How To Turn A Losing Trade Into A WINNING Trade – Rolling Over & Credit spreads – Trading Strategy

[Music] all right my beautiful people I hope you're having a wonderful weekend today I'm gonna talk about how to turn a losing trade into a winning trade using option so as you see I got many titles for this the art of options becoming a finesse God working the well but I asked you guys for some recommendations and I think I really really like this one because we had a question on stream you know shot at Museum he gave this and we're gonna talk credit spreads is part of it but overall the multiple strategies with options and how you could use options to get creative and manage and handle your position so I'm gonna use Robin Hood to show you guys how to do it on Robin Hood as well as tasty works too but the best thing to take from this in and this is one thing I really really want to highlight it doesn't matter what brokerage you're on okay one may make it oh it's easier so I switch here so I do this no no no no no it's the Indian not the arrow my friends it has not if you don't understand what you're doing with these concepts or how to manage these positions it doesn't matter what brokers are on so I want to make sure we get that out of the way but I hope you guys are ready for this like I said we're gonna talk credit spreads we're gonna talk rolling over we're gonna talk butterflies and overall I'm gonna show you a few different plays both that we've done how to do it and then some plays that I have now that we will execute on Monday or again that you will see me handle over time and the key to all of this is making sure you are factoring in timing and how important that is to when to act especially if you're down on a trade or if you make an option trade it goes against you understanding the factors that you could use to your advantage so before we get into it drop your thumbs up on the video make sure you are subscribed and make sure you subscribe to our live trading channel it is the first link in the description and it's also pinned in the comments and we'll see you Monday in the watchlist tomorrow so the first thing I want to talk about the three ways is if you're down on a trade and again I'm referring the options here so you can use some of these strategies if you are trading stocks and how to use options to hedge is actually how options were initially intended to be used and surprisingly it'd be a lot simple but here we're gonna be referring to let's say you're an option so let's say the option goes down in value on you buy an option and you're down a lot of money on it and now this is the first key that you have to understand it all depends how much you're down on especially with any of these strategies using spreads credit spreads all of this you have to ask yourself how much are you really down and what's the dollar amount only if the options hold enough value it will make sense but sometimes it won't and that's why I don't like trading smaller price companies and then depending on how much you're down if you if you do this when you're down already 90% it's probably gonna be too late you know if anything you could still do it but the spread is only gonna help you lower the cost basis if you're already down so even before we talk about the butterfly aspect of it simply what this spread is is that you bought a contract you're down on it and now what you would do is you would sell premium instead so let me show you a play that I have here's my beyond meet contract I had this 185 for November and I bought this months and months and months ago and as you see here I'm down $2,000 on it or 86% now the best part you've seen with this play is this one has time and this is what I'm saying understand the factors on it and you might be like well you're down why does it matter if you have time I've already made this $2,000 back so by holding a contract with a lot of time and at one point when beyond me was a lot higher here was even in the money I used that to create spreads both ahead of time and when the contract was down because at one point even then because this is where you have to understand if you bought a contract at too high of a price it could still even get back to the money and you'll still be down and that's what happened here but it didn't change the fact that other positions were worth a lot of money so you could even see here I could sell these for 190 or another thing you could do this is called the calendar spread I'll call it a ghetto spread I could even go up to February 20 let's say now this is a lot more risky because you see a 185 now I could sell a 190 for 265 which I guess isn't too bad but no that's actually awful cuz I could sell that one right here on the same date for about like $100 less money so again this is on you to determine if it makes sense and if you're gonna take this risk but originally what I did instead is I would sell the short term so even though when I was only down like maybe 20 30 % and the stock was going up I would just sell premiums on the options we're further out of the money or right below it and turn it into a spread to collect money and now I would pretty much do that week after week after week and I've done it already on place to collect over $2,000 on it so again when you do a spread if you're gonna turn any spread or any play down into a spread more often than not it's gonna require a lot of time a lot of planning and that usually will only lower your cost basis so that's may not be the most helpful thing to start out with but you got to also understand the concept of what we're doing here is taking a single-leg option and turning it into a multi leg option and adding factors whether it