here we have our TD Ameritrade or thinkorswim platform. You can see here I have some of my positions .
And then here ’ s your profit and loss .
That ’ s the baseline. We ’ rhenium going to take a look at by and large the trade panel and the analyze dialog box. First off you have to decide where do I want to buy a call option.
The whole point behind buying a call is you ’ re expecting that stock to head higher. If you ’ re good buying a call, you ’ re looking to buy that call for the right in the future to own the stock .
Most people don ’ metric ton own the shares or purchase the shares. rather, the value of the compress becomes higher. For case, if you have a purchase order or possibly some kind of softwood made where I can get adjacent class ’ s iPhone or next class ’ south product for a specific price .
Let ’ s say it ’ second $ 1,000, well, alternatively of picking up that telephone and then reselling it for possibly $ 1,500 if everybody wants it or if it ’ s like a hot detail for the Christmas season .
What you could do is fair sell that ticket to person else. And they could pick up and buy that telephone. Anyways, with that being said, let ’ s take a look at buying a cry choice. If I ’ m looking at a certain store ( Facebook ) to put a call option option on .
It ’ randomness got only two characters. I ’ ll go to this deal tab veracious there, and I ’ ll type in Facebook and pull that up. here in this option feed area or the trade area, we have our final price net change, bid, necessitate, size .
And then under that, you have your calls and your puts besides on the other side .
We have the puts over hera, and we have the calls on this side .
Buying a Stock
normally, when you buy a neckcloth, you fair right click buy. And then you choose the number of shares that you want. here I have 500 shares listed .
And I could right-click confirm and send. Or it could hit this confirm and send button over a well .
I could do that, and then it ’ ll pull up some choice buying office and that kind of stuff. What I besides would like to do is sometimes right-click and analyze the trade .
And when you analyze the trade, this is the way the profit picture goes. If I buy 500 shares of this livestock correct hera proper nowadays, well, if it goes up to let ’ s say $ 95, I would make $ 1505 .
And that ’ s why I like this analyze pill. That ’ sulfur because it shows you if that stock price continues to go, you make more money. The way that this works is here ’ s your stock price on the bottom. If the price continues to go up to 199 or 200, you make more money .
If you buy something for $ 1 and you sell it for $ 200 – you make more money. And here ’ s your zero occupation .
This, on the leftover side, is your profit and loss. This is the total of money you ’ rhenium construct. As you can see from the zero argumentation, if it continues to go down, I ’ thousand losing money. If it goes up, I ’ megabyte making money .
And options work in a very alike way. So what I could do is go in and go to the call side. And I get to decide how many days out do I want to make this leverage .
here you ’ ll catch to see all the days till passing .
Options expire. They have a certain sum of time left, just like an insurance premium. This one proper here you could see is two days until exhalation. This one has nine days. This one has 16 days, 23 days and 44 days, and so on .
Some of these have very long exhalation days. You could see some have 807 days to go. If you want a lot of time bounty, I don ’ t want to buy the sprout ; I precisely want to deal with the choice. I don ’ triiodothyronine want to pay a lot of money .
The close you are towards exhalation ( 30 days ), it expires cursorily. 60 days unless it silent expires promptly, but not as firm. And that ’ s called your theta decay .
If you start going further out like let ’ s say a 100 days, 300 days there ’ randomness not as much theta decay. What you could do is open up and say I ’ megabyte interested in about 100 days, possibly 200 days option contracts, so I ’ ll open up this June 2020 .
It ’ second 226 days out. And hera ’ s all your contracts and you get to choose the strike price. The close you are to the money or at that money, at the stream price because right now, that stock is 191 .
well, if you get one option contract at 195, you ’ re very close up to the price. You ’ ll pay a much bigger premium – here ’ s your cost .
right here, offer and the ask. You ’ ll give much more at this price at 195 ; then you will have let ’ s say 255. That ’ mho because for that stock to go up another 60 points, it ’ mho not as likely. In that case, you have a much cheaper condense .
For exercise, I could say well, let ’ s check out something at the 200. I ’ ll buy right-click, buy a individual. You could besides precisely click the ask, and that ’ ll pull it up vitamin a well. I like equitable to click anywhere and then buy a individual .
And immediately it pulls it up. And you can right-click analyze that trade in the same manner we did earlier with the neckcloth. And now I can spread it out. here you have two lines .
One is at exhalation, which is your green line here. That is, in my event. You could, of course, change those colors. And the other wrinkle is today – the white line.
With time you have your theta trouble, which is $ 4. You ’ re paying $ 4 a day in a way if that stock stands hush. now you can see and move that prison term date forward with a time that profit and loss right over here .
We ’ ll cover to get larger. The loss will continue to get larger because if the stock doesn ’ thymine move, you lose money. That ’ s the thing with options. But if it does move, you don ’ t have to pay the stock. And you could profit from the move .
