stop your stocks that aren't going to be profitable in the near future. You should get out of those physicians and use that money for your life. Or if you have a position that isn't performing while you have a position that might not perform well in the future. Based on your predictions, you should sell that stock and put it into a different investment. And the last option is when you need that money for cash. It is always a good sign toe. Hold some cash. It can always be better to hold cash than have your money in the market when it is a downtrend and it is a bear market, so holding cash can actually be better than holding stocks at certain periods in time. If you had held cash instead of stocks from the beginning of March to the middle of March, you probably would have done very well. And if you re deployed it afterwards, you would have had a whole lot more shares for the same amount of capital that you had a month before. So lots of different options, sometimes holding cash, is the right answer. A lot of the times it's not, but sometimes it is. Last thing is profits come when you sell early. It's better to lock in profits than toe hold that stock and risk the downside of it, especially when you have the opportunity to lock in profits. The only way that you make money is by closing the trades and that trade, and that profit is not really until it is realized. What I mean by that is your account could have a market value of $100,000 but if you don't have the ability to realize that cash right away, and if you don't realize it, it's not really it is not liquid money. It is not liquid cash. It is invested in the market, and it can change at any point at any time. The thing here is that taking your profits is 100% mental. It requires discipline. You need to know what you're doing and understand these factors to combine them all together and take your profits at the right point. So trust your intuition, trust your gut. Don't feel bad about taking in and walking in your profits, and then the stock runs. Never feel bad about that. If you're getting the return that you're looking for. And if you're getting any value out of this course, please consider writing a review. Thank you so much. I will talk to you soon. 13. Hedging: What's up, you guys? My name is Carly, and in this video, we're gonna talk about hedging. So first of all, real quick, What is hedging? Hedging is a strategy you used to reduce your risk. It's kind of like making a side bet or playing both sides. So, for instance, if you get to the NHL Finals and your favorite team is in it, you're probably gonna put a big bet on your favorite team. But if you think the other guys are probably gonna be the ones to actually come out with it , you might put a smaller bet on that team so that either way you get a little bit of a return and you can do you risk your total loss in the event that you're wrong. So that's the idea of hedging. What we're gonna do is talk about it with a real life example in the instance of stocks, so real quick options for stocks. They have different risk and return profiles with a stock. If you buy it and you own it, the stock goes up by $1 you see a $1 return. Same thing on the downside with options when you own a contract. If that stock goes up by $1 you could see a much, much larger increase in your portfolio than a relative $1 increase. So the risk to return ratio with options is very, very different. And therefore, when you buy specific options together with stocks, you can reduce your risk by hedging them. It's almost like buying an insurance and Paul an insurance policy, and today we're going to use for it. As an example, I'm using real life stats of real life quotes today for this one. So what we're gonna do is we're gonna talk about it in two examples. The first most trader, one and trader to It's basically two different guys. And here's the scenarios that they went through buying this exact option today and I'm gonna show you the end results off both different methods. So Trader One is buying for with no options, and trader To is gonna buy with the option, and he's gonna hedge his bet, going to show you the results here. So true to one he by scored at the market price today, July 23rd 2020 at a price of $7 in two cents. That's the real price. I just pulled that from my ticker. He buys 100 shares in his initial investment, $702. It's a very simple stock purchase. He's basically gonna buy it. He's gonna hold it and hope it goes up. Super simple. Nothing complicated here. Trader to, though, has a different strategy. So Trader To is gonna buy Ford, but he's also going to buy a put option now. In this case, he's making the exact same traders buying forward at the market price today, $7 in two cents, $702 initial investment. However, he is also going to buy three put contracts for 16 cents. Now, if we look down here, I pulled the actual price quote off my RBC list. So this is an actual trade that you could really make right now. So the bid is 15 cents, he asked. 16 cents in the last trade was 16 cents, so if you placed a market order, it would get in at exactly 16 cents. Right now. Now, this has an expiry two months from now. So september 18th 2020. It is a put option at a strike price of $5.50 meaning if the price of the stock on September 18th is below $5.50 we invited the market price and then we can sell it at 5 50 for the difference there being our profit now, because we're paying 16 cents for the option are break even on this is gonna be $5.34. So what we've done in this trade is we've bought in the exact same trade of 301 100 shares of Ford at a market price of 700 to $7.2. We've also bought three contracts at a strike price of 5 50 an expiry of September 18th 2020 and the break even on those is $5.34 were buying them at the market price of 16 cents right now. And the total cost for the three contracts is gonna be $48. Therefore, when you add that to our shares are total investment of $750 so $48 more than trader number one we paid upfront. Now the thing here is in somebody's doing almost the same thing. The only difference is he's adding on the put options that are out of the money right now that expire in two months. So let's run through a different couple difference in theirs and see what the results are. Let's say September 18th comes around. This is now the two months later, and the stock has gone up to $10.2. It has made a $3 increase in the value per share. So if we look at the math here, it's really kind of easy to figure out. Trader one has a $3 game per share, and he owns 100 shares. Therefore, he made a $300 profit. Now I'm using simple numbers here, and I'm not calculating commission in this because it varies by platforms. So this is excluding commission, but really simply Trader one. He made a $300 profit on this now trader to a little bit different return. He still made the $300 profit $3 gain on 100 shares because he did the exact same thing there. However, he paid $48 for options with a strike price of 5 50 that expired today. September 18th were two months ahead right now, and those air now worth the state strike price of 5 50 the stock has gone up to $10.2. It's a put option, so it's absolutely worthless. It's no good to him. He wasted that $48. So, as you can see here, Trader One made $300 trader to made $252. So Trader one had a better return by a small margin, about $50 on a $300 profit. He had a better return here trader to lost the $48 on the options. However, let's say the scenario went the other way. Let's say the stock goes down by $3 to $4 in two cents on September 18th 2020. So is at 702 when it went up to 10 02 Trader one made a lot more money. When it goes down to 402 let's see what happens here. So Trader one, as you can see, he suffers a $3 loss on 100 shares, and that gives him a $3.300 dollar loss, so he made 300 before. Now he's lost 300 almost the exact same risk return ratio traded to has a different story traded to also did the same trade. So he has the same $300 loss $3 per share. Times 100 chairs have lost $300 on the share transaction, however. Trader to spend $48 buying a put, and those options just expired in the money by a dollar and 32 cents. Remember, our break even from before you go back to it was $5.34. And now the stock prices $4.2. Therefore, he is in the money by $1.32 per share. Because he owns three contracts that covers 300 shares. Times a dollar 32 gives him a $396 profit on that option. Straight now it cost him $48 in premium, meaning that he made $348 in profit. And when you compare that to trade or one who lost $300 he actually had a net profit on the trade of $48. So when we summarize this, we can see that if the stock goes up and you make this trade, you're gonna lose that premium. However, if the stock goes down, traded to actually made $48 on this trade, whereas Trader One lost $300. So therefore, for a $48 basically insurance premium trader to was able to eliminate his losses. And he was able to make a little bit of money on this trade where traded one lost all $300 . And that is how hedging using options can help you in your stock trades. When you are long on a stock and you buy the stock, you can buy a put option toe. Limit your downside, and if it goes really far down, you're actually gonna make money on that. Put more than the money you lost on your options On the reverse side. If you're shorting a stock, you can buy a call option that is gonna make money. If the stock goes up that way, you can limit your liability when you short a stock. So let's just look real quick at the chart on this. So on the left side, you can see the price, and on the bottom, you can see time. So the price when we bought the shares was about $7 and when we bought the options, it was $16.16 per share. Therefore, our break, even when the shares go up, is $7.16. So, for instance, if the shares only hit $7.10 we would have lost a little bit of money on this trade overall . But if the shares get above $7.16 that profit from that 16 cent difference is gonna cover the premium that we lost from buying the put options. And we will always make money above that price. On the reverse side, we can