good morning and welcome everyone my
name is cameron may it's 9 30 eastern
standard time on a friday morning
i just heard the opening bell sound and
that means that it's time for managing
an options portfolio where we spend 30
to 45 minutes
every friday morning sort of walking
through this i'm looking forward to
today's discussion is going to be a
little bit of a
follow-up on a previous discussion in
another webcast so
i'm going to be interested to see who
might be able to anticipate the
direction i'm going with my strategy
selection so keep your eyes out let's
see you can be the first one to pick up
on that
but uh i know that's a bit of a teaser
but we'll set a more precise agenda in
just a moment but let me say hello to
all of our returning veterans
i already saw kenny checking in there
kenny says it's
73 and cloudy in pittsburgh robert hello
michelle
harold robert uh hot and humid in
indiana
hello there harold in bowling green who
else is here brad ramesh sandeep kathy
laura
randy ricardo anthony
paul joseph good morning to all of you
thanks for being here week after week i
really do i notice your support i
appreciate it
i also appreciate your contributions to
the to the learning environment in
the weekly discussions if you're here
for the very first time though
i want to welcome you as well if you
want to just chat in and say hey first
timer here or
or uh first time in your webcast or
whatever
something along those lines is sunday
mornings we also have
uh mike falette standing by so mike's
gonna be helping us out with chats so
thank you mike
mike mike is as you know if you've ever
been to one of mike's uh
options presentations perfect for the
role
yep so
let's get right into it
as we always do we're going to kick
things off with a quick review of the
risks associated with our investing some
important information to bear in mind
the following presentation is for
educational purposes only options are
not suitable for all investors
any investment decision you make in your
self-directed account is solely your
responsibility
transaction costs are important factors
and should be considered when evaluating
any trade
and all investing involves risks
including risks of loss and
also one other thing that we should need
to bear in mind is that short options
may be assigned at any time regardless
of the in or out of the money amount
right so
now let's get to our agenda and our
agenda from week to week
is consistent however what it reveals
is inconsistent so the first thing that
we're going to do
is as we do each week we're going to
review our current open positions and
manage those as we see
appropriate then that's going to have an
impact on our overall
options portfolio so after that we're
going to use thinkorswim to assess our
resulting portfolio greeks so what does
that mean we're measuring
our resulting account exposure our
portfolio exposure to price
time and volatility influences and then
we're going to go
tailor a new trade using our greeks
to to more closely align our portfolio
expectations with our ongoing
expectations to
price time and volatility that's it okay
so if you haven't ever been here before
i think it's an interesting process it's
not the only way that options management
can be accomplished
however the management of self-directed
portfolio of options trades can get
pretty complicated pretty quickly
and this can maybe simplify things
all right so let's get into it kanye
finished our
an option certification today on td
ameritrade.com very good
sandeep just watched uh mike's virtual
workshop yeah those are excellent aren't
they
yup yup okay so let's go
straight into it let's look at the
management of our of our positions so i
have our positions queued
up here and it looks like we have about
10 positions
as you look over to our profit loss
scenarios we're doing pretty well
in this account let's try to keep that
up
but um let's
let's talk about a couple of things here
typically when i manage our positions
what i'll do is i'll look for things
that are coming up on expiration
i'll look for things that are way out of
kilter i'll look for things that are
approaching
their profit their maximum profit
potential but there's one
here that has me a little bit perturbed
a little bit annoyed the reason it has
me annoyed even though it's performing
just fine is that it reveals an
error that i made anybody can you see as
you look at this account
what i'm talking about your eyes
probably if you look here you'll notice
there's roku it has this
annoying n a here which creates an n
a there what is that well for our
accounts and we'll be
looking at this in more detail in just a
moment we use the greeks
to measure our total portfolio
sensitivity
to price time and volatility however we
can't
right now measure our portfolio
sensitivity
to price because our delta is kind of
goofed up
here's the here's the mistake i made
it's not one that i really
would normally care about when i but
when i'm teaching
it can present an obstacle that n a is
not
roku's fault it's my fault for not
recognizing the facts of roku
roku hasn't been around long enough to
establish
a beta relationship with the s p 500
so the the system can't generate
our delta our portfolio spx
