Master Credit Spread Class

Question 1

Premium - where is the money coming from?

Answer 1

The premium is the current market price of an option contract.

income received by the seller. ln the money premiums are composed of extrinsic and intrinsic value

Question 2

Theta

Answer 2

the rate of decline in the value of an option over time. its our best friend if we are selling and our worst enemy if we are buying

Question 3

vertical spread

Answer 3

buying or selling a call or put and simultaniously selling or buying at a different strike price but with the same expiration

Question 4

Expiration Date

Answer 4

the date on which the options contract expires

Question 5

Strike Price

Answer 5

the price at which an option or other derivative contract can be exercised

Question 6

how much per month can you expect to earn on credit spreads. %

Answer 6

5-10%. 15K can bring in 750 to 1500

Question 7

How do I avoid max loss?

Answer 7

never hold to day of expiration

Question 8

He risks max loss of?

Answer 8

16% of account. 10K = max loss 1600. so with his plan 480 is true risk. 4.8%. From class but I think he’s going to let me risk more

Question 9

What is a vertical spread/credit spread? Where is the risk in the strategy?

Answer 9

Entering 2 options at the same time. Buying and selling each leg. Your risk is the difference between the two strikes.

Question 10

Discuss how expiration date and premium and theta work.

Answer 10

The farther away the expiration the more premium you could recieve AND

the further away you can sell your spread from the stock price,

But theta does less work until closer to expiration, and you have more time for the trade to lose.

Question 11

Benefits of Spreads (4)

Answer 11

1 Dont have to have perfect entry timing
2 consistent income
3 you don’t tie up much buying power
4 pre determined ultimate risk

Question 12

cons of spreads

Answer 12

risking more than you are making

easy to mess up in the broker

Question 13

What is a bull put spread and how do you win it?

Answer 13

you are using buying and selling puts but you win if the stock stays above your sold strikes.

Question 14

How do you use puts for a bull put spread and how do you win?

Answer 14

You buy a put and sell a put. and as long as the price of stock stays above your sold put you win.

Question 15

What does selling a put mean?

Answer 15

What does selling a put mean?
If it closes in the money at exp. you have to buy 100 shares of that stock at the strike. Its a bullish move.

If it expires worthless then, you just keep the premium and leave.
When you sell a put, you agree to buy a stock at an agreed-upon price. It’s also known as shorting a put. … That’s because the buyer must buy the stock at the strike price but can only sell it at a lower price than the current. Seller makes money if the stock price rises because the buyer won’t exercise the option.

Question 16

In a bull put spread do you receive a premium? why or why not?

Answer 16

You are selling a put and receiving a credit. You are agreeing to purchase the stock at a strike that you sold the put at. You will get paid to enter into that agreement.

Question 17

Why do you buy and sell a put in a BPS?

Answer 17

Buying a put is like buying insurance. It will kick in when the stock price moves below the strike of your put. This way you lock in a max loss.

Question 18

How are the expiration dates handled in a Bull Put Spread?

Answer 18

They are always at the exact same time

Question 19

How much money does the broker put aside for a bull put spread?

Answer 19

The difference between your short and long put

Question 20

Where is the value in the Bull Put Spread?

Answer 20

The Premium. Thats why we get out before expiration

Question 21

What stock action are BPS best used on

Answer 21

stocks in a bull trend that are having a pullback to support

Question 22

How do you win a bull put spread

Answer 22

You sell and receive money and then buy it back to get out.

This costs money.

So the money collected for the selling is larger than the money you spend to buy to get out.

Question 23

How does the winning strategy work when the stock is moving farther away from the credit spread?

Answer 23

If the price moves away from your spread the options will be worth less and thus you can buy back for less.

Question 24

How does winning strategy work when stock doesn’t move much in a BPS

Answer 24

theta - time decay. The closer to expiration the trade gets the less it’s worth.

Question 25

What is the most money you can make in a credit spread?

Answer 25

The amount you make from selling the spread. short put - long put = profit.

Question 26

What is your “limit” price in a BPS

Answer 26

The combination of both legs in the spread.

Question 27

What if you start losing on trades?

Answer 27

The market changes a few times a year. When this happens wait two weeks, reassess plan and make sure youre doing the plan right also

Question 28

What is the only way you can loose max loss?

Answer 28

ON the day of expiration

Question 29

He’s only lost more than 35% how many times in 4 years.

Answer 29

twice.

Question 30

How often does he lose 30% loss

Answer 30

Always a chance and happens a couple times after you are on a 10-30 win roll.

In 7 he might also lose on 2-4 of those at the most.

If in three then you will lose on maybe 1.

It’s hard to tell really but overall 92% win rate minimum.

Question 31

What is the max loss risk he likes to take?

Answer 31

16%. 1600 per trade max loss for a 10,000. But with his plan you lose about 30% max rarely
only if you lose $480 or 4.8% of max loss.

Question 32

explain drawdowns

Answer 32

I lose when the markets change sentiment. On average 2-4 spreads at once. So drawdowns on average will be about 10% of his account.

Maybe happens once a year where you lose on your account (max loss?). But account will be bigger than now so its fine.

Question 33

He wants to get paid what percentage of what he’s risking?

Answer 33

10%

Question 34

for a vertical spread you pick two things…

Answer 34

The strike and the expiration. strike is different (I think) expiration is the same.

Question 35

Where should you set the limit order

Answer 35

Mid price is good. The price between the ask and bid. or the price you are hoping to get filled at.

Question 36

If you aren’t getting filled within the first ten minutes

Answer 36

bump the price a bit 2 to 5 cents lower than the bid . Never market in or out of an credit spread. The lower the number the less you get paid

Question 37

What will cost more in a credit spread. What will cost less?

Answer 37

The sold price will give you more than the buy price. The buy price is what you pay to get out.

Question 38

What to check before placing an order?

6 items

Answer 38

1. You are receiving a credit for the spread and and not paying a debit for it.
2. You have the correct strike prices, expirations date, correct limit order
   3, Hedging game plan
3. not selling over earnings or other major news announcement
4. You have the correct # of contracts
   …..
5. You put your target in as soon as you are filled.

Question 39

A monthly credit spread is what kind of trade?

Answer 39

swing

Question 40

How long are we in a monthly credit spread

Answer 40

5-15 days or 5-8?

Question 41

What is the win rate with a monthly credit spread

Answer 41

92%

Question 42

What is his average profit on a monthly credit spread

Answer 42

75$

Question 43

What does IV mean to a monthly credit spread?

Answer 43

1. Low IV (big moves are not expected)

2. High IV (big moves are expected)

Question 44

How many average daily contracts do we want a stock to have to consider a credit spread?

Answer 44

Minimum of 5000 total average. https://marketchameleon.com/Home/Dashboard

Question 45

Monthly Credit Spread Plan General Beginning Rules
7 of them
These are broader than the #1 #2 rules

Answer 45

1. Minimum of 5000 total daily contracts
2. Do not sell over earnings
3. Sell the monthly spreads around 30 days out
4. Stock must be above the weekly 60 ema for bull put spread
5. And below the 60 ema on the weekly for a bear call spread (go with trend)
6. Check 3 news sources to make sure no big event is coming out during the time of your spread. You don’t want to sell a spread if has unusually high IV = gaps are death to spreads.
7. Close the spread, no matter what, the day before expiration. Max loss occurs on the day of expiration!

Question 46

How many days out do you sell monthly spreads.

Also talk about time, premium and expiration and how they are inter-related

Answer 46

Sell monthly spreads about 30 days out.

the shorter the time to expiration the better, but the shorter the expiration time the less premium you will receive.
need to get paid 10%.

Question 47

Low IV means?

Answer 47

Big moves are not expected

Question 48

The average daily volume on options is what? how many minium should we be dealing with.

Answer 48

All calls, puts, strikes, expirations, volume traded needs to be above 5000. Below 5000 is not super liquid and will be hard to get out of and hit profit target.

Question 49

How do we deal with earnings

Answer 49

Do not sell over earnings. If the earnings are over any time of our spread you can not do. How do we know for sure when earnings are?

Question 50

How many days out do we do a monthly spread

Answer 50

around 30 days.

could be 20 or 40.

but the shorter the time frame the better.
Less time to not go against you. quicker you can get premium capture. But have to sell closer.

Question 51

What EMA do we deal with on a BCS

Answer 51

60 ema above for a bull and below 60 for a bear call spread.

Question 52

Watch 3 news sources before entering into a spread? why?

Answer 52

We dont want a big news event to come out over the time of your spread. you do not want a high IV. They are the Death to spreads. gaps are the death of spreads.