see that it's a little bit different. Anything below the strike price of 5 34 will definitely make money and anything up to the expiration date of September 18th. It can change a little bit, depending on the time value of those options. We talked about that a little bit recently. The longer time you have until your expiration, the more likely you are to end up in the money and the more valuable. Those are meaning that if the stock drops by $2 right away and it sits at, let's say $5 right here forward, all their $6 you're gonna be in the money right away. And that's why this line is on a slant. However, if it's at $6 all the way out and really close to expiry date, you will be losing money. And that's why that wine is slanted like that. And so when we look at this trade, you can see that above 7 16 we're gonna make money and below 5 34 on expiry of September 18th we're gonna make a lot of money on the options. But anything in between there, we're probably gonna lose money because we paid so much in a premium for that option. And we had to cover a little bit on the upside to cover that opinion. When you make money on the stock, so couple different things you need to realize you need to understand how these charts working so that you can realize at what point you're making money, at what point you're losing money and how you can limit your losses when your trading and hedging with the stocks and options. So option number two is to short the stock and buy the option. I talked about this just briefly. It's the exact opposite trade of what Trader number two did in this instance. He bought the sock, hoping I would go up and bought the option that put option as insurance. You do the exact opposite trade where you short the stock thinking it's gonna go down and then you by the call option in case you're wrong. There basically insurance policies with different risk reward so that you can sleep a little bit more comfortably at night knowing you're not gonna have unlimited liability on a short stock sell, or you're at least gonna make a little bit of money in case you're very, very wrong on a bullish purchase. Now, in summary, there's a couple different things I want to cover. Using options as insurance for stock trades is a great policy can definitely help you limit your loss, and it's even better when you couple it with a stop loss, great technical analysis and actively monitoring the shares. It's a really important thing that you need to know what you're doing. You need to know what the trades air that you're making. You need to know what the math is behind them before you actually make these trades. Because when you're buying shares, you're selling shares and you're adding the options into that. It gets more and more complicated. And that's just part of the game. You had your bet. You make a more in depth trade. You make a more complicated trade to hopefully limit your loss. But it comes with a little bit more complications that need to be very well aware off. The last thing is, you need to understand the numbers behind the trades because they are more complicated. We're buying and selling options and shares at the same time here. So you need to be a very aware of how you're going to set that up in the broker that you use, as well as the math in your head and making sure you put in the right trades in the right quantity. So if you have any questions about this, send me an email. I'm gonna do a little bit more on this through the course but police pay attention when you're making your trades. I do not want to be responsible for you thinking you're buying shares and you end up buying options. You need to be very careful when you're filling out. Those forms will talk to you soon, my friend. 14. Mentality: What's going on, you guys. My name is Zak Hartley, and in this video, we're talking about your trading mindset. Any time you sit down at your computer and you're gonna trade options, you're gonna trade stocks. You even just gonna make an investment? What should you be thinking about? What kind of mind space should you be in when you're making those traits? Let's jump right into it. First thing is, this is the most important factor of your trading. This is more important than any secret indicator. Any trading strategy or any knowledge that you could have It is your mind set when you step into the train, making sure that you are in a healthy mindset urine, clear space. You're clear decision making and you're ready to go for the day. That is the most important factor in your success or your failure when it comes down to trading. So two of the things that I found really helped me out. Anytime I'm making trades in any time I'm gonna sit down on my computer is one how morning routine. So I wake up. I have a Babel in order shoes. Every single morning I watch a little bit of news. I try and water the garden. I do a little bit of a morning routine before I get up before I sit down on my computer so that I have some consistency in my day. I'm warmed up. I'm ready to go. By the time I had to computer and I'm not gonna have to take a break in 20 minutes. Teoh, eat or use the washroom or do whatever I can Sit down and I can actually focus on what I'm gonna do. Secondly, is find a trading routine. So I have a very specific routine that I go through on a kind of a day to day basis. When I sit down, I looked through the same 30 or 40 stocks every single day. I am. No, take them. I decide what I'm gonna do. I read some of the news. I look at what's happening in the market and then usually in the afternoon, I'm making my trades. If I'm swing trading, if I'm day training, it's a little bit different technique. But that is basically the same routine that I go through. Every single day is the same 30 or 40 stocks annotate them, read the news on those stocks or anything that I have interested and then execute my training plan from there. So what you need to do is find those two routines of morning routine and a trading routine , depending on if you're a trader, a day trader, a swing trader or a long term investment kind of maker, you need to decide on what your routine is gonna be. But it is important. Secondly, options options are much riskier than stocks. You need to understand that you need to be aware of that. Swings are much higher, so you don't need to be prepared for that by hedging in implementing stop losses or having both buy and sell opportunities to limit your risk. Or you need to have a handle that risk and need to moderate it and how small positions of your portfolio and options so that no one position is going to set you off side or unbalance your position or make you uncomfortable with your holdings. Secondly, you will not win every trade you need to be aware of that. You need to understand that you need to handle it like a champion. You need to be a toe. Take a loss, Rocco, to the gym. Take your bag, pack it up and go work out the next day and get back at it. And practice your craft. You need to be a tow walk over that, Jim. You need to be able to walk over that trade like a champion. You need to understand that you took a loss to understand why you took a loss. How you can change and improve your strategy and get back out there and make another trade . But you also need to make sure that that lost was not too big. Do that Vice implementing a stop loss, hedging your trades, small positions and asset allocation. Making sure in the right stocks the right type of assets profits. This is the big thing. You don't make money unless you sell or close that trade. If you're buying, put or buying call options, you need to sell in order to get out of that trade and make money. It is not real money until you have exited that trades exit bad positions early. That's another thing is, if you're in a bad position, you get in two days and you're not feeling good about it. You're not feeling good about it. The signs aren't there. But you haven't. Maybe hit your stop loss. Get out of it. Like don't wait for it. Get out of it. Get back in if it completely turns around, but get out of it. If you don't feel good about it, get out of that position and go find a position that you do feel good about. Do not sit in these bad positions that are gonna make you worried and stress overnight. Go get out of them. Take the loss. Take the hit and go find a position that you are happy with. Thirdly, you only make money when you close. The trade like this is literally the most important thing is all these people like talking about the shares, their buying and how him and owner and Tesla and I'm an owner and apple and all these different things. But the truth is like the only time you get a payday is when you're not an owner in apple or you become less of an owner. And so the key here is Take your profits when you can execute your training plan. do not reach for the stars Reach for consistency. Consistent profits month over month over month is how you build a fortune is how you build wealth And that's how you make it in this industry. Also, close the trade like get out of it. Do not hold them that trade if you don't need to get out of it and close that trade and take the profits. Um, the big thing here is breaks. So you're not always gonna be motivated. You're not always gonna be ready to go. When you get up in the morning, you feel like crap. You're on the toilet. Things aren't going your way. You eat the Baghlan. It just doesn't go down very well. Don't trade. It's better to not trade than to make bad traits or to sit down on the computer and hate what you're doing or to sit down and be pressured and be forced into something. It's better to take a break. Sit back, relax. Enjoy your day off. Book your day off and just take it to yourself. Like relax. You do not need to trade every day. You do not need to be on the ball every day. It is better to not trade then to take a trade that you are not comfortable with, and that is not a good trade. You will not win every trade, but still you need to handle it like a champion. If you are not there one day because you're just not feeling it, try and get up early the next day, getting a little bit more work, a little bit more