Futures Option Trading | Futures Index Options | 6-10-19

hello investors will the S&P 500 the Russell the Nasdaq all these futures are up over a half a percent this morning are very close to a half a percent this morning where do we go from here [Music] valo investors and welcome to our futures option trading index features option session here today my name is Ken rose and as always it's great to be here to discuss investing in the stock market in this area of trading options on futures do you want to welcome you here it is a beautiful June 10th here along the Wasatch Front hopefully things are nice River you folks are at as well well so today we want to do is we kind of want to look to look at what the futures are currently doing and relate that to options trading not only with regards to futures but also individual our agenda will include look at the characteristics and risk of index options we'll also look at transitioning from equity options to options on futures using strategies that your that you already know we'll talk about applying defined risk options spreads will identify potential entry exits and trade management techniques and will determine appropriate risk and position sizing for a particular option strategy and of course we would like to trade a paper trade candidate given time that'll also be an objective here as far as far as what we looking to do just a heads up investors it it is assumed here this this is an advanced class that is assumed that you have an understanding of both options and futures if that's not the case you're more than welcome to continue to join us here today I would suggest however that if you do feel a little bit overwhelmed a time that you consider also attending our getting started with futures webcast that's on Tuesdays at 11:00 a.m. and also possibly are getting started with with options webcast that's on Fridays at 11:00 a.m. these are these are available live those times are also available via our archives just to show you those archives are at you come here click on education and then right over here if you open up the education tab right here and we'll give this a second or two to come up if it doesn't come up immediately sometimes in our room here things a little bit slow but there will be a little link over here that says webcast and you can click on that webcast link and then there will be a place to click on accounting pull up a calendar out of those webcast you can see that the name of the coach that's teaching them then you can go into the webcast like that coach and and and find find both the archives and also links with regards to up trading upcoming sessions but before we get too old for our long hair investors let's go ahead and run through our disclosures no wave disclosures just reminded that in order to demonstrate the functionality platform we need use actual symbols however TD Ameritrade does not make recommendations or determine the suitability of any security or strategy for individual traders any investment decision you make in your self-directed account is solely your responsibility futures and futures options trading in speculative is not suitable for all investors future accounts are not protected by the security investor Protection corporation futures and futures options trading services are provided by TD Ameritrade futures and Forex LLC also options are not suitable for all investors as the special risk inherent options trading may expose investors potentially rapid and substantial losses keep in mind that spread straddles other multi leg option strategies can entail substantial transaction cost including multiple commissions which may impact any potential return transaction cost commissions and other fees are important factors and should be considered when evaluating any trade we do use the paper money software application this is for educational purposes only successful virtual trading during one time period does not guarantee successful investing of actual funds during later time period as market conditions do change continuously that we'll be looking at characteristics and risk characteristics of index futures options transitioning from equity options and options and futures already no applying defined risk option spreads identifying potential entry exits and trade management techniques and of determining appropriate risk position let's start off though by making a comparison between trading options on futures two options on equities you know what are some of the what are some of the unique characteristics with regards to options on futures that typically you don't see to the same extent with regards to with regards to regular equities well first of all we have here diversification you know if we're talking about options on futures well you have access to a wide variety of assets and classes you know you've got you have stocks if you're trading index index futures that's will be our primary focus here today but you also have options on energy you have options on inch eh you have options on metals Gold's gold and the like options on currency and also options on on agriculture you know different type of agricultural products when you're talking about options on equities you can trade options on companies in different sectors and indices but but you know usually you are looking at a specific company that's related to more of a sector and Industry when you're looking at futures let's so let's say for example you're trading of futures options on a future that is related to meth holes right here well rather than then look at a single gold miner which you may be looking at over here you'll be looking at that that option contracts a movie in relationship to all the gold miners out there as well as as well as other metals in metals institutions as well so so you have a great deal of diversification available to you through these options through the futures contracts and options capital efficiency you know that when you're looking at at pricing of option contracts the nature of the option the nature of option contracts for futures is based on a different formula than what