Introduction to Trading Index Options l Options Traders MUST Watch

okay good afternoon and welcome back everyone to our options education webinar series my name is tony zhang i'm the chief strategist here at options play and we're here to talk about an introduction to index options trading now over the years i have talked a little bit about trading uh ndx and qx but we haven't really spent a lot of time talking a little bit about the differences and the benefits potentially of trading index options and specifically around some of the strategies and the back tested results of those strategies for different index options so today i want to do a deeper dive into options into index options so that you understand the differences the advantages that index options may provide and then also announce some new new launches within the index options world that make it more friendly for retail traders to access these products that historically were very large and really suited more so for institutions than retail so let's go ahead and get started but before we do what we're going to discuss here today is purely for education and demonstration purposes it is not a solicitation or recommendation to buy or sell any specific securities so we'll start off with a broad-based understanding of index versus etf options they're very similar but also have some distinct differences some advantages to index options some advantages of the etfs understanding the difference and it really comes down to two things the fact that index options are european style options and etf and stock options are american styles so we'll break that down what that means and what that what the benefits are for each type of strategy we'll talk a little bit about the tax benefits of index options this is one part that not all investors were necessarily familiar with that index options provided a tax benefit then i'll talk a little bit about the nasdaq 100 index options the complex of options of of inde of options that are listed on the nasdaq 100 index so that you can see which ones are best suited for you then we'll talk a little bit about the trading strategies for index options and i'm only going to talk about one today because you know the vast majority of indexed options strategies that are traded are traded using uh this one strategy then we'll talk a little bit about the back test so we back tested this strategy on the s p 500 and on the ndx and nasac 100 index and we want to show you the difference in terms of performance before we open this up for q a here at the very end so like i said a deep dive into trading index options now i just want to do a quick poll here how many of you currently trade index options please type yes into the chat window if you trade index options and please type no if you do not trade any index options okay a large number of no's um but also quite a few yeses okay so a lot of you have traded index options hopefully for those of you that have traded index options you're familiar with the differences and some of the advantages and for you know the vast majority of you that have said no hopefully this teaches you something about what you can potentially get from index options but the primary thing i want to help investors walk away from today's session is an understanding as to what are the primary differences between index and etf options so my name is tony zhang i'm the chief strategist here at options play and i want to share with you how you can utilize index options to generate um you know trading trading ideas and strategies using this type of of of trading so first let's talk a little bit about what is an index an index is very simple it's nothing other than just a way to track the performance of a group of assets an index could be on a group of securities like the s p 500 and the nasdaq 100 it could be on a commodity it could be on an interest rate it could be on anything it's just used to track the performance of it it is nothing other than just a measurement and it provides performance uh that we need so you know most of us are familiar with the concept of looking at the s p 500 to look at the the performance of the broad-based markets we look at the russell 2000 to get a sense for the performance of the small cap markets um but indices are not tradable and that's really the important thing to remember about an index itself is that it's pure it's there purely just for the purpose of tracking um of the performance it's not there for you to trade you can't trade them however there are etfs listed on indices and this is what you can actually trade so it's a it's the actual basket of security so when we talk about the s p 500 the s p 500 tracks the performance of 500 of the largest stocks so when you talk about spy or qqq that's the etf that actually owns those 500 shares or 100 shares in the nasdaq 100 index and you can actually buy and sell that etf it's very similar to a mutual fund but an etf is something that you can trade actively intraday on an exchange just like you can with a stock so typically it's something that you track with an index um you know an etf is something that allows you to trade something that's typically tracked with an index but it usually allows you to do so at a lower expense ratio compared to trading let's say a mutual fund or some other type of open and or closed-ended fund so an etf is really this really convenient way for us to get exposure to a lot of different asset classes a lot of different slices of the market whether you want just access to the communication sector or just access to uh you know growth stocks value stocks broad-based exposure gold silver oil it covers a very wide gamut of the things that you can have access to so an etf really is very similar to a stock in terms of how it trades but when we talk about an index versus an etf option many times they're listed on the same index so a lot of investors may not necessarily know the difference between trading an index option versus an etf etf option if they're listed on the same index so the really