Podcasts about wdis

Kay and E wrap up their time on Where Do I Start with a few more options trades and a reflection on everything they've learned. 

Kay and E wrap up their time on Where Do I Start with a few more options trades and a reflection on everything they've learned. 

The two yutes look back on how far they've come--and both are in the green! Before diving into a few more trading opportunities this afternoon, Kay and E list the following as some of the most important points in their trading education thus far:Learning by doingBeing OK with taking a lossCapital allocationUnderstanding riskKnowing your mechanics Make sure to check out Kay and E together in their very own segments premiering the week of October 4th:Today's Assignment: Mon-Fri 2 PM CentralTrades on the Go: Tues & Thurs 3:15 PM Central

The two yutes look back on how far they've come--and both are in the green! Before diving into a few more trading opportunities this afternoon, Kay and E list the following as some of the most important points in their trading education thus far:Learning by doingBeing OK with taking a lossCapital allocationUnderstanding riskKnowing your mechanics Make sure to check out Kay and E together in their very own segments premiering the week of October 4th:Today's Assignment: Mon-Fri 2 PM CentralTrades on the Go: Tues & Thurs 3:15 PM Central

The Bat is back with the yutes to introduce “The Stupid Trade,” a 60%+ POP, high return, directional strategy that turns out to be not so stupid after all. The Delta Buster (“The Stupid Trade”) combines two strategies that want the same thing, thus why some may find it a “stupid” play--you're betting double on one assumption. But Tony explains that this is one of those trades that's perfect for folks with smaller accounts who want to maximize their profits when they get them. The bearish version of this trade is composed of:A long vertical put spread with the short leg at the moneyA short vertical call spread with the short leg at ~30 delta In the case that you're bullish, you would reverse the put spread for a call spread, and vice versa. You'll find in either scenario that your max loss and max profit net out to about the same, and you'll have a nice healthy POP. Widen or narrow both spreads to maximize or minimize your risk and gains.

The Bat is back with the yutes to introduce “The Stupid Trade,” a 60%+ POP, high return, directional strategy that turns out to be not so stupid after all. The Delta Buster (“The Stupid Trade”) combines two strategies that want the same thing, thus why some may find it a “stupid” play--you're betting double on one assumption. But Tony explains that this is one of those trades that's perfect for folks with smaller accounts who want to maximize their profits when they get them. The bearish version of this trade is composed of:A long vertical put spread with the short leg at the moneyA short vertical call spread with the short leg at ~30 delta In the case that you're bullish, you would reverse the put spread for a call spread, and vice versa. You'll find in either scenario that your max loss and max profit net out to about the same, and you'll have a nice healthy POP. Widen or narrow both spreads to maximize or minimize your risk and gains.

As the yutes witness their first mini-market crash, Tony Battista swoops in to add his two cents to their trading mechanics. On this episode see:Bat defend the ZEBRAAn easy way to add more short deltaWhy you might want to roll an ITM naked option to the next expiration, rather than take the stockWhy Bat would go long VXX when vol's low, but not short it when it's highHow to put on a Batman trade This and more, on today's Bat-centric segment.

As the yutes witness their first mini-market crash, Tony Battista swoops in to add his two cents to their trading mechanics. On this episode see:Bat defend the ZEBRAAn easy way to add more short deltaWhy you might want to roll an ITM naked option to the next expiration, rather than take the stockWhy Bat would go long VXX when vol's low, but not short it when it's highHow to put on a Batman trade This and more, on today's Bat-centric segment.

Nasdaq's been down a few days in a row, and IV's looking a lot better for Tom and his contrarian wards. On this Triple Witching Day, the gang dons their wizarding garb and puts on some juicy new trades. Featured Symbols: /S420, TLRY, CCJ, URA, EWZ, ARKQ, ARKK, SPYBonus Lesson: Kay has been assigned for the first time. She had on a BABA iron fly, and she was assigned on the put side. She now has no real risk--she can only make money back if BABA has a big rally. When you get assigned on the put side it's just an opportunity for the stock to go up some, and you can make a little more. BUT it ties up capital. If you want to get out of an assigned stock position like this, ask the trade desk to exercise the other side and the positions will offset each other.