used for stocks and there's a relate and as a as a as part of that then typically what you have with regards to trading options on futures you have a higher level of leverage you can look at that as capital efficiency but you do want to keep in mind in that leverage cuts two ways it can not only cut for you but can also cut against you trading hours and versatility with regards to trading hours you can trade virtually 24 hours a day six days a week when you're looking at options on futures now options do have a little bit of a rest period I believe it occurs about 15 minutes after the usual market closes options the the futures markets will close you know for about 15 minutes and reset everything then then they'll kick back up again and they'll trade in the afternoon through the evening and then they'll get ready to until 2 - Kenny to resume out I would make perhaps not so really say resume but they'll go through the night and then and then into the next day okay then at the end of the trading day again they'll take it they'll take another 15-minute break there to reset and they'll continue to go afternoon evening you the next day and they they do closed for the weekend on they do pick up on Sunday afternoon so so just about I'm just about 24 hours a day six days a week if you're talking about trading options on regular equities they basically trade from 8:30 a.m. to 3:00 p.m. Central Time so that's something to keep in mind day trading now day trading is a rather challenging endeavor with regards to investing you have a lot of volatility intraday or some investors that that do that dude a trade on somewhat of a regular basis if you're if you're looking to day trading and basically what a day trade is considered is when you enter a position and exit that same position over the period of a single trading session and if you're looking at doing that with regards to with regards to ordinary securities you have pattern day trading rules that apply these rules are reflected with regards to minimum minimum account balances and also some of the characteristics that are looking for looking for requirements as far as individuals that are rate that are day trading with regards to futures you don't have those same restrictions if you're looking at entering an option trading getting out of an option trade on the same day if you're doing it in relationship to future so a little bit more flexibility that you have here when you're looking at potentially day trading again that's entering and exiting a single position over the course of a single day expiration if you know are some differences here as well if you're looking at futures settles to the underlying future contract or cash important to note the that underlying futures contract expires as well this is Rene excuse me so it's one thing to keep in mind if you're if you're if you're trading a an option contract on an underlying security then you're usually looking at either taking a position of providing a position in the underlying security itself in other words stock in the underlying security if you're looking at trading options on futures and you're usually talking about taking a position or providing a position on the underlying option on the underlying futures contract you do want to keep in mind those futures contract themselves also expire so that a little bit of a difference there to keep in mind when you're when you're looking at some of these things to see these are some of the key metrics and some of the key characteristics that investors will look at when they are considering whether or not to possibly trade an equity option or on the other hand possibly trading a futures option so some of the some of the characteristics and things to keep in mind with regards to with regards to futures contract um one is the is the multiplier right here you know this is this given us a multiplier for the /es emini 500 futures the multiplier is 50 so where does this multiplier come from let's let's come over here and take a peek in here and let's um let's see we want to do here I'm going to come up here to our trade page here and let's see if we can pull up something here yeah this is what we want right here so this is this is just a grid and this has shown us the S&P 500 futures contract the Q's futures contract the Russell's future contract and the Dow futures contract for right now we're focusing primarily on the S&P 500 the Q's and the Russell just because the right you know currently the liquidity here is a little bit more intriguing force for some investors but as far as we're aware does that multiplier come from well we am mentioned that the multiplier on the S&P 500 is 50 so where does that come from well one of the when if when you're looking at a futures contract these future contracts will change in price and the amount of that change in price is referred to as a tick and so that gives you the the the minimum amount that the future contract will will change either to the upside of the downside with the S&P 500 its 0.25 of a point okay so it's basically it will move in increments of a quarter of a point if you look up you look up here you see the sell in the by notice that these are all in in increments of a quarter of a point this is this is one quarter of a point right here this is three quarters of a point right here well how many quarters of a point are there in a point well if it's a quarter it means that there's going to be four how much is each one of those quarters of a point worth well right here it tells us on on the sp500 sort of 1250 so if you take four then and times that by 1250 that's going to give you the value who one point move and notice that the value that one point move is fifty they excuse me so that's so that's giving us this this is where the multiplier comes from for to kind of the multiply effort for /nq well the minimum quantity that it changes is also a quarter of a point it's 0.25 but each quarter of a point is worth $5 so we have four quarters each one of those is worth five bucks we take four times five and the multiplier that we have for NQ is going to be 20 if