Want to learn how to trade options the right way but feeling overwhelmed? It’s like this big giant elephant is standing in front of you and you have to figure out a way to consume it. And the best way to do anything in life, like eating the proverbial elephant, is to tackle it one bite at a time. So today, I want to introduce two ways of learning how to trade options; the first using frameworks, and the second using concepts. Both are effective ways to quickly process information, and more importantly, retain the information so you continue to build your knowledge base for trading. Plus, either one I feel could be done start to finish, including coverage of all options trading topics, in less than 90 days.
Key Points from Today’s Show:
- The concept of “eating an elephant” as applied to options trading, is that you should be learning in bite-sized chunks.
- Repetition helps to drill down the habits until they become part of your core.
- In options trading, the way to do this is by using frameworks or concepts.
- You’ve got to systematically and methodically go through a process or framework for learning.
- Tracks are guided learning paths that take you step-by-step through the entire process, start to finish.
- Using tracks is the best way to start learning how to trade options.
- Framework learning “holds your hand” through the entire process.
2. Course Modules
- The course modules dig deeper into specific topic areas or categories.
- In the case of course modules, you can go into a course and learn everything there is to know about trade adjustments.
- It goes through why you make trade adjustments, the big picture strategy, and how to adjust different trades.
- The modules are essentially blueprints that guide you through each type of strategy.
3. Live Trades
- As you become more comfortable with the basic foundations of trading, the next step is to watch trades in action.
- These live trades allow you to get into the mind of the trader, giving the experience without any risk on your end.
- This gives you a guide to mimic or take ideas from when you do your own trades.
- Audio triggers different things and has different reactions in your brain compared to visual representations.
- This gives you yet another way to learn — podcast episodes versus blog posts.
- Podcasts are a great way to supplement a lot of the other training that you already have.
- Our research is used to prove strategies and also dispel myths about options trading.
- This supplements a lot of the concepts that we already teach.
- With concept categories, there is a strong focus on drilling for muscle memory.
- This means taking a specific concept across all of the different frameworks.
Example: If you want to learn how to exit a trade that’s gone back or make a trade adjustment, take that concept — exiting trades or making trade adjustments — and work that concept across all of the different framework disciplines.
1. Go through the tracks on adjustments, look at course modules of course adjustments.
2. Then go through live trades and look at only the live trading videos that have to do with adjustments.
3. Look up podcasts and look up everything that has to do with trade adjustments. Go to the research page and look up all the research we’ve done on trade adjustments.
- Essentially, you are taking the one single concept, trying to hit it from a million different ways.
- You are taking a true concept and you are learning everything you need to know about that concept across many different areas.
- With concept-learning, you learn about options basics first, across all disciplines.
- Next, you learn about entries, then managing positions and your portfolio
- Position size, spreading out trades over different securities.
- Then you learn about exiting
- Adjustments and rolling contracts, exiting for dividend risk assignment
- Finally, you learn about portfolio management
- How much cash to keep on hand, what return you should be targeting, how to use leverage, how often to trade.
Free Options Trading Courses:
- Options Basics [20 Videos]: Whether you’re a completely new trader or an experienced trader, you’ll still need to master the basics. The goal of this section is to help lay the groundwork for your education with some simple, yet important lessons surrounding options.
- Finding & Placing Trades [26 Videos]: Successful options trading is 100% dependent on your ability to find and enter trades that give you an “edge” in the market. This module helps teach you how to scan properly for and select the best strategies to execute smarter option trades each day.
- Pricing & Volatility [12 Videos]: This module includes lessons on mastering implied volatility and premium pricing for specific strategies. We’ll also look at IV relativeness and percentiles which help you determine the best strategy to use for each and every possible market setup.
- Neutral Options Strategies [7 Videos]: The beauty of options is that you can trade the market within a neutral range either up or down. You’ll learn to love sideways and range bound markets because of the opportunity to build non-directional strategies that profit if the stock goes up, down or nowhere at all.
- Bullish Options Strategies [12 Videos]: Naturally everyone wants to make money when the market is heading higher. In this module, we’ll show you how to create specific strategies that profit from up trending markets including low IV strategies like calendars, diagonals, covered calls and direction debit spreads.
- Options Expiration & Assignment [11 Videos]: Our goal is to make sure you understand the logistics of how each process works and the parties involved. If you don’t feel confident in the expiration processes or have questions that you just can’t seem to get answered, then this section will help you.
- Portfolio Management [16 Videos]: When I say “portfolio management” some people automatically assume you need a Masters from MIT to understand the concept and strategies – that is NOT the case. And in this module, you’ll see why managing your risk trading options is actually quite simple.
- Trade Adjustments/Hedges [15 Videos]: In this popular module, we’ll give you concrete examples of how you can hedge different options strategies to both reduce potential losses and give yourself an opportunity to profit if things turn around. Plus, we’ll help you create an alert system to save time and make it more automatic.