Nasdaq's been down a few days in a row, and IV's looking a lot better for Tom and his contrarian wards. On this Triple Witching Day, the gang dons their wizarding garb and puts on some juicy new trades. Featured Symbols: /S420, TLRY, CCJ, URA, EWZ, ARKQ, ARKK, SPYBonus Lesson: Kay has been assigned for the first time. She had on a BABA iron fly, and she was assigned on the put side. She now has no real risk--she can only make money back if BABA has a big rally. When you get assigned on the put side it's just an opportunity for the stock to go up some, and you can make a little more. BUT it ties up capital. If you want to get out of an assigned stock position like this, ask the trade desk to exercise the other side and the positions will offset each other.

It's Triple Witching Week again. Tom explains that theres usually a bit of a bullish moment during these times, before things even out again. Volume also tends to be heavier, so you get some nice liquid markets. Featured Symbols: ORCL, ZNGA, UNG, URA, KR, ULTA, VFC, and MARA

It's Triple Witching Week again. Tom explains that theres usually a bit of a bullish moment during these times, before things even out again. Volume also tends to be heavier, so you get some nice liquid markets. Featured Symbols: ORCL, ZNGA, UNG, URA, KR, ULTA, VFC, and MARA

The gang reminisces on how far Kay and E have come in the last few months, and then dives right back on the platform to look for more trades. One of the trades Kay considers is a PTON call spread, but the IV Rank is in the single digits. She'd be collecting a nice credit, but Tom says she would give up that wiggle room to be wrong. He points out that her spread is just a couple strikes OTM. She really wouldn't have a lot of room to the upside if her bearish assumption turned out to be incorrect. She moves on to other symbols. Featured Symbols: MTTR, AFRM, URA, CCJ, MARA, /S420, RBLX, PTON, and CWH

The gang reminisces on how far Kay and E have come in the last few months, and then dives right back on the platform to look for more trades. One of the trades Kay considers is a PTON call spread, but the IV Rank is in the single digits. She'd be collecting a nice credit, but Tom says she would give up that wiggle room to be wrong. He points out that her spread is just a couple strikes OTM. She really wouldn't have a lot of room to the upside if her bearish assumption turned out to be incorrect. She moves on to other symbols. Featured Symbols: MTTR, AFRM, URA, CCJ, MARA, /S420, RBLX, PTON, and CWH

Kay wants to put on an X strangle, but Tom emphasizes the importance of staying away from low IV strangles at all costs. X's IV Rank is currently a little over 9%. He says if she had a directional assumption, that'd be different. He's all for a single put or call if the credit's there. She then casts her eyes on a Disney ZEBRA. Tom is dubious but says if she wants to put this on, she should consider it a relatively short term trade since she's using over $1000 in BPR and will need that capital back for continuing to put on more trades. He says if Disney goes her way, take the profits: “No hero crap.” She ends up making her first “scalp” for a $25 profit a few minutes later.* *If you have a smaller account (less than 25K), your account will be flagged as a pattern day trading account if you perform more than 3 day trades (opening and closing the same options or stock trade in a single day) in a rolling 5-business day period. To keep your account from being flagged, make sure you keep an eye on the “day trades” number at the top of the platform.

Kay wants to put on an X strangle, but Tom emphasizes the importance of staying away from low IV strangles at all costs. X's IV Rank is currently a little over 9%. He says if she had a directional assumption, that'd be different. He's all for a single put or call if the credit's there. She then casts her eyes on a Disney ZEBRA. Tom is dubious but says if she wants to put this on, she should consider it a relatively short term trade since she's using over $1000 in BPR and will need that capital back for continuing to put on more trades. He says if Disney goes her way, take the profits: “No hero crap.” She ends up making her first “scalp” for a $25 profit a few minutes later.* *If you have a smaller account (less than 25K), your account will be flagged as a pattern day trading account if you perform more than 3 day trades (opening and closing the same options or stock trade in a single day) in a rolling 5-business day period. To keep your account from being flagged, make sure you keep an eye on the “day trades” number at the top of the platform.

