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How to trade stock options for beginners

How to trade stock options for beginners



you're in the right place if you came to learn about how to profit with options tonight so that's what this webinar is all about here so how to profit with options and I'm really just going to be breaking down how this whole thing works with options at least as best as I can during the next 45 minutes all right so let's get into the information so here's what's on the agenda for tonight I want you to walk away from this learning why option traders have a unique advantage over other stock traders also once you understand and discover wise trading stocks is more risky than trading option so you may have heard that you know I heard trading options is risky I'm going to share with you tonight why it's actually the reverse why trade only know how to trade stocks is more risky than trading options and that's what you're going to take away from this training tonight you're also going to uncover the secret to growing a small account with as little as 500 bucks using options and maybe I shouldn't have put the word 500 bucks in there because the example I'm going to show you is it's with like three thousand dollars but you can basically take that example down to five hundred and say if I have five hundred dollars what could I do with the same example does that make sense so you know so that's what I'm going to share with you tonight and if you got questions hold them to the end because I'm going to take some questions at the end and I'm going to also give you an opportunity to partner with me and get some additional training if you choose to so let's dive in to it and oh and also this is one of my favorite parts you're gonna we're going to cover how you can control expensive stocks like Amazon Google Tesla for a fraction of the cost because most people don't trade the best stocks out there because they don't think they can afford them but I'm going to show you what how what options you can afford some of the very best stocks out there on market all right now who is this webinar not for so this is not for you if you're already a sophisticated investor this is not for you if you already know how to make money in any market condition which means you know how to profit no matter whether the markets up down sideways or upside down you already know how to make money then no problem go ahead and log off and get 45 minutes of your night back if you completely understand how options work already then this webinar is probably not for you and if you are not open to additional coaching or training then this webinar is not for you because at the end I'm going to offer you an opportunity to get some additional coaching or training if that's not something that's for you this webinar is probably not for you alright so let's uh let's keep it moving so let's go back why am i sharing this information with you so if you don't know me already I'm assuming some of you guys know me but maybe you found me through YouTube or Facebook but if you don't know me I've been trading for over ten years I've been trading since 2003 I've been trading over ten years I grew a small account to a six-figure trading account with no formal education and you know since then I've made a lot of money lost a lot of money made it back lost it and people would always ask what am i what am i trading one of my teaching and so I started blogging about what I'm trading and I started a website and then people start following me on youtube I started doing tutorials and then I wrote a couple courses right so that's me in a nutshell but why am i sharing this information I believe with everything in me that if more people knew how money works if they knew how the stock market worked we would be in a better place as a society right I mean just think about it if you had an opportunity to provide for your family buy a card move into a better neighborhood give more it's your church give more to the charities that mean the most to you then we would probably have less people robbing still and killing less people having abortions um I know you're like well you know what he's getting deep on this webinar but that's why I like to share this informations because you know I was in the seats that you're in I wish somebody would share it with me I was on the outside looking in wonder how do this how does this whole thing work how do people make money off the stock market what are options I didn't even know there was an option component to the stock market and so now that I've been blessed with this knowledge and it's not like it fell out of the sky as a blessing I mean I went and learned and studied and followed traders and so now I'm in a position where I can teach it and so that's why I'm sharing this information so please take the next 45 minutes seriously because I took it seriously preparing this information for you and someone said that's noble of you to share the information Hey somebody's got to do it or at least we all should be doing it and we'd be in a better place right so let's dive into it why do option traders have a unique advantage over stock traders so I want you guys to type in the chat box what do you think why do you think option traders have unique vantage of a stock trader so you're going to help me out with this webinar I'm not just going to be talking at you I want you to interact with me so why do you think option traders have an advantage over stock traders just type it into the chat box what do you guys think and if you don't know that's okay but take your best guess right Roop says small equity dave says buying power with less risk actually you're right on the money Ethan says you can make money in an up/down the sideways market you've probably been following my stuff but yeah that's right Ethan Marcus has more leverage Jason Shepard says less total risk Alec says profit 100 fold per contract yep Gabi says make money if the market goes up down or sideways we're in stocks you only make money where the stock goes up while all right so you guys are kind of already into my presentation this is make money and up-down cue says more control alright so perfect it's less so you guys some of you already know but first let's discuss how how do stock traders make money so if you if you don't know how stock traders make money I'm going to break that down for you right now so stock traders basically buy low and sell high that's exactly what they do so you can see here if you're a stock trader the only thing you know you ought to do is hopefully you buy something at ten bucks and you can sell it for 50 bucks someday down the road right but that just means you only know how to make money if the stock market goes up right what's the problem with that well most stock traders mindset is they're gonna write every trade to the moon right that's how stock traders look at every trade they look at it like it's green they only see green like this trades going to the moon this trace keeps this is the one trade that's gonna take care of my family for the rest of my life there's one trade that's how they think one trade or every trade is going to the moon but what is the reality there's the stock traders reality right they end up holding those stocks riding them right into the ground because we all know stocks do not always go up right and what goes up at some point usually ends up coming down and most people just end up riding their stocks all the way down into the ground so that's the real reality of the stock market if you only know how to buy stocks because we all know stocks can move in three ways some of you've already alluded to it right stocks can move up that's no surprise to anybody right stocks can move sideways but what do I mean by a stock can move sideways if you buy a stock for example at ten dollars it moves all the way up to a hundred dollars then it falls to fifty then it falls to forty thirty and it falls to ten dollars five years later that stock essentially just moves sideways because you bought it at ten dollars in 2005 and in 2010 it's back at $10 so you didn't make any money just move sideways so you basically wasted time and then we all know that stocks can move down right so here's the here's the here's the the question I asked I would ask everyone that can hear my voice if we know that stocks to move sideways and we not as stocks can move down and we just covered that stock traders only make money pretty much one way and that's if the stock goes up wouldn't it make sense to ask yourself well wait a minute if stocks move up down and sideways and I