Investor Conference 2020: Using Weekly Options to Unlock Trade Opportunities | Mike Follett

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Investor Conference 2020: Using Weekly Options to Unlock Trade Opportunities | Mike Follett

Good morning, everyone My name is Mike Follett, and I’ll be your presenter for the next hour And then we’ll have a question and answer session about the content that I cover here today But hey, I’m really excited to share this information with you We’ll talk about using weekly options as a way to unlock trade opportunities So for those of you who’d like to trade a little bit more actively, or if you’re interested in that, well, this is the right session for you, because these weeklies have a shorter duration Hey, just to get some things taken care of as we get started here, remember, we will be talking about options, and there are risks when you’re trading options Really, when you’re investing in anything, there’s going to be risks But because these types of options that we’ll be looking at today are such short-term investments, generally they require closer management And just remember how transactions are going to stack up And so just keep those things in mind here These examples that we’ll use– and I want to go through some examples today– they’re going to be for illustrative purposes only Also, when you’re dealing with multi-leg strategies like spreads and so forth, remember the complexity, and also the impact of transaction costs When you’re dealing with advanced strategies, the complexity can go up This class is for educational purposes, and we will use paperMoney on the thinkorswim platform If you’ve never used that before, check it out, because it’s a great way to learn and practice And remember, as we talk about returns in these examples that bring in the impact of transaction costs, what you experience in a paperMoney portfolio may not be the same experience in a live portfolio because market conditions, they do change No soliciting, no recording, and no taking pictures And remember, we will take a look at probabilities today As we look at probabilities, that’s not a guarantee of an outcome All right So there’s a picture of– and believe it or not, it’s not Woody Harrelson That’s me, Mike Follett And just to give you a little piece on my background here, I’ve been pretty active in the options market for quite a long time In fact, for another broker, I was actually a registered options principal and one of the trade desk managers And so this is going way back to about Y2K It goes back in time a while I’ve been involved in the education side of the business since 2003, however, and I really enjoy teaching other people about the opportunities and about the things that are available in options– risks, pros and cons, et cetera Just to let you know, I teach in-person events, as well, and also webcasts If you get the opportunity and you want to learn more, check out the webcasts that we do throughout the week I am one of the many instructors for those All right, so let’s talk about the agenda So if you’re wondering what we’re going to talk about today, well, weeklies options Definitely that’s our agenda And we’ll start off by talking about what these really are, and some background on what traders might expect when they’re using weeklies options And then we’ll talk about how they work And one of the pieces of conversation we’ll get into there is going to be on implied volatility, the impact of volatility on these types of options In fact, as I teach the background and we talk volatility, I want to get you involved with some strategy examples here And you can see those on your screen We’ve got covered strangles and butterfly spreads And based on conditions of implied volatility, that might be one reason why a trader might decide to use, especially, this butterfly spreads strategy that we’ll get into So we’ve got a lot to cover Let’s get right to it OK, so first of all, let’s talk about the background of weeklies or weekly options here Actually, they’re technically called weeklies options, just so you know They’re an official product And I remember, going way back to when these types of options were actually introduced to the market, when the proposal was kind of given for weeklies to become available, and the initial proposal for what these would be called was actually quickies And they decided not to go with quickies They settled on weeklies options And now, here we are So first thing, weeklies are not available for all stocks Generally, they’re available on the stocks that people have interest in trading multiple expirations with By the way, if you’re on the thinkorswim platform, there’s an easy way to spot the stocks that actually trade weeklies options because there’s a public watch list actually available It makes it nice and convenient Now, what is it that makes weeklies, though, different than any other type of option? And that’s one of the items here that sometimes becomes a bit of a hang-up And so let me just take care of that detail When you’re talking about weeklies, they cease trading basically every Friday

Also, when you’re looking at the option chain, you’ll see a notification there indicating they’re weeklies Now, outside of that, they’re really just like any other option Rights and obligations, the terms of the contract, it’s all the same as any other option So don’t let that hang you up too much Just remember, they’re generally issued and they expire closer to expiration And one of the reasons why there’s interest in doing these are because of the opportunity to have so many different expirations available, and how that can fill in some of the gaps that traders might have in the way they wanted to approach the market Now, in reality, there are actually products out there that have weeklies that expire multiple days intraweek There are weeklies that expire, in some products, on Monday, Wednesday, and also Friday Plus, sometimes you’ve got a standard expiration on a Thursday, or at least when they stop trading on a Thursday And so that could mean a trader could have literally four expirations, if I’m thinking clearly about that, four expirations all in the same week So why would anybody do this, right? Well, because when you’re choosing these weeklies options or these shorter duration contracts, there are some pros And so let’s talk about some of the pros that are available with weeklies options And if you remember the– it was a show, The Good, Bad, and the Ugly, there’s good, there’s bad, and there’s ugly when it comes down to trading weeklies options So let’s talk about what these are So first of all, one of the huge benefits that people like about these weeklies options, there’s actually a metaphor for that, as I’ve taught people about options over the years, there’s a metaphor that sometimes I’ll use, and other instructors will, too, describing how options work And that is that they’re kind of like ice cubes, meaning that they melt, right? And the closer they get to expiration, they melt faster The premium erodes faster So if you’re dealing with the concept here that an option actually erodes, and it erodes faster the closer it is to expiration, well, these weeklies become interesting for people who want to benefit from that because they have rapid time decay And for the seller of these options, that rapid time decay could be considered a way to generate– starts than an I and ends with an income– a way to potentially generate income Right? So that’s one of the nice things that traders consider a major benefit here, is the rapid time decay and the way an options seller could use those to generate income Also, these weeklies, if somebody is maybe– maybe they’ve got a position in a stock, and the stock has an earnings announcement coming up And with that earnings announcement coming up, they want to protect or maybe hedge their stock position or their portfolio around some event that could create some volatility Weeklies are kind of nice because they can be plugged in as a shorter-term solution so a trader doesn’t have to use something that might be 30 days or 90 days away from expiration if they’re just trying to protect or cope with that event And so they can be used over those short-term events, either for protection or speculation, and they fit quite nicely into that timeframe there So a couple of major benefits here when we’re talking about weeklies Now, there are risks I’ve got to be careful here because there’s a tendency for people, when they’re approaching the options market and they’re learning about weeklies, to think primarily about the benefits But there are risks here And some of the risks might include, well, increased transaction costs If somebody is using these weeklies over and over and over again, well, their activity rate is going to be going higher So any impact from the transaction costs, that’s going to have an impact Also, you can take on some additional complexity, right? If you’ve got multiple options that are expiring every few days, well, it might be more difficult to keep track of And also, there’s something called gamma risk that happens when somebody is trading options that are closer to expiration And that gamma risk means these options, the values of them could move a lot more with a lot less movement in the underlying stock And especially for an options seller, that means they take on this gamma risk, and that could potentially hurt them, where smaller moves in the stock can actually have a bigger impact And you know, when you’re just talking about the amount of time it takes to manage things, well, because these expirations are so close close, they generally