Question 53

What do we need to know about IV related to news. How many weeks is it an average of?

Answer 53

52 week average.

1. broker can tell you about it (trade station)
2. market chamelion can tell you
3. if it’s unusually high IV, normally means they are expecting something big.
4. If the premium is too good to be true, believe it.
5. They may not have news but the weird IV is saying something for that particular stock.

Question 54

Implied volitility IV

Answer 54

How high is something expected to move. If there is a high IV we get paid more but there is a chance it will gap and go against us. IT’s stock dependent.

Question 55

We will close the trade no matter what when.

Answer 55

Day before expiration. It DOESNT matter what you are gaining or losing. Just get out.

Question 56

What are the focus steps for entry on monthly BPS. Short version

Answer 56

1. RSI
2. Barriers closest to stock price
3. Determine what set up to sell one or two
4. What you get paid minimum 10%
5. Create game plan if trade doesnt work.

Question 57

First step (1) on Bull Put Spread Monthly

Answer 57

1. Oversold on the 4 hr RSI
   (below 32 on the RSI)

BELOW 32

If not oversold - no set up.
Wait for it to be oversold!
If oversold - move to step two

Question 58

Step two (2) for a Monthly Bull Put Spread. 3 parts to answer

Answer 58

1. Locate the next two weekly barriers
   WEEKLY support, or
   WEEKLY ema 10.20.30
2. find those closest to the current stock price and the sold strike that you’re selling
3. We can sell anywhere below the second weekly barrier

Question 59

Step three (3) for the Monthly Bull Spread

Answer 59

Determine if youre going to do setup #1 or #2

Question 60

Step four (4) for Monthly Bull Put Spread

Answer 60

1. Make SURE you get paid a minimum of 10% of what you’re risking if you are risking $500 the minimum you can get a pid is $50 for the spread.

If it does not pay at least 10% of what you are risking pass on the setup

If it pays more than 10% of what youre risking - move to step 5

Question 61

Step 5 for a Monthly Bull Put Spread

Answer 61

Create a game plan if the trade does not work. If you cant figure out a hedging plan, do not take the trade

Question 62

What setting do you want the RSI on for bull put spreads? and what about what chart to look at?

Answer 62

1. 14
2. extended hours OFF.
3. on a 4 hour.
   It wont be oversold prob on a weekly. Doesn’t matter. It’s the 4 hour that matters.

Question 63

Step #2 Monthly BPS - locate the next two barriers. how do we do this? and on what time frame? involved wicks

Answer 63

1. Weekly support, 3 or more interactions in the same zone or more.

You dont want these to be near where the price is at currently.

the barrier is a zone.
Three wicks at least or body closes in the support/resistance zone

2. 4 hour chart.

Question 64

If a weekly support is near the price or even if the current price is sitting on an ema is this a good barrier?

Answer 64

No. If the current price is sitting on a barrier. Pass

Question 65

The barrier has to be where as far as pricing?

Answer 65

Below the price of the stock and above the strike price for the BPS

Question 66

With regards to barriers, where can we sell the monthly credit spread?

Answer 66

At the second barrier, which is the long put or below it.

Question 67

How do I choose between set up #1 or #2 and what is the selling difference between them.

Answer 67

1. I will use if set up #2 is not available. Or if set up #2 doesn’t pay the 10% ROI.

One 1# is when we sell right on top of a weely support. This would look like the neckline of a double bottom at the retrace of it in his example.

2. # 2 requires a strong weekly support (if it was a strong resistance, it should be a strong support = needs two bear candles under support, check out example slide #13.

This is where sell below a higher low. (double bottom look on chart, sell if there is a second bottom or higher low, but below the first part of the double bottom or the first low of the support)

Question 68

Which set up is easier to hedge. one or two

Answer 68

2

Question 69

What does he consider a higher low

Answer 69

One bear candle on the weekly is not a higher low, two bear can be considered a higher low and then bounces above that, it can be a higher low. two or more. It’s got to then bounce above those.

Question 70

where do you want to sell it around the weekly support area? I think this is for #1

Answer 70

Right at the support or just below.

Question 71

how do I hedge against set up #1?

Answer 71

Buy calls

They will make more than the spread is worth and when It bounces out of the area it will be a WIN in the end.

This is when the stock doesn’t keep continuing up and looks like it’s coming down to bounce off the support line. If it doesn’t bounce and keeps going lower. you lose on the put spread and on the calls.

But hedging like this usually works (if youve picked your resistance and support lines well.

Question 72

Location of set up #2

Answer 72

1. have barrier one and two
2. have higher low
3. Then look for the 10%
4. you will pass on most 4 hour oversold stock set ups

Question 73

Dont forget to set up your EMAs like Tony

Answer 73

10.20.50

Question 74

When does a weekly chart become bearish?

Answer 74

When we take out the higher low

Question 75

Higher low sell Bull Put Spread below how far below higher low?

Answer 75

At least two percent away from alert level where you would short a stock. This gives you room to hedge with puts.

Higher low must have at least two bear candles in the pullback.

Question 76

why do I have to get paid at least ten% of what Im risking

Answer 76

it’s the ONLY way the math works for you to be profitable

Question 77

What is the Math on 10 contracts with 4 spreads per month and three months

Answer 77

800 per month and 2400 in profits

Question 78

What premium capture will you get in for the monthly BPS

Answer 78

Get in at 13-15% premium capture if can so you can exit at 10%

If he gets in at 10% he then will hold for 80-85% premium capture and walks with 8% premium capture

Question 79

Always assume…

Answer 79

You are going to loose. have a plan if you will lost. Keep your emotions out of it. Follow the strategy.

Question 80

on average how many loose?

Answer 80

1 out of ten

Question 81

On average how long are you in monthly credit spreads?

Answer 81

5-8 days on average to win on these.

Ten on average overall.

1 1/2 weekly candles going sideways to win.

Question 82

How to use the indicator start here for cards.

Answer 82

1. Money sign goes off
2. Use second barrier on it, orange line.
3. Decide set up #1 or #2. do you use the indicator?
   There may be extra barriers there that the
   indicator doesn’t show.
   *you can turn it to be more sensitive but he goes for the big supports. The sensitivity level is where he uses it.

Question 83

What EMA do you want to be above on a BPS?

Answer 83

60

Question 84

What do we want to see on a daily bullish chart for a BPS

Answer 84

Bear candles as it needs to be pulling back.

Question 85

In the higher low pullback for a BPS how many bear candles

Answer 85

2

Question 86

once % pay back gets into the ?, its getting into too good to be true

Answer 86

20s, you can get UPTO 20 but not more.
could be over earnings
look at the time frame,

don’t trust anyone on earnings, give yourself room

Question 87

watch youtube videos on

Answer 87

support levels

Question 88

do not chase premium. what do you do. These are the steps for a spread

Answer 88

1. oversold 4 hour
2. 2 weekly barriers
3. what set up 1 or 2
4. where and why we will sell
5. then go to broker and see if your nice strike pays 10% of what your risking. if no go to set up 1 and see if it pays that. i
6. if does, then set up a hedge

Question 89

he shows 50 ema on trading view b

Answer 89

but then types in 60 ema in the instructions and talks about 60 ema

Question 90

bear call spread, trying to call the top

Answer 90

Dont do it. Hard to win on and even JAN sucks at it.

Question 91

do not sell against…

Answer 91

the trend

Question 92

set up #1 and #2. and barriers

Answer 92

set up 1 is AT the barrier and set up 2 is above the barrier.

Question 93

what does an advanced set up entail as far as general principals that define it. Short term credit spreads. I think this is what Tony wants me to do?

Answer 93

more aggressive
set it closer
they come around more often

Question 94

short term spreads are how long

Answer 94

two weeks or shorter

Question 95

anything longer than two weeks is the ? credit plan

Answer 95

Monthly

Question 96

advanced is almost always a set up #?

Where are the barriers set up.

Answer 96

2

1. higher low
2. barriers on weekly.

Question 97

Make sure you go to his charts used and….

Answer 97

put his weekly supports in

Question 98

bull and bear markets quote

Answer 98

Someone told me once that bull markets open weak and close strong. Bear markets open strong and close weak.

Question 99

for the advanced credit BPS plan what is the second setup meant to do

Answer 99

Its a trap set up

Question 100

for the #2 trap set up. what do we want to see as far as action on the weekly candle

Answer 100

for the candle to break the support and then go back up in the same week.