learned how to make money one make money one way that's a 1 in 3 chance of making money let me ask you are the odds in your favor are they against you you don't have to be a rocket scientist to know that if you only not to make money one out of three possible ways the odds are not against you I mean I mean the odds are not in your favor the odds are against you now you might say I could short some stock right and that's this flat right here you know shortened stock has unlimited risk so if you're not familiar with what shorting stock is shorting stock is you saying I'm going to sell something to someone that I don't have and I'm gonna hope I can buy it back at a lower price so if I told you hey you can come by my Apple stock today at a hundred I don't own Apple stock but I tell you you can buy it from me at 100 well we enter that trade and you enter it short you're short because you don't have the stock your hope and Apple falls down to something below 100 so that you can buy it so if it falls down to 90 then you would actually buy the stock in case I come knocking on your door for it I already agreed to buy it to you at 100 you bought it at 90 you'd give it to me well what's the reverse can happen well what if Apple never falls from 100 what if Apple comes out with a new phone it goes 120 150 what if the iWatch is a big hit and it goes to 200 you have to still go buy that stock at 200 and give it to me at 100 because you agreed that I could buy it from you at 100 whether you owned it or not so that's where the unlimited risk comes in with shortened stock you're selling somebody something you don't own that's not smart that's unlimited risk so again I'm trying to prove the point that essentially stock traders can only make money one way and that's if the stock goes up by and low selling high so I asked why do option traders have a unique advantage over stock traders the answer is very simple option traders have way more tools to build their house with than a stock trader stock trader has one tool buy low sell high option traders they can make money in the sideways and a down market right so what are the two tools or what are the more tools the more tools are simply two types of options called cause and puts there's only two options that make up the options market a call and a put but man when I tell you when you can mix these things together you probably can get twenty different combinations so what I mean you could buy a call and buy a put that's you can you know you can sell a call you can sell a put you can buy just a call buy just to put you can buy a call and then sell a call on top of it and buy a put and sell a put on the bottom of it that's called an iron Condor or something like there's so many different combinations that stem from just these two options right here cause inputs and I want to kind of give you a little insight into both of those tonight so if you're taking notes that's one to jot down right I need to understand what our cause what our puts so let's talk about what our cause so cause are used for bullish strategies so call is something that you can buy and control the stock for a certain amount of time for a certain price so if you're buying a call you're assuming the stock is going up that's a bullish strategy right on the other end there's what's something called a put which is a bearer strategy so if you're buying a put you're basically saying I believe this stock is going lower and that's where I put starts to make money then you'll see how later on in this webinar puts can be used for a few other cool things that most people don't even know about but the two types are called input causes a bearer strategy puts is I mean causes a bullish strategy put Sowerberry strategy now there is once you get even more sophisticated you can flip both of these around and kind of do some weird stuff with it to change the meaning of the strategies but on the surface if you're buying a call option you're bullish if you're buying a put option you're bears you believe the stock is going to go down alright now once you understand these two you have uh everything that you need in my in my opinion the bill financial freedom for yourself if you're just buying stocks you do not have everything you need to buy to build financial freedom because we just discussed you have a one in three chance of making money well what about the other two-thirds of the time right so which those two-thirds at a time happen more often than you think now have you heard that options are risky you know III see people say it all the time or I see other traders who don't understand options because they don't understand and don't know how to teach it they say stuff like well why would you do that options are risky trade penny stocks or you know trade the Forex surge I don't know all this stuff binary you do all these different things but normally that just means they don't understand how options work because if they truly understood how options work and now I'm willing to have a debate with any other trader that buying stock is always the risky position and not buying options right so trading stock has more risk than options and don't take my word for it I am going to prove it to you on this webinar because my goal is to educate you so whether you get continued training after this or not you will least be able to have an intelligent conversation with someone about why options are less risky and my stock is actually more risky than so let's dive into my first example here so I'm trying to keep it really simple so we're going to use just a made-up stocks called stock XYZ later on we'll bring in some real stock and option examples in this webinar but let's just say you're looking at stock XYZ and is trading at a hundred bucks you could buy 100 shares of the stock and that cost to you would be ten thousand dollars right a hundred shares times a hundred dollars be ten thousand dollars for you to buy a hundred shares of that stock now you don't have to answer this but how many of you have ten thousand dollars sitting around to get started trading I'm telling you I didn't have ten thousand when I first got started I got started with five hundred dollars in the stock market that's why five hundred has always been my magic number now let's look at the other hand that is so you can buy the stock hundred shares a hundred dollars ten thousand or you can buy one one hundred dollar strike price option right so you might be thinking what's a strike price don't worry I'm going to cover some of that or as much as I can in this webinar but you can buy a one you can buy one contract which is a hundred dollar strike price so what that means is someone has agreed to sell you the stock at $100 so strike is like that agreed-upon price so you bought a hundred dollar strike that's the agreed-upon price one option an option controls 100 shares okay and then there's a time frame to the option so in this example I'm just using 30 days and then I made up the price of this option I just called it $5 all right because you may be thinking well where do you get $5 from don't worry I'm going to show you a real option chain I'm going to show you some real option prices okay if you bought one option contract the cost he would be one contract controls 100 shares so one times 100 times $5 so simple math simple question you can type this in the box would you rather control XYZ stock for $10,000 or would you rather control a hundred shares for 500 bucks for 30 days assuming you know the stock is going to move within 30 days you tell me which homes you pick typing in the box Ethan said nope I don't know if that's a nope you don't want to spend the 10,000 bob says the 500 Rupert says I'll go with the option Anthony I'll go with the option Duane says options Alex's options the Sandra 500 bucks of course Keisha says the option Cynthia 500 C right so everybody send option Laura Jason Wendel Marvin Nadine I'm all set the option Marion says or Marlon I'm sorry options every day all day right so it just makes sense but as I as we walk through the webinar it's going to make even more sense right because I want to show you the different potential that you have with options that you don't have with the stock so let's keep going now let's let me saw earlier I told you I'm going to share with you why a stock is more risky than an option so let's say same example you bought a hundred shares at $100 ten thousand bucks on the right side you bought one contract times 100 shares $5 that's 500 what if XYZ stock tomorrow falls $40 overnight well on the left hand side you're going to be down $4,000 right because if it