INSANELY CHEAP STRATEGY THAT COULD 10X YOUR MONEY! | TRADING OPTIONS

hey what's going on youtube and welcome back to tech conversations i'm your host guillermo it is september 2nd hope you're all having a great day today as you can see a green day for me so far up almost 700 today or about point six point percent so far so we'll see what the rest of the day brings us now in today's video i want to talk about a very cheap options trading strategy and how you can use this to set it up for low risk high reward plays and so before i get into this options trading strategy all i ask is that you guys hit the like button down below and subscribe guys it really helps out the channel check out the discord link to it in the description below 56 000 members completely free to join 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 today this is a call option on netflix we paid 370 we sold for 1500 so we made a 1 130 profit per contract on this alert so check out the discord link to it in the description below now let's get right into this video guys and again i have to tell you this anytime before you ever enter any options trade please make sure that you know how to close it make sure you know how to get out of an options trade before you get into it because most of the time you are probably going to want to get out before it expires okay now our goal here is to profit from slightly bearish movement in the underlying stock with limited risk of course i never use strategies that have unlimited risk i suggest you guys stay away from those as well and of course with high reward low risk ratio and so again uh the key here is you want to be slightly bearish on a stocks the ideal situation you're slightly bearish on a stock you believe it will drop to a certain price and then just kind of stay there for you know a couple of days kind of just trade sideways from that level and then of course you want to implement a play here with low risk high reward so what i'm going to do here is i'm going to use ticker symbol bp so british petroleum and again this is just an example i'm showing you here guys so that you guys get the idea of how to set this up please don't actually take this as an actual like alert or trade or anything like that this is just an example here now of course remember anytime we're going into an options trading strategy that involves selling options because we are going to sell some options here we need to check a couple of things so number one we are going to be opening and closing multiple contracts so we do want to check the commission fee for whatever broker you're using robinhood doesn't have any commission fees so we don't have to worry about that there are some brokers that charge some pretty big fees for opening and closing a contract so make sure you always take a look at that how much it's going to cost uh make sure it's not eating away too much at your profits your potential profits the other big thing of course we need to check anytime we're selling options is the x dividend date because remember anytime you sell options there is risk of assignment early assignment is generally related to the x dividend date so you always need to check does this stock have a dividend if it does we need to check the x dividend date we don't want to sell options that expire on the week of the ex dividend date if we do we want to make sure we close out two days prior to it okay so again what i like to use is um nasdaq.com so we go to nasdaq here and then up here we just type in the ticker symbol so again we're using bp and then we can click on it right here and then on the left you can go to dividend history this will show you all the things you need to know about the dividend for this stock and so it tells us up here right the the last ex-dividend date was august 12th and of course we're on september 2nd so it just passed it looks like and the next one won't be until it looks like around november 5th 7th somewhere around there so we'll have to worry about that as long as we're using like you know the next week or so as our expiration date so again always check that but now that we've checked that now we can actually dive into the options here uh for this stock so here we go into the options so again the very first thing you need to do is choose an expiration date now september 3rd is coming up very quickly that's not going to give me enough time for the stock to move in the direction i want it to move so i'm going to go ahead and choose september 10th right just so that you know we would have more time for the stock to do what we want it to do now this is going to involve puts so i'm going to switch over to put here okay so i've chosen my expiration date i've chosen puts because it's going to involve puts and the first thing that you want to do here is you want to determine what price you believe this stock will drop to and be at on the expiration date okay now this is obviously the hardest part of this entire thing trying to figure out what price this stock will drop to and so again let's just pretend that i've done some due diligence some technical analysis uh you know a couple of things like that and i believe that bp will go down to 23.50 and that's what the price that it will be at or close to that on september 10th so what i would do is i would start by selling two uh put options at that price so i would go to the 2350 strike or as close you know the strike that's closest to what price you think it'll drop to and sell to put options so remember when you sell an option you receive a premium we're going to receive a premium here of seven cents per share remember each contract controls 100 shares so i'm going to receive seven dollars for each contract i'm selling and again we're gonna be we're gonna sell two and i'll show you guys how to switch or change the number of each contracts that you want but uh now that we've done that we want to do is we want to switch over to buy so the first thing i'm gonna do is