comes down to the fact that index options are cash settled and that etf options are for physical delivery is the primary difference that you're going to see between an index and an etf and this comes down to the fact that you can't trade an index so there's nothing to actually physically deliver when you trade an index option versus an etf because you can trade the etf when you sell a when you buy or a call or a put you can choose to exercise to effectively own or sell that etf so when we trade an index option these are options listed on the exchange directly on an index versus an etf option as an option on the etf that tracks that index and like i said uh index options are our european cash settled indices and we'll talk a little bit about what that means but etf options are american style options for physical delivery this is going to be the primary difference that you're going to see between these two strategies these two types of um of options but index options also provide a potential tax advantage because there is a section 1256 contract for those of you that are experienced with trading futures or other cftc products they're taxed at 60 capital gains 40 capital gains we'll talk a little bit about that but the benefit of etf options is that there's a very wide range of them over 700 etfs have options listed on them and one contract equals 100 times the index value for index option versus one contract equals to 100 shares of an etf so the two are very similar from that perspective it's a 100 multiplier usually standardized across the industry but the primary differences again comes down to the fact that one is european and cash settled the other one is american of physical delivery and the index option does provide a tax advantage so when we talk about the european versus american style it's really important to understand the difference so index options are mostly european style and what that simply means is that they can only be exercised at expiration so many investors when you're trading etf options or stock options i hear from investors a lot where they're concerned about um they're concerned about early exercise they're concerned about you know selling a call or put whether it's a cover call a short cash secure put or a credit spread you're concerned about being exercised early on the short strike so when you're selling a etf or stock option that are american style which you can have the right to exercise at any time before expiration uh american style options are at risk of early assignment so when you trade a european style option there's no risk of early assignment that's number one so prior to expiration you have no risk of assignment and at expiration the uh index options are cash settled meaning there are no shares or securities traded at expiration so at expiration whatever your profits and losses are on the trade they're simply settled in either a debit or a credit into your trading account directly so you don't have to worry about physical delivery you don't have to worry about the risk of overnight risk over the weekend and what if what if this uh you know a stock or index you know maybe some macro event happens right after the close on friday are you at risk of early assignment or or have exercise risk all of that is eliminated when you trade an index option versus american style options in the money options are subject to auto exercise at expiration so if you have an in the money option that's expiring you have risk of either assignment or exercise depending on whether you're long or short if you don't close out this trade now the one thing about index options historically speaking is that they are typically am settlement versus what most investors are familiar with is pm settlement which is settlement value based on the close of the expiration date most of us are familiar with the friday close meaning your settlement value or the whether the stock whether the option is in the money or out of the money is dependent on where the stock closes on friday but a lot of index options are am settlement so what that actually means is that the settlement values is determined based on the opening price of the expiration date and this is really confusing because if an option closes on friday the last trade actually happens on thursday night but the settlement value isn't determined until friday's open now this is really confusing for a lot of traders and and there's also risk there right because you have to stop trading on thursday night but you don't really know what the settlement values are until the the open of the next day and you have that what we call overnight risk so this is something that's not actually that common anymore most of these index options have now offering pm settlement especially in the more retail friendly sizing that you'll likely be trading um so this is something that's important to understand that when you're trading index options some of them have am settlement some of them have pm settlements really important that when you're trading them you know which one you're trading because if you get it wrong you could find yourself in a position where you think that you're going to close your position on friday but actually sees trading had already closed on thursday the night before so these are some of those nuances of trading index versus america versus in etf options that you have to be aware of before you trade them so let's talk a little bit about the tax benefits because this is really one of the the major advantages in my opinion of trading index options it's the fact that it's a section 1256 contract that means you're taxed at 60 long-term capital gains 40 short-term capital gains that means you have a maximum of tax of 26.8 if you're in the highest possible tax bracket um so no matter what happens you cannot trade pay more than 26.8 based on the current tax rate and this is true regardless of your holding period and remember most of the trades that you make in this type of trend in this type of product are short dated options so you typically