[00:02] is where our one-month moving average is coming into play. So keeping all of that in mind, this may be an opportunity here for a short call spread right now in Euro dollar which is something I'm already doing here. I'm short the 155
[00:17] and a half 116. >> This is a trade where if I wasn't >> I would be putting it on here today. And in fact uh thinking about this right now, could we go 11718? What does that look like in terms of risk-to-reward?
[00:29] That's not fantastic. We don't need a risk one to make or risk 15 to make one. Um >> yeah and the just to layer on the the kind of validating uh uh line of thought for this Euro dollar play is you are
[00:44] seeing just across the board uh I of course looking more granularly at dollar exposure what's moving where it's a pretty blanket uh US dollar story. So you don't have to look any further than the euro. I mean, the yen's been
[00:59] interesting. A huge move there from a a pip value basis, but still, I mean, uh, right now we're retracing back to dollar lows. Um I mean this uh Japanese yen
[01:12] sank half a percent in the first 30 minutes uh of that non-farm payroll report but that's been getting bought up almost immediately that just traders and market participants you know begging the Bank of Japan to trying to call their
[01:28] Bank of Japan to trying to call their bluff. Um every big dip in that um dollar yen has been been bought up. Um but that's still one to watch. We're still at 161. I know you were you had traded uh kind of a divergence from that
[01:43] 160. Were you able or 161? Were you able to take that off on the upside? We got a whole 100 points to the upside uh before this recent shake out. >> I I purchased the 0064 call in the case of an uh intervention, which um you
[01:59] know, right now I can't really take it off or anything. There's no not seeing a price there, but maybe a $100 loss. I I think around the holiday here, I mean, yields are down. You just got a bad jobs report. Oil is low. What more does the
[02:11] BUJ and the Ministry of Finance want if they're going to try to defend the very key level of 160 in dollar yen? They have not near a peep. But you can see today how maybe the market thinks that we're getting ready to turn a corner.
[02:25] above yesterday's high. We're about to close below yesterday's low. That's 161 uh 07 we'll call it in dollar yen spot rate. That's a bearish outside engulfing bar and it's at the top of a trend. It's at the top of a level that we haven't
[02:39] been in 40 plus years. That is a key reversal if I've ever seen one. And so we we frequently say how the BOJ doesn't really like to swim against the tides. conditions to be in place. They like >> before they ultimately so they get the
[02:52] buck, bang for their yen. [gasps] here, >> there is still that yen intervention not like nothing can be done with it by the time this closes out, but thinking
[03:05] about like what does a potential volatility inflation trade look like? 654 short 65 risking one to make
[03:18] 7006. I mean, there are ways to operate around that we need to be considerate of here. It's already a 60 pip rally today in the intervention yet. And now the table may be a little bit better set. So having
[03:33] don't think is the worst thing in the world, especially if you're already long have traded on opposite sides of the equation for many years. >> Yeah, you nailed it. That, you know, of course the sentiment is the yen isn't
[03:48] really going to help itself. It needs an external catalyst in the form of dollar weakness. And it's gotten that. you layer on top of when the last time the Bank of Japan intervened. It was during the Japanese holiday uh golden week. So
[04:04] thin liquidity conditions riding the coattails that does favor, you know, a possibility for a move tomorrow um and whatnot. And
[04:16] on that backdrop, I'd contend that the spot market's actually a better place to be looking over the weekend. Um although liquidity will be thin, you have uh markets open tomorrow in the spot market. You can get in and out of this
[04:32] market. You can get in and out of this at at all times up until the weekend. Um and try to catch that move if it's there. Um whatever hours uh put your take profits, what have you. um and start small enough to perhaps layer in
[04:46] if this is more of a wait and see because the one thing we do know is because the one thing we do know is nobody's comfortable even with um this nobody's comfortable even with um this slight uh bid back in the yen. Nobody is
[04:59] comfortable with the yen at these levels at least historically. >> So yen, strong yen day today, weak dollar day today. Uh really the weak dollar is kind of the story at least when it goes into the the commodity FX
[05:11] rate space. uh in so far as when you're looking at gold's up, silver's up, uh a little bit better. But stocks here as we get ready for this weekend, Glenn, reversal. We're almost 80 points off the highs from the session 7523. You'd like
[05:25] to say it was spurred on by the non-firm payrolls report, but that I, you know, immediately after NFP. It held there for a few minutes, pulled back, then rallied again. So seeing a decline start around 10:20 in the morning. I don't think we
[05:39] related sell-off. Particularly when you see that rates here SR3Z6 year end Fed see that rates here SR3Z6 year end Fed funds you get that bump right in rate Stocks go up. Rate hike odds have not moved all day long.
[05:54] >> That's one of the, you know, one of the particularities about the market move. about the Fed in the way because of the non-farm payroll report. So I just want will battle about this later on, but I
[06:06] just show it to me. Show it to me on the charts. It's not true of anything else. >> Yeah, it's definitely a murkier picture for uh stocks today. And and to your where you kind of want to look and and
[06:18] a pretty clean setup. If you do look at more of those rate sensitive asset classes, gold having a day as expected uh across the curve. But if you are primarily an equities trader, indexes
[06:31] hard read, hard to pin on these macro conditions. Um, and you you certainly have a lot of funky moves in the individual names. So, uh, not a day where I'd get too crazy and, uh, look to something new. Um, but
[06:48] I don't like having anything that's close to 21 DTE when I go into holiday weekends. I do not want to I really don't want to think about the markets or gosh, this is what you guys love. Yeah, we love this stuff,
[07:01] >> but I like hot dogs, too, Chris. >> Yeah. And I want to watch baseball and I to wear my American flag, you know, overalls and jumpsuit around town. >> I'm going to need a picture of that. >> Uh,
[07:16] that's that's that's for the premium service there. [laughter] Hold on. Um, do you want we have a pro? No, there's no tasty.com/chrisals. the screen. Uh, you know, I mean, like I don't I don't like putting new capital
[07:30] out if it's going to be short ordated when we have 3 days until we're reason going to touch this thing potentially in some stocks or ETFs until Monday. Monday when I can have both hands on the steering wheel as opposed to like you
[07:44] comes out over the weekend. >> I prefer not to operate by that way. So, positions I have over the course of the day. I still have this S&P short iron condor on, which is, you know, it's moving around a little bit. It's not
[07:58] We're getting close to touching the downside strikes, but if we get a little probably going to lift it off. Other than that, here, uh, Rivian, I'm still Gus here this morning talking about Rivian. Let me in
[08:12] >> right before it broke out and I couldn't get I still can't get filled. So, um, we will see there. Hey Glenn, it's been a very speedy morning here on uh on Tasty on vacation here, so I want to thank everyone for sticking with us through
[08:27] this non-farm perils Thursday. It's a synthetic Friday here. Of course, Tasty throughout the course of the day. Uh we do have some video on demand coming up to what's important. Dr. Jim Schultz is here 2:30 Eastern, 1:30 Central with
[08:42] them to practice. Tim Knight's coming on with Trading Charts at 2:15 Central wrapping up the day and the week on last call 3:30 Eastern, 2:30 Central. So we will see you there. Glenn, thanks so much. You've been watching Tasty Live.
[09:11] best ways you can help us are by liking the video, subscribing to the channel. Either one of those guys would really help us out a ton. So, how do you trade a runaway bull market? If you're watching this video when it was released
[09:24] in June of 2026, it's like, man, this is the market that we are in right now. couple of downdrafts and what have you, but man, it has been incredibly strong to the upside. Well, the truth is our biggest risk as a premium seller is
[09:40] away from us, whether it be to the upside or the downside. So whether you're trading a runaway bull market or a runaway bare market, everything we're going to talk about today for the next, you know, two or three or 27 minutes
[09:53] applies to both of those guys. So let's dive right in. Let's go to let's go through three things that you can do to help protect yourself against a runaway bull market or a runaway bare market. All right, so daytoday I'm going to say,
[10:08] you may or may not agree with me, the markets are pretty random and pretty think about asset pricing, you start think about what's controlling asset geometric brownie in motion, you've got the efficient markets hypothesis, you
[10:21] volatility shocks, you got all these different mathematical models that are kind of pointing to, all right, there's a great degree, a high degree of randomness and unpredictability. So, a lot of the time, the market's just kind
[10:35] of wiggling. It's just kind of waggling. It's just kind of moving around a little bit on either side. And that really helps us as premium sellers. And even if want because it makes the premiums on the options that much richer, still it's
[10:49] very rare that we get caught in a runaway move that just has no signs of slowing down. But that does happen. You get that one-sided move where it's just wiggling and no waggling or it's just zigging and no zaggling. And so what do
[11:05] you do in that scenario? Here are three things that you can do before you ever put the trade on. The first thing is your position size. The second thing is your capital allocation. And the third thing is going to be your strategy
[11:19] selection. Because remember what price does dayto-day, it's out of our control. control. We need to control the controllable. And in my opinion, position size, capital allocation, and strategy selection are all within our
[11:32] control. And all of these things happen before the trade is even live. So number one, first and foremost is going to be position size, right? Everybody wants to talk about Jim, how do I hedge against a big move against me? How do I hedge
[11:47] against a big drop or a big pop or whatever? And my answer is always the same. It has to begin with position size. This is the most kind of organic way that you can hedge against things that move against you by controlling
[12:00] that position size on order entry. You want to be small enough such that it frees you up to do whatever you want to do later on. Like if you want to later do that. If you just want to kind of lean into the position size and let the
[12:15] into the distance, you can do that too. But if you are too big on entry, it really just kind of handcuffs you in terms of the different things that are available to you and at your disposal. So position sizing is number one because
[12:30] sellers, right? We're selling 30 delta, we're selling 40 delta, whatever. But once that position spills over to now where it's in the money, now the deltas begin to grow. So now they're not 40, they're 50. Now they're not 50, they're
[12:43] 60. Right? You've got a naked position on those deltas are starting to grow. So what was a very small kind of innocent position at 25 or 35 deltas is now all of a sudden 75 deltas and it's going to feel a lot bigger than it was at order
[12:58] entry. And so if you don't size on entry so that you're okay when the position does go in the money, I think you're doing yourself a huge disservice and it is going to show up at times when you probably really don't want it to show
[13:12] up. So that's why when it comes to position size, generally speaking, define risk 1 to 3%. That's a great reference point. 1 to 3%. If you have a 100,000 or more, you could probably even be below the lower end of that range. If
[13:26] you have a smaller account, so let's say maybe 10 or 12,000 or or less, then you might be actually above the upper end of that range. You may have to go to 4% or 5% or 6%. But 1 to 3% for defined risk is a great reference point. for
[13:38] undefined risk 3 to 7%. In terms of your buying power allocation, again, you have the lower end of that range. You have less capital, you may have to kind of creep up to maybe 8% or 9% or 10%. I probably wouldn't go above 10% because
[13:52] again, you want to be small enough on such that you can go ahead and manage the position objectively and do all the things that you want to do and think with a level-headed, you know, mind all throughout the process and not get
[14:05] emotionally charged up. So the second thing capital allocation right now Cedus for all my Latin groupies that might be watching the show here today but you allocation when it comes to how much capital we're using obviously we're
[14:22] more capital. We would love to get where we're trying to go using less capital rather than more capital. I mean that goes without saying. I mean that's a given. But there are times when we might have to deploy a bit more capital to get
[14:35] need to tick up when it comes to capital allocation. Just be careful that if you're concerned about guarding against a big move against you, whether it's to the upside or the downside, both would apply. You're always going to be better
[14:48] off if you have less capital deployed. And so, that's why generally speaking, we like to live somewhere between 25 to 50% most of the time. There are be, you know, above the upper end of that range and maybe even times and
[15:01] places when you'll be below the lower end of that range. But if you are really concerned and you want to guard against and protect against a runaway bull would live on the lower end of that range, maybe be around 25 to 35%. And
[15:16] then thirdly, the strategies that you select. So obviously, if you go define iron condors and diagonals and butterflies, they're going to have built-in mechanisms into the actual strategies that are going to protect you
[15:29] against runaway moves against you. they have kind of outlier risk mitigation built into the structure of the strategy because they are defined risk by nature. So that's going to be the easiest way to protect against the outlier moves
[15:43] against you. You have the gimme of the protection against that runaway move, but of course we know it's been said before and I don't know who said it, but it in the comments below this video because it is a catchy catchy jingle.
[15:57] Very gimme there's a gotcha. So what's the gotcha? Well, one of the gosses with defined risk. In fact, I can actually think of two. Number one, you don't have the unfiltered exposure to the Greeks. So, you're not going to get, you know,
[16:09] going to get the pure negative Vegas. That's going to kind of slow down what Greek exposure. But then, number two, they're going to be much harder to adjust. These strategies are much more difficult to adjust if things do go
[16:22] you kind of want to maneuver a little bit. You kind of want to manage your way out of these guys a little bit. much much harder to do with a vertical spread or iron condor or even a butterfly when it comes to the adjustments relative to
[16:35] undefined risk strategies. But if you do want to do an undefined risk strategy, a great strategy, which is my favorite strategy, is the out of the money short put, right? Again, specifically if we're in a runaway bull market, you know, a
[16:47] want to participate in this. Like, man, I want to be a part of this. Like, I strong market, but I don't really want to buy the tippity top. like I don't buys the NASDAQ at 313 and that's the top tick for the next seven or eight
[17:01] or seven or eight weeks or seven or eight days or whatever. So one of the strategy you one of the strategies that you can deploy in this type of market is by selling an out ofthe- money put it is a naked strategy. you do have undefined
[17:14] you're like, man, I'd be happy taking the stock or taking the index at that in the event that the market goes nowhere or even goes higher. And if you
[17:26] are in a scenario where the option does go in the money and you are going to be assigned at that price, you're still better off than if you had bought the stock at that tippity top price point. So, as an active trader, right, we can
[17:39] but there are certain things that we can't control. We can't control the happen. Nobody knows what's going to happen next. But we can control our position size and we can control our capital allocation and we can control
[17:51] our strategy selection. And so put those things in place, let the math take over and give the probabilities a chance to play out. And I'll see you guys next play out. And I'll see you guys next time.
[18:06] best ways you can help us are by liking the video or subscribing to the channel. a lot. So, one of the things that you guys see us do all the time on the mean, we're rolling up, we're rolling down, we're rolling out, we're rolling
[18:21] in. This is a very common tactic that we like to deploy to maneuver around the management of our positions rolling. And so, today I wanted to take a few minutes and let's unpack what it is, why we do it, and kind of some of the inner
[18:37] workings behind a rolling strategy. Okay, so let's start simple. What is a roll? It's actually very, very straightforward. All you're doing is you're closing your current position. You're picking it up. You're moving it
[18:50] out to a later cycle, and you're reestablishing oftentimes the exact same position or maybe something that is slightly different. So, all you're doing is picking it up, moving it out, and dropping it back down. That is a roll.
