All right, well, the time has finally come. It is time to record the options master class. I threw together a video not too long ago. It was called sort of the the charting and options master class and i feel like it covered everything that i wanted to discuss in terms of charting.

However, there's more that, i think can be said about options essentially in that video, uh and i'll link it down below in case you'd like to go check that out, i gave what i find to be the absolute basics of options. Well, fear, not as your your knight and absolutely no armor instead, just a limp dong t-shirt is going to walk you through what i believe to be the most important aspects of options, uh. Obviously, at the public saying i'm not a financial adviser, not financial advice. Please take what i say: the grain of salt.

Do your own due diligence fact check me back check me whatever you got to do right, do your thing uh, but this is going to be everything that i find to be pretty valuable. So let me give you a brief introduction into what we're going to be discussing today, because this is going to be a long video. It's going to be chaptered out, there's going to be lots of uh good content in here, starting from the absolute basics of options to what i find to be solid strategies of options. So here you can see on the left side in red that i've got uh levels, one through four of what we're going to be covering today: the basics, the people, hate, learning, long versus short and then finally uh strategy.

What i find to be decent strategy, we're gon na dive through each individual piece of this uh one bit at a time but, like i said before, if you'd like uh, if you want to sort of skip through stuff, feel free to just do so, i'm not Gon na take the time to to edit this, i don't think this is a video meant for editing. I think this is one of those ones you do off the cuff. So, let's just begin: let's start off with level one basics of options, and i think the most important thing that we can do and if we're going to talk about options, is first off talk about the risks of options. In fact, there is a infamous page, which is literally uh dedicated to the risk of options, and that is uh last porn on wall street bets.

This is uh. This is something that if you, google you're going to find lots of dj's out there who who've got the itch for gambling, probably the same as as many other people on planet earth, uh will piss away hundreds of thousands and millions of dollars for every person who Uh on the flip of a dime turned 10 grand into 10 million. You've got a guy who, who turned 111 grand into 3 000. uh.

You know the long-lost secret of wall street is, if you want to become a billionaire uh, first, be a trillion and then lose a couple billion dollars. You know, or vice versa. You know a billion down to a million, whatever uh make sure you start with extra uh, and the point of this is it's very easy to lose money on options. If you don't know what you're doing so uh the first thing that i would tell anybody is to learn to practice, and you can do this in a paper account.

There's lots of brokers out there that allow you to do this uh and then to try executing it's always good to start off small. It's always good to sort of gauge yourself in your risk, tolerance and learn about the way that you would like to personally trade. Uh and here's just a couple examples of people who did not do that and i just pulled some images off the internet. This guy lost 99 of his port value uh this guy lost 30 000.

down to twenty five hundred. This guy, which i just showed you straight from wall street, bets uh lost a hundred eleven thousand, and this screenshot right here for full transparency, is a loss that i have taken in the past due to uh poor risk management. This was on moderna. It was a 41 000 loss and i actually happen to be green on this trade before it closes it out.

For that uh that 41 thousand dollar loss it was uh. It was a rough day, i mean to say the least bad trades happen, and you can avoid these bad trades by taking good risk. Uh good risk tolerance, decisions which we are going to be talking about we're gon na dive in all that sort of stuff. As we continue on, but i think i'm doing it with the service, if i say anything other than that trading is risky trading is hard and that you are likely destined to be a statistic.

If you don't take the time to actually learn. Successful traders are successful because they've spent hundreds of hours, thousands of hours practicing and honing their craft to adjust with the market and to beat the market. It's a difficult thing to do, and i want to make that painfully clear before uh. We even begin so uh.

The takeaway from that options can be risky if you don't trade with a plan. However, right now that i've shown you that this can be risky, there are ways to avoid that risk and actually take less risk, believe it or not. Then, if you were to own stock and let's say tesla or maybe some uh some, you know it could be like a like a vaccine play, it could be a pharma play, it could be a one-off squeeze play like ppi g or mullen or this or that Or i know i'm going to get people in the comment section to say the truth. Please please please, please don't say that, but you get my point right, i'm using examples.

Uh options can be less risky because you're putting up less money overall uh, then you would have to with a share now i'm gon na get into why that's the case, so to start off with what are options, to put it, the most simple way possible. There's two possible ways that i think you can look at this uh and it is that options can either a be a leveraging tool or b that can be a hedging tool now, why would an option be a leveraging tool right? Well, if you have to break this down in the most simple way possible, one contract, whether that be a call or a put - and i'm gon na get into this more as we continue on uh - is equal to 100 shares right. So let's say that i wanted to take on uh a 10 contract uh 10 contracts on the 10 call for xyz stock right. What that would mean, then, is if one contract is worth 100 shares.

I am actually uh working with about a thousand shares of total leverage. That's a lot of leverage you're able to put up far less money than if you were to actually buy the thousand shares. For example, i'm just gon na work with one contract here. Let's say that i was looking at tesla right now and i wanted to buy a 15 july.

