Uploaded by Cathy Blackmore on October 1, 2015 at 9:12 pm
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Hi Andrew, I am a beginner option trader. Please correct me, I figure that with $8 credit and $42 at risk, or $13 credit and $87 risk, your expected return = (win% x win$) + (loss% x loss$) = (80% x $13) + (20% x -$87) = 10.4 – 17.4 = -$7 (minus $7)
Please buy a better microphone… Distorted speech is annoying.
Good presentation. I am an experienced option trader and find other trader techniques and tools interesting.
1) Writing a credit spread simply because RSI is "Overbought" or "Oversold" sounds like a horrible strategy. Any trader worth his salt can tell you that an OB stock (especially in a bull market) can get more and more OB and stay that way for weeks on end, ensuring max loss! It is critical to have more than just one technical indicator (and a pretty lame one in my opinion) to prompt you into entering the trade.
2) It is true that if you write a bear call spread for x cents, once that stock starts to turn south, it's easy to think "Great, now I can just buy the spread to close for less than what I wrote it for and cash in." What he does NOT mention is the fact than when a stock goes south, there is a very real risk that IV rises along with the stock's downward trajectory. Guess what that means? You can't close the trade for a profit because premiums have risen and you now are are forced to stick with the trade potentially until expiry because you cannot buy to close the spread as cheaply as you thought.
There are other issues which I won't go into, but suffice to say, this video made things look a heck of a lot easier than they really are. The first time you wake up and your bear call spread which was "80%+" probability of expiring OTM is suddenly a complete and utter loser as the stock blows through both strikes on some random positive headline/rumor, that's when you will internalize that you now have to execute a good 5 trades in a row just to get back to even, as each of these trades tend to have a risk:reward of approximately 5:1, meaning you risk ~ 1 dollar to make ~ 20 cents.
Your video is very informative. I really enjoyed it. My first question is on the calculation. Are those returns based on leveraged positions ie selling naked? I have an IRA with about 5k and have to sell covered transactions. How much money would you reccomend I have to overcome frictional costs and what kind of returns would I average selling covered and cash backed options?
horrible audio, hard to concentrate when too much white noise in the background..
Where do I get the RSI mean reversal indicator software that you guys use? Thanks
This is an Awesome teaching video. Wow!!
What is the difference between SPX and SPY?
folks please subscribe and look up ANDYS video on youtube,you won't regret it folks.
fantastic!people need to see this !!!!!!!!
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