key points that nobody tells you when trading options
David Jaffee with beststockstrategy.com and in this video you're going to learn a few really
key points that are going to help you improve your trading so the most important aspect when trading
options is to make sure that your sizing is in check so that you don't trade too large and that
you're not forced to close out a position for a loss however the other aspects that are extremely
important is knowing when to trade and when not to trade and a lot of this is very nuanced you're
going to get better at this the more experience that you gain personally i try to keep things
as simple as possible and what i usually do in order to know when to trade and when not to trade
is i look at volatility and i also look at the trading range of the underlying that i'm trading
so as long as the individual stock that i'm looking at is trading at either the low or the
high end of its recent trading range then i will either sell a put or i will sell a call however i
will also look at volatility i'll look at both the vix and the vvix i want to make sure that there's
not a large spike in vix and vvix because when there are large spikes in vix and vvix
that means that there's a large increase in fear and panic in the stock market as a result when you
sell an option you are committed to that position the worst thing that could happen is that shortly
after you open up a new position the trade goes against you and you experience a large volatility
expansion event so by looking at vixx and vvix you're able to determine the amount of overall
fear and panic in the marketplace and that will give you some clues to better time your entry
points for example right now it is september 14th 2021 and last week the market sold off a little
bit vix was trading at about 15 and then it spiked up above 20. but even more importantly than that
you saw a significant weakness in the market where you saw the s p open up but as the day progressed
the s p 500 was unable to hold on to those gains that's a sign of weakness so when you combine
the price action of the overall market and then you combine that with the spikes in volatility
where the vix has increased from about 15 to over 20 which is a 33 percent increase in over a week
that gives me concern that i want to be much more conservative in choosing puts and i'm going to be
much more aggressive in selling call options on stocks that have appreciated in value for example
microsoft is currently trading over 300 so from my perspective considering that there's elevated vix
there's more fear and panic in the market and over the past week the market has shown a decent amount
of weakness i would then target selling the 335 or the 340 call option today in the trade alerts
unh was up around six or seven dollars in the morning we then sold a call option
on unh which then pulled back as the day progressed and then we closed out that position
just a few hours later for a 40 game to recap the most important aspect when trading if you
want to be consistently profitable is making sure that your sizing is correct and that you're not
trading too large and that you leave enough excess liquidity in your account so that if the trade
goes against you you're not forced to close out the position the second most important aspect is
making sure that you understand both the vix and vvix and you also monitor the overall price action
for the market so that if the market is showing you signs of weakness and you still want to sell
put options then you're going to be more selective and more conservative in the underlyings that you
choose and you're also going to sell further out of the money additionally i definitely believe
it's more important when we're in a weaker market to be more aggressive and sell more call options
which means that you can scan your watch list and if an underlying stock is up and it's trading
close to its 52-week higher you think that it's overbought in that situation i think it's to your
advantage to sell a call option and get some negative delta in your portfolio especially
if you already have some short puts in your portfolio to help offset some of that long bias
David Jaffee with Beststockstrategy.com please like comment share and subscribe
please let me know your thoughts on these tips that I'm sharing with you about
better timing your trades and your entries so that you know when to trade and when not to trade
leave a comment below and let me know your thoughts and i appreciate your attention.