i'm gonna go back to the put i sold and i'm gonna go one right under so i'm just gonna go to the next one right underneath it this 23 strike and i'm gonna buy this put option so now that i'm buying this i have to pay i have to pay five cents per share or five dollars for this contract now the last step you go back to the puts that you sold what you want to do is you want to go up one strike right which would be the 24 strike you want to skip this go up to the next one 2450 and buy this one okay so we're gonna buy this put pay 18 cents per share or 18 for this contract and so ultimately at the end if we take a look here the the put that we sold uh that we that we bought down here right with the lower strike this is 0.5 away from the puts for sally this one up here that we're buying should be twice as far away so if since this is 0.5 away there should be one away which it is right and that's how we know we did it correctly now finally like i mentioned we do want to sell two of these puts not just one so we go up there and we go here to the puts we're selling and we're going to switch this to b2 so ultimately this is what it should look like at the end right so this is going to be a debit this is going to cost us 11 we're going to pay 11 here okay and you can kind of start to see what this will look like when we take a look down here right our max profit almost ninety dollars and we're risking about eleven dollars ten dollars or so so basically risking ten dollars to potentially make ninety dollars right which is a really nice risk to reward ratio so we've created a strategy here uh with a bearish to neutral direction with very little risk and high reward now i do want to mention this may sometimes instead of being a debit uh end up being a credit so make sure that you understand that the other thing of course is that this is called the long skip strike butterfly with puts okay and again uh you can kind of tell that this is done correctly because it should look kind of like you know a triangle here and then of course it should it sometimes it might just be a triangle sometimes like you see here even if it goes all the way down we'll still end up making money no matter how far it drops so with that being said let's go over to the options strat let's take a look here at what this looks like so again you should always use the option strat just to visually see what your trade looks like what your profits or what your losses will be depending on you know what what the price of the stock is depending on what date it is uh so we're gonna go to build here and i'm just gonna go to i'm just gonna go to short put okay i'm gonna start with short put because again we are you know we start by selling some puts so again i'm going to go up here and i'm going to type in the ticker symbol which is bp british petroleum and then we chose our expiration remember as september 10. so we go to september 10 here so again we started by selling two puts at the price that we thought this stock will be at on the expiration which again we said was 23.50 so i'm gonna go to 2350 here i'm gonna add another option sell another put again same price 23.50 right and then we went ahead and we body put right underneath it at the 23 strike like that and then finally we went ahead and we bought a put uh we skipped over one strike right so we were at 23.50 we went 24 we skipped that we went to 20 uh 450 instead and so this is what it's going to look like here so as you can see there's going to be a debit nine dollars max loss nine dollars so that's the most we can lose max profit 91 dollars here okay which if we take a look here of max risk you know those are some pretty big returns that we can see here right and so again what we want this stock to do is to be slightly bearish doesn't have to drop a lot it just needs to drop a little bit right right now the stock is at around you know 24.99 you know even if it drops to like you know 2440 20 you know 24 uh you know we can make some pretty decent profits right uh but ideally what we want to happen here is that we want the stock on the expiration date to be as close to the strike of the puts that we sold as possible which was 23.50 right so if i can get this to go to 2350 here right right here right that would be a 1010 percent return right and that's where we would make our max profit here of 91 dollars so we wanted to be as close to that price as possible on the expiration date but the way we set this up even if there's like you know were to go even further down uh we'd still end up making money on the downside right 41 dollars as you can see here so again this is called the long skip strike butterfly with puts very interesting strategy you want to use this when you're slightly bearish on a stock you think the stock will drop to a certain price and then just kind of stay there for a while right so if you have any questions feel free them in the comments section below also remember to always uh you know kind of check what you know changes in implied volatility does uh you know what happens if implied volatility starts to go up what happens if implied volatility starts to drop right so make sure you always take a look at that because again iv does affect you know the pricing of options uh so anyways guys i hope you enjoyed the video let me know what you guys think and i'll see you guys next time

Channel: TechConversations

Views: 87,811

Keywords: broken wing butterfly options, broken wing butterfly option strategy, broken wing butterfly strategy, broken wing butterfly options robinhood, broken wing butterfly robinhood, broken wing butterfly trading strategy, broken wing butterfly spread, robinhood investing, robinhood options, robinhood, options trading, options trading strategies robinhood, options trading strategies for small accounts, trading options on robinhood, trading options, trading options strategies robinhood

Id: G9CcMo7mePk

Length: 11min 28sec (688 seconds)

Published: Thu Sep 02 2021