require more active monitoring All right, now that’s kind of the good, the bad Now, here’s the ugly And the ugly, this really kind of relates to that concept I mentioned on the previous page, which is gamma risk And I’ve got a slide here that will hopefully explain where I’m going with this The short timeframe can be a hindrance And if you think about this, because weeklies, depending upon the time frame that a trader uses, because they’re so short to expiration, they may not accommodate regular cycles or cyclicality within the market For example, one of the ways that sometimes people will trade these weeklies is over an earnings announcement because of that volatile event If a trader is using this over an earnings announcement, and let’s say these options expire this Friday, maybe earnings are on Tuesday or Wednesday, after an earnings announcement, you might see the stock have a large move down, which may not be favorable, potentially, for the weeklies trade So imagine over here the stock is up here, and then over earnings, the stock has a big move down And maybe that’s not good for that weeklies trade But you’ve only got a couple of days before expiration, so unfortunately, you’ve got to take your lumps and get out But then the next week comes around– I don’t know if you’ve ever seen this before, but when the market goes against you in the near term, but given enough time, it kind of comes back around again, that’s what I’m talking about here You know, imagine you had to get out because you’re right on top of an expiration, but then next Monday, after your weeklies options have expired, the market goes right back to maybe where you wanted it before the earnings announcement, in the best spot Right? And the problem with that was just the fact that, because of that expiration date being so close, you just didn’t have any time for the market to circle back around again And that’s not allowing for market cyclicality And also, if this was a damaging trade, because there’s not enough time for recovery before expiration, the losses can actually get pretty big pretty quick if you’re not careful on a move against you like that because it’s so binary with expiration coming up That’s gamma risk That’s market cyclicality And so just be aware of that And even just an extra week worth of time might have made a big difference OK, so that’s kind of the ugly part of these weeklies Now, let’s clear out these drawings and start to get into some strategy selection And one of the strategies that I’ve prepared today– let me clear that out and we’ll go back to the mouse view here– well, one of the strategies that I prepared today is actually a strategy where some of those ugly and some of those risk items related to these weeklies, well, those can be a tolerable outcome if they actually occur The lack of market cyclicality, the gamma risk, those could actually be an outcome that a trader actually is comfortable with, and they could still use weeklies to potentially generate income So ask yourself here for just a second, as we launch into a strategy, do you like the idea of generating income in a portfolio? And if you do, do you already buy stock? Are you a stock investor? Are you comfortable buying stock shares? If the answer to that question is yes, well, then check Another question here Are you comfortable with selling your existing stock shares if you had to, as long as you’re selling those shares at a higher price? That’s kind of where I’m going with this, right? So this type of strategy is for generally stock investors, stock investors who want to buy additional shares if they can buy into shares at a lower price, and then sell existing shares that they might have if the shares go up at a higher price But along the way, generate income It’s very much an income-generating strategy And this is called a– one term for this is called the covered strangle That’s what you’re seeing on your screen right now But some people might call this, to break down the parts, a covered call and a short put Remember, when you’re dealing with a covered call, you’re selling an option against stock you own That means you’re under obligation to sell stock that you have And if you sell a put, that means that you’re willing to buy stock at the strike price Right? So think about the strike price The call here means we’re under obligation to sell the stock at the strike price for the call And if somebody sells a put, that means they’re willing to buy stock at the strike price for the put Now, here’s what’s interesting Along the way, because they’re the options seller of these weeklies, they’re generating income Right? So just to break down the slide, own stock but willing to buy more or sell existing shares, buy more stock at a lower price, sell shares at a higher price

Well, what this is, then, is combination of selling an out-of-the-money put, so basically a naked put here, or a cash-secured put, and a call out of the money Right? And so what that call does is create a covered call, and the put is a cash-secured or a naked put And so if somebody is considering this, let’s talk about of some basic guidelines for entry here If they’re going to use the weeklies, they might want to consider– and again, these are just guidelines Figure if I’m going to teach you something, we’ll put it together in sort of a plan where you can kind of maybe build on this and customize it to your liking But consider potentially selling options that are one to three weeks from expiration OK? So that takes care of the option time frame, potentially Now, there’s another concept that needs to be covered if somebody is going to use options They’ve got to think about their strike price selection OK? So which calls and which puts am I going to sell here? Maybe a guideline here is a delta around 30 Now, if you’ve never used delta before, it can be hard to understand what that is Delta is basically the probability of the option that you’re looking at being in the money So the probability of that on the expiration date becoming an in-the-money option, which would result in an exercise All right? So what are the probabilities of these options being in the money? About 30% So that means the probability of these options being out of the money is going to be about 70% So as a guideline for strike price selection, right, is to maybe use probabilities and select options that have a higher probability of expiring worthless, and that way the trader could think of this as maybe a high-probability way to generate income But the consequences of an assignment would result in buying shares of stock, right, if the stock goes below the put strike, or selling their existing stock if the stock goes above the call strike Now, just to let you know, there are ranges here, right? Somebody could choose a lower delta, so a delta that actually has a higher probability of expiring out of the money Now, if the trader does that, they’re going to bring in lower premium, but there’s more room for the stock to move before they have to take an assignment Right? That’s when these options actually, if you’re an options seller, contractually you’re under obligation to do something, the assignment basically means that your obligation is kicking in You’ve got to either buy the stock or sell the existing stock So a lower delta here equals lower premium, but more movement for the stock to move either up or down before the assignment risk tends to go higher Does that make sense? Hopefully it does Now, a higher delta means there’s less freedom for the stock to move around before one of those options go in the money, but there’s actually going to be greater income in the option that’s selected And so you know what? Let’s just follow along here And as I do this, as you’re kind of thinking about this strategy at home, do me a favorite Kind of think about what might be an appropriate delta, based on what I just taught you here, if you were considering this type of a trade Now, I mentioned that, for this example, we’ll start at about 30 delta, but some traders will go higher delta, some traders will go lower delta Now, just to explain delta, this is the Trade tab on the thinkorswim platform You’ve got the calls on the left, and you’ve got the puts that are on the right With the calls on the left, if a trader is looking for a delta of about 30, well, a 30 delta would actually be kind of right in here, wouldn’t it, on these calls, about the 111 strike And then on the other hand, if somebody were simultaneously looking at the puts– the puts are over here on the right– maybe I said the calls were on the right Calls are on the left, and the puts are on the right But they’d be looking at these puts, and just– this is something that’s a little bit weird if you’ve never seen this before, but the puts will actually have negative deltas Right? But think the same thing in terms of probabilities If somebody were looking for right around a 30 delta, even though it’s negative, they might be looking at maybe a 102 or a 103 Now, if the current stock price is 106.72, right, and somebody owned shares here, that means they would be investing about $10,600, right?

