Show notes: http://optionalpha.com/show96 Today we wanted to use our new options backtesting software under our Trader's Toolbox to run some credit spread backtests on DIA. Namely, we were trying to determine if selling options during higher implied volatility markets actually generates a higher net credit for the position or not? Plus, we tweaked the allocations just a bit as well to see how different positions sizes impacted returns, drawdowns, and sharpe ratios....
Jun 07, 2017•24 min•Ep. 96
Show notes: http://optionalpha.com/show95 It's finally here! After years of research, development, and testing the doors are open to purchase access to our incredible new options backtesting and trade optimization software we're calling the "Trader's Toolbox". Given that we've now got a whole suite of tools and scanners for you to use we have to consolidate it under one roof which is why we believe having a Toolbox is the clearest and logical route. You can learn more about the new software rele...
Jun 01, 2017•50 min•Ep. 95
Show notes: http://optionalpha.com/show94 Apple (AAPL) is by far one of the most loved and favorite stocks to trade for investors. Often times people will email me asking how they can use option buying strategies to go long AAPL stock. So, in today's show, I wanted to reveal the results from our call bull spread backtest we ran on AAPL and how changing the long strike prices impacted the overall returns and drawdowns of a bullish strategy like this. If you've ever thought of buying options, you ...
May 29, 2017•21 min•Ep. 94
Show notes: http://optionalpha.com/show93 How far out should you go when entering a new options trade? 10 days, 30 days, 60 days? Does it change based on the strategy you are using or the market situation you are in? All great questions we aim to answer and in today's newest case study we'll look at how options trading timelines and duration impacted the returns of this EEM straddle backtest. Plus, we'll cover some of the overall performance and variance metrics we ran on both strategy setups us...
May 27, 2017•19 min•Ep. 93
Show notes: http://optionalpha.com/show92 I've said it for years, position sizing matters in a high probability system. Much more so that you would believe and today's show is the first in a new mini-series we are doing leading up to the launch of our new backtesting software. Inside we'll cover a case study using and iron condor backtest we ran on TLT including the impact on returns that altering the position size had on the portfolio.
May 25, 2017•24 min•Ep. 92
Show notes: http://optionalpha.com/show91 In today's show, I wanted to take a step back and give everyone an overview of what we've been working on here at Option Alpha and what we have planned over the next couple months. More specifically I wanted to officially announce that our new options backtesting software will be released publicly on June 1st. And as mentioned before too many people, as soon as the new software goes live the cost of the Lifetime Membership will go up by $1,000. Options b...
May 19, 2017•37 min•Ep. 91
Show notes: http://optionalpha.com/show90 We're now in the heart of earnings season for the current quarter and with hundreds of companies set to announce their performance, we're presented as options traders with tons of opportunities to profit from the volatility crush that occurs after an announcement. But these fast (and often violent) moves in the underlying stock in the session following the announcement can often scare and confuse investors trading options. In today's show, I want to walk...
Apr 24, 2017•48 min•Ep. 90
Show notes: http://optionalpha.com/show89 It's been over a year since we released our game-changing report on technical analysis indicators called SIGNALS, and since then I haven't talked more about how we are using technical analysis in conjunction with our options trading. So, I wanted to revisit this topic on the podcast today because I still see a lot of simple, easy to correct, mistakes being made by both new and experienced traders when it comes to ready signals generated from technical an...
Apr 17, 2017•22 min•Ep. 89
Show notes: http://optionalpha.com/show88 Newbie traders and investors who make the transition over from stocks to options often become overly confident and excited that magically they've discovered the "Holy Grail Of Investing" in a high probability option trading system. Surely no system or investing methodology is perfect and options trading has its own challenges. The goal for me today in this new show is to present both the benefits and drawbacks of a high probability investing system like ...
Apr 10, 2017•16 min•Ep. 88
Show notes: http://optionalpha.com/show87 Losing trades are part of the game - they are going to happen and it’s a reality we must all face. And I believe what sets really great traders apart from those who are average at best is the ability to cut a loss by making smart adjustments. Adjustments that reduce risk and extend the trading timeline. In today’s show, I’ll cover the 3 option adjustment principles you should follow if you’re considering adjusting a short premium, option selling strategy...