2022 1050 call right. If i wanted to actually purchase 100 shares of tesla, it would cost me a lot of money, 100 shares of tesla times a thousand fifty dollars. You can kind of do the math here, it's it's substantial. I mean it's a lot of money.

You're putting up that'd have to be close to twelve to fifteen thousand 000 versus this option. Right here, which is 111, comes out to about 11 000. you're saving a couple thousand dollars, and that's not a further out expiration for to use a shorter expiration, you're gon na get a whole different sort of metric in this situation. If i wanted to buy uh one contract of tesla uh for a call that would be twenty four dollars and fifteen cents, you multiply that by 100 shares because there are 100 shares per contract.

This is sort of giving you the price you're paying per share on that contract right uh. That would come out to 2 415 to essentially have the same leverage power of 100 shares of tesla. That is a lot of leverage you're able to do so right. This is sort of the leveraging example.

The hedging example is, if you were to use a call or a put to hedge against another position. If you were to hedge against inflation, some people say you should buy gold. Some people say you should buy bitcoin uh. Some people say you can't hedge it against inflation, but nonetheless there are ways that you are essentially trying to protect yourself from inflation.

So you can think of a hedge if you were to use an option as a hedge as a protection against something in the market. Uh an example could be something as simple as if i was to scroll. You know over here ways to just draw this out. If i wanted to hedge against, let's just say a long position right.

Let's say that i'm long on tesla and uh i'm a little bit nervous, i'm looking at the stock - and i say you know what i think this might go down for the next two or three weeks and i have i don't know 100 shares of tesla. I'm a big dick, i'm a big dick daryl. I've been rocking a lot of freaking shares. If i want to hedge against that hundred shares, what i could do is go long on a put, and what this is doing for me is saying: look if this goes down.

I am able to protect myself from the downside right. That put is going to offset some of the losses that i have on my 100 shares of tesla and then, if it, if it doesn't, you know it doesn't actually end up going down. Well guess what you don't have to put up that much money for this! Put in comparison to what you're going to make on the 100 shares that you own, if it does go down, you happen to make money on that downside, which you can then cash in and then either a buy more stock or b just sit on whatever you Want to do i mean, if you're a long-term bull on tesla, you think five, ten years from now uh you'd, probably wan na buy more. But if not it's up to you, you got ta, you got ta, do what you got ta do.

That would be an example of a hedge is protecting yourself from the downside. You can do the same thing for the upside right. If i was short on tesla, i don't know why anyone would ever want to do that, but my point still stands but short of tesla 100 shares, and i thought you know what the next two three weeks look pretty bullish. I could go and get one long call to hedge myself against the upside, essentially offsetting any sort of losses i made in crew as a bear on tesla right uh.

It's just a protection. It's a way to say you know what i'm not 100, certain that the short term looks good or the medium term or the long term. Uh looks the way that i think it's going to go. So i am going to hedge against that position by the off chance that i am wrong.

It's a protection uh. Typically, a hedge takes away from my you know the total you can make in the grand scheme like, for example, if i bought a hedge on tesla, but the hedge ended up being worthless. Well, you're not going to make as much obviously, but it is a protection. Think of it as insurance, you can use options as an insurance plan sort of to back up in case you think your dentures are gon na fall out.

You need a new pair of dentures if you're applying to the stock market. You know it's it's just saying. Like yep, if this is uh, if this is wrong, if i happen to be in the wrong here, uh you happen to be protecting yourself. You bought that insurance, so um.

Now that you can kind of think of it in these two sort of ways you can break it down from there. Leveraging is more of a trading thing or an investment thing. Hedging is an insurance think of it as two separate things: investing or trading or an insurance policy, that's kind of how you can view options in in the really sort of macroscopic lens uh from there we got to dive into the next thing risk right now. The risk of options uh is actually pretty fascinating, because it can either be a really risky uh sort of tool that you use, if you are not using proper risk, reward, uh and strategy and having a plan going into a trade or it can actually alleviate risk.

You can actually do that and what i mean by that very simply put. Let me come over to just an empty part of my screen right here and draw something out for you right. If i wanted to buy 100 shares of tesla. What i am doing is putting up nearly a hundred thousand uh ten thousand dollars right now, right, tesla's, very expensive.

So now it's not a cheap stock uh and if i go down, let's say uh five percent on my overall position. Well then, i lost a pretty good chunk of change off of ten thousand dollars. The adverse to this would be if i don't want to put up ten thousand dollars of risk to my investment granted that that investment uh stock cannot expire, worthless right, contrary to a caller to a put or two options. What i can do is pick up a call or a put, which is far less money as i've just previously previously showed you uh than stock would be, and tesla's sort of an expensive stock to use.