Tom explains that the ZEBRA (a kind of backspread--a trade in which you buy more options than you sell) is sort of the mirror image of the ratio spread. A ratio spread is a high probability, undefined risk (and capped profit) trade where you sell 2 options, and buy 1. With a ZEBRA, a lower probability trade with defined risk and unlimited gains, you buy 2 options and sell 1. Kay's KR ZEBRA worked out well for her. She made a $111 profit! It doesn't always work out that way. With a trade like this, you need the market to do what you want it to do, but if it does, you could make a lot of money. E has on a GPS ZEBRA. Tom explains that he should want to know how much the stock will move per day so that he knows how much he can expect to make in a day (he can use this information to decide when he might want to take the trade off). He lays out a little math for the yutes:Look at the expiration closest to 30 daysDivide the IVx % in this expiration cycle by the number of days to expirationMultiply by the stock's current price The number you get is how much you can expect the stock to move in price during one day. To wrap things up, Tom breaks down what makes a fair market. The key is that the brokerage, exchange, and market maker must all be different parties. He compares the weighted casino, sports, and crypto betting markets with the fair market world of stock, options, and futures trading. Bonus Lesson: With meme stocks, volatility increases when the stock increases--the complete opposite of what we expect with any other stock. This is because all the risk is to the UPSIDE, not the downside like we usually see. Keep this in mind when placing trades in these special equities.

Tom explains that the ZEBRA (a kind of backspread--a trade in which you buy more options than you sell) is sort of the mirror image of the ratio spread. A ratio spread is a high probability, undefined risk (and capped profit) trade where you sell 2 options, and buy 1. With a ZEBRA, a lower probability trade with defined risk and unlimited gains, you buy 2 options and sell 1. Kay's KR ZEBRA worked out well for her. She made a $111 profit! It doesn't always work out that way. With a trade like this, you need the market to do what you want it to do, but if it does, you could make a lot of money. E has on a GPS ZEBRA. Tom explains that he should want to know how much the stock will move per day so that he knows how much he can expect to make in a day (he can use this information to decide when he might want to take the trade off). He lays out a little math for the yutes:Look at the expiration closest to 30 daysDivide the IVx % in this expiration cycle by the number of days to expirationMultiply by the stock's current price The number you get is how much you can expect the stock to move in price during one day. To wrap things up, Tom breaks down what makes a fair market. The key is that the brokerage, exchange, and market maker must all be different parties. He compares the weighted casino, sports, and crypto betting markets with the fair market world of stock, options, and futures trading. Bonus Lesson: With meme stocks, volatility increases when the stock increases--the complete opposite of what we expect with any other stock. This is because all the risk is to the UPSIDE, not the downside like we usually see. Keep this in mind when placing trades in these special equities.

Bat steps in for Tom today and adds a few new tools to the two yutes' collective toolbelt. He first explains the concept of put-call parity which allows us to extract the extrinsic value of the in-the-money side of the options chain, from the out-of-the-money side (other type of option)... Example: DIDI's $5 call is worth $3.40. Most of this is intrinsic value since it's an ITM option. We can quickly figure out how much is extrinsic value but looking directly to the other side of the option chain at the $5 put option price. There is NO intrinsic value in this put because it's OTM. The bid and ask are at $0.15 and $0.20, so we know that the extrinsic value in the $5 call is somewhere around $0.15 or $0.20 (you can confirm this if you have your “Ext” column turned on). Bat then introduces the yutes to a new strategy: The ZEBRA (Zero Extrinsic Back Ratio). This strategy mimics a long stock position, but requires significantly less capital. The ZEBRA consists of:Two long 70 delta optionsOne short 50 delta option (of the same kind) It gives you about a 1:1 shot of making money, but your risk is defined to the downside and your profits unlimited to the upside (like owning stock!). Tony says it's good to keep selling premium, but every once in a while it's healthy to take a 50/50 shot where you can make a hefty profit. Watch to learn more about this fascinating strategy.

Bat steps in for Tom today and adds a few new tools to the two yutes' collective toolbelt. He first explains the concept of put-call parity which allows us to extract the extrinsic value of the in-the-money side of the options chain, from the out-of-the-money side (other type of option)... Example: DIDI's $5 call is worth $3.40. Most of this is intrinsic value since it's an ITM option. We can quickly figure out how much is extrinsic value but looking directly to the other side of the option chain at the $5 put option price. There is NO intrinsic value in this put because it's OTM. The bid and ask are at $0.15 and $0.20, so we know that the extrinsic value in the $5 call is somewhere around $0.15 or $0.20 (you can confirm this if you have your “Ext” column turned on). Bat then introduces the yutes to a new strategy: The ZEBRA (Zero Extrinsic Back Ratio). This strategy mimics a long stock position, but requires significantly less capital. The ZEBRA consists of:Two long 70 delta optionsOne short 50 delta option (of the same kind) It gives you about a 1:1 shot of making money, but your risk is defined to the downside and your profits unlimited to the upside (like owning stock!). Tony says it's good to keep selling premium, but every once in a while it's healthy to take a 50/50 shot where you can make a hefty profit. Watch to learn more about this fascinating strategy.