weighted delta against roku
so that's kind of bungling up our
overall portfolio's delta
if you don't know what i'm talking about
that's okay what the bottom line here is
right now our roku trades up about a
thousand bucks there's still some more
potential there but i'm going to be
clearing this
out of the account so that it
it gives us a clear view of our
otherwise our portfolio delta okay
so that's the very first thing i'm going
to do roku you're out of here
so i'm going to right click here and if
you want to look at it here's what we
have
we have a bull put spread on roku has it
been a good thing to be in bullish
trades for the most part recently
yep bullish trades have generally been
doing pretty well
but i'm going to boot these two or this
position out these
these two legs of our roku position
right click create closing order buy
that vertical back
looks like it's going to cost us about
62 cents i think we sold it for maybe a
buck 50
something like that if we want to see
that we we could go back and check it
yeah so someone's saying can you
allocate it somewhere could i maybe put
it in
its own unique group up above or
something like that i could but i'm not
going to do that today it's not a bad
suggestion though
hey there eddie good to see you but
right now it looks like our mid price on
that vertical spreads about 60 cents the
natural is about 74 cents
i'm gonna nudge that up closer to the
natural try to give us a better chance
of getting a quick fill
how about we see if we can get out for a
maximum 67 cent deb but i'm not going to
play around with this too much i do want
out of this position so let's click
confirm and send
buying that vertical back the 141.35 put
spread
this is going to give me a max profit
max losses though it's an opening
transaction it's not this is a closing
transaction
it does though have to have 13 in paper
money transaction fees and transaction
fees are still
something to consider when trading so
i'm going to send that order off
and we're out okay so we bought that
back for 60 cents we've now
realized the gain on roku
but now look what that did for us no
more
nas not applicables now we can see our
portfolio greek so let's go
along with the rest of our portfolio
management so we have nine positions now
let's open this up and as i mentioned
there are a few key things that i
might be looking for here as we're
looking to manage this portfolio number
one is anything coming up on expiration
the closer we get to expiration
particularly with the short options that
risk of early assignment goes up
especially if it's if we're in the money
but really any option
that short can be assigned at any time
okay next thing i might look for are any
positions that are severely misbehaving
and then i might look for some positions
that are near their
maximum profitability so do we have
anything that's approaching expiration
well we're looking at august here and we
really don't have anything expiring
until september
you see that as i scroll down through so
we don't have anything
along those lines to worry about next up
is there anything misbehaving well not
really if i click on my little pizza
slices over here again
i can see that just about everything is
profitable
except for amd advanced micro devices is
slightly underwater down
42 bucks overall so
really it's the smallest profit or loss
it just happens to be a loss at this
point it wouldn't take
much for amd to make that profitable
again
and with time to work we already know
there's time to work maybe we just leave
that alone
so the final thing is are there any
contracts that are approaching their
maximum profitability with a lot of
these
these are options uh that we have gone
short on
but others we might be long but what we
might look for
how do we quickly check for maximum
profitability
well well this first of all this apple
i'm going to ignore that that was
purchased for a different reason
that was actually i did a special
webcast about the apple the approaching
apple
four for one split i'm gonna leave those
alone and just move on down
but if we're looking for um
like let's say a vertical spread that's
achieved its maximum profitability
profitability if it happens to be a long
spread we we might look for something
that is approaching the uh the total
spread width and i don't think i have
any long spreads going on right now
any credit spreads another way to put
that
they're all debit spreads yeah not that
i have a whole lot of those going on
anyway
uh for short options we'd look we look
for something where the
market value is getting close to zero or
for the net
cost of exiting the trade to be getting
close to zero with each of these i think
there's still some room to work
all right but let's go through these
quickly advanced micro devices we have a
short put
we sold it for 215 there's that amd
that's a little bit underwater
it would cost us about 250 to buy it
back right now thus
our small loss there we're just gonna
let that work it's one contract plenty
of time left
uh bank of america we have a long call
diagonal so we have a 15th of january
2021
call that's a long call and then we sold
a short call against that
that short calls we sold that for a buck
62.
