All posts by T3 Live
Your Intro to Options Trading: The ABC’s of Calls and Puts
Are you ready to start trading options?’ Then you’re in luck. You’re about to get a 100% FREE crash course in options trading, comprised of 5 in-depth articles: You’re going to understand how options work in the real world without understanding complex math or financial theory. You’re going to understand vital concepts like implied volatility and time decay, and you’ll get 3 simple strategies that you can use to speculate on stock price movements. Contrary to popular belief, options are actually not that complicated. And they’re not inherently risky — you can take as much, or as little risk as you want. Are you ready to start learning? Let’s go! What Are Options? Derivatives are securities which are priced based upon the price of another security, like a stock, ETF, index, or commodity. And options are the best-known form of derivatives. In this series, we’re going to focus exclusively on options on stocks and ETF’s. Options represent the right but not the obligation to buy or sell a certain stock at a certain price by a certain date. And as the price of the underlying stock fluctuate, those rights change in value. A sports betting analogy can help you understand this concept. An option is at its most basic level a bet on a bet. You’re betting that the value of the bet itself will change. Let’s say it’s the start of the NFL season, and we think the Green Bay Packers will win the Super Bowl. Options would allow us to bet that the value of a bet on the Packers to winning the Super Bowl will rise or fall. If the Packers win their first 10 games in a row, that bet will be worth a lot of money. But if they only win 5, it won’t. Calls vs. Puts Call options give a trader the right but not the obligation to buy a certain stock at a certain price by a certain date. All things being equal, when a stock price rises, the price of a call option goes up. Therefore, the buyer of the call option wants the price of the underlying stock to rise. Put options give a trader the right but not the obligation to sell a certain stock at a certain price by a certain date. All things being equal, when a stock price falls, the price of a put option goes up. So the buyer of the put option wants the price of the underlying stock to fall. Why Even Bother with Options? First, options require less capital to trade than stocks. Let’s assume we’re bullish on Tesla. If Tesla (TSLA) is trading at $380, it would take $38,000 to buy 100 shares of the stock. However, we could buy a call option on Tesla for $2,000 or less, giving us exposure to 100 shares of Tesla at a low cost. So options give you a lot more bang for your buck in terms of upside potential. On the downside, options have a fixed expiration date. You can theoretically wait forever for a stock to move, but an option has to move in your favor quickly. (In a future article, we’ll explain the role of time in options prices.) Otherwise, it will decline in value or expire worthless, giving you a 100% loss. And that’s just long options. Shorting options — a practice we don’t endorse — is even more dangerous, and can destroy your trading account. And that’s the trade-off: options require less capital and they have huge upside potential. But you also face serious downside risk. Another benefit of options is that they can be used to hedge an equity portfolio or individual stock positions at a reasonable cost. And finally, options are incredibly flexible. With options you can speculate that a stock will rise, fall, or even do nothing. Yes — you can use options to make money if a stock does absolutely nothing. We’ll be going over a strategy for this in the future. Strike Prices and Expiration Dates All options have a strike price and an expiration date. If a person says “I bought NVDA $180 November calls,” they are telling you two things: They have the right but not the obligation to buy NVDA at $180 (the strike price) That right expires in November And a person says “I bought TSLA $350 January puts,” they are telling you two things: They have the right but not the obligation to sell TSLA at $350 (the strike price) That right expires in January Most options expire on Fridays at 4:00 p.m. ET. Large-cap stocks tend to have options that expire every week. Small and mid-cap stocks sometimes have options that expire only on the third Friday of each month. The Basics of Options Contracts and Exercising Options Most options contracts represent 100 shares. So buying 1 call option gives you the right to buy 100 shares. 2 contracts give you the right to buy 200 shares. To determine the dollar value of an option, take the current price and multiply it by 100. If an option is trading at a price of $1, it actually costs $100 to buy. As we told you above, when you buy a call option, you have the right to buy a stock at a certain price by a certain date. Let’s say we own 1 NVDA $180 November call. This means that at any time before the November expiration date, we can buy 100 shares of NVDA at $180. Assume NVDA skyrockets on earnings and hits $200. We can then do two things: We can sell the option itself for a profit. Or, we can exercise our right to buy the stock, and purchase 100 shares for $180. That gives us an instant profit of $20 per share, or a total of $2,000. (minus whatever we paid for the call option in the first place) What Is an Options Contract? Options are not like stocks, which have a certain number of shares outstanding. Options don’t actually exist until a buyer and seller come