be more time different strike prices different dates so on and so forth so on the other end of things let me show you a play that you guys saw us do because this is even highlights just the opportunities you can make where if you are proactive on this stuff and you're paying attention you could now even make sure once you're up on a play you turn it into a win win and this is something I talk about a lot and I talked about this too in that advanced Robinhood video for selling spreads but take a look at this AMD right here we bought this for $19 it's trading at 47 bucks so this was a 26-foot that expires in September so now instead though after we were up on it we bought it for 16 what I decided to do here is I went to this 24 put so we did that about two two weeks ago or a week and a half ago and what happened is I got thirty four dollars in credit and it's a 24 put we remember we own the 26 so I noticed we were up on the 26 a lot and then these ones had a high value and this is what I'm trying to highlight both make a win win but now you guys could see how option pricing is so all over the place you could use if you're paying real close attention whether you're up or down on a contract there's gonna be dislocations in price especially even as the stock move so again that $26 put we're up on that one but then I'm also up on this so what did I do is I sold this contract for 34 bucks but now it's only worth 19 so we made it actually 40% on that so far I could even now cut this play out and it pretty much made the other tray free or we could hold this and then even then even if AMD plummeted I own the 26 we sold the 24 I would still walk away with a guaranteed $200 or more than a thousand percent on the first train so this is one way you could see again how to use these strategies as well but now the big one is a butterfly and now a butterfly can help you walk away with profit or turn it into a higher probability so now let's say on this play I'm down on this 185 and now if you don't know what a butterfly is it's when you buy one contract sell two so I'm doing this one actually reversed you would sell two and then buy one more here so again let's switch this to two contracts and as you see here so if I bought this contract sold two of these and then I held this one it creates a whole different play and the key with the butterfly if you see now I would be buying one of these 165 selling the two of the 175 s and then I would still be holding the 185 and it allows me to get closer to the money and get a higher probability and pretty much on a butterfly you profit everywhere up until the middle strike so if it goes above your middle strike that's when you start to lose if it stays and expires here if the stock price at 175 we collect the premium and we would get a thousand dollars of value here too so usually this is probably one of the best things you could do and it all depends on the price of the contract especially if you could sell them for more money and with this what I mean by turning a losing plane out again that Beyond contract was expensive but if you could go here now pretty much we could sell two of these for 550 and then you could buy one of these I got to reverse that well this should be buy one and sell two but then you could buy one of these for 500 so literally you could walk away with 50 more dollars and then get now a strike $10 closer and have a whole different play but now you guys got the butterfly down and and that one's part of it but again the butterfly is really the best to take any random plane just like that AMD play earlier it's kind of a mix of that especially if you notice the premiums are high or if you're down but not too much the key would be the most ideal is where you're down not 80% but let's say you're down 50% if you're only down 50% you could probably do a play where you walk away with a few hundred dollars and turn it into a butterfly and again the whole idea would be get closer to the money and increase the probability on that play even though butterflies are a little harder to hit so that's number one now this next part this is very important this is the question we have is rolling over a credit or debit spread so you have to understand time is on your side when you are selling premium so it's better to roll over a credit spread rather than a debit spread when you were doing a debit spread really I would just let it expire again you can roll over but what I mean by that is if you did a debit spread and you're down on it and you want to roll over it wouldn't make sense to just buy the same one when you could probably get a better contract if you're already down on that first one but a credit spread is differently and to answer a roll over if you don't know what that is is when now you're in a position it's coming to expiration or it's at expiration or you just want to get out of the trade on that trade and then roll it over to something else so let me show you how it looks here on taystee let me find a spread here's the Qualcomm let's say we wanted to roll it over you would click both of these on taste so you just click roll positions and look what it's doing now so here's the October we have and it pushes it over to one month but it's saying now we would sell to close these and then buy to close these cuz again this was a this was a debit spread not a credit spread but the whole concept of a rollover in one trade it would close out these and then go to the same exact strike price on the next day and that way I'm not on October anymore but I get the same time with I'm rolling over the time and as you see here there's a few factors it's telling you your max P&L it's saying I would have a $45 debit and if you