we come down here we take a look at the wrestle the wrestle trades of the minimum movement for the rustle is going to be a tenth of a point if you notice this is too tense this is this is 3/10 4/10 that's going to be a tenth each one of those tents is worth five dollars so if we're looking for the multiplier for the rustle would say well one point divided by a tenth of a point is going to be there's going to be ten tenths in one point movement right and each one of those points is worth five bucks so we take our ten and times that by five that puts us at fifty so actually the multiplier for the /yes the multiplier for the rustle is the same and the multiplier for NQ is different it's currently at 20 well so so this is where they originate from but how does that relate with regards to an individual option contract well if we come up here to the I'm up here to trade I'm just going to switch gears and go here to all products and let's go to all products will look at /ps this is going to be this is going to be the e-mini futures right here and looking right here I'm going to come in here by the way do want to welcome Ricardo and Donald good to see you guys here I'm coming over here we've got we've got the futures contracts themselves I'm just going to come down here let's pick something out here that goes I hear about 25 days of July 19 and let's just say hypothetically that we wanted to pick up maybe the at the money call contract I'm going to reduce the number of contracts we're showing down here to for this we can pick it out we're currently trading at 28 94 so the at the money call contracts going to be the closest to the existing price which is the 28th 95 so I'm going to click on that and this shows me my my premium here is 45 dollars and 50 sands well how do I calculate the actual cost that premium why what I need to remember is I need to remember the multiplier so what does our multiplier there again well our multiplier is 50 right so we'll take our 50 and times that by 45 0.75 that's going to show us two thousand two hundred eighty seven fifty so when I come down here to look at my cost to buy that call contract I come down here and I click on confirm and said there it is right there are two thousand two hundred and eighty-seven fifty plus plus some related transaction cost over here so that's basically where that where that multipliers coming from and that's basically how you would use that multiplier as far as defining what's going on with regards to your to your options futures contract let's come back over here then and so we basically talked about tick size I wanted to discuss those actually looking at the trading trading tab itself but just to clarify things here with regards to the with regards to the to the trading hours here let's pull up and just underline some of these fact the factors of the Garza trading hours so the trading hours is Sunday through Friday 5:00 p.m. 4:00 p.m. central with a trading halt at 3:00 at 3:15 p.m. or 3:30 p.m. Central and that's your that is your daily maintenance period losing father so again Saturday through Friday at 5:00 p.m. 4:00 p.m. central so is going to be Eastern Time 4:00 p.m. central with a trading halt from 3:15 p.m. to 3:30 p.m. Central Time not sure that that's your daily maintenance period that's really kind of get reset and everything ok and then Monday Monday through Thursday 4 p.m. to 5 p.m. Central time so keep in mind your your trading hours here daily settlement time ranges is going to be right here from it looks like basically as the market closes from 3:14 3:30 p.m. to 3:15 p.m. so basically right here before that halt right there at the end of trading before that little halt right there American options when you're looking at when you're looking at the S&P 500 keep in mind that that all of the options on those option chains are going to be European what is the unique characteristics between European and American options the unique characteristic the primary thing to keep in mind is that European options they are not exercised until the expiration where an American option can be exercised at any time up to and including the expiration so if you'd like to avoid the potential of the option being exercised before the expiration then you'd want to lean a little bit more towards the European options right here if you weren't overly concerned about that then you'd want to feel free about the American options the primary difference here in relationship to the sp500 is that the American options expire the third Friday of the contract month these these are wood cuts which tend to be considered standard or standard options where the weekly options is basically everything else is going to expire different weeks and different days as well okay and a month european-style 3:00 p.m. Central time on the last business day of the calendar month so you have these weeklies and you also have the last business day keep in mind that the only one that's American is when the expires on the third Friday and settlement is that expiration also remember just reminder investors that these things saddle settle with the underlying futures contract okay so you either be making it the futures contract available to someone else or you'll be or you'll be taking delivery of that futures contract options exercising in position in the underlying cash-settled futures contract let's take those guys off the board here then and II mayonnaise there's your multiplier here's your tics eyes calculation trading hours pretty much the same daily settlement again American American here's your European settlement at expiration a primary difference here is a multiplier we're talking about the rustle here's our multiplier again same as a /yes at 50 here's the kind of the calculation thinking behind that trading hours pretty much the same daily settlement time ranges pretty much the same again we have American 3rd Friday and then European and European is basically everything else settlement at expiration now let's do this let's let's take it let's let's take a look at an example of a of a of a option trade here ok then we'll