Continue Reading -->Sami Abusaad: How to Trade a Slow and Sleepy Market
In this special video, Nightly Game Plan Moderator Sami Abusaad walks you through how he traded a sleepy week for stocks. Typically, Sami showcases one of his swing trades so you can understand his strategies, but this was a particularly slow week, so instead, he’s going to break down a variety of this trades: In the video, Sami’s going to walk you throgh The extremely tight trend in QQQ, which didn’t matter in August, but which matters now The time frames Sami uses for finding patterns and perfecting entries The bearish 1-2-3-4 continuation pattern The weekly buy setup in Adtran (ADTN) An after-hours entry in Microbot Medical (MBOT) Why Sami bought the controversial Equifax (EFX) Earnings plays in Steeelcase (SCS) and Copart (CPRT) (click here to learn about Sami’s Earnings Play strategy) Click here to learn about Sami’s Nightly Game Plan
Continue Reading -->Trader’s Digest: The 10 Stories We’re Reading Right Now
Wonder what traders are talking about today?We’re here with the top 10 stories we’re sharing with colleagues today, covering topics like:The latest twist in the Fed’s rate policy adventureThe danger of individual investors are jumping into stocksWhy the $1,000 iPhone X may actually be cheapAnd more!So check out these links right now and get up to speed:1) Fed Signals Another 2017 Rate Hike, Asset-Shrinking to Start Next Month (Bloomberg)Federal Reserve officials set an October start for shrinking their $4.5 trillion stockpile of assets, moving to unwind a pillar of their crisis-era support for the economy. They continued to forecast one more interest-rate hike later this year, saying storm damage will have only a temporary impact on the economy.Read the Story ==>2) The masses are going all-in for stocks, and that’s not a good thing (MarketWatch) The latest Wells Fargo/Gallup Investor and Retirement Optimism Index hit 138 in September, its highest level in 17 years. That was in September 2000, when investors still couldn’t shake their denial that the bull market of the 1990s was over.Read the Story ==>3) Tim Cook says the $1,000 iPhone X is a ‘value price’ – and he’s right (Boy Genius Report)The iPhone X represents a number of firsts. The iPhone X is the first iPhone in history to incorporate facial recognition. The iPhone X is also the first iPhone to do away with the home button, a staple of every single iPhone since the beginning. And economically, the iPhone X is the first iPhone to ever break the $1,000 threshold.Continued Reading ==>4) From Russia with fuel – North Korean ships may be undermining sanctions (Reuters)At least eight North Korean ships that left Russia with a cargo of fuel this year headed for their homeland despite declaring other destinations, a ploy that U.S. officials say is often used to undermine sanctions.Continued Reading ==>5) Merkel warned Germany needs a policy rethink to keep economy growing (CNBC)Angela Merkel is likely to win a fourth term as chancellor after a national election on Sunday but business leaders are already warning her that the next government must implement growth-friendly policies to ensure Germany remains the euro zone’s largest economy.Continued Reading ==>6) Ray Dalio, the Steve Jobs of Investing (Tim Ferriss Blog)Ray Dalio (@raydalio) grew up a middle-class kid from Long Island. He started his investment company Bridgewater Associates out of a two-bedroom apartment at age 26, and it now has roughly $160 billion in assets under management.Over 42 years, he has built Bridgewater into what Fortune considers the fifth most important private company in the U.S.Continue Reading ==>7) Why You Need to Know the Only 4 Stages of Market Movement (T3 Live) If you want to be an expert swing trader, then you have to understand the Foundation of stock movement, broken down into 4 clear stages:AmbivalenceGreedIndecisionFearContinue Reading ==>8) Bitcoin’s Parimutuel Problem (Or Why Shorting Doesn’t Pay Today) (CoinDesk) When the price of bitcoin plunges — as it did last week — seasoned investors are caught in a market that doesn’t exactly have the mechanisms they’re used to. Case in point, hedging long positions, is today a difficult prospect. Unlike most traditional stocks, where investors can open a margin account with their broker that allows them to short most shares, the tools in bitcoin are few and far between.Continue Reading ==>9) What Makes a Great Trader? An Interview with Jack Schwager (CFA Institute)If you peruse the Wikipedia entries that describe some of the world’s great investors, you’ll often find that they share a common footnote: a series of books entitled “The Market Wizards” which feature Jack Schwager’s profiles of a number of successful traders.Continue Reading ==> 10) How to Get Out of Your Own Head and Take Action (YouTube) In this video, author Mel Robins shows you how to stop worrying about your troubles, and start taking action.