If this happens. you put alerts above and below.

and the following week he will look to get into a spread on it

Question 101

Managing the trade. First thing you do once you get filled

Answer 101

Profit target entry - Immediately enter into your broker your profit target.

(70% premium capture or more)

If you sold spread for 1000 set a target to spend 300 to buy it back

Question 102

When he says playing it safe in credit spreads while managing the trade what does that mean?

Answer 102

Its ok to take .22 target instead of .20

When you buy it back you make money if you buy it back cheaper than what you sold it for

Question 103

For managing the trade why do you set an alert after you enter your target?

Answer 103

set it at the “concern” zone and your sold strike of your spread (set up #1) / your alert level (set up #2). In case the trade is looking weak

Question 104

after setting up your alerts what do you do on your trade while its in action.

Answer 104

wait and do nothing until/dont lose cool

1. your profit target is hit
2. or one of your alerts are triggered, then follow the plan associated with that trigger.

Question 105

How do you exit a BCS

Answer 105

exit together as a vertical spread in your broker, do not leg out, it can mess up your potential for a profit

Question 106

How to handle the expiration date on a BCS

Answer 106

Do not let the spread expire worthless, always close out early
If you have made 600 in 4 does it make sense to wait another 20 to make 200? no. Close it out and spend that buying power to make another 600 in 4 days.

Question 107

What is the concern zone and how to handle it.

Answer 107

The cz is a good way to determine strength of a spread before it hits your alert level.

Credit spreads will have a high win rate, but you are risking a lot to make a little. So if you can exit a spread (if it’s not working like you planned), and save yourself a loss, it will elevate you above everyone else trading spreads.

so what is the sweet spot between exiting a CS at the right time and sitting and letting it work.

Question 108

If you make what profit within the first two three days can you get out.

Answer 108

50%

Question 109

what is the secret to being a great spread trader

Answer 109

“Shhhhhh”

knowing when to get out for a small win or loss when everyone else is taking max losses like a bunch of Noobs.

Question 110

what is a concern zone

Answer 110

is usually in between one of your barriers and your alert level/ sold strike of the spread

The area that the stock should not get to (already broke one of your barriers

Gives you an early indication if your trade is working or not

Question 111

what happens when your trade closes in your concern zone as far as what % you are trying to go for?

Answer 111

When it closes in your concern zone your no longer trying to make 70% profit target on the trade.

Just take the small win and wait for a better set up. If it is not working no need to be in it.

Question 112

Concern zone rules. What do you need to be thinking if the CS gets in this area?

Answer 112

You have not lost on the spread yet, but it’s showing signs of weakness

1. You can’t hedge it yet because it has not met your requirements, but it’s not looking strong
   It must close IN THE CONCERN ZONE ON A DAILY CHART
2. if it enters the concern zone but does not close in it = you do nothing

Question 113

what if your trade closes on a daily chart in your concern zone? (3)

Answer 113

1. if you are profitable - take the small win, exit the trade, look to get back in later on better set up. (take 3% win or whatever)
2. if you are not profitable - do nothing and wait until you are profitable and exit the trade for around break even
3. wait until your alert goes off, and then follow your hedging plan

Question 114

He may have 20 entries in a week or 2 in a week

Answer 114

hes in most of his trades within a week or two each month. maybe a couple more set ups. feast or famine I guess

Question 115

What are short term credit spreads. In general how do you describe them?

Answer 115

1. high risk because faster,
2. expiration in 2 weeks or less, 1-2 day swings, stock has to hang out for a fews days and you win,
3. have 2 sets of rules regarding expiration

Question 116

Pros for short term CS (more aggressive) (4)

Answer 116

1. You can earn a month’s worth of credit spreads profits in a few days
2. less exposure to time in the markets
3. easier to see where the stock could go over next few days
4. you can do with 10K trading account

Question 117

Cons of shorter term credit spreads, (3)

Answer 117

1. you are selling your spread much closer to the stock price compared to monthly spreads (gaps are tough)
2. Your risk is the same as long term spreads, but win rate is less 80%-90% win rate and it fluctuates (92% with monthly)
3. Hard to find set ups in low IV markets

Question 118

With regards to IV when do you take short and long credit spreads?

Answer 118

25 on VICS or lower is low IV - monthly

any time over 25 look for short term credit spreads,

30-50s play 100% short term credit spreads.

Question 119

shorter term credit spreads. tickers (8)

Answer 119

AMZN, TSLA, SPY/SPX, 
SHOP, CMG, 
NFLX, AMD
if you use any other stock you will lose
you DONT want gaps

Question 120

Same week credit spreads. (short term) same week expiration. (4). what are the main thoughts you need to have on them.

Answer 120

1. You can hit profit target in hours - 2 days after entry
2. Has 83% win rate
3. You are asking yourself “where is the stock not going to go in the next two days”
4. Entries will be based on skill of reading price action

Question 121

where does the VIX need to be for short term credit spreads

Answer 121

above 25/ stock has high IV

Question 122

For short term credit spreads you want to check three news sources to make sure no major events or company announcements. why?

Answer 122

you dont want gaps

Question 123

Dont sell short term credit spreads over earnings. why? (3)

Answer 123

1. increasing IV offsets theta.
2. Now you are relying on the stock to make a big move away from your spread.
3. earnings bring gaps

Question 124

What do you want the delta to be for short term credit spreads

Answer 124

.25 or lower

Question 125

When is theta the strongest in an option?

Answer 125

the last week before expiration

Question 126

How do you win with short term spreads with same week expiration

Answer 126

theta is the strongest

if the stock just hangs for a couple days you win

if it moves away from your spread you usually win the same day. 70% premium capture.

Question 127

Delta

How do we work with delta on credit spreads. What delta do we want to be selling?

Answer 127

The further out you go from the price the lower the delta is and your percent chance that that stock will be in the money.

If it’s .10 there will be a 10% chance that that option will be in the money by expiration.

So you have a 90% chance it wont be. Thats how you win. We want out of the money. so we have a 75% chance to win. we want to sell the .25 delta

Question 128

what percent does he always want to make on spreads

Answer 128

70% or more

Question 129

how much of a distance between the alert level and where you sold your spread?

Answer 129

2% (of the stock price) minimum but it’s too much on AMZN or othe super expensive stocks

Question 130

hedging is different for the monthly spreads than the short term how?

Answer 130

The monthly has more confirmation. So if it’s a month out he will be waiting for the daily close over alert level.

If its a couple weeks out he will look for buying calls.

Question 131

What is the difference in the legs of a vertical BP spread? How do they work and how do you get paid?

Answer 131

The sold leg is closer to the price of the stock and pays. The long leg is a little further away from the price and costs you less.

Question 132

To make 10% we need to get paid at least ? in monthly spreads?

Answer 132

.5

Question 133

Set up #1 is where?

Set up #2 is where?

Answer 133

AT the HL, while we wait to get the pullback further up on the S curve.
Set up 2 is below set up ones line and is using it as an alert.

Question 134

When you find the HL you set up an alert where?

Answer 134

Waiting for the pullback on the S curve. When it pulls back He sells a spread. For one the set up is AT the higher low. This is where you look for premium. And for two,, your set up is below the HL and about 2% of the way down.

Question 135

Prob OTM - what is it?

Answer 135

Delta in percentage form

Question 136

pos - on the trade station app in options

Answer 136

expected move on strike prices of options. It is the IV

Question 137

if we buy a call above the strike price, when do we go out of the money

Answer 137

Buying calls is a bullish behavior because the buyer only profits if the price of the shares rises.

Question 138

further out of the money means what?

Answer 138

less of a chance of being in the money. And so the option is cheaper.

Question 139

If I buy a put when the price is at a certain spot, how does it go more out of the money?

Answer 139

as it goes up
bearish play

An in the money put option is one where its strike price is greater than the market price of the underlying asset.

That means the put holder has the right to sell the underlying at a price that is greater than where it currently trades.

This allows for an immediate profit if they buy the shares back at the market price, therefore the price of an in the money put closely tracks changes in the underlying.

Buying a put option gives the buyer the right to sell the underlying asset at a price stated in the option, with the maximum loss being the premium paid for the option.

Traders buy a put option to magnify the profit from a stock’s decline.

A trader can profit from stock prices below the strike price until the option expires. By buying a put, you usually expect the stock price to fall before the option expires.

Question 140

for a bull put spread what legs and what direction do you go?

Answer 140

Buy a put, sell a put. Buy a put sell a call.

Question 141

When you are placing a vertical order in TS and you see the two rows of strike prices. The price that is closest to the side you are looking to trade (put, call), is what side of the trade? And so the strike placed further away is the?