come back in here we'll talk a little bit about the economic calendar but I would like to get a paper trade in here just so that we kind of go through and exercise here now those of you that again it's assumed that you have a basic understanding of options here okay that you know that is that is the assumption options and options trading and again I I recommended maybe getting started with options in the class and the webcast related to that and again that's going to be at Tuesdays at 11:00 a.m. well two Tuesdays at 11:00 a.m. is getting started with futures and Friday 11:00 a.m. is getting started with options but assume you do have some familiarity here so using our familiarity here let's take a look at some of these in relationship to options trading let's let's start here with with RT y I'm just going to expand our chart here will maximize our sale here I'm going to bring up some some option parameters that can be used for options traders here let's come in here to style a load style and let's see futures futures option webcast here we go right here and this this is a this is a layout that that that sum option traders find to be beneficial we do discuss this in the Advanced Options strategies course that I teach that is on Thursdays at 4:00 p.m. Eastern Time actually it's going to be it's going to be at 3:00 p.m. Eastern Time it ends at 4:00 p.m. Eastern Time I'm going to shore up the timeframe on this chart just a little bit though just so week well you know what we'll just zoom in here a little bit okay so these are Bollinger Bands kind of give you an idea of where you're at in relationship to volatility again this is more of a discussion we won't go into these in too much depth because we we primarily want to focus here on putting on an option trade here okay but notice where the Russell is right here in relationship these Bollinger Bands it's pretty close to center it's not quite center it is bouncing here and is starting to move up here strongly but the Bollinger Bands are starting to collapse a little bit meaning that we are starting to see a little bit of a decrease with regards to the overall volatility we don't know that that will continue this is a probability to come something probability cone against something that's commonly used in with regards to options trading this probability cone is set so that the center part of this you have a fifty five percent probability of being within the center part of this cone right here which means that if you a trade that is balanced to stay within this cone then your probability of success on the trade is from a theoretical perspective is going to be fifty five percent or higher now the reason I'm using these these common technical indicators is because an option is an option now whether it's an option on the on the futures or whether it's an option on an individual security an option is an option usually looking at a security that has price moon which you do have here with futures so so we're okay using using some of the same strategies and some of the different things that are presented in options courses and you could you know if you you know you've you know we do we do have a fair amount of option courses on Thursday we have what's called selecting an option strategy primarily focused on on technicals in that that is at Thursdays at 10:30 a.m. Eastern Time so when you do you know when you look at the education everything just kind of keep that in mind if you're looking at an option strategy that same strategy that would apply for an individual security could very well apply if you're looking at trading of futures options let's look at this one let's also take a look here this is the this is RT y let's come up here and look at the the /yes here I'm just gonna pull this up /yes and this one this one's moving a little bit stronger it's coming up here almost to the top of the Bollinger Band right here now notice that that Bollinger Bands here has a history of acting as a resistance level and right up here to the top when we have this little candlestick that's referred to as a spinning top indicating potential weakness and possibly reverse to the downside we don't know that we'll get a reverse to the downside but it doesn't indicate that possibility so one option trade is some opt that some option traders may look at as they may look at setting something up perhaps a short call vertical up here outside of the Bollinger Bands and maybe try to get outside of our probability count with a relationship to the front timeframe that's chosen so what would something like that look like well let's come up here to the trade tab because technically that looks like it could have some possibilities let's come up here to the trade tab click on trade here yeah and we'll come down here and let's see on /yes let's say we want to go out on a short vertical go ahead and say with our time period here of 25 going out about 25 day so I'm going to give ourselves a few more strike prices here and if we want a high probably if we want to be a higher probability trade then we want to come over here to where we have our deltas and we're looking at selling a short strike price it has a delta that is less than 50 because the Delta again Kate kind of getting back some of those old option option noodles the Delta is giving us a probability that that that the price that that option will be in the money which means for a call option the price will be above that price well we don't want it to be in the money so we want a probability that's less than 50 so here we are at 50 we want to come down here out in this area where we have something significantly lower than that I've got 14 I'm going to escalate our strike prices up here to 28 and let's come down here and find a delta if we have a delta of say 30 here that means we'll have a theoretical probability of 70% because there's a 30% probability the option run in difficulty and at 70% probability that we that we that we'll be successful on the tray so let's put together just just a short call vertical here where we're selling a delta of 30 so to do that I'm going to go