The yutes continue to adjust their positions, and add more on. E decides to sell a call spread in LVS. He first sets his strike width at $1, collecting $0.35, which is a reasonable amount for that width (a third of the width of the strikes). But he's not actually getting very much bang for his buck. tastytraders aim to collect 50% of max profit: in this case he would just make $17.50. Tom says he's always a proponent of widening strikes. He explains that it's statistically the best play--it proves better math-wise when it comes to results. It's less risk per dollar, provides greater overall returns, and has higher probability of profit. E moves his strikes $2 apart and he is now collecting $64. Featured Symbols: NVDA, LVS, TPR, GPS, EFA, VFC, BBY, and PDD

The yutes continue to adjust their positions, and add more on. E decides to sell a call spread in LVS. He first sets his strike width at $1, collecting $0.35, which is a reasonable amount for that width (a third of the width of the strikes). But he's not actually getting very much bang for his buck. tastytraders aim to collect 50% of max profit: in this case he would just make $17.50. Tom says he's always a proponent of widening strikes. He explains that it's statistically the best play--it proves better math-wise when it comes to results. It's less risk per dollar, provides greater overall returns, and has higher probability of profit. E moves his strikes $2 apart and he is now collecting $64. Featured Symbols: NVDA, LVS, TPR, GPS, EFA, VFC, BBY, and PDD

After Tom reminds Errol that as soon as you take off positions, new positions should be going right back on (”Capital on the sidelines doesn't do you any good”), Errol looks for new opportunities.  Tom says that all things being equal, selling an iron condor is statistically better than just selling a single vertical spread on one side of the market. Even though Errol has directional assumptions on 3 stocks (KR, NVDA, and PDD), he takes Tom's advice and places skewed iron condors (farther OTM puts for a bearish skew and father OTM calls for a bullish skew) on each of these underlyings. Errol asks Tom if he thinks most of the skill in trading lies in managing trades. Tom says, no, it's really in order entry. He says most investment and trading classes will put a hard emphasis on risk management, something Tom says is almost impossible to achieve. He says the burden is on being intelligent when entering an order, and that's where wealth is created in trading. He says a lot of people fall down during this stage because they get too excited about opportunities that don't fit the mechanics and probabilities.Bonus Lesson: Errol grills Tom on how he plays earnings--does he always play neutral? Tom says, for the most part, yes, he plays it neutral and looks for that IV crush, but these are also the only instances Tom sometimes likes to lean a little long! He thinks company's can lowball how well they're doing.

After Tom reminds Errol that as soon as you take off positions, new positions should be going right back on (”Capital on the sidelines doesn't do you any good”), Errol looks for new opportunities.  Tom says that all things being equal, selling an iron condor is statistically better than just selling a single vertical spread on one side of the market. Even though Errol has directional assumptions on 3 stocks (KR, NVDA, and PDD), he takes Tom's advice and places skewed iron condors (farther OTM puts for a bearish skew and father OTM calls for a bullish skew) on each of these underlyings. Errol asks Tom if he thinks most of the skill in trading lies in managing trades. Tom says, no, it's really in order entry. He says most investment and trading classes will put a hard emphasis on risk management, something Tom says is almost impossible to achieve. He says the burden is on being intelligent when entering an order, and that's where wealth is created in trading. He says a lot of people fall down during this stage because they get too excited about opportunities that don't fit the mechanics and probabilities.Bonus Lesson: Errol grills Tom on how he plays earnings--does he always play neutral? Tom says, for the most part, yes, he plays it neutral and looks for that IV crush, but these are also the only instances Tom sometimes likes to lean a little long! He thinks company's can lowball how well they're doing.