fell 40 bucks you got a hundred shares you just lost 40 times 100 shares that's $4,000 on the right side if that option expires worthless in 30 days how much did you lose you lost $500 just with this example alone I will pose this question now which one is more risky options or buying stock just off the sheer numbers alone you can see that stock is more risky because you don't have a defined amount well I mean I guess if it goes to 0 that should define amount but with options we can never lose more than the amount of money we pay for the option in this case we bought option for 500 that is the absolute maximum that we can lose I don't know about you but I feel good going into a trade knowing I've already determined how much I'm willing to lose which is how much I pay for the option I already have talked to myself and agreed that 500 is the most that I'm willing to lose on the left side with the stock it's it's unlimited right I mean the stock could go to zero have you ever seen a stock go to zero I can tell you a few Kmart Enron right some of these stocks have went to zero the company went out of business right and your shares went to zero well on this side your option if it goes to zero the most you lose is 500 in this example now when I ask you do stocks fall $40 overnight if you don't believe me I'll show you some examples but options can also be used not as protection as income protection which I'll show you in a second because if you're in the trade and you're making money one of the worst things that you can do and I see this happen all the time when it comes to earnings season most people will hold the trade all the way up to earnings and then the company may come out announced bad earnings or something like that and then everything that you've built up over the last two three months six months the stock's down forty bucks we're going to show you how you can protect that income with options so the option the way that you can protect it is by using put options so put options gives you the right to put the stock to someone else at a specific price it actually allows you to profit from the fall of a stock now you couldn't do that when you were just buying the stock itself if the stock fell you just were out of the money that it fell but with put options it gives you the right to put it to someone else so let me give you just a hypothetical example if stock XYZ we just talked about trading at 100 if I bought a $90 put if that stock failed down the $50 because I had a $90 put I have the right to put that stock to someone else at $90 even though it's trading at 50 bucks now because I bought a that says you agree to allow me to put this stock to you at a certain price for a certain amount of time so on the flip it allows you to protect your portfolio as well so let me give you an example of how this works so we still got the same XYZ stock trading out a hundred dollars you got a hundred shares still but this time the stock falls forty bucks on the right hand side you own a $90 strike put contract at three dollars so the cost for one contract times 100 shares as times three dollars is 300 and we're going to assume that's a 30-day contract right on the left hand side your account if you Falls your account is down thousand bucks here let me take a moment slow down make sure I'm explaining this right if you have a hundred shares at a hundred dollars okay so you own a hundred shares at a hundred dollars once you buy a $90 strike price put yes that put cost you 300 bucks if the stock falls $40 you will only lose $1,000 because you're put kicks in at the 90 dollar mark so even though the stock fell 40 bucks from 100 to 60 that put kicked in at 90 so all you really lost was the difference between 100 and 90 so that's ten dollars and that 10 dollars times 100 shares is why it says your account is only down a thousand bucks I want to make sure you guys understand the boxes that make sense if not I'll explain it again Marcus says it makes sense Gaby says yes it's like insurance and it's absolutely like insurance Gaby which is what I talked about in my course Windows doesn't make sense alex says it makes sense alex has plain please explain it again all right so let me let me explain it again Sheila wants to hear it again OKC says sorry it didn't make sense right so for all of you who said it didn't you didn't really understand it I want you to think about it think about it like this you bought the stock at a hundred dollars a share you bought a hundred shares at $100 right if the stock falls $40 so let me just clear let me clear some of this off the screen let me just go back a little bit think about this if the stock falls $40 okay how much is the stock trading for for 40 bucks it was trading at 100 it falls 40 bucks so you guys typing the box how much is it trading for for $40 sixty right Marcus type 60 Laura type 60 Sheila type 60 all right so that's simple math you own it at 100 on the stock falls $40 now it's trading at 60 okay so if it's trading at 60 and you paid 100 for it you lost $40 you own a hundred shares you just lost $4,000 okay now if you bought the $90 strike price put what happens is the stock still fail down to $60 but you have the right to go to someone else and make them buy it from you at $90 because you have a $90 put so if a stock is trading at 60 and you have the right to sell it to them for 90 that's a $30 price difference in there so the stock fell $40 you can make 30 of it back because you can force somebody to buy it from you at 90 even though it's trading at 60 so you really only lost the $10 right because it failed 40 but you can make 30 of it back by forcing someone to buy it from you at 90 because you own that call option so that's how your account is only down $1,000 because you made 3,000 of it back which is $30 times 100 shares so I hope that makes sense I have to move on but I hope that makes sense I got a lot more examples to go through you'll probably catch it on the next one if you didn't but let's just pause real quick did that make sense Keisha says so they have to buy it from you at 90 yes because you bought a put option which means someone sold you the right to put it to them at 90 so when they sold you a put option and you bought it they entered a contract with you and that contract says hey I have the right for a certain amount of time to put that's what's called a put to put this stock to you at $90 now let me tell you let me spend a couple extra minutes here you may be thinking why would someone sell me the right to put the stock to them at four at ninety because the stock market has two types of people one person think the stock is going up one person think the stock is going down so the person who thinks is going up is saying this stock isn't going to fall this stock isn't going to fall it's going to go up so I'm going to sell them this contract and they're going to keep that $300 see that cost three hundred bucks but who gets that three hundred the person who sold it to you so that person is thinking I'll make a quick three hundred dollars because the stock isn't falling you might be saying I'm willing to spend $300 to protect my ten thousand dollar investment and then we let nature take its course the next day to stock fell forty dollars somebody else asked why didn't they just set a stop loss well let me ask you this how can you set a stop loss if the market is closed and the next day it just opens down $40 how can you how can you set a stop loss if the market opens up the next day down $40 there's nothing you can do about that right so let's move on um some people got it some people didn't and that's why it takes way more than a you know quick webinar to explain options but I'm giving you a taste of the power of what options can do here so let me show you an example so someone said why didn't they just set a stop we'll follow me on this look at by do anybody ever heard of this coming little company called by do you can see on Jen you on July 27th buy to close at 197 58 where did Baidu open the next day look at the second error by to open it 172 and it went as low as 162 on July 28th the next day all right you can see that alone was over a $35 drop overnight right maybe they have bad earnings so you woke up the next day that stock is down $35 there is nothing a stoploss can do to protect you from that because the next day the stock is is down $35 but if you knew earnings was going to be released after the bell the smart people the smart traders like myself I never hold stocks over earnings but if I do I'm going to buy some protection because you could wake up the next day and the stock is down $35 and there's nothing you can do about it let's look at another example look at a little company called LinkedIn anybody familiar with them LinkedIn on April 30 of 2015 look at it it closed at 250 $2.13 LinkedIn open the next day which was the first day of next month May 31st it opened at two hundred and six dollars and 86 cents and traded as low as a hundred and ninety-eight dollars and 40 cents right that's over a 50 point drop overnight you think some people were sick about it the next day that's the amateur think about if you had $10,000 tied up in LinkedIn and you said oh I'm just gonna hold it over earnings I know it's a great company and then they have poor earnings and then the next day you wake up it's down 50 bucks that is what the power of a put option can do it can protect what profit you have it can protect your portfolio from waking up and foolish things like this happening and these happen every day I should say every day but it happens when there's a lawsuit it happens when there's earnings coming out it happens when you know a new product is coming on it's not as big of a hit as they thought the different it happens if you wake up and find out the CEOs been stealing from the company and all of a sudden they've been cooking the books so this stuff really happens I'm just letting you know how you can protect yourself from it and protect your portfolio especially around earnings season but this is the stuff that other professionals don't tell you this is the stuff that other people don't share with you so Ethan said what happens if the stock goes up and you have that put well you pay $300 for that put in at one example you basically lose your $300 I want you to think of it as insurance right so I talked about this in my course but think about it like this think about options as insurance you pay insurance every single month but what happens if your car if you don't get an accident do they come give you a refund for your insurance absolutely not right but you had that protection in case you totaled your car this is protection in case you total your portfolio so I want you to think about it like that all options are are contracts that people use every day they use option contracts in real estate they use option contracts and insurance they just insurance company doesn't call you up and say hey I want to enter into an option contract with you no they say we are willing to take on X amount of risk based on your driving record and based on your age and based on where you live and for that we want to be compensated X amount of dollars every month and if you get an accident we will pay you but based on your driving record this doesn't a third we don't think you're going to get an accident so we're willing to insure you same thing based on the stock chart you should be telling yourself do I need insurance or not do I need some put options based on if earnings is coming up around the corner you should be asking yourself do I need insurance right if I don't get an accident and LinkedIn goes to the moon I just spent $300 but I'd rather spend the 300 to protect 10,000 same thing if you're driving a Cadillac or some nice car you would rather spend a hundred and seventy-five dollars with your insurance company then they get out here and crash the car tomorrow and now you got to figure out how you're going to pay for a forty fifty sixty thousand dollar car so people pay for insurance for their cars but why aren't you protecting your portfolio chances are you probably never knew about this stuff before tonight right let's keep going so let's talk about some of the secrets – well let me take a pause is this good stuff let me know is this is this helping guys let me know type in the box I want to make sure this is valuable and good information to you alex says yes Gabi says yes dave says yes sir Jayson good stuff Sheila's is just whining Anthony Marvin good very valuable Ethan says Marcus's develop a new strategy oh yes Cesar says it's making sense se it says your name is as someone new to this yes this is helpful awesome awesome guys so that's that's always my my goal to provide some value and make it make sense let's talk about the secrets to growing a small account alright so there's two secrets to growing a small stock trading account number number one both of the secrets are using options by the way but there's two way to use options you can buy contracts in volume meaning a high number of contracts hi for me as five to ten and you're buying five to ten contracts of low price stocks that move at least fifty Cent to $1.00 within a 30-day time period and I'll show you why that's important the other way use options to power up a small account you can buy smaller contracts up high price stocks that are fast moving I'm going to show you two examples of each so so so hang with me here so I'm going to walk you through what I mean in both situations okay so here's this chart of a stock called s NV what I call a low price stock is any stock that's under about $50 sometimes I'll try to keep it under 30 but definitely under 50 that's a low priced stock to me now I want you to look at this stock chart because if you took my foundations course this is where the foundation starts to come into play you have to be able to read a stock chart and determine where the stock is going before you can pick the right option so I want you to look at this if you you can see this like this big sell-off happen and then you can see mid-august right which is not too long ago too three or about a month ago cause we're mid-september at the time in this webinar so mid-august you can see here it had a big sell-off but since from mid-august it went from about twenty seven dollars up to thirty dollars you can see that on a chart right so that's about a three dollar move so I want to talk to you about what a three dollar move could mean for you and if you look back even further than that you can see the stocks been in an uptrend so you can see it's been moving at least a good three dollars it looks like every 30 days or so now let's look at an option chain to talk about what what option you should pick and what that can mean for you so if you look at an option chain you have the ability to control you can see 122 days to expiration I can buy an option to control this stock for 122 days okay 122 days that's what like four months or something four months I can control the stock if you look at the example I pull it up I'm looking at the $25 call option so that's what we call an in the money option because the stock is trading at 30 dollars and 82 Senate right now but I'm going to go in the money and buy a 25 dollar a call option so for that you can look over here at the price let me ask you guys this how much do you think you should pay for that option because I did this earlier and I bet everyone gets it wrong how much do you think that option should cost to buy the $25 strike price call option to control the stock for 122 days all the way out to January 2016 how much did that cost just take it take a stab at it how much would you pay per contract Alec said 450 will per contract how much would that cost per contract rupa says 250 Marcus says 530 okay Marcus your close and close Sheila says don't know Rupa says it's 2500 Jamila's $5.00 I so let me break down how this works guys on the left you see something called a bid and an ask so bid means someone's willing to pay five dollars and 30 cent per contract on the right someone saying hey I want six dollars and 40 cent to sell it to you so that's what creates a market someone says I'm willing to pay five thirty someone says well I'm willing to sell it at six forty and then at the very far left you see something called lass that is the last price it sold for which is four dollars and fifty cents right so you got what someone's bidding what someone's asking and then what the last person paid for it but here's what the smart traders do smart traders look at the intrinsic value plus the time value if you actually add those two together you should actually be able to buy this for five dollars and 85 cent because it has five dollars and 82 cents of true value and you're paying three cents for time value now that might not make sense to you right now because you just learned in options but is made up of two components the true value and then how much of my opinion for time and so when you put those two components together you actually should be going in and offering five dollars and 85 cents but if you don't know that you'll go into the market and you'll pay six dollars and 40 cent for it and you'll overpay for this option and if