If they sold a call, let’s say at 111, they’re under obligation to sell their existing stock at 111 And if the stock is at 106, almost 107, that means there’s room for the stock to go up before that option is in the money But yet, they’re still bringing in some premium here, right? The bid price Some premium’s coming in Now, on the other hand, if the trader were looking at the puts, that’s the obligation to buy into additional shares So if the stock were trading at 106.72– and let’s say they selected this 103– they’d be willing to buy into additional shares at 103 Now hey, I’m not the greatest mathematician in the world But compared to the current price of the stock, 103 is actually almost $4 less than the current stock price So if a trader had to take that assignment, they’re actually buying the stock at a lot lower price than what it’s currently trading for right now Now that seems all good until the stock goes down to 100 And sometimes that’ll happen The stock will just drop a lot And the trader’s under obligation to buy shares at 103 It’s not going to feel as nice at that point anymore That’s one of the risks of this But think about this So when you’re selecting your options for a strategy like this, just remember, what price am I willing to sell the stock for We’ve talked about a guideline of around 30 on the column to put right in here And what price am I willing to buy new shares? So what price am I willing to sell the existing shares? What price am I willing to pay to buy a new set of shares and also balance that against the premium that’s coming in? And there’s no perfect answer here Just know, when you go with a higher delta, the premium goes up on both the calls and the puts– a higher delta, higher premium, but not as much range for the stock So I want you to think for just one second If this were you, what Delta’s might you be considering? What kind of ranges or what kind of options might you be thinking about? If the stock’s trading at 106.72, work on that process in your mind So let’s just talk about a few of these here as potential outcomes Let me clear out of that pointer Let me clear out of this drawing tool here And we’ll move to the next slide I want to show you just an example here of how some people might select different options here for this example If the current price of the stock is trading at 107– and let’s say a trader were looking at this, and they sold a 109 call and a 105 put And those are deltas around 40 That means they’re willing to sell their existing stock at 109– stock’s at 107, 109 So they’re willing to limit their upside on the stock to about $2 here But they’re getting paid a premium for selling the call Now on the other hand, if they sold the 105 put, they’re going to be willing to buy new shares of stock or add to their existing stock position at 105 So is the trader comfortable with that? If they did that, that would be 40 deltas on both sides Now that total credit here would be 505 But again, the risks are buying additional shares at 105, selling the currently own shares at 109 But one thing to think about here– this is something that some traders will look at– is if the credit that’s coming in is $5, logically, if they had to sell the stock at 109 because the stock went up, well, it’s almost like they’re selling the stock at 109 But they’re also getting the premium here So that’s almost like selling the stock at about 114 if you include the premium because you’re getting paid premium for both sides, or the trader would be getting premium from both sides If the trader had to buy in at 105 to new shares, because there’s premium coming in from both sides, it’s almost like buying into those new shares at about 101 with that 505 credit Does that makes sense? But that’s 40 delta Now let’s say a trader went with 30 delta Let’s take a look at some of the differences here 30 delta means strike selection would be the 111 and the 102 Now because these are lower deltas, there would be less credit coming in, but they’d be buying additional shares at 102, selling their current shares at 111 and bringing in 360 credit So is that the correct choice? How about a delta of 25, which means higher probability of these expiring out of the money? But that would be, on the calls, 112

So if you notice these calls are gradually higher strike prices– and on the puts, these puts are going to be gradually lower strike prices if the trader used deltas of 25 They bring in less credit But notice, they’re willing to buy in and sell shares farther away from the current price So it just gives more range of movement, so to speak So as I’m going through this, again, just reflect on what might be right for you, the individual trader And also realize that there’s not one correct answer here There’s just pros and cons– lower credit, more range; higher credit, less range of movement And maybe as a little trick, just as a reminder, you can add the credit to the call strike And that’s sort of where synthetically the trader’s selling the stock if they had to And subtract the credit from the put strike And that’s synthetically where the trader would be buying into new shares on an adjusted invested amount, if that makes sense So let’s move on here Let’s talk about exits And then I want to go into an example with you And we’ll talk about– I’ve actually got an existing example as well because I do webcasts on a weekly basis And this is one of the strategies where, in our webcasts, they last about– the webcast lasts less than an hour But this is one of those strategies that actually I will demonstrate and, in a paper money account, will actually manage a couple of these examples And I’ll show you how you can access that class if you want to see more examples of this But just so you know, there are ways to continue to learn about this outside of a class like this But let’s talk about these exits, and then we’ll apply some of the exits to an existing position I’ve already created So how do we handle the exits? Well, it could break down into two categories here Number one, someone might decide to be active on their exits And what that means, somebody is an active exiter It might mean just, hey, as we get close to expiration– so maybe just a couple of days from expiration if the trader sold three weeks out– they might want to step back and see what their option premiums or what their options are currently worth And they might make a decision whether or not they want to allow an assignment to happen if that is a possible outcome here And active investors, they may decide to buy to close the current position and then resell options in a longer duration again There is a term that sometimes you’ll see used for that called rolling But an active investor, they’ll let this work And as they get closer to expiration, they’ll look to buy back the existing options and potentially– not always, but potentially– sell new options at an extended duration And we’ll talk about– I’ve actually got an example that’s in a pretty good situation like that And when the trader is adjusting, if they’re active here, if they’re actually buying back their current options and selling farther away, they might decide to actually adjust their strike prices using those delta guidelines that I talked about on that previous screen Now let’s talk about a passive exit And this is for the individual that’s just kind of– they analyze the trade beforehand They’re comfortable with the outcomes And they just let the position work That kind of a trader is passive, and they might do nothing with these And so if they do nothing, that means all the way through expiration, if both options are out of the money– it means the stock is in between both strikes– these options just expire worthless And if these options are in the money, meaning that the stock’s gone above the strike on the calls or below the strike on the puts, they’re just willing to take the assignment, which means they buy new stock at a lower price or at the strike price for the puts or they sell existing stock at the strike price of the calls Make sense? Doing nothing and just taking it over the expiration and dealing with the assignment Some traders really like that They use this as a way to maybe buy and sell existing stock and get paid income along the way Novel idea, does that ever– I don’t know if you’ve been there before but, have you thought, hey, I should buy stock when it goes down And if you’ve thought, hey, I should sell stock when it goes up That’s sort of what we’re doing here We’re just using these options strike prices as a way to obligate ourselves to do that It can take some of the emotion out of it for these passive investors Let’s go to a paper money account and go through an example here of exits And then what we’ll do is we’ll actually circle back around and put on a new trade for this paper money account And I’ll show you where you can access our education if you want to learn more and see more examples