Continue Reading -->Morning Call Express: Risk-On Ahead of the Weekend
Catch T3 Live’s latest Morning Call Express video with Kurt Capra:
Continue Reading -->Sami Abusaad’s Trade of the Week: NLNK
In this special video, Nightly Game Plan Moderator Sami Abusaad walks you through a winning trade in Newlink Genetics (NLNK). Biotechnology stocks have been hot as of late, but few are hotter than NLNK, which recently skyrocketed on positive results from a clinical study. After NLNK’s rally, Sami spotted the opportunity for a Climactic Sell Setup, giving him a profit of over $3,100 in 4 days*. Here’s how the trade worked: *(click here for a breakdown of our P&L calculations) In the video, Sami’s going to walk you through the trade from start to finish so you can understand: Why NLNK showed up on his radar What qualified NLNK as a climactic play Where Sami set his entry, stop, and target for a 3:1 reward:risk ratio How the Climactic Sell Setup works Why he used the 5-minute time frame on this trade The pattern that signaled a breakdown in NLNK was coming Click here to learn about Sami’s Nightly Game Plan
Continue Reading -->Trader’s Digest: The 10 Stories We’re Reading Right Now
Wonder what traders are talking about today? We’re here with the top 10 stories we’re sharing with colleagues today, covering topics like:Why Apple May Have Pulled Off a Genius Move with the $1,000+ iPhone XAn important lesson learned from superstar money manager Seth KlarmanHow T3 Live’s Jeff Cooper spotted a home run trade in Fairmont Santrol Holdings (FMSA)And more! So check out these links right now and get up to speed: 1) Don’t laugh — that $1,000 iPhone could be a genius move for Apple (MarketWatch) Is the $999 price tag for the iPhone X too high? Some people clearly think so. They think Apple has finally overreached. They think this thing could be Tim Cook’s folly. Apple stock, which had risen on news of the new cellular Apple Watch, slid after the high-end phone was unveiled. Read the Story ==> 2) Markets Are Hard: Seth Klarman Edition (A Wealth of Common Sense) Klarman isn’t as well known to the general investing public as some of his peers but his track record ranks right up there in terms of the greatest of all-time. When someone like Klarman makes these types of warnings it’s hard to ignore. Read the Story ==> 3) Secrets of Successful Speculation: Riding the FMSA Rocket (T3 Live) A trader’s job is to narrow one’s field of vision and cull for the very best setups: the more one tries to see, the less one sees. In this game, there is so much going on that it’s easy to get overwhelmed. As the old saw goes, less is more. Continued Reading ==> 4) Top House Tax Writer Says Overhaul Framework Coming Week of Sept. 25 (Bloomberg) Kevin Brady, the chief House tax writer, told the chamber’s Republicans that White House advisers and congressional leaders working on a tax plan will release a framework the week of Sept. 25. Specifics, including such basic matters as where to set the corporate tax rate and how to set up individual tax brackets, have yet to emerge. Continued Reading ==> 5) Brazil police detain JBS CEO Batista on suspicion of insider trading (Reuters) Brazil’s federal police on Wednesday detained the chief executive officer of JBS SA, the world’s No. 1 meatpacker, saying he used insider information to avoid hefty losses related to a plea bargain signed earlier this year. Continued Reading ==> 6) Pandit Says 30% of Bank Jobs May Disappear in Next Five Years (Bloomberg) Vikram Pandit, who ran Citigroup Inc. during the financial crisis, said developments in technology could see some 30 percent of banking jobs disappearing in the next five years. Artificial intelligence and robotics reduce the need for staff in roles such as back-office functions, Pandit, 60, said Wednesday in an interview with Bloomberg Television’s Haslinda Amin in Singapore. Continue Reading ==> 7) 9 Ways to Destroy Your Account with Options (T3 Live) Options trading is fun. Options trading is sexy. And options trading can destroy your account if you don’t know what you’re doing. Continue Reading ==> 8) Why Is North Korea So Interested in Bitcoin? (FireEye) In 2016 we began observing actors we believe to be North Korean utilizing their intrusion capabilities to conduct cyber