I'm a market maker I'll take that trade all day because you just didn't know how to price out of option correctly so there's a lot of little tricks and different things like that to understand it what's the right price to offer for option but again if nobody shares this with you you don't know right so let's move on with the example so the stock is trading at 30 dollars and 82 cent we just saw that from the chart let's just say you bought 97 shares and the reason I pick 97 I'm going to assume you got three thousand dollars to work with here so let's say you bought 97 shares cost of 97 shares at 30 dollars and 82 cents it's two thousand nine hundred eighty nine dollars and 54 cents okay now on the right side the call option so let's say you bought five January 2016 $25 strike price that's the price we were looking at option contracts for five eighty five so I just show you how I came up with that 585 number the cost that would be five contracts times 100 shares to the contract controls 100 shares times five dollars and 85 cents it's going to cost you two thousand seven hundred and ninety so they're kind of close right you're spending a little under three thousand for both of these trades but let me show you where it makes a difference being an option trader so assuming this is all assuming you only have three thousand dollars to invest for some of you that's your tax return right you can get three thousand from your tax return which is coming up and you know for five months here so some you got three thousand dollars to invest now let's look at what happens if the stock moves up so if the stock moves up three dollars on the left hand side your profit would be three dollars times ninety seven shares because that's how many shares you own so you would make two hundred and ninety one dollars woohoo congratulations right but look at the right side if the stock moves up three dollars because we bought a deep in the money option that option is going to gain and value dollar for dollar as the stock would so if the stock moved up three dollars we have five contracts so three dollars times five contracts times a hundred shares to the contract controls 100 shares we make fifteen hundred dollars on the option side and how long do we have to put it to move three dollars we got four months because remember let me back up let me back this up a little bit remember we're looking at the hundred and twenty-two day expiration options okay if you wondering where I'm looking just is this look up up the yellow it's yellow yellow yellow look to the top where it turns gray says to the left we're start to turn gray 122 days to expiration okay so I have four months for it to move three dollars for me to make fifteen hundred bucks okay let me go back to the example alright so let me ask you this would you rather spend $3,000 and try to make 291 bucks or would you rather spend put $3,000 at risk to make almost a 50% return on the left side we're talking about a 10% return 291 on the right side we're talking about a 50% return which one would you rather have type it in the box you tell me if anyone says I'd rather have the left side log off now no I'm joking I'm joking but the point of plane is I don't know what in what why would you not want the right side of the equation let me see I got a couple question devices can you sell the option before 120 days yes you can you do not have to wait for 122 days you just have control for 122 days so you needed to do something within 122 days but if it doesn't in 30 days you can sell the option and get out in 30 days so absolutely you can exit that trade Rupa Patel says Wow yeah exactly blew my mind too when someone really showed me how this thing works Sheila says the right side Dave says do you normally buy that much in the money good question Dave I do talked about this in the course but I do go deep in the money on stocks under $50 because they don't move that much so when it does move I want to catch the bulk of that moving my option so if the stock is a $30 stock like this it may take a month to move $1.00 may take two months to move three dollars when it moves three dollars I need to make sure my options gonna move three four dollars so yes I would go deep in the money now if I'm talking about a Netflix or something like that I might go out of the money because that stock can move 30 40 dollars in a month and it'll kind of like swallow up my option being out of the money and put it in the money but that's there's a whole nother topic but hopefully that answered your question the one he said I'm the one I would take the right side any day absolutely she said that makes sense now good good 1,500 good to know you don't have to wait three months options every day all day – this makes sense Roopa says do options on commodity currencies or in that is you can do options on almost anything I just trade options on stocks you know that I don't really get in the commodities and Forex somebody else made but that's just not my thing but if it has an op you know as options go for it cool window says make sense all right so let's keep it moving I hope you guys are getting a lot of value out of this right so let me let me walk you through one more stock chart one of Tesla right so we did a low price stock let me do a little bit of a higher price stock like Tesla okay so Tesla makes the electric cars so these guys are trading at two hundred and fifty three dollars hundred fifty seven cents you can see based on a chart but if you look at where Tesla had its big fall in August Tesla fell down to two hundred bucks and then in a month okay mid August to mid September it's ran up $50 $50 so I'm going to show you how this would work on a more expensive stock like Tesla so let's look at the option change for Tesla I would still look at a potential in the money option to two hundred and thirty-five dollar option but notice on Tesla I can only control this one for 31 days so stocks that move big and quickly they get more expensive if you try to control this for six months or 122 days this would get really expensive so because these move faster you only need to control them for a shorter period of time or else these get really expensive so in this example you can see the bid was $23.80 and ass was 24 dollars and 55 cents and the last price so it was $24 and five cents you can see how I got it broken down by how much you're paying for it time value and how much you're paying for true value that's important for you to know and be able to read that now let's do the Tesla example very similar to the last example we just did alright so you buy a hundred shares of Tesla stock first of all 100 shares of this stock now that is a big boy is two hundred and fifty three dollars times fifties mean fifty seven and fifty seven cents that's going to cost you twenty five thousand dollars just to mess with a stock like Tesla this is what keeps most people from playing with the big boys stocks and the stocks that really could change your life most people don't even try them because it's out of their reach that's because they don't understand options now let's look at the October 2015 strike which is the chain we were just looking at the option chain that contract is going for twenty four thousand fifty five cents okay so the cost of one contract and control one hundred shares it's now two thousand four hundred and fifty five dollars that's a big difference isn't it big difference do you have twenty five thousand the trade Tesla no but I bet most of you do have two thousand dollars two thousand four hundred and fifty five dollars now let me walk you through the example that's a twenty two thousand nine hundred and two dollar difference versus the person who only knows how to buy stock compared to the person who knows how to trade options okay remember the chart of Tesla it went from two hundred dollars to two hundred and fifty that's a $50 move within thirty days okay now let's walk through it the stock rose fifty bucks over on the left hand side you got a hundred shares it rose fifty bucks you'd make five hundred dollars where in the world would you put twenty five thousand dollars at risk just to make five hundred dollars that is not a smart trade on the right hand side you own one contract at two thousand four hundred and fifty five bucks and if the stock rose 50 bucks you would make anywhere between 4,000 and 5,000 the reason there's a price range is because the stock isn't as deep in the money so it may not move dollar for dollar with the stock price the option is not deep in the money so may not move dollar for dollar with the stock price so let me kind