and attend my weekly webcasts that I’ll do on demonstrating strategies like this So what I’ll do is I’m going to jump over to the monitor page on this paper money account And I’ve actually got to arrange my screen just a little bit And so that’s what we’re looking at right now This is a paper money account– By the way, thinkorswim If you do not have this downloaded and if you’re not using this, especially if you want to practice, if you want to test out strategies that you’re learning about, like simulating but it’s a live environment– but it’s not, it’s actually fake– check out paperMoney Download thinkorswim You can just go to or, log into your account, and follow the prompts under the Trade tab And you can download thinkorswim that way But you can get this on your computer Log it into it, and actually apply some of the principles that I’m talking about here without risk in a paper money account Now I do have groupings here based on different classes that I teach And so the grouping that I’m after is this one It’s called multileg right here Now, there’s a position here that in particular is one of these covered strangle positions And there’s actually two of them in here Well, let’s deal with this one It’s called NTNX is the ticker symbol for the stock And this is a little bit unusual, but that’s one of the reasons why I wanted to bring it up, is because unusual is kind of good, I think And let me show you what I mean Let me bring up my drawing tool here So we already own 300 shares of stock in this paper account So we already have a position here in stock And so if we break down these options– it’s hard to see the entire thing here– but there are three calls that are sold that expire here in actually six days, three calls expiring in six days And the strike price on those– it looks like these options have actually gone in the money Let me clear out of this and see if I can make that just a little bit easier to read There we go Just creating a little bit more space out there Now if you notice, because we own 300 shares of stock, we’ve actually sold three calls Now the strike price here is 25 and 1/2 So class, if somebody has short calls against long stock like that, they can only sell one call for every 100 shares of stock and still have that position covered So that’s why there are three calls that are short Now, what’s my obligation? The obligation here is sell stock at $25.50 OK? Now, here’s what’s interesting What’s the current price of the stock? It’s at $25.90 So, the stock price is actually higher than those short calls So, if we just kind of fast forward here, and to expiration, the stock doesn’t do anything It just stays right at this price But if nothing is done, there’s going to be an assignment, which means the trader is going to sell their stock at $25.50 Now, is that good or bad? Well, the trade price, the original purchase price of the stock, was $23.96 So, that means they’re actually selling that stock at a higher price than what it was purchased for Now, in addition to that, because that option if it disappears because of the assignment, the trader really doesn’t have to worry about the premium The premium that they sold in that option basically just is kept essentially here, which was $0.65 So, if you can visualize that, it’s just kind of a short call If the stock stays above $25 and 1/2, we’re going to be selling the stock at the strike price, and we got paid the premium for doing that Now, if you notice here though, there are two puts The two puts put us under obligation to do what? Buy stock at $23 And there’s only two of them Now, why are there only two of these? Why are there three calls and only two puts? And this is what’s unusual here It’s because as a class, we talked about not wanting to have more stock than 500 shares Remember, the stock that you own plus the number of puts that are sold here represent the total amount of stock that the trader could have the risk in owning So, we decided as a class that we don’t want to have the risk of any more than 500 shares of stock So, we actually sold three calls and two puts So, it’s a little bit unusual there, but I think you can logic your way through that

Now, we’re under obligation here to buy stock at $23 The stock is at $25.90 If we do nothing with this and the stock stays right here, those puts just expire worthless and the premium gets kept The premium here is $0.81 But really, when we put this on, we got premium from both sides of the market here So, it’s going to double the income so to speak Now, a couple of things If a trader is more of an active trader, OK, and let me clear all my drawings, and we’ll just talk quickly about a roll idea, I’ll put on a new position, and then we’ll move on to our next trade idea But if a trader were looking at this now that we’re getting closer to the expiration date, they might decide, now that these options are in the money, the short calls are in the money, and the short puts are out of the money, and believe it or not, the short puts are getting pretty cheap They’re only worth $0.15 That means they’re very close to their maximum gain A trader might decide to roll these if they want to potentially avoid the assignment and also perhaps sell a new put to generate additional income Now, the way to create a roll, and this is going to be for somebody who’s more active on the exits, is just right click on the short option So, let’s say we right click on that short 25 and 1/2 call, and in the menu that pops up here, we can choose Create Rolling Order Now, in the menu that pops up, the choice is going to be to sell three calendars here And usually that pops up the stock here, NTNX Let me make sure the stock is up here, just so we see it a little bit easier But here at the bottom of the page, this is really what I want to focus on You notice we now have an order created And this order, it shows a process of buying back our existing calls and then selling new calls in the next week out So, buyback the existing, sell new, and put it on the same ticket Now, there’s no avoidance of transaction cost There will be transaction costs here, but this is a way for a trader to do that on the same ticket Now, if a trader wanted to do this and just keep everything the same, they’re willing to sell their stock at $25 and 1/2, they could bring in $0.30 credit for doing that Just rolling one week out Now, let’s say the trader wanted to give the stock more room to go up Let’s say they just wanted more range for the stock to go higher They felt like the stock were bullish here, and they didn’t want to get assigned at $25 and 1/2 What they could do is when they’re looking at the roll, they could choose potentially a higher strike Let me show you what I mean Let’s say on this sold option, the negative 3 there, we changed the strike price to $26 So, basically buying back the existing option and selling an option at a higher strike And that probably isn’t going to happen in real life It’s because it’s the weekend This actually shows a higher credit for selling that higher strike price In reality, that credit is going to be lower If you’re rolling a call higher, the credit is going to be lower than rolling the stock to straight sideways Just so you know But practice this But, a trader could roll to a higher strike, and that means that they’re taking the obligation to sell the stock at a higher price And what they’ll do is give up some of the premium, and sometimes they even have to pay a debit to do this But also, the trader could sell farther away So, on the expiration, rather than selling the next week out, they could consider maybe going out a little bit farther So, if we bought back the November 13 and sell the December 4, that extends that duration, and that’s going to assist actually in bringing in a higher credit even if the trader has to roll that to a higher strike But this is the idea This is the active adjustment This is the active trader just considering maintaining possession of the stock, and choosing a new strike, and getting out of their existing option, selling something farther away at the same strike, or if they want to be more bullish, sell a higher strike, or if they think the stock might actually stay down for a while they could actually sell a lower strike And that could be done with both the puts and the calls I’ll tell you what I’m going to go ahead and move the strike price up here I’ll go to November 27 here, so that expiration is going to be two weeks out And we’ll see if we can get that rolled to a $26 strike which would give us another $0.50 appreciation in the stock All right So, that is the idea of rolling Those are the calls We could even do the same thing with the puts The puts are actually basically worthless here If we go back to the puts, we can right click there, choose Create a Rolling Order, and sell two of these calendars it says, but this is really just rolling We could stay with the same strike, or we could adjust our strike and our expiration date here Now, if we rolled out one week on these puts,