go back here net debit is gonna be 15 so it's taking $15 from me that's the net total debit so even though it's saying a $45 debit that's after closing out of the other place and doing all that so again you would realize $88 a loss because I'm down on the first position so it closes out of these you take the loss because you spent a different amount here then you reopen for and you spend a $15.00 extra but now I get the same exact play with same risk reward but now coming into November so that is rolling over but this is very important especially if you're doing a credit spread so I'll use that example we talked about it a few times I know we this was brought up on stream but here's one thing to to note well you just saw me do it you know tasty works makes it look easy I just press rollover you do not need a special platform or anything to do this you just have to understand what you're doing with it and understand the whole concept here because you could do this same exact thing on Robin Hood let's take this Tesla spread go to view all options and wait what do we only own the 185 180 put and this is a debit spread but what I would do here now let's go to the puts there's our 185 so we need to sell that one because again we +1 we would be closing this position and then we're negative one on here so we would need to buy that one back close it there so then this would be closing the trade this is just simply closing that spread and again for those who want on Robin Hood if you ever do a spread that's not like sometimes if you buy them at the same time Robin Hood will group it like you earlier saw but if there you do a spread and it's ungrouped and you want to close out or saying you're buying power this and that you go to view all options and you would do it like this now let's say again we want to roll over the whole idea is close out of the August be in the same position and give us more time so then now we go to let's say one week ahead remember we had got the 185 that's the one we're selling so we'd want to buy one of those and then we'd want to sell the 180 and then boom you press Continue and as you see here your total it's giving you the difference but it said earlier total costs would probably be 21 cents you pay a little bit extra than you do it but this is a four trade option right here what's gonna do close out this and reopen that's rolling over so again that's a debit spread but this is what you need to understand you just got to understand what the hell you're doing and don't trip when you're selling premium understand the odds in the max risk so here's that example this is the the one that was brought up on stream it was like on Boeing they were tripping out saying they were down on this credit spread they didn't know what to do and again if you don't know the credit spread is and this is what happens usually this is only necessary if you try to sell premium on short term so there's a few factors you have to take note of here be very careful selling short term premium anytime I've ever really lost on premium selling is when I did short term premium or it made my life a living hell because I literally had to keep rollin over rollin over rollin over rollin over but again that is the strategy to turn a losing spread into a winner because time is on your side that's why I say it's better to just sell a lot of time than anything there's that is the first part you need to be aware of but then also the max risk a lot of people will trip out and sometimes if you Celes spread so again a credit spread could be like this you would be said of buying this contract you would sell the 360 and then buy the 365 so you would get a credit of 184 you'd sell this for 500 buy this for 340 you keep the difference in cash because you collected more on this so you get credited money and then your risk is on the back end if this caught if these if it goes below 360 you will you make 185 bucks your gain is cap but if it goes up now this is that's where you lose you take the risk on the back end because you got paid up front but this is what you guys need to understand when you're selling premium your max loss is $500 that's it and then if you collected 184 theoretically your max loss is really just $500 minus 184 so roughly like 350 320 is that some of you guys will trip out a you know even if this be a like again last week Boeing started shooting up and you're like oh my gosh it says I'm down $700 $800 no you're not because even though that's what the price is quoting if it's still out of out of the money and sure there's assignment risk but you have to understand unless it's close to expiration you're not gonna get assigned nobody would do that doesn't make logical rational sense but the max you ever could lose on this trade is that $500 difference so you have to chill out and that's why usually by letting it go more and more time the better but now let's say it goes in the money so let's say the stock right now is trading at 365 you're down that amount of money now and you're like well what do I do if after it expires today you have to eat the loss and you lose not necessarily you roll it over so instead now what you would do is you would buy these back and really just go to the next week and then or you could even go two weeks and do the same thing you would sell this one and then buy back this one so it'd be the same thing you would yes you'd have to close this trade take the loss so you again if it was at 365 you would be down $300 so you would take a realize loss of $300 but then he would open up this trade right away again we sell it for 680 buy this for 520 you would collect that other 184 bucks again so you would take the loss but now if it comes