trade short term you typically pay short term capital gains if you're in a taxable account now for those of you trading in an ira account this tax benefit does not exist so this is only for a taxable account um the and the thing about an index option is that it is marked to market at the end of each year as if you've closed out the position from for a tax purpose perspective so you can't carry over uh gains and losses to the next year for a an index option versus etf option trade just like stock options they're taxed just like stock or stock options and it's simply based on the holding period of the option itself now many of you may hold the stock for longer than a year but it's rare that people tr hold on to an option for longer than a year so positions held for more than a year are taxed at long-term capital gains which is in the 15 to 20 depending on your tax bracket but positions held for less than one year is is taxed at short-term capital gains which has a maximum of 37 percent so this is something to consider uh because if you're trading in a taxable account a maximum tax bracket to a maximum tax amount of 26.8 versus 37 percent is does provide a tax advantage for index options versus etf options especially if you're in a higher tax bracket but regardless of which tax bracket you're in you're going to see a smaller tax rate for index options versus etf options so you know we've talked a little bit about the benefits but there's also some limitations of index options so i just want to make sure that everyone's clear on this so we talked about the fact that european style and cash settlement is a huge advantage in my opinion for certain strategies meaning strategies where you are selling options that are near the current price and that's predominantly credit spreads straddles and strangles these types of strategies where you're selling options that are near the money and have uh early assignment and exercise risk by doing these types of trades on an index option you completely eliminate exercise and assignment risk so for certain strategies index options provide this unique benefit where you don't have to worry about that during the lifetime of the trade the other benefit of index options is the fact that you know these are listed on some of the most liquid and widely tracked indices so if you think about the s p 500 the nasdaq 100 the russell 2000 the vix these are some of the most liquid products in the world which means that index options you can trade thousands and thousands of contracts and as a retail trader you will never ever ever come close to tapping the liquidity uh you know concerns that some institutional investors may be concerned about largely i would say even when you're trading in any stock in the s p 500 you really don't have to worry about liquidity because you've seen the the unusual volume prince where people trade 15 20 25 000 contracts of of some of these names and they're able to get their orders filled so trading 5 10 20 50 lots is not a problem but especially in these index options these are some of the most liquid names in the world and some of the advantages of trading index versus single stock is simply the fact that indices diversify away single stock risk you don't have earnings risk and you don't have these large gaps if you will that you typically see with stocks where you know some news come happens overnight some macroeconomic news some product launch something that happens that causes the stocks to make a big move when you trade indices you don't have these large surprises so especially when you're doing option selling strategies right where a large move actually works against you because it expands volatility and that's not something you want um index options are an interesting tool or interesting way to trade these options selling strategies but there is a very high limitation there's a limitation because there's only about 50 indices in the u.s that have indexed options listed on them and the vast majority of them are traded in just a few of these indices so it's really important to understand the limitations that you kind of have when you're trading these types of of of of contracts now with these benefits one of the major drawdowns i would say that have existed for index options is the fact that these contract sizes typically were made for institutional traders they were not really sized well for retail um you know especially for those of you that have seen me do presentations on ndx and nqx even nqx you know the reduced value nasdaq 100 index is simply too high and some of you that trade qqq or spy you think that's too high now in the three four hundred dollar range so that's why i'm really pleased to announce this is a brand new product that nasdaq just recently launched the nasdaq 100 micro index options this is a 1 100th value of the nasdaq 100 index so the nasdaq 100 index currently roughly at about 14 000 as an index the new micro xmd is only valued at hundred and forty dollars so it's the equivalent of trading an etf that's roughly priced at about a hundred and forty dollars so you're basically getting the benefits every all the benefits that i just explained to you of index options at a contract size that's much more in line with what you're used to trading a stock option or an etf option actually giving you more flexibility than some of the etf options that are available on the nasdaq 100 index so now if you look at the nasdaq 100 index complex you know you have number one three index options that you can choose from you have the full value ndx this is the most widely traded the most widely tracked nasdaq 100 index this is what the institutions trade because nbx currently trading at 14 000 means that a single contract is 1.4 million dollars in notional so again suitable for institutional traders not suitable for retail unless you have a very large account so there was the one fifth value index which is nqx that was the closest thing you could trade prior to this new launch of new product but that was still at two thousand