welcome back to my channel everybody
thank you for tuning in
and in this video i'm going to break
down the difference between
stocks and options trading and i'm going
to also go through some real
live trade examples of where we would
have purchased
the option in relation to the stock at
the same price
and time points and how that would
compare to our return on investment
by trading each of the different
instruments and by the end of this video
you guys are going to have a better
understanding of how to use options
and how highly leveraged they are
compared to equities or the stock
whereas you could buy only one share of
a stock but you might be able to buy
multiple contracts of an option with a
highly leveraged position
now with both instruments options and
stocks they have risks involved and with
options there are a little more risk
is involved because you have different
factors affecting the pricing of the
option contracts
but i just wanted to make this video as
a starting point because i don't have a
lot of new subscribers and followers
that have a lot of options questions and
that aren't very experienced
whether they're coming from penny stocks
or futures or forex
and they want to learn options so i
think this is going to be a good
starting point for all you guys to
understand
how to use options properly and to not
trade stocks
if you are probably educated with
options trading now before we get into
the video
if you guys could drop a follow on my
instagram i will link that in the
description below i post
very good options trading tricks i post
daily trade recaps
on a daily basis so it's definitely
worth a follow
and also if you learn anything from this
video if you could drop a
like on it or even subscribe to my
channel that would be greatly
appreciated so without further ado
let's get right into the video now the
first trade i want to go over
is on spy or the s p 500
the option had an expiration for 717
and it was the 321 strike put and we had
an entry
of 269 and an exit at 428 which is about
a 59
return on an investment now if we traded
the equity or the stock
spy we would have shorted at 322 and a
half
and covered at 319 and a half for about
three dollar profit per share
or about one percent return on our
investment now this was
the based off of a four hour supply zone
so this was a trade that we actually
took
real time in the discord room and in the
chat room so we chart
the s p 500 future forward slash es
but trade spy options around it
so the s p 500 es had a four hour supply
zone at three two
three two nineteen and three quarters
and the price
broke high a day so i love higher day
breaks going into supply zones because
what happens is you have retail traders
buying a breakout above a high a day and
they're basically providing liquidity
for these
supply zone orders to get filled and
once we had the supply exceeded the
demand
inside the supply zone gave us a
confirmation to get short
and hypothetically speaking if you were
to trade the
opt or if you were to trade the stock at
the same time we traded the option
you would have shorted at 322 and a half
now down here on the bottom left we have
the option contracts
went from a low of where we would enter
at at 269
to a high if we were to cover at 15 to
minute demand where we did
at 431 or 428 area which is about a
59 return on investment if you were to
buy one contract
and entered at 2.69
you would have costed the trade would
have costed 269
because every one contract equals about
100 shares of
the stock if we were to buy them
outright now if you were to buy five
contracts it would cost us thirteen
hundred dollars and we could sell those
same contracts
30 minutes later 45 minutes later for
2100
and 21.40 for a profit of about 800
so no matter how many contracts you buy
your return on investment is going to be
the same
but it's no-brainer when you have a
stock if you were to trade the same time
you bought the option
and only make one percent on your money
now yes there are other risks involved
you could have a time decay issue you
could have
not proper strike price play on the
option contracts
you could have not a proper expiration
you don't give yourself too much time
so there are other factors and other
risks involved with options trading
and i do have other videos on that on my
channel if you want to understand
strike prices and expirations but this
is just the
a realistic trade that we took in the
chat room and i'm just showing the
difference between if we were to trade
the option like we did
versus the stock now the next trade is
on tesla
and this is something we call a lotto
trade and it only happens on fridays
where
contracts you could pick up for very
cheap you know a couple of pennies
and these things could triple double
these things could go up by a thousand
two thousand percent
uh within a couple of hours now with
lottos
you have to accept the risk of your
premiums going to zero
before you enter the trade because it's
basically a lotto ticket you know you
buy a lotto ticket if you don't hit on
it
then you don't win nothing and you
basically lost your initial investment
but if you do hit you know you're going
to win big on it and the
profit and the return on your investment
is going to be very high
same thing with options so on fridays
you have option expirations
and all the contracts that are way out
of the money that are have
a slim chance of becoming in the money
by the time they expire that day
they're going to be worth pennies and if
they do get closer to in the money and
they
actually do go in the money those
contracts are going to
you know skyrocket and this happened
here with tesla
as you can see we had a low of 39 cents
to a high of 65 cents