SPY took a 30 handle dip this morning then turned right back around to its initial levels. On this uncertain day, Errol looks for neutral opportunities. He puts iron condors on in both ZM and RBLX. His RBLX IC is an earnings play (earnings to be released in 4 days). Tom says the only thing we know with an earnings trade is that volatility will be killed immediately after the earnings are released. There's not a lot of juice in them otherwise--BUT you get some nice instant gratification when you're right, and they're a way to familiarize yourself with a variety of different stocks. Bonus Lesson: Maybe wait on trading Robinhood for the time being. Tom cautions that there's nothing to base IV on. We have no historical context for the stock yet!

SPY took a 30 handle dip this morning then turned right back around to its initial levels. On this uncertain day, Errol looks for neutral opportunities. He puts iron condors on in both ZM and RBLX. His RBLX IC is an earnings play (earnings to be released in 4 days). Tom says the only thing we know with an earnings trade is that volatility will be killed immediately after the earnings are released. There's not a lot of juice in them otherwise--BUT you get some nice instant gratification when you're right, and they're a way to familiarize yourself with a variety of different stocks. Bonus Lesson: Maybe wait on trading Robinhood for the time being. Tom cautions that there's nothing to base IV on. We have no historical context for the stock yet!

VIX and VXX (both volatility products) are the definition of “ugly” with 9 straight downdays. Of course these products have downside risk but it's not unlimited--volatility can't go to 0 because there'll always be some activity. Emails are flowing in asking “should we take the long side of vol?” so the gang jumps on lookback to see how selling a put in VXX (at 22 delta) would have performed over the last 15 years. We see:A 67% win rateAn average profit per trade of -$3.13 Tom explains that strategies like this can be misleading. The negative average profit tells us that in the long run, this is not a great strategy. However, our test doesn't account for where volatility stands at any point in time. Errol opts to sell a VXX put spread, acknowledging that even though this is not a great long-term strategy, with vol this low, he anticipates a bounce.

VIX and VXX (both volatility products) are the definition of “ugly” with 9 straight downdays. Of course these products have downside risk but it's not unlimited--volatility can't go to 0 because there'll always be some activity. Emails are flowing in asking “should we take the long side of vol?” so the gang jumps on lookback to see how selling a put in VXX (at 22 delta) would have performed over the last 15 years. We see:A 67% win rateAn average profit per trade of -$3.13 Tom explains that strategies like this can be misleading. The negative average profit tells us that in the long run, this is not a great strategy. However, our test doesn't account for where volatility stands at any point in time. Errol opts to sell a VXX put spread, acknowledging that even though this is not a great long-term strategy, with vol this low, he anticipates a bounce.

Beginner traders would arguably do well to mostly steer clear of earnings. Although these events tend to pump up IV in underlyings, it's a crapshoot which direction (if any) a stock will move come earnings. They are, however, a fun engagement tool. Errol says he likes to follow our mechanics for most of his trades, and then adds some earnings plays on the side for fun! Bonus Lesson: The gang all agrees it's kind of been a boring day with not a ton of opportunity. But Tom emphasizes that we never want to FORCE trades through that don't meet our mechanical standards. He says that when you do this, these are usually the trades that take you out.

Beginner traders would arguably do well to mostly steer clear of earnings. Although these events tend to pump up IV in underlyings, it's a crapshoot which direction (if any) a stock will move come earnings. They are, however, a fun engagement tool. Errol says he likes to follow our mechanics for most of his trades, and then adds some earnings plays on the side for fun! Bonus Lesson: The gang all agrees it's kind of been a boring day with not a ton of opportunity. But Tom emphasizes that we never want to FORCE trades through that don't meet our mechanical standards. He says that when you do this, these are usually the trades that take you out.

The yutes jump on lookback, tastytrade's groundbreaking new FREE backtesting tool, and run a group of trade ideas through it. lookback scans data over the last 15 years to see how your proposed trade (with those specific deltas) would have performed in the past. It provides useful info on each trade including the % win rate of the trade, and the average P/L on that trade when run hundreds of times. When Kay wonders why we don't buy Iron Condors, Tom has the yutes run this idea through lookback. They enter a long DIS Iron Condor and see that its win rate over the last 15 years would have been 32%. They run the same trade, but short it this time. As you might guess, we now see a 68% rate, and that's without managing early. E plays around with the platform and notes that with winning trades, the percentage gets even higher when you select the “manage at 50%” preference. This is why we follow this mechanic at tastytrade. Watch to see the yutes run more trades through lookback, and sign up to try it yourself!  Bonus Lesson: Kay had dreams of shiny, shiny gold and went long a /SPRE contract (the Small Exchange precious metals futures product). She put the trade on a bit arbitrarily and is now down $250. Tom cautions that when you put on a directional futures trade like this, make sure you set the levels where you plan to take the trade off both in your favor, and out.