eight hundred dollars similar to amazon stock right which is around thirty five hundred dollars right now so a single contract of nqx was still 280 thousand dollars again still larger than most retail traders unless you again you had a fairly large account so the new xmd product is 1 100th the value of the full value index which is now 140 for xnd and so so you basically get all the benefits of index options you have the european cash settlement you have the tax benefits and now you have a size that's even more flexible because prior to having the ndx the i'm sorry x and d the only product you can trade was qqq because qqq gave you a very strong correlation to the ndx um about a 99.9 correlation to ndx so you were able to trade qqq but you didn't have the european settlement you didn't have the cash settlement and you didn't have the tax benefits when you traded qqq and as these uh these etf options continue to rise in value and they're not splitting uh it becomes more you know harder to trade some of these because a qq contract now is 34 000 right so it is still sizable so if you have a small account it becomes less flexible for you to be able to trade scale in and out of these trades so xnd at 140 a contract with pm settlement and the one thing i want to point out here is that ndx still has am n pm settlement so when you're trading nbx you have to be careful whether you're trading an am settlement or pm settlement contract but nqx xnd and qqq are all easy to remember because they settle on the friday's close uh something that most of us as options traders or index options trade i'm sorry stock or etf options traders are familiar with so with this new xmd product you really have access to the best of both worlds but the one thing i want to warn investors is that this recently just launched about a week ago on april 22nd now right now there are only monthly options available on xnd so there are no weekly options available just yet but those are coming on may 20th so i think of this as more of a introduction to the product i don't necessarily know that it's best practice for you to go out there and start trading these immediately but be aware that these these products are coming out that you know these exchanges are listening to the to the feedback that investors have been saying because i've been doing education on ndx and nqx for years and the feedback that i keep receiving from investors is the fact that they're too large they're too big for most retail investors so they're launching xmd but it's a brand new product the volumes are still relatively low and the spreads are still fairly wide but i do expect that when the weeklies launch on may 20th you're going to see more volume and you're going to see the spreads tighten up but the one thing i will say is that despite the fact that volumes are low the liquidity is still there so if you want to trade the liquidity is there because remember to a market maker it doesn't matter whether he's making a contract that's 1 100th of value or 100 times the value we're talking about literally one of the most widely tracked and widely traded indices in the world it's very easy for market makers to hedge an xnd contract just like how it's very easy for them to hedge a qq contract the two are very similar and they're effectively identical so just because there's no volume doesn't mean there's no liquidity so be but i will say that i do want to wait i think investors who want to trade this you want to be aware of the fact that weeklies are not listed until may 20th and i would wait largely until that may 20th date before i start trading it i have traded a few contracts myself just to see um because i before i tell anyone to look at a product i always i always make sure that i've traded them myself you know i actually have a position here in xmd right now so they are tradable they are liquid i've been able to get filled at the midpoint very close to the midpoint on these types of trades so it is something that you can trade but until the weeklies come out you want to have the flexibility of weeklies so just be aware that that's coming out on may 20th so this is really going to provide you the benefits of index options in a more retail friendly size and again it eliminates exercise and assignment risk that you typically would see if you were selling qqq credit spreads or qqq options that you wouldn't have and you also have the potential tax benefits they will offer leaps later this year as well as monday and wednesday weeklies so something that many investors are used to trading spy or spx you're used to the monday and wednesdays these will be listed later this year and like i said this is 1 100th the size of ndx 120th the size of nqx and roughly half the size of qqq so you're really getting a lot of flexibility here with these xnd products that allows you to get in and out so i just want to show you like a sample trade of what you could potentially do with an xnd product um and so just to give you a sense you know credit spreads represent at least about 50 of the volume we see traded on these types of index option products and many of you that follow us you're familiar with the credit spreads that we sell our target credit spread is always going to be 45 days to expiration where we sell the 50 delta and buy back the 25 delta so xnd is currently just around 139 this is going out to june which is roughly 45 days expiration it's actually exactly 50 days to expiration and we're going to sell the 140 call against the 145 call as a neutral to slightly bearish play and please don't take this as a recommendation that i think x and d is going to decline in value or anything like that i'm just simply using this as an example this is not a recommendation or you know a viewpoint if you will on x and d i'm just simply saying that if you think if you i'm just looking at this chart and seeing this kind of uh double top here and maybe you think it's going to pull back a little so taking more of a neutral slightly bearish view here you can sell a call spread here