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3 Easy Options Trading Strategies for 2021

Jun 02, 2021
Hello Birdie Nation, thanks for being here, Joseph Hogue, here with the Let's Talk About Money channel, thanks for another one. Be here for another beer money Sunday. Grab your favorite cold beverage, whether it's an adult beverage or not. I love doing this every Sunday. you know, having a sort of casual chat with you taking off your bow tie and talking about money and this week we have a great video planned for you that will cover my three favorite

easy

options

trading

strategies

and this is based on the video we made last Friday , a comprehensive video on

options

trading

, and I know it was long, it was about 55 minutes long, but it covered everything you need to know to put these types of investments in your toolbox and um.
3 easy options trading strategies for 2021
They are incredibly important tools to use in non-gambling investments. I know a lot of investors have the misconception that options investing is just gambling, you know, and those types of high-risk, high-return investments, but they're actually a great way to not only protect your money, but also making different types of investments that you wouldn't otherwise be able to make, so we're going to cover that a little bit real quick, but please go back and look at that. video here I'm going to cover those three

easy

options trading

strategies

in addition to the five strategies we covered last Friday, so thanks again for being here, let me know in the chat if you can hear or see me.
3 easy options trading strategies for 2021

More Interesting Facts About,

3 easy options trading strategies for 2021...

Okay, and where do you come from in the bow tie nation. So I want to start here, but first I want to send out one more call to sign up for the daily bow tie. This is a new diary. The market updating service I am launching is something I have wanted to do for a long time. It's just something, you know, something to do for you in the community to give you kind of a daily market update. of the trends, some of the things that I see every day, so I put this together and we're launching it tonight.
3 easy options trading strategies for 2021
Well, we've been testing it for the past few weeks and for those of you, you know it's available now. On the list, you know you'll be able to tell people who haven't signed up yet how much information you're getting because really every day you're going to get market updates on the economy and stocks. In the markets, you'll be able to see the best in the worst performing sectors and some of the trends in some of the best stocks over the last day and why those stocks are up, as well as all the top news you need. to see before the trading day begins, these will go out at 9:00 p.m.
3 easy options trading strategies for 2021
ET, every night, every week, at night, so you'll have plenty of time to read that five minute quick read, easy, uh. I'll be able to understand, you know what your plan is for the next morning, when the Mark stock market opens, so I left an attachment in the chat link, click on that sign up, it's completely free, like I said, it's something that I've been wanting to do it for quite some time for you across the country. I simply give you these daily market updates so that signing up is completely free. I will never charge anything for that, but now I want to start here because I have a lot to cover in this episode, we are going to cover those three easy options strategies that I am using for

2021

, three strategies that you can use even if you have never traded options before, never before you have invested. in options before to protect your money getting a discount on stock prices is actually one of those options trading strategies and do a lot more with them, so let's get started.
I see a lot of cool members of the bow tie nation here from toronto vero beach uh california a lot of people from california love it I have some awesome cousins ​​out there happy new year to youtube they're uh they're in the chat so let's get started Here, you know, we'll have opportunity to ask some questions after the discussion point here, but I want to get to those options trading strategies because like I said, these are not just ways to bet on investments, I know many. Investors think these are purely gambling, you know, ways to get a leveraged return on stocks and they can do it.
You can, you know, use leverage in options to earn many times more than you would with, you know. of normal stocks, you know that if a stock goes up 100, the options will go up a thousand percent. In some options trades, you can get those leveraged returns, but the way I use them, the way I like to use them. I suggest that a lot of people who use them are very different, these are ways to use them, you know, there are ways to use options that protect your money and that lock in your profits and ways to generate cash flow in stocks that don't pay dividends and one of that's one we're going to talk about here, so real quick, let's go over some basics, what the options are, some of the terminology here, but go back to the video from last Friday and watch that video.
I know it's long. 55 minute video but will give you everything you need to understand these options trading strategies. It has five options trading strategies that we discussed in that video and it will really get you started with everything you need to know about options investing. make it a tool in your investing toolbox so sit down for an hour or two sometime and watch that video and really be able to understand them so now basically the options are the right ones to buy or sell a stock at a specific price in In the future we're going to go over a lot of examples here when we talk about those three strategies, so call options.
There are two types of options. Basically, you can buy a call option that gives you the right to buy a stock at a certain time. at a certain time in the future or there is a put option that gives you the right to sell a stock at a certain time in the future and they are both for fixed prices, okay, so you can buy a stock and let's go to uh, ya you know, let's look at this example right here, we have options on Apple and these are for January 21, 2022. Okay, we're a year away and you can see here that you can buy options for different weeks, different months. generally you can buy options trades, you know, the ones for upcoming weeks, so over the next few weeks they will have options for them, usually there will be one option available for each month, what I usually like to do is the ones for January, it's well these are They are called jump options so they are long term options they usually give you a year lead so here we are in January