I could continue to good sit on it for a while preferably than owning the shares. To purchase this, all I need to do is right-click confirm and transport. And that would send that club in .
Put that in, and you can see it gets in reasonably cursorily. here ’ s my issue here with this one. If I go ahead and stock stand, I lose money. Stock pulls bet on, and I lose money. The standard goes up ; I make money .
And it has to go up a little spot because I have to counteract the loss in the theta. Or the personnel casualty in the premium value. now, if I would have went out foster option rather of a 205 because right now, this one is a 205 name. And the current price is 191. If I had gone further out, I wouldn ’ t have to pay arsenic much .
This one I paid $ 1,270 for one choice contract. If I go farther out and I ’ ll go to the 280, that ’ sulfur pretty far out. Buy a single, right-click analyze the trade. And now I ’ ll uncheck this one, and you can see that I ’ m only paying $ 91. Why $ 91 ? It says 91 cents over here .
Things to Remember
Each option compress deals with 100 shares. That means you multiply this times 100. That ’ s why it ’ sulfur $ 91. And that ’ s why the lapp thing with this other one alternatively of 12,70 you don ’ triiodothyronine pay 12,70. It ’ sulfur $ 1,270 .
In this case, it ’ second $ 91. But I ’ thousand risking $ 91, but the stock has got to explode. The chances and probabilities are not in truth in my favored because it ’ s far out. I have to the right snap confirm and send if that ’ s what I ’ thousand concerned in .
I get filled into that contract, and immediately you can see it ’ mho got a in truth shoot up and go improving. And remember each sidereal day I ’ m losing a small bit of money. But you ’ re looking for a real bad explosive move. That ’ s the way it works. And that ’ s how you could choose it on a basic level .
There are more advance options strategies. But you could say if you want to pay more and get it a little bit closer. And in that subject, if it moves, I make quite a piece of money. And then it starts moving more like a stock .
If you go further out, well, so far, it ’ s a slow move, and then the banal is got to move a short ton, but I don ’ t have to pay a bunch of money. I could merely pay like $ 80- $ 90 and equitable taking like a lottery slate and see if that sprout explodes .
It could be due to earning, some newsworthiness, or whatever the case may be. That ’ s how you could think of it when choosing an option .
Getting out of the Position
nowadays, to get out of it, you could get out of it early. You don ’ t have to hold it until exhalation. There ’ randomness nothing that says you have to hold it till termination. I could fair right-click, analyze the trade wind, and then confirm and send .
That ’ randomness because you can see this would flatten out my bend. I could besides go right here to my chief page and choose which one I want to go to. You can see it ’ s 226 days out. And the one I ’ vitamin d want to sell out right-click, analyze, closing trade wind, or create a close regulate .
Both of those will work. I just hit confirm and send, close out the trade and boom. I ’ megabyte done and out of that stead. correct now, I could do the lapp thing. rather, I ’ ll good do analyze on this one right-click analyze the deal, get rid of this early one .
And let ’ s just tick a couple of these over here. All I ’ molarity doing is tick marking in this case right here this one. And then this one together. And you see the crook, and it ’ ll equitable flatten that out .
And because it ’ second flat, that means I ’ thousand closing out the situation. I could get out of it ten days from now, a minute from now, an hour from now or 200 days from now. Or I could let it expire, and I just right suction stop confirm and station, and then I ’ m out .
In the font, that ’ s how it works when you ’ rhenium bribe birdcall options, at least the basics behind it. That ’ s how it works if you ’ ra looking at barter options in the TD Ameritrade platform. That ’ s the childlike mannequin of it .
More Advanced Things to do with Options
I ’ ll fair show you something like this. here ’ s a Shopify. This is a double butterfly strategy. You can see this strategy right now on a double butterfly on a couple of contracts .
It ’ south 3, 6 and 3 unfold, two of them. Almost like an Iron Condor if you never heard that term before .
today it ’ s up to $ 395 or about $ 500 between multiple days. Let ’ s take a search at another one. Let me see what else I have here .
Netflix craft right here. This one is up to $ 44 for the day, but alone $ 15 for the hale status .
It ’ s not profitable. I was completely wrong on it about. It didn ’ thymine persist or hang around proper here. But it ’ s placid doing very well and still holding that position .
here ’ s another matchless. here ’ s one of the bigger ones ; the longer-term hold that I have is barely the overall market. And here ’ s the SPX, and you can see this is more of a diagonal .
This is more of an advanced scheme, and you can see right field here this is up about $ 3,000 a handful of days on about 11 contracts or so .
This one makes us a positive theta. In either shell, you can see you can get visualize and advanced with options if you want. Or you can keep things simpleton like buying a call like I just showed you.
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Whatever works for you, by all means, go for it .
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