Answer 141

Short

Long

Question 142

1. How do you come to the 10% on a spread? give a numbers example from tonys lesson. 408/410.
2. Then what do you do with this number?

Answer 142

1. Take the difference between the two legs. Then figure 10% of that. and then Times X 100 for one contract. 408/410 = 2, X .10 = .2, X 100 = 20$.
2. Go to “mid” number and make sure it’s paying more than that number (.2 ten % of the difference)

Question 143

When do you use “analize sell vertical”. Right click on your price next to the strike you want.

Answer 143

1. He uses this example to change the spread to a $5 spread, but still wants to sell the 410 strike price.
2. You want to go to bottom of TS and go to the buy 408 to a 5$ spread and buying 405 is the end result. Then you look at reward risk ratio and you need .10 (on the bottom to the right)

Whatever the distance is between the legs. You need .? (point. and whatever number it is. So if it’s 2 bucks. You need . 2. If it’s bucks you need .5

Question 144

why do you want to do less contracts on TS?

Answer 144

Because it’s less commissions

Question 145

How do you set it up so you can have less contracts (and pay less commissions)?

Answer 145

1. First move the # of contracts so you can get to max loss. More contracts is also harder to get in and out of due to the larger number of them.
2. Max loss can be 10% of your account ( for 30K account 3K max loss)
   Max profit: changes
   $5 dollar spread
3. Wider spread for less contracts. The wider the spread the faster theta will act. Theta takes off dollars each day as it decays.
4. The bigger the account the wider you can go. But then when you do a wide spread it messes with your max loss. It gets much bigger.

Question 146

What dollar spread should I always do right now in my account and why.

Answer 146

1. $5
2. Easy enough to get filled without too many contracts
3. Good theta but not risking too much of a percentage per trade.

Question 147

What is your max loss on 30K

Answer 147

1. Max loss can be 10% of your account ( for 30K account 3K max loss) - 900$
2. $5 dollar spread

Question 148

What is Tony’s strategy max loss

Answer 148

30% of the max loss which for me will be 3,000 (max loss on TS). 9% of the original total. 30% of 30% out of 1000 is 9

Question 149

Is Buying a Call Bullish or Bearish?

Answer 149

Buying calls is a bullish behavior because the buyer only profits if the price of the shares rises

Question 150

Is selling a call bullish or bearish?

Answer 150

Selling call options is bearish. The seller profits if the shares do not rise.

Some investors use call options to achieve better selling prices on their stocks. They can sell calls on a stock they’d like to divest that is too cheap at the current price. If the price goes against the seller and rises above the call’s strike, they can sell the stock and take the premium as a bonus on their sale

The purchaser of a call option pays a premium to the writer for the right to buy the underlying at an agreed upon price in the event that the price of the asset is above the strike price. In this case, the option seller would get to keep the premium if the price closed below the strike price.

Question 151

Is selling a Put bullish or bearish?

Answer 151

Bull

If the stock is below the strike price near exp. you will receive something for your option (intrinsic value).

Question 152

What position are you bull or bear if you are selling a call

Answer 152

selling call options is a bearish behavior, because the seller profits if the shares do not rise.

The purchaser of a call option pays a premium to the seller for the right to buy the underlying at an agreed upon price in the event that the price of the asset is above the strike price.

The option seller would get to keep the premium if the price closed below the strike price.

Question 153

How do put options work

Answer 153

A put option buyer grants the right—but not the obligation—to sell a specified quantity of the underlying security at a predetermined strike price on or before its expiration date.

On the other hand, the seller or writer of a put option is obligated to buy the underlying security at a predetermined strike price if the corresponding put option is exercised.

This is the opposite of a call option, which gives the option holder the right to buy an underlying security at a specified strike price, before expiration.

Put options are used as downside protection since if you own the underlying asset and you have the right to sell it at some price, it effectively gives you a guaranteed floor price. Put options can also be used to speculate on an underlying if you think that it will go down in price. Thus, a put can give short market exposure with limited risk if the underlying in fact rises.

Question 154

When Is a Put Option “In the Money?”

Answer 154

A put option is considered in the money (ITM) when the current market price of the underlying security is below the strike price of the put option. The put option is in the money because the put option holder has the right to sell the underlying security above its current market price. When there is a right to sell the underlying security above its current market price, the right to sell has value equal to at least the amount of the sale price less the current market price.

An in the money put option therefore is one where the strike price is above the current market price. An investor holding an ITM put option at expiry means the stock price is below the strike price and it’s possible the option is worth exercising. A put option buyer is hoping the stock’s price will fall far enough below the option’s strike to at least cover the cost of the premium for buying the put.

The amount that a put option’s strike price is greater than the current underlying security’s price is known as intrinsic value because the put option is worth at least that amount.

Question 155

on set up two #2 where would you have your alert level

Answer 155

where you would short it

Question 156

what percentage do we have to get paid of what we are risking?

Answer 156

10

Question 157

Set up #1 where do you sell PBS

Answer 157

At the second barrier. right on or right above it

Question 158

set up #1 because you are selling it a bit closer to the current price you are probably going to get what percentage ROI

Answer 158

15% or higher return on Investment ROI

Question 159

set up #1 for a bear call spread. Where do we sell?

Answer 159

Right at the resistance or above. we need two or more barriers to come before it

Question 160

Where do you set up alerts on #1

Answer 160

2 alerts set

in the concern zone (first barrier is broken)

and sold strike of your spread which is on the support zone (or resistance)

Question 161

if you hit ?% at any time within the first three days of a spread you can get out. you dont have to but Tony does

Answer 161

50. The last days of the spread will just take a long time. You wont make much more and you could put the money somewhere else and make more

Question 162

For short term credit spreads, how close do you sell from the price of the stock generally. This means gaps are tough.

Answer 162

2-3%

Question 163

What are the cautions of short term credit spreads? (5)

Answer 163

1. Short term CS have a really high ROI, but also have a small cushion to be wrong, since you have to sell closer to the stock price.
2. “Every time I stepped outside of the plan I lost money.”
3. More for the advanced traders that are good at reading price action.
4. You will need to hedge more often with short term spreads since you will be wrong more often.
5. Everything happens quicker - good and bad.

Question 164

Why use only those 8 stocks on a short term credit spread. Same week spread.

Answer 164

1. They have high Daily IV but dont gap a lot.
2. They are consistent trend following stocks.

So he can sell a good distance away from a couple days out expiration and win. Any other stock that is going to pay you with a high IV, there is prob news coming out and it will gap.

Question 165

What do you mean by .25 delta or lower?

Answer 165

The further away you go from the price of a stock, the lower the delta is.

It’s your percent chance that your stock will be in the money by expiration.

So if you’re selling the option you have to reverse that and think 90% chance it wont be in the money if it’s a 10 percent delta.

with .25 it’s 75% chance.

Question 166

When you set your targets to buy back on PBS, what percent must you not go below?

Answer 166

70% premium capture or more

Question 167

Entries for SAME WEEK expiration. (7) stocks. (7 steps). plus (2) other points. What are these things you have to know?

Answer 167

1. Only entering Monday or Tues
2. You dont have to wait for a bear day to sell a bull put.
3. Expiration is the current week’s friday.
4. Sell with the daily trend
5. Need 1 DAILY and a WEEKLY barrier between sold strike and stock price
6. Set up #1 selling right at support or resistance. Better premium but harder to hedge
7. Set up #2 selling below a support/above a resistance. Allows you to use that support/resistance level as a place to hedge.

Other two points
8. Must get paid 10% ROI

9. Have a strong hedge plan in place before taking the trade. Sell at the correct location.

Question 168

For same week expiration, when is the time to get into trade. Why?

Answer 168

Only Monday or Tuesday.
Monday morning is the best time to enter the spreads.

That is when the expected move is the greatest for the week. You can sell farther away and still get paid, with greater chance of winning.
The first 30 minutes to an hour is the best time if the set ups are there.

and then when the stock picks a direction, the hope factor goes down.

Question 169

Dont forget to watch intro to options and the free advanced course - options

Answer 169

sldfkja

Question 170

Selling out of the money is selling what?

Answer 170

hope

Question 171

With regards to selling with the trend on same week spreads..what do you need to know about trend and candles?

Answer 171

Stay with the trend.

dont assume it will reverse just because it has a lot of candles.

Question 172

How do you handle barriers with the same week credit spread?