[19:03] Now, sometimes when we roll a position, we may do it inside the same expiration we're going to talk about here in a couple of minutes, we may not necessarily be moving it out to a later expiration cycle, but most of the time
[19:15] when you hear us use the term roll, we are referring to moving it out in time and adding days to expiration to the trade. But understand, there are times too where we do roll within a given expiration cycle. All we're doing is
[19:28] we're changing the dynamics of the strategy slightly to kind of maintain the same spirit but adjust it so that the risk parameters are a little bit more to our liking. But when it comes to rolling out in time specifically, this
[19:41] can be really advantageous to us because again remember what are we doing, right? We're trying to manage our winners. We're trying to engage with high probability trades. So when the market gives us something that works out, we
[19:53] We want to be done with it. We want to make sure it's economically significant. of course, but we don't want to stay in the trade too long. But by rolling out in time and giving trades extended duration, we are able to kind of give
[20:05] us, which doesn't mean it's always going to work. It doesn't mean that every you, but it does give the losing trades, the ones that don't work, a little bit more time to work out. We just want to
[20:18] tap into the natural eb and flow of the marketplace. We just want to tap into kind of the natural back and forth nature of the market, which doesn't mean green. It doesn't mean that every losing
[20:30] does mean that when things don't work out, we have some things that we can do. adjustment protocols. We have some mechanics that we can turn to to kind of give the trade a little bit more life and give the trade a little bit more
[20:44] time. That is what a roll is just in a nutshell. If we zoom out and kind of look at it kind of broad-based. Okay. So now when do we roll? Well, there are two basic times when we would consider rolling. There may be other times and
[20:57] nuance when it comes to actually you know when we roll. But the two main pillars are going to be when the strike is hit and when we hit 21 days to go. Now both of these more readily apply to undefined risk rather than defined risk.
[21:12] we'll come back to that in just a couple strike is hit with an undefined risk position. So we sell a put or we sell a two great examples. When you put on this strategy, these strikes are out of the
[21:27] like the strategy is working, everything is easy. Everything is great. The sun is shining. The air is fresher. Like everything is absolutely amazing. Well, now all of a sudden the strike gets hit. Once the strike gets hit, now that out
[21:40] of the moneyiness on the trade is gone. Now that out of the money is that buffer that you had has now been evaporated which that means that now the strike is close to being in the money. So now we're in a situation where you know
[21:54] don't have any wiggle room left and the strike might be in the money which isn't necessarily a death sentence. It doesn't necessarily mean this is going to be a losing trade but it does begin to change the risk parameters of the position
[22:07] rather significantly. Case in point, your directional bias is now going to start to grow, right? Because at the money options have a delta of 50. And so out of the money, the deltas are below 50. They're 30, they're 25, they're 35,
[22:21] whatever. And so it's not going to feel like that big of a position as it moves around. But once it goes in the money and it spills over that at the money strike, now the deltas go to 55 to 65 to 75. So now the direction moves are going
[22:35] to be a lot more significant. And so that's why if we take a strategy like a short strangle, when one side gets hit, the first thing we like to do is actually roll that untested side, roll the other side in a little bit to help
[22:47] to protect the side that is being tested, protect the side that is being short strangle on and the market goes down and my short put is my tested strike, I'm going to be looking to roll my call down and maybe trim my
[23:01] directional bias by about 30 to 50%. Because what that does is it protects that tested side. If the market keeps going lower and if the market keeps and goes deeper and deeper in the money on the put side, I have more protection
[23:16] because I brought in more premium by rolling that call down. Similarly, let's runs up. So now my short calls the tested strike. Now I'm going to be looking to roll my put up. So same basic idea. I'm just on the other side of the
[23:30] ledger, if you will. So now I'm rolling the put up to protect that call strike. I want to protect against the runaway move higher. I want to protect against, that short call strike and it going deeper and deeper in the money on the
[23:42] call side. And so maybe I roll the put up and trim my directional bias by 30 to 50%. What I'm doing is I'm bringing in more credit. I'm controlling my directional bias on that tested side and I'm actually improving my break even
[23:55] point on the tested side. And then even with a strategy as simple as something leg. So I'm not going to be rolling the untested side because there is no untested side. There's only one single side. And if that side gets tested, it
[24:07] is both the tested side and the untested side at the same time. And so what I might do is if that strike is tested, maybe now I just roll out in time. Maybe now I use my rolling mechanics, my rolling tactic to just add duration to
[24:20] Greeks. That's going to improve my break even point. and it's just going to give me more time and extended duration in the trade. And so when it comes to a short put where the strike is tested, rolling out is typically going to be the
[24:33] short call and trim the directional bias, but that's kind of a separate project for maybe another time because that's a little bit more involved. And so that sounds like it could be theoretically, hypothetically, a future
[24:46] calculated risk. So you've got to stay tuned for that guy. But also, when it comes to a short strangle or a short put or really un any undefined risk strategy are going to be looking to roll out in time. And the reason for this is pretty
[24:59] last couple of weeks before expiration, so anywhere between 14 and 21 is probably a fine time to roll. The gamma on the position is naturally going to be increasing. The gamma on the position is naturally going to be on the rise. Now,
[25:13] Blackstone's model. It's showing you how delta changes when the stock price changes. So, it's kind of an added layer of directional risk and directional bias. And so, by controlling that, by adjusting and rolling our positions
[25:27] expiration, we're kind of naturally putting a lid on just how much damage gamma can do to us. And so, this is a no-brainer. If you're at 14 to 21 days be on the position, just roll it out. Don't think about it. just go to the
[25:41] your premium, improve your break even point, and slow down those Greeks, want to remember when it comes to rolling, 99 times out of 100, 98 times
[25:54] out of 100, we want to be rolling for a credit because when we roll for a net credit, we improve our basis. We widen our break even points. Now, this doesn't mean that you can't ever roll for a debit, but you just have to understand
[26:07] have to understand that when you do roll for a debit, you are worsening your basis. When you do roll for a debit, you are potentially kind of uh shrinking or narrowing that break even point, which is kind of working against what you want
[26:20] selling active trader. So just understand when you pay a debit to roll, it's not exactly in line with what we're cents, you pay 4 cents, debit to roll. That's not a big deal. I'm kind of
[26:32] talking about the more significant debits, but I think as a rule, rolling for a credit is a really, really great reference point. Now, this is really easy to do with undefined risk because when you roll out into the future,
[26:44] So, you're pretty much always going to be able to roll for a credit. But with defined risk, so vertical spreads, iron condors, you can't always roll for a credit. And the times when you do want to roll, when the trade is in the money
[26:56] a credit to roll. It's going to be a debit to roll. that additional time is going to cost you something. And so when it comes to defined risk, a lot of times you just have to control your size on entry and be ready to hold that thing to
[27:09] the very end if that's what it comes to. Don't expect to be able to adjust. Don't credit. If you get to 21 days to go and you can do it, then that's fine. But to do it. Oh, when you trade something like a vertical, like an iron condor,
[27:22] something definous, like a butterfly, just be ready to hold that thing all the way to the end. And don't expect to be able to roll for a credit. If you can, that's great, but I would not bank on it. So, rolling is not a magic wand.
[27:34] It's not going to turn every loser back into a winner, and it's not going to give you a 100% hit rate. But it is a nice tool to have in the toolbox to allow us to lean into the probabilities to allow us to soften the Greek exposure
[27:47] to allow us to widen out our break even points to allow us to improve our basis and kind of slow down that gamma risk that is notoriously on the rise as we get closer to expiration. So again, it's just a tool in the toolbox and this is
[28:00] why we roll and this is when we roll. I hope that makes sense and I'll see you hope that makes sense and I'll see you guys in the next video.
[28:12] Live and we're coming at you with another episode of Options in Action. If you've missed this series, it's basically a new series where I take an old whiteboard concept or maybe a strategy that I talked about previously
[28:26] and bring it into an advanced light. We take a look at the platform and we talk through the practical application of some of these concepts. Uh we're going to go through the entire YouTube playlist uh the old whiteboard series.
[28:39] So we have talked about call options, put options, we've talked about premium, we've talked about strike prices and expirations, you name it. Uh and today we're talking about the age-old question. Can you make more money
[28:53] trading short premium or can you make more money trading long premium? And what are the gimmies and gotchas as Dr. Jim says? uh what are the tradeoffs with selling premium versus buying premium? We're going to take a look today and
[29:08] we'll break it down on this edition of Options in Action. So, we got this S&P Options in Action. So, we got this S&P chart pulled up here and this is not the S&P stock or index chart. It is actually a chart of a long call out in December,
[29:24] a chart of a long call out in December, the 8,300 strike to be specific. You can see here S&P uh at the top is trading at 7,300. So we're looking at this call option a,000 points out of the money to the upside and this is the December
[29:38] cycle. So before we dive into this and before I I start spewing nonsense, uh I just wanted to say, you know, when you're selling premium, there's a difference between selling premium in the S&P 500 products like S&P or MEES or
[29:55] the S&P 500 products like S&P or MEES or XSP or SPY. Uh there's a big difference between selling premium in those sorts of products versus selling premium in of products versus selling premium in the equity space, right? S&P 500 or
[30:07] the equity space, right? S&P 500 or other indices even products like SMH uh that have moved quite aggressively with the tech sector popping off and selling off uh at the same time. There's things to consider, right? Short premium in the
[30:20] S&P 500. I I've said this before. I think if you can trade successively short premium on both sides of a market in an equity, you can definitely do that in the S&P 500 simply because the S&P 500 moves less. It doesn't have the same
[30:36] binary events. It doesn't have the same binary nature of equities. You could have a CEO step down and the stock price be down 20% pre-market or after the happen. They can announce something something that the market likes and that
[30:50] stock is up or down 20% when the options market is closed. It's not necessarily going to happen in the S&P 500. There's also uh market stops. Even if there is a big crash in the S&P, there's certain levels where the market stops trading.
[31:04] uh that doesn't necessarily help you in the case of not taking on risk when it comes to short premium uh if we're talking like short puts for example into a market move like this or even strangles. Um but what I will say is
[31:19] over the years I've learned that there's a time and place for all strategies, right? Uh I have long premium strategies where I'm buying options. It's a lower probability trade if you're holding trades to expiration. But I like to say
[31:33] if you're buying options, you get what you pay for. I don't really buy options that are near-term. I don't buy zero day options. I don't buy 7-day options. In my mind, you're buying a lot of implied volatility in those cases. And it
[31:45] becomes just that much harder to be profitable on those strategies because you have this super decaying uh asset that is if it moves against you become worthless and it becomes that much harder for it to reverse and work
[32:01] in your favor. If you're buying a LEAP option though, totally different story. Uh LEAP options cost a lot of money. you get what you pay for when it comes to long premium, but I think when you're buying premium, it doesn't necessarily
[32:14] have to be a naked option. It can be I actually have a position on in Nike right now. Uh I bought a LEAP option out at the 60 strike all the way out almost at the 60 strike all the way out almost 600 days away, January of 2028. So, this
[32:29] was a situation where, you know, Nike drops to multi- multi multi-year lows. We're talking decade lows. Uh this Nike hasn't been 45 at least around this
[32:42] price point since uh 2015 if I'm not mistaken. So the further a price falls, especially in a product like Nike where I think we'll still see some upside I think we'll still see some upside potential there, um yes, I could sell a
[32:55] put to uh collect that premium, but at the same time, Nike's already fallen uh and it's still down at 40. If I sell a put 16 days away for a 100 bucks, sure,
[33:07] probability trade, you can see my probability of profit is nice and high at 66%. Uh, but I take on the undefined risk nature of Nike where maybe they another 10 points, and now all of a sudden I have a $900 loss on my hands
[33:23] and not much management in terms of what I can do. Uh, it also takes a decent amount of buying power, 800 bucks relative to a $40 stock. So, for me, instead of selling a put, uh, especially when a product like Nike or any other
[33:38] equity gets to multi-year lows or decade lows, I'd rather just inventory some long-term premium. And you can see here the further out in time you go because you're avoiding the implied volatility increase of something like an earnings
[33:53] earlier, you've got plenty of implied volatility here in the near-term cycles that isn't necessarily reflective of these long-term cycles, right? Look at this expected move for June 30th. You have a plus - $4.60 implied move with a
[34:08] 60% IV almost. But you look at January of 2028 and it's only a 17point implied move. And that's because the implied volatility is significantly lower when you get all the way out here on the curve. So will I be trading Nike? Will I
[34:24] earnings announcement in a defined risk way? Absolutely. Uh like I said, there's a time and place for everything. I think I'll probably sell something in this 22-day cycle, but I'm going to buy
[34:38] will go to something like a diagonal spread or calendar spread uh in that intelligently. I still want to reduce cost basis which has always been uh something that we've said here on Tasty Live. I want to make sure that I am
[34:53] reducing my cost basis and improving my probability of success anywhere I can. So in this case, if Nike is offering super high premium to sell something whether it be a calendar spread or diagonal spread, uh we can look at this
[35:08] here like the 45 strike in July trading for $2.50, we'll call it the 45 strike in July 2nd. Look at that. You have two weeks of a difference in time, but only prices. I'm absolutely going to be selling something against that long
[35:24] option that I buy if I'm bullish. And same thing if I'm bearish, but longer term, Nike is down to 10-year lows. So, what does that mean? It means I'm going to get really far out on the curve here and risk $500. This option hasn't really
[35:38] moved all that much, which is interesting. Nike still chopped around and this 2-year leap basically is trading for 500 bucks. My whole thesis is would I be surprised to see Nike go from 45 back up to 50 or 55 or 60? it
[35:54] my answer is no. I would not be surprised. And if I'm buying a LEAP volatility, I know yes, it's a little bit more costly, but I'm out of the IV spike in the near term. I'm inventorying long-term delta inventorying premium
[36:10] that isn't going to decay against me all that much. And if we get a move in Nike that much. And if we get a move in Nike from 45 to 50 or 55 or 60, that option from 45 to 50 or 55 or 60, that option is going to uh be worth $1,000, $1,500.