Mar 20, 2017•14 min•Ep. 87
Show notes: http://optionalpha.com/show86 Trading inverse ETFs and leveraged ETFs are becoming more and more popular with retail traders. Maybe it’s the appeal of quick profits with 2X and 3X leveraged securities like FAZ (Ultra Bear 3X Financials) but the should we adjust our options strategy for these unique products? I think we should for good reason. In today’s newest podcast I’ll cover the three different ways you should adjust your options strategy when trading these products to take advan...
Mar 13, 2017•19 min•Ep. 86
Show notes: http://optionalpha.com/show85 Legging into spread trades and complex option strategies is a popular way for traders to get quicker fills. However, is this legging technique really the best approach or should we be doing things a little different when entering or exiting trades? In today’s show I’ll discuss my thoughts on approaching legging into and out of spreads and the benefits and risks of doing it or not as part of your trading system....
Mar 11, 2017•18 min•Ep. 85
Show notes: http://optionalpha.com/show84 For years we’ve talked about the need for increasing your trading frequency. In today’s podcast, we want to re-introduce the concept of stacking or laddering option trades over time and price. More importantly, we’ll talk about why our extensive backtesting (and current experience) proves that when you break down your trade entry into smaller and smaller chunks, the overall performance of the trading system increases dramatically....
Feb 25, 2017•24 min•Ep. 84
Show notes: http://optionalpha.com/show83 A casino's edge ranges from 0.5% for blackjack to as high as 17% for some slot machine games. Now, of course, this edge may or may not play out on the first, second, or tenth roll of the dice. But they are not in it for the short-term game. You see, the casino doesn't have to beat every player every time. They just know that they'll win their mathematical edge so long as enough bets are placed each year. It's precisely why casinos offer huge incentives t...
Feb 13, 2017•30 min•Ep. 83
Show notes: http://optionalpha.com/show82 We can't control the stock market - yet many of you try to will or hope stocks to move up or down as needed for your position to make money. Eventually, you'll come to realize that it's an impossible dream and the harsh reality of transiting from novice to professional investor requires a more consistent and systematic approach. The question then becomes, "What can I control?" and "How can I adjust or hedge a position that moves against me?" In today's s...
Feb 06, 2017•21 min•Ep. 82
Show notes: http://optionalpha.com/show81 Fundamental investors are like the wooly mammoth; big, strong, powerful, yet destined to become extinct in the future. And while there is absolutely nothing wrong with the core beliefs and activities of fundamental investors, I just personally believe that the same passion and hard work could be applied to the options market with much better results and less risk. Besides, even Warren Buffett, the biggest advocate for fundamental investing and long-term ...
Jan 30, 2017•26 min•Ep. 81
Show notes: http://optionalpha.com/show80 Your option strategy payoff diagram is an ever evolving and changing animal. Unlike stocks which have one-dimensional payoff graphs, either upward or downward sloping, and theoretically unlimited holding periods, option strategies are impacted by cubic pricing events. Namely, time decay (Theta), implied volatility (Vega) and interest rates (Rho) which can cause your payoff diagram to shift, mold, and bend as these additional pricing elements change with ...
Jan 23, 2017•16 min•Ep. 80
Show notes: http://optionalpha.com/show79 Today's podcast is all about learning how to trade calendar spreads. And while newbie traders might find them a little difficult to understand conceptually at first, I think you'll find our talk today to be incredibly helpful as we break down these time spreads from start to finish. During the show, I'll walk through setting up and building calendar spreads, the impact of implied volatility and time decay, how to adjust and exit as well as the best marke...
Jan 16, 2017•43 min•Ep. 79
Show notes: http://optionalpha.com/show78 I know one of the key elements to successful options trading long-term is maintaining an investment portfolio that is consistently balanced. And when I talk about balance, I'm not talking about 80% stocks and 20% bonds - that's portfolio diversification. Unlike traditional investment strategies that favor 99% of the portfolio invested in long equities and bonds with minimal short exposure, what I'm specifically referring to here is the concept of trading...
Jan 09, 2017•25 min•Ep. 78
Show notes: http://optionalpha.com/show77 Options expiration week can be a scary time for some traders as they struggle with fears about short option contract assignment. And while the reality is that most options are not assigned, it still creates anxiety and confusion about what to do with short positions that are in-the-money. On today's podcast, I'll walk through the most recent OCC stats on options expiration including the #1 reason why you shouldn't be afraid to hold positions that go in-t...