As an example, usually whales are sort of uh trading tesla. You have to have a pretty sizable portfolio, but if i wanted to go, buy a call for this week to put up that ten thousand dollar trade uh instead, i could put up 2400 2400 looks a hell of a lot better. If you have a good risk. Tolerance plan then 10 000 does now keep in the back of your mind, obviously that uh 10, that 10 000 is going to price a heck of a lot differently than this 2400 is going to, but you can actually uh avoid additional risk if you're willing to Stick to uh sort of a plan.

Now i'm gon na give you a cheaper example of what i mean by that. Let's just go over to apple, because apple actually has some pretty decently cheap contracts. If i pull up apple right now and also look at the 14th april, what you're going to notice is, you can put up 1.18 cents per share which comes out to 118 a contract for the 172.5 stripe. This is actually a very reasonably uh decently, reasonably priced uh, sort of contract in comparison to buying 100 shares of apple uh at current market value, which is 170.

If i was to buy 100 shares at 170, that is drastically more expensive than buying one contract, which represents the same amount of leverage for 118 dollars. The difference would be if i was to multiply. Uh 100 shares of apple at 170, you're gon na get zero uh. Well, that's been so long since i'm just gon na.

Do this the easy way? Guys in the comment section be nice to me all right, i'm not a math guy! I went. I went to school for uh nutrition, but nonetheless you're putting up seventeen thousand dollars you're, putting up a lot of money, a lot of money, which means that i was actually probably in the in the wrong ballpark with tesla. It would have been a hundred thousand, but the the point still stands. I'm putting up seventeen thousand dollars for 100 shares right.

17. 000 here versus the contract, which is 118.. You see what i'm saying and now, if i was to take that same math, and you apply that to uh to tesla right right now, let's just say it's trading for a thousand dollars. I multiply that by a hundred you're putting up a hundred g's for a hundred shares of tesla.

That is a lot of money. It's a lot of money right! So if you're putting up a hundred g's for that and then you come back to sort of uh, you know the the call chain for tesla you're putting up 2400 instead of 100 g's. You can see what i mean right: you're, putting up a lot less risk. If you can manage that risk accordingly, uh in terms of actual dollar signs, so i just want to make that painfully clear that you can avoid risk if you want to take a very steadfast and trader slash investment approach, right, not gambling, uh, but trader, slash investment.

Next thing i want to talk about is the bid and the ask similar to stock. Actually, the exact same as stock options have a bid and an ask you could think of these. Typically, as a bid and ask spread, there is a difference in the pricing between these two things and whenever you think about it, ask you want to slap it. You like who doesn't like slapping ass man.

If you say asses, ask right, you want to buy the ask: you want to slap the ask: that's typically, what you mean by buying bid would be obviously the opposite of that a bid is going to be the sell, and this is the exact same thing as Stock, there's not much really more to dive into on this until we get to the bid and ask spread, which is going to be later, as we dive more into sort of uh the mechanics of options and what i personally am watching for when i want to Buy uh a call or a put or or some form of a derivative, which is what options are considered to be. That brings me into the differing price factors. There are a lot of things which we are going to dive into as we continue on that price. In options, the way that these things price stock is simple right: stock stock, if a stock goes up, you make money.

If you bought it, if a stock goes down, you made money. If you shorted it, that's not quite the case for options. Options are a bit more complex than that. You can look at options and say as a whole.

Most of the time, if you bought a call and the stock price goes up, then you make money as a whole. Most of the time, if you bought it put and the stock price goes down, you make money, but it's not that simple. We have to make sure that there is that differential right stock price going up or down does not always reflect the value of your call, or your put. We are going to discuss that uh as we sort of uh continue on there's gon na bring me into the next sort of thing that i'd like to discuss.

We've got a lot of different things in this first category that we're gon na go over, which is going to include uh. How, where do options come from? You know who writes them? How does that process work? The value of options which is going to bring us into a couple different terms and then we're going to get into uh the take i choked on my spin, the takeaway uh of options. Overall, let's start, let's first dive into this: where do they come from? Where do options come from market makers? Now market makers i'm not gon na dive into the ethicality of market makers? I could. I could go on for a very long time about how i hate these people, but at the end of the day, these guys handle your options, contracts uh.

They write them up most of the time when you buy or you sell a call or a put either long or short, which we're gon na get into as we continue on. Uh market makers handle these sort of transactions, so the most simplified way possible. There are extra steps that sort of dive into uh how a contract is written up and sold, and this and that, but from the most simple sort of perspective, if you want to buy or sell a call or a put, you send this order into your broker. Right over here, i've got weeble as an example, but you can use robinhood, weeble, think or swim td ameritrade, interactive brokers, there's tons, i mean you, can you can basically uh walk outside and all the rappers you see, you know flying down the road candy bar rappers.

That's gon na be the equivalent of how many brokers there are you send that order to your broker? That broker then gets that order filled by a market maker. This market maker will fill that transaction uh and you can think of this very simply put for every sort of buy order. There has to be some other half of the trade, which is a sell order. So the market maker is writing up these contracts and if i was to buy a call, that means that they sold me that call, if i'm to sell a market maker, a call that means that they bought.