[36:23] click on the option in the chart, the 60 strike, if you right click on the bidder ask, you can have this menu pop up here. View the option in the chart. And here we go. It's been trading for $500 basically ever since I bought it. But
[36:37] back here, when Nike was at 55 and60, this option was trading for $1,500. So, from a riskreward standpoint, as a product like Nike or any other equity gets to decade lows or multi-year lows, I'm going to be inclined to lean into
[36:53] the long-term positioning. I did the same thing in Microsoft, right? same thing in Microsoft, right? Microsoft went from 550 down to sub 400 levels. What did I do? I was buying into some near-term stuff. We we set up some
[37:05] short premium trades, of course, but I also did a really long-term calendar spread at the 500 strike. I bought January of 2027 and sold September of trade. I was just like, well, I don't
[37:18] term, but I do feel like over the course of the year, Microsoft's going to be higher than where it is now. And that ended up being the case. We saw a nice bid, got all the way up to uh 460, and just looking at the order chains here,
[37:33] you can see uh I've had some decent trades up until that point. And the only trade I have left is that calendar spread in Microsoft and it's up a couple hundred uh right now. Uh if we look at the 500 strike, I bought it for 500
[37:47] bucks. It's up $400 right now. So I still want to have it on. I think there's uh a bullish case for it. But to answer the question, selling premium versus long premium, uh I think when you're selling premium, you have to be
[38:01] able to withstand all variance within that product you're selling, right? Because from my perspective, the most success that I've had in products where I've sold premium, uh, it's been in products where I've traded small enough
[38:14] or the product size was small enough to where I could manipulate the strikes, manipulate my time in expiration or a combination of both. Right? That's the beauty of undefined risk. You have the flexibility to be like, you know what,
[38:27] this expiration. I'm going to buy this back and I'm going to move it out a month. I'm going to move it out two months and move my strike and collect a credit still. So, that is how I approach undefined risk these days. It's going to
[38:40] be a much higher probability of success naturally because when you're selling premium versus buying premium, if you sell an option, you just need the stock price to stay out of the money or in this case above your 37 1/2 put. If
[38:54] you're buying premium, you need a directional move in the stock price. And that's as simple as that. So, when you think about that, if I'm selling premium the money, I'm going to be much more inclined to sell near-term premium
[39:08] because I know that implied volatility is higher. There's not enough time or there's not as much time for the product to move against me in a big way. It can still happen, of course, but that 30 to 60 day window is where the implied
[39:21] volatility is nice and high relative to a nice blend of time value as well. So, that window. We have research that shows that that's kind of the sweet spot of implied volatility value plus time
[39:34] value. So selling premium in that 30 to 60 day window. Buying premium, I prefer to be outside of that 60-day window. Honestly, I would rather buy premium in a 90-day 100 day option cycle if it if it's something I can afford. In the case
[39:48] of Nike, I can do that in a 25k, 30k account. Of course, um even smaller, you have the ability to do it because the stock price is so low. But in something like S&P, $7,300 stock price, I don't have the ability to sell premium in
[40:03] here. Uh I can trade spreads in here. I can do uh calendar spreads, some diagonal spreads in here, but sometimes the stock price is the determining factor of your strategy. So keep all this in mind and just really make sure
[40:16] if you're selling premium, you you need to be able to withstand the variance of any kind of move. I prefer to if I'm selling a put or a strangle, uh let's talk about puts. If I'm selling a put, I would rather sell it in a product where
[40:29] I can just hold that premium or take the shares. I would rather not exit at, you know, two or three times the loss of that short put because if I'm selling an undefining risk put, I kind of want to have that bullish delta anyways if it
[40:43] does get down there. I don't want to be stopping myself out and then two weeks later see that it could have moved out of the money. So, that's just me. Um, but to summarize, if you're buying options, you get what you pay for. I
[40:56] think, uh, in this kind of market environment, I'm always going to have something against it. Like, if I'm buying a 60-day option, I want to be selling something in the 30-day cycle or maybe the weekly cycle against it. if
[41:08] that premium is really juicy and I can reduce the cost basis on my long option because the more you can reduce the cost basis on your long option, the more flexibility you have going forward to have that long option be profitable or
[41:22] even a scratch. If I'm selling premium, I'm very cognizant of the fact that it going to have a lot of winners when you're selling premium, but you should also understand how to manipulate that trade with defined risk debit trades.
[41:37] When you're buying premium, there's not a lot of things you can do. There are spreads uh and diagonal spreads where you can manipulate that short option by moving the strike or moving it out in time. Uh but with short premium,
[41:50] undefined risk short premium specifically, you can do a lot of different things. you you have a ton of flexibility uh in the ability to manipulate strikes. And if you look at my order chains for the MEES position,
[42:03] this is my year-long strategy for 2026. I've clearly manipulated this position over and over and over. And every single time I do it, I collect more credit. I started with 93 points in credit. I now have 700 points in credit uh overall,
[42:20] which means my break evens are 700 points beyond my strikes. And this is a profitable trade because I've been selling premium to offset any kind of intrinsic value uh losses that might show against me. So short premium I like
[42:34] to reserve it for either products that I can afford any variance in or something in like an index like MEES is a great example or IBIT even the Bitcoin ETF that was my year-long trade from last year. Um, so I think when you
[42:50] you in a a good spot to be able to withstand variance. And again, if you have a day like today and you're like, "My account is really suffering." Then I think maybe the strategic decisions might be a little bit off. Again, we
[43:06] want to be able to withstand as much variance as possible. With undefined variance. The trade size has to be small enough to where you can withstand any success in the future and it gives you that flexibility to manipulate the trade
[43:21] as the markets move. And with defined risk, same story. Uh I like to keep them within $500 to $1,000. I think that's a healthy level for me. But again, if I'm doing a diagonal spread or calendar spread, I have a plan for if things go
[43:35] strike out in time. I know I can move that short strike up or down depending that short strike up or down depending on the strategy. But uh yeah, let me know what you think in the comments below. That was a long- winded segment.
[43:49] Wasn't expecting to go that long, but uh hopefully that kind of mental shift helps a little bit. Again, if I'm selling on finders premium, it's usually selling on finders premium, it's usually in an index product or a micro futures
[44:02] product and it's sectorbased. It's not something that's going to move 20% pre pre- post market. But if I am involving myself in those types of products, it's small enough to where I can withstand any variance. I can manipulate the
[44:16] strikes up and down. And I think that's another interesting uh and important point is undefined risk trading, super high probability if you're doing out of the money uh sales of options. But understand what you can do to manipulate
[44:29] that risk profile. And that's just going to give you another leg up in the future of trading uh as the markets move and things go wrong for you. I mean, you're to have your losers, but you got to know how to manipulate and adjust those
[44:44] losers if they are undefined risk trades. But thanks for tuning in. Let me below. Please like this video, subscribe to the Taste Live channel, and we'll see you on the next episode of Options in Action.
[45:02] Live with another episode of Options in Action. If you've missed the previous episodes, this is a series where I'm talking about old whiteboard videos strategies, but we're giving it more of an advanced twang and we're looking at
[45:18] the platform itself, talking about certain concepts that I'm using today and how it applies to everyday trading. We talked about expirations last time and today I wanted to talk about letting an option expire in the money and
[45:34] ultimately taking shares of stock. Al also we can talk about expiration risk and assignment risk and how it's not something that I'm worried about at all. I think we can wrap those up into one and kind of just give you a nice uh
[45:48] package of ways to think about expiration and why not to be afraid of assignment risk, especially if you have defined risk spreads or an in the money something like that. So, let's dive into
[46:02] it down for you. So, we're looking at SPY right now. As you can see, SPY has had a massive rally from the lows of this year. In April, we were all the way down at 635ish. Now, we're sitting at 755. Just an insane run to the upside.
[46:20] And maybe that has resulted in in the money options. So, for those that don't know yet, uh if you have an in the money option, it's ultimately going to expire and turn into shares of stock. So if I have a 760 put, for example, that is in
[46:36] have a 760 put, for example, that is in the money, I will ultimately be assigned 100 shares of spy at 760. Same thing with the opposite side. If I have an in the money call, a short option that's in the money and it is assigned or expires
[46:50] in the money, I will be uh basically have 100 short shares of stock at 750. Now, a lot of times we're not really dealing with assignment risk because we're rolling our options positions out in time. And really, assignment risk is
[47:06] highest when you don't have a lot of exttrinsic value in your options strike. exttrinsic value in your options strike. So, even even with a 750 call that's in the money, 15 days to go, there's still $600 of exttrinsic value that uh
[47:19] somebody would be giving up to exercise this option and turn it into shares of stock. In other words, they're taking $600 and lighting it on fire. That's why risk because it just doesn't happen all too often. I've been trading for over 10
[47:33] years and I've been assigned maybe three times, four times maybe. Uh, in one of them was a celebration. In this case, it was literally like I had an in the money option that was that had $200 or so of extrinsic value and I woke up the next
[47:46] day, I was assigned on it. I got the shares and kept that money, the and I just resold the option and I basically doubled my credit overnight. So that's another thing. If you are assigned early and there's plenty of
[48:01] exttrinsic value associated with your option still, it can actually be a benefit to your position. Uh the only situation where that would not be the case is if you had a dividend that you had to pay. So like with an in the money
[48:13] had to pay. So like with an in the money call at 7:30 for example, let's say spy call at 7:30 for example, let's say spy had a dividend of $400. there's $288 of exttrinsic value here. The counterparty would give up their $280 of exttrinsic
[48:26] value to get the $400 dividend. So in that case, it's a net positive for that counterparty. And that is the circumstance where you can get assigned early. Your options can be converted to stock early uh if there's a dividend
[48:40] where the dividend exceeds the exttrinsic value left in the option. But other than that, like you can look at these options here. Like this is a 715 these options here. Like this is a 715 720 option. It's 35 points in the money
[48:54] and it still has $200 of exttrinsic value. This is still an option that has value. This is still an option that has a low assignment risk here. So not into shares of stock. What I do want to
[49:06] bring up is how it can actually change your risk profile for the better in a lot of cases. So yes, if you have a spread, so like let's say you've got a uh 755 750 put spread, right? You're kind of teetering on this short option
[49:22] kind of teetering on this short option here. This is a defined risk trade. here. This is a defined risk trade. However, if SPY drops significantly and over time someone exercises this short put, you're still left with a long put
[49:35] Because a short put converts into a 100 shares of stock. A long put represents a 100 short shares of stock beyond the strike to the downside. So even if I have a short put spread and I'm assigned a 100 shares of stock in SPY, if I can
[49:52] hold that buying power, that's the big caveat. If I can hold that buying power, that would certainly be increased relative to this $300 uh buying power here for this narrow spread. It actually increases my max profit substantially,
[50:05] potential max profit substantially. And that's because the most I can make from this spread is just the credit I received on entry. However, if spy drops short put and I still have this long put, as long as I have the long put, my
[50:21] risk profile doesn't change on that package. But I would now have 100 shares package. But I would now have 100 shares of SPY with a static delta of 100. Which means if the market drops dramatically and I get assigned on the short put, I
[50:33] still have the protective long here. if the market rebounds and now all of a sudden we're back at 755 and beyond, I'm making money on those 100 shares of that money on the shares because with
[50:46] just this options trade, I can only make the credit received. So, another situation where that makes a lot of sense is to just like take the shares uh and just use the shares as a static delta lever is in products that are
[51:00] smaller priced and maybe you've sold a put and you're trying to uh you know stands out to me because I already have 100 shares of Under Armour for this exact reason. But let's say you sold a put uh in these options expirations.
[51:15] There's not too many here, but let's just say you you sold the 7 and 1/2 put and or like the 10 put. You can see there's very little exttrinsic value here. The deltas are super high. And if you were assigned 100 shares of stock in
[51:29] you were assigned 100 shares of stock in Under Armour, yes, you can only make the amount of the put if you sell this put. And I think that's the big the big key here. If you're assigned 100 shares, you now have unlimited upside potential on
[51:42] how much you can make if the market does recover to the upside. So, the deeper in the money a short put goes, the closer it gets to a 100 delta, the less exttrinsic value you're going to have. So, if you're thinking of rolling a deep
[51:55] in the money put and you're trying to roll it, let's say from July to uh not picking up a lot of credit, but you have a really high delta on your short put, it actually might make sense to consider taking the shares of stock
[52:09] where you no longer have a option that you can only make as much as the option is worth. You would have 100 shares of stock where you can make a lot more to the upside. So, that's pretty much it when it comes to options that expire in
[52:21] the money. I mean, again, I don't really hold things to expiration to uh risk that. That is one of the things that we should talk about, though. Like, if you have a a spread that's teetering in the money and out of the money, if you let
[52:34] the spread expire and you're assigned on the short put and your long put goes away, now you don't have the same risk profile. You still have the 100 shares that you're assigned on the 755, but you would no longer have the protective put
[52:46] down here. So, something to consider. But uh deep in the money options that have no exttrinsic value, if you take the shares instead, you have a higher the same risk profile as you did with
[53:00] in the money short call. Uh but you now have the static delta in the shares where a short option that's deep in the money if it starts to rise uh towards the at the money price, you can only make the amount of the option itself. So
[53:16] again, deep in the money options close to 100 delta with no exttrinsic value. In almost all cases, your max profit is higher if you just convert the shares if you're willing to do that. If not, you'd have to manipulate the strategy and
[53:28] change the risk on it uh by rolling out in time and moving it if you can. But those options that are super far in the money are trading like stock basically anyways. So let me know what you think in the comments below. Uh, please like
[53:41] this video, subscribe to the Taste of Love channel if you haven't already. But yeah, let me know if you've ever been affected by uh a short option that had a left. Not a dividend stock, but like maybe someone made a mistake. Maybe the
[53:54] converted to shares. You get to keep that premium. You sold out of it again. Uh, it's only happened to me once in 10 years. So hopefully that kind of stuff happens to you guys more often. Uh, but let me know what you think in the
[54:07] comments below and we'll see you on the next episode of Options in Action.
[54:19] We do have a fun little research piece though hosted by our only one and only >> Hi guys. How's it going? >> Good. Your hair is shiny and wavy today. What's going on? I uh washed it yesterday and now I'm wearing Yeah. It's
[54:35] the curls are coming out. I usually We usually wear it in a bun. So >> Never seen you in a bun. >> You never seen me in a bun? Really, >> Oh, >> have I? Maybe I have. I don't know. I
[54:49] >> If I wear my hair down in the office when it's like full full throw, it's People are going to be running into it. It's going to be [clears throat] it's going to be causing problems. So yeah, I'm more of a braid person. Actually,
[55:01] >> Oh, so >> it's for safety. It's for office safety. >> It's for safety. Workplace hazards. We're trying to reduce the >> OSHA inquiries. >> Yeah. Um what do you got for us today?
[55:15] where it's going, uh I'm talking about SpaceX today. We're just kind of checking in on um where it's at. uh you know with options coming out kind of recently and a lot of lot of volume since it got options a lot of people
[55:28] talking about it we just wanted to check in on um where it's at is the price any more or less stable um and where the options in terms of liquidity because um shocker this options the options on SpaceX became liquid very very very
[55:42] quickly um I want to do a study on this um at some point but I feel like with a lot of these major IPOs the options are becoming liquid faster and faster and we're just doing a quick little check-in. Um, now that we're, you know,
[55:54] little little over a week uh little over a couple weeks in. >> Yeah, it's been uh super volatile. We've got a couple of positions on butterfly to the upside. Uh I feel like it's too cheap. The one 180 160 200 uh that was
[56:09] for like three bucks, 20 points wide. and then a Super Bowl sold the 125 put all the way out in Jan 2028 to finance the entire cost and more of a upside
[56:21] call. Uh really I just think this is going to be this is going to behave like Bitcoin and volatility products where if and when you get that big rip to the upside you're going to see implied volatility expand. Uh and I want to have
[56:33] that naked long call in that situation. So we'll see what happens. >> Yeah. You like that? Longterm. >> Really long term. Wa. That's crazy. can't I can't imagine being that committed to anything.