back down the minute it drops out you'll make that money back but again you're like well I just lost $300 so usually what you could do is you could add an extra time to it to roll over and get a better play but just be cautious of where you're at but that is the strategy of how to do it a lot of people if you ever sell a credit spread and you're in the money I usually myself I just keep rolling it over I did that I did that but then that's the the risk is that if you keep having to roll it over every time you're taking the realized loss and you're usually spending money or collecting less you have to ask yourself is it worth it so if you guys remember I did that with an Amazon and I did it for about a month I rolled over every single week for about a month maybe a month and a half in the stock was $150 in the money and eventually it came down and I made all my money back and I think I lost like 300 bucks versus losing I think 1500 or 2000 dollars so keep that in mind but that is rolling over and that is very very important if you guys do have questions on it let me know but I think it all really does come down to understand what you're doing and understand how all the odds are gonna be in your favor especially if you're only doing credit spreads like we said debit spreads a whole different story but there's that and then lastly control thy position size my friends average down to a more high-quality option and what I mean by all of this is if you want to turn losers into the winners I lose a lot and it doesn't really matter to me because a lot of them are smaller plays and then that's what you got to realize if you are able to control it from the get-go so even if you're selling a spread here's your problem some of you are selling spreads with $1,000 max risks it makes sense why you're freaking out because you could lose $1,000 thousand dollars when you could do spreads for 500 or you could even sell these right here and do them for $250 you could do credit spreads for a lot a lot smaller most people fail at trading because they're just starting out and they trade way bigger position size then they have the experience to handle and they blow up their account before ever learning anything that will advance them to the next level if you guys want to play with these strategies you want to do it sell a lot of time and selfs tighter spreads so that your max risk isn't there and if you still are gonna sell the weeklies just tighten it up again make it a $2.00 50 cent max loss you may only make you know what this this one you buy it buy it six sell at 5 o 10 you bought a 15 maybe you got filled at 1450 you'd make like 60 bucks but your max risk is only 250 if you didn't under if you don't understand what rolling-over is if you don't have enough capital to roll over for multiple weeks you don't know any of these other advanced option trading strategies give your ass time to learn that you can't take the thousand-dollar risk you don't know enough where you're just setting yourself up in a position where it's just gonna make life and trading a lot harder when you could do things a lot easier so please just control your position side because again the whole point is to now if you buy an option and you're down on it you don't buy the same option again so again in this case so take a look at the beyond this one's still expensive because it has a lot of time but even then my the the best strategy would it be okay I want to buy it again even if I wanted to spend more money I'm gonna get the same contract it would make more sense to get closer to the money and improve your odds again going back to that that one play here with AMD you'll notice the one closer to the money actually went up in value but this one is still cheaper than when we sold it that's why we're winning on both so you have to keep that in mind if you guys want to do that and even another idea if you let's say you didn't you know again I'm here to give you guys information no just trade smuggler I get it if you already did make a big trade and you're wondering how to get out of it or make it a little bit better you still use a small amount but do it better now so if you've already put in a big amount and you're down don't try to keep buying the same contract either go to a shorter date so there's more theta premium and if you could try to get a quicker flip or you just keep it on the same contract but try to spend a small amount of contracts or a small amount of money to get a closer to the money contract cuz even if that hits these ones could probably gain up a little bit of value but if you get the right contract at the right price it could help increase the value so that's pretty much it you guys it's pretty much talking to more in the spreads and the rolling over hopefully this makes sense if not you guys could go see some of the other videos we've done or just come in live and you'll see this more but let me know what questions you have make sure you guys are subscribed to make sure I see you in the morning on Monday and on a watch list tomorrow let's go

Channel: Trading Fraternity

Views: 52,736

Rating: 4.8126464 out of 5

Keywords: stock market, stock trading, how to trade, robinhood, robinhood app, robinhood gold, how to use robinhood, tastyworks, credit spreads, credit spread options, rolling over options, trading strategies, trading straddles, how to trade options, option trading, options trading, trading options, robinhood options, stock market for beginners, options trading strategies, options trading for beginners, swing trading, day trading, trader, option trading live, trading, tutorial, options

Id: uiEx0p2UqQ4

Length: 19min 27sec (1167 seconds)

Published: Sat Aug 24 2019