Answer 172

Need 1 daily barrier in between your sold strike and the stock price.
Daily support
Daily EMA (10,20,50,100)

Need 1 weekly barrier in between your sold strike and the stock price.
Weekly support
Weekly EMA (10,20,50,100)

Question 173

on short term credit spreads what ROI do you need

Answer 173

We need miniumum 10% ROI.

He prefers 15-17% of the risk you take.

Question 174

Main SET UP for same week expiration. #1. What is the set up on the chart.

Answer 174

1. Big pullback to weekly support
2. Strong break of an S-Curve
3. Trap and reverse

Question 175

the indicator was created for what time frame and trade type

Answer 175

monthly

Question 176

Entry on a one week spread. Pullback to weekly support. what does that look like?

where would you sell for #1?

How many does he get in?

What is a common occurrence for short term spreads?

Answer 176

On weekly and daily….you need a support. We want a pullback. Sell at weekly support for #1. goes up a little in price and we win. He gets in 2 or 3 a week in a good IV market.

You will have to hedge these more often. You will have to know price action well. More skilled. Need your hedge plan in place.

You make money on a little bounce

Question 177

For short term one week credit spreads. what does he do monday and tuesday to find trades? specifically on the charts?

Answer 177

He looks for potential breaks in S-curves and sets up alerts where that would be.

Question 178

What does he do on Fridays?

Answer 178

Takes time to look at weekly charts to see how they are about to close.

Looks at how trades might set up for monday and tuesday also.

Later as he got more experienced he doesn’t need to take time to do that. Can do Monday morning

Question 179

How much time does he spend on his credit spread research?

Answer 179

30-40 min on monthly spreads, per week.
Short term spreads 1-2 hours on monday or tuesday.

3 hours a week to make a ton of money.
he spends most of his time on the golf course.

Question 180

What does breaking of an S curve look like?

Answer 180

Where the curve should continue it’s trend, it doesn’t and it goes the other way. That is where you get into short term spreads.

Question 181

Where do you get in (on the chart) on a weekly credit spread?

Answer 181

Below the daily and WEEKLY first support.

At or below the second DAILY support barrier 2.

They can be reversed. Dont have to be in that order

Question 182

How does an entry trap and reverse work on a weekly credit spread?

Answer 182

1. On a daily chart. The daily candle goes below the Daily support (barrier) and then closes above it by the end of the day.

**Best case: happens on a friday! And the example closed with a hammer.
He’s only looking at those 8 stocks so it’s easy to scan.
NFLX, SPY/SPX, AMZN, AMD, SPOT, TSLA
2. As it breaks out and opens above the hammer on monday. he’s got his barriers and things figured out.

3. He then enters the trade and sells at the daily support barrier 2 and hopes it works a couple days later.

Question 183

How do we manage same week trades? (3)

Answer 183

1. Exit the spread, no matter what by end of day Thursday.
   Expiration day Friday is the only time you can lose max loss.
2. Profit target is 70% or more premium capture
3. Have a game plan to hedge before you get filled on the trade.
   Hedge plan is determined based off of entry #1 or entry #2
   Entry #1 - selling right at support
   Don’t hedge, or do a reverse hedge for #1

Question 184

2 Week Expiration: (5) RULES

Answer 184

1. Can trade this strategy on any stock that meets the requirements
2. Enter on any day
3. Dont sell with stock that have inflated IV
   with monthly spreads you can get away with it since the stock most likely wont gap to your spread. Selling 2 weeks out you are still too close to the stock price and gaps can easily take you out.
4. 5000 average daily option volume minimum
5. Must get paid minimum of 10% of your max loss

Question 185

2 week expiration general ideas

Answer 185

1. easier to trade than the same week exp
2. expect to win after 2-7 days
3. 87% win rate
4. Entries are based off of more rules than chart knowledge. (like roberts plan for credit spreads).

Your knowledge of price action doesn’t have to be as skilled, but you will need to know how to read price action to get the most out of this strategy.

Question 186

Entry Location rules for 2 Week spreads (4)

Answer 186

1. Need 2 barriers in between your sold strike and the stock price. A weekly and a daily barrier.
2. RSI on the 2 hr chart needs to be extended in your spreads direction before you can take a trade (oversold (<30) for bull put spread, and overbought (>70) for bear call spreads)
3. SET UP#1 Selling right at support or resistance better premium but harder to hedge.
4. SET UP #2 Selling below a support/above a resistance allows you to use that support/resistance level as a place to hedge.

Question 187

Example of 2 week option trade. (3)

Answer 187

1. needs to be oversold on a 2 hour chart. can create a scan for that
2. delta .25 or lower
3. Go to a weekly and identify two weekly barriers. One of the barriers can be a daily. But on the monthly BOTH need to be weekly barriers.

Question 188

He keeps ?% of his total account for credit spreads.

Answer 188

16. not sure that is something I need to think about as my entire account will be used for that

Question 189

Concern zone for the two week credit spread. (how do you manage it?. (4)

Answer 189

Hedge plan based off of #1 or #2 entry.

1. # 1 Selling right at support. Dont hedge, or do a reverse hedge
2. # 2 sold spread below a support/above a resistance
3. Buy the hedge if it closes below the alert level with a 1 hr candle
4. Profit target = 70% premium capture

Exit the trade no matter what the day before expiration

Question 190

Dont’s with short term spreads - 2 weeks

Answer 190

1. Do not sell against the trend even if you think it will go reverse a couple days.
2. if the premium is too good - don’t take the trade.

** if you’re getting paid more than 30% on your max loss and you’re selling less than .25 delta = too good to be true.

Question 191

options rewind on TOS you can practice back trading options. Not sure I need to do that?

Question 192

?% of your total account do you put on each credit spread trade

Answer 192

16

Question 193

Gaps happen to him with his short term strategy that knock him out how many times out of how many trades.

Answer 193

3 out of 74 in a year

Question 194

He will do CS on more stocks on bi-weekly.

Answer 194

He can use any stock for the two week.

Question 195

if you have a good hedging plan youre going to make money no matter what? T or F

Answer 195

T

Question 196

Rules for hedging are the same for all Credit Spreads. But for the monthly what are you looking for before you hedge, and why is that different from a one or two week CS hedge?

Answer 196

You are going to make sure you have more confirmation. Wait for a daily close across your alert.

For the two week or the one week, he may wait for a one hour close instead.

Question 197

Rules for Hedging (4)

Answer 197

1. Only enter a hedge if your rules have been met. Not because a big scary candle has come in.
2. Only hedge if it makes sense
   If your max loss is 5K, and you can buy puts, that turns your max loss into $1500 = great hedge
   If your max loss is 1K, and you buy puts that cost $2K, max loss is now 1500 = not a good hedge.
3. Can only do 2 hedges on the same trade, don’t get whipsawed.

Question 198

when you are in a losing CS and you want hedge more, what would you need to be doing to make another hedge worth it?

Answer 198

cut the loss at least in half.

Question 199

You can only do ? hedges on the same trade.

Why?

Answer 199

2.

You will likely get whipsawed and lose A LOT more than you would have originally.

Question 200

How to hedge #2

What is the key point?

What three supporting points do you need to remember?

Answer 200

The spread location where you sold is key to be able to hedge effectively.

1. If you sell too close to your alert level you’ll need to buy a lot of puts/calls to hedge = the more you spend on your hedge the harder it is to lose small on the trade.
   * *Sold strike of spread needs to be at least 2% away from the alert level. But he seems to have not been real good with them buying even that close.
2. Make sure there are no other major support levels in between your alert level and your spread.

** If you sold your spread below a support, but there is another strong support between your alert level and your spread = when you buy puts when it hits your alert level, goes lower, hits the next support level and then bounces and you lose on those puts.

3. When your alert level is triggered your no longer trying to make money on the spread, your goal is to lose small or break even and get out.

Question 201

Why is it easier to set up #2

Answer 201

because you have a clear zone where you are wrong. Your alert zone is actually where you would short it.

Question 202

to hedge #2 you have to buy how much?

Answer 202

30% of your max loss. So you need to make room.

At your sold strike your spread is going to be down 30% of your max loss.

So at your alert you need to buy puts to cover this loss at break even or at a profit by the time it hits your sold strike.

Question 203

What percentage do you hedge most CS with and if you can’t do that percent due to expense of stock (over 1K or more), how do you make sure the numbers work?

Answer 203

You don’t want to spend more puts or $ than half of what your max loss is. If the space between your legs is too much to hedge properly. Dont do the trade.

for most stocks it’s at least 2% of stock value. But for more expensive stocks that’s too much (AMZN) so just make sure the math works.