[56:46] >> Really? [laughter] >> Well, let me ask you this, Julie. If you would you go to space? >> Absolutely not. >> Absolutely. I hate space. >> Okay. So, I want you, E, and Jamal in my
[57:00] spaceship when we go. [laughter] >> You three are gonna be screaming. I'm be like, "Hell yeah, let's do this." >> Like, we got a perfectly lovely planet. We got air, we got food, we got grass. We don't need to go. I'm I'm cool with
[57:14] movie as a physicist. >> And she did science. She knows. >> I Yeah, I know. I studied actually a good amount of stars, cosmology, all that stuff. Um, but space is just like interstellar. I've never been so
[57:27] life. >> That's a good one. That's a good movie. published two general relativity papers just from the simulations of the black hole that they use in that movie. So, it is like the mo I call it the most sigh
[57:40] that fi can get while still being interesting. And I still cannot watch >> Yeah, that movie. >> So, y'all can go to space. Let me know don't know. >> I'm going to sell these puts in SpaceX
[57:54] and that'll be my way of going to space. I want this thing to go to space. I am not going [laughter] to space. But yeah, along the same lines of Mikey, I did um yapping. to talk about. No, we could just yap about SpaceX, too, if you want,
[58:08] Let's look at your slides. >> Let's do some slides. Yeah. Okay. Mission control, the current state of SpaceX trading. This piece is by Sahil. You want to follow him over on X. Um, we've been writing a lot more articles
[58:20] just between uh the couple of us on the research team. So, give Sahil a follow these pieces. But, yeah, we're talking about the current state of SpaceX the state with how crazy it's been. Um,
[58:32] to the first slide. So, options very volatile. Um, and we're seeing how seeing like really I mean it's up a flip from the pre-market levels where it was at, but still down 25% in the last
[58:47] like five five days. So, um, that came and went very fast and still a lot more to go. Um, and what an interesting statistic, uh, looking at the July 17th expiration options on SpaceX, uh, we had 20 20,000 contracts in open interest
[59:02] during the market close on June 17th, and now it's down to 6 6830. So, just options. We're seeing a lot of people closing their positions out just with the volat volatility. So Mikey, maybe with taking your very long-term approach
[59:15] um could make sense with getting some exposure to this uh but you know being short-term movements as it's trying to as the market is trying to undergo price movement although a little bit less today which is actually quite
[59:29] >> Next one. >> Yeah, sure. Next one. >> Cool. Um yeah, so this is a fun I call this the Pelaton curve. Uh but usually it takes place over a longer period of time. Um so yeah, just a sheer the sheer
[59:45] bit of a continuation of that although it's up a bit today. Um just over the had with this underlying. So really volatile IPO and we're seeing also consistently from where we were at. Um so uh we haven't had a lot of major IPOs
[01:00:02] in the last like 10 years. So there's not a ton of data um to kind of point to to say whether this is exaggerated or um exaggerated than it would typically be. Um but certainly like just from pure
[01:00:15] like the ad like the MAG 7 and some other highly liquid underlyings just really you know lot of interest in this in the option space and in the um equity off. So we're seeing a little bit of cooling as the price is starting to come
[01:00:28] Although Jamal, I know you wanted to take right back off. >> Yeah, of course. >> I think we'll see uh we'll see some chop. I mean, it's just this how it
[01:00:41] works. Like Meta had the same thing. Meta was a dog after an IPO and now we'll see. But yeah, expect implied volatility and realized volatility for >> Yep. Um and again we're seeing where these like liquidity levels kind of
[01:00:57] consistent with what we see just like across underlyings in general. Um but when we're looking at average volumes we see yeah still a lot of activity like towards the close with liquidity levels being a little bit drier towards the
[01:01:09] middle. This is generally what we see across the market you know more broadly where we get towards midday that's when liquidity becomes a little bit thinner. trading these uh with something that still has so much volatility associated
[01:01:23] liquid, just bearing in mind trading times throughout the day, especially for short-term trading, this is just something that's good to just note when whenever putting positions on um in underlyings like this. So, just little
[01:01:36] that and then um this one found very interesting little comparison on the next slide of just like how liquid is this compared to some other underlyings So, uh, we basically looked at the 59-day options, the at the money puts
[01:01:49] across a couple different underlyings, and we can actually see like even though couple of days now at this point, um, it's actually showing when we look at spread as a percentage of close, like similar tightness in the bid ask spread
[01:02:02] as other names like Oracle, Coinbase, CRM, much more established um, options markets and other underlyings. So um this thing got very liquid, pretty liquid very quickly um comparable to like some other major names that are
[01:02:15] very actively traded um and potentially more to go again as the price becomes more um or the the I should say the market becomes more confident of the price moving forward. >> Yeah. Uh this is similar to like IBIT
[01:02:29] too. IBIT was released bid ass spreads were going to be super liquid going forward. Uh I think implied volatility is going implied volatility is the slightly wider the bid spreads will be. But I have no
[01:02:43] doubt that SpaceX will be one of the most liquid products uh going forward >> It's too big not to be for sure. >> Yeah, it's huge. Yeah. And just bearing like considering getting into this is
[01:02:56] that liquidity with options is a much more nuanced concept because like further out of the money you get for example the less liquid time like the liquidity level. So just really looking at like bid ask spreads um looking at
[01:03:09] open interest looking at volume for specific contracts can be really helpful just to make sure that you can easily get in and out of the position. So liquid. That's what we're seeing right now. But option liquidity is a little
[01:03:21] bit more nuance. So just checking those different. Doing a little sanity check getting into a position, especially further out of the money and especially takeaway is kind of what we've been talking about. Um we're seeing SpaceX
[01:03:36] really move all over the place. Big selloff um big runup, big sell-off. um movement today but still like a you know the very brief history that is very volatile um and we're seeing that kind of continue to move on. So what we're
[01:03:51] more and more liquid on this now just using one contract as a reference point. We're seeing SpaceX options be as liquid as some other major names such as Coinbase. So, um, we're seeing option liquidity make this more tradable, but
[01:04:05] there, especially when we're seeing large contract or large positions, um, closed out very quickly. It's just about being careful and being mindful of the especially in the short term as this thing is becoming more um, I don't know,
[01:04:22] as the market is becoming more confident in the pricing and the true value, I >> as it matures. Yeah. >> As it matures. >> Yeah. Yeah, I think you'll see chop going forward. You'll have your up days,
[01:04:34] you've got like the inclusion into the ending. So, it's going to be some push and pull. Um, so just keep your size in check, but still plenty of premium on
[01:04:47] either side of the market if you are uh selling it or creating calendar spreads, diagonal spreads, and whatnot. >> But appreciate it, Julia. Go get a pack of Zebra Stripe gum. I'm sure you could find it somewhere. Uh, I can't wait. It
[01:04:59] only It only lasts like like a minute and then this flavorless. So that's why they give you a hundred in the pack. >> Of course. And you guys can go get some purple ketchup, which I'm sure the purple ketchup from like the two early
[01:05:12] >> That's just like they're breaking my brain to think of purple ketchup. >> The McDonald's fries that like they were found in like a 50-year bin and they >> They [snorts] just don't age. Like a fine wine, those McDonald's fries.
[01:05:25] >> Uh, appreciate you, Julia. nicely. Thank you guys. you guys. >> Absolutely. See you later.
[01:05:37] dip um contra back testing. We don't always use price signals um for short volatility um signals. Uh but obviously price signals more depending on your style of trading as well. Um uh God put
[01:05:51] follow him on Twitter, he's God litics on X. Got to stop saying that. But uh he very interesting results. So basically we're going to test like if the market is down some amount and you open up a trade, does that outperform or
[01:06:04] underperform just kind of trading every day? Um and we specifically wanted to assumption. And this is I would say a short-term contrarian. So markets down >> [clears throat] >> uh you know zero to half a percent, half
[01:06:18] to 1%, 1 to 2% or more than 2%. you go open um a 30 delta 15 delta put spread 45 days out. Um and we're going to hold that to expiration just to kind of like management out of it because people manage things so differently. We're
[01:06:32] markets down and you decide to be a contrarian put on a put spread short put spread does that tend to perform better or worse at these different dip >> Makes sense. >> So that kind of that was funny timing.
[01:06:47] Um, so we can go on to the next slide, kind of look at the results, and I my intuition on on this already just from short premium trading a whole bunch. Um, when we're trading the put spreads, just like on any given day, these tend to
[01:07:01] kind of like average to be relatively profitable long term, which makes sense last like, you know, 20some years, very strong bare market, especially the last like 10. Um, and then what we can see is that when you're kind of trading the
[01:07:13] noise, so markets down between zero and half a percent, which happens a lot, um, or trading a little bit more than noise, half percent to 1%, that actually tends to, if just trading that, underperform kind of trading every day.
[01:07:28] And we start to see more of an increase in profitability on average when we're trading now the 1 to 2% down days or even higher the 2% down days. And what these different thresholds, the pops were pretty much the same between 82 and
[01:07:42] were pretty much the same between 82 and 90%. Or 82 and 89%. So pop stayed about performance was not from the trades you guys already know. It's from increases in premium, increases in
[01:07:55] volatility, all that jazz. Um but uh yeah. >> Yeah, makes sense. I think it's interesting that the uh down 0 to half a get rid of the bullish days where they just stay bullish. Uh I think that is
[01:08:11] way. >> Yeah. Which um I was a little bit underperformed just kind of like trading every day. So trading those very moderate down days. Um we're calling that kind of noise and that's between
[01:08:23] like a zero to half a percent down then as well from half to 1% down. So if we go to the next slide and now we're just looking at ROI. Oh, we can go to the C bar slide too. This one's fine. Um so when we look at extreme risk instead
[01:08:38] interesting result because as the market big down days right like you have more volatility so your losses can be larger but your premiums are also significantly larger right so what you actually saw
[01:08:51] when you looked at sebar as a dollar value is that the dollar value of sebar your kind of extreme risk or your extreme losses I should say didn't actually increase um which I found very interesting and that again kind of goes
[01:09:03] to show you like when premiums increase, how much more compensation um there is and that tail risk like once volatility is already you know increased um kind of normalizes out regardless of where SPY kind of lands um on the day. Does that
[01:09:16] >> Yeah. >> And when it with uh I remember a piece many many years ago, but it was about uh buying power risk. So like how how often you your loss exceeds your buying power requirement and when you did it for
[01:09:31] equities the the percentage was significantly higher than when you did it for SPY or SPX because these markets just don't move as much. So I think this this speaks to that. Exactly. >> Exactly. And now this is where the piece
[01:09:44] to me got very interesting um to kind of look at it because like right so like short-term contrarian approach markets down 1% 2% um or more right and now you're taking a directional contrarian assumption and so we're seeing this
[01:10:00] better results as the market's down more and more trading the put spreads give you richer and richer results um but that's not really from the directional assumption being more correct
[01:10:13] the directional assumption being more correct when the market is down. Um, if you look 45 days out after SPY is down 2% or more, the probability of a rebound, it's not any more performant, I guess, or any more likely uh compared to
[01:10:29] any given 45day period in the S&P. So, right, we're not looking at markets down 10, 20, 30%. We're looking at very short-term movements in the S&P and like it's more from the premium increasing and more from the volatility
[01:10:42] assumption being more correct. And we know that the market just generally like with this case, it kind of makes sense. But the what I found interesting bars being relatively constant, just from your pops being relatively the
[01:10:57] same, and your premiums increasing, it's more from the volatility rather than the correct when we're looking at these very short-term scales. Does that make sense? >> Yeah. Yeah. Cool. So, that was my fun little contrarian
[01:11:10] interesting when you're trading kind of actually tends to underperform just kind of trading on any given day. Large dips tend to outperform. Um but this is primarily due to increases in volatility
[01:11:24] contrarian directional assumption being looking at very short-term price movements in the S&P. this is down 2% in movements in the S&P. this is down 2% in a day, not 20% in a month, right? Um so
[01:11:37] average performance, that sweet spot is really between like 1 and 2%. Um the S&P tend to happen a lot more often. And that tends to be a high enough move or a
[01:11:49] drive volatility up enough to provide that extra compensation. So that tends also occurring often enough to be something that can be systematically implemented. So yeah, >> serendipitous day for that.
[01:12:03] >> quite >> serendipitous. Was that a pun? >> serendipitous. Was that a pun? >> Serendipitous. do that. >> Love it. Thank you so much, Julia.
[01:12:17] >> Love it. Thank you so much, Julia. Appreciate you. And >> That's going to become the question soon. What What color tie does Gad have
[01:12:33] on? >> Oh, it's a rock. So, [laughter] >> How you doing, man? >> I'm good. I'm good. I'm good. I'm doing >> I'm good. I'm good. I'm good. I'm doing great. And um nice to see you right now.