2021

you can buy options with the right to buy or sell an Apple stock for a specific period. price one year in the future, so here we are looking at these options, uh, and on the left, here you see call options, on the right, here you see put options, this is just from my e-commerce account, you can buy or sell options from above. on pretty much any brokerage platform, you know it's there, okay, and right in the middle here, you can see that the options date is January 21, 2022, that's when these options expire and, understand that the Options are just that. is the option to buy or sell something on that specific date and then you get this strike price and this strike price is the price that you are buying or selling that stock for in that future, that is the option price or the option, uh you know what price you're setting for that stock, okay, and here you can see that you know you have from 122 to 145, you can actually expand this to pretty much any price for Apple all the way down, you know. 50 dollars up to 500, but you'll notice here where it says last on each side here this last column this is the premium okay this is the last price these options were traded at and this is what you pay or cash out with these options is okay, so, for example, with calls it gives you the right to buy an Apple share for this price, you know this strike price on January 21, 2022, well, in order to have that right, you must pay something correct. investor who is going to sell you that right to buy your shares at that price, is not going to do it for free, so he is going to charge you this premium right here, okay, and you can see, obviously, you know if Apple is trading at 132 when I took this screenshot.
With Apple it's trading at 132. If you want to be able to buy it for 122 a year from now, you'll have to pay a pretty big premium. You already know the investor who is going to sell. If you have this option, this purchase option wants to charge you 24.50 to be able to buy that option, okay, then you pay the 24.50 and in a year you can buy Apple no matter where it is, you can buy Apple for 122.50 now . obviously, you know that for these more expensive strike prices here, to be able to buy Apple for 145 a year from now, you only have to pay 14 and 50 cents, okay, because you know this is out of money right now, Apple stock . they're actually below that point, so you know you're buying the right to buy it at a higher price than today, but you're getting it in the future, you're getting it a year from now, so they're not going to give you a price. charge.
That's it, so that's just the basics of options, and the thing is, when you buy these options or sell them, we're also going to talk about selling options. These option prices will change throughout the year. Okay, the prices of these options are going to the premium of those prices are going to go up or down depending on where Apple stock goes, okay, if Apple shoots up to 145, then obviously anyone who sells that right, you know, for someone to buy those call options, you're I'm going to charge over 14 and 50 cents, okay, and at any time during that year you can sell these options again if you bought this call option to buy Apple for 145 dollars, if you bought it for 14.50 and Apple shares skyrocket to 150 160 dollars. so, then you can sell that option to someone for a lot more than 14.50, so just because you know this, just because you buy it for a specific bait in the future doesn't mean you can't buy or sell all of these things. the path to that point is fine, so you know, I see some really good questions here, you know, how is the premium priced?
The premium really comes at a price on a lot of things that we don't really want to get into yet right now. It's very complicated, basically the premium is just knowing where the stock price is trading right now relative to that strike price and how much time is left, well, plus the kind of volatility in the stock, okay, like that that if we looked at some of these other purchase options for Apple, if we looked at the one you know here, maybe April 16, 2021, obviously, much sooner than January 21, 2022, much less time for that option to become more valuable, so they would be cheaper. buy those than buy the older ones, so time is one of the ways these options are priced.
Well, you know, obviously relative to the stock price, so if Apple were trading at 150 right now, those calls to buy it at 145 would be a lot more. expensive, okay, because those, uh, because the stock price would already be above the strike price, so that's two and the third one really is the volatility. Okay, you know, if Apple just has a tendency to go up or down ten percent in a day, then obviously anyone sells. these options want more money for these options, because the chance or probability that you know the prices of these options go up or down will be much higher if it's a much more volatile stock, okay, so for example, I'll look at some Tesla options too, but you know Tesla options are a lot more expensive than, you know, Apple options, because Tesla happens to move a lot higher or lower when it's traded, okay, they're stocks a lot. more volatile, okay, that's also the reason if you look at buying options or selling options on ETFs funds, so if you're an owner, say the spy, which is the spyder s p 500 index fund, tracks the s p 500 index, yeah If you buy options on that one, they're actually a lot cheaper because they're all those stocks together and they kind of match the correct stock price movements, so that's how options are valued.