That call. Somebody has to take the other side of that trade and the other side of that trade is always going to be uh. The market maker, not always i'd, say nine times out of ten, sometimes it's retail, sometimes you're, selling back and forth to retail, but the market maker at the end of the day is who is handling those transactions. So you buy or sell broker sends the order to the market maker market maker fills the order.

Brings that back to the broker you receive that order, uh or whatever, whatever you want right. If i wanted to buy a call, then you give them that money. They send you sort of that call you get that uh that transaction. If you wanted to sell same exact thing right, it goes.

It goes both sort of uh, both sort of ways which brings me into how to access options and the different level types of options. Now uh, i think most people will take a pretty basic approach to options and i don't think that's inherently a bad thing. Over complexity is almost never a good thing. I think that there are people who try to use super advanced sort of option, strategies, uh and in reality sometimes don't know what the they're doing right.

I think that's, i think, that's the honest to god. Truth. If you're part of the point zero one percent of options, traders who has mastered everything - and you know the exact uh best sort of strategy - and what i would compare this to - is like uh speedcubers speedcubers people who solve rubik's cubes, uh, insanely, quick right. What these guys can do is look at a cube and say based on where every single square is right.

Now i have like a thousand different algorithms memorized to spin the cube in whatever way that i want that is sort of what i would expect for people who want to use all the different option, strategies that exist, there's a ton of them uh, i'm gon na, Go into later, the ones that i find to be the most important, the most useful for the most basic level uh. But how do you access them? First, in the first place, you have to request options uh from your broker, there's different levels and types to be freight. You know quite frank with you when i got mine uh you you, you can read between the lines here right. Sometimes they ask you questions and it's up to you to decide uh to be truthful with those questions uh, so you got a first request from your broker for weeble for think or swim for robin hood uh for international interactive brokers.

For this, for that, you can call them or there's typically a form online in which you have to request uh options and based on your experience, level based on your income, based on how long you've been investing, they will, assign you or or deny you uh, based Off these four levels, level, one which is uh allowing you to write, covered, calls and protective puts level two you can do all the above and buy calls or puts and open long straddles and strangles, and essentially what this is saying right, covered calls and protective puts. Is to sell a call and sell a put, this is a covered call, is to sell a call, a cash secured, put or protect the put is to sell the put right. These are the most basic and typically, the the most risk adverse sort of options level. Two is long calls long puts this, allows you to buy a call by a put, you would be on the opposite side of somebody selling you a call or selling you a put level three and four get into more complex sort of strategies, level.

Three, you can see you can do all the above and open long spreads and long side ratio spreads level. Four you can do all the above and use uncovered options short straddles and strangles, and uncovered ratio spreads. I'm not gon na spend a lot of time on. On level three and four, because these are more of the advanced sort of uh subject matters that i think is like i mentioned before the point: one percent or the point - zero one percent of people who know all the algorithms for every single scenario.

That makes sense. I i think that most of the time you can get by very easily by having a good risk plan uh and by having a strategy, and that's really about it. I thought i was trying to get a third a third thing here, but i really don't think there is one so from there. Where do you buy them? I've got an example here check this out.

These are things that i find to be important, anytime, you're, looking at a call or any put, you can see that i've got calls and puts up here on weeble for your broker. It's gon na look different, but these are the things that you're looking for to know where you can buy them right. If i wanted to buy, for example, a put what i'm going to be looking at is the strike which is uh the price in which i have interest in for either the call or the put position, the expiration date, which i also have in white right here. This example being 14 april 2022 and then i'm going to look at the bid and i'm going to look at the ask.

As i just mentioned before you slap the ask anytime, you want to buy something. You hit the bid anytime, you want to sell something. If i wanted to buy a put, i would come to the ask, which is this white square right here and if i wanted to buy a put for 13, the expiration date of 14 april 2022. I would hit this right here and hit this button and hit that five cent ask uh and i would then have if i have five dollars, because five cents times 100 is five dollars.

I would then have one put for 13 available to me. That would be available. You can be able to see that and say yup that does make uh some sort of inherent sense. I want to buy a call, be the exact opposite.

I just click on call here. I look for an expiration date to look for a strike that interests me and then i would buy that uh call for whatever the ask is on the day when you go to sell right either a call or a put. If you went long, you have to hit the bid, the bid is what you are actually going to receive after you sell that contract, which you can see here, is different than the ask and we're gon na get into this more. As i dive into sort of mechanics and strategy behind uh, what makes sense to me uh with options, but this is sort of what this looks like and where you would first off buy them.