[01:12:46] >> Yeah. Not for us. >> Yeah. Earlier this week, you were with us and you were talking to us about the IPOs in SpaceX and kind of uh be beginning, but maybe that's not how it works out for the average stock moving
[01:12:59] >> What do you have for us today? >> So, today are going to come with another research study. So, listen to received so many emails and also yesterday we we went into comments of YouTube comments. destiny nations were asking about ID IWM
[01:13:14] destiny nations were asking about ID IWM small caps and we're like oh this is a great topic to talk about right now what's the difference between large caps and small caps what traders need to know about these kind of two competitive caps
[01:13:27] small caps and large caps so let's dive into our study right now and see what traders need to know and how it can be actionable to traders so uh as everyone
[01:13:39] knows right now uh IWM is kind of overpassing or like dominating uh the small caps right now it's when you compare like last year year to year so compare like last year year to year so right now is 40 40% and the spy is only
[01:13:56] SP500 is 25%. which can bring so many traders to be interested in trading IWM and say there's so many choices so many opportunities of growing there's so many volatility so that's why this study is
[01:14:10] going to bring uh statistics behind this uh logic is it really happening IWM or small caps is overtaking large cap in terms of uh like bring joy to the table
[01:14:24] of for traders so This graph shows like 1 year, 3 years, This graph shows like 1 year, 3 years, uh 5 years, 10 years and since 2000s. And when you compare one year, you see uh SP 500 large cap is already
[01:14:39] dominating 5 years 10 years dominating. But when you compare since 2000s there's But when you compare since 2000s there's no like big difference between their returns year-to-year returns when you you do the average which is like
[01:14:53] interesting stats we we saw as a research and we can deep into after this. So the next slide. So for the last 13 years uh we have seen
[01:15:07] So for the last 13 years uh we have seen like when you compare five lowering um like when you compare five lowering um these kind of uh IW minus SP 500 the positive one is like where the small cap outperform the the large cap you will
[01:15:21] see since um 2006 up 20 14 I mean since 2000 early 2000 after uh recovery IDW had like 8% annual age over the SP
[01:15:37] 500 over the 5year roaring which is interesting and right now you will see interesting and right now you will see here on 2014 all way went way way back and it's like rolling down and everyone is like what's going on and right now
[01:15:52] because we AI and this kind of crazy uh movement in market we kind of see like small caps is coming to the recovery right now is on like to 3.8% recovery
[01:16:04] which was there in 20 years ago. So which is interesting start to see and how this uh small cap is heading in future. So we're going to see in u slides. So when you go to the next slides you
[01:16:19] will see IW price divided by the price. This is a kind of ratio which shows the dominance which one is dominating right now and how which one is like spreading the ratio the strength of the ratio. So the rising the small the small ratio or
[01:16:35] the rising the small the small ratio or the rising is like indicate like the small cap is out outperforming the large cap which means like if you have the higher ratio that means the small cap is
[01:16:48] outperforming the the like in terms of the price outperforming large caps. You will see this graph do like demonstrate perfectly since 2000s the large cap dominate the uh I mean the small cap dominates the the large caps until uh
[01:17:06] 2014 and it started going way way down where large caps just take it over and dominate that. It's interesting to see uh last year April during like the rate shocks. It's where we see the bounce
[01:17:22] back of the small caps. We see why this bounce back happened last year. Most of the time is because the small caps it's more sensitive to the market like 48%
[01:17:34] sensitive to the rates to the change of rates. we will see what happens because like almost like 80% of the small caps the component of small caps 80% of it the component of small caps 80% of it depend of internal US economy while only
[01:17:49] 40% of the large caps is only depend on US economic change and especially these rates so we see the stats on the following slides so but this is like a great understanding of the how small caps and large caps really operate and
[01:18:05] how they do help each or interfere to each other in terms of ratios. Uh Chris, Chris, what what's your comment on this? comment on this? >> Uh you know, I'm I'm thinking about
[01:18:25] run of luck recently. >> Mhm. [clears throat] a sentiment gauge. I trade Russell from time to time, but I'm having just such a
[01:18:37] hard time trying to think of a world in which small caps outperform >> Yeah. >> Right. Or the mag 10 or whatever we want of what's in what's in that, you know, what's in the bucket of Russell 2000
[01:18:51] >> Mhm. >> Yeah, I understand. >> Yeah, I understand. Yeah. So, this is like the slides. I'm sure like Chris, do you like it anymore? because it's kind of like uh more micro uh why small caps
[01:19:06] dominate or respond more why it's the same thing I said earlier so it's like 70% of it like it reflects to the banking system this interest rates so
[01:19:18] when there's rate cuts reduce borrowing cost for the faster for the small caps so this 70% of it consists of the small caps rather than 30% on the large caps caps rather than 30% on the large caps and As I said, small caps, the component
[01:19:34] of small caps, 80% of it, it's US-based economy and also benefit directly from the US growth or stimulus, which is interesting rather than like 40% of the
[01:19:46] large caps. So, the general banks like almost like 70% of small caps, they are already priced in in IWM because it's like the component of it. So if there's
[01:19:58] like the component of it. So if there's any change in the rates it affect like vigorously the IWM small caps. Another factor is that 48% of the components of
[01:20:11] the IWM or these small caps it's really sensitive to the market to the bigger sensitive to the market to the bigger market to the uh SP500. I I took an market to the uh SP500. I I took an example like if Sy move like 2% IDM can
[01:20:25] move closer to 3%. Which is like more almost like 8%. Which is like a significant number. If you're going to trade any component to IWM or IWM as ITF
[01:20:37] know this factor like you will have like 40% 48% of moves more than uh large caps and also I I put some kind of stats behind like these meetings events how it
[01:20:51] behind like these meetings events how it affects both ASPI and IWM just for you to understand deeply. So when you go to the next one, so we saw kind of like IWM dominates a little bit and we saw like this downside how the daily draw downs
[01:21:06] really kind of works in IWM and and these large caps you will see like 4 58% these large caps you will see like 4 58% of it has like the max the way max draw downs ever. So when you compare to the large cap and small caps uh small caps
[01:21:22] have a 50 or 59% draw downs more than that and also as I said it's 48% more sensitive to the market. So it's more dangerous when you don't understand
[01:21:34] this and you want to tra you are trading you are trading these uh these ETFs you got to understand how better to to take risk and how to size your positions according to draw downs because any ser in market it's bigger than you think so
[01:21:49] to the next slide so this kind of like kind of stats I put behind this uh logic kind of stats I put behind this uh logic and forward pay ratio is kind of like as a price when you divide by the next uh year earnings this will take like 12
[01:22:05] year I mean 12 months. So the lower the cheaper the the stock is and I put the different kind of results on the uh the uh the next uh uh corams where you see
[01:22:17] uh the next uh uh corams where you see where the u IWM is so cheap than SP500 where the u IWM is so cheap than SP500 or SPY as an ETF of course but of but when you compare the risk you can't compare because IWM is more riskier to
[01:22:31] compare because IWM is more riskier to trade in more than uh um SP500 and also the volatility in IWM is more people people are interested in kind of like people are interested in kind of like stocks or ITF which kind of like bring
[01:22:44] volatility. So when we go to the um to the takeaways, so this is a kind of a summary of everything I said. Right now we kind we kind of see like uh IWM kind we kind we kind of see like uh IWM kind of dominate uh the SP500 I mean small
[01:22:58] caps dominate uh large caps but initially when you go on average large caps still dominates which is a good thing to know and start behind can show. So another thing I can I can conclude this study with when you IDW
[01:23:15] pays more premium than uh than SP500 or than large cups. So but when you you than large cups. So but when you you want to size it try to size at 20 to 25% because when you you know throw the sizing portions because the risk and you
[01:23:30] throw the premium [snorts] you're going to take like 48% risk more than you're to take like 48% risk more than you're going to take into large cups. Yeah. And that's a really important point Jamal, right? You know, not everything is
[01:23:43] the volatility metrics, just got to be aware when you're doing one size and you know, ES, it's a different level of risk than when you're doing it in RTY. And important. That way you set your strikes at the appropriate levels.
[01:23:57] so therefore I'm going to get short IWM,000. appreciate that. >> Yeah, that is that is also one of the takeaways there, Gad. Thanks for joining us. I need to get on your Stitch Fix
[01:24:10] subscription. That way I [laughter] can >> fix because right now it's like all Vori >> No, you look nice. >> I need to get
[01:24:25] today, the best ways you can help us are liking the video or subscribing to the channel. Either one of those really helps us out a lot. Okay, so around here you guys already know the drill. Like you already know that we are premium
[01:24:38] to live on the short side of the option contract. We want to play time. We want to play volatility. We want to play probabilities. We want to do all those kinds of things. But time to time, every once in a while, we want to venture off
[01:24:51] onto the other side of the contract and maybe buy a little premium. Well, today that's what I want to talk about. When does it make sense to maybe consider contract? Well, I can think of three specific scenarios and I want to unpack
[01:25:06] specific scenarios and I want to unpack those in detail right now. So again, by and large, we want to be on the shores alley contract, right? We want to play premium, especially out of the money premium, you're going to have
[01:25:18] probabilities of profit that are in excess of 50%. Could be 60, could be 70, could be 80, could be, you know, 97 for my three delta put sellers out there. I you've got to blaze your own trail. We want to trade the high probabilities of
[01:25:32] being out of the money because that gives us room to be wrong. That gives us a little bit of buffer and a little bit of wiggle room on the position when it comes to not needing to be right historically. And then lastly, we've got
[01:25:45] realized volatility on average over time. Doesn't happen every single time, hanging our hats on. So, when it comes to why we're on the short side of the why. But when does it make sense to be on the long side of the contract? Well,
[01:26:00] here's the first scenario. when the VIX is super low, like you've got a VIX at 11, 12, 13, 14, you're just not really getting paid to sell premium. You're just not really getting paid to be on that short side of the option contract.
[01:26:14] And so in these markets when volatility is at these levels, it's now going to make a lot more sense to be on the long side of the contract because a option prices are cheaper. So whether you're buying the options outright, again,
[01:26:26] necessarily suggest, or even buying your spreads, they're going to be relatively cheaper than they would be if volatility was higher. But then also remember, revert. Like volatility has a tendency to move back towards its long run
[01:26:40] average. So with a long run average VIX at like maybe 16, 17ish, when you've got a VIX at 1314, like there's some upward pressure for volatility to expand. And of the range for a very very very very very
[01:26:54] long time. So it doesn't mean that it's going to revert back you know today or statistically this is a decent time to take a shot by buying premium and playing for that volatility expansion.
[01:27:06] Okay. So scenario number two earnings right? If you've been around the tasty love to trade earnings. There's high volatility. There's lots of movement, lots of action. And honestly it's just fun. like you want to do something in
[01:27:19] something in, you know, some hot stock in the marketplace, you want to take a doesn't matter. It's just it's fun. It's engaging to trade earnings. know, man. I mean, it can be a little crazy, right? The moves after an
[01:27:34] earnings event can be rather significant. So, it can make a whole lot of sense to maybe buy options going into earnings rather than selling options. By and large, we do think the opportunity is still on the short side of the
[01:27:46] announcements, but I respect the fact that some people might look at the scenario and the situation and say, "Man, I'm looking at AMD earnings. I'm you're trading Nvidia earnings. And
[01:27:58] this from the short side. I would much rather do this from the long side." That's totally fair. That's very reasonable. That's going to be a great time and a great scenario for you to lean into the long side of the options
[01:28:10] contract and consider buying some premium. You could buy vertical spreads. butterfly sh to yesterday's calculated risk. You could buy a lot of different strategies, diagonals, calendar spreads, even around earnings and play that long
[01:28:23] side of the option contract in a much more controlled way. Okay, scenario you a little bit of strategic diversification, right? When you've got a portfolio, when you've got a book as the pros call it, and it's mostly short
[01:28:37] premium, it's mostly short options. It's like that's all well and good. You got you got all those things, but just to smooth things out a little bit, just to smooth out your directional bias, just to smooth out your, you know, your
[01:28:50] exposure and smooth out the different strategy sets that you might be using, it can make a little bit of sense to add in some long options and add in some long spreads and add in some debit strategies that really kind of balance
[01:29:02] everything out. Now, let's be clear about this. You're buying verticals, you're buying calendars, you're buying diagonals. In my humble opinion, those the needle. Those are not going to be the things that ultimately kind of get
[01:29:14] you where you're trying to go. And so, we can't expect too much out of our long premium strategies and put too much pressure on them to carry the load and premium is supposed to do. And so, it
[01:29:26] diversify, but we just have to temper our expectations, make sure that we're strategies, you know, things that they were really never intended to do. Because remember, when you buy options, especially naked options, but oftentimes
[01:29:41] even with spreads, what are you giving up? What are you sacrificing? What are effectively, you're not going to have high probability. You're either going to money spread, or you're going to have very low probability, 10%, 20%, 30% with
[01:29:55] like a butterfly or something like that. And you also don't have time working for you. So, the two primary pillars of what we like to lean on as a premium seller non-existent or b working against you when you buy premium. So, hopefully now
[01:30:09] you can kind of see we can't really expect too much out of these strategies in the end in terms of being a really significant needle mover. And that's why at Tasty Trade, we lean on the probabilities, we lean on theta, we lean
[01:30:22] on the shorts out of the option contract because we do feel like that's where big needle movers. Those are going to be the things that get us where we're trying to go and move the portfolio forward. But still, there's a time and a
[01:30:35] premium to your portfolio. And hopefully now it's a little bit clearer to you what those times are and where those places are. And I'll see you guys next places are. And I'll see you guys next time.
[01:30:51] best ways that you can help us by liking the video or subscribing to the channel. Either one of those guys really helps us out a lot. All right, so earnings season is here and we all know what that means. Everybody wants in on the action, right?
[01:31:05] get going. We want to trade our favorite stocks. We want to get in on the big names, use our favorite strategies, take our directional shots and what have you. But we all know that earnings, man, it can go either direction. I mean, these
[01:31:18] events are binary in nature for a reason. there is most likely going to be a very explosive move in the stock one way or the other. And so when it comes to earning specifically a lot of times using a strategy that is defined risk is
[01:31:32] you guys know if you follow me for any length of time you know that I don't that I think there's a lot more opportunity with undefined risk strategies but still we have to be aware of kind of the potential quagmire that
[01:31:46] we're walking into. And so around earnings, I definitely have a greater love, at least a greater like for defined risk strategy. So today, I want to walk through my all-time favorite defined risk strategy for earnings, the
[01:31:58] expected move butterfly. So most of the time as premium sellers, like we're volatility. Right? We're selling premium, we're playing time passing, we've got the positive data, we've got the the the time decay, we've got all
[01:32:11] that's great. We're also trading volatility. We're trading volatilities We're trading volatilities, you know, natural kind of grind lower over time. And so these two things are nondirectional in nature. And that's
[01:32:24] typically what we're hanging our head on as a premium seller. Okay? But every once in a while, we might want to trade direction. Like every once in a while, Every once in a while, we might want to take a bearish shot. And around
[01:32:36] earnings, one of the metrics that can be really nice to kind of have an objective view of the analysis around that stock or the market at that given time or what have you is the expected move for that cycle. So looking looking at the
[01:32:49] expected move using the expected move for that cycle in that stock can really give you an unbiased look at what the market is pricing in for the upside or the downside. And the really cool thing is we can use the expected move
[01:33:03] alongside the expected move butterfly to set up a really nice directional shot that's relatively cheap to play earnings and play it to the upside or the downside, however we see fit. So, let's hop into Tasty Trade now and let's set
[01:33:17] one of these guys up. All right, so I'm inside of my Tasty Trade platform and I picked a real doozy of a time to do an expected move butterfly around earnings right now. And so if you go to like the Tasty Default watch list, I mean, you
[01:33:31] looking at this before the video and it's like, man, we've got Len like Len has earnings today. Never heard of them, right? We've got Adobe coming up maybe could potentially trade Adobe, but you've got Kroger next week and JBL on
[01:33:45] ACN. And it's like, okay, this is not exactly the season for the heavy hitters. If I go into the Tasty Default watch list and I sort by earnings just you're going to see that I mean there aren't really any decent ones coming up
[01:33:59] that we like to trade on a regular basis until later on in July. And so really this isn't the best possible time to do a video like this, but we are so far we're going to go ahead and still use the same basic principles of trading and
[01:34:14] expecting a butterfly like in the front week around a binary event. And so that way you are ready come time July when there are more earnings opportunities. Okay. So let's use Google for the purposes of this example. Now I may not
[01:34:27] have done a good job from a calendar standpoint in terms of the best possible time to do a video like this. However, it is a Thursday. So today is a Thursday and oftentimes using an expecting a butterfly. I'm looking to set that guy
[01:34:40] up in the front week. So using that Friday's expiration. And the reality is this, Thursday into Friday butterflies are really, really nice because with a butterfly, you want to nail the direction of move close to expiration.
