Trapper Options Course 12.23.21

Trapper:

I have people I respect, options traders. I respect them, it's a skill set. There are so many different ways this game could be played. They asked me, how come you never use technical analysis?

A: I feel like if I understand the foundation of a business, if I understand how they make money, and I understand that a good business will perform for me over time. Why would I play a game that I know that it's in the house favor? 

Time is against me. Now I need to recover in a speedy pace now. I did weekly before. I tried to day trade. Once I started doing 9 months to a year, it changed for me.

It takes a bold person to learn this game. ***Because most people fear the idea of losing money but they embrace the imagery of wasting money.****

Warren Buffet reads 800 pages a day, that means he thinks he can learn more. This game will never get boring because there is always something new to learn. 

Once you learn this, don't stop learning. The more ways you can learn to make money with this market, the more you can intensify your wealth.

I have a triangle,                                            

                                       Options                                                         Long Term

                                                                                     Capital

(See drawing)

 The goal for me is to make million-dollar trades. I have friends that have done it. You have to build your account in order to do that. in 2018, I had $100 days, $150 days, $500 days,. I was cool with that because I was learning. I was learning the hard way, from people that really didn't know how to teach me. The way we teach, you will be able to scale that as long as you are able to take your time and follow the blueprint.

We'll give you plays that you can use. I want to make sure everybody makes money. 

1) Barchart-Price Performance

2) Barchart- Support/Resistance

3) eTrade- Open Interest

4) eTrade- Volume

5) Selection: Expiration & Strike

6) Check Premium History

7) Bid/Ask & Limit Price

8) Exit 

*****

Those expiration dates give us time, this is what I want you to understand. The lady gave testimonial, she can get out in 45 days. You don't have to wait until the option expires. You don't want to give the market nothing back.  Trap masters class teaches you the fundamentals. How to break down businesses. I want you all to do great business. 

Businesses that perform well, they perform well fast. She got into this play early October, she's up 200% by December. She got her money back times 2 on this. That option is already paid for, she can rinse and repeat.  You don't have to hold it for the whole time.  Making the game rentable and in my favor.The way I'm teaching and using these type of companies it is guaranteed you will do at least 100 percent. Market loves value, companies with great products, value, cash. 

These type of returns are possible. You can do it with one call, two contracts. Win with 1 contract a few times. Then graduate to two. 

Trapper Tools

AAPL. Look at the 52-week performance, 52 weeks is 1 whole year. Apple did 34.91% green is up. 

***Don't look at year to date. You have to look at 52 week (price performance)****

1. Gurufocus.com 

It tells me what the stock averages in performance. Let's say they perform 34% in 52 week.  What if they don't do 34%, what if they just had a good year, and you basing your expiration on one good year. 

***Financial strength: 5 or better. That means its stable. 

****Profitability: 7 or better

It's an indicator that company will perform. We will do more homework than the average trader but its going to work out for us. Who will do a little more homework to be up 200 percent in 2 months?

Next: IMPORTANT

gurufocus> summary>performance

On gurufocus, we put ticket symbol and we go to the performance tab. Average annual return. 

I like to go to the 10 year. This 10 year performance will give me an idea of how its performed average consistently. In this case, apple has done 28.87 over 10 years. I can truly base my idea off this. 

We're going to be conservative: some of us are going to be extremely aggressive. and they will use 28 percent (the 10 year average). Annualized return cut in half.

28% divided by 2 = 14%. I (Trapper) round it up to 15% (15, 20,3 0 that's what I do)

Key turning Points

15% take that and add it to whatever the current stock price is.

current stock price: 173 plus 15% is 198.95

                                173 minus 15% is 147.95

***We always want our strike price to be above the third resistance. ****

Why? (he didn't say it, comments in chat).  GOOD QUESTION TO ASK.

Keep that in you mind, 198.95 (current stock price plus the 15%)

Do not buy options on the Weekend.***

Why? The market is closed. It's sitting in the queue when you make the trade. anything can happen during the night or during the day that can affect you Monday morning. 

Also understand that hope is not a strategy. That's why we do the work. 

Open Interest- (key metric in options trading)

total number of bought and sold contracts. not the total of both added together. 

total number of contracts

increasing open interest represents new money coming into the market while decreasing open interest indicates money going out of the market

we want as much open interest as possible

Etrade- site that I use. go to open interest. we want the open interest in the contract that we're pursuing to be

Let's say the one we wanted (the contract with strike price is 165 for example) the open interest was 9,000 and another one that is close in price (for this example strike price at 170) has open interest at 75,000 I personally would take the one with the 75,0000. There's a lot of money in that contract which tells us when it's time to tell it would be easy to sell. 

If you get into those cheap contracts, 50 cents, 3 cents, 5 cents, the reason they are so cheap is because once it's time to sell no one wants to buy it. this only makes sense if someone in the other side will buy it from you. just because you have it for sale doesn't mean someone will buy it from you. 

you want the one that has the most open interest within our parameters. this is why i will give you 3 parameters. 

Volume

Number of contracts traded during a specific period (daily).

Tells you if that contract is jumpin' that day.

Doesn't stop you from entering trade if there is no volume. 

Each day, volume can change. 930am and 1030am you will see the most volume. also between 3pm to 5pm. you have human traders at that time. between that, its usually bots. day traders look for gaps in the beginning of the day. they get in, human beings are emotional, make emotional decisions. algorithm moves how it moves.  