analysis and try and figure out how you can improve yourself, how you can learn a little bit more on how you can identify more opportunities for yourself . The big thing here is the only person that's gonna hold you accountable is yourself. The more work you put in, the more working in to get out of it, and at some point it's gonna break even for you. That's the point that I'm trying to help you accelerate to in somewhere you hear your mentality is the most important part. It's better to not make a trade than to make a bad trade. And when you have the profits and you're above where you thought you were gonna be, take the profits. Take the profits at every chance you can get better to take the profits and let that stock run than to let it run and lose some of those profits. It's much better to lock in some of those gains. And don't do this. If you're not enjoying it, wait until you do enjoy. Take a break until you do enjoy. Take a break until your reinvigorated. You need to have a passion for this, and if you don't have a passion for it, you should reconsider it because your mentality going into that chair and going into every single trade is more important than any strategy. I can teach your indicator that I can show you your mentality. Going into this is the most important factor that's gonna dictate your success or your failure. So please be careful. Please monitor your own mental health and make sure that you are not overextending your fiscal ability, as was your mental ability to handle what is going on in the markets. If you have your entire your entire portfolio exposed to options or you didn't get to handle it. If there's a crash tomorrow, probably not. I wouldn't be able to handle it, so I only put small positions in my portfolio into options. Hopefully, as you can see in this course, I do a little bit better than probably the average trader. But that's because I have some experience in and trying to pass that on to you. So take everything I say with a grain of salt. You need to kind of blend everything that you learn together and come up with your own strategy. The best fits your personal needs. But this is all just my advice. Please be careful out there and good luck trade. 15. Buying Air Canada Options: What's going on, you guys. My name is Zak Hartley, and in this video, I'm gonna walk you through the Air Canada options trade that I made him. Also gonna review real quickly. Why made it and how to make the options trade. Now, quick, little disclaimer. My camera wasn't working very well when I recorded this video. So all you're going to see here is the screen recording. But you will hear me walking you through the trade just like every other video. So here you go to come down. Looking at today is Air Canada on the Toronto Stock Exchange from using stock charts dot com. And this is what the stock looks like over the last six months. So super steady growth. There was a 40 $50 stock prik overhead. Kobe it hit it dropped all the way down to $10. So again, this is an airline stock. It was one of the absolute hardest. Take companies from Cove it they were absolutely decimated. They fell by 80 90%. Here they laid off most of their staff and it's been one of the most hard hit industries from Kobe now. Since then it climbed back from that low blow, $10 climbed above $20. 12 looks like 3456 different trading days where reached above $20. So I really like that. And then since then it's come all the way back down. It's test of that 12 $13 level, and now it's around $16 it's been trading at this 16 $17 range for about 60. So that's what I'm looking out in the chart. And the reason that I want to buy Option an Air Canada is because I'm gonna buy this option for a couple of months out from now, when I think that air travel will start to come back, we'll start to resume and Air Canada has a large fleet, has a ton of great staff as, ah, lot of good things going for it where people start to travel again. Air Canada is gonna be very well positioned to take advantage of that and be one of the first companies to recover and hopefully within 1 to 3 years, get back to where they were before. And so I'm gonna buy options for a couple months out. I do know that this chick come. This industry is extremely volatile right now, So I invited a couple months out from now hoping that Cove it starts to ease. People start to get a little bit more confident, going traveling again. And hopefully within a couple of months, people are starting to book plane, plane rides again, and business is back to normal. So we will see this is my back. If things don't go well, I'm only buying options, so I don't have a ton of risk. But if things do go well, there's a ton of upside here. Especially since the options right now are super cheap. I'm gonna buy in Price right now is $16. And the price has already traded above $20 even $22.5 just in the last couple of weeks here . So I'm gonna buy a option with a strike price around there, so I'm gonna go right into my bank here. I'm gonna just kind of start from scratch. You can see how I'm doing everything. So we're gonna go Air Canada on the on the normal Toronto Stock Exchange. You can see it listed there. Now, if you're gonna buy the stock, you would use the same page, just click, buy and sell. But if you're gonna buy options, there's one option right here and click on this. And now at the top, you can see the year on the left hand side of your speaking my options all the way out. We're gonna buy them in 2020. The month right now is May. It's the 28th. Right now. It's 2:40 p.m. I'm gonna buy my options for October. That is when I want to get in. And now your options will almost always expire on the second or third Friday of the month. I forget which one it is right now, but they always expire, basically about 2/3 the way into the month. So I am going to buy an option for expiration in October. Now what that means is I am buying the right to purchase the share at a certain price. In October, we go down, we could see the prices that are available. So the strike price in the middle here The stock is currently trading at around $16 if we look at this, I can buy a option with expiration in October with a strike price of $18 that would cost me $3.30. So that means that my break even point would be $21.30 if I bought this one right here. Here's another 1 $17 strike strike price that cost is $3.70. So my break even on this, Even if we open it up, you can see the break even is $20.55. So it's the price of the stock, the strike price, plus the price of that option. And this is given at the most recent ask, not the most recent press. So that's where you get this break even price right here. But basically, you start making money as soon as the President stock goes past your strike price, plus your option price. So we're not looking at this right now. I say, Okay, I can break even at 2055. I can also break even at 2150 15 pretty close, pretty close. The next one jumps up to 4 25 Not a huge difference there, So I'm gonna go with this one right here. I really like this one. My strike price on this one here is $17 and the current aspirin now is $3.55. So if I buy this at market price right now, my break even will be $20.55. So if the price is stocks higher than that, by the time we had October, that means I will have made money. And I really like those Audrey now, because in the previous month, where code was at its absolute worst, air cannon has already traded above this exact point that 2055 I believe let's go back to a real quick here. It looks like you got all the way up to 22 50 here at the end of May. So I really like these odds. I think I've got a good chance here making some money. Even if we have just a slower than predicted recovery in the cove, it I think we're going to do fairly well on this. So I'm gonna go in and I am going to buy. And remember, when you buy auctions, you're buying them in contracts of 100 units. So when I'm buying at a ask size of 3 55 that means one option costs me $3. 55 cents. I buy it in a contract of 100 units. That means I'm spending $355 at a absolute minimum to get into an auction on this stock. So I'm gonna place a $5000 position on this. So when I go five 1000 divided by 3 55 that means I'm gonna buy 14 contrast. So go into here buying this on the Canadian exchange. I'm using my margin account. We're going to buy the Open written by 14 contracts, and we're gonna call them is Air Canada is on the Canadian market with an expiry of October 16th 2020 at a strike price of $17. We're gonna buy it at the market price because we're a couple months out. I'm not do trading here. I'm not super specific. I'm buying this a couple months out with a little bit of room to wiggle, so I'm going to get in at the market price and no limit price. I just want to get in and I want to hold that trade we're gonna hit. Continue, and I'm gonna confirm this trade. And then we're gonna lock in that auction. Straight boom orders a minute. And so now, ready for your Here's the breakdown. So here's my account. I'm gonna buy the call to open. I mean by 14 contracts. It's a call, which means I'm going long on the stock. If I was going short and I thought the pressure is going down out by a put, I'm buying Air Canada. The description is October 16th 2020. That means that that's when it is going to expire. The strike price of $17 it is a call option. So on October 16th if the price is higher than $17 plus 3 55 or whatever this trade executes act probably around $20.50 that I will have made money on the Canadian market. I'm buying at the market price. Here's the rest of it. This trade is gonna cost me exactly five grand, just like I predict it and it is submitted. And either today or tomorrow we will have that trade executed, and that is having by an option and in air Canada. So I'm looking at the stock. All we have to do is get backed up. I'm gonna annotate this right now just so I can see my green light. So we're gonna go horizontal line. $20.50 so right about their cover that green. And if the stock price gets above that line, that means that we're making money using options on Air Canada. And I have a ton of