INSANE 700% OPTION TRADING STRATEGY THAT'S VERY CHEAP! | CALL CALENDAR SPREAD

hey what's going on youtube and welcome back to tech conversations i am your host guillermo it is april 6. lemon comment section below how you guys are doing today as you can see the market is starting to dip but we're still green up a hundred dollars today or about point one percent so far so we'll see what the rest of the day brings us now one quick thing guys we're almost at a hundred thousand subscribers which is just insane thank you all so much for your support i really appreciate it and so because of that i do want to do a giveaway once we reach a hundred thousand so if you'd like to enter that giveaway all you need to do is hit the like button down below make sure you subscribe to this channel and let me know in the comment section below what your favorite stock in the stock market is right now again thank you guys so much now in today's video i want to talk about a very powerful strategy that we can implement that's very easy to understand very easy to set up and also very cheap so we'll see with just a few dollars we can potentially make some really big returns now before i get into that guys check out the discord 17 000 members completely free you can also become a premium member on here for seven dollars a month you'll get access to a bunch of great resources one of them is our alerts here's an example of an alert from yesterday this was a call option on apple we paid 167 we closed out at 259 so we made a 92 dollar profit per contract on this alert so again if you're interested in joining the discord link to it in the description below now let's get right into this video guys let me comment section below if any of you guys are utilizing this strategy and with which stocks so the goal from this strategy is to profit from a neutral or directional stock price move with very limited risk if the stock goes in the wrong direction again it's going to be very cheap so a risk is going to be very limited but we do want to find a stock that is trading sideways that's staying with any defined range and so in other words the stock it's not very volatile so the stock i'm going to be using for this demo here is going to be hmc honda okay and i'm not telling you to use this stock this is just an example we take a look here at honda in the last month really hasn't moved a whole lot so this is one of those stocks that kind of trades sideways for the most part now i will talk about what some risks are when it comes to these types of stocks at the end of the video so make sure you stay around for that so make sure that you've enabled options trading in your settings so that you're able to trade options and let's head on over to the options for honda so here we are in the option so the way this strategy is gonna work is that we're gonna buy and sell the same type of option so call or put we're gonna focus on calls in today's video for the same stock and we're gonna choose the same strike for both of these contracts but with different expiration dates so let me actually give you guys here an example so we're going to go out let's say a month here or two so let's go to the next next available expiration date so we're going to may 21st so first we want to sell our call option okay so we're going to sell a call now the expiration date that we want or the strike price that we want to choose here should be the price that you think honda will be at by this expiration date so on may 21st what price do i think honda will be at that's the strike price i want to choose so let's just say again this is just an example that i think honda will be 25 on may 21st that's the strike price i would choose and so i'm going to sell this call right here and remember for selling this call i'm going to receive 4.70 per share each one of these contracts controls 100 shares i'm going to receive 470 as a premium so i'm going to click on this i'm going to receive 470 now we also need to buy another option that's of the same type so buy another call which is going to have the same strike price but a further out expiration date so i'm going to go here to the expiration date i'm going to go to the next available expiration date so july 16th and i'm going to buy a call this time and again it has to be the same strike price that we chose for the call that we sold so now in this scenario i'm going to pay four dollars and 85 cents per share and again there's 100 shares in each one of these contracts so i'm going to pay 485 to buy this call option so i'm going to click on here now you can see this right away changed to call calendar spread this is a call calendar spread that's what the strategy is called and as you can see it's going to be very cheap strategy this is going to cost us about 15 bucks or so 15 for one call calendar spread and of course this is a debit trade because we are paying to enter this trade our risk here is defined the most that we're going to be able to lose here is 15 and so the goal remember is for the stock to be at or near the strike price uh at the expiration date of the call that we sold so our goal here is for this stock honda to be at or as close to 25 on may 21st now so let's actually visually see this okay let's go over to the options profit calculator let's actually see how this visually looks so that we can see what our profit or losses are depending on what the price of the stock is depending on what date it is so here we are in the options profit calculator i am going to go under custom and i'm gonna click on two legs here so remember the first thing we do here is we enter the sticker symbol here so ticker symbol is hmc you can click on get price check what the stock price is right now and again we're gonna sell a call here we're to buy a call we're actually going to do the exact same trade we just set up on robinhood so let's start with writing or selling our call so we're going to click on select