it's trading at 2 30. where do we need
this stock to be
for this trade to work out truly
optimally
well where we would like it to be is to
be below this short strike 24
right now it's at 26. what is that doing
at the moment
to the risk of assignment that risk is
elevated okay so
for an investor who is concerned about
about assignment on a stock when when a
short call goes in the money that can
elevate that risk although the risk is
even there when that
call is out of the money so we take a
quick peek of bank of america
bank of america where we'd like it to be
we have that short
call it's down here
stock is trading up here assignment is a
real risk here
we might need to take another look at
that
in coming weeks but i'm gonna let it
work
with that short call in the money what
that also means
is that the long call is doing is
probably doing very well so yeah
that 18 call it has a profit of 495
bucks
the short call is underwater by 131
net between the two doing fine on bank
of america
all right i can see mike is definitely
helping us out thank you mike
very much appreciated also i did notice
that there has been
a survey posted to the chat if you
haven't ever filled out one of our
surveys before here's the process
click the survey link right now and it
would be very much appreciated if you
would
click that survey link and then
and then just park that survey until
after the webcast
i don't want to be too much of a
distraction but
after the webcast you can just fill it
out it's very quick five
multiple choice questions and a comments
box
but i read all those comments i get that
feedback and it definitely helps me
improve my webcast so i always
appreciate that
bank of america is doing well disney
what do we have going on here an iron
condor
we have we have a bear call spread and a
bull put spread
so where do we need disney to be as we
get toward that expiration well we would
like it to be between the two short
strikes
between 120 and 140 and look where
disney is right now
133 it's pretty much disney's been
cooperating with us
hanging out right between those strikes
so that looks okay
we're gonna let that one continue to
work and right now it's profitable
facebook we have
a 16th of october long call an 18th of
september
short call both at the same strike so
what's that
that's a calendar spread how does a
calendar spread work out best well
the closer we get to the strike the
better without going above it
okay that's that's really 289.99 would
just be
just what we're looking for here where
are we
we're at 294 does that mean that we're
in lost territory not necessarily
that does elevate the risk again of
assignment on that shorter term option
but the long term option
is also performing well so overall
actually that facebook trade
doing quite well up 3 600
microsoft what do we have here well we
have a long call
and then we have a short put vertical
two bullish positions
on the stock with this long call doing
very well
short put vertical also contributing to
profitability up twelve thousand bucks
this short vertical is getting close
looks like it would only cost us
about 30 cents to get out of that trader
could decide to get out of that if they
want to
there's if there's not much left to be
made
in a trade maybe we take a position off
i think i'm going to let that
continue to work with the stock with the
strikes at 195 and 200 we need to be
above 200
and microsoft's at 230 bucks or
right around there so we've got a good
cushion as we're moving toward the set
september 18th expiration
we're in good shape there next up
netflix flat out long call
if we're still bullish on netflix it's
still doing well
how's netflix doing let's go to our
charts
and you can see look at the day netflix
had a couple of days ago
that definitely helps out long call
owners doesn't it
so that's doing well
roku we're done two trades left we have
a bull put spread on starbucks
with the upper strike at 80. so if we're
above 80 we're in good shape and we're
at 84.
so we'll let that work and finally visa
we have a
we have a long call at 210
a short put at 195 what is that
teaser this is going to be pretty
similar to what we're going to be doing
today
all right but this is a net bullish
transaction with both of these a short
put is a bullish trade
a long call is a bullish trade so we'd
just like the stock to go as high as
possible visa right now is at 212.