[01:34:54] That's going to allow you to achieve the most profitability out of the strategy. And so by choosing an expected move butterfly on Thursday going into Friday, you're going to be in a situation to potentially make a decent amount of
[01:35:07] money in a pretty short amount of time on that following day's opening bell. know, the previous week or even like a Monday or a Tuesday going into Friday, it's a little bit more challenging to make significant profits on the strategy
[01:35:20] because with a butterfly, you want all the extrinsic value to come out of the options. You want all the extrinsic value to drain out of the options. And butterflies oftentimes cling to their extrinsic value until the very end. And
[01:35:33] so Thursday into Friday, butterflies, Wednesday into Friday, butterflies using the front week are going to be my favorites. Monday and a Friday and because they do give you more opportunities to make money, but you're
[01:35:46] money. Okay? So, if we pretended that Google had earnings tonight, let's say, and I wanted to set up a butterfly to take advantage of that, then what I might do is, let's say I wanted to play Google to the downside. So, a lot of
[01:35:59] my butterfly is I want to situate my strike right around where the expected move cuts off. So, this copper strip is the expected move for this cycle. So, it's only a 1-day cycle. The expected move obviously is only plus or minus
[01:36:13] 345 and I sold a 340 and I went ahead and bought a 335 because the butterfly has to be a one by two by one. So, I go back into the center and I double that guy up. And you
[01:36:29] can see that is a very very cheap way to take a directional shot, right? I'm only paying 90 or 91 cents for a $5 wide butterfly. And so again, very cheap way. Take your directional shot if you miss and if you're wrong. And in this case,
[01:36:44] going to lose what you paid. Like you're debit that you paid. If we were to set this guy up on the call side, you're going to see a very, very similar setup. If I buy at 345, I sell a 350, I buy a
[01:36:57] If I buy at 345, I sell a 350, I buy a 355, I double up on the 350, again, it's 95 cents. It's basically a symmetric market right now with the with the Google be with the the Google with Google being right around 345. And so
[01:37:09] market, we essentially have same the same pricing on both sides of the down or up, it's effectively going to be the same risk in both trades and the same risk return dynamic. And generally speaking, what I want to do here is I
[01:37:24] want to size my butterfly such that it Right? Remember with defined risk, we want to be typically 1 to 3% of our account. Now, in this account that I'm trading here, the from theory to
[01:37:37] $35,000 account. So, this is a very small position relative to my account size. I could easily go up a few more dollars, no problem. But generally you want to live on the lower end, you want to live on the higher end, that's
[01:37:50] generally speaking, that's going to be a pretty good range where we can where we can live. Now, the wider you make your butterfly, the easier it's going to be to make money. That is just the truth. But of course, we've heard it before,
[01:38:03] and here it is again. For every gimme, there's got to be a gotcha. And so, if I'm going to widen my butterfly, then I'm going to have to pay more for that additional width. So, for example, if I just stay on the call side here, just to
[01:38:16] make this a bit simpler, let's say I move my 345 strike down to 342, and I move my 355 strike up to 357 12. Look at what happens with uh to the debit that I pay. It's gone up to $2.32.
[01:38:28] But now I have a lot more money that I could potentially make. Now my maximum profit is over $500 whereas before it was only about $400. My probability is higher than it was previously because again the market understands and the
[01:38:41] metrics understand that this is going to be an easier trade to manage if it moves in my favor. If you have a super tight butterfly like a dollar wide or $2 wide, Like yes, it's not going to cost you anything. Like you're literally not even
[01:38:54] going to know that it's gone if you lose it. problem is those are very very hard manage. You have to thread that needle. I have to get the perfect price at the perfect time. And so I much prefer to widen out my butterflies to give them
[01:39:08] probably settle on this butterfly whether it's to the upside or the depends on, you know, the directional bias that I might have. But this is Give me a little bit more kind of meat on the bone when it comes to, you know,
[01:39:21] the risk return dynamics. Give it a bit more economic significance. So, when you're setting up your butterfly, your expected move butterfly, I should say, expected move with your short strike, and then choose the width of the
[01:39:34] butterfly relative to your position sizing parameters in your account. And again, this is a great strategy for a binary event like an earnings release. So, there you go. That is an expected move butterfly. Now, again, it's not
[01:39:46] because I couldn't really find one today, at least in terms of a stock that we all know and trade and are familiar with. And so save this in your repertoire for when earning season comes around in just a couple of weeks. And so
[01:39:58] you will be ready to go because we want to hang our hat as premium sellers on to time taking a directional shot. I the game and you might even make a little bit of money. And now you have a
[01:40:10] really really cheap way to do that relatively speaking with the expected move butterfly. And I'll see you guys next time.
[01:40:22] best ways you can help us are by liking the video or subscribing to the channel. out a lot. So, generally speaking here at Tasty, we like to sell premium, probabilities. We want to play into the positive theta. We want to be on the
[01:40:37] generally speaking. But every once in a while, we also like to flip the script. buy volatility. Every once in a while we like to use debit strategies and kind of play for volatility rising. And one of the classic strategies to set up for
[01:40:52] that type of play is a calendar spread. So what I want to do uh what I want to do today is hop into the platform and let's set up a calendar spread. But talk in general terms. What does that spread look like? Well, it is going to
[01:41:06] be a multiple expiration cycle strategy where you're selling the front month and choosing the same strike in both months. So, it's very much an overlapping feature of the strategy between the short option in the front month and the
[01:41:20] long option in the back month. And the reason why you set the strategy up this advantage of two elements. You want to take advantage of time decay even though to take advantage of any potential volatility expansion. So, the time decay
[01:41:34] short option that you're selling in the front month, it's going to burn faster than the back month. it's going to decay more quickly than that long option that is sitting in that back month. And for the volatility aspect, the back month
[01:41:48] option is going to have a higher Vega than the front month option. And so by month, if there is any volatile expansion in that underlying stock, you are likely going to see a pop in your P&L from that volatile expansion. This
[01:42:01] is why we typically like to do calendar spreads when volatility is on the lower end of the range. So, all right, let's hop into Tasty Trade and let's set one inside of my Tasty Trade platform and I've got Meta pulled up and this is a
[01:42:17] $600 stock. Okay, so the first thing you want to understand is we really like to use calendar spreads on higher price stocks. So, not necessarily $600, but necessarily kind of preclude preclude you or prohibits you from doing a
[01:42:33] calendar spread in that stock because the higher price of the stock really plays well with the more aggressive management style that we typically deploy with calendar spreads. We're typically managing these spreads at 10
[01:42:46] to 20 to 25% of our debit paid. And so if you choose a really low price stock like a $50 stock or a $75 stock, it's going to be a super cheap calendar spread, which is nice because that is indeed your maximum loss, but it's just
[01:42:59] economic significance when it comes to the profit potential on that strategy. So, okay, so I'm in Meta. The way that we would generally set up a calendar spread is going to be again, I'm selling the front month and I'm buying the back
[01:43:13] right now for the purposes of this illustration. We'll come back to that at illustration. We'll come back to that at a later date. Usually, we like to be at month and the back month. So, you can see we're at about that ratio right here
[01:43:27] with this meta calendar spread. So, when I go to set this guy up, I'm going to I go to set this guy up, I'm going to open up my July cycle first. Now, in we're going to be selling and buying the same strike. So, the 580 in bull cycles
[01:43:41] or the 560 in bull cycles or what have you. Usually calendar spreads, the spirit of the calendar spread is a more of a neutral strategy. So you're usually typically choosing a calendar spread with some strike around where the stock
[01:43:54] is currently. Now you want the stock to pin the strike. So whatever you choose, that's where you want the stock to go. So if you want to be more directional, the low end. You can certainly choose strikes on the high end if you want to
[01:44:06] be more bearish or more bullish. But usually the spirit of a calendar spread is more of a neutral strategy. On that note, we typically prefer put calendars relative to call calendars. It's not a huge difference, but remember this is a
[01:44:22] volatility expansion play. This is a long volatility play. So, if volatility rises, that's going to help our calendar spread. Well, we know, or maybe you time you're hearing it, but market prices and market volatility typically
[01:44:35] move inversely. So, when market prices are down, volatility is typically up. where the market is down huge and volatility is up pretty significantly. And so we typically observe this relationship across the board with a lot
[01:44:48] of individual stocks as well. So if I'm playing volatility to expand, I'm playing volatility to the upside, then I want to position myself to potentially extract as much benefit from their volatility expansion as I possibly can.
[01:45:00] So choosing the put option slightly below where the stock currently sits. Even if it is mostly neutral, choosing a 580 or 575, that's going to allow me to situate my strike such that if there is volatility expansion and the stock price
[01:45:13] moving lower, that's going to really help me. So right here, let's say I sell a 580 strike, which is just slightly below where Meta is right now in July. And then I close up July. I go to August and I buy the same strike, the 580
[01:45:25] strike. And so notice how this is a debit of $14 on this strategy. So this is a fairly significantly priced calendar spread. You would probably want to have, I would say, maybe $30,000 in your account or so, or maybe even more
[01:45:39] less. But this is not going to be a strategy for a tasty bite-sized account. But if I'm managing this at 10% of debit paid, that's 140 bucks. 20% of debit significant when it comes to the management. When I'm using my or when
[01:45:55] I'm selecting my strikes, I want to make sure that the exttrinsic value in the front month is over and greater than the debit that I pay in the strategy. This gives me the best possible chance to make money from time decay because I
[01:46:08] just sits here, which we know that it and ends up back here when all is said and done, then all that extrinsic value going to cover the debit that I pay in the strategy and it's going to
[01:46:22] effectively make it a little bit easier for me to make money. So this $14 and some odd cents. If we go back to July where my front month is, you can see I'm collecting over $22 in exttrinsic value. I know that that's all extrinsic value
[01:46:36] And so the way that this calendar spread is setting up in Meta looks pretty good. This would be a great candidate for a kind of makes sense from the higher priced stock preference to the put uh
[01:46:50] put preference. It's mostly a neutral strategy managing aggressively at 10 to 20% or even 25% of debit paid and then making sure that front month extrinsic covers the debit. So, okay, so that is a calendar spread. Hopefully that makes
[01:47:03] sense and we kind of covered the major points of setting up a calendar spread. Now, in today's market with the VIX skyrocketing and volatility rising, this put on a calendar spread in, but when volatility eventually collapses, when
[01:47:17] know that it will, if history is any guide now, hopefully you are ready with that low volatility. And I'll see you guys next time.
[01:47:33] best ways you can help us are by liking the video or subscribing to the channel. Either one of those guys would really help us out a ton. So, how do you trade a runaway bull market? If you're watching this video when it was released
[01:47:46] in June of 2026, it's like, man, this is the market that we are in right now. couple of downdrafts and what have you, but man, it has been incredibly strong to the upside. Well, the truth is our biggest risk as a premium seller is
[01:48:02] away from us. Whether it be to the upside or the downside. So whether you're trading a runaway bull market or a runaway bare market, everything we're going to talk about today for the next, you know, two or three or 27 minutes
[01:48:15] applies to both of those guys. So let's dive right in. Let's go to let's go through three things that you can do to help protect yourself against a runaway bull market or a runaway bare market. All right. So, dayto today I'm going to
[01:48:29] say you may or may not agree with me. The markets are pretty random and pretty about asset pricing, you start think about what's controlling asset price brownie in motion, you've got the efficient markets hypothesis, you got
[01:48:44] shocks, you got all these different mathematical models that are kind of pointing to all right, there's a great degree, a high degree of randomness and unpredictability. So, a lot of the time the market's just kind of wiggling. It's
[01:48:58] just kind of waggling. It's just kind of moving around a little bit on either side. And that really helps us as premium sellers. And even if volatility ticks up, which is what we want because it makes the premiums on the options
[01:49:10] that much richer. Still, it's very rare that we get caught in a runaway move that just has no signs of slowing down. But that does happen. you get that one-sided move where it's just wiggling and no waggling or it's just zigging and
[01:49:25] no zaggling. And so what do you do in that scenario? Here are three things that scenario? Here are three things that you can do before you ever put the trade on. The first thing is your position size. The second thing is your
[01:49:37] capital allocation. And the third thing is going to be your strategy selection. Because remember what price does daytoday, it's out of our control. So we need to focus on what we can control. We need to control the controllable. And in
[01:49:49] my opinion, position size, capital allocation, and strategy selection are all within our control. And all of these things happen before the trade is even things happen before the trade is even live. So number one, first and foremost,
[01:50:02] is going to be position size, right? Everybody wants to talk about, Jim, how do I hedge against a big move against me? How do I hedge against a big drop or a big pop or whatever? And my answer is always the same. It has to begin with
[01:50:14] position size. This is the most kind of organic way that you can hedge against things that move against you by controlling that position size on order entry. You want to be small enough such that it frees you up to do whatever you
[01:50:29] want to do later on. Like if you want to later on and add on additional hedges, kind of lean into the position size and let the position kind of, you know, do that too. But if you are too big on
[01:50:42] you in terms of the different things that are available to you and at your that are available to you and at your disposal. So position sizing is number money premium sellers, right? We're selling 30 delta, we're selling 40
[01:50:56] delta, whatever. But once that position spills over to now where it's in the money, now the deltas begin to grow. So now they're not 40, they're 50. Now they're not 50, they're 60. Right? You've got a naked position on those
[01:51:08] deltas are starting to grow. So, what was a very small kind of innocent position at 25 or 35 deltas is now all of a sudden 75 deltas and it's going to feel a lot bigger than it was at order entry. And so, if you don't size on
[01:51:22] entry so that you're okay when the position does go in the money, I think you're doing yourself a huge disservice and it is going to show up at times when you probably really don't want it to show up. So that's why when it comes to
[01:51:36] position size, generally speaking, define risk, 1 to 3%. That's a great reference point, 1 to 3%. If you have a larger account, so let's say you're at 100,000 or more, you could probably even be below the lower end of that range. If
[01:51:48] you have a smaller account, so let's say maybe 10 or 12,000 or or less, then you might be actually above the upper end of that range. You may have to go to 4% or 5% or 6%. But 1 to 3% for defined risk is a great reference point. for
[01:52:00] undefined risk three to 7%. In terms of your buying power allocation, again, you below the lower end of that range. You have less capital, you may have to kind of creep up to maybe 8% or 9% or 10%. I probably wouldn't go above 10% because
[01:52:14] again, you want to be small enough on Nifty such that you can go ahead and manage the position objectively and do all the things that you want to do and think with a level-headed, you know, mind all throughout the process and not
[01:52:27] get emotionally charged up. So the second thing capital allocation right now Cedus parabus which is all things being equal for all my Latin groupies today but you guys already knew that capital allocation when it comes to how
[01:52:41] much capital we're using obviously we're going to prefer less capital relative to more capital. We would love to get where we're trying to go using less capital rather than more capital. I mean that goes without saying. I mean that's a
[01:52:53] given. But there are times when we might have to deploy a bit more capital to get need to tick up when it comes to capital allocation. Just be careful that if you're concerned about guarding against a big move against you, whether it's to
[01:53:06] the upside or the downside, both would apply. You're always going to be better off if you have less capital deployed. And so, that's why generally speaking, we like to live somewhere between 25 to 50% most of the time. There are
[01:53:19] be, you know, above the upper end of that range and maybe even times and places when you'll be below the lower end of that range. But if you are really concerned and you want to guard against and protect against a runaway bull
[01:53:31] would live on the lower end of that range, maybe be around 25 to 35%. And then thirdly, the strategies that you select. So obviously if you go define
[01:53:43] iron condors and diagonals and butterflies, they're going to have built-in mechanisms into the actual strategies that are going to protect you against runaway moves against you. they have kind of outlier risk mitigation
[01:53:56] built into the structure of the strategy because they are defined risk by nature. protect against the outlier moves against you. You have the gimme of the protection against that runaway move. But of course we know it's been said
[01:54:12] let me know if you know who said it. Put it in the comments below this video because it is a catchy catchy jingle. Very gimme there's a gotcha. So what's the gotcha? Well, one of the gosses with defined risk, in fact, I can actually
[01:54:25] think of two. Number one, you don't have the unfiltered exposure to the Greeks. the pure positive data. You're not going to get the pure negative Vegas. That's trying to do in terms of your Greek exposure. But then number two, they're
[01:54:39] strategies are much more difficult to adjust if things do go against you and you kind of want to do you kind of want to maneuver a little bit. You kind of guys a little bit. much much harder to do with a vertical spread or iron condor
[01:54:53] or even a butterfly when it comes to the adjustments relative to undefined risk undefined risk strategy, a great strategy, which is my favorite strategy, is the out of the money short put, right? Again, specifically if we're in a
[01:55:07] times you're like, man, I kind of want to participate in this. Like, man, I to take advantage of this super strong market, but I don't really want to buy really want to be the guy that buys the NASDAQ at 313 and that's the top tick
[01:55:22] know seven or eight months or seven or eight weeks or seven or eight days or one of the strategies that you can deploy in this type of market is by selling an outofthe- money put. It is a naked strategy. You do have undefined
[01:55:36] you're like, man, I'd be happy taking the stock or taking the index at that in the event that the market goes nowhere or even goes higher. And if you
[01:55:48] are in a scenario where the option does go in the money and you are going to be assigned at that price, you're still better off than if you had bought the stock at that tippity top price point. So as an active trader, right, we can
[01:56:01] but there are certain things that we can control. We can't control the price. We Nobody knows what's going to happen next. But we can control our position allocation and we can control our strategy selection. And so put those
[01:56:15] things in place. Let the math take over and give the probabilities a chance to play out. And I'll see you guys next time.