- Professional Trading [14 Videos]: Honestly, this module isn’t just for professional traders; it’s for anyone who wants to have eventually options replace some (or all) of their monthly income. Because the reality is that mindset is everything if you truly want to earn a living trading options.
Option Trader Q&A w/ Cindy
Trader Q&A is our favorite segment of the show because we get to hear from one of our community members and help answer their questions live on the air. Today’s voicemail comes from Cindy:
Your online training is quite good and gives us a step-by-step, which has allowed me to be more and more confident to make trades, now that I know some of the things to look for. I love the way you really break it down. I feel a lot more comprehensive of the things that you say as you train and understand all of it better. I do look forward to constantly watching your videos and seeing you live so I can lear more and do exactly what you do. Thanks so much, I appreciate it.
Remember, if you’d like to get your question answered here on the podcast or LIVE on Facebook & Periscope, head over to OptionAlpha.com/ASK and click the big red record button in the middle of the screen and leave me a private voicemail. There’s no software to download or install and it’s incredibly easy.
PDF Guides & Checklists:
- The Ultimate Options Strategy Guide [90 Pages]: Our most popular PDF workbook with detailed options strategy pages categorized by market direction. Read the whole guide in less than 15 mins and have it forever to reference.
- Earnings Trading Guide [33 Pages]: The ultimate guide to earnings trades including the top things to look for when playing these one-day volatility events, expected move calculations, best strategies to use, adjustments, etc.
- Implied Volatility (IV) Percentile Rank [3 Pages]: A cool, simple visual tool to help you understand how we should be trading based on the current IV rank of any particular stock and the best strategies for each blocked section of IV.
- Guide to Trade Size & Allocation [8 Pages]: Helping you figure out exactly how to calculate new position size as well as how much you should be allocating to your each position based on your overall portfolio balance.
- When to Exit/Manage Trades [7 Pages]: Broken down by option strategy we’ll give you concrete guidelines on the best exit points and prices for each trade type to maximize your win rate and profits long-term.
- 7-Step Trade Entry Checklist [10 Pages]: Our top 7 things you should be double-checking before you enter your next trading. This quick checklist will help keep you out of harms way by making sure you make smarter entries.
Real-Money, LIVE Trading:
- EWZ Iron Butterfly (Closing Trade): After nearly pinning the stock at our short strikes, and thanks to the volatility drop, we netted a $600 profit on this iron butterfly trade.
- VXX Short Call (Closing Trade): One of the most consistent and profitable options trades we can make is shorting pure volatility with VXX and today we closed this naked short call in VXX after a couple days for a $420 profit.
- DIA Iron Condor (Adjusting Trade): This neutral iron condor in DIA is need of a quick adjustment early this week as the market continues to rally. In this video, we’ll discuss why I’m adding an additional put credit spread while also choosing NOT to close out of our current put credit spread due to pricing reasons.
- COP Short Put (Closing Trade): These single short puts in COP acted as a great hedge for our other bearish bets in oil this month and helped smooth out our returns after we closed them for a nice big profit.
- TSLA Put Debit Spread (Closing Trade): Although many people thought we were crazy for getting bearish in TSLA this pre-earnings put debit spread trade made us $200 today. After the huge run up from $140 to $260 and getting some technical sell signals, we were pretty sure this stock would pull back.
- MON Iron Condor (Closing Trade): Following a huge drop in implied volatility we worked hard to close this MON iron condor trade adjusting the order multiple times to fill before the end of the day.
- IBB Call Debit Spread (Opening Trade): We’ll show you how I started searching for a new bullish trade and eventually found a low volatility trade in IBB looking for a move higher to hedge our portfolio.
- TLT Iron Butterfly (Closing Trade): Following the Brexit vote TLT and bonds traded in a nearly $8 range really quickly – even still the drop in implied volatility helped generate a $330 profit for us.
- XBI Call Debit Spread (Closing Trade): Got lucky picking the exact bottom for our entry in this call debit spread for the XBI biotech ETF which ultimately was closed for a profit of $165 today on the rally higher.
- COH Iron Butterfly (Earnings Trade): Shortly after the market open we close out of our COH earnings trade for about a $160 profit, leaving just 1 leg on to expire worthless.
- EWW Debit Spread (Closing Trade): Using some of the technical analysis signals we discovered in our backtesting research, we were able to make a quick $130 profit on this bearish EWW debit spread trade.
- IBM Iron Condor (Earnings Trade): Shortly after the market opened you’ll follow along with me as we watch volatility drop and liquidity come into the market before closing out the position for $250 profit.
- SLV Short Straddle (Opening Trade): Using our watch list software we decided to continue to add to our existing SLV short straddle position with a new set of strike prices reflective of the move lower in the ETF recently.
Thank You for Listening!
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