our trade is up about 566 bucks let's go
look at the chart of visa
and see if we have any technical reason
to believe
that we're likely to reverse last week i
think
did we put this on last week let's go
back to that monitor tab
click on the quantity and that will show
us when we got into this
yeah august 20th took that trade
so as we go back to our chart august
20th we were just seeing this breakout
of this resistance anticipating that
maybe we're going to move higher
and we have moved sharply higher okay
so that's looking good anthony says
will you let microsoft expire if
everything continues going well
so going back to microsoft anthony's
question
the short put how does a
short put vertical or credit spread work
out best well if we do allow it to
expire
if everything expires there's no
transaction costs
no associate you know that just expires
worthless that is the
best way to optimize if that's possible
to optimize the the performance of a
credit spread
now with a long call though this 15th of
january 2021 long call
am i going to let that expire that's
probably not likely i don't i don't
expect to actually hold this all the way
through
the 15th of january
and if we allow a long option
to expire in the money which is what
this would
do what's going to happen well that
those contracts
would then be assigned and we would wind
up owning shares of microsoft and i
suppose if an investor is okay with
owning shares then that's all right but
i didn't really set into this trade with
the idea of buying 200 shares of
microsoft it was to make some money on a
upward move in microsoft and then close
it up
dan says is the disney call moving too
much
so then what we're really interested in
here is for disney to stay between 120
and 140
right
so if we look at disney here are our
strikes
there's 140 there's 120. we're moving up
toward the calls
is the trade in danger territory yet
well there's still
that comparatively small risk of
assignment of an out of the money short
option
it's not very likely still a possibility
but really what we're hoping for is to
hit
this time frame to hit our expiration
between these two levels and we'll still
we're still there
what i completely anticipate when
getting into
a trade where we have two strikes
between which that's our that's our um
sweet spot outside of which there's our
danger zone
we know the stock is going to move
around unless something weird has
happened
the stock's going to move around
sometimes it's going to be a little bit
closer to the one sometimes it'll be a
little bit closer to the other
but really as long as it's between the
two maybe we just have the patience to
let it work
okay good question though
all right but that's it no more no more
portfolio adjustments so let's go have a
look at those greeks let's close this up
go up here to our little pizza slices
again
and look at our greeks exposure so
what's our current
delta it's a plus 5504
theta is a plus 28.87 those are these
are going to change as i
talk because the markets are still open
vega vegas a plus
what is it 12 212 6 39 okay
67 i think it was before that's good
enough okay
but what are we doing here now we're
gauging our portfolio sensitivity
to the three primary influences
on whether we actually ultimately make
money or not
as the stock market moves up and down
well
if our account is primarily bullish
that's good if it moves
up if it's bad if it moves down so
is our portfolio bullish or bearish that
seems like an obvious question but
sometimes
those answers aren't as obvious when a
trader has a whole bunch of options
positions
you know if they've got a long call on
this and a bull put on that
and a and a diagonal over here and a
calendar over there and a double
calendar here and an iron condor on this
and they all have different expirations
on different stocks
it can get hard to tell which way is up
sometimes
so what delta can do for us is it it
takes the pulse
of our total portfolio and gives us an
an expected
this is obviously just a just
anticipated potential
return if the uh if the s p were to go
up
one point so we have benchmarked our
portfolio
benchmarked our portfolio in other words
beta weighted it against the s p
500 so if we see this number around 55
a delta 55 it tells us if
um if the s p were to go up one point we
would anticipate
a paper profit an unrealized gain of
about 55 bucks
if the other two variables hold constant
right
so what are the other two variables well
time plays a role in trading of options
and volatility plays a role so this
tells us the potential impact of time
we have a positive exposure as the days
go by
tomorrow if everything else were to hold
constant we'd be looking about a 37
dollar
profit just from the passage of time
because we have positive theta and
finally vega
tells us whether we would benefit
from an upward move in volatility or
whether we'd be negatively impacted
right now we would benefit
to the tune of about 208 dollars
theoretically again
so that those are our account facts
right now
we're bullish we have positive time
decay and we have
a positive vega exposure we what we
want is for volatilities to rise
so our delta um
are we bullish on the markets i will
take a look at that
theta we we typically just maintain a
positive theta
in this portfolio it's just a managerial
a managerial decision that i've made for
this portfolio
but our vega we need to take a look to
see if we actually expect volatilities