confidence in this because it's May. We got June, July, August, September and half of October for this price just to go up by about $5 where it was, like less than a month ago, when Kobe was even worse. So I've got a ton of confidence in this. If you're interested in making the exact same trade, definitely check out the options at your banker. Your broker. If you have any questions, send me an email. Look forward to hearing from you. And if you get anything from this video, please remember to show some love 16. Selling Air Canada Options: Alright, guys. So you just saw the video where I purchased the Air Canada options in this video, I'm going to sell the Air Canada options at a pretty good profit margin. So if you are getting any value out of this course and out of the lessons that I'm showing you, please consider writing a review. It really helps me out in growing this course and sharing the knowledge. Other than that, I am sorry about the video quality. These were filmed a little while ago, So I'm working on getting better at my videography skills as well as some of the equipment . So without any further ado, please consider writing on the view. And here's the trade where I sold the Air Canada options. Okay, So before I get into the actual trade, let's just take a look at the charts. So here's the one we've been looking at over the last couple of days. We bought it right here. Our trade executed June 1st, and since then we've gone from about 16 $17 all the way up to $22.36. We broke through that ascending triangle and you can see here this green line was the break even point for my auctions. So we're now above the break even point for my options, and we're doing extremely well and once again, a reminder. Our options expire in October. So here is my history page that you can see we bought Air Canada for an expiry of month tens October 16th 2020 at a $17 called about 14 contracts for them at a price of $3.30 on June 1st. So it is now June 8, exactly one week later, and we're ready to sell these auctions. So I just want to show you what it looks like now because it's pretty amazing. So Air Canada, here we go, the exact same options. They're up 28.9% today, and we have made in a total return of 134.97% were up $6272 on a 46 $100 investment in literally one week. So this has done phenomenally well for us. I still expect this to continue. However, we've done very well on it, and I want to lock in some profits. So what I'm gonna do is I'm gonna trade about $5000 out of this. I'm gonna get my original position out and I'm gonna leave the remaining $5900 in the position. We're gonna let this run for at least probably at least another couple days, if not another couple of weeks, depending on the price action movement, we're gonna lock in our profits and we're going to take some money on this, so I'm very excited. So here's what it looks like. So when we click on cell, all we're gonna do I'm gonna sell at the market price cause I'm basically ready to get out of it. I want to sell. Let's see what six contracts looks like the exact same thing. Let's just see what on the estimated proceeds are 4600. So we get back almost our entire initial position in this. That looks pretty good to me. So I can confirm that we're gonna execute this trade, and we're going to basically all right, it's good. So Jerry is executed, and now we go to my portfolio holdings. I will moving forward. Onley owned seven SUV or eight Air Canada contracts, but they're still up 130%. We just locked in basically well, not looked. And we got our original position back, and we still have $6200 in the market. So really, really great trade. It was less than a week and were up 130%. We just took half of our position out our original position. I'm gonna start investing it into a couple other companies. And so far, that was one of the best traits have made in a little while. So really great performance. Great technical read. Great. Read on the market overall. And if you get any of it any value out of these videos, please remember to show a little bit of love. Thank you. 17. Buying Shopify Options: What's up, everybody? My name is Zak Harvey. Today we're gonna be buying options in Shopify. But like I said, we're going to buying options and shop by. And the reason we're doing that is because I just sold half of my Air Canada options position at a massive 136%. So we want to reinvest that original $5000 the company that I'm looking at today's Shopify so I really like shopping by. If you look at some of their financials, they're doing amazingly well, I'll just pull up there last quarter announcement on the first line in that its first quarter rather Negroes 47% year over year. There are very, very few $1,000,000,000 companies. They're growing their revenue of 47% year over year, and shop buys one of them, and they're doing amazingly well. So I want to get in on this upside now. They just announced their financials on May 6, which needs the next set of financials is probably going to come out in about three months . So if we go June 6 July 6 August 6, they're probably gonna come out sometime in August, which means I want to buy options for September or October somewhere in there. So let's look at RBC. I'm buying it in the US right now because there's a little bit more volume on the options compared to the Canadian market. I'm looking at an expiry of October 16th. I'm looking to call it now. This doctor now string at $747.33. It has traded as high as 850 within the last month. So it came off it. It's got a little bit of a correction right now, and my plan is I'm buying it on the dip right now. That is my strategy. I'm planning on buying it on the dip. I expect this trend to continue because shop by such a great company and with Kobe, I think shop by. Revenues are going to skyrocket as more and more companies come online and Shopify is the number one player in that space. So I want buy options for September October for probably around that 808 50 mark. Maybe a little bit higher. Let's see what we can do. Look it up something. Look for Shopify and I'm going to be looking for a strike price options. I'm gonna be looking for a strike price in October. October 16 is the day that the options expire. We have a strike price right now $748 Aiken, by the $750 strike price for price of $103 which means my break even is gonna be around $850. And that seems really good to me. Let's just compare it a little bit lower. If we look at a strike price of $800 the current ask right now for it is $84 which means my break even is $884. So this one is clearly a much better bet. I also like it cause the break even is 8 55 And if you look at our chart, we pretty much hit that 8 55 mark about a month ago. So let's zoom in here. A and C were right at that 8 50 mark radio shop by. So all we have to do is break through a previous high on between now and October, and we will be doing extremely well. So I really like this training to buy these options right here on by one contract. It should be about $10,000 purchase. So a little bit more than the games that we made on our Air Canada options, but that's ah is perfectly fine. That's wrong. Okay, got our camp. We're gonna buy open being by one contract. Single shop. Good. It's all good. We confirmed that trade. All right, confirm the straight. All right. And so here we go. We can see it right here. So I purchased it from my margin account. We bought it toe open. I bought one contract was a call auction. Meaning I am long on that contract. The symbol was shop, so I bought it in company Shopify. It expires month 10 day 16 year, 2020. So october 16th 2020 as a strike price of $750. That C means that it is a call. Same information right down below. Here. It's on the US market because it had more volume than the Canadian market. The commission I came on this trade was $11.20. U S. And the total proceeds of the trade was 10,700. So be now owned shop by options were in it until October or until we sell it. I'm really excited and really confident with this. I think we're going to do really well. I do expect to hold this for kind of 1 to 2, maybe three weeks on my don't expect to get out of this right away. But it could be. Could be some big news coming out soon, especially within the covitz, so we'll see what happens. But if you get any of that value out of this, please remember shows love. Thank you. 18. Selling Shopify Options: options and it should give us basically everything we want. So sell the clothes on your cell. One contract. I'm gonna do it at the market Price, and we're gonna get out of this pretty quick here. Alright? Continues that I confirmed that. And now it will lock in our trade. So here is what just looks. So here's my account. Sell the close one call of AP phone call of Shopify Options expiring. 10 16. 20 at a strike price of $750 were selling all of it at market price. And the estimated proceeds are going $23,000 on a $10,000 trade. So we just talked in about 120 130% gains on our trade and we're doing pretty well, but we got in at a great level. We got in right on this dip here and we strolled it all the way out. Now we could have done better if we sold the options at, like 14. 