Many people prefer to trade options
instead of stocks.
So right now, I will show
you how to trade options
using the PowerX Optimizer.
Let's get started.
Before we get started just a very
quick disclaimer. What I'm about to
share is not an options
101.
If you don't know much about options
I'll record another video for you
that tells you what you need to
know. So, in another video
I will explain to you the different
types of options, we'll talk about
days to expiration, I will
talk about calls and puts,
I will talk about time
decay.
So, if right now you
don't know these terms,
this video right now might not
be best for you.
This video is for people
who are already trading options
because one of the feedback that I
got on these videos is that
you said, "You know what?
I would love to know
how you use this information
to actually trade options."
Take a look at some very
specific examples.
Right now you see the
PowerX Optimizer,
and this the software that I
personally use to find the best
stocks to trade.
Now you said, "Why am I interested
in stocks, this is a video about
options." And you're absolutely
right. Here's the deal.
Options are a derivative.
Meaning, that you need to
know what is the underlying
stock doing before you
trade options. And there's three
things that a stock can do, it can
go up, it can go down
or it can go sideways.
So, first you need to know
what is the stock doing
before you can trade options.
Now one of the stocks that I traded
today is SLCA.
So SLCA gave me
a sell signal according
to my methodology.
And this is I use three indicators
the RSI, the MACD, and
the stochastics to actually
determine whether the stock is more
likely to go up, down
or sideways.
Based on these three indicators
I saw that SLCA
is more likely to go
down.
So now it gave me a signal to sell
at fifteen seventy four
and this is what I did today, I
traded the stock.
Now, if you want to trade options
instead, it's very
easy and let me show you how
to do this.
Instead of betting on a falling
market with a stock, you can
trade a put option.
And again, this video is meant for
those of you who are familiar with
calls and puts, So and for
me honestly this the easiest way
to trade options.
You buy a call when you expect
the market to go up and
you buy a put when
you expect the market to go down.
Don't get any more complicated I'll
show you how easy this can be.
So here's what I like to do.
Out of all the available
options right now, and let
me just show you all of the options
that are available for SLCA.
Take a look at this here.
So you have all the different
expiration dates May 17,
June 21,
September, December, January
and then you have all of these
different strike prices.
So, the question is, which
is the best option to trade?
So first of all, we already know
that we want to trade a put.
For me personally, the best
expiration date is anywhere
between 30 and 60 days.
So, I like to trade options that
have plenty of time left
so the stock can actually do
what it is supposed to do.
So therefore, here I'm picking
the options that expire
in June because they have 52
days to expiration.
Now for me there's two
possibilities, I can either
trade an in the money option, so
this would be a strike price of 18,
or I can trade an at
the money option which would be a
strike price of 17.
Let's compare these two and then
make a decision of which one would
be the better one to trade.
Now what the software does for me,
every single option has
a fair price, right?
And there's two different models
that help you to determine what is
the fair price of an option.
It is the black-scholes formula, or
the binomial model.
Doesn't matter what you use but it
tells me here that a fair
price for this option, for
the in the money option would be
$3.25 and for the at the money
option the seventeen put
would be
$2.45. So, this is my entry price.
I can then also use the same formula
and estimate how much would
the option be worth once
the stock hits my profit target.
And you see my profit target is
that the stock drops, because
we're talking about a falling
market, that it drops by at
least $3.50.
So this means that the option at
target should be worth
$5.76.
Now, if this trade does not go
in my favor and if SLCA
is going up, so this
would be going against me,
then I know that the option,
once it goes up to my stop loss,
is still worth
$2.27. Knowing this I can now
calculate my reward and my risk,
very easy. And again, this for those
of you who are trading options and
you will right now see how powerful
it is because this is how easy
PowerX Optimizer is
making it for you to trade options.
So here you see that the reward
is $2.51.
And the risk 98
cents. So, you're risking
approximately $1 trying to
make $2.50.
One to two and a half?
I mean this is a pretty good risk
reward ratio.
Knowing this, this is probably
the option that I would go for but
we said, let's compare these two.
With this option and having all the
data that we can calculate
using the binomial model
or the black-scholes formula,
we know that we would have risked
98 cents trying to make
$2.31. Now let me ask you this: If
you could risk 98 cents and make
$2.51, or you're risking 98 cents
and make $2.31, which
one would you choose?
Would you choose option number 1 or
option number 2?
Pretty obvious, right?
I mean you have the exact same risk,
but you can make 20 cents more
on option number 1, so you would
choose option number 1.
So let's take a look at this.
This is the eighteen strike
and I said, today I did enter
this stock, I sold the stock.
Let's go to finance.yahoo.com
and see how much the option
was worth this morning and
how much it is worth right now.
So how much you could have made
if you picked the June 21
and we want to look for the put, and
we want to look for the eighteen
put. Here we go.
Here's the maximum price that we
are willing to pay for it.
For the eighteen put we want to pay
a maximum price of
$3.25. So let's see, this
morning as you can see in the
open, it was trading at
$1.85. Great.
It is below the maximum price
that we are willing to pay. So you
could have bought this option for
a $1.85.
Where are we right now at the end
of the day? And you see it right
here. The bid ask is anywhere
between $3.40
and $3.70.
So, as you can see, right
now if you would try to sell
the option you would get at least
$3.40 for it. Now, let me ask you
this: Would you be happy
if you invested $1.85
this morning and right now
it is worth $3.40?
Of course, right?
The most important thing is you need
to know which stocks are
making an explosive
move.
And this is why
I use PowerX Optimizer.
I first look at the stocks
that are ready to make an explosive
move. And once I know
which stocks are primed to move
then I'm looking at the option.
How do I decide which option to
trade? I only look at two options,
I look at the conservative one with
at least 30 days
to expiration but no more than 60
days, and I look at the
medium aggressive one which is the
at the money. For those of you who
are familiar with options I'm
looking at a delta as you can see
here of point seven.
And the other one is the delta of
point five to point six.
So again, this is for those of you
who know their ways around options.
For those of you who are trading
options you should be pretty excited
about this because this, for
me personally is the information
that I need in order
to make informed trading decisions.
This is a very brief
overview on how to trade options
using the PowerX Optimizer
with a very, very specific
example of a stock trade
that I did today.
And if you would have traded the
option, again you know that options
come in hundred packs so you would
have paid
$185 for the option, and right now
at the end of the day it is worth
$340 almost doubling
your money within a day.
I hope that you find this exciting.
If you would like to know more about
the way how I trade and
the software, please go to
mytradingroutine.com.
This is where I set up a website
that explains all of this in detail.
How I find the stocks, how I set
up my indicators.
Now I hope that you enjoyed this
video and if so please make sure
that you leave a comment, that you
subscribe to the youtube channel.
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