ahead and this is the 2950 I'm going to click on the yeah what I'll do is I'll do a right click and we'll go ahead we'll go $10 wide with this so I'm going to right click on the short strike price I want to do because these come in $5 increments I'm gonna choose sell but I'm gonna go deep in white because I want to go to strikes white on my short call vertical so I'm gonna go deep in white I'm gonna go one month two strikes and there's our vertical right there and here we have it right here so we're ten dollars wide and we're looking to get a three dollar credit looks like it's bounced around between three and 325 so we're looking at being in this trade for 25 days we're looking at a theoretical probability of 25 percent but getting into trouble which means we have a theoretical well actually we're looking at 25 days here and remember that that the the Delta on the option we sold here which was our 20 9:50 was 31 it's kind of bouncing and changing here a little between 30 and 31 so right now our Delta on the short option is 31 it means we have a probability of about a theoretical probability of 69 percent so let's see what our risk is on this trait one of the things keep in mind investors with regards to two options trading in general and this also applies to options trading on futures is the reality is we can't control where that price is going to go we can look at our technical analysis and based on our technical analysis we can say you know what it's looking it looks like from a technical analysis standpoint there were somewhat extended here up towards this Bollinger Band with where the underlying security has found resistance and move down in the past this little candlestick right here is referred to as a spinning top or maybe even a doji candlestick which is a candlestick with a small body we're relatively early in the day that could change dramatically during the day but that does indicate a potential a potential reversal and turnaround point from a from a technical analysis standpoint it doesn't guarantee it but but you know frequently when you see a cattle stick like that it does indicate potential weakness and potential move to the downside but the reality is we don't know we can say you know from a statistical storica standpoint there tends to be that possibility but we could continue to go up here continue to go up and basically you know and do some real damage to a short call vertical so so we can we can we can theorize and we can put trades based on on theoretical z' and also based based on the trading journal it's a very very I'd say many investors find it very beneficial to keep a trading journal and what were you thinking when you enter the trade what was the what were the metrics you were using when entering of the trade and I'm using not only that not only not only the theoretical tools you have here but also your trading journal tends to be beneficial for many investors but take all those things in consideration you still don't know okay but but one thing you can know with with relative surety it's again it's not perfect but it tends to be relative surety you can know the the risk when you when you enter the trade now if we come back up here and look at our trade down here we can look at this and we can calculate our theoretical risk now our risk could be different because we may not get filled of the prices that we anticipate getting filled out so was even our risk is not 100% guaranteed but we can but we can manage our risk from a from if you leave you look at several trades you look at where you where you where you forecasted your risk and you forecasted your reward and how it actually turned out you know typically most investor is going to say hey I feel comfortable estimating my risk you know sometimes I may not get filled exactly where I thought so I may be incurring a little bit more of a loss what I originally anticipated but still there tends to be a higher comfort level when you're in when you're looking at that in comparison to Pricer so what would our theoretical risk here be on a $10 wide spread we know our probability here is about 69 79% we're now we're looking at being in the trade about 25 days well now we in relationship to that we want to look at our reorder reward on our risk and our return on that risk so we're ten dollars right here I'm just I'm just gonna stay with three dollars this is kind of bumping up between three dollars and 325 let's just stay with three dollars so to calculate our risk here you take the distance just like a regular regular security trade you take the distance between these two which is ten dollars you subtract from that your credit you're anticipating we'll go ahead and use three dollars and that gives you your max loss which is seven now what's our multiplier though what is our multiplier on /e yes our multiplier on /es is fifty so we take our maximum loss and we multiply it by our multiplier of fifty that's telling us where risk on this trade is going to be three hundred and fifty dollars so you want to keep that in mind what's our maximum gain well our maximum gain is going to be what our maximum gain is going to be the three points but what do we do with those three points in order to get our maximum gain in dollars and cents we multiply it by our multiplier that our multiplier is fifty so we're looking at looking at $150 so risk in we are risking three hundred fifty dollars in an effort to make 150 dollars so what's our return on risks and we take our 150 we divided by our maximum loss of 350 we have a 42 percent return this is a theoretical return and how many days is that over that's over that's all about 25 days so the question the investors that you'd be looking at here is do you feel comfortable with a trade that has a theoretical 69 percent probability of providing a return of 42 percent over the next 25 days if you're comfortable with that then you go ahead and go with to go ahead with the trade if you're not comfortable with that then you wouldn't go ahead with the trade there's there's one other item to look at this though and that is to look at the break-even