50 were up 200% on that at one point. But you know what? I'm gonna take the gains. We missed it. We missed it by just a couple of days, and I'm going to get out of it. But I'm gonna lock in those profits. We did pretty well on it, so I'm very happy with it. Thank you so much. And we'll talk to you soon. 19. Buying Aphria Options: What's going on, everybody? My name is Zak Hartley, and in this video, I'm gonna look at four different cannabis companies and we're gonna buy options in one of them. So let's get right into it and jump into my screen. So the main reason that I'm interested in this industry right now is because we're seeing four different companies that are moving very similarly and when they move very similarly, it gives me confidence to predict how they're gonna move and make a trade. So let me show you what I'm talking about. The 1st 1 we're looking at is a roar canvas. So right here you can see price jumps up to about 26 $28. It has another little bump here at the beginning of June and then it falls all the way back down to 16 before out of two very positive trading days here today and yesterday were also seeing the Mac D come very close together and it looks like you could cross over pretty soon. On top of that, they are size about to break through the midway point. So that's one company. The next one we're gonna look at is Africa. This is another Canadian company, and as you can see here, they had a slight little bump at the beginning of June. They've come back down and settle down just like a roar did. And in the last two days they've had two very positive days of trading. So that's two companies down that are moving pretty similarly. Let's look a heck, So if you look at heck so the exact same thing. In June they had a massive bump up to about $1.6 that came back down to just under a dollar . And now they've had three positive trading days sitting at about a dollar nine right now. And the last one that I want to look at is Canopy Growth Corp This is the largest one in Canada, and it's the exact same photo again, a big bump up, beginning off end of May story. A little bump up in June and then it's sat down in about $22 after the last two days has had a very positive trading. So the entire industry for the last two days has been very positive. We're seeing turnaround on all of them Acti. We're seeing positive correlations on the RSC, And it looks like we have the makings of a trend reversal in the industry. So I don't want to put in a massive positions. I'm not 100% confident in the position yet, but because off all the different symbols and four different companies moving very similarly in an upward direction, I do want some exposure to this right now. So what I'm gonna do is I'm gonna go in and I'm gonna buy options on Africa. The reason I like after is because they're fantastic distribution. They're great value in terms of revenue for the stock that you're buying. And they had terrible news that came out about a year and 1/2 ago where they were growing illegally. Since then, they've made some drastic changes. But I think that news has kind of lingered with them, and it's made investors very wary because of what did cause a major drop at the time. So however, I do like Africa as a company, and their options also provide a decent amount of liquidity, meaning that there are enough that I could buy and sell. So the option that I'm looking at today is for an August expiry. August 21st expiry. And I'm looking for a strike price of $7 right now. So as of right now would be a strike price of $7 they're asking for 50 cents per option. Now, To me, that sounds pretty reasonable. I'm gonna buy 100 of them. It's gonna cost me $50 per contract. Remember, contractors worth 100 shares. And so for me to break even on this at a strike price of $7 I'm gonna pay 50 cents for that contract on each option. Therefore, if the price gets above $7.50 by August 21st I will have made a good amount of money. So I'm gonna buy these right now, I'm going to buy a good amount of units, actually, so we're going to buy open, and I'm going to buy to 10 by 30 units. And, um, let's go from there. So 30 units, I'm gonna buy them at the market price on the Canadian market. Market price today. Strike price of $7 we are good to go. All right. So you could continue. It's gonna ask me to confirm this trade. I'm gonna go through that confirm one more time, and then it will put us in here. So here is the trade that I just made. So I bought calls to open. I bought 30 of them. There were call options on Africa with an expiration of August 21st 2020 at $7 on the Canadian market, at market price there opened for the day. The estimated commission was $47 the total trade is gonna cost me $1500. Not a massive trade, but it should give me a great return if the entire cannabis industry goes up and it's gonna give me good exposures. So we're now in tow out Fria. I'm gonna go back to the trade here, So let's go back to Africa and let's draw this line here. So Africa. And if this price it's $7.50 we're going to be doing extremely well on this. So $7.50 century there. So, as you can see, we don't need to move a whole lot more like we're fairly close to it at 6 61 right now. And if we get a couple more days of big movement before August 21st. We should do extremely well in this option. So I'm feeling good about this one. We're gonna let this right out for a couple of weeks and we'll see you in the next little video. If you have any questions, send me an email. Thank you so much. 20. Technical Analysis and Options: What's going on, you guys. My name is Zak Hartley, and in this video, we're gonna look at it, trading example where we couple technical analysis with options trading to establish our position in the market. And I'm gonna show you exactly how we do it in this video. Okay, so break down the technical analysis for you. This is what I'm looking at on the chart here and now. I've drawn a blue trend line that goes from bottom left to top right here. And this one is really important because it shows really strongly to me. So as you can see, coming up August, September and November December, we've got the price bouncing off of this trend line all the way up until we have February March. Where Cove, It really has its impact. And we fall all the way down to about $120 Now, since then, we have come all the way back up through that trendline, and we've capped out about 3 $2330 And then it came back down and it tested that trendline again. Now, when I zoom in here on your show, you exactly what it looks like because it gets super interesting because we now have an ascending triangle and ascending flag pattern. And what I think is gonna happen is we're gonna no breakthrough that 3 23 30 level. I think we're gonna have a run for our money and we're going to see this trend line continues. So it's taking out our bottom line here some so zoomed in. But as you can see, we clearly clearly tested that 3 25 3 30 level dropped all the way back down into 90. We basically tested this 3 23 30 level twice now and today. This morning we've had some big gains. We're all the way up to $331. I think we're going to stay above and breakthrough that thrown in $30 mark. And therefore I want to buy the options because one that 3 23 30 mark is now gonna become support if we can break through and stay above it. And two, we still have that trendline that's falling behind us, enacting his support. So I think we have strong technicals here. We also have an artist's eye that's moving upwards to the overbought zone and we have the Mac D that relatively compared to previously before it is fairly low. It looks like the black slow are faster moving. Average story has crossed above the slower red one, and we could be due for a break out. So I think it's a great time to buy options. It could be a little bit early, but if it works out, we're gonna really, really capitalize on this. And if it doesn't work out, we're not gonna lose very much money. So I'm buying them far out from today. So this is the loose stock quote right now it's at $331. I'm gonna buy options on it today, and I am looking at options with a December expiry. I want to buy it a little bit weight of the ways out. I think that they're gonna be reporting at the beginning of December. At least that's when they reported last year. So if I could buy them for December 18th expiry, it could come after their Q three earnings, which could give me a little boost. Great at the end if I decided toe, hold them all the way. So the ones that I had my eye on before Were these ones here the $360 ones for 26 50? So I really like these ones. That gives me a break even of $386. It means I need about 20 to 25% game between now and December. Now, that's six months away. And based on my technical analysis, we should be able to get at least pretty darn close, if not beat that. So I do feel confident in that. Now, my timeline on this is probably only a month or two. I don't expect to hold these very long. I'm looking for a jump in a breakthrough of that 3 23 30 level. And I'm looking to sell these out of 22 60 maybe 80% profit in the short term. So that is my strategy on this one. And that is how I'm going to combine the technical analysis with my options trading in order to get the best result here. So what I'm gonna do here is I'm just gonna click on the buy button, and then I'm gonna go through the process of filling my order I'm gonna buy to contracts of this. So it should give me about a $10,300 position. So it's currently 26. 50? Is the current ask on this? So choose my account, and then we'll get right into this. Okay? So, to place this trade, I'm gonna buy to open. I am by two contracts. That's gonna be good for 200 shares at 26. 