of clarify that if the stock moves a dollar the option might move seventy five cents okay so it's not moving dollar for dollar because it's not that deep in the money but you could go deeper in the money but it gets more expensive on bigger stocks so that's why I says ideally you'll make anywhere between 4,000 and 5,000 now there is something that you can calculate out that'll give you exactly what the option will move if the stock moves a certain amount right so I talk to you and show you how to calculate all that but the point is here here's the point do you want to put $25,000 at risk to make 500 or do you want to put two thousand four hundred and fifty five dollars at risk to potentially make four or five thousand dollars it's it's it's it's a simple no-brainer I know which one you would you would pick and so that is the that's the webinar ladies and gentlemen um I do have an opportunity that I want to show you one of my new courses that's coming out but before I before I get in let me just open it up for questions real quick and then I'm going to talk to you about a course that I have that really teaches you how this all works and whether you get the course or not I'm hoping you got immense value out of this tonight but in a minute I'm going to open up the course and kind of show you what's in there how I break all this down but first let me open it up and ask what questions do you have Sheila said is it a good idea to buy options on stocks under I don't see the rest of your mess Oh under $10 uh it just depends you look for stocks under $10 it's probably only going to move somewhere between 30 to 50 cents so now it's about volume how many shares can you buy to make that 30 to 50 cent worth your time because the stock under $10 moves 10 cents a day five cents a day so it just really depends on your strategy and how many contracts you can buy to make that 50 cent or if you're a while if you're buying a hundred contracts and it moves fifty cents well that's going to be worth your a while if you're buying one contract and it moves 50 cents I think that's like 50 bucks not worth your a while you're going to pay Commission getting in and out of the trade not worth it how I said what's the difference between in the money and out of the money um Howard in the money option is an option that has real value so if a stock is trading at $100 and you go by $80 option it has $20 in the money like why would I sell it to you why would I enter an agreement to sell it to you at eighty when is trade not a hundred so that's an in the money option if the stock is trading at 100 and you go buy a hundred and $20 option that means you agree to but you have the right to buy it from someone at 120 well it's only trading at 100 bucks so that's out of the money it's $20 out of the money so I mean oh that's the difference between in the money out of the money is there a limit on how many option contracts you can buy however many you can afford can you quickly explain what you mean when you talked about deep in the money can you show the two secrets to growing small accounts again all right so I'll tell you what some of these questions bob says my biggest concern is what options is when I hear that most options expire worthless can you elaborate or explain I mean they expire worthless if you don't know how to read a stock chart and buy the right stock or buy the right option right so if someone is buying out of the money option because it's cheap that's not the right reason to buy that option you need to have a foundation of looking at a star chart and saying where do I think this stock can go based on a chart based on the momentum based on where we're at an overall market and how long do I think it's going to take to get there right so I don't just pick random dates there's a reason I picked 30 days 122 days because I have to look at a stock chart and say what do I think this stock can do and in what time frame so that make sense I hope that makes sense um all right so gosh you guys have a lot of good questions so I tell you what let me um let me switch screens and let me I'm going to show you guys what we have inside the options explaining course because basically everything you're asking um there's no way we'd be able to cover everything on this webinar but let me just show you what's inside the course and then I'm going to switch my screen here so bear with me while I switch my screen now someone asked can I show the this trade secrets are growing a small account so let me just flip back to that really quick and she'll show you that so there it is if you want to take a picture or I don't know but there it is so hopefully you can see it on my screen there and I'm going to leave that up there for a minute and then I'm actually logging into the course right now and then I'm going to share my screen with you and I want to show you guys what's back there because there's no you know a lot of the questions that you're asking inside the course so let me switch screens here so for all of you that are asking a lot of good questions right this webinar there's no way that I could teach you everything on a one-hour webinar right so this is the back end of the course so option a module one we break down what options are in a different industry that use options module two and this option we break down the foundational components that make up the building blocks of an option so we talked about the time component the intrinsic extrinsic value of all that stuff module three we break down what are in the money call option so somebody was asking what's in the money call option we break that down how to interpret an option chain and in module four we learn about in the money put options and how to interpret put option chains module five we break down how to use in the money cost as a buying strategy and then in six we break down how to profit from the downturn of the stocks by buying in the money put and then under each module so for example under module one you'll see there's like six mini modules underneath it that really breaks down the whole process if I go to module two and break down an option components you can see here that I'm going to break down all the components of the option so you're going to understand everything from A to Z by the time we're done here if we go to module three you can see we break down call options and options explained so you'll know how to use at the money in the money the money out the money options to profit from it number up I can't even talk right module four put options we're going to break down in at out of the money put options and then uh there's module five we got call option strategies there's a ton of strategies here there's six month will actually more than that right there's eight modules on strategies how to use it for income protection how did how to use it for bullish markets bearish markets protecting my portfolio protecting my stock there's just a ton of us buying strategies in there and then in module six we break down all the put option strategies here there's only four put option strategies and we break down why um you can see there's real examples of where to look for how to come up with you know everything there's bonus modules in here galore there's a bonus module I'll show you how to buy stocks at a discount there's there's PDFs that you can download on you get my option cheat sheet worksheet you get the option strategy and profit grid you get the option formula worksheet the option buying and selling rules the option Greek click reference there's also a course on in here on Greeks so there's I mean everything you need on options I broke down in this course and it would be way too much to break down on this webinar so someone asks how much is the options explaining course let me ask you this before I share with you to price let me ask you this what would it be worth for all the information I just showed you that's in the course not to mention knowing how to trade the market the way I just showed you knowing how to put smart money at risk nor how to increase your gains you know 50 percent follow verses ten percent putting less at risk what would that be worth to you I'm just curious I'm going to tell you the price I mean the prices is what it is some of my other students are already taking the course on who got early access to it but I'm just curious what would that be worth to you for those of you who can still hear my just typing in the box what would that be work don't worry I'm not going to jack the price up if you say a priced as more than what it is interesting she looks at two hundred and fifty Ethan said five