crime, targeting banks and the global financial system. This marked a departure from previously observed activity of North Korean actors employing cyber espionage for traditional nation state activities. Continue Reading ==> 9) U.S. middle-class incomes reached highest-ever level in 2016, Census Bureau says (Washington Post) The incomes of middle-class Americans rose last year to the highest level ever recorded by the Census Bureau, as poverty declined and the scars of the past decade’s Great Recession seemed to finally fade. Continue Reading ==> 10) Miami Nun Uses Chainsaw to Remove Downed Trees (CBS Miami via YouTube) Hurricanes Harvey and Irma did untold amounts of damage to countless families. But it’s also brought out the best in Americans all across the country, as everyday people step up to help their neighbors. In this video, watch a nun pick up a chainsaw to clear trees in her Miami neighborhood. As a YouTube commenter pointed out, she wasn’t exactly following chainsaw safety protocol, but it’s heartwearming nonetheless…
Continue Reading -->Morning Call Express: Calm Before the Storm
In today’s Morning Call Express video, T3 Live’s Kurt Capra breaks down the market action ahead of the weekend. Kurt covers: This week’s contraction in volatility What could signal more momentum to the downside Levels that could indicate a move back to all-time highs The down move in financials The strength in gold (GLD) and gold mining stocks (GDX) The downtrend in the US dollar P.S. Looking for Scott Redler’s Morning Call videos? They are only available to Redler All-Access subscribers. Click here to learn more.
Continue Reading -->Trader’s Digest: The 10 Stories We’re Reading Right Now
Wonder what traders are talking about today? We’re here with the top 10 stories we’re sharing with colleagues today, covering topics like:The retirement of Fed Vice Chair Stanley FischerWhat the iPhone will change about smartphones foreverHow a Navy SEAL commander thinks you should start your dayAnd more! So check out these links right now and get up to speed: 1) Fed Vice Chairman Fischer Resigns, Says Economy Is Stronger (Bloomberg) Federal Reserve Vice Chairman Stanley Fischer has resigned effective on or around Oct. 13 after serving three years at the U.S. central bank. Fischer, 73, was appointed to the Fed by President Barack Obama in 2014 to a term as vice chair that would have expired in June 2018. He cited “personal reasons” in a Sept. 6 resignation letter to President Donald Trump, released Wednesday by the central bank. Read the Story ==> 2) Kohl’s is the latest retailer to partner with Amazon, selling Echo devices in its stores (CNBC) Add Kohl’s to the list of brick-and-mortar retailers signing deals with Amazon. The department store chain unveiled plans on Wednesday to roll out a “smart home experience” in 10 stores, ahead of the holiday shopping season. Read the Story ==> 3) Scott Redler’s Chart Attack: SPX, QQQ, IBB, AAPL, NFLX, TSLA (T3 Live) T3 Live Chief Strategic Officer Scott Redler breaks down 6 key charts so you can understand how he’s reading the rocky market action. Continued Reading ==> 4) A legendary volatility pioneer says one of the market’s hottest trades is like ‘betting on the roulette’ (Business Insider) One of the market’s hottest trades this year has involved betting on stocks to sit still. The wager in question is shorting the CBOE Volatility Index, or VIX, and many investors are big fans. Following a recent short-term increase in the VIX, traders added almost $400 million of exposure to the trade. One guy — a former manager at Target — says he’s made millions betting against the VIX. Continued Reading ==> 5) Three things that will never be the same after the iPhone 8 (The Verge) Apple, like everyone else, sometimes takes multiple iterations to complete its most ambitious goals. But as we face up to the culmination of another year of hyped-up iPhone speculation, I do see three particular ways in which the iPhone 8 (or whatever Apple calls its new flagship) will indeed be the harbinger of massive and irrevocable change. Continued Reading ==> 6) Hurricane Irma batters Caribbean as Florida braces for weekend landfall (Reuters) Monster Hurricane Irma slammed across islands in the northern Caribbean on Wednesday, packing a potentially