Well, I just wanted to cover a few reasons why you might want to use options and then we'll get to those three strategies. here's okay and one of them is really something that a lot of people don't think about and this is and this is why options are becoming so popular this year, you know, some of your favorite stocks. Amazon in particular is getting very expensive, so let's show the Amazon options chart here, okay, here's Amazon and you can see that to buy one share of Amazon you would need 1306, right, that's actually the call, it's Well, that's the option.
Sorry, to buy one share of Amazon you would need three thousand two hundred and eighty dollars. Well, many of you heard me say that you could buy a share of Amazon for thirteen hundred dollars and you went to your broker because it's a pretty good discount, there are no Amazon shares that cost three thousandmy right covered options trading strategy, uh, and there are two ways. you can use them right now a covered call it's just you own the stock so let's say I own tesla stock and you know tesla doesn't pay dividends but I'm a dividend investor at heart so I always want to get paid.
While I'm investing, you know, what I can do is sell those call options to someone that you know well, so that's the right one. Someone wants to buy the right to buy my shares for a specific price at a specific time. In the future right here we are talking, you know, January of next year, well, they are going to pay me, uh, uh, uh, you know, that call premium they are going to pay me to be able to have that right, so you know, that it's just a way that I can raise some money on those stocks that don't pay dividends and basically the cash flow on those stocks, otherwise it works, it's like we said, it just reduces your risk on those stocks if I'm raising 200 in my Tesla stock, so that really reduced my risk, reduced my exposure to the stock by that amount, okay, and the example I want to use here is going to be a long-time dividend payer who has fallen deeply from grace. look at this general electric stock, general general electric ge used to pay a big dividend used to pay, you know, what dividend two three four percent sometimes used to be a solid dividend and then they cut it in 2018 and now it's just a penny, ya You know, a dividend of a penny a share every quarter, which is basically nothing, so if I still own GE stock, I think in the future, you know, I think I think they're going to recover, but again I'm I'm a dividend investor and I want to collect some cash while investing in these, then I can access these call options.
I can access these options and again, this is for January of next year, this is when these options expire and I can sell these 15 strike prices, so this is uh down here 15 and that is the right for someone to buy my shares of GE at 15 uh by January of next year, that's fine and right now they'll pay me 85 cents to do it. Okay, so I'm going to charge 85 cents per share for every GE share I sell. You know, in these call options, I'm still sticking with the stock. I'm just selling someone else the right to buy those four, four, fifteen dollars. going forward, that's an eight percent return on the current price, right, uh, and the best part of this is that the stock would have to increase by 39 for that investor to buy those shares from me, right, they bought the right a um they bought the right to buy it from me at 15 okay well right now it's only 10.81 cents a share so they won't do it unless the share price goes up if the share price goes up 39 a 15, they will exercise the option to buy those shares for me at that price, so I lose my shares, I get 15 for them, but I also keep that 85 cents per share, so I have essentially made this a dividend stock for eight cents, you know, an eight percent return for that year.
Also, you know, I'm 39, you know, return if they call that, call that option from me. I have a super chat here for five NC dollars. Thanks for that, it says it might be a stupid question about spreads. But how can I sell a call or put option if I have never had a put or call option and I don't see that stock? I mean, call options are completely different investment options. Do you know you don't have to own the stock to uh, to buy a put option or a call option, uh, you can just exit. I could buy.