hundred to a thousand Marlon said a thousand Caesar said a gazillion Oh Marcus says the course is well worth it took it three times you must be in our foundations course because we we pre released it early to the Foundation's members Alex has five hundred bob says 750 Dave you said $49.95 to be honest I would tell you to kick rocks for $49 an attorney maybe you meant 495 because I would say kick rocks for $49.95 and bucks and possibly make 1,500 that was a recent transaction all right so let me just give it to you guys straight I'm going to show you on my screen if you're and this is no sales pitch this is more up to you if you want to learn how to trade options I put this course together and I made it very affordable I'm going to scroll down I'm going to show you the super low price but I could have charged a thousand for this I could charge 1200 for this other people do but for me it's important that everyday average people can afford this because when I bought my first course I paid $4,000 for and I had to put it on a credit card out to apply for finance and the Duda and I thought how many people will never be able to take a course like this because a they don't have $4,000 to just put on credit be they're scared to even take that risk even found out they don't like it so my course is a hundred and ninety seven dollars and because I'm confident in my teaching in my material I also offer a 30-day money back guarantee because if you don't want to be in the course I don't want you in the course right I don't I don't fight with people and are you please keep it I don't have time right I'm trying to make this stuff reasonable and affordable for the everyday person to learn the tricks tips and the trades that the average not the average that the professionals won't share with the average person so there it is course is 100 in $97 and it comes with a 30 day money back guarantee so we're going to be Dave said the knowledge is invaluable Linda says I love it michael says great david says well worth it yeah I think that you took the course but you know you can go to power stock options comm and check out the course that's where it's at where you can buy it we're going to be holding a private coaching session for those I believe we're hosting that the first week in October but we're going to be doing a private group coaching for those who have the course to kind of answer some questions make sure they fully understand options to make sure that they're getting the most out of the course so we're at the top of the hour I'm going to take a few questions but again you can head over to power stock options comm and pick up the course and I'm going to hang out and take some questions from those who have questions Rupa says do you take so do you take weekly webinars I'm not I'm not sure I understand that question do I take weekly webinars I'm not sure I understand that Dewayne says I'm definitely going to purchase options hey pick it up and go ahead and get inside of our private coaching that we're going to do you know for those who pick up the course not Sheila says please email on the link to the course alright I will email it to you she de Q says Jason excellent presentation and offer hey I appreciate it someone says it's 2:00 a.m. in London but oh nice well thanks for joining us up from London at 2:00 a.m. I appreciate it it's only like 913 Eastern Standard Time here in Detroit Michael says Jason how do you take profit from options basically the same way you bought an option you basically sell the option back to the market so you know when I showed you an example where you can pay $3 for an option well if the option rises in price you can sell it back for like 6 bucks or I'm just using as an example so you basically do the opposite of what you did to get in on the tray which we talked about in the course unwind our Roopa says if I register for the course oh if you register for the course we're going to do like a one time group training but I do have a private coaching group that if you filled out let me let me go to my website and show show if you're looking for like to be part of our group coaching session if you go here and just click work with coach Brown you click that there's a coaching application for you to fill out and once we reopen it which will be sometime in October we're going to reopen it back up we do do weekly webinars where we jump on line live for an hour on Mondays and we go through stocks and charts and stuff like that dave says thanks for the webinar appreciate it no problem bob says i will purchase options hey I appreciate it but more importantly you'll be a better and more confident trader again that's power stock options calm or if you're on my website you can go to stock market courses and you can go right there as well and just click options explain is going to be right there Roopa says me too but I would like to attend a live class as you mentioned the first week of October what that will it will be only available for those who purchase the course because we're going to be talking about stuff that you need to have an understanding of before you get in that live class Gabi says you mentioned you like to go deep in the money for stocks under 50 is there a certain amount of prices prices in that you go yeah Gabi I'll talk about that in the course but I usually like to go about two to three usually two strike prices in the money and there's a reason there's certain reason why sometimes when you start to go three it gets too expensive but there are some things that you need to look at that will tell you how much the optional move if the stock will move because that's really what we're looking for how much will this option move per one dollar movement in the stock so that's really how you determine what option you're going to get Sheila says do I get to keep all the courses I'm yeah they're all online so once you pay for it you can watch it as many times as you want and trust me you're going to probably need to watch the options course once or twice you may not get everything the first time you may not you understand Marcus's do I have opening for coaching not yet we're good I'm gonna send the email out when we open that back up but I wanted to really want it to launch the options explained course because you'll get more out of the coaching if you understand if you took foundations you understand how to read stock charts and then when I start saying by the $10 call or look at this you won't be like what's a call option I won't have time to stop in a live webinar now and do a training on what's a call option so that's why there's a sequence to take in these courses and then getting into the private training because it's not fair to the people who understand what it is and they're paying for expert expert coaching for me to come in and start saying well here's what a call option is and here's what all right so so so hopefully that makes sense Cynthia says I will purchase as well it is on the it is on the bottom of the Foundation's module yes I think if you're in the backend the Foundation's you can purchase it as well to use it Gaby says or certain ratio of strike price to option price that you live there are no it's not a ratio is more about Gaby about how how the option is going to move in relation to the stock that's really what I'm looking for bob says can i trade options in my IRA you can you normally have to get approved to trade options in an IRA so you have to check with fidelity or whoever you have but normally you can yes chase says is there a minimum amount of money you have to have to fund an options account I believe what options express you need don't quote me I want to say it's 2,000 bucks but that's only if you're going to use margin if you're not going to use you can't use margin with options anyway if you're not using margin there is no minimum width options Express which is normally the broker that I recommend Dwight says how much is coaching oh no I'm not gonna go down that rabbit hole right now it'll be a reasonable price once we reopen it back up but any price is too expensive if I don't build value for what you're going to get so but trust me I mean you can see from my if you took a previous course amount course you can see I'm not out here trying to price gouge is just I have to pay for internet connection a microphone have to pay for Internet storage I have to pay for web software to allow you to log in and stuff so that stuff's not free that's what you're really paying for because the information is priceless but I always try to make it a reasonable price right but GoToWebinar charges me to pay to have