to rise
so let's go first of all see if our
delta aligns with our
outlook for the stock market so what's
the stock market been doing
stock market's been going up it's been
going up and up and up and up
really hasn't taken a breather now in
seven days
so for at least those last
seven days and really for the months
before that
has it been good to have a positive
delta
it has yeah yep
is it going to continue to be good to
have a positive delta it depends on what
the markets decide to do but let's just
say
that an investor looks at that they say
yeah it's pretty bullish
we just broke to all-time highs we seem
to be
investors as a group seem to be setting
aside concerns about
covet or maybe they see good progress
there whatever
but for whatever reason let's just say
that the investor
looks at this and they say yep looks
like we're still bullish i want my
portfolio to maintain bullish
maintain a bullish outlook and again
someone can have a different of a
difference of opinion here
so what would we do with our delta
we might just choose to maintain it i'm
going to look to maybe increase that
delta
okay so just make the portfolio a little
bit more bullish
time value i'm actually going to hold
that steady
steady as she goes captain right
there we go because it's already
positive
our volatility let's have a look at
what's happening with the vix
okay we have a very
positive bias for volatilities
now on the other hand for most of the
last several months
volatility has actually been negative or
going downward
so this if this were the case
back here in april may and june that
would have provided a drag on our
portfolio
if this were the case from june until
about the first part of august
that could provide a drag on the
portfolio however
look at what's been happening this is
kind of interesting
i have a question for you options
veterans
what's the typical assumed relationship
between
price movement and volatility movement
don't we usually assume that and we've
probably heard this stated before
well that if price goes up volatility
goes down
if price goes down volatility goes up
you ever heard that before
well let's zoom in on this i'm gonna i'm
gonna put that to the test
look at this period going back to ah
about the
first part of august what have
volatility's really been doing doing
during that time
we have three days up here but boy
during this whole period not much
happened with volatility sometimes it
was up sometimes it was down but overall
just sideways
that would seem to imply if we assume
that
the relationship for the for
volatilities and stock prices are always
inverse
maybe stock prices went sideways during
that same time frame as well
right but you and i know we just saw the
chart of the s p 500
what actually happened with stock prices
during this time frame from early august
until just a few days ago
it definitely went up look at this
this is that same time frame for the
stock market i'm going to zoom in on
this
and really with maybe a day or two
margin of error there
that's what the stock market has done so
have
volatilities been doing what's
anticipated
no it seems like volatilities have kind
of i don't know if this the right phrase
from some investors perspective should
have gone down
they didn't they held sideways so
this has kind of propped up this sort of
a bias so i'm going to maintain that
bias
because for volatilities at least if the
stock market is going down this is
holding
pardon me if the stock market is going
up uh no going down this is sort of
holding it's not going up
uh if it's going if the stock market's
going up it's not going down
but just recently it seemed seeming to
pick up again
okay so how about we just say for our
bottom line there
vega looks good let's hold that steady
as well
so as i mentioned i said we're gonna do
a strategy today it might be a little
bit unusual
and it's and it's harking back to one
that we did earlier i actually thought i
did it in a different webcast but i did
once a similar one to this
uh similar trade to what i'm hinting at
here
in this webcast so how does one take an
option trade
that is bullish where we're
increasing the delta but it has really
not
not any impact on theta or vega it's
just
all delta now let's sort of walk
through this generally if we're looking
to increase delta
or generally if we're looking to
increase any of these greeks
to increase our delta we would open a
bullish position that's obvious
bullish positions have positive delta to
increase
our theta we would open a short position
to increase our vega we would open a
long position
but maybe if we let's just look at theta
in isolation
if we wanted to increase that theta we
would open a
short well what if we were to do
a short and a long that could be as
effectively a wash for the impact
on theta and what if we were to open a
long and a short
that could theoretically be a wash on
vega
let me show you what i'm talking about
yep michelle ricardo
we're going to do a synthetic we're
going to do a long
sometimes called a long sit a synthetic
long stock okay but this is what it
looks like
let's let's uh let's bring up an example
stock i'm going to use home depot for
today's example
but we're just theoretically looking for
something that maybe a trader thinks has
a bullish outlook
and on home depot what do you see upward
trend
recent pullback if you'll notice this
and then we pulled up out of what we