hey, were only bringing in $0.07 So, one way to get a little bit more premium is to choose an extended duration, or go out November 27 Now, going out November 27, that actually is a much better credit So, that looks good potentially, but also the trader has a choice here If they think the stock is actually going to stay higher and they want to increase that credit even more, they could choose to sell a higher strike price put And let’s just say for fun here we decided to go to the $23 and 1/2, that would send that credit up to $0.95 And now, we’re under obligation to buying new shares at $23.50 rather than $23 All right But we’ll go ahead and hit confirm and send on that, and send that off That’s an example of active management, rolling those short options All right Now, I understand you’re probably going to have questions about that That’s why we do webcasts That’s why we have education Let me just mention here that on the Education tab on the thinkorswim platform, we have a whole lot of resources here for you to learn more about strategies like this, and really many strategies related to option trading On the Education tab, if you make sure you’re on the sub-tab here, Education, you can [INAUDIBLE] just options in general If you want to learn more about what options are, just look over here on the left hand side of the page, click Options, and what that will do is take you to coursework where you can do self-study, where you can start watching some short introductory videos about option trading here And so, that’s kind of nice for those of you who are just getting started Now, for those of you who want to see more examples, and more demonstrations, kind of like what we’re going through We do webcasts every single week So, if you click webcast right there at the top of the page, that’s actually going to load up our schedule of webcasts that we do And so, we have a schedule of upcoming webcasts and also archived webcasts We also have a calendar so that you can see all the webcasts that are coming up throughout the week And just to give you a heads up, if we go to this webcast calendar here, we choose this webcast calendar, and in particular, if you want to see examples on these covered strangles, plan on this next Wednesday, that’s when I teach this class But Wednesday, I’ll go through another example of a covered strangle and we’ll do a covered strangle example in this class as well And we can follow up on that one Wednesday But that class is going to be this guy right here Let me just highlight that just so you can see it It’s called multi-leg option strategies I do that every Monday– every Wednesday morning when the stock market opens And this will give you a schedule of just basically all the classes that we do throughout the week And so, all you need to do is basically when we’re close to the appointed time, that start time just right when the market opens, just go to Upcoming Webcasts, and you’ll see a link there where you can join that session We also have a YouTube channel and you can subscribe to the YouTube channel It might be a little bit easier way to get involved in those OK So now, let me clear that out And let me go back to the mouse And let me just show you an example of how somebody might create a new covered strangle like this And so, I’m going to jump over to the Trade page And this is for simply educational purposes only Well, let’s say a trader we’re looking at something like AMD AMD, they just got upgraded It has been a pretty good week for semiconductors in general And it looks like maybe they’ve got a little bit of momentum Now, I don’t have any AMD in this paper money portfolio, but let’s say I was interested in buying 100 shares What I’m going to do is actually create a trade here I’m going to go to the Trade tab, and then go to the Ask Price, and this will be available for Monday morning I’m just going to choose to buy 100 shares of AMD stock I’ll hit Confirm and Send And so, there’s the trade going in OK So now, let’s say at the same time though, that the trader is thinking, well, based on what the stock is doing here, based on their assumptions, they’re OK with actually selling this stock that they’re buying if the stock goes up to a higher price And also, because we’re starting with a low share amount, maybe they’re willing to buy new shares at a lower price if the stock winds going down OK? Now, that means that they might be interested in a covered strangle, or selling a call on their existing shares, selling a put to buying new shares So, let’s just say we go through the process of selecting something like this And let’s go out three weeks We’ll go out here to the 20 days to expiration That’s going to be the 27th of November

And just to bring myself a few more options, let’s go with 14 of these contracts And let me switch over to the option theoreticals and Greeks, and I’m going to hit delta here Ooh, we’re going to need to choose even more of those Let’s put 25 contracts here If we wanted to be right at the delta of 30, or very close to delta of 30, if we’re looking at the calls, the calls would be at about a delta of 30, 90 and 1/2, or 91, and that would bring in premium of $1.50 So, let’s just left click on the bid here as if we’re going to sell those And then, on the puts, how about these right here? How about the 82, those are a 31 delta I’m going to hold my Control key down on the keyboard and left click on the bid selling those puts So, that means we’re willing to buy new shares of stock at $82, stock is at $85, $88, and we’re willing to sell our existing shares at $90 and 1/2, and the stock is at $85, $88 And for our troubles, bring in $3.58 worth of credit And let me go ahead and just give up a little bit of that premium there because the market is closed and I want to just kind of give ourselves a higher probability of actually getting filled Now, be aware there will be added risk If somebody does this They’re going to take on the risk of buying another 100 shares of stock at $82, so they would have all that downside This would now be equivalent to the risk of 200 stock shares All right So, there you go Covered strangles Income generating type of strategy, and hopefully that gives you an idea of how this works Now, I want to move on into another way here of how some traders might actually use weeklies options Now, when this presentation was originally created, I don’t know if– I’m sure you’re aware of the background, but we usually do these sessions in Las Vegas We normally have a live scenario with hundreds of people in the room and a little bit more time to get through all the material I’m condensing the kind of longer form presentation into a smaller time frame here So, as we go through this material, I’m going to encourage you to use these slides and attend the webcast so that you can see more examples of this And this is going to be categorized, not necessarily as an income generator, but as a speculative way to trade And it’s actually called using a butterfly around event based volatility believe it or not OK But some of the other opportunities using weeklies is when implied volatility is expected to make a move, not so much– this is not so much a focus on price of the underlying stock This is a focus on implied volatility Now, implied volatility is a reflection of option prices Option premiums, they inflate and they deflate, and implied volatility is a reflection of that When volatility is higher, options are more expensive When volatility is lower, options are actually cheaper relatively speaking It’s kind of like a beach ball You blow that thing up, it’s more inflated, you take the air out, that thing is deflated Now, when you’re talking about that volatility, it tends to go in cycles It tends to be higher at some points than others, and it tends to move, especially on a stock, around earnings announcements Not always, but it tends to Before earnings, you tend to see implied volatility move up, and then oftentimes after earnings, volatility actually comes down And it comes out pretty quick Now, sometimes it’s easier for traders Some traders will think that’s more predictable than stock price movement So, there are some times when traders will focus more on the idea of trading that volatility going up or down around that earnings announcement Does that makes sense? And again, you can learn more about volatility Now, when you’re just looking at a standard option chain, when there’s not, for example, an earnings announcement coming up, it’s pretty common that you’re going to see options in these different expirations priced at fairly similar volatility levels Nothing unusual in terms of risk in different time frames here But when you’re dealing with an earnings announcement, all of a sudden the market realizes, OK Wait There’s this event that’s coming up And traders will have a tendency to start using options to prepare for that event And the event of earnings tends to create more volatility So, what you tend to see is an inflation of volatility prior to an earnings announcement So, the options typically get more expensive in front of that earnings And here’s kind of an example of that on the right hand side of the page So, volatility, imagine this line is a reflection of volatility It does have a tendency to go up, not always But it does have a tendency to go up closer to earnings Then after earnings, oftentimes you’ll see it drop That’s something called a volatility crush, that drop