Question 204

When your alert level on set up #2 goes off. what happens then. What is the rule.

Answer 204

you no longer want to be trying to make money. Your goal here is to lose small or break even and get out.

Question 205

rules for Set up #2 hedge

(3). On all time frames

Answer 205

1. Do not start the hedge until your alert is triggered
2. Wait for a 1 hr candle close across your alert level (can be a daily candle)
3. Exit hedge and spread when the stock price hits your sold strike/or when break even if it has not gotten to your sold strike yet.

Question 206

Bull Put Spread Hedging rules for set up #2. on Bull Put Spread - tips. (3)

This is after your alert is hit. What is the protocol?

Answer 206

1. buy puts when the stock closes with a 1 hour candle (or daily candle) below your alert level,

UNLESS you’re oversold on the 1 hr rsi. (Below 30 on rsi)

if oversold on the 1 hr at the time of the 1 hr candle close below alert, WAIT 1 day before getting into hedge.

After waiting 1 day, get into hedge when the rsi is no longer oversold

Then wait for another 1 hr candle close below alert level, if not below it already.

2. Use the analysis tool to determine how many puts you will need to buy so that you will be at break even by the time the price gets to your sold strike.
3. If you get two 1 hr candle closes back above your alert level, after you entered the hedge, exit the hedge for a small loss.

Remember you are still going to make money from the spread so it’s not that bad. Our goal is to lose small.

Bear Call Spread
same but inverted. (above 70 rsi)

Question 207

where are you going to choose your strike for your hedge?

Answer 207

Between your alert level and your sold strike of your spread

(too close to the price and it will cost a lot, too far from the price and it will lose value faster if the stock reverses)

You will plan ahead and know how many you will need to buy.

Question 208

If you only have a couple contracts

Answer 208

dont hedge. it’s not worth it.

Question 209

on the analysis tool for Trade Station what do the colors mean?
yellow
green
purple
Blue on both ends

Answer 209

gives you an estimate on those days

yellow is your p/l today
green is just a selected date so you can watch it as it progresses
Purple is close to the expiration
Blue is the expiration and is capped at max profit and loss

All of these can be adjusted and more or less addded and colors changed.

Question 210

On the Trade Station analysis tool where is the price of the stock
Where is your P/L
Where is your break even?
where do you know youre losing money on a Bull Put Spread

Answer 210

On the bottom of the graph moving from left to right. less to more

on the left

On the dotted line

Any line below the dotted line you are losing money on

Question 211

Why is the blue line flat on the Trade Station analysis tool?

Answer 211

Because that is the expiration date

There is a max profit on BPS. You can only make what you get paid. Your P/L is capped out what you made.

You also have a max loss which is also a flat line blue

Question 212

What is a covered/married stock

Answer 212

shares hedged by options

Question 213

In the vertical spread where you have two strike prices in front of you on trade station. Which is the short and which is the long?

Answer 213

The short is the one closest to the side of whatever type of option you are doing. (On the put side the strike price closest to the put side of the option choices is the short. The strike further away will be your long strike)

Question 214

When looking at strike prices on the Trade Station options sheet. When do you choose the ask and when the bid?

Answer 214

Bid is red and ask is blue. If you are selling a put. You choose the red row because you are selling. The red row is the bid.

Question 215

When looking at the options sheet. Where do you look to compare the percentage you need for the trade (at or more than 10%).

Answer 215

The Mid price.

Question 216

Hi Lera! I hope you are able to learn all of this really fast! In two weeks we will be experts. LOL

Answer 216

yay!

Question 217

For two week spreads..look at the RSI on what chart? And what do you also need to remember about it?

What should the RSI be or BPS and for BCS

Answer 217

2. RSI on the 2 hr chart needs to be extended in your spreads direction before you can take a trade

(oversold (<30) for bull put spread, 
and overbought (>70) for bear call spreads)

Question 218

Where do we set up #1 for a Monthly bull put spread. (photo)

Answer 218

Monthly

Question 219

Set up for Bull Put Spread #1

Photo card

Answer 219

Question 220

Set up for BPS #1 and 2# (photo Card)

Answer 220

Question 221

Same week credit spread. Pull back to weekly Support entry. One of three types of entries.

Answer 221

Question 222

Same week credit spread. Entry Break of S - Curve.

One of three types of entries. Describe what it looks like.

Answer 222

Break of S-Curve

Question 223

Same week Credit Spread
Entry Trap and Reverse
One of three types of entries.

Answer 223

Question 224

two week expiration example of a credit spread

Photo

Answer 224

Question 225

Example of hedging BPS #2

Answer 225

Question 226

Example of Hedging Bear Call #2

Answer 226

Question 227

Example of Hedging Bull Put Spread Set up #1

This card is blurry and the original screen is blurry too. this is as good as it’s going to get

Answer 227

h

Question 228

Monthly spread rules. 15-60 days to Expiration (from Quick reference sheet) (3)

Answer 228

1. Minimum of 5000 average daily volume total (calls and puts)
2. Dont sell over earnings
3. Check news from 3 different sources to confirm major announcements

Question 229

Entries on Monthly credit spreads: 15-60 days to expiration (5- from tonys sheet)

Answer 229

1. oversold on the 4 hr RSI
2. Locate the next closest 2 weekly barriers (Weekly EMA, or weekly support)
3. Determine if you will be selling set up #1 or #2
4. Once you determine your location on the chart, go to your broker check to see if that location pays at least 10% ROI
5. Make sure that location is easy to hedge

Question 230

Advanced Set Up Entries Monthly

Answer 230

1. Set Ups
   Pullback to weekly support
   Strong break of S curve
   Trap and Reverse
2. Need to have 2 barriers (weekly chart)
3. Choose set up #1 or #2
4. That location must pay you 10% minimum ROI

Question 231

Manage the trade on the Monthly (quick reference)

Answer 231

When your filled…
Enter target for 70% premium capture, or more.

Set alerts at your concern zone, and alert level (spread zone?)

If stock closes with daily candle in concern zone…

If your profitable exit the trade, take the win

If your not profitable, wait until you are, then exit around break even/wait for your hedging plan to be triggered, then hedge it

Question 232

Same week expiration spreads RULES. From quick sheet. (7)

Answer 232

1. Minimum of 5000 average daily volume total (calls and puts)
2. Dont sell over earnings
3. Check news from 3 different sources to confirm no major announcements
4. Best when VIX is above .25
5. Only trade these stocks: TSLA, AMZN, SPY/SPX, SHOP, NFLX, AMD
6. Sell .25 Delta or lower
7. Only enter trades on monday and tuesday

Question 233

Entries on Same week Expiration

Answer 233

Set ups
Pullback to weekly support
Strong break of S Curve
Trap and Reverse

2 hour oversold
Need 2 barriers (weekly and Daily)

1. Choose set up #1 or #2
2. That location must pay you 10% min ROI
3. Hedge plan

Question 234

Manage the trade on Same week expiration.

Answer 234

When you’re filled…

enter target for 70% premium capture, or more.

Set alerts at your concern zone, and alert level

If stock closes with daily candle in concern zone…

If your profitable, exit the trade, take the win

If you’re not profitable, wait until you are, then exit around break even, or wait for your hedging plan to be triggered, then hedge it.

Question 235

2 Week Expiration Credit Spreads

Answer 235

Rules
1. Minimum of 5000 average daily volume total (calls and puts)

2. Dont sell over earnings
3. Check news from 3 different sources to confirm announcements
4. You can trade any stock that meets the rules
5. Sell .25 delta or lower
6. Entry can be on any day, but can’t sell current weeks expiration

Question 236

2 Week Expiration Entries

Answer 236

Set ups
Pullback to weekly support
Strong break of S curve

Trap and reverse
2 HR oversold

Need to 2 barriers (weekly and a daily)

Choose set up #1 or #2

That location must pay your 10% min ROI

Hedge plan

Question 237

2 Week Expiration Credit Spreads

Answer 237

Manage the Trade
When you’re filled
Enter target for 70% premium capture, or more

Set alerts at your concern zone, and alert level

if stock closes with daily candle in concern zone

If you’re profitable exit the trade, take the win

If your not profitable , wait until you are, then break even/wait for your hedging plan to be triggered then hedge it.

Question 238

What barriers do you look for on:

1. weekly entry
2. Two week entry
3. monthly

Answer 238

1. daily and weekly
2. daily and weekly
3. 2 weekly.