The yutes jump on lookback, tastytrade's groundbreaking new FREE backtesting tool, and run a group of trade ideas through it. lookback scans data over the last 15 years to see how your proposed trade (with those specific deltas) would have performed in the past. It provides useful info on each trade including the % win rate of the trade, and the average P/L on that trade when run hundreds of times. When Kay wonders why we don't buy Iron Condors, Tom has the yutes run this idea through lookback. They enter a long DIS Iron Condor and see that its win rate over the last 15 years would have been 32%. They run the same trade, but short it this time. As you might guess, we now see a 68% rate, and that's without managing early. E plays around with the platform and notes that with winning trades, the percentage gets even higher when you select the “manage at 50%” preference. This is why we follow this mechanic at tastytrade. Watch to see the yutes run more trades through lookback, and sign up to try it yourself!  Bonus Lesson: Kay had dreams of shiny, shiny gold and went long a /SPRE contract (the Small Exchange precious metals futures product). She put the trade on a bit arbitrarily and is now down $250. Tom cautions that when you put on a directional futures trade like this, make sure you set the levels where you plan to take the trade off both in your favor, and out.

On this relatively quiet day, Kay and E pick Tom's brain about market crashes. Tom quells Kay's fears and explains that the chances of a market crash with no recovery are pretty damn near non-existent. He goes on to explain that predicting when one will happen, or when one's coming to an end is essentially impossible. Tom thought he'd never see something like the crash of ‘87… then there was 2000, and 2009, and 2020. You'd think when the markets go down, you should get short, but then they bounce right back up again. Don't try to chase the beast. The unpredictability of these crashes is another reason we stick to our mechanics.

On this relatively quiet day, Kay and E pick Tom's brain about market crashes. Tom quells Kay's fears and explains that the chances of a market crash with no recovery are pretty damn near non-existent. He goes on to explain that predicting when one will happen, or when one's coming to an end is essentially impossible. Tom thought he'd never see something like the crash of ‘87… then there was 2000, and 2009, and 2020. You'd think when the markets go down, you should get short, but then they bounce right back up again. Don't try to chase the beast. The unpredictability of these crashes is another reason we stick to our mechanics.

In the midst of their usual 21 days-to-expiration rolling, adjusting, and closing, the yutes ask Tom about how margin works.  He explains that neither of them have been using margin. While everyone's required to have what's called a “margin account” in order to trade futures and options, you can't actually borrow money to trade options, futures, or options on futures. The money put aside for these trades (buying power reduction) just comes from your own money that you put into your own account in the first place. What you CAN do is use margin to buy stocks. Whatever remaining option buying power you have, you have twice that amount available to you for stock buying power. Remember though: half of this money the brokerage has lent to you to go long these stocks. If you ever leave the brokerage, you'll have to make good on that original margined amount.

In the midst of their usual 21 days-to-expiration rolling, adjusting, and closing, the yutes ask Tom about how margin works.  He explains that neither of them have been using margin. While everyone's required to have what's called a “margin account” in order to trade futures and options, you can't actually borrow money to trade options, futures, or options on futures. The money put aside for these trades (buying power reduction) just comes from your own money that you put into your own account in the first place. What you CAN do is use margin to buy stocks. Whatever remaining option buying power you have, you have twice that amount available to you for stock buying power. Remember though: half of this money the brokerage has lent to you to go long these stocks. If you ever leave the brokerage, you'll have to make good on that original margined amount.

We're back at crazy market levels--we're in a world of price extremes! It's completely subjective whether markets are going to go up or down at any point in time. Our trading should continue to be simply a function of staying small and putting on more occurrences. Kay has booked a nice win with her most recent /SM75-/STIX pairs trade. Tom explains that she's profited from a “pot odds” trade: a play with a 50/50 chance, but with greater potential returns than losses. The key is that when you go against the trend and bet bearish, you get paid a lot more if an underlying drops than if you're bullish. This is because the velocity of a down move is generally greater than that of a rally.