50. Market price. I'm gonna continue this, and then it should give me a quote. So here is my quote. As you can see, we're looking at two contracts and comes out to 5300 and $12 I'm gonna pay $12 and commissioners Well, so almost exactly what I thought it was gonna be. I'm gonna confirm this, and then it will place that trade for us. Okay, so here is our order Screen order submitted. As you can see, we own two contracts. Now they're call options for Lulu with an expired December 18th $360. Call strike price and we paid about $26 per share for them for a total of $5300. U s. Okay, So this is the trade that I made. So as you can see, we've got basically that level. They're at 3 23 30 I'm hoping we get above that. I'm expecting it to run to 3 43 50 And if I start to see a curtail at that point that I'm probably gonna get out of these options. But if I get above 3 43 50 and it continues to run, I'm just gonna let it go. I might even hold him long term. If especially gets above 3 80 Everything at that point will be profits. So we will see what happens as time progresses. But that's the trade I made. So if you guys are getting any value out of this course, please consider writing our view for it. Sincerely house me out by spreading the knowledge. And be careful when your options trading. It's definitely riskier. You put more money on the line, you put more more risk into your portfolio. So you really need to be to manage that. This one. I'm doing it based on technical analysis, but you need to do it based on the strategy that works best for you. So if you have any questions, send me an email and I hope to talk to you soon. Bye for now. 21. Selling Premium: What's going on, you guys. My name is Zak Hartley, and in this video I'm going to be talking about selling the premium or taking the other side of that trade that we've talked about so far, so real quick. I just wanted to a quick summary to cover what we've gone over so far just so we can establish a baseline for this last thing cause it's a little bit more complicated, so you could buy a call option. And that would mean you're bullish on the stock. You can also buy a put option, and that would mean your bearish on the stock. And when you're doing that, you're paying a premium for the option to buy or sell at a strike price on or before the expiration. So those are the basic two trades that we've talked about all the way throughout this course. But what we need to hit on what we need to talk about real quick is the other side of that trade. Any time you go into the marketing, you buy a call option where you buy a put option and you pay a premium. There is somebody on the other side of that trade that is selling you that premium and is going to back up that option. So what we're gonna talk about in this video is how to get on that side of the trade and what it actually looks like. Okay, so selling the premium, This is the idea of taking the other side of the trade and making time work for you. As time goes on, your premium is actually going to appreciate in value as opposed to depreciated value. Like when you buy out of the money, call an option call and put options. The idea here is that you were going to collect the premium up front, and if that option expires worthless, you will be a to keep the entire amount of that premium. Therefore, your maximum return whenever you sell a premium is 100%. You're never going to make 203 140% on your premiums. You're only ever going to make 100% on your premium. However, some of them have unlimited loss and unlimited risk because it's the exact same traders shorting a stock. If you short a stock and the stock Oh, skyrocketing up, you have unlimited risk. It's the same thing here with the options and some the premiums. So we're gonna talk about that real quick now, Before we get into that, though, every time you place in options order, there's gonna be four different types of orders that you can place. Those types of orders are made up of buy and sell and open or close, you can do any four of those combinations. So I'm gonna walk through all four of them real quickly for us right now. So a by to open, this is a really simple order. This is what we've talked about mostly in this course. This is when you buy a call option. When you buy a put option and you pay a premium for that option, get out of that trade you sell to close, you sell a call option or you sell a put option, and you basically recollect that premium or the other option would be to execute that trade later on. Now, on the other side of this, you have these cell toe open. This is the idea of selling a call option premium or selling a put option premium. So when you want to sell the premium and you're going into your trades, you would click on cell to open. What that's gonna do is it's going to basically that the bank let you borrow those options you're gonna go out into sell them into the market, and if they expire, work thus you get to keep all of that money. If they expire in the money, you then have to be to cover that option. That's the idea here. But in order to receive that premium, you have to place an order type that is sell toe open to get out of that trade. You then bye to close. The idea here is that you have a cell to open trade, and you basically have a couple of options that you have liabilities for in order to close that out by the options on the other side of it, they basically cross each other out, and you get to keep the difference. Hopefully, it's, um, profits. Sometimes you might have to cover the loss, but the idea here is to by the close is buying the call option premium buying a put option Premium and Xing out that trading getting out of it. You pay the premium to cover your position, and hopefully you can keep the difference as some profit. Now selling a call. This is the example that we're gonna go through and we're going to use Ford Motor Company. And the idea here is that we're going to sell a coal premium. So there's a real strike price and a real quote that I just pulled from my bank. It is Ford at an $8 strike price with an expiration of September 18th. The underlying price of Ford's stock right now is $6.61 and the last price that this executed at was nine cents. So that's what we're going to use for a math here. So if we were going to sell the call option had an $8 strike and an expiry on September 18th the last price for it was nine cents, and it comes in a contract of 100 units, meaning that we would collect $9 per contract for this trade. So if we execute 123 traits, it multiplied by nine and then you have to add a commission depending on the platform. Europe in this instance, were selling that premium for nine cents at a strike price of $8. So that means that some of the else is buying that long call at a strike price of $8 paying nine cents on it. It means they're breaking even his $8.9 and so is our. So if the stock stays below $8.9 we're going to make money on it because that premium that auction is going to expire completely worthless if it goes above $8.9 that person may want to execute on that option when the expiration date comes. In. That instance, we have to be a to cover that difference on that stock when it expires. Now, here's where the unlimited risk comes in is if that stock goes from $8 to $20 that's a $12 difference that we would have to cover on every single stock meaning 100 units or, like 120. What is that? $12 times 100 $1200 story, $1200 coverage on like a nine cent trade. So really, really important to know these numbers and understand these math because when you sell a call option like this, you have unlimited risk, and this is considered naked in the next video. Aren't going to talk about this? We're actually gonna make this trade, and we're gonna head your risk by buying a call option at a higher strike price. And I'm gonna walk you through that entire trade in the next video. But in this instance, we would have a break even point of $8 a night sense. If the stock does not move above $8.9 before September 18th that option will expire worthless. And we will get to keep 100% of our initial investment. If before then itics it is in the money and the stock prices above $8.9 we will be out of the money. We will have to cover that difference. This is what the chart looks like. So this is how you read the options Church. So we have a price on the bottom. $7.8 dollars and $9 over here. And then we have your return in number in actual dollar amount. So our maximum return on this on a per share basis is nine cents. So anything below $8.6 here is 100% return for us. This is where we're gonna make her money. So anything below this kind of just above $8 mark dollar nine cent mark is gonna be pure profit. We're gonna keep our entire initial investment. If the price goes above $8 you can see that this line here then turns to read and you can see that we lose almost 20 cents for every 50 cents at the stock goes up. So, as you can see, if the stock goes up 10 15 $20 we're gonna lose a drastic drastic amount of money on this premium because we have unlimited risk. Now, the other side of this trade is selling a put. So this is the exact same ideas what we just talked about, but selling a put so Ford $8 Strike price September 18th expiry. The last price for this put was a dollar 50. So if we sell the put for a dollar 50 times 100 units, we will collect $150 per contract in income. Now it is an $8 strike price. It is a dollar 50 to get into it. And it is, they put, that means that $8 minus dollar 50 gives us $6.50. Therefore, the person on the other side of this has the ability and will be in the money at $6.50. And we will be in the money if the stock stays above $6.50. With this, we can also only gain 100% of our initial investment. If that premium expires out of the money, we're only ever going to make a dollar 50 no matter what prices at, because it is going to expire worthless. And we will just get to keep our initial investment. So here's what the chart looks like for this one. So when we sell a put, it means that we want the stock to remain higher than a specific level. The strike price was at eight, and we sold that put for a dollar 50 mean break even a $6.50. That's what this blue line here represents. So if the price goes below $6.50 you can see the red line continues, and we lose all the way down to a dollar at 5 50 probably a dollar 50 at 4 50 However, if the price continues to stay above 6 $57.8 dollars here we will always maximize the return on capital a Dollar 50 return and keep 100% of our initial investment that we captured as a premium. So this is a really good way of looking at it. Thes charts to a really good job of understanding your position, so make sure you can understand them and read them now. A couple of things that I just want to cover before we move on to the real life example in the next video is selling the premium you sell toe open, whether it's a by whether it's a put or call and you buy too close, and that's what's gonna cover your position on that premium. When you sell, the premium time works in your favor. So you want time to go by as quickly as possible because that means that you were closer to expire and you will be a to keep 100% of that premium when you sell and naked call, it has unlimited risk. So what I recommend is, if that is your strategy, you should buy and out of the money call as well, so that if that stock skyrockets, you will make money on that call. And that is exactly what we're gonna do in the next video. The last thing is, you get 100% return. If