point on your chart along with your maximum gain chart on your target sometimes it's nice to be able to visualize these things so let's see this first of all I'm going to come over here and click on confirm and San and just note our buying power defect here is it is about three hundred and fourteen dollars ya notice that that's a little bit less than three hundred and fifty dollars that's because of some of the that some of the leverage that is involved here and also that's possibly going by the mid price here of 325 and when we're talking primarily about about three dollars I'm going to go ahead and click Edit here let's take this over the analyze page and just like we would a regular security well core here and analyze our trader I'm going to collapse this this is typical short vertical right we want to do is we want to we want to set our pride we want to set our slices on our breakeven to begin with on our expiration which appears to be July 6 so there's our break-even point and I want to I'm just going to add a second slicer I'm going to put it our maximum gain point which is right here then I'm going to grab another slice I'm going to put it our maximum loss point which is right here those are all kind of scrunched up here we might be able to wide them out a little bit do a couple of exercises here in Nice this Green Line is expiration right here's our breakeven and I'm gonna actually move this over a little bit right there is our max gain anything over there and then down here's our max loss anything here and over there so let's see what these look like on our chart then we can see them visually so we'll set our slices to chart right here and they are scrunched up here as well so they're all it all kind of scratched up here you can kind of see so can I get a little bit more room here if I bring this down okay so right here folks right here's our max loss so if we get above here anything above here is max loss right here is break-even and right here is max game perhaps I can stretch this out a little bit more they are they are in close proximity but but basically this is going to be our primary line right here do we feel comfortable about staying below this line here between now and the expiration I believe the expiration on those was July 9th if I'm remembering correctly what are we God July 19th is our expiration well no that's just July 9 let's come over here and look at our option chain here to make sure we've got it it does look like the 19th here's going to be the expiration that sounds like about 25 days 25 days from where we're at right now so using that coming over here to our chart then I'll come over here and let's just identify July 19th we'll do that with a rectangle we'll come over here and do July like we need a little bit more time over here 19 to 2 out in this timeframe right here so do we feel relatively comfortable investors as far as being below this line here from here all the way out to here and we're zoomed in here let's zoom back out it just allows us to see it a little bit better in relationship to a one-year chart I'm going to change our chart here to six months you know you can you you always want to be careful when you're looking to these things because you can make the chart depending on how you work with it you can make it look pretty attractive for any trade okay I think this may be a little bit more realistic right here so if you're comfortable with this then you'd say okay if you're not comfortable this you just pass on the trade what we want to do is we want to go ahead and put in a trade for practice purposes so come back over here to our trade page here's our trade if we get filled at 325 that's just going to be a better situation and we know what our risk is it's 350 bucks for each contract let's say that we didn't want a we didn't want to incur is greater than $1,000 well if we got if we have $700 of risk actually our risk our risk was 350 so if we don't want to risk more than a thousand bucks to take a thousand bucks divide that by our 350 it's like we can do 2.8 contracts we'll play the part of the aggressive investor that's okay rounding that up to three let's go ahead and click on confirm and send here and just review it with God here so sell vertical yes u19 it gives you it gives your little multiplier right here until I have 19 week one and I wanted to catch this - there we are right there I you know I just want to look at this little bit 1920 one week one of July 19 shoot nineteen week one I'm gonna click on edit here for just a second investors and come up here and just want to what's going out twenty-five days and if we pull up your chart here I want to grab a little drawing - I just want to double check our work here I think we're talking about the first week in July here let's come in here July 5th yeah looks like the first week in July that makes let's move this up investors - coming out here 25 days and July 4th 5th hey what what we're gonna do investors working we're gonna go with July 5th on this because I'm looking at this a little bit I'm looking at this as as the end of July the year 19 the end of week 1 which is going to be July 5th so let's find your life I'm gonna delete this well delete that little drawing right there yeah let's find July 5th come across here I thought that that seemed to be out there quite a ways and I believe that to be the I believe that to be the accurate one here also note that and setting up here if you look at this resistance level over here notice that that are that our max loss area is above this previous resistance level it's also above our Bollinger Bands right here but these bands definitely can't white now you might feel a little bit better if both of these were above this probability cone and you could go in and adjust that perhaps take a lower return to get outside the probability cone and that would be okay if you want to do something like that we'll go ahead and and play the part of the investor that's anticipating a move here to the downside let's go ahead and send this order in there now we're at 350 if we get filled with 350 that's even