We're back at crazy market levels--we're in a world of price extremes! It's completely subjective whether markets are going to go up or down at any point in time. Our trading should continue to be simply a function of staying small and putting on more occurrences. Kay has booked a nice win with her most recent /SM75-/STIX pairs trade. Tom explains that she's profited from a “pot odds” trade: a play with a 50/50 chance, but with greater potential returns than losses. The key is that when you go against the trend and bet bearish, you get paid a lot more if an underlying drops than if you're bullish. This is because the velocity of a down move is generally greater than that of a rally.

We're at record highs and Kay's portfolio (thanks to her bullish SNAP position) is way up, but E's and Tom's portfolios are suffering. Kay throws Tom's past advice back in his face: “Get over it.” After the gang makes a few adjustments and adds some trades, Tom grills the yutes, first on if anyone's currently trading crypto (they're not), then on what social media platforms Gen Z uses and cares about. The yutes explain that the top 3 platforms as far as their age group is concerned are Snapchat, Instagram, and TikTok. Watch to see what these two yutes with their fingers on the pulse have to say about these social media companies and more!

We're at record highs and Kay's portfolio (thanks to her bullish SNAP position) is way up, but E's and Tom's portfolios are suffering. Kay throws Tom's past advice back in his face: “Get over it.” After the gang makes a few adjustments and adds some trades, Tom grills the yutes, first on if anyone's currently trading crypto (they're not), then on what social media platforms Gen Z uses and cares about. The yutes explain that the top 3 platforms as far as their age group is concerned are Snapchat, Instagram, and TikTok. Watch to see what these two yutes with their fingers on the pulse have to say about these social media companies and more!

Volatility product VIX is up around 25% today! Tom says a monster spike like this will work against a lot of the yutes' existing trades (increased volatility doesn't do short positions any favors), but it creates a lot of new opportunity. It's a fear index: when the world gets scared, that's the most opportunistic time for traders. E wonders if he should get more aggressive with his existing positions at a time like this, but Tom says it's more about: defending current positionsputting on new trades to take advantage of the increase in volatility E and Kay make some defensive moves, rolling their untested calls and puts up and down ( thus collecting more premium, and reducing their cost basis), and finally look for some new trades to put on!Bonus Lesson: Tom explains that based on tastytrade's research, the average length of a VIX explosion is usually between 3 and 5 market days.

Volatility product VIX is up around 25% today! Tom says a monster spike like this will work against a lot of the yutes' existing trades (increased volatility doesn't do short positions any favors), but it creates a lot of new opportunity. It's a fear index: when the world gets scared, that's the most opportunistic time for traders. E wonders if he should get more aggressive with his existing positions at a time like this, but Tom says it's more about: defending current positionsputting on new trades to take advantage of the increase in volatility E and Kay make some defensive moves, rolling their untested calls and puts up and down ( thus collecting more premium, and reducing their cost basis), and finally look for some new trades to put on!Bonus Lesson: Tom explains that based on tastytrade's research, the average length of a VIX explosion is usually between 3 and 5 market days.

After some portfolio housekeeping, Tom and the yutes take a look at the volatility products VIX and VXX. Tom explains that while price often mean reverts (drifts back towards its average), it doesn't have to. Volatility ALWAYS does. It's a math equation: volatility will always mean revert... you just don't necessarily know when. Volatility tends to drift slightly down, which makes sense because the market tends to drift up (they're inversely correlated). REMEMBER: When you use either VIX or VXX to trade volatility, selling puts is actually bearish and selling calls is bullish. This is not how our option-trading brains are used to thinking, but we do have to switch contexts, because when volatility goes up, the markets are bearish and when it goes down, the markets are bullish.

After some portfolio housekeeping, Tom and the yutes take a look at the volatility products VIX and VXX. Tom explains that while price often mean reverts (drifts back towards its average), it doesn't have to. Volatility ALWAYS does. It's a math equation: volatility will always mean revert... you just don't necessarily know when. Volatility tends to drift slightly down, which makes sense because the market tends to drift up (they're inversely correlated). REMEMBER: When you use either VIX or VXX to trade volatility, selling puts is actually bearish and selling calls is bullish. This is not how our option-trading brains are used to thinking, but we do have to switch contexts, because when volatility goes up, the markets are bearish and when it goes down, the markets are bullish.