call a bull flag now if you're not
familiar with bull flags
this is just a price pattern that
sometimes a chart user will use to
identify what they think
is a continuation signal of a current or
an established trend
so bottom line for this bull flag is
they might see this and say all right we
had a nice advance
a bit of a pullback maybe explained by
profit taking or whatever
and now prices are starting to rise
again
so that investor might see potential for
stock prices to rise from there
well looks like we might be a few days
late on this entry however let's look at
this in actual dollar terms
if we got this breakout right here from
this bull flag on the 24th
we close trading at 286.75 we're really
within about a buck or a buck and a half
of that right now
so maybe we missed out on a little bit
of initial
anticipated move but but it looks like
there's still room to go
at least if we if we use typical bull
flag
analysis right in any case
what we're seeing here is a stock that
looks like it might be bullish
all right does that fit if we go place a
trade on that
could that align with our outlook for
price activity
looks like it might so let's go to our
trade tab and let's build a trade
that is going to serve to increase our
delta but this is going to hold steady
on time
and on volatility exposure here's how
that might be done
our example trade today
is just going to be a synthetic stock it
has
a bunch of different ways that you can
combine combine these phrases
but it's described as being a synthetic
stock position because
it tends to move right with the
underline
if the underlying goes up a dollar it
makes a dollar if it goes down a dollar
it loses a dollar
and time and volatility really don't
play much of a role in this
so let's go to how about we pop out here
the 16th of october is already open
we um we already have a bunch of things
that are coming up on expiration and
18th of september so let's go ahead and
move out here to the 16th of october
and let's make a synthetic stock
position
that is good for the next 49 days
so stocks trading right around 288
let's maybe look at doing uh how about
the 290
typically a synthetic stock position
this doesn't have to be done this way
but a synthetic stock position is
typically done at the money
okay so the 290 strike is the at the
money strike
and here's how it's built at the same
time
a trader is going to place two trades
they buy a call
and they sell a put so we're going to
buy the 16th of october
let's see and that's the 290 call
for and it looks like it's trading right
about 10 i'm going to be a little bit
not generous to myself really if we're
going right between the bid and the ask
price we might be able to get for 9.95
but it's
giving me the opportunity to use a nice
round number so i'm going to use the
nice round number
and that now we're closer to 10 bucks
anyway so we buy that call for 10
and at the same time we sell
the put at the same strike
oh not call but put
and that put like it looks like it's
trading between 1270 and 13
guess what now i'm gonna be a little bit
more generous made
of two dollars because we spent uh
pardon me three dollars
because we spent ten bucks
and we received 13
but overall let's just get acquainted
with what we've gotten ourselves into
here when we
own a long stock where do we want the
stock to go
up is that a bullish trade it is
when we've sold a put where do we want
the stock to go
up is that a bullish trade it is
yup so we have two bullish transactions
here
and that's reflected in the in the
delta let's look at our delta our
combined delta
or delta for each of these if we look at
the calls
um here's a key and i had a little chat
discussion in one of my earlier webcasts
somebody was asking me about how some
greeks work and so we went
we did a little quick um a quick
tutorial on greeks
but when buying options we just use the
greeks as displayed
that is the anticipated impact
when selling options we invert
or we reverse these numbers so
since we're the calls over here if we
buy this call
radically make about 48 cents on this
trade
now on the so instead of a negative we
reverse that to a positive
so this is now a 51 positive delta
reflecting the bullish bias
on the stock again so if the stock goes
up on the call we make 48 cents
this is again an unrealized gain until
we lock it in
by closing successfully
on the put if we go up a dollar we make
an additional 51 cents hey do the math
for me
51 plus 48 is what
99 cents on the dollar
on the move did that move pretty much in
in lockstep
with the stock yep
stock goes up a dollar we make 99 cents
there's actually
a little bit of rounding going on behind
the scenes look back at the greeks right
now what did our
delta just do on our on our puts for
just a moment it was a 52 52 plus 48
we're at a dollar yeah what's happening
there is the
the greeks actually go out a few more
decimal points and there's some rounding
here
so this one's probably like 40.48
0.48472 or some i'm throwing out some
random numbers there but
this one may have been rounded down this
one may have also been rounded down
in any case we're really close to a
dollar for dollar
so the way that greeks work is if the
delta is using up
all of the available movement doesn't
leave much over
for time and volatility to play a role
so let's look at our 290
theta impact all right
we're buying so we just use the
displayed theta this has a negative
theta of 10.