We kind of already went over the advancement levels and what this looks like, which brings me into next sort of some terms that i would uh that i would like to discuss in the value of options as a whole. After that, i'm going to talk about market makers a little bit more, because this is going to have some some inherent value and then the takeaway, so in the money at the money out the money and extrinsic and intrinsic value. If you got ta watch this a couple times, that's okay! Right! That's that's perfectly fine, but i'm gon na show you an example of what this actually looks like in the money at the money out the money. To put it in the most simple way, uh mean the following: in the money, which is a term we're going to use uh quite frequently throughout this video is referring to a strike price that is within the either call or put range ah already hit, and what I mean by that and i'll draw this out for you.

Let me refresh my page real quick, it's lagging just the hair. What i mean by that very simply put right is, if i have a put, for example, i'll give you both calls and puts, and what this would sort of look like and i'm looking at uh a chart, and i can see that the chart uh is showing Me that uh, let's just say it's tesla, right tesla right now, i come back to handy dandy, tesla and i'm looking at this and it's showing me that the price is and twenty-five dollars in the money for this, if i was to buy a put, would mean That that strike price has already been hit right. What would that mean, then, if i want the price to go down, as a put, that would mean it is above the current price of a thousand twenty five dollars. So in this example, if price is one thousand twenty five dollars a in the money put would be above that price, the strike price could be.

A thousand. Thirty could be a thousand thirty five anything above right. These are all in the money. The opposite of this.

For calls and in the money call would be below the current price. A thousand twenty five dollar current price on tesla in the money call would then be thousand twenty thousand fifteen thousand ten thousand five one thousand. These are all in the money, and these are thought of as sort of uh. The least risk associated uh for a call or for a put at the money is super simple.

The next term, which is at the money, is when strike price equals actual stock price. So at the money caller put both to be the exact same, would be buying a call or buying a put at the current stock price of 1 000 call or put easy right last term is going to be out the money out. The money is when you have a call or a put that has not yet been hit yet for uh the specific stock. So if i was to buy, for example, an out the money call on tesla right, i'm looking at this and it's at a thousand twenty five dollars.

That would mean that the strike price is above the range that has already been hit because, if you think of it in terms of uh calls being bullish, if it's at a thousand twenty five dollars, it's already hit a thousand twenty. It's already hit a thousand fifteen. A thousand ten it has not quite yet hit one thousand thirty. This would be considered out the money anything above 1025 for calls is out.

The money for a put anything below 1025 dollars would be considered out the money out the money, for example, 1020. 1015. Five. 1010 thousand, these have not yet been values hit for that designated strike price, making it out the money.

This is considered to be the most risk: high sort of uh investment or trade or leveraging tool or hedge, whatever you wan na, consider it for a call or for a put right calls, obviously meaning stock price you want to go up, puts obviously meaning long anyways. Both of these that you want the stock price to go down so far, so good. That brings me into then extrinsic versus intrinsic value. These are actually going to be very important and i think uh the best way that i can put this uh.

I read this once and i found this to be pretty useful. Extrinsic value equals time, and this is going to make a lot of sense as we dive into the greeks, but you can think of extrinsic value as something that may not come to fruition. The value in extrinsic value is that you have a lot of time for something to come to fruition. What do you want to come to fruition intrinsic value? Extrinsic value is the time allotment that may allow you to have intrinsic value.

Time eventually passes, which means that you lose extrinsic value. Intrinsic value happens if or when, or already it depends right. When the strike price has been hit, you start to accrue intrinsic value when your contract may actually be worth uh selling 100 shares or buying 100 shares. All this stuff we're gon na get into as we continue on to have this in far greater detail uh when we go down, but the intrinsic value comes from the actual value of the contract and not from time simple stuff.

Baby, let's go on. Let's go on! There's uh there's one other thing. I think i wanted to add to sort of uh this little part right here. I don't think so, but we'll continue on uh anyways, we'll go into market makers, check this out market makers and the takeaways from this level.

One and then uh, then we can move on to the next piece market makers, as i mentioned before, these guys manage orders. But i want to dive a little bit deeper into this, because this is going to help you sort of visualize a strategy later in uh. Later on in the video, so if they're managing orders, that means they're a business right, market makers are there to profit they're there to make money. Uh they're there to essentially pay employees and pay themselves fair enough right.

That's a pretty easy thing to accept! So how do they do that? How is the how behind that they like to collect premiums? The reason that i bring this up collecting premiums is going to dive into something that i'm going to discuss later, which is called max payne max payne is a theory. That's really not a theory, it's just kind of proven by mathematics by by uh by algorithms or whatever uh, by collecting premiums. These guys designate uh max payne and from that they want to have contracts expire worthless. What does this sort of mean? So if you were to buy a long call buying would mean that you have a long position, buy a long call or a long put uh on the opposite side of that is the market maker, who is selling contracts right? Most contracts expire worthless.

This comes back to what i mentioned before last point: it's very easy for people to blow their entire accounts if they don't have some some sort of uh risk assessment, some sort of risk plan uh, avoiding the dangers of what can be a a really bad thing. Right, but they want to collect premiums and how they do that is by expiration uh on a contract coming to fruition, for example, if i had uh a thousand dollar put on tesla for this, this next expiration date right, but it doesn't happen. Tesla doesn't close beneath a thousand dollars that expires worthless. Every dollar that pumped into this vanished thanos snapped dead.