And so, some traders will look to possibly use this elevated volatility, and choose expirations for their strategy that have the most exposure to that elevated volatility And it creates potentially a volatility SKU, that’s earnings announcement, which can potentially really inflate the value of options So, if we take a look at this These options now, the ones that are closer to expiration, you can see here, two days, 10 days, 17 days When they’re close to expiration and there’s an event situation like that, they tend to see their volatilities really increase while the longer term tends to stay kind of the same, or it tends to be less impacted by that event And so, what’s interesting is if a trader can recognize that, and they’re willing to take the risk, they might decide to take advantage of potentially a strategy that could sell this near-term volatility Now, there is an earnings announcement So, there is risk in terms of doing this And so, some traders are not going to be comfortable with doing that But is there a strategy where a trader could maybe look to the opportunity to maybe take advantage, participate, in that elevated volatility, and maybe benefit if that volatility comes out without taking on a huge amount of risk? Maybe by using a strategy that has, relatively speaking, a small reward relative to the potential outcome, or the potential profitability of that trade And that’s where some traders might actually consider using a butterfly spread And I’m going to introduce you to the butterfly here And you’ll have access to this presentation so that you can go back and study this if you need more work on it But now, there’s something that actually happens prior to those earnings announcements when this volatility in the near term inflates Traders are going to see something called a market maker move What this market maker move reflects is theoretically how much movement traders are kind of pricing into that stock over that earnings announcement And this market maker move, this expected move, sometimes you’ll hear it called, can be a way for a trader to maybe position themselves if they wanted to bring some probabilitiness into their trade here So, remember that market maker move idea And the idea here is is that based on that, still maybe they might expect the stock to stay within some sort of a range Now, so this takes a trader to the possibility of a butterfly spread Now, this butterfly idea, again, it might seem like it’s going to go fast here, but you’ll have access to this information And also, you can view webcasts In fact, last week, in a probability webcast that I do on Wednesdays, I did an example of a butterfly spread So, you can see more examples of this in our webcasts But a butterfly spread is something that tends to move slow It’s the type of trade that is a slow mover until you get closer to expiration Now, if somebody is thinking weeklies options, that might be a fit Now, also a butterfly spread tends to be priced better if volatility is high, and then it drops after the fact And that has a tendency to be one of those things that could happen after earnings Not always, but possibly And so, remember that This is a strategy that can have favorable pricing when volatility is up These could be cheaper out of pocket to buy And then, when volatility comes down, these could potentially increase in value This is going to be a debit spread believe it or not But the thing is these have a relatively small investment amount, and if they work, they can actually get a large gain Now, there are risks here There is a higher probability than most strategies of experiencing a max loss So, trade accordingly Prepare for max loss is one way a lot of traders are going to think about this And there’s a lower probability of getting the maximum payout here, and the risk is that potentially as we get closer to expiration with these weeklies, the liquidity can kind of dry up It might be a little bit harder to trade out of these as they get closer to expiration So, those are just a couple of things the trader would want to keep in mind This is a butterfly spread OK? And just if you’ve never seen one of these before, let me just kind of give you a quick overview of how these work This is a risk profile They’ve got two break even points They’re going to have one if the stock goes too far down, they could lose The stock goes too far up, they could lose And then, they’ve got a perfect level where they want the stock to be on expiration And in this particular example, this