Question 239

Same Week Expiration General Rules. (11)

Answer 239

1. Minimum 5000 average daily volume total (calls and puts)
2. Don’t sell over earnings
3. Check news 3 sources
4. Best when VIX is above .25
5. Only trade: TSLA, AMZN, SPY/SPX, SHOP, NFLX, AMD
6. .25 delta or lower
7. Only enter trades on Monday and Tuesday
   Monday within the first half hour is best.
8. You don’t have to wait for a bear day to sell a bull put
9. Expiration is the current week’s Friday.
10. Sell with the daily trend
11. Must get paid 10% ROI or higher

Question 240

Advanced Set up On Monthly. ***. (5 sheet)

Answer 240

1. Pullback to weekly support
2. break of S curve
3. and reverse
4. 2 barriers on the weekly chart
5. Choose set up #1 or #2 - must pay 10% ROI

Question 241

Managing the advanced Trade on the Monthly*** (sheet)
When your filled (2)
If stock closes in concern zone (2)

Answer 241

When you’re filled
1. Enter your target for 70% premium capture, or more
2. Set alerts at your concern zone, and alert level
If stock closes with daily candle in concern zone
1. If you’re profitable exit the trade, take the win
2. you’re not profitable, wait until you are, then exit around break even/wait for your hedging plan to be triggered, then hedge it.

Question 242

Hedging Monthly for Set up #1 *** (sheet)
Option #1
Option #2

Answer 242

1. Option #1 - No Hedge
   Don’t do any hedge. If you get two daily candle closes below your sold strike close the spread out for a loss. Usually give it a day and you will be able to see if any strength has come in or not.

Option #2 - Reverse Hedge Plan -
Since set up #1 has you selling at resistance/support level you can use that to your advantage. A stock that has made a big move lower and hits a weekly support, most of the time bounces off of that support for a short time. If you sold a bull put spread right on top of the weekly support you can wait for the stock to reach your sold strike (weekly support) then buy calls.
These calls will make money as the stock bounces off of the support, at the same time your spread value losses will decrease. The long calls will get you to break even very quickly so you can exit the spread avoiding the loss.
There are downsides to this hedge. If the stock does not bounce off of the support then you will lose a little more because the long calls will lose money also.
I keep a tight stop on these calls. Use a strong support to judge the strength. If we break below the support then you know to exit the long calls and lose small on them
Dont buy the calls far from the support that you sold your spread on (tip: sell your spread right at the support, not a few dollars above it, makes it much easier to hedge.) The closer you are to the support the faster you can determine if you’re wrong or not.

Question 243

What are the rules for the Option #2 Reverse Hedge Plan #1 set up on the Monthly *** (7) Sheet info

Answer 243

1. Before you get filled on this spread you will plan to use the reverse hedge if the price gets to your spread.
2. Determine the next resistance level above your spread on a daily chart.
3. Then use the analysis chart to determine how many calls you will need to buy to be at break even by the time the price gets to that resistance.
4. When the price is close to your spread (less than .25%), you can start legging into the hedge. If you need to buy 4 calls you can leg into 2, then buy the other two when it hits your sold strike. Or just wait until it hits your sold strike and buy the 4 then. Up to you.
5. Buy around the .35 or .40 delta calls (just out of the money) with expiration no shorter than 2 weeks out, or longer if you want and the cost is reasonable.
6. Exit the hedge and your spread for a loss if it closes below the sold strike of your spread with a daily candle.
7. If the hedge works, exit the hedge and spread when you’re around break even (profits from the calls are more than what the spread is losing)

Question 244

Before you submit your order verify that… (7)

Answer 244

1. You are receiving a credit for the spread and not paying a debit for it. If it’s a bull put…
2. You have the correct strike prices
3. You have the correct expiration date
4. You have the correct limit order entered
5. You have a hedge plan.
6. You are not selling over earnings or other news
7. You have the correct amount of contracts

Question 245

still have to make cards for how to handle overnight gaps. Then mostly done with making cards.

Question 246

Bear Call Spread

Answer 246

A bear call spread is a two-part options strategy that involves selling a call option and collecting an upfront option premium, and then simultaneously purchasing a second call option with the same expiration date but a higher strike price. A bear call spread is one of the four basic vertical option spreads.

Question 247

What to remember when looking for price action in deciding a lower high. 2

Answer 247

1/2% of the stock price close to the area is fine for a lower high.

If there a lot of body closes and then it just wicks up. That’s fine too

Question 248

How are options priced? (3)
from class not second one from tony

Answer 248

Extrinsic
Intrinsic
Implied volatility

Question 249

set up 2 has to go under what?

Answer 249

2 barriers and a higher low

Question 250

What is his concern zone. How does he identify it.

Answer 250

It’s the second barrier from the price. It’s never the first barrier. its where you dont want the stock to go

Question 251

What happens if you get a close in the concern zone in #1

Answer 251

You are taking your profits. Get out.

If you are not profitable. Do nothing and wait for hedging plan to come into play.

Question 252

DTE

Answer 252

Date to expiration

Question 253

for #1 if it goes against you how do you hedge

Answer 253

Buy calls for a BPS. If it doesn’t bounce you have a very tight stop with the calls

A reverse hedge is: doubling down on our direction.

We just need for the calls to go up a couple days.

Question 254

News Sites

Answer 254

CNBC
Google: news on 
releasings on
bloomberg. 
just google the crap out of it.

Question 255

when do spread set ups happen the most?

Answer 255

sometimes its slow and sometimes its busy
with monthly he can scan all month and one week of the month he can get into all his spreads. But doesn’t always happen

Sometimes he sees 5 set ups but earnings are coming up and he cant get paid properly or earnings are coming up

hit and miss especially with earnings coming up

Matter of what scanner is set up to and how much you want to look (what does he mean how much I want to look? I want to look as much as I possibly can)

his scanner is set up to 2 to 3 week with the big pullback to a strong support

scan that has 3 or 4 bear or bull candles in a row

how often does he scan?

oversold on a daily is a good scan

bullish stock that is getting beat up on a strong weekly support is one of his entries.

When the market is right you will have too many you wont even be able to do them all.

Question 256

He really likes to get what percent most of all?

Answer 256

14%. so when he buys it back he gets 10%

Question 257

How to put in your profit target on Trade Station. He gets paid 60$ on the spread.

Answer 257

1. Do we put in a 50% target first?
2. to put in 70% He looks at his “net profit” and takes 10% and multiplies that by 3. :) (what is 70% of 60$ = 18)
3. Take Net profit and subtract that number (30%) He wants a profit of 42$
4. On the Manage page, Right click on your spread (area) that you blended together, and click on “close position”
5. Watch the “max profit” area and adjust the “limit price” to get the max profit as close to the 70% profit target you calculated. (Net profit - 30%)
6. MAKE SURE it’s GTC or you have to cancel it and redo after placing the order.
7. Press “place order”.
8. Sometimes there is a delay. So just wait a minute or a few to make sure the trade gets in there. Dont redo it because you think it didn’t work. (prob best not to do the last few minutes of the day then….)

Question 258

How do you look on the analize chart to see what price the stock has to go to, to get to your 70%?

Answer 258

Look at where the yellow dot is over on pricing

Question 259

how to tell if it pays enough based on your spread.
What is spread
how do you figure out on the options chart what it pays

Answer 259

What is your spread? 5$ for me right now
Multiply that by 10 = always… 500
What is 10% of this number? 50
Compare this to the mid, where you want to sell it. Multiply mid by 100. Move decimal over to the right twice. We are looking at .82 in the Mid price. So this one pays 82 dollars
Anything over .5 is always good. But make sure the spread IS 5.
So depending on the spread it’s (point .?). 8 dollar spread needs to be .8

Question 260

set up one is at next higher low down/ set up 2 at least 2% below that.

Answer 260

Sda

Question 261

Concern Zone Rules. How to set it up

Answer 261

The concern zone is simply the area where it should not go. So if you go to a 1 hr chart and identify where the higher low is ( needs to be before the alert level) if we take that out it’s not showing strength. So put your concern zone on a 1 hr a curve break

Question 262

to make the S curve…..

to break the S curve…

Answer 262

Can be a wick even or above the LH

has to close above or below the lower high

Question 263

he’s in monthly credit spreads how long?

Answer 263

5-15 day

Question 264

How do you enter an iron condor in the broker?

Answer 264

If you put in it as a iron condor it’s hard to get filled. Do it separately. So get filled on the bull put spread part. Then get filled on the bear call spread part

Question 265

if we need to hedge a BPS we need to? / if we need to hedge BCS we?

Answer 265

Buy puts
Buy Calls

You are correct, if it is a setup #2!

