Options Trading Basics for Beginners — Step-by-Step Guide & Transcript

[00:02] you how to trade options in under 10 minutes so get ready for a lot of knowledge in a short amount of time I started trading options with two thousand dollars almost a decade ago I did not use old two thousand dollars

[00:15] because I wasn't willing to lose my two thousand dollar account so I just traded a small amount of money and you need to understand this if you're jumping into the game right now you should only trade what you're willing to lose for me that

[00:29] was five hundred dollars out of my two thousand dollar portfolio back in 2014. I was learning a lot from my option trading internship when I was 19 but I still barely knew how to be consistent with it because working on the New York

[00:43] Stock Exchange was a tough time and honestly no one had enough time to teach me how to actually trade options I had to do it myself I had a very rough three years despite studying this stuff from someone who has been on CNBC many times

[00:58] as my mentor I can really make money because I was too aggressive I really wanted to chase those fast gains and I didn't fully understand the game of figured it out I took my two thousand dollars into seventeen thousand dollars

[01:12] and then to seventy thousand dollars and the rest was history let me walk you through the ins and the outs and the shortest amount of time that I use daily to make over a hundred dollars a day even when I had a few thousand dollars

[01:25] to my name okay here's how I like to make quick money I look at the chart daily to see where the stock is moving if it's rising then that's what we would call at the hedge fund positive momentum and if it's falling down we call that

[01:39] negative momentum so check it out here we have Amazon notice how it has positive momentum and look at the previous close it's 103.81 and today the

[01:51] previous close it's 103.81 and today the stock gapped up to 106.96 this is a setup that I always look out for I make easy money writing the trend of a stock depending on the direction if it is Flowing my boss on Wall Street told me

[02:05] to just keep it simple and keep it stupid he literally said that and it blew my mind he said look at the chart and see where the stock is going when you see momentum like this starting you can jump in with a call option and ride

[02:17] the price action higher call options are way cheaper than owning shares of the stock take apple as an example so if you were to buy 100 shares of the stock it thousand five hundred and sixty one dollars very expensive right that's why

[02:33] buying shares is not as attractive as buying call options and that's what is the beauty of option trading is that you get a lot of Leverage you can control 100 shares without having to Fork up all that Capital which makes this a very

[02:46] beautiful small account strategy if you have a small account buying call options can make you very wealthy very quickly it may not be the best strategy because it's not as consistent but if you're looking for the largest raw returns then

[02:59] this is going to be the video for you because you can do that by buying call options and specifically I recommend that if you want the largest return in the quickest amount of time that you will buy call options before earnings so

[03:11] studies and I was looking at the research if you buy call options right specific way which I'm going to show you some examples of then you can actually have a double on your money very short term and this is a very proven strategy

[03:26] now going over this example right here on Apple okay if I expand this 145 call option you can see that the Delta is 0.54 so actually your chances of success here are a little bit higher than 50 percent which is much better than the

[03:40] one percent option when you buy out of the money or even if it's a 10 option that's not good the most successful Traders and the most successful experiences that I've had is going to be options that are in the money since they

[03:53] have a higher Delta than 50 percent your chances of ending in the money and actually making a profit is again going to be higher than 50 percent now the expiration date that I'm going for is December 16. but if you're watching this

[04:05] to know if you're buying a call option then it's better to do at least one month out if it does not have earnings and if it does have earnings then as going to be in good shape so let's go over this example of apple and then I'm

[04:20] examples of how I would look at earnings and figure out if that company is going to beats or not so here's the mechanics say that I buy this 145 dollar call option now if I go ahead and buy it the total cost is going to be 870 dollars

[04:34] per contract as you can see here my maximum loss is 870 dollars that means the stock has to move a lot for me to actually break even the reason for that is although the strike price is 145 since the premium is eight dollars and

[04:49] seventy cents my actual Break Even is going to be 145 dollars plus eight dollars and seventy cents or roughly 153 dollars and 70 cents this is is why strategy you want to make sure that the stock is going up because if it goes up

[05:04] you're going to profit however if it stands still you can lose a hundred percent of the premium that you pay or this 870 dollars and if the stock goes down of course you can still lose the 870 but the good news is about a call

[05:17] option is you cannot lose more than what you pay for the call option so one of the benefits is you have a limited risk profile of just 870 but you have an unlimited upside so if Apple goes up to 200 per share this option is going to be

[05:32] 200 per share this option is going to be in the money by 55 now guys I also like to make money when a stock gaps down it's not easy because there can be a lot of volatility in the market but if you can catch this you can make a lot of

[05:45] money quickly with a put option buying put options can be a great opportunity to make money check out this trade I made for earnings on Airbnb I knew that they were going to fall because I spotted negative momentum guys I saw

[05:58] this stock coming down so so I jumped in with a put and I turned twelve hundred dollars into two thousand two hundred dollars over a three day period I didn't want to use too much Capital because buying options can be risky you can lose

[06:12] exactly what you put in which I guess in some ways isn't too bad but you can lose a hundred percent of the premium that you pay that's why guys limit your Capital per trade it's very important that you follow proper risk management

[06:26] and you manage every single position without losing too much money in any one of them you don't have to buy low and sell High guys your job is to spot opportunity please like And subscribe guys you can also make money selling

[06:41] guys you can also make money selling high and buying low that's right you can high and buying low that's right you can sell high and buy low so guys please put in the work to learn this skill if you need me I have a Discord teaching all of

[06:53] this and sharing my trades in the description be safe and consistent my description be safe and consistent my friends