Kay is eager to put on a naked option trade in a cheap-ish stock. The gang look at NOV, CLOV, WEN, and X and decide X is the best bet because there's the most credit to be had (~$1.34), the least Buying Power Reduction ($250), respectable IV Rank (20.7), and good liquidity (~15 million in volume). Kay sells a strangle in X. Bonus Lesson: When Kay went to route her strangle, she had troubled getting filled in this very liquid stock, even when she pennied down. Tom explained that this means the two legs are coming from two different exchanges. He instructs her to route them separately, and she's able to get filled on each bid price no problem. Try this if you're ever struggling to get filled on both legs at a fair price!

Kay is eager to put on a naked option trade in a cheap-ish stock. The gang look at NOV, CLOV, WEN, and X and decide X is the best bet because there's the most credit to be had (~$1.34), the least Buying Power Reduction ($250), respectable IV Rank (20.7), and good liquidity (~15 million in volume). Kay sells a strangle in X. Bonus Lesson: When Kay went to route her strangle, she had troubled getting filled in this very liquid stock, even when she pennied down. Tom explained that this means the two legs are coming from two different exchanges. He instructs her to route them separately, and she's able to get filled on each bid price no problem. Try this if you're ever struggling to get filled on both legs at a fair price!

When Errol expresses interest in the covered call strategy, Tom explains that in comparison to the 50/50 shot owning stock gives you, a covered call strategy improves your probability of profit to roughly 60%. A covered call is simply:100 shares of stockA short call in that same stock Tastytraders almost always prefer covered calls to naked stock because it allows us to profit when the stock doesn't move at all, and it also reduces our max loss if the stock goes down. Watch to see how Errol puts his DIDI covered call on in the tastyworks platform! Bonus Lesson: In your positions list, add the Capital Requirement column to see which of your positions are taking up the most buying power. Taking off these positions will help you free up some capital!

All of a sudden we're in the middle of an unbelievable rally. The S&P 500 and the Nasdaq are shooting up like crazy growth stocks--this is not the usual behavior of equity indices. On the other hand, the Russell (a small cap index) is just going sideways. Tom shows the yutes a way to trade this diversion: a bastardized iron condor--AKA a Frankenstein spread.  Errol follows Tom's directions and sells a call spread in QQQ (Nasdaq) and a put spread in IWM (Russell). You could think of this as wonky iron condor--they're both representations of the market at large, and with both spreads in place, you're delta neutral. But it's also a pairs trade--E is selling the spread between the two indices. Kay does another version of the same trade but with Smalls futures products: she sells a /STIX contract and buys a /SM75 contract. Both yutes are betting that the two indices will come back closer together. They're relying on a mean reversion of the spread, just like IV Rank mean reverts.

All of a sudden we're in the middle of an unbelievable rally. The S&P 500 and the Nasdaq are shooting up like crazy growth stocks--this is not the usual behavior of equity indices. On the other hand, the Russell (a small cap index) is just going sideways. Tom shows the yutes a way to trade this diversion: a bastardized iron condor--AKA a Frankenstein spread.  Errol follows Tom's directions and sells a call spread in QQQ (Nasdaq) and a put spread in IWM (Russell). You could think of this as wonky iron condor--they're both representations of the market at large, and with both spreads in place, you're delta neutral. But it's also a pairs trade--E is selling the spread between the two indices. Kay does another version of the same trade but with Smalls futures products: she sells a /STIX contract and buys a /SM75 contract. Both yutes are betting that the two indices will come back closer together. They're relying on a mean reversion of the spread, just like IV Rank mean reverts.

Kay acknowledges that she knows tastytraders don't like trading trends or “technicals”---but something about NKLA is really speaking continued rally to her. She throws mechanics to the wind and sells a put spread in the stock. After emphasizing that it's breaking every one of the tastytrade guidelines, Tom encourages her to do it anyway. He says that we have to see these things work--we have to see the tastytrade mechanics play out in our favor, and the follow-the-trend strategy fall apart, in order for us to learn. Who knows? Maybe she'll be right this time...