would be $1.85 because that’s where our profit peak is located here is right at $1.85 So, if we go down too far it loses, if it goes up too far, it loses But if the stock stays at a perfect spot, it could profit its maximum value, and it could still make something out to some given break even points That make sense? Hopefully it does Now, butterflies, they’re actually combined of two vertical spreads And so, that’s why I’ve outlined this at the bottom of the page You can see the actual butterfly here that’s what a butterfly would look like after you chew it up But I’ve also broken it down into parts so you can see what this is This would be a long call vertical This is a long call vertical, $1.83 to $1.85 We want the market to be at $1.85 or higher in order for that to profit its maximum amount, and its maximum amount would be two bucks The cost to do that by itself would be $1.04 Now, at the same time in a butterfly, a trader would be selling the $1.85 to $1.87 call spread here So, that would be a short vertical, and that would bring in credit here And this credit would actually offset some of the investment of the long vertical But this could become a loser That is if the market goes up too far, this call spread that’s getting sold could lose And if the market goes down too far, this call spread that’s getting purchased could lose But meanwhile, because there’s income, money coming in, as money is going out, the net cost of this, the butterfly, is going to be the difference between the value of those two spreads, in this case $0.27 And if you can visualize this, if the market is at $1.85 on expiration, what that means is that all of these calls at $1.85 or higher expire worthless But there’s one call at $1.83 here that would be worth how much? It would be worth two bucks This in the money option would be worth two bucks And so, if the trader paid $0.27 for that, and they still have this call that’s worth two bucks, well that’s where the maximum gain comes from It’s the difference between $0.27 cents invested and $2.00 which should be the maximum value for that single long option with all these other options expiring worthless All right Now, I get it there is probably still some uncertainty in your minds, sorry, I keep hitting the wrong button here, on how these butterflies work Attend my class this week, my weeklies options class this week, and I’ll take you through another example of these butterflies We’ll go through an earnings announcement together as a group Let me clear out of that All right Come on now Sorry about that Now, if a trader is planning this out, if they are thinking about a butterfly spread, remember they got to figure where they think the stock might go after the earnings announcement, or by the time expiration rolls around Some traders will go a little bit higher strike, some traders will go a little bit lower strike If the trader really doesn’t know and they’re just keeping the trade neutral, they might just keep their butterfly where the middle of it is right close to the current price of the stock In this case, this is an example of $1.85 So, this is a little tiny bit bullish here Be expecting the stock to go up a little bit All right, now if somebody were putting one of these on and they were exiting, especially if they’re thinking around earnings, they might consider a butterfly in an expiration that’s maybe around one to two weeks to expiration, eight to 10 days before expiration And then, if they’re going to trade this, exit this, maybe if the value of the butterfly becomes worth maybe 50% of the strike width, the butterfly that we had on there in the last example was a $2.00 wide butterfly And so, if it became worth a dollar, maybe the trader decides to exit it early And certainly as they get closer to expiration, remember, that’s where the liquidity can run out Especially if the trader wanted to avoid assignment, they might look to get out of this thing maybe with one or two days before expiration However, if we’re talking about an earnings situation, after the earnings announcement, normally a trader is going to approach it in the following fashion If it’s a profitable trade, they’re going to tend to get out pretty quick after the earnings announcement If it’s not profitable, they might step back and evaluate the likelihood of the stock going closer to their butterfly strike prices And if they think there’s a chance, they might let the trade work for a while And if there’s no chance, they might actually– if they don’t think there’s a chance that that trade is going to work, the stocks are going to go back to the perfect point, they might decide to just exit that trade prior to expiration,

and hopefully avoid taking a max loss But if the stock moves too far either up or down, a maximum loss definitely could happen here All right So, now butterflies I know I burned through that really quick Again, the session was designed a little tiny bit long for the live session But still I wanted to introduce you to those butterfly spreads, at least in a condensed format here And just to show you a really quick example, I am going to jump over to thinkorswim here, and we’ll just take a look at a quick earnings example Disney, and this is not a recommendation, but Disney does have earnings coming up this week Their earnings announcement is going to be on the 12th And so, let’s say a trader wanted to queue up a butterfly over that earnings announcement, they might go to the option chain And if they’re really speculative, they might choose the weekly so they’re closer to expiration, expiring this week Or, if they wanted to give a little bit more room, they might decide to go with the 20th of November I’ll tell you what In this case, I am going to go with the 20th of November And if we have no idea where Disney is going to go, and we just wanted to create a neutral spread, we could just create this trade where we choose our butterfly close to the current price of the stock And in this case, let’s just say we put it at $1.28 The stock is right now at $1.27 and 1/2 So, I’m going to right click on these $1.28 calls, and I’ll choose buy, and then we’ll go with a butterfly spread And that’ll queue up a dollar wide butterfly here Now, this butterfly, if a trader is doing a butterfly like this, rather than just going with a simple dollar wide spread, they might use some logic as to what strikes they’re using If you notice, there’s our market maker move up there It says $5.00 and 1/2 This is at the top of the trade page if you can see my pointer there And so, some traders will actually take their butterfly and actually make it $5 wide or something close to that width of that market maker move So I’ll tell you what let’s do maybe a $5.00 wide spread here And so, $1.28 is the perfect number If we go $5.00 wide, that means for the lower strike price here , we’d probably go with $1.23, the difference between $1.23 and $1.28, if I’m doing my math right is 5 And then, on the next one let’s go up to– and this is going to be the higher strike Let’s go to one about 33 here And so, now this becomes a $5.00 wide butterfly And the debit on this, it says that the mid price is going to be a buck 14 The natural is actually $1.63 I’ll tell you what I’m going to do here I’m going to raise that debit just a little bit to $1.20 and see if it’ll fill on Monday for $1.20 But just looking at this, and going to hit Confirm and Send so you can see kind of the outcome here The max profit on this would be $3.80 That’s going to be the $5.00 width minus the debit, which is 120 bucks here, and this is not including transaction costs But if you can see there, this trade has about a 3 to 1 reward opportunity And when somebody has got that kind of reward, just be aware that the probability of winning is not going to be the highest So, just remember that when you’re trading this This would be in the category of speculative where the reward is higher than the risk Therefore, the probability probably isn’t going to be very high But if a trader wants to have something like that, trade that volatility decline That’s one way to do it Some traders will actually choose to do this the day before the earnings announcement Because doing this right now, we don’t know where the stock is going to be right before the earnings actually takes place But nevertheless I’m going to hit Confirm and Send Send that in Remember trading costs as well when you put on those strategies But my friends, I’ve covered a lot of stuff with you here today And one thing I would have to say is that as we’ve covered weeklies options, hopefully you’ve got a better understanding of what they are, how they work, and hopefully you’ve got a better understanding of some of the ways implied volatility can move around these weekly’s options, and in particular I really hope that you’ve got a better understanding of a couple of strategies that people could use Covered strangles, that’s an income generator And when you’re talking about these butterfly spreads, that’s very speculative the way we’re talking about this But one could be maybe the covered strangles a little bit more consistent for a stock investor And the butterfly spreads might be one of those that the trader if the option strategies represent different tools and basically a tool bucket, you just pull out the right circumstance for the hammer, so to speak And so, think of it as a couple of tools