option and again make sure you're choosing the appropriate expiration date for the call that we sold we chose may 21st we chose the 25 strike and this is a call remember cause on the left puts it on the right don't get confused by that so we're going to click on this so we're selling this call we're receiving as a premium 470 now let's go ahead and buy our call so again the call you're buying should have a further out expiration date than the call you sold so for this one remember we chose the 16th of july expiration date again same strike so 25 strike same type so a call again calls it on the left here so right there so again we're selling this we're receiving 470 dollars but then we're buying this call we're paying 485 dollars so for the stock price range i'm going to go ahead and do uh let's do 19 to 31 here so 19 to 31 and let's click on calculator see how this actually looks like this is what this trade is going to look like here now let's first focus up here so our entry cost 15 net debit again we're paying to enter this trade and that's going to be 15 that we're paying that's also our max risk that's the most that we can lose here 15 dollars our max return is 96 and this will be at around 25 if honda is at 25 on the date of expiration and remember this is on may 21st that's what we're seeing here may 21st which is the expiration date of the call that we sold right so again that's why it's very important that the first thing you do is kind of look the stock and kind of decide what price it will be on the expiration date of the call that you're selling uh because that's the price you want to choose for your strike right we said hey i think honda on may 21st will be at 25 that's the strike price we chose that's the price we wanted to be on expiration so that we can make our max potential return which again in this example is 96 dollars and that would be about a um you know 640 percent return right so it's a pretty big return here if everything were to work out right now we actually take a look at this chart we can see that there's a pretty huge range where we're still making money right and so like we mentioned before we kind of want the stock to trade sideways i mean it can move up a little bit it can go down a little bit but for the most part we want to stay within this range here now the way this is working guys is that remember there's theta decay on these contracts uh and both of these have theta dk however on the call that we sold theta decay is a good thing for us on the call that we bought theta dk is a bad thing but remember theta is higher the closer it is to expiration date and so since the call we sold is closer to expiring than the call that we bought the theta decay we're making from the call we're selling is a lot higher than the theta dk that we're losing from the call that we're buying so ultimately we're taking advantage of that that's how we're generating some money here uh so we are uh making money here from theta dk now when it comes to risks there are some risks that you need to be aware of uh and of course the biggest risk here is early assignment risk especially where the expiration date follows the x dividend date because the probability of assignment increases significantly so you should always check for x dividend dates honda pays a dividend they have ex dividend date that would be something i would like to take a look at first before entering this calendar spread now the other thing that we need to take a look at here is what happens once our call that we sold expires because this is going to expire on may 21st and this will not expire until july 16. so what do we do once this is getting close once a call that we sold is not the available thing you can do and this is what i usually do is just close the whole strategy just close out the entire strategy and remember to close out any trade all you need to do is do the opposite the exact same opposite trade so if i wanted to close out this call that i bought all i would need to do is sell this exact same call so i would sell a call that's also expiring on july 16th with the exact same 25 dollar strike if i wanted to close out of this call i sold here i would just buy the exact same call with the exact same expiration date exact same strike price that's how you close these strategies out the other thing you can do of course is that you can allow the long term put or call position so this one right here to kind of just stay in place by itself right uh you can just let this expire and then this one you can kind of just let it play out by itself hopefully it kind of works out in your favor after that so again i usually like to just close out the entire strategy i always think it's you know kind of uh important that you close it out yourself never let robin hood close it out for you because i've seen a lot of problems happen that way so this is the calendar spread guys and again you kind of take a look at here uh what your potential profits are kind of mess around with this uh you know definitely use the options profit calculator and if you have any questions feel free to leave them in the comment section below check out the discord link to that in the description below i hope you enjoyed the video let me know what you guys think and i will see you guys next time

Channel: TechConversations

Views: 102,082

Rating: 4.953402 out of 5

Keywords: robinhood investing, stock market, option trading, robinhood options, robinhood challenge, robinhood options trading, robinhood, calendar spread, call calendar, call calendar spread strategy, call calendar spread, long calendar call, long calendar spread option, long calendar spread strategy, calendar spread options, calendar spread strategy, calendar spread option strategy, calendar spreads with weekly options, calendar spread robinhood, calendar spread options robinhood

Id: SnvpTRHS_-Q

Length: 11min 50sec (710 seconds)

Published: Tue Apr 06 2021