Where does it go market makers? These guys collect that right. I bring this up because it's drastically important and this actually affects the way that sometimes options move and the way that you're going to pick an option. This dives into things such as uh implied volatility, historical volatility, uh differing prices for calls and puts there's a great example right now that exists that i'm actually gon na go over uh, but they they don't actually pick a side. Let me make that painfully clear.

They favor these guys want to make money. I see it on the most profitable side of either calls or puts we're gon na dive into more later. But i wan na just kind of dip your your palate in the taste buds of diet, coke, so that you can. You can get ready for the sweet, succulent milk uh that is going to come later on, that is sort of the big takeaways from the the level one, which is the basics behind options we dive into the risks behind them.

Uh we've dived into sort of the different level complexities, i'm gon na focus primarily on level one level two. I think these are the the best for the majority of people uh, and if you have an interest for more, i am confident that you are going to be able to learn about it. Uh on your own uh, we've talked about how it's like leveraging, shares, you're able to put up far less money for the exact amount of leverage in a position right and then the value system and sort of uh. You know how these can move based on different price factors, which is actually what we're about to discuss next, so clap yourself.

Catch yourself, do whatever you got to do, uh we're about to dive into sort of the next part of the course which is level two. The people hate learning, let me tell you right now, all right uh. The reason i have not made this deep of an in-depth options. Master class, yet to be completely honest with you - is because people hate learning this.

This stuff is boring. It's not fun. Uh! It's mind-numbing. When i learned this stuff, i had to sit down and bang my head against the wall for hours and hours and hours and hours, because i didn't feel like anyone broke it down in a way that made sense to me, i'm going to do my absolute best, But i'm going to be straight with you right, you're, probably going to have to watch this section of the video, if you do not understand it more than once, because that's what i had to do i had to when i was learning this stuff.

I had to sit down and watch the video five six seven eight times, because it is a complex concept, but let me make this perfectly clear right. If you want to make money on options, if you want to make money trading, if you don't want to be a statistic, that's what it takes. I mean genuinely. You just have to understand how things work, or you are most likely going to lose.

That's something you have to accept: that's the truth right! So, let's start off. Let's just dive right into this. How do options price and move? There are sort of two over overlapping factors in which you can see how options will get priced and, like i mentioned before, options aren't so black and white. That stock goes up.

You make money. If you're long stock goes down, you make money if you're short, there's other things that sort of move the price and those things that i find to be valuable are ivy, which you can think of as implied volatility and the greeks. Essentially, it's a representation of uh. The greek alphabet there's different letters that mean different things.

You can see this down here right the option, greeks we're gon na dive into what i find to be the most important, probably the most worthless as well. But i didn't really matter at the end of the day uh, but we're gon na dive into that. As we continue on for now, let's focus on implied volatility. What is implied volatility? What does this mean in the grand scheme of things implied volatility in the most simple metric possible is what a market maker which we just mentioned before uh believes an option or a stock.

More rather, you know a stock will go up or down in a given year. So if there's an implied volatility uh on a stock, we're just going to use an example right now we're going to come over here to apple and i'm going to look at the implied volatility on the 14th april's right. What you're going to see is the implied volatility is 24 if the implied volatility is 24. That means that options uh market makers believe that the stock price will go up or down 24 percent, and at this given next trading year, meaning that one year from tomorrow, they believe that the stock price will go up or down one year.

That is a representation of how they're going to price the overall contracts either calls or puts sometimes we'll find imbalances on the calls and puts we're gon na dive into that more as we continue on uh. But these implied volatilities to me are based on two things: they're based on volatility - i mean volatility - is in the name implied volatility, so it makes sense that volatility will play a factor in how implied volatility is sort of moved around and priced, which obviously affects how Much you're going to pay for your contract, there's also demand, and i think the best overall way to measure demand is by looking at open interest now, if i'm to come back up and show you guys, this really quick open interest is a metric that gauges uh. How many contracts are currently being held either long or short, meaning buy uh, buy a call or to sell a call, buy a put or sell a put? That's all measured, it's measured, you can keep track of that and you can look at it by looking at the overall open interest now. What is something that you notice here right check this out, this contract for seventeen dollar puts is a hundred and seventeen percent current implied volatility.

It's actually a little more expensive than this one right, 116 percent. Four thousand uh total uh contracts open. What about this, though? Check this out, 116.42 implied volatility, which is actually further out the money. Remember we just mentioned out the money before it's further out the money, but it has a overall higher implied volatility.