[01:56:28] best ways you can help us are by liking the video or subscribing to the channel. a lot. So, one of the things that you guys see us do all the time on the mean, we're rolling up, we're rolling down, we're rolling out, we're rolling
[01:56:43] in. This is a very common tactic that we like to deploy to maneuver around the management of our positions, rolling. And so today, I wanted to take a few And so today, I wanted to take a few minutes and let's unpack what it is, why
[01:56:57] we do it, and kind of some of the inner workings behind a rolling strategy. Okay, so let's start simple. What is a roll? It's actually very, very straightforward. All you're doing is you're closing your current position.
[01:57:10] out to a later cycle and you're reestablishing oftentimes the exact same position or maybe something that is slightly different. So all you're doing is picking it up, moving it out and dropping it back down. That is a rule.
[01:57:25] Now sometimes when we roll a position, we may do it inside the same expiration we're going to talk about here in a couple of minutes, we may not necessarily be moving it out to a later expiration cycle. But most of the time
[01:57:37] when you hear us use the term roll, we are referring to moving it out in time and adding days to expiration to the trade. But understand there are times too where we do roll within a given expiration cycle. All we're doing is
[01:57:50] we're changing the dynamics of the strategy slightly to kind of maintain the risk parameters are a little bit more to our liking. But when it comes to rolling out in time specifically, this can be really advantageous to us because
[01:58:04] again, remember what are we doing, right? What are we doing on the tasty winners. We're trying to engage with high probability trades. So when the market gives us something that works out, we want to close that. We want to
[01:58:16] want to make sure it's economically significant, of course, but we don't want to stay in the trade too long. By rolling out in time and giving trades extended duration, we are able to kind of give those losers a chance to come
[01:58:28] always going to work. It doesn't mean that every losing trade is going to come back to you, but it does give the losing trades, the ones that don't work, a little bit more time to work out. We just want to tap into the natural eb and
[01:58:42] tap into kind of the natural back and doesn't mean that every red trade is going to turn green. It doesn't mean scratch, but it does mean that when things don't work out, we have some
[01:58:56] tactics, we have some adjustment protocols, we have some mechanics that we can turn to to kind of give the trade a little bit more life and give the trade a little bit more time. That is what a roll is just in a nutshell if we
[01:59:10] zoom out and kind of look at it kind of broad-based. Okay. So now when do we roll? Well, there are two basic times when we would consider rolling. There bit more subtlety and nuance when it comes to actually, you know, when we
[01:59:23] roll. But the two main pillars are going to be when the strike is hit and when we hit 21 days to go. Now, both of these more readily apply to undefined risk rather than defined risk. Defined risk is a special thing and we'll come back
[01:59:36] to that in just a couple minutes. But let's talk about when the strike is hit with an undefined risk position. So, we sell a put or we sell a strangle, examples. When you put on this strategy,
[01:59:48] you put on this strategy, like the strategy is working, everything is easy, the air is fresher, like everything is absolutely amazing. Well, now all of a sudden the strike gets hit. Once the strike gets hit, now that out of the
[02:00:02] moneyiness on the trade is gone. Now that out of the moneyiness, that buffer that you had has now been evaporated, which that means that now the strike is close to being in the money. So now we're in a situation where, you know,
[02:00:16] don't have any wiggle room left and the strike might be in the money, which isn't necessarily a death sentence. It doesn't necessarily mean this is going to be a losing trade, but it does begin to change the risk parameters of the
[02:00:28] position rather significantly. Case in point, your directional bias is now going to start to grow, right? Because at the money options have a delta of 50. strikes are out of the money, the deltas are below 50. They're 30, they're 25,
[02:00:42] they're 35, whatever. And so it's not going to feel like that big of a position as it moves around. But once it goes in the money and it spills over that at the money strike, now the deltas go to 55 to 65 to 75. So now the
[02:00:56] more significant. And so that's why if strangle, when one side gets hit, the first thing we like to do is actually roll that untested side, roll the other side in a little bit to help to protect
[02:01:10] the side that is being tested. protect the side that is being threatened. So, for example, if I have a short strangle on and the market goes down and my short put is my tested strike, I'm going to be looking to roll my call down and maybe
[02:01:23] trim my directional bias by about 30 to 50%. Because what that does is it protects that tested side if the market keeps going lower. And if the market keeps pushing through that short put strike and goes deeper and deeper in the
[02:01:36] money on the put side, I have more protection because I brought in more premium by rolling that call down. Similarly, let's say a short strangle. call is the tested strike. Now I'm going to be looking to roll my put up. So same
[02:01:50] basic idea, I'm just on the other side of the ledger, if you will. So now I'm strike. I want to protect against the against, you know, the market running up through that short call strike and it
[02:02:02] going deeper and deeper in the money on the call side. And so maybe I roll the put up and trim my directional bias by 30 to 50%. What I'm doing is I'm bringing in more credit. I'm controlling my directional bias on that tested side
[02:02:15] and I'm actually improving my break even point on the tested side. And then even with a strategy as simple as something like a short put, now I only have one untested side because there is no untested side. There's only one single
[02:02:27] side. And if that side gets tested, it is both the tested side and the untested side at the same time. And so what I might do is if that strike is tested, maybe now I just roll out in time. Maybe now I use my rolling mechanics, my
[02:02:40] rolling tactic to just add duration to the trade. That's going to slow down my even point. And it's just going to give me more time and extended duration in short put where the strike is tested, rolling out is typically going to be the
[02:02:55] short call and trim the directional bias, but that's kind of a separate project for maybe another time cuz that's a little bit more involved. And so that sounds like it could be theoretically hypothetically a future
[02:03:08] calculated risk. So you've got to stay tuned for that guy. But also, when it or really un any undefined risk strategy, once we get to 21 days to go, we also are going to be looking to roll out in time. And the reason for this is
[02:03:21] within the last couple of weeks before expiration, so anywhere between 14 and 21 is probably a fine time to roll. The gamma on the position is naturally going position is naturally going to be on the rise. Now, gamma is a second derivative
[02:03:36] of the Blackstone's model. It's showing you how delta changes when the stock layer of directional risk and directional bias. And so by controlling that, by adjusting and rolling our positions prior to getting too close to
[02:03:50] expiration, we're kind of naturally putting a lid on just how much damage no-brainer. If you're at 14 to 21 days to go and you're not where you want to Don't think about it. Just go to the next monthly expiration cycle, pick up
[02:04:05] point, and slow down those Greeks. Specifically, gamma. The key thing we want to remember when it comes to rolling, 99 times out of 100, 98 times out of 100, we want to be rolling for a credit because when we roll for a net
[02:04:21] credit, we improve our basis. We widen our break even points. Now, this doesn't mean that you can't ever roll for a debit. But you just have to understand have to understand that when you do roll for a debit, you are worsening your
[02:04:33] basis. when you do roll for a debit, you are potentially kind of uh shrinking or narrowing that break even point, which is kind of working against what you want selling active trader. So just understand when you pay a debit to roll,
[02:04:48] trying to do. Now again, you pay 2 cents, you pay 4 cents, debit to roll, talking about the more significant debits, but I think as a rule, rolling for a credit is a really, really great reference point. Now, this is really
[02:05:02] easy to do with undefined risk because when you roll out into the future, So, you're pretty much always going to be able to roll for a credit. But with defined risk, so vertical spreads, iron condors, you can always roll for a
[02:05:14] credit. And the times when you do want to roll, when the trade is in the money a credit to roll. It's going to be a debit to roll. That additional time is going to cost you something. And so when it comes to defined risk, a lot of times
[02:05:26] you just have to control your size on entry and be ready to hold that thing to the very end if that's what it comes to. Don't expect to be able to adjust. Don't credit. If you get to 21 days to go and you can do it, then that's fine. But
[02:05:39] to do it. So when you trade something like a vertical, like an iron condor, something definous, like a butterfly, just be ready to hold that thing all the way to the end and don't expect to be able to roll for a credit. If you can,
[02:05:52] that's great, but I would not bank on it. So rolling is not a magic wand. It's not going to turn every loser back into a winner, and it's not going to give you a 100% hit rate. But it is a nice tool to have in the toolbox to allow us to
[02:06:05] lean into the probabilities to allow us to soften the Greek exposure to allow us allow us to improve our basis and kind of slow down that gamma risk that is notoriously on the rise as we get closer to expiration. So again, it's just a
[02:06:20] tool in the toolbox and this is why we roll and this is when we roll. I hope that makes sense and I'll see you guys in the next video.
[02:06:34] Live and we're coming at you with another episode of Options in Action. If you've missed this series, it's basically a new series where I take an old whiteboard concept or maybe a strategy that I talked about previously
[02:06:48] and bring it into an advanced light. We take a look at the platform and we talk some of these concepts. Uh we're going to go through the entire YouTube playlist uh the old whiteboard series. So we have talked about call options,
[02:07:02] put options, we've talked about premium, we've talked about strike prices and expirations, you name it. Uh and today we're talking about the age-old question, can you make more money trading short premium or can you make
[02:07:18] more money trading long premium? And what are the gimmies and gotchas as Dr. Jim says? uh what are the tradeoffs with selling premium versus buying premium? We're going to take a look today and we'll break it down on this edition of
[02:07:32] Options in Action. So, we got this S&P chart pulled up here and this is not the S&P stock or index chart. It is actually a chart of a long call out in December,
[02:07:46] a chart of a long call out in December, the 8,300 strike to be specific. You can see here S&P uh at the top is trading at 7,300. So, we're looking at this call option a,000 points out of the money to the upside. And this is the December
[02:08:00] cycle. So before we dive into this and before I I start spewing nonsense, uh I just wanted to say, you know, when you're selling premium, there's a difference between selling premium in the S&P 500 products like S&P or MEES or
[02:08:17] XSP or [snorts] SPY. Uh there's a big difference between selling premium in those sorts of products versus selling premium in the equity space, right? S&P 500 or other indices even products like SMH uh that have moved quite
[02:08:34] aggressively with the tech sector popping off and selling off uh at the same time. There's things to consider, right? Short premium in the S&P 500. I I've said this before. I think if you can trade successively short premium on
[02:08:48] both sides of a market in an equity, you can definitely do that in the S&P 500 simply because the S&P 500 moves less. It doesn't have the same binary events. It doesn't have the same binary nature of equities. You could have a CEO step
[02:09:03] down and the stock price be down 20% pre-market or after the market closes. announce something something that the market likes and that stock is up or down 20% when the options market is closed. It's not necessarily going to
[02:09:17] happen in the S&P 500. There's also uh market stops. Even if there is a big crash in the S&P, there's certain levels where the market stops trading. uh that doesn't necessarily help you in the case of not taking on risk when it comes to
[02:09:31] short premium. Uh if we're talking like short puts, for example, into a market short puts, for example, into a market move like this or even strangles. Um but what I will say is over the years I've learned that there's a time and place
[02:09:44] for all strategies, right? Uh I have long premium strategies where I'm buying options. It's a lower probability trade if you're holding trades to expiration. But I like to say if you're buying options, you get what you pay for. I
[02:09:57] don't really buy options that are near-term. I don't buy zero day options. I don't buy 7-day options. In my mind, you're buying a lot of implied volatility in those cases. And it becomes just that much harder to be
[02:10:09] profitable on those strategies because you have this super decaying uh asset that is if it moves against you directionally, it's basically going to become worthless and it becomes that much harder for it to reverse and work
[02:10:23] in your favor. If you're buying a LEAP option though, totally different story. Uh LEAP options cost a lot of money. you get what you pay for when it comes to long premium, but I think when you're buying premium, it doesn't necessarily
[02:10:36] have to be a naked option. It can be I actually have a position on in Nike right now. Uh I bought a LEAP option out at the 60 strike all the way out almost at the 60 strike all the way out almost 600 days away, January of 2028. So, this
[02:10:51] was a situation where, you know, Nike drops to multi- multi multi-year lows. We're talking decade lows. Uh this Nike hasn't been 45 at least around this
[02:11:03] price point since uh 2015 if I'm not mistaken. So the further a price falls, especially in a product like Nike where I think we'll still see some upside I think we'll still see some upside potential there, um yes, I could sell a
[02:11:17] put to uh collect that premium, but at the same time, Nike's already fallen uh and it's still down at 40. If I sell a put 16 days away for 100 bucks, sure, I could sell that. It's a higher probability trade, you can see my
[02:11:32] probability of profit is nice and high at 66%. Uh, but I take on the undefined risk nature of Nike where maybe they announce something, the stock's not down another 10 points and now all of a sudden I have a $900 loss on my hands
[02:11:45] and not much management in terms of what I can do. Uh, it also takes a decent amount of buying power, 800 bucks relative to a $40 stock. So, for me, instead of selling a put, uh, especially when a product like Nike or any other
[02:12:00] equity gets to multi-year lows or decade lows, I'd rather just inventory some long-term premium. And you can see here the further out in time you go because you're avoiding the implied volatility increase of something like an earnings
[02:12:15] earlier, you've got plenty of implied volatility here in the near-term cycles that isn't necessarily reflective of these long-term cycles, right? Look at this expected move for June 30th. You have a plus - $4.60 implied move with a
[02:12:30] 60% IV almost. But you look at January of 2028 and it's only a 17point implied move. And that's because the implied volatility is significantly lower when you get all the way out here on the curve. So will I be trading Nike? Will I
[02:12:46] earnings announcement in a defined risk way? Absolutely. Uh like I said, there's a time and place for everything. I think for Nike with the upcoming earnings, 22-day cycle, but I'm going to buy something in July or August. I likely
[02:13:01] will go to something like a diagonal spread or calendar spread uh in that intelligently. I still want to reduce cost basis which has always been uh something that we've said here on Tasty Live. I want to make sure that I am
[02:13:15] reducing my cost basis and improving my probability of success anywhere I can. So in this case, if Nike is offering super high premium to sell something whether it be a calendar spread or diagonal spread, uh we can look at this
[02:13:30] here like the 45 strike in July trading for $2.50, we'll call it the 45 strike in July 2nd. Look at that. You have two weeks of a difference in time, but only I'm absolutely going to be selling something against that long option that
[02:13:46] I buy if I'm bullish. And same thing if I'm bearish, but longer term, Nike is down to 10-year lows. So, what does that mean? It means I'm going to get really mean? It means I'm going to get really far out on the curve here and risk $500.