now the realistic trade was watching and
speculating
out of 90 minute demand forming so tesla
made a crazy rally
then started basing out over here
creating demand
if we got a bullish move to the upside
we got that bullish move out of demand
the demand was then validated look at
the volume coming through here on the
stock
top left we have tesla on a 30 minute
and on the right we have tesla on a five
minute
and you could have bought calls here
above 90 minute demand
out of speculation for a rally up and
you had no reason to sell
maybe had a little reason to sell here
once we were trading sideways and stuff
so realistically i'm just putting an
exit here at the 1483 mark
it would have been a sick trade if you
held it all the way to end of the day
but here we have the example trip of the
option versus the stock
so if we were to buy the stock we would
have bought at 14
19 and sold at 14.83 for about a five
percent return on investment
again 1419 to about 1483-ish here at
this red candle
now if you were to trade a lotto buying
way out of the money for 72 cents in
this case
i know the low was 39 cents but in this
case where we entered
it was 72 cents you have to enter the
trade
knowing your risk that those contracts
are going to go to zero
but if we do hit on it we're gonna hit
big and in this case you know it did the
contracts went up almost 1700 percent
to a high or to an exit price of 12.92
you could have bought one contract and
it costed you 72 dollars
so with options longing calls or puts
your initial investment
is the max risk that you can lose if you
were
on the debit side so the most we could
lose is 72 dollars and if you
sold where we sold you would have made a
1200 profit
or about 1700 on your money now if you
bought let's just say in this case 10
contracts it costed you 720
bucks you could have sold for a profit
of 12 200.
this does not happen every day and i
just want to make it to the point that
this is considered a lotto and before
you enter the trade
you have to expect your premiums to go
to zero and it is very risky because the
chances of it happening are very slim
but when you do hit you're going to hit
big on this
so i didn't really want to include this
in the video but just hypothetically
speaking and experimental purposes only
let's say we bought the tesla contracts
at low of day for 39 cents
and held all the way to the end of the
day and held all the way
and sold at the high of the day
hypothetically speaking so the chances
of this happening where you're going to
buy at the low
and sell at the high very very very slim
you know if you could do that
you know please message me um but just
hypothetically speaking and showing you
the power of options
if we entered at that 39 cent sold at 65
that is a 16 567
return on investment again assuming the
premiums go to zero
one contract costed thirty nine dollars
so we went to the store bought a lotto
ticket for thirty nine dollars
and we hit the lotto for sixty four
hundred sixty one dollars
you could have bought fifty contracts
you know spent almost two grand on the
on
on your lotto tickets and you could have
made 323
000. like i said there's other factors
involved
completing you know with strike prices
you're gonna have different percent
returns and stuff like that
but just hypothetically speaking i
posted this on my crazy option of the
day
on my instagram story um you know it's
just funny seeing how this happens on
options and the realistic
uh let's be realistic here but
you know the chances of it hitting this
big is very slim but i just find it
funny how the options do move this way
now the last trade i want to explain is
boeing and boeing had a nice four hour
supply that formed
the day prior and then price was gapping
down
then we rallied into that four hour
supply zone and started rejecting it
where we started to play puts now the
contracts or the
the stock at this price was at a 179 and
a half
and we wanted to cover at 15 minute
demand so somewhere in this area
and for this illustration we're just
going to call it 176.
so going back to my spreadsheet we could
have shorted at 179
and covered our position at 176 for
about a 1.7 with
five or one point seven percent return
on our investment
or about three dollars per share so for
every 179 dollars we put into the stock
we're only going to make back three
dollars profit
now if we were to trade the option
contracts which we have right here in
the bottom left
we have boeing and let's call it in this
case
four dollars and 61 cents and we exited
at
15 minute demand when the stock or when
the option was at six dollars and 12
cents
so that is about a 33 percent return on
our investment
if we entered and exited where i just
explained so one contract would have
costed us 461
and we would have made 151 bucks out of
461.
so nothing crazy you know options are
going to be different depending on the
strikes you play
the expirations you play so nothing
crazy but it's a no-brainer to
trade the option versus the stock
again the reason for this video was just
to show the power of the leverage with
options
and like i said earlier there are other
risks involved so if you're not properly
educated with options
you can lose your full premium if you're
not smart with it you know you're
holding for closer to expiration
there's just a bunch of different
variables so it's important for you to
get educated properly on it
before you make your real trade but this
video was just to show real live
trades that we did take and the options
how they moved
in relation to the stock if we were to
trade the
equity so i hope you guys enjoyed it
like i said drop a like subscribe to my
channel
if you guys learned anything or enjoyed
this video