Jan 04, 2017•21 min•Ep. 77
Show notes: http://optionalpha.com/show76 Our #1 core value here at Option Alpha is that options trading education comes first before anything else. I believe that you have to crawl before you can walk in this business and it's why all of our trading courses, guides, and checklists, podcasts, webinars, etc. are completely open and free. Still, I understand that options trading can be overwhelming and confusing at times with so much to review and consume. Recently, I found myself in the same situ...
Dec 26, 2016•26 min•Ep. 76
Show notes: http://optionalpha.com/show75 I've been trading publicly on Option Alpha for more than eight years now, and I'm still baffled by the number of investors who get absolutely shocked when option trading portfolio drawdowns occur. I'm talking ALL CAPS emails, mind blown, ripping their hair out shocked that a trading system wasn't a 100% probability of success. And while losing money is by no means "fun" or "exciting," it is, however, part of high probability trading systems. In fact, you...
Dec 20, 2016•29 min•Ep. 75
Show notes: http://optionalpha.com/show74 Most newbie option investors start trading with small brokerage accounts. Whether by choice or necessity, the average investor opens up their account with approx $10,000 according to most brokers. And while this isn't a small amount of money by any means, it does limit your ability to trade more aggressive options strategies like straddles and strangles. In today's podcast, I want to help you understand how you can still trade these more aggressive and p...
Dec 17, 2016•32 min•Ep. 74
Show notes: http://optionalpha.com/show73 What does great pricing look like when trading short strangles? Is it collecting a certain raw dollar amount? Or a certain percentage of the stock price? Without a doubt, these are tough questions to answer for newbie options traders and hard to answer without some context. And while comparing pricing on different risk defined option trades, like credit spreads and iron condors, is pretty straight-forward and easy, it can become difficult to recognize gr...
Dec 05, 2016•20 min•Ep. 73
Show notes: http://optionalpha.com/show72 You've entered a new option trade with a high probability of success - but you also know that a 70% chance of success doesn't mean it's a sure thing. As soon as your order fills the stock starts to move against your position - just your luck right? And each subsequent day the stock continues to trend closer and closer to your strike prices, threatening your position. At this point, you're starting to get pretty emotional about the whole thing and don't k...
Nov 28, 2016•25 min•Ep. 72
Show notes: http://optionalpha.com/show71 For years now I've talked about the concept of exiting option trades early and taking money off the table as a way to both improve your win rates and increase overall profitability. Still, I'll often get emails and questions about the legitimacy of exiting trades early vs. letting profitable trades go all the way to expiration and "milking it for all its worth" as some members have put it. Honestly, I can't blame anyone for questioning it because on pape...
Nov 21, 2016•22 min•Ep. 71
Show notes: http://optionalpha.com/show70 We’ve reached yet another options expiration week, which can sometimes cause many traders to freak out as they worry about positions that are still lingering in their portfolio. And with the deadline for expiration quickly approaching it's no wonder why many people are incorrectly managing trades with the fears of assignment knocking on their doorstep. Either rushing to close position that shouldn't be closed or waiting too long to act and putting them a...
Nov 14, 2016•23 min•Ep. 70
Show notes: http://optionalpha.com/show69 Regardless of your current account size or trading experience level, you should be putting some serious thought into how you plan on scaling your options strategy over the next few years. Especially if you’re looking to generate a consistent monthly income from options trading, you probably realize that having $10,000 in your account won’t be enough to generate profits to replace your current job or salary - or if this was a shock to you, sorry for the r...
Nov 07, 2016•19 min•Ep. 69
Show notes: http://optionalpha.com/show68 Naturally, if you’ve started trading options for any reasonable amount of time you’ll run across the VIX index. Or as it’s commonly referred to, the “Fear” Index. And while the concept of tracking and trading volatility with the VIX might sound intimidating at first, trust me, it’s not all that complicated and just requires a little common sense. In today’s podcast, we’ve brought on a very special guest, Mark Sebastian, a former floor trader, hedge fund ...
Oct 31, 2016•50 min•Ep. 68
Show notes: http://optionalpha.com/show67 In most investing or online trading circles, it's common place to hear people tout the need for "stop loss" orders to theoretically protect your portfolio. And while there is no doubt that stop loss orders help mitigate large drawdowns from time to time, the question I never see asked is, "What am I giving up by implementing a stop-loss order as part of my trading system?" You see, all too often traders and financial educators are quick to harp on the "n...
Oct 24, 2016•38 min•Ep. 67