over here though we're selling this has
a positive theta of 13
minus 10 plus 13 we almost have no
impact and
a plus uh pardon me uh yeah plus 3
42 that we're selling so that's a minus
42
plus 42 minus 42 wash what are we doing
here
we're increasing our delta fare of this
uh of what we just outlined
so let's go ahead with this trade how do
we place the trade
pretty simple we could do it up here
where we change the spread i'm not going
to do that i'm just going to go right to
the strike
and i'm going to come over here to the
call that i intend to buy and click on
the ask price
and then i'm going to scroll up here to
the put that i intend to sell
and while holding down my control key
i'm going to click on the bid
press there we go and that creates
our synthetic stock position the system
doesn't call this a synthetic stock or
whatever it just calls it a combo
combo means we did multiple legs and it
didn't have a name to give to it so
that's what it's calling it
all right so it looks like we're
generating a credit of you know
somewhere between three and 347 how
about we dial
down the required credit that we're
looking for
matter of fact i can just use the slide
here
why don't we try to get maybe a 325
credit
so um regardless of
the credit or credit received or debit
paid
that doesn't tell us the profit or loss
potential of this trade
how do we make her lose money on this
trade and how much could we make her
lose well if the stock goes up
we're in position to make essentially
dollar for dollar
gains on the stock price if the stock
goes down
we're in position to lose dollar for a
dollar
on that stock price all right
so let's go ahead and click confirm and
send it looks like our mid price is
starting to collapse on us so let's see
if we can hurry up and get this filled
let's go ahead and enter into
this synthetic stock position
the maximum profit is infinite because
the maximum profit on a stock position
is infinite
maximum loss pretty big we're leverage
dollar for dollar on a pretty expensive
stock
do we maybe need to ease off on that a
little bit
we could do this let's edit that trade
maybe we take this
down to just a few contracts because
this would be mimicking
the performance basically of 200 of 100
shares
of a 287 dollar stock
might even take this right on down to
just a single contract
louis down is definitely the problem
right buying power effect can be
significant let's click confirm and send
again
see what our buying power effect is
right now
the system is calculated hey cameron you
could lose money on this trade
you need to have some of your own cash
to bring to the table to cover that
potential loss
that's what this buying power effect is
telling us
and in this account we typically keep
that around five
thousand bucks so that's about it about
sixty seven hundred
peter correctly points out that had we
done ten contracts would have been sixty
seven
thousand dollars and that would have
been way outside risk
way outsized risk for what we typically
do so i'm going to send that order off
there is a transaction fee associated
with this and let's go look to see what
impact that trade just had on our
um on our greeks
okay so we had a positive delta of 55 we
wanted to increase that
it's now 64. did we do we accomplished
that objective yep
we had a positive theta of 28 we wanted
to hold that steady it's now 34.
what's actually happened is yeah this
trade actually contributed a little bit
to that
but also markets are moving around a
little bit so our other trades
have some fluctuating theta and our
volatility
was right around 210 now it's at 212 and
it has changed
nominally so we've accomplished
everything we set out to do
and this is a webcast i think some might
have to go back and revisit that's okay
when there's a new strategy sometimes
it's good to go back
and see it again but
we've accomplished everything that i set
out to do we wanted to manage our
current positions
check our resulting exposure to price
time and volatility and then use a new
trade to tailor
those exposures using our greeks and we
did it
so everybody hope you enjoyed that we're
gonna
wrap it up i'm gonna send you off into
the rest of your uh
your day but we're gonna take a little
bit of a break and come back and hear
from barb
armstrong who does an excellent job in
her discussion getting started with
options so if you're at that front end
of your own personal learning curve go
check out barb's webcast
but i'll see you again next week where
we'll continue to manage this portfolio
let's continue to let's hope things that
continue to perform like they're going
and maybe go place your own synthetic
stock trade see if you can
follow the risk and reward and the
structure of the trade
all right quick reminder the risks
associated with our investing risks are
real we did use real examples in today's
discussions not a recommendation or
endorsement of those securities or those
strategies
if you would again quick reminder fill
out my survey if you have just a moment
click the link
mike has reposted it there thank you
mike and thanks for helping us mike
always appreciate it and um
that moment arrives i want to wish you
the very best of luck happy investing
bye