With a BPS:
Setup 1 would be calls because we are expecting a bounce off the support.
Setup 2 requires puts because we are expecting it to continue to move down because it broke through the support.
With a BCS:
Setup 1 would be buy puts because we are expecting a drop off of the resistance.
Setup 2 requires buy calls because we are expecting it to continue to move up because it broke through the resistance.

Question 266

on a chart when the bears or bulls both get stopped out close together it’s likely creating a ? And how do we trade that?

Answer 266

a channel.

Only deal with the outsides of the channel.

Question 267

on a massive run in a direction do not sell?

Answer 267

a spread in that direction because the trend will be broken eventually

Question 268

When stocks are parabolic. What do we do?

Answer 268

be careful because it’s the hardest and the most frustrating time to do credit spreads. Sell two higher lows back. sell 3 months spreads back. Earnings may be an issue. Ask Tony. But we may be able to sell over earnings with this strategy. The moves are so big that we can make money and get out in a week generally. it’s really hard to hedge at all time highs too.

Question 269

wait for the break

Answer 269

we want to make sure it’s strong. two candles at least.

Question 270

How are options priced? (3)

Answer 270

1. Time
2. Underlying Stock Price (strike)
3. Volitility

STV

Question 271

Monthly: When he is selling a pullback to a weekly support on the advanced set up, he’s usually going to do what set up?

Answer 271

2. You are selling a little bit closer and this one is more aggressive. But they come up more often.

A big weekly pullback into a weekly support (1 out of 3 set up for advanced #2 monthly credit spreads)

They also require you to hedge more often.

Selling about three weeks out. Anything over 2 weeks he considers it his monthly plan.

Question 272

What is a monthly trap entry? (advanced set up #2 (2 out of 3)

Answer 272

Weekly candle to break the support entry and will close above back above the support in the same weekly candle. Then he will get into the spread the following monday.

Question 273

What is the 3rd point on advanced set up #2? (3 out of 3)

Answer 273

Break of an S-Curve. with a close above it. and then we wait for a retest.
All Set up #2 advanced need 2 barriers (in video)

Question 274

What are the three monthly set ups for set up #2

Answer 274

1. Big weekly pullback to a STRONG weekly support. (sell three weeks out. Always wanting to be selling this #2 on this one for sure)
2. Trap set up. Weekly candle dips below support and then closes above it in the same week. (Get in the following Monday)
3. Break of an S-curve - (wait for the pullback of that to get in)

Question 275

For set up #2 monthly. if you start getting a set up what does that mean for the future.

Answer 275

You will prob get more quickly, as one sets up others.

Question 276

How long to do you hold a credit spread for?

Answer 276

Normally hold for 20% of the time. So if you sell it 1 month out normally youre in it for a week or so.

Question 277

Must get paid how much?

Answer 277

10% of ROI

so He goes for 14%

Question 278

Hedge on #2

Answer 278

Alert on a #2 is at the spot where you would do a #1.

If you get a 1 hr close over the alert and if it’s not overbought on the RSI, hedge by buying calls.

Question 279

What are you looking for when you get into a spread.

Answer 279

1. for the stock to simply have a pullback
2. that pays you enough to make money down where you want to sell it
3. try selling 30 days out to start with
4. Then choose your higher low on a weekly chart.
5. And look and see if it pays you 10% of what you are risking.
6. If you have a $5 spread, meaning you are selling a $100 and you’re buying the 95, then you would need to get paid .5 or higher.

Question 280

Iron Condor

Answer 280

selling a put spread (bull) and selling a call spread (bear) (neutral position) Want the stock to stay inside that range of the date you chose.

Question 281

what is Nat and what is MId

Answer 281

Natural - pay the best available price and sold at the best available bid. selling everything on the bid and buying everything on the offer. no negotiation. This is the at market price?
Mid - the negotiated price. The average of all the bids and all of the offers. The middle of where everyone wants to buy it. Not just was is offered and asked for as in the natural.

Question 282

Getting into spreads. So If i have a 5 dollar spread for credit spreads. How do I tell if it pays enough?

Answer 282

1. you need at least 10% payment (15% better) So 50$ on 500. 5 dollars times 100. 15% is 75, 14% is 70. Look for &75
2. If it’s .82 mid price would be 82 dollars. It’s over 50 bucks.
3. Make sure you see Reward/Risk. This gives you the percentage. So .19 is 19%
4. if the spread is higher than 5$ you need the payment to be higher. So if it’s 8$ then you need .80 at least at a minimum.

Question 283

So for a credit (spread) how do you move the limit price to get filled more quickly if you are not getting filled?

Answer 283

You move the price lower (you get paid less) because it’s a credit. You are getting paid that, so you want to get more money for the mid price if you can. The mid price is what you are selling it for so you want to make more, rather than less.

Question 284

delta for calls and puts. What are negative and positive. And what would be closest to nutral delta in the market and what does it mean?

Answer 284

Long calls are positive
short calls are negative delta

long puts are are negative delta
short puts are positive delta

zero and the closer to zero your account is the less it will be affected by big moves in the market. And the delta in your account is akin to one share. So if your delta is 5 it’s like owning 5 shares in the market overall

Question 285

What does beta weighted mean?

Question 286

components of the volume profile are what? (8)

Answer 286

Value area
value area high
value area low
high of day
low of day
point of control (POC)
Low volume node
High volume node

Question 287

when are we allowed to look to buy options on a weekly chart?

Answer 287

When it breaks a pivot point. It doesn’t have to have two bear or bull, for some reason a pivot is enough.

Question 288

You want to get into credit spreads when as far as sentiment?

Answer 288

When you dont have a clear edge. Maybe using all your chart reading skills to predict. But then he waits for the market for ten minutes to decide what to do. Confusing. Hes watcing the SPY open to see what it does on a one minute. Seeing if it takes a direciton. Hes looking to see how quickly we take out bottoms if it rolls. Ok so when you see it chopping that’s good for credit spreads. You want it to kind of hang out. Theta eats it up and you make money.

Question 289

with options which ones do we not need to move quick?

Answer 289

None of them. We need them all to move quick. Even leaps. short term can go sideways for a bit but only a couple days. Day trade only a couple hours.

Question 290

Plan on the market doing what? This is the best way to make money thinking like this.

Answer 290

The rudest meanest thing possible.

Question 291

When do spreads work best

Answer 291

When people are confused. When people know where the market is going, spreads aren’t as good.

Question 292

You could just do spreads and have a stupid consistent income

Question 293

anything lower than the current price on an options chart is what?

Answer 293

Out of they money. When buying puts

Question 294

Delta

Answer 294

how much will the price of an option move if the stock moves $1? That’s where “delta” comes in.

Delta is the amount an option price is expected to move based on a $1 change in the underlying stock.

Calls have positive delta, between 0 and 1. That means if the stock price goes up and no other pricing variables change, the price for the call will go up. Here’s an example. If a call has a delta of .50 and the stock goes up $1, in theory, the price of the call will go up about $.50. If the stock goes down $1, in theory, the price of the call will go down about $.50.

Puts have a negative delta, between 0 and -1. That means if the stock goes up and no other pricing variables change, the price of the option will go down. For example, if a put has a delta of -.50 and the stock goes up $1, in theory, the price of the put will go down $.50. If the stock goes down $1, in theory, the price of the put will go up $.50.

As a general rule, in-the-money options will move more than out-of-the-money options, and short-term options will react more than longer-term options to the same price change in the stock.

Question 295

If my max loss is 3,000, what is my true loss?

Answer 295

30% 800 dollars

Question 296

What delta does he buy and sell at

Answer 296

when hes buying he usually buys at 35 to 40 delta. Just out of the money. When he’s selling it doesn’t matter.

Question 297

Anything lower than 50 Delta is ?

Answer 297

Out of the money

Question 298

Anything lower than ? delta is out of the money

Answer 298

50

Question 299

How do you use the pivots George?

Answer 299

What I typically do is get 1 put there then add if it pops a little more. If it fails that area strongly, I will try to get an add on if there is a second push to the pivot.

Depends on how strong it is. If it just blows through the pivot, then you want to be more cautious.

Question 300

TZang. Three Best practices rules for 45 day credit spreads?

Answer 300

1. Exit with a profit of 50% max gain first day. Then move to 70%
2. Exit with a loss of 100% max gain.
3. Exit at 21 days to Expiration if you have not hit either 1 or 2.

A. You can exit or roll if you like how it’s going

Example: Sell a 10$ wide credit spread for 4$ max profit. Take profits ar 2$ debit. Stop loss 8$ debit.