There is also more total open interest. Obviously, as you continue further and further and further out the money you're going to have a higher implied volatility uh in both directions, both calls and puts there's going to be a higher overall implied volatility. However, that is a metric that you're going to notice is that when there is more overall demand, when there's more open interest that is going to affect the implied volatility, this is one way that an option can get priced. We're gon na dive into the specifics of this, as we continue on that's actually going to dive into uh historical volatility, which is a sort of a strategy that i find to be useful, but before that uh, let's dive into these things.

So what is uh? What are iv pumps? What are iv dumps in the open interest right? I think, there's ways to protect yourself, uh from twitter scammers. I find this happening all the time it pisses me off. This is sort of my psa iv. Pumps can happen when one of these two things change right.

So if the man goes drastically up, a pump is obviously when something goes up. If demand changes for the upside or volatility changes for the upside, meaning that there's more volatility or there's more demand, you could see something happen. That's called an iv pump in which a market maker will temporarily push the the implied volatility up on a option. You can actually benefit from this.

If you, if you catch uh, you know an option before an iv pump happens. Maybe the stock barely goes up. It goes up a percent, but that percent happened really fast. They pump the iv.

You can make a ton of money. It can actually can actually be good. It's actually a strategy that some people use on twitter to scam their followers uh iv dumps are the exact opposite thing right. So let's say that you bought at the top of that huge iv pump demand went way up.

Volatility went way up and then all of a sudden, a stock starts doing this chop chop chop chop chop chop chop nothing trading sideways. What i guarantee you will watch happen is an iv dump, because, what's gon na happen right good options, traders will know that sideways trading or choppy price action is typically not good to be holding a long call or a long put. So what will they do? They will sell, which inherently lowers demand and there's less volatility which is going to lower the overall implied volatility on that given ticker, so you would witness an iv dump. This is what i mean when i said earlier that options don't necessarily improve value by simply seeing the stock price go up, the stock price go down, a stock can be trading sideways or even going up.

If you have a call, but if you have an iv dump, you can still lose money, that's a risk, that's an absolute risk, and these are things that we have to be aware of. As we continue on. I bring up iv pump iv dumps because twitter is infamous for this. I've seen people, and this is sort of a way you can protect yourself by the way i've seen people who will iv pump their followers and what i mean by that is, if you can't, you can't affect volatility right.

None of us, as retail investors, can affect volatility. The majority of the markets move by wales, majority of the markets, move by institutions, banks, whatever market makers, but you can't affect the man. So if you see a guy on twitter, who is picking up a very low open interest, caller put position and they're pushing it on their twitter right, don't buy it. They're iv pumping you and what happens after a pump? Is you get dumped? Do not follow people on twitter who try to scam you for iv pumps.

Don't do it now that you know what an iv pump is now that you know how v pumps happen, look for low image, low, open interest if somebody's pumping something they say - hey buy. This uh ten dollar call for xyz stock and then you look at the 10 column. It's got a total open interest of two: don't buy it, that's not financial advice, but don't buy it you're getting scammed all right. This is it's not a good idea avoid those things before we dive into the greeks.

I want to talk about historical volatility, and i actually have a chart up here that i find to be interesting. This is sort of a bonus if you want this extra information. Historical volatility using a website called market chameleon, which i actually have pulled up here, uh i'll also link this in the description box down below. If you'd like it, it's free, all you have to do is create a username and log in we'll show you the historic.

If the historic volatility implied volatility of any given ticker, what i have pulled up right now here is apple. You can see the historical implied, volatility or hiv to take that for what it is uh marked on a chart. It shows you dates. You can go all the way back to 8 april 2020, uh or 8 april 2021, and it continues all the way up to present day uh there's, actually a strategy involved here in which you will see people trying to just buy, based on historically low implied volatility.

So, for example, if right now uh apple's, i'm gon na draw this up on the chart that i've got pulled up. Let's say that right now, apple's uh volatility was actually about here right, instead of being way up here, we're gon na pretend this isn't happening. It was way down here right historically speaking, that is very low and what typically happens when you see low historical implied volatility as decent size moves back up right. This is just sort of the ebbs and flow of the market.

Nothing goes up forever. Nothing goes down forever. You typically have sort of a homeostasis in which the market always wants to kind of slingshot around. You can think of it as a slinky.

You know, energy just has to move from one side to the other. Something to pay attention to is historical volatility levels, and this is actually a way to know whether or not you're paying a lot for your contract compared to previous historical implied volatility. It's just a nice tool to have, i would recommend looking at it. There are some people who actually trade based just on this just on uh.

How is the implied volatility now compared to how it's been for the previous year and they'll just buy stuff based on that? And it's actually a pretty viable option if you're sort of a swing trader or a leap trader which we'll get into as we continue on? But that's the piece on historical uh implied volatility and on implied volatility makers, pay attention to this we're gon na dive into this uh more as we continue on to the video. But now, let's get into the most confusing the stuff that people hate learning the most, which is the greeks. I am not even gon na focus on rome right, i'm going to first off give you the the book definitions, because i think that's maybe important and then we're going to dive into actually what the concepts are here, because that is uh actually important. Right delta, gamma vega, theta rho, you guys can read right.

