MTT - Options

Question 1

Why does John F. Carter say options are the one instrument that gives people the best chance of success?

Answer 1

• Great leverage for directional moves
• Fixed amount of risk for buying or calling a put, ur account can’t go negative
• it’s way more forgiving
• can be setup for any account size

Question 2

What’s the only real danger in selling options?

Answer 2

Selling naked

Question 3

What’s a spread?

Answer 3

Selling a naked option with a fixed amount of risk in place

Question 4

What markets have options available?

Answer 4

nearly everything - individual stocks, sectors, idexes, currencies, on the lookout for crypto

Question 5

Whats one idea for benefitting from rising interest rates?

Answer 5

Instead of shorting bond futures and holding all that risk, buy long-term puts on TLT (iShares Barclays 20+ Yr. Treasury Bond ETF)

Question 6

Whats one idea for benefitting if u think NFLX (Netflix) is going to trade sideways for a while?

Answer 6

Sell premium

Question 7

What’s the main trick with options?

Answer 7

Learning what NOT to do

Question 8

How to know when an option trade is too complicated?

Answer 8

When u can’t explain it to a 12 yr old

Question 9

What’s a good focus for simplicity?

Answer 9

Focus on directional plays and collecting premium

Question 10

When does a call option increase in value?

Answer 10

when the value of the underlying stock moves higher, like going long

Question 11

When does a put option increase in value?

Answer 11

when the value of the underlying stock moves lower, like going short

Question 12

What does 1 option represent?

Answer 12

100 shares of stock

Question 13

What are strike prices?

Answer 13

an option is either in-the-money (ITM), at-the-money (ATM), or out-of-the-money (OTM)

Question 14

What is intrinsic or real value in an option?

Answer 14

Equal to the current market price at the time

Question 15

Why are out-of-the-money(OTM) calls so difficult?

Answer 15

Not only does trader have to be right, they have to be right in a big way. It has to be an explosive move

Question 16

What is Delta?

Answer 16

how far the option price will move in relation to each $1 move in the underlying stock

1. 00 means stock goes up $1 then option price goes up $1
2. 10 means stock goes up $1, then option price goes up 10 cents (market makers think there’s only 10% chance the stock will get to strike price

Question 17

Why aren’t purely directional plays very sexy?

Answer 17

simple, and they work, as long as combined with high-probability technical setup on the underlying stock

Question 18

What’s the key to options?

Answer 18

1st - clean signal on an underlying stock, then stepping in with option strategies to leverage the move

Question 19

What’s one of the biggest mistakes newer option traders make?

Answer 19

Not understanding the role of implied volatility (IV) and how it affects the price of an option

Question 20

When does implied volatility increase?

Answer 20

With panic, uncertainty, or a looming big event with the underlying stock

Question 21

What are our 2 choices when trading options?

Answer 21

• buy an ITM option or sell a credit spread during a quiet IV period for a directional play
• sell options during high-IV periods, looking for a collapse in the value of the IV

Question 22

What’s the main reason to sell options?

Answer 22

They’re literally losing premium value, everyday, especially OTM options

Question 23

What is one mistake option sellers make?

Answer 23

Hoping their option expires worthless. Satisfying, yes…but risk/reward ratio is outta whack. Take the profit and gop

Question 24

What does John Carter say about buying out-of-the-money (OTM) options?

Answer 24

Won’t do it. All premium and a sucker’s game

Question 25

When buying options, what percentage of the overall purchase price should our premium be?

Answer 25

30%

Question 26

What’s the purpose of options?

Answer 26

To own a stock at a cheaper price