better that would move these lines up a little bit more so we'll do a confirming send here and let's send this into this little account right here again this is a paper trade not a recommendation we're just going through the mechanics here come here so we were filled out at 350 which gives us a little bit better reward risk and but again this is a paper trading account there's nothing guaranteed here in a paper trading cow so you do want to keep that in mind and as and when I say guaranteed I mean I mean what we're talking about is where we got filled we got filled here at 350 would we get filled on a live trading account at 350 we no because sometimes a paper trading account can act a little bit differently all right investors just want to I just also also want to emphasize economic calendar here you know TT can take into consideration some of the economic announcements that come out if we come back over here for a second you know here we're talking about economic strength non-farm payrolls gross domestic product industrial production retail sales durable good orders housing data interest rates interest rates can have an impact on the markets you know from from the FOMC announcements Treasury oxygen inflation consumer price index producer prices personal consumptions all these can have an impact lately one of the economic reports that this tended to have a significant impact on futures has been the employment situation also known as the jobs report and if we come over here to the thinkorswim website just a little reminder you can come up in here and come over here to market watch and under market watch click on calendar under calendar this is sad usually for earnings if you come down here and just click on econo day events just check mark then you'll get these economic events but I did want to show you here on the SP if I phone and see these little arrows right here this is the most recent job reports and you can see on these days there have been some significant Dalls they they they have been they have been rather significant let's just zoom in this is the last four right here the last one look at this Campbell in relationship the previous candles it's one of the bigger ones it's not the biggest here so this in jobs report here's another jobs report look at this candle in a relationship the ones that preceded it's it's not necessarily the biggest but it's one of the bigger ones here's the jobs report here if you look at this if you look at this this isn't as big as the other one so they're not always going to be big be big moose but it's a reasonable move then down here if you look at this one this one's a little doji down here this is one of those ones indicating potential change else we come down here possibly move it notice the range here we did have a very wide range there so it is it is very helpful to keep in mind potential economic announcements because they could affect the overall implied volatility also investors just a reminder that contract specifications vary for future products is important to know those specifications we getting involved you can learn more at TD Ameritrade calm futures and also @ww CME Group calm sea also be mindful that so investors what we talk about here today much that well we talked about the characteristics of index options we talked about transitioning from equity options options on futures talked about applying to find risks we talked about risk you know calculating your risk managing the risk because you can't identifying potential entry and exit exit exit techniques we talked about management techniques but you know we in looking at our chart you know we use the probability cone we use the Bollinger Bands when the price moves out of those Bollinger Bands or starts to get or starts to do some unusual things in relationship to some of those studies though those will be times when you may consider some action we talked about determining appropriate risk and also position sizing and what I think what I'd like to encourage all of you to do is to go out and trade trade of futures options it doesn't have to be a short call bernal Kobe any option you want but it's it's kind of like learning a bike you know you're not really able to learn how to ride that bike and links actually get on there and and start pedaling and trying to keep your balance so you know go out there and just just do a just do a paper trade on a future do your analysis follow up with it use those multipliers so you become familiar with using those multipliers so that you feel comfortable with that okay all right also investor just reminder that coming up here we have Cameron May getting started with technical analysis we looked at some technical analysis tools as well so so be mindful that he'll Cameron will be coming up here at the in our next webcast alright and also investment just like call your attention to the chat window if you look over there in the chat window there is a survey over there if you can take just a second or respond to that so it's always appreciated if you can just just take a peek of that survey and respond to it that gives us an idea of the interest with regards to the to the particular webcast that you're viewing it also helps us assess how we're doing on these webcasts and how we can improve those webcasts there's there's no writing involved it's just basically clicking on circles and giving us your feedback about the webcast in that way all right everybody just a reminder that in order to demonstrate the functionality the platform we need to use actual symbols however TD Ameritrade does not recommendations already terminus it'll be on any security or strategy for individual traders everybody bets of success you're investing hope you have a fantastic week going forward here and we'll catch you later bye everybody we'll see you thanks again [Music]

Channel: Trader Talks Webcasts from TD Ameritrade

Views: 7,880

Rating: 4.787879 out of 5

Keywords: index options, options trading, options strategy, futures index options, Ken Rose

Id: 4NjsmleH5F0

Length: 44min 10sec (2650 seconds)

Published: Tue Jun 11 2019