I'm gon na zoom in here uh. If you wan na pause the video and read this feel free to do so. I'm gon na dumb it down, there's there's a much easier way to think of these uh than what is given by the book. I think if you look this up online most of the time it's kind of confusing these are what are the most important to me and then sort of the the number four is going to be uh vega right, i i do look at vega, but delta gamma Theta by far the most important to me, uh delta is great for hedging great to know for hedging.

I i think that gamma is great for trades. I think that theta is great for both uh and we'll dive into sort of what this means, as we continue on delta right, uh delta is how much you are going to make on your contract every time a stock goes up or down a dollar right. Obviously, if you're playing a put, you want the stock to go down a dollar, you will make, however much the delta is for that dollar move down. If a stock goes up a dollar you're playing a long call, you will make that incremental uh value on that dollar move up.

Let me show you an example: quick check this out. If i'm gon na come over here to apple - and i look at the 172.5 - calls for 14 april 2022 you're going to see delta, this is almost always going to be on your broker. You will always have access to this. You can see that it's at a value of 32.328, if there's 100 shares per contract.

That means that you want to multiply this value by 100, which would mean that this is actually 32 dollars and 80 cents. So what does this mean? That means that if apple's current price is 170 and it goes up one dollar to 171, if you bought this contract at a dollar 18, you would actually make that extra 32 cents onto your contract. So let me draw this out and visualize this so that you can actually see it. Right.

Apple is trading at 170 right. This goes up one dollar my contract, then my call, which was previously priced at a buck 18 for the for the ask side, would then go up. However much the delta was right and if the delta here is 32.8 cents, then i can add 32 right. Add that up you get a zero.

You carry the one, you get a five congratulations. Now you had a buck 50.. You made pretty good money. Maybe you have 20 percent, not crazy, but that tells you how much you're actually making that is uh.

That is the value that you make on any sort of move delta. There's another concept, though, that we need to sort of apply uh, and it's that it goes up and down depending on sort of risk right. So when you're out the money on either a caller put, you have the greatest risk and typically the lowest delta. The reason that people love to yolo out the monies is because it hasn't been priced in yet you're still in extrinsic value land, which i mentioned before.

This brings me back to the extrinsic versus intrinsic value. If you're, playing with extrinsic value delta, is going to be low, you're not going to make a lot for every dollar move. However, if you can get an out the money call to in the money delta ramps, the up when you buy it in the money call, it's already been priced for. You haven't gotten the gain of transitioning from out the money to in the money that is sort of the the risk, and that's why people take.

The risk is because you can make a ton of money either tipping out the money call or put runs to then in the money, because it hasn't been priced yet so low delta, when it's out the money, uh delta, when it's at the money, which means it's At current stock price, the strike price is at stock price. It's usually at about 0.5 uh. I'm just gon na pull this up here. Really quick uh like, for example, let's look at the spy and we look at the at the monies for calls.

You're gon na see it's at 0.479 right. Typically, it's at about 0.5, which means that every dollar move up. You will make about uh 50-ish cents per share, which is at about 50 bucks on your contract, which means that this would go from 340 up to about 390. ish when it's in the money.

You can only go up to about one. So, if i'm at a call, you're gon na notice that all the way super deep in the money down here - 99, 99, 99, 99, 99, 99, it's about 99 cents and eventually taps at about one. You can go all the way up to a one delta, which means that that contract is equivalent to 100 shares. That's what that means.

Uh shares have a delta of one and contracts can reach a delta of one, but very rarely will out the money run in the money and then you'll be able to capitalize on it most of the time you have to actually buy the in the money caller Put to reach that delta, but uh that's the most simple way that i can put it and if there's an analogy that i've got d for delta stands for big dick gains. I think that's, i think, that's the easiest way you can think of it. Gamma g stands for give me more delta. That is the easiest way to think of this.

This tells you. This is a metric that tells you how much delta changes per one dollar move. So if delta increases that runs as it runs, you know further in the money whatever for either a caller for a put gamma is the metric. That's telling you how much it's changing until it maxes out at that value of one.

If that's to be the case, so in this example, let's come back to apple, we can see that the the uh, the delta for the 14 aprils right now is 32.8 right, 0.328. The gamma, which tells you how much that delta will go up. How much more you will make? This is what i was mentioning before about out the money being sort of the favorite yolo thing, because this is how you make a ton of money. The gamma's telling you how much that'll go up.

This delta will go up every time that apple goes up a dollar. So now, let's say you know we come back to this and we look at the fact that the gamma for this strike is 6.7 right 0.067, and we look at our previous example right. If the call goes, this way, apple goes up a dollar, it's now trading at 171 dollars. What is going to happen if no other metrics change, which is the implied volatility uh theta decay this, and that whatever, which we're gon na get into more uh?.