catastrophic mix of pounding winds, raging surf and rain en route to a possible Florida landfall this weekend. Continue Reading ==> 7) 7 Ways to Be Just Another Failed Trader (T3 Live) Do you want to fail as a trader? Do you want to miss your next mortgage payment? Or pull your daughter out of private school because you can’t make tuition next month? Well you’re in luck! Because we’ve got 7 surefire tips for failing as a trader. Continue Reading ==> 8) The ‘demonetized’: YouTube’s brand-safety crackdown has collateral damage (Digiday) This past May in New York City, YouTube held a summit for its top 100 or so video personalities, individuals and networks. It was a chance for these creators to get face time with senior YouTube executives and discuss what was happening on the video platform. One issue that some attendees felt YouTube needed to address: declining ad revenue. Continue Reading ==> 9) Putin Rejects Cutting Off Oil to North Korea (NY Times) President Vladimir V. Putin of Russia said his country opposed cutting off oil supplies to North Korea as part of new sanctions being considered in the wake of the country’s latest nuclear test, according to official accounts of his meeting Wednesday with President Moon Jae-in of South Korea. Continue Reading ==> 10) Life Advice from a Navy SEAL Commander (YouTube) Retired United States Navy Admiral William H. McRaven, a former Navy Seal has 10 tips to help you make the world a better place. And it starts with making your bed every day:
Continue Reading -->T3’s Trades of the Week: Is TSLA All Charged Up After the Long Weekend?
Welcome to the latest edition of T3’s Trades of the Week newsletter! Have you heard about Redler Ultimate Access, Scott Redler’s all-new education program? Click here to learn about how you can learn Scott’s best trading secrets.. Now let’s jump right in to this week’s trades and analysis: 1) Scott Redler on TSLA TSLA is getting tight as the upper pennant builds. Some are long from the Red Dog Reversal at $339.72. If it can hold $351 and then clear $357.50 with authority, we can add for a trade. Click here to learn about Redler Ultimate Access, Scott’s all-new education program 2) Jeff Cooper on Advance Auto Parts (AAP) I am watching AAP for a short swing trade. I would enter short at 97.50 and keep a stop at 99.50. My target for half of the position is 95.50. If it hits that target, I would cover half and move the stop down to 97.50. Click here for information on Jeff’s 181-page trading case study 3) Kurt Capra on USDJPY USDJPY bounced hard last week after taking out the prior pivot low. This morning it is trying to push back down. The action here should not come as a complete surprise as this area is a long term support level. A decisive break and close under this area will signal a much more significant move lower is to come. I am looking for this to move back to the prior low as a first step. Click here for Kurt Capra’s forex trading case study
Continue Reading -->AVAV: Anatomy of a Winning Earnings Play
In this special video, Nightly Game Plan Moderator Sami Abusaad walks you through a winning earnings play in drone company AeroVironment (AVAV). This video series is typically focused on swing trades, but since no swing trades triggered, this will be a special edition focused on Sami’s proprietary Earnings Play strategy, which he only started using this year. Sami used the Earnings Play to enter AVAV at $39.35, and exit the next morning at $44.67 for a $1,330 profit. (click here for a breakdown of our P&L calculations) Here’s how the trade went down: In the video above, Sami’s going to walk you through the Earnings Play from start to finish so you can understand: How Sami analyzed the daily trend in QQQ, which he uses as a market proxy The rationale behind the Earnings Play strategy Tips for predicting the post-earnings reaction How to judge expectations for earnings Lessons from past earnings playes like DHR, TMO, and CY Why AVAV appeared on Sami’s radar The ‘proof’ Sami got that AVAV was a bullish play Why he only took 250 shares Click here to learn about Sami’s Nightly Game Plan P.S. Earnings Season is still going strong. Be sure to check out this FREE Earnings Season resource: The Ultimate Guide to Trading Earnings Season
Continue Reading -->