[02:13:59] much, which is interesting. Nike is still chopped around and this 2-year leap basically is trading for 500 bucks. My whole thesis is would I be surprised My whole thesis is would I be surprised to see Nike go from 45 back up to 50 or
[02:14:14] 55 or 60? it was just there a couple months ago. So my answer is no. I would LEAP option that has much lower implied volatility, I know yes, it's a little bit more costly, but I'm out of the IV spike in the near term. I'm inventorying
[02:14:29] long-term delta inventorying premium that isn't going to decay against me all that much. And if we get a move in Nike from 45 to 50 or $55 or 60, that option from 45 to 50 or $55 or 60, that option is going to uh be worth $1,000, $1,500.
[02:14:44] And we can see this here. If I right click on the option in the chart, the 60 strike, if you right click on the bid or ask, you can have this menu pop up here. View the option in the chart. And here we go. It's been trading for $500
[02:14:57] basically ever since I bought it. But back here, when Nike was at 55 and60, this option was trading for $1,500. So, from a riskreward standpoint, as a product like Nike or any other equity gets to decade lows or multi-year lows,
[02:15:13] I'm going to be inclined to lean into the long-term positioning. I did the same thing in Microsoft, right? Microsoft went from 550 down to sub 400 levels. What did I do? I was buying into some near-term stuff. We we set up some
[02:15:27] short premium trades, of course, but I also did a really long-term calendar spread at the 500 strike. I bought January of 2027 and sold September of trade. I was just like, well, I don't
[02:15:40] term, but I do feel like over the course of the year, Microsoft's going to be higher than where it is now. And that ended up being the case. We saw a nice bid, got all the way up to uh 460, and just looking at the order chains here,
[02:15:55] you can see uh I've had some decent trades up until that point. And the only trade I have left is that calendar spread in Microsoft and it's up a couple hundred dollar uh right now. Uh if we look at the 500 strike, I bought it for
[02:16:08] 500 bucks. It's up $400 right now. So I still want to have it on. I think there's uh a bullish case for it. But to answer the question, selling premium versus long premium, uh I think when you're selling premium, you have to be
[02:16:23] able to withstand all variance within that product you're selling, right? Because from my perspective, the most success that I've had in products where I've sold premium, uh, it's been in products where I've traded small enough
[02:16:36] or the product size was small enough to where I could manipulate the strikes, manipulate my time and expiration or a combination of both. Right? That's the beauty of undefined risk. You have the flexibility to be like, you know what,
[02:16:49] this expiration. I'm going to buy this back and I'm going to move it out a months and move my strike and collect a credit still. So, that is how I approach undefined risk these days. It's going to be a much higher probability of success
[02:17:05] premium versus buying premium, if you sell an option, you just need the stock price to stay out of the money or in this case above your 37 1/2 put. If you're buying premium, you need a directional move in the stock price. And
[02:17:20] that's as simple as that. So, when you think about that, if I'm selling premium the money, I'm going to be much more inclined to sell near-term premium because I know that implied volatility is higher. There's not enough time or
[02:17:34] there's not as much time for the product to move against me in a big way. It can still happen, of course, but that 30 to 60 day window is where the implied volatility is nice and high relative to a nice blend of time value as well. So,
[02:17:48] that window. We have research that shows that that's kind of the sweet spot of implied volatility value plus time value. So selling premium in that 30 to 60 day window. Buying premium, I prefer
[02:18:01] to be outside of that 60-day window. Honestly, I would rather buy premium in a 90-day 100 day option cycle if it if it's something I can afford. In the case of Nike, I can do that in a 25k 30k account. Of course, um even smaller, you
[02:18:16] have the ability to do it because the stock price is so low. But in something like S&P, $7,300 stock price, I don't have the ability to sell premium in here. Uh I can trade spreads in here. I can do uh calendar spreads, some
[02:18:29] diagonal spreads in here, but sometimes the stock price is the determining factor of your strategy. So keep all this in mind and just really make sure if you're selling premium, you you need to be able to withstand the variance of
[02:18:42] any kind of move. I prefer to if I'm selling a put or strangle, uh let's talk about puts. If I'm selling a put, I would rather sell it in a product where I can just hold that premium or take the shares. I would rather not exit at, you
[02:18:56] know, two or three times the loss of that short put because if I'm selling an undefined risk put, I kind of want to have that bullish delta anyways if it does get down there. I don't want to be stopping myself out and then two weeks
[02:19:09] later see that it could have moved out of the money. So, that's just me. Um, but to summarize, if you're buying options, you get what you pay for. I think, uh, in this kind of market environment, I'm always going to have
[02:19:22] buying a 60-day option, I want to be maybe the weekly cycle against it. if there's an earnings announcement where that premium is really juicy and I can reduce the cost basis on my long option
[02:19:35] because the more you can reduce the cost basis on your long option, the more flexibility you have going forward to have that long option be profitable or even a scratch. If I'm selling premium, I'm very cognizant of the fact that it
[02:19:48] is a higher probability trade. you're going to have a lot of winners when you're selling premium, but you should also understand how to manipulate that trade with defined risk debit trades. When you're buying premium, there's not
[02:20:01] certain things like with calendar spreads uh and diagonal spreads where you can manipulate that short option by moving the strike or moving it out in undefined risk short premium specifically, you can do a lot of
[02:20:16] different things. you you have a ton of flexibility uh in the ability to manipulate strikes. And if you look at my order chains for the MEES position, this is my year-long strategy for 2026. I've clearly manipulated this position
[02:20:31] over and over and over. And every single time I do it, I collect more credit. I started with 93 points in credit. I now have 700 points in credit uh overall which means my break evens are 700 points beyond my strikes and this is a
[02:20:46] profitable trade because I've been selling premium to offset any kind of intrinsic value uh losses that might show against me. So short premium I like to reserve it for either products that I can afford any variance in or something
[02:21:02] in like an index like MEES is a great example or IBIT even the Bitcoin ETF that was my year-long trade from last year. U so I think when you compartmentalize these things it puts you in a a good spot to be able to
[02:21:15] withstand variance. And again, if you have a day like today and you're like, "My account is really suffering," then I think your trade size might be off. I think maybe the strategic decisions might be a little bit off. Again, we
[02:21:28] want to be able to withstand as much variance as possible. With undefined variance. The trade size has to be small enough to where you can withstand any success in the future, and it gives you that flexibility to manipulate the trade
[02:21:43] as the markets move. And with defined risk, same story. Uh I like to keep them within $500 to $1,000. I think that's a healthy level for me. But again, if I'm doing a diagonal spread or calendar spread, I have a plan for if things go
[02:21:57] strike out in time. I know I can move that short strike up or down depending that short strike up or down depending on the strategy. But uh yeah, let me know what you think in the comments below. That was a long- winded segment.
[02:22:11] wasn't expecting to go that long, but uh hopefully that kind of mental shift helps a little bit. Again, if I'm selling on finders premium, it's usually in an index product or a micro futures product and it's sectorbased. It's not
[02:22:26] something that's going to move 20% pre pre- or post market. But if I am involving myself in those types of products, it's going to be in a product size that is small enough to where I can withstand any variance. I can manipulate
[02:22:38] the strikes up and down. And I think that's another interesting uh and important point is undefined risers trading super high probability if you're doing out of the money uh sales of options but understand what you can do
[02:22:51] to manipulate that risk profile and that's just going to give you another leg up in the future of trading uh as the markets move and things go wrong for winners, you're going to have your losers, but you got to know how to
[02:23:04] manipulate and adjust those losers if they are undefined risk trades. But you think in the comments below. Please like this video, subscribe to the Taste Live channel, and we'll see you on the next episode of Options in Action.
[02:23:24] Live with another episode of Options in Action. If you've missed the previous episodes, this is a series where I'm talking about old whiteboard videos strategies, but we're giving it more of an advanced twang and we're looking at
[02:23:39] the platform itself, talking about certain concepts that I'm using today and how it applies to everyday trading. We talked about expirations last time. And today I wanted to talk about letting an option expire in the money and
[02:23:56] ultimately taking shares of stock. Al also we can talk about expiration risk and assignment risk and how it's not something that I'm worried about at all. I think we can wrap those up into one and kind of just give you a nice uh
[02:24:10] package of ways to think about expiration and why not to be afraid of assignment risk, especially if you have defined risk spreads or an in the money something like that. So, let's dive into the Taste Trade platform and we'll break
[02:24:25] it down for you. So, we're looking at SPY right now. As you can see, SPY has had a massive rally from the lows of this year. In April, we were all the way down at 635ish. Now, we're sitting at 755. Just an insane run to the upside.
[02:24:42] And maybe that has resulted in in the money options. So, for those that don't know yet, uh if you have an in the money option, it's ultimately going to expire and turn into shares of stock. So if I have a 760 put, for example, that is in
[02:24:58] the money, I will [snorts] ultimately be assigned 100 shares of SPY at 760. Same thing with the opposite side. If I have an in the money call, a short option that's in the money and it is assigned or expires in the money, I will be uh
[02:25:14] basically have 100 short shares of stock at 750. Now, a lot of times we're not really dealing with assignment risk because we're rolling our options positions out in time. And really, assignment risk is highest when you
[02:25:29] don't have a lot of exttrinsic value in your options strike. So, even even with a 750 call that's in the money, 15 days to go, there's still $600 of exttrinsic value that uh somebody would be giving up to exercise this option and turn it
[02:25:45] into shares of stock. In other words, they're taking $600 and lighting it on about assignment risk because it just doesn't happen all too often. I've been trading for over 10 years and I've been assigned maybe three times, four times
[02:25:58] maybe. Uh, in one of them was a celebration. In this case, it was literally like I had an in the money option that was that had $200 or so of exttrinsic value and I woke up the next day, I was assigned on it. I got the
[02:26:11] shares and kept that money, the exttrinsic value. I closed the shares basically doubled my credit overnight. So that's another thing. If you are assigned early and there's plenty of exttrinsic value associated with your
[02:26:25] option still, it can actually be a benefit to your position. Uh the only situation where that would not be the case is if you had a dividend that you had to pay. So like with an in the money call at 7:30 for example, let's say spy
[02:26:39] call at 7:30 for example, let's say spy had a dividend of $400. there's $288 of exttrinsic value here. The counterparty would give up their $280 of exttrinsic value to get the $400 dividend. So in that case, it's a net positive for that
[02:26:53] counterparty. And that is the circumstance where you can get assigned early. Your options can be converted to stock early uh if there's a dividend where the dividend exceeds the exttrinsic value left in the option. But
[02:27:08] other than that, like you can look at these options here. Like this is a 715 these options here. Like this is a 715 720 option. It's 35 points in the money and it still has $200 of exttrinsic value. This is still an option that has
[02:27:20] value. This is still an option that has a low assignment risk here. So not into shares of stock. What I do want to bring up is how it can actually change your risk profile for the better in a lot of cases. So yes, if you have a
[02:27:36] spread, so like let's say you've got a uh 755 750 put spread, right? You're kind of teetering on this short option here. This is a defined risk trade.
[02:27:48] here. This is a defined risk trade. However, if SPY drops significantly and over time someone exercises this short put, you're still left with a long put here that protects your risk, right? Because a short put converts into a 100
[02:28:00] shares of stock. A long put represents a 100 short shares of stock beyond the strike to the downside. So even if I have a short put spread and I'm assigned a 100 shares of stock in SPY, if I can hold that buying power, that's the big
[02:28:16] that would certainly be increased relative to this $300 uh buying power relative to this $300 uh buying power here for this narrow spread. It actually increases my max profit substantially, potential max profit substantially. And
[02:28:29] that's because the most I can make from this spread is just the credit I received on entry. However, if SPY drops like a rock and I'm assigned on this short put and I still have this long put, as long as I have the long put, my
[02:28:43] risk profile doesn't change on that package. But I would now have 100 shares package. But I would now have 100 shares of SPY with a static delta of 100. Which means if the market dropped dramatically and I get assigned on the short put, I
[02:28:55] still have the protective long here. If the market rebounds and now all of a sudden we're back at 755 and beyond, I'm making money on those 100 shares of stock where I wouldn't have been making that money on the shares because with
[02:29:07] just this options trade, I can only make the credit received. So, another sense is just like take the shares uh and just use the shares as a static and just use the shares as a static delta lever is in products that are
[02:29:22] smaller priced and maybe you've sold a put and you're trying to uh you know stands out to me because I already have 100 shares of Under Armour for this exact reason. But let's say you sold a put uh in these options expirations.
[02:29:37] There's not too many here, but let's just say you you sold the 7 and 1/2 put and or like the 10 put. You can see there's very little extrinsic value here. The deltas are super high. And if you were assigned 100 shares of stock in
[02:29:51] you were assigned 100 shares of stock in Under Armour, yes, you can only make the amount of the put if you sell this put. And I think that's the big the big key here. If you're assigned 100 shares, you now have unlimited upside potential on
[02:30:04] now have unlimited upside potential on how much you