these webinars so that's why we have to charge for the stuff to be honest and obviously my time or else I could be sleep right now all right just like you gabby says also also already took your options course and loved it going to refresh and take it again an awesome guy be cool I'm glad you yes I saw your name come through any purchase it Marcus says you just answer my question keep up the good work sir I've learned a lot from you over the past few months hey awesome I appreciate it I'm out here trying to share the stuff that the big boys aren't willing to share with the little guys right because if a bunch of us little guys get this knowledge what happens if all of us collectively have $100,000 to put into a stock trading account right what happens if all of us take the money we make from the stock market and go buy real estate somewhere right I mean so I mean this is bigger than just the stock market once you start making this money umm what was to stop a group of us from going to buy a couple of franchise restaurants cash money right so I mean you just understand what my thinking is that with this right the more people we can help you just don't know how far that money can go and what we can do collectively as a group as a team but that's what I'm going off on a tangent but that's how I think everyday so that's why I love sharing this information right be it means so much for me for a year from now for you to jump on a webinar and say hey cuz if something you taught me a year ago mr. Brown I put my kids through college Cash Money none of them have college debt that's what this stuff is about being a smarter trader so you can use stocks and options as a bridge to get where you want to get in life right I'm going to try to run through these questions I see a couple more questions Michael says great job I'll contact you and I hope present me with the link of your offer through email yeah for some reason you need to email me just email info at the brown report comm Sandra says I have been reviewing Bollinger Bands Candlestick charts and recently learned about oscillator house is there any single technical fundamental you use or do you use several I mean I use Bollinger Bands I use MACD I use stochastic but that's for a whole nother webinar but I use a lot of different things do you post your webinars on YouTube not all of them but I may post this as a replay Marvin says thanks Thank You Marvin from joining in let Elsa do you day trade or teach on day trade I got a free course on day trading if you want to take that look at the screen right now so the good the bad the ugly a day trading I mean it just kind of teaches you what it's all about I used to date Ray but to be honest I don't day trade anymore because when I looked at my life I got into this so that I didn't have to sit in front of a computer for a boss or sit at the desk every day when you start day trading you kind of start sitting at a desk every day watching a stock market Sun up to 4 o'clock when it closed that's not a lifestyle to me you just bought another job so I personally don't date ray anymore but I used to and I was successful at it I just don't you're basically trading time for dollars when you're day trading cuz you're in front of a computer all day long unless that's how it was for me and I'm just not interested anymore I'm more about 30 day trades 60 day trades making 5,000 10,000 and I don't have to look at it every day I just need to look at it once a week Rupert says we have access for how long to the web course after registration once you pay for you have access to it I mean forever for life so it's on the web long as I'm paying for my web hosting every month which I do it's just there for you to take the course all right Rupert says till what time period I'm not sure I understand that it's just on the web until you take it have ever heard of fixed indexed annuities yes mateesah is it basic or intermediate to advanced level the options course is really intermediate advanced level would be talking about spreads iron condors some of that stuff I don't really get into that in the course because you have to have a foundation and understanding of how options work if I start talking about buying one cause selling another one on top of it and then buying a put selling one on top of and that's an iron Condor you'd be like what where's my profit what does the stock you'd be confused so I do teach some intermediate strategies but there's another level to this of sophisticated strategies and that'll be a whole nother course if and when you're ready for that it's options Express available for Canadians last time I checked I don't I'm not sure but if they're not checked with fidelity I think fidelity works with Canadians Windows so thanks for the webinar and I bought both courses in there great I got to keep studying more and more options expressed by phone awesome and if you're a part of our private Facebook group post questions in there the white says took foundations course great plan on taking the options course great work thank you delight Matthew the online broker is is hire and options the online broker is hire an option than stock I'm not sure I understand your question Matthew sorry Jason separate says thanks he enjoyed the web and I thank you Jason roof says cool marking says yet I need advance stuff looking forward talked over hey I'll be there if you need the advanced stuff alright guys so tell you what if you got any other questions for me don't hesitate to reach out on Facebook if you got it if you need to email me reach out at info at the brown report.com I hope I answered all your questions I appreciate you guys spending some time with me and whether you take the course or not I sincerely hope you got a lot out of this out my goal is always for my free content to be more valuable than other people's paid content so I hope you got a lot out of this so have a great night


Reader Comments

  1. I wanna drop a feedback because I know there are people like me out there who has had losses too in bitcoin trade. Like I mentioned earlier, I made losses in bitcoin trade, then I came across Mr Richard Scottfield whom was referred to me through my friend, I was skeptical about giving him a try considering my ordeal of losses with previous brokers, but finally I gave him a try and after just period of 7days, I made profits and since then its been profits over profits.

  2. let me ask this to make sure i am understanding this… if i buy a call option for .24×100=24$ Stock goes up .30 is that .30×100=30$ which is a 6$ profit that i can sell it for? If in just stock it would be .06×100=6$which is the same profit… so what am i missing here?

  3. hey man, good video. I have just started trying to learn options. Most of the material in your video I have seen and heard before but you present it in a way that helps it to come together and understand better. Thanks!

  4. I have an issue with your video @ 48:44. You say the Tesla went up $50 and the stock side only gained $500, but it should of gained $5K. Can you explain why you put only $500 and not $5K?

    Also I did like the video said your train is $197.00 and your current web site says $597. I liked everything you had to say and the way you presented, but I feel the video needs to be updated to reflect your web site, to make me confident in buying into your training modules.

    When I'm looking to invest thousands of dollars to grow my retirement, I need to feel 100% confident in trading training sites.

  5. This is glorious, I've been looking for "online share trading free" for a while now, and I think this has helped. Have you heard people talk about – Meyayce Piyathan Plan – (just google it ) ? Ive heard some great things about it and my partner got cool results with it.

  6. Well if you bought a stock at $10 and you bought 100 shares and it went from $10-$100 no one is going to just let it drop without selling out that’s common sense. There’s not just one way for stock traders… option trading is just gambling and if it’s not going your way you have to bail out on it. With that being said when you buy stocks and they go down you can just hold them. Option trading has a expiration date stock trading doesn’t have a expiration date…

  7. I know I'm late, but I'm new to options… I heard the price on the video after another person reached out about teaching me for a price I'm not willing to part with these days.

    Went to the site, and it's gone up, you must be building winners. Again, I know I'm years late, just thought it was funny, because I got excited.

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