the option expires out of the money, you are not going to make 502,000% return because you got really lucky on this one, your games or captain 100%. So you need to use this strategy wisely. And a lot of the times investors will use selling the premiums to couple it with other trading strategies. We're gonna go through that a little bit later on in this course, but in the next video, we're going to sell a call and we're going to hedge your bet and the risk that best So stay tuned and we'll talk to you soon. 22. Selling Premium Trade: What's going on, you guys, My name is Zak. Hardly. And in this video, I'm going to talk about how to sell the premium on a call or put option. So let's get right into it. So this is the company I'm looking at Were on Ford Motor Company, the same company that we used in the last example. I'm looking at a September 18th expiry. The companies currently at $6.61 and I'm going to look at the $8 call options. Now I'm going to sell this premium, and then I'm going to hedge my bet, and I'm going to de risk this trade because it has unlimited risks. So what I'm gonna do right now is I'm gonna get in here, and I'm going to sell this option and going to collect the premium. So let's do this. Let's execute this trade scroll down here, okay? So you can see here that it says action, and then it tells me to select. Now, this is gonna give me a drop down menu, and I don't think you're gonna get to see it. Just because makes screen recorder isn't easy capturing it. However, I'm going to choose to sell toe open. And what that's gonna do is it is going to give me the ability to collect that premium by borrowing the option from the bank and selling it in the marketplace. Now, if that option expires and it is in the money and the person decides to execute on that, I need to be to cover that. Therefore, I have unlimited risk. However, if it expires and it is out of the money, that means that it is going to expire completely worthless. And I will be to keep my entire premium. So I'm gonna buy 10 contracts of this. It is going to be the call option for Ford Motor Company U S own. I knew 18. I'm gonna continue this and we're gonna execute this trade. Okay? So as you can see, we just executed this train we got into it at at about nine cents, so really good. However, we have a problem here because it has unlimited risk, meaning that if that stock goes up, we now have to cover that trade. So in order to hedge this bet and hedge this trade, what I'm going to do is I'm actually going toe by the call options now at $9. So what's what this means? Is that if if the Ford Motor Company within that time period so I'm gonna fight for September 18th again, So within that time period, if the stock stays below $8.9 which is my break even for this cell right now, then I will be making money. If it goes above that and it goes above $9 I will be making money on the call option. If it stays anywhere in between there, I'm probably gonna lose money on it. So But that's OK, because at least that way, I no longer have unlimited risk on the upside. So what I'm gonna do is I'm gonna buy the call option right now. It's gonna cost me six cents, meaning that my maximum loss is gonna be three cents per option. Okay, so now I'm gonna buy to open by 10 of them. The exact same idea. It's gonna be a call for the exact same thing, and we're going to get right into it. Okay, so here is what it looks like. Here is the order. You can see that it is submitted. And now when we go to the actual charts, if I go to Ford Motor Company currently at $6.61 and my break even on selling my premium was $8.9. So if it gets it stays anywhere below $8.9 we're going to make money on it. And if it goes anything above $9 we're gonna make money on that call option. So now we've placed the off the trade. We're gonna make money on the premium. And if it goes above $9 will make money on that options we've had start back. We no longer have unlimited risks, and that is how you execute the trade to sell the premium and open the trade. So if you get any value to this, stay tuned for the next videos. 23. Trade Risks: What's going on? Everybody, welcome to another lesson in this video. I'm going to talk about the risk profile associate with the four trades that we've talked about so far in this course. So we have the option to buy a call option by a put auction, sell a call option for a premium and sell a put option for a premium. And in this video, I'm gonna break down the maximum risk and the maximum reward for each one of those trades. So when we talk about risk, what I'm referring to is understanding exactly that understanding the maximum upside in the maximum downside for each trade and then managing your risk accordingly to your own strategy, your own personal preference and how experienced are good you are at actually trading. You can do this and manage a risk by implementing a couple of factors. Number one, though, is just making the right trades and understanding your trades. After that, you could hedge your bets, and you can also implement to stop loss to help mitigate some of your risk in these trades . Now, when we talk about the 1st 2 options, the 1st 2 trades in this course we talked about buying a call option or buying a put option . The idea here is that you're paying a premium in order to get the option to buy or sell a specific stock at a specific price on or before an expiration date. In this instance, when you get these contracts, you pay that premium and if that stock does not have a certain price before or after a certain date than that option becomes worthless, therefore, in those cases you will lose your entire premium. When that happens, you will have lost your entire initial investment 100% of your investment. However, you will not owe anybody any money on top of that. So the risk here when you buy a call or put option is 100% of your investment could go completely to zero on or before a specific day. That is the risk profile when you buy a caller put option. When you buy a call option, you have the opportunity for unlimited gains. If you have the right to buy Apple at $400 it goes to 800 it could even go to 1216 100 you're gonna make a drastic amount More money. However, when you buy a put option and Apple is at 400 you have the right to buy it a 300 it can only go down to $0 meaning you only have the ability to profit $300 on that trade. So a put option has a maximum upside. There is a limit to how much money you can make on a put option, and that's determined by the price of the stock. A call option has no maximum on how much money you could make. And if you're Kodak and you go from $40 to $300 you will make all of that money. And there's no limit on how much money can make. So buying a call or buying a put option have great upsides, and they have limited downsides. That downside is limited to 100% of your investment, so you can very easily lose 100% of the money you put in, which is why you need to be very careful when you're training with options. Now, when we talk about selling a call option toe open what I'm referring there is taking the other side of that trade that we just talked about and selling the premium to somebody that wants to buy that option. So what's actually happening there is you're borrowing that option from the bank. You were selling it out to somebody, and then you were saying, I will cover this option in the event that the stock prices above the strike price on expiration and you decide to exercise. So the downside here is you were taking the other side of that call option, and you now have unlimited risk. Just like when somebody buys a call option, they have unlimited upside. This is the other side of that trade, and you now have unlimited risk when you sell it, call, call, option and collective premium. If the stock goes up, you have to cover that call option. So with apple goes from 400 $800 you have that $400 difference that you have to cover, and you will have collected a premium on that to help you a little bit. But you have to make sure that you understand this risk because it is unlimited. If you do a cell a call option collective premium and don't do any other trades with it. The maximum gain on this is only 100% of your investment. You can collect that premium, and you can hold that entire premium if that option expires out of the money and it expires worthless. So the upside here is 100% of your investment you get to keep at expiration. The downside here is unlimited loss. If Apple skyrockets, you could be on the hook to cover that difference the entire way through. This is, without a doubt the riskiest options trade, and it's usually only lose used to hedge bets and in combinations with other options. I do not recommend you ever putting out just a cell call option to open because it is the riskiest type of trade, and I do not recommend you ever doing that. The last type of trade that we've looked at is selling a put option toe open. This is the idea off selling a put option for a premium and covering that put option in the event that the strike price is below the stock prices below the strike price on expiration . In that case, the put would be in the money, and you would be on the hook to cover that difference. So the idea here is you can lose more than 100% of your initial investment. You can lose more than 100% of urine visual investment. For instance, if you sell that put option and you collect a $1 premium on the stock is currently have $5 . If that stock was down to $0 you have a $4 difference in there that you have to cover, so you have a maximum downside of 400%. If the stock price was at $10 you collected a $1 premium, it can go all the way down to $0 you have a $10 difference that you have to cover their. Therefore, you have a 1000% risk on this trade. Now, the maximum loss here, Exactly what I just said is the current price of the stock minus the premium. So if the stock price is $10 you collect a $1 premium for it. That means it's currently $9 if it goes to zero, you could have to cover that difference. So your risk when you sell a put option is basically the price of the stock minus the premium. Now, if