Let's talk about it for a second. 

Out of the money contracts. Listen, we took that 10 year, we saw that 28%, we cut it in half rounded it up at 15%. *********I don't have to hit homeruns if I can hit consistent base hits.******

15% is always my sweet spot unless I feel homerunish. It depends on what is going on in the market. Market is unstable, I don't have to feel homerunish. you know when the market is on that run. market sentiment is important.

We pick the strike price

Current price on apple $173

10% $190

15% $199

20% $208

Apple is in my 10 stocks. Some of you will pick more, create lots of contracts. It's hard to keep up with so many. Overtrading is a killer.

Bill: Deep in the money contract, its up 80%. 

Shante out the money contract is 200%. Bill bought it with instric value already in it, a super safe play. Shante went out the money and she's up 200%. 

The most I want you to go out the money is 20%. if we look at the stocks that we like, on average they can perform 30%, 40% in a year. we are being conservative, we slashed it in half. I like to do fundamentally strong companies. that 20% is saying that's the homerun.  We took the $173. the 15% is 199. That's above our third level of resistance. GAME CHANGER, THE SAUCE. 

If the stock hasn't been around for 10 years, in my mind you need to find another stock. that's just me. I only teach you what I do. Using my same play, the 2 that I'm down on the most are newer stocks that I wasn't able to follow my metrics on. Ask me how I know, experience.

If we did a $190 strike, the market would reward us more if we took a chance with the $199. The homerun is $208 (20% plus). We always go for a year when we do the 20%. The market will reward more with taking on more risk. 

What options are available? $199 is our price. Let's look at the Sept 2022 call. Our other call at 10% was at $190. You got your journal, don't forget your journal. the 10% is 7k open interest. 200 at 12k. Both are within our 10,15, 20. The $200 is going for 8.30. the $210 is out of the question for me. The 20% is $208. Why? Because if you go 20% make it a year for the option.

THE ONE THING NO ONE EVER TAUGHT ME:

How to buy them at discount. Chart is from E-trade. Click on Details (on e-trade). Go to Option price and Volume. 

Last week 10.75 was high. This is how options and day traders fail. Because they don't have any strategy in buying. These are the points that they are trading (12.35 and 10.75,  the high points in the price.)

In TD Ameritrade you can do it. (Bill explained how to find it) 

Most options trade don't look to get contracts at a cheaper price. I never heard them say that. If I can get them cheaper, everytime the market fall the market gets cheaper. I don't have to trade all the time. Feed my account, feed my account and so the biggest time that the market gives us a discount is either in the correction (market is down 10%) big pullbacks (5-6% on a pullback), anytime an event like that was going on with PayPal or quadruplewenching. 

When it has a few days in a row a combination 5-8% then cool. All you need is 30 points down on the DOW, that ain't nothing. that ain't enough for me to move. 

Entry vs Ask

What price to enter?

-Bid Price is the price the buyer is willing to pay an asset/security

-Ask Price is the price the seller is willing to sell their asset/security

-Call options we want to pay the lowest price!

-Mid Price is in the middle of the two prices

-Last Price is the last price paid on the market

-Record the date & price in your journal

Come close to the last price, but cheaper. it may not look like a lot but you buying a 100 contracts at time. that couple of cents add up. they don't always take it. Sometime they will sit you in the queue. your order is in the quote. You gotta go cancel that order and go back. Negotiate. 

APPL Strategy 1

Sep 2022 $200 strike price

12,000 open interest

191 Volume and Limit $?

Question to ask: in an option contract, do I have wait until the expiration date to exercise the option. or can I buy it any time?

I don't worry about stop/losses. I hold the options out for the year. 

January 2023, use the same 3 (10%, 15%, and 20%). rice was 190, 199 and 208.

This option is adding 3 more months. Now let's look at it. 

Q: deep in the money we want .80 minimum on Delta.  out of the money we want .20 or better on Delta.

back to option price and volume.

someone can get it on $3.50 , sell for 14.90. So for the person that bought the option at 14.90 is going to be in the red unless bid price goes above the 14.90, INDEPENDENTLY OF WHAT THE STOCK PRICE IS DOING.    

-Options are not based off stock price, its based off of what someone is willing to pay for the contract.

The contracts reflect the stock price. if stock price is running, this is essentially how we get these things on discount. the bid and ask price start to change because they become less desirable. different kind of animal, yeah. I said I would teach it until I learned it how I needed to learn it. 

APPL Strategy 2

Jan 2023 $200 strike 48k open interest  1,312 volume  Limit $?  

Deep in the money- 20, 15, 5

Buy to Open & Sell to close

Buy to open: start a new position, open a new position

Sell to close: order to exit a trade.

Limit Orders

Negotiate

Allows you to set a specific price for your order to get filled

Buy limit you can enter the exact price at or below the current price

Market execution will fill when a seller is willing to take that price

Exit Strategy

Know when & where you want to get out before you enter a trade

Up 100% take profit (partial profit with multiple contracts)

Down -30% plus consider closing

45-60 days to expiration time decay accelerates, close.

Why close it? losing 20% is way better than losing 100%. you have to figure out mentally what you can handle. can you handle looking at that and not tripping? 

guarantee: you're going to make a losing trade. (in options) when you do everything right.