You could buy call options on Tesla right now. I don't own Tesla shares. I don't plan to own them at this time, but I might buy a put option. or a call now could also, okay, and you can also sell a put or a call, it's just a separate investment, okay, you don't have to own the calls to sell the calls, okay , basically, basically, it's just going to be an unsecured option, okay, so if you sell a call option to someone that gives you the right to buy the stock from you at that price in the future and you collect that premium, you collect that money Now, you don't own that stock, so if a year from now or when that option expires, if they come to you and say, "Hey, I have this call option." I want to buy the stock at that price in the call option, so you would have to go into the market and buy it. stocks at whatever price they are in the market and sell them for that strike price, okay, so there's a risk if you're selling those options, you know, if you're buying the options, then investing in options is worth it.
Whatever the value of that premium is, you know that you can never lose more than what you paid for that premium, if you sell the options, if you sell the calls or you sell the puts, then there is more risk because do you have the obligation to sell them the shares in the example of a call or buy the shares from them in the example of a put? So, there is that risk and many trading platforms. many brokers will make you have a margin account for that, that's fine, so if you know if you have that higher risk if you buy or sell a put option that gives you the obligation to buy. stocks away from someone because puts give them the right to sell you their stock, so you have to have the money in your account to be able to satisfy that put, so it's a great question, a legitimate question, but yeah. these are these are investments separate from stocks, uh, and you can use them, you can use them like this, okay, so, again, you know, our example of covered call with g he ge here um, you know, I just did ge a Dividend-paying stocks with a yield of eight percent.
I can hold the stock and if the stock goes up 39 percent over the next year, this options investor, this call buyer is going to buy my shares for 15, so you know he's going to buy them. I get that 39 return because the stock went up to 15 and I'm keeping its 85 cents so I'm keeping that 8 return on the stock so another great way to apologize, great way to use options to invest there. covered call strategy and again another one that we highlighted in Friday's video, so be sure to look for that one. Now understand that there are risks to this, okay, for example, with the covered call strategy, so you gave someone the right or you sold it. write to him to buy those shares from him, uh, for a certain price now, if he surprises us all and goes up to thirty dollars a share, it won't happen because he knows he's been pretty unlucky lately, but let's say that, for the sake of argument, he says. at thirty dollars a share, I already sold someone the right to buy them from me for 15.
Okay, I still get that 39 uh yield because they went up to 15, but I don't get anything beyond that, okay, so there's the risk of that if those stocks take off you know I'm tough, I'm unlucky, I'm unlucky with the extra return that those stocks would have generated, I always maintain that premium, although I always maintain that options premium, so eight percent plus 39 that I came back, you know, with the stock going up to 15. That's the downside of that particular strategy and there's a risk and there's a downside to all of these strategies, so make sure you understand what they are, one more option. trading strategy that I want to get to and then we'll answer your questions there uh and this is going to be a great strategy to get stocks that you want to buy at a discount okay and I love this strategy that I would love to use.
This strategy because it can works very well with that long-term buy and hold strategy where you just buy stocks and hold them forever, but with this strategy you will get them at a discount, which is always great, so let's take a look , let's look at the calls for Apple, okay, here we are in the options for Apple and again you know you can see we have calls and puts here, calls here on the left, puts, these are for January 2022 with Apple trading at about 132 right now, if I'm looking at Apple, I say, okay, you know they have, Apple owns everything that they're about to introduce in electronic vehicles, they say, in the next few years and I want to be part of it, I want to be, I want to be Apple stock, but they've gotten so far this year, you know, how high has Apple gotten this year, 50 60 or something like that, it's, you know, just ridiculous.
I look at valuations sometimes, so I would feel a little better if the shares were around 120 each, you know, 120 would be 10, 10, right, I'd like to pay 10 less for Apple stock. Well, what I can do here is I can sell those January 2022 puts, okay, let's just look at the 155, so I come down here and again remember the puts, the put option gives you the right to sell shares to someone else for that price, well that's the buyer if I'm selling that then I have an obligation to buy that stock for that price from that person so if I sell I sell the puts, the puts $155 or $155 strike for Apple and I know this can be confusing.