the stock doesn't drop like that and the stock is out of the money on expiration, in other words, your option or the option that you just sold expires worthless. You will bid to keep 100% of that premium, meaning that you are a gain on that. Trade at expiration will be 100%. You will get all of that money back, and you will not have to cover anything, so your maximum upside when you sell a put option toe open is 100%. Your maximum downside can be more than 100% and it can be up to the price of the share minus your premium. So you need to understand that math, because when you sell a premium, the downside is usually much higher than the upside. So that's why it's a little bit riskier. It's a little bit more complex, and that's why when you sell the premiums, you're using time to your advantage. But you pay a little bit more for that, so these are really important things. You need to understand the maximum upside of the maximum downside on every single trade you make. Because when you start to combine these options, it gets a little bit more complicated. And that's exactly what we're gonna start doing in the next video. So please stay tuned, but please make sure you manage your rest. Do not overexpose yourself. Do not over overestimate how much money you think you're gonna make and trade goes wrong and you're in a bad position. Those are very, very bad mistakes that you don't want to be in. So please be careful, understand your risk and make sure that you're paying very close attention and doing more research than just this course. You need to do more than what I'm showing you, because I'm only just covering the basics and covering all the high level stuff. There is more that goes into this, especially when you start playing with different platforms. So continue your research even passed this course. But please consider writing our views. I sincerely appreciate it, so thank you so much on to the next videos 24. Day Trading Options: Alright, you guys, welcome to another video. In this lesson we're gonna talk about day trading options. So a little bit shorter term than everything we've looked at previous to this. And we also have a new platform to introduce you to. So let's jump right into it. Okay, so I know my screen looks a little bit different. Things are dark and things are totally different. That's okay. I'm using a day trading platform. This one is called Quest trade. You can use any platform you want. There's a lot of different brokers you can use out there, td, td thinkorswim, and interactive brokers, a kinda two most popular. There's also trade Ninja and there's lots more out there. They'll do pretty much the same thing I chose to go with question because it's the best for Canadians and it has pretty good commissions. And what I want to talk about today is day trading options. So when we're day trading, I am looking at these charts on a much shorter timeframe. All of the technical analysis that we've talked about previously in all of the other videos. It's still applies directly to this. The only differences is the period of the candle sticks. The time length of each candlestick is much shorter. So the chart that we are looking at today, everything is on a one day and two-minute timeframe, and we are looking at apples. So on the left-hand side here I have Apple stock. You can see the ticker on the left-hand side and then STK rate where my mouse is highlighted, you see that the stock opened at $464.25. That's this blue line here. And it closed today at $458.55. So this is at 04:00 PM And this is at 09:30 AM. And then these are basically two minute candles all the way in between here. So this is what the stock chart looks like. And when we day trade options, what we're doing is we're gonna day trade options that have high volume. I like to day trade apple because it is the single stock that has the highest volume. You can also treat indexes that have high volume and we'll talk about that in a minute here. But I'd like to go with Apple because it's personally one of my favorite companies, as well as super high volume, so it's easy to trade and there's a lot of day traders on it, so you can see a lot of good swings. So when we look at this chart, we see Apple on the left and on the right-hand side here I have Apple options. That's what the OPT stands for here. The expiry on these as August 21st, 20-20, there are $460 strike price and they are a call option, meaning that if the price gets above $462 plus my strike plus my premium price, then we will break even on it. And what I'm gonna do is I'm going to day trade these within the day, so I am going to buy and sell them within the day. And the reason that I'm going to do that is because when I trade options that are close to the money and close to exploration, they act and they move just like the stock does, but with much higher volatility. Let me show you exactly what I mean. So Apple opened the data for 64, they closed the day F10, 58, they lost 0.01. 4% today. So not a very large move between the day yet a little bit larger from the high to low for 64 to 455, maybe that's one or 2%, but it's not very much at all. It's tough to day trade with one or 2%, especially if you have a smaller account for me to buy one or two shares of Apple and then only make $4 per share, I would lose that in the commission, so it just doesn't work for me. So what I'm gonna do. And what new beginnings do and we'll, you should consider, is day trading the options. Now this is definitely much more risky, it's much more volatile, but it will give you a little bit better returning, you won't lose as much money to your commissions. So when I look at this chart, you can see it opened the day at 925, so $9.25 with a strike price of $460, meaning if the stock is above $469.24 before August 21st, 20-20, you'd be in the money on these options and there would be worth a lot of money at this point here, there with open today at $9.25 sets. If you compare these charts, you can see Apple also started the day. Lower, lower, lower. They basically transitioned all the way down to they hit their first bottom here, 1018. And you can see the exact same thing happened in the options at a little bump. And then they traded lower, lower, lower delay, basically hit the bottom right at 1018 and the exact same time-frame. Then again, you had a little increase, a little pullback, little increase, a bigger pull back down to your low of the day, right at around 11451146 AM. The exact same thing happened in the Apple stock. You had to load the data for 4455 out of 11461144 somewhere in there. So the stalks and these options are trading almost identical to each other. The difference here though, is that the options opening at $9 in the lowest $5, meaning that we are having a fluctuation here of almost 45% between the high and the low, the value of this option is changing by about 45%, whereas Apple is only changing by about 1.5 to 2%. So it's difficult to trade Apple if you have a small accounting, you pay high commissions, whereas you could have bought the option, you could abort one option that you short sold it at $8.5 here, it would have cost you 850.10 in commission. You co-wrote it all the way down to 505 and you could have made $400 on that trade alone, whereas it would have been extremely, extremely difficult to do that, trading the Apple stock. So that is one way that you can trade the options compared to this. Now, the other thing that you could do is actually buy the put. So here's what the put chart looks like. So when we go into the daily chart, you can see it's the exact opposite. So as Apple went down, you can see that the value of the put actually went up. So the high of the day came at 1146. It was valued at $9.20. As you can see here, 1146, it was valued at $455. So the poet had its peak when Apple had its low. It's the complete inverse of the call. Therefore, when Apple goes up, you can buy the call option and when the output goes down, you can buy the put option. Both of them will treat just like the stock does intraday. As long as you get in and out of them, you don't have to worry about time decay. And other than that, you can take advantage of the volatility between the options and the stock. Now the important thing here is do not read the options chart for support and resistance. The options chart is a reflection of the stock chart. Therefore, you need to read the stock chart for support resistance trend lines your Mac to your RSI. You should never be putting that on your options chart because it will not give you accurate information because the options are moving based off of the stock. You want to follow what everything is moving off of. And that is going to be the price action movement in the stock. Therefore, that is where you want to put your focus. And instead you wanna make your trades on the options. You don't want to look at the options for your technical analysis. You want to look at the stock for your technical analysis. So when I go through here, what I'm going to be doing is I'm going to be analyzing Apple's stock for my technical analysis, try and find an entry point. This one looks like a great entry point right here. If I got in and we were trading the calls, I'm going to switch this over. And now if I got in at 132 and sold out at 238, let's see what that would look like. 132 we would have got in at around 522, let's call it 550, and we would've sold out around $7 here. So really nice. We would have made a $1.50 on 550. So that's probably a 20 or 30% move compared to Apple where really maximum that was like a 1% move. So you get a much more volatility when you're training the options, it's a great avenue for that. And now I'm just going to show you some of my results from last week. So this is what one of my trades was. This was Apple. I bought into a call option at a $1.56 and I sold it at $2.35, it gave me a 50% profit on that trade using these exact strategies. And in the next video I'm gonna give you so my live trading and I'm going to show you what it actually looks like when I wake up and day trade these exact options. So I will see you guys in the next video.