that a trader could use if they wanted to trade these weeklies options Now, one thing I would say is turn to your own paper money account, apply what you’ve learned Maybe try one covered strangle And since we’re right in the middle of earnings announcement, maybe try one butterfly spread and trade in paper money, and that way you can start to learn about the outcomes here and how these actually work And you can practice that And then, make sure you attend those webcasts that take place throughout the week where you can focus more on application So, make sure you take advantage of our education and continue your learning from this point we’re at right now OK So, what I want to do is I want to turn my attention here to the Q&A section because we’ve got some questions, it looks like, that have been coming through the session And my team has actually got these and I’m going to go ahead and answer some questions for the next five, actually nine minutes here before we wrap up our session here All right So, the first question here is about shorter term options OK Gamma risk is really compartmentalizing this question It’s basically a review of with short term options, what are the risks that can actually really pile up on an investor here, or that could cause problems? Let me go back to– remember that butterfly spread that we just looked at I’m going to take this over to the Analyze page And on the Analyze page, so we’ve got this order actually working where I chose one of those butterfly spreads And I’m going to analyze this, which makes it– when you analyze, these if you’ve never seen this page before, it’s actually pretty useful if you wanted to kind of dig into some of the details about your trade Let me change the font color on this and see if that’ll be a little bit easier to read OK So, now here is the butterfly spread that we selected How many days does this have before it expires? Well it expires on November 20 Now, this has earnings coming up on the 12th Now, if you think about the difference between when this butterfly expires and when that earnings date is, there’s not a lot of time differential between those two things So, let’s just visualize this Let’s say after the earnings announcement, the market just absolutely loves Disney, the Mandalorian, all right, saved Yoda, Baby Yoda, and it’s the greatest movie ever Whatever And the stock just has a giant move higher, all the way up to, for example, $1.42 The spread that we’ve selected here is at $1.28 Now, if on earnings, the stock makes that big move higher, and this only has seven days before this spread– actually I think it’d be eight days before that spread expired from there You just got to think, what are the chances in the mind of the market that a stock that went to $1.42 after earnings, what are the chances that’s going to get back to $1.28 in the next week? In the mind of the market, those chances are probably going to be pretty low And so, what that means, this spread very rapidly will go to max loss In other words, the debit gets lost here very quickly Now, on the other hand, if we went up to $1.33 after the earnings announcement, there’s a chance that this market could come back to $1.28 So, this spread probably isn’t going to go worthless if we’re only up at $1.33 And that’s gamma risk If the market becomes very clear that there’s not going to be a chance that this is going to go back to your perfect number here, basically, what that means is as you get closer to expiration, this spread is just going to go to max loss faster because there’s no recovery time There’s no time for that market cyclicality All right I’ll be able to handle another question here And I’m trying to get used to these drawing tools They’re a little bit different than the drawing tools that we normally use OK OK There’s a question here coming through Are there some minimums that a trader might look for on a covered strangle? And what that means really is two things Are there minimum values that the trader might look for in terms of the options that they’re selling? And is there a minimum to the stock price that they might be using? There’s really not It’s kind of going to be just up to the individual Somebody who has got a smaller account, they might keep this to lower priced stocks

For an example, I’m just trying to think of something that’s in a lower price range here How about something like this WD– oh, no How about this, CLF Just a thought here Not a recommendation But if somebody were going to buy shares of CLF, it’s only $8.36 So, it’s a lower priced stock Certainly if the trader wanted to build into multiple shares here through selling those puts, well certainly it would take less capital ultimately to do that However, when you’re dealing with a lower priced stock, when you go to the option chain, and you start looking at these options, and this actually is quite volatile This stock is actually quite volatile, which when you’ve got a volatile stock, option values actually are going to be relatively higher But because the stock is so low priced, somebody looked at a 30 delta option on the call side here, the premium is only going to be $0.16 to $0.19 in there Now, it’s kind of nice because commissions are gone It’s basically just a transaction cost here So, certainly in terms of the cost to do something like that, it’s a lot more forgiving now than it has been in the past But it’s still only $0.16, $0.17 So, that’s kind of the trade off there when you’re dealing with lower priced stocks Some traders when they’re looking at this, they might decide to use some different tools to determine whether or not the premiums are actually worth it One of the tools some traders will use is this I’m going to go to one of my columns here, the one that says last X, and I’m going to go to Option Theoreticals and Greeks, and in the menu that pops up for Option Theoreticals and Greeks, I’m going to choose something called covered return, covered return And so, we’re just going to focus on the call side here If the call’s premium, if that’s comfortable for the investor, generally the puts are too So, I’m just going to look at the calls in this example But if the trader were looking at, for example, this 30 delta call here, let me hit my drawing tool there So, we got this call right here 29 delta is what that is So, that’s, yeah We already talked about this Maybe somewhere between $0.16 and $0.17 But if somebody annualized that, if they could generate that premium every 13 days for a calendar year, this is an annualized number, the type of income on that stock investment, or relative to the price of the stock here, would be 54% So, a trader could use that maybe as a way to gut judge whether or not it’s worth it So, if 54% annualized, now it doesn’t mean this is always going to be the same The stock might be at a different level, volatility could be at different levels But right now, that’s kind of the situation If annualized from just selling the calls here, the trader likes the idea of 54%, 55%, not including transaction costs, then that’s a possibility OK Let me go ahead and clear that out, and let’s see if we can answer another question here OK So, there’s a question saying this Basically what you’ve talked about, Mike, especially with the covered strangle, is that a sideways market strategy? For some people, yes For other people, no Let me go back to my mouse here OK We just put an example here on AMD of one of these covered strangles And with this covered strangle, certainly it can make money in a lot of different ways So, the question is, is this a sideways market strategy? Well, we actually sold a call that’s going to be up in here somewhere, want to say we went with about the 93 strike, or 90 and 1/2 strike I should say If the stock does go up too far, that’s going to limit the upside There will be premium coming in, but the upside will be limited So, in that sense, maybe a trader has a moderate view of how much a increase to stock is going to have behind it Because remember, selling those calls, you’re going to have to give up the stock or limit your stock gain And now, on the other side, you know what the real risk is on a covered strangle? Is that the stock goes down a lot If the stock really falls apart, even though we’re bringing an income, for every 100 shares the trader is losing on that, and for every put that gets sold, that represents additional loss because they’re under obligation to buy more shares of stock The big problem here is a very bearish stock that just keeps going down I mean, really up, yeah, your gains are limited Sideways though, profits Down a little bit profits Down a lot, that can be more difficult because you’re taking on additional shares of stock And hopefully, it comes back up I don’t know if that helps Is it a sideways strategy? Maybe But just think about the outcomes, the outcomes

of the short call and the short put, and see if it fits your scenario That’s ultimately the way to go All right Oh, OK All right, well let’s wrap this up then Thanks, everybody Glad we had a chance to go through a couple of those questions And I’ll turn it over to introduce and to kind of manage everything for our next presenter Remember, we do have a situation where in between these sessions, you do have the opportunity to attend different webcasts Remember, you got the panel here that shows different sessions I mean, the miracle of technology, right? Different places that you can actually go in between my session and the next official presentation that’s going to start Explore what’s available there within that chat panel It’s pretty amazing technology what we’re doing here All right Thanks, everybody for your time I really appreciate this Remember the final disclosures And everybody have a terrific day And remember, practice what we talked about And hopefully, we’ll see you in class this Wednesday We’ll talk more about these strategies Bye, now