This is the first time you're hearing it, so bear with me, um, okay, these 155 give someone, these puts give someone the right to sell Apple for 155 in January of next year. If I sell it to you then I'll buy Apple stock for 155 seems like some kind of shit deal, if Apple is selling for 132 right now why would I buy it for 155? Well, because right here you see the premium they are paying, they are paying 33 for that right. Well, that will be insurance for them, you know, maybe they own Apple stock and they are afraid that it will go down, so they are willing to pay 33.33 for insurance that, no matter how low Apple falls, they can do it. sell them to me for 155 dollars, so I'm basically going to say yes, I'll buy your Apple stock for 155 in January of next year if you pay me 33 right now, you know, that gives me, basically, okay if I know, let's say, for For the sake of the argument, that Apple remains below $155, whether it falls from here or stays the same, within a year it will be below $155.
They sell me their shirts for that price. Since I raised that $133, my my share, my cost, my actual cost from Apple is now $121,122, because I paid them $155 for their shares, but they had previously paid me $33, just so you know, just for those options. , so now I can set my price. for Apple at 122, about eight percent off the current price and I wanted to buy the stock anyway, you know, so I wanted to buy the stock anyway because I love Apple's future, I think it's, ya You know, I think I could go higher. um but I wanted that discount so eight percent off Apple stock now the results are here so again if Apple stock stays below 155 for next year someone will know that investor will sell me those shares and I bought them for 122 each, okay, so that eight percent discount now is the disadvantage here or I mean, it's kind of a disadvantage, however you want to look at it, if Apple stock goes up by above $155, then they are not going to sell those shares.
Me for 155, okay, let's say Apple will go to $185 at the end of this year, until January of next year, if Apple is trading at $185 and they want to get rid of their shares, they will just sell them. They are on the market for 185, right, they are not going to use this contract and they will sell it to me for less than the market price, okay, so I will not buy the shares from them, but I can still keep them. 33 33 dollars that they paid me, okay, so now it's almost cashless performance with this strategy, so if you're okay with it and like I said, a lot of brokers, a lot of platforms, they're going to make you have money in your account. account in case I have to buy these shares from this person, so you know if I agreed to buy Apple for 155 dollars a share, then for one hundred shares it's fifteen thousand five hundred dollars, so if I have those fifteen five sitting in my account ready to buy these shares, uh, in January of next year, but I raised those thirty-three dollars per share, you know, so I basically collect thirty three hundred dollars from that person who sells me those puts or buys me those puts. that's a yield of 21, okay, so the two results here from using this protective put or this cash guaranteed put is one: you get the stock at a discount that you wanted to buy it anyway, you get a discount here , so I mean it's kind of a win-win for you two you had this money in your account waiting to buy those shares for that year the shares surpassed that price and you held the premium for an instant discount or an instant return, so Either you get the stock at a discount from what you wanted to pay for it or you get that 21 return, you get that instant return on your money, so anywaynew, just another great options trading strategy that I like to use and one of my favorites. for that kind of buy and hold long term idea, if I see a stock, I very rarely go and buy a stock in the market, you know, at least I'll go and sell the puts, maybe a month or two out , okay, you know, normally for this type of strategy I don't go all the way to one-year puts, so right now I wouldn't go out to these January 2022 puts because I wouldn't want to wait for that.
It's going to take me a long time to get the stock, but you know I could get out to maybe a March contract. I could come up with maybe these running options for Apple. Sell ​​the put options to someone for cash. You know maybe you know you don't get paid. eight percent discount, but maybe I could still take a five percent discount on the stock, so I would get a five percent discount, get the stock in March and, you know, be able to hold it for as long as I want after that. so again, another great options strategy, be sure to watch Friday's options video, you know, because it's five options trading strategies, it's going to cover the basics and beyond a lot of what we talked about and you'll really be able to to make sure that you use them to really make money however you can so now we're going to open this up to questions and answers and I want you to know that I want to scroll up here and see if I missed any questions if I didn't see your questions just make sure put them there in the uh. you know, in the chat below, make sure you use a question mark so I can see it and I'll get to that last one, okay, thanks for the video options, neo call options, I'm not going to hedging specific options on specific stocks because I mean that would mean we would have to go

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