where i sell the 50 delta 140 call buy back a 145 call here and let's say i collect two dollars and 25 cents for this five dollar wide credit spread that's a max gain of 225 dollars and a max loss of 275 dollars that's just an example of a credit spread that you can sell this is one that i actually traded earlier today um because i again before i always uh tell someone to look at a product i always want to make sure i i've traded it myself and the one thing you i wanted to share with everyone is you know we've been doing a lot of back testing on these types of index options because i'm curious is to see you know are all index options the same meaning if you were trading them on spx versus ndx do you see the same returns and you know the one thing we have to pay attention to is the fact that the ndx has outperformed the xpx by a very large very wide margin over the past 10 years and that margin has only increased substantially over the past couple of years so this is something to remember because as you're looking for opportunities within you know index options as a universe right you have a lot of choices and and the the most widely traded um index option is still going to be spx so the question becomes you know where do you see the performance and this is where i did some back testing i traded the same exact credit spread on ndx and spx going back to 2007 to today um you know the 45 day selling the 50 delta buying back the 25 delta and closing out the trade 21 days from expiration i back tested the strategy going back to 2007 to today and we see some very big differences in terms of performance now the one thing is that you shouldn't necessarily see look at this annualized return as a absolute value because this is basically only trading one contract at a time on a hundred thousand dollar portfolio so you're not utilizing the vast majority of the portfolio so the returns themselves don't mean a whole lot you just want to look at the relative returns from one strategy versus the x the next and notice how ndx outperforms spx by a pretty wide margin um again the the the absolute performance here doesn't look good because it's only trading one contract on a hundred thousand dollar portfolio it's not allocating the full portfolio to the strategy but the relative performance to ndx to spx is a fairly wide margin you also notice that the win rate here for ndx again this is the exact same strategy is about five percentage points higher here for ndx versus spx you have average um a p l per day is you know sorry we should look at percentages the average p l percentage per day here for spx versus ndx ndx is almost more than double the average p l per day and also the sharp ratio and the sortino ratio risk adjusted returns uh you see our performance here for ndx versus spx so i know a lot of you trade spx and a lot of you are familiar with it so i just wanted to show investors you know this type of these numbers because i was curious myself um i'm trying to understand where do you get better performance if you have effectively access to both right you know where can you get better returns and the the nasdaq 100 outperforms the s p 500 by a large margin and again most of that outperformance has come over the past few years so looking at how those strategies perform over time it's important to understand do you have a relative performance advantage for one index option versus the other so this is one that we i found surprising and i found i thought we were going to have similar performance where one maybe outperformed the other by a small margin but it turns out that the outperformance is actually fairly sizable between ndx versus spx so with that what we'll do is we'll wrap up by talking a little bit about the trade management of these credit spreads remember when you're selling credit spreads on an index option you don't have early assignment risk and you don't have exercise risk these are two things that we're very acutely aware of in when we're trading credit spreads on a stock and we actually modify our strategies to account for early assignment and exercise risk one of the major rules that we have with selling credit spreads on stocks and etfs is that we exit at 21 days to expiration but when you're trading this on an index option this last rule is actually optional optional because if you have a trade that's working out and you want to hold it to expiration the reason that we don't hold this expiration on a stock on an etf or stock option is because we're concerned about exercise risk we're concerned about us early assignment risk which kind of throws the whole trade out of whack to some degree so when you're trading an index option you don't have that risk so if you want to hold a trade to expiration especially a trade that perhaps is already up 60 70 percent you're confident that that trade will will capture the other 30 40 percent you can do that using an index option you don't have to worry so much about an option being in the money and having to roll uh that strategy the second rule that you also don't have to necessarily follow is the fifty percent of max gain um with normally when we do this on a stock or etf the second we make one a fifty percent of the max gain we close out the trade and we move on to the next one when you're trading an index option this also is an optional rule because you know the the 50 max gain rule we tend to find is marginally better than not taking the profit and holding it to expiration but the reason that we don't want to hold it to expiration is because again that exercise and assignment risk that you have when you're trading etf and and and stock options but again when you're trading index options you don't have that same problem so the 50 max gain rule is also optional so if you think the stock's gonna the et index is going to continue moving higher and you want to hold on to that out of the money credit spread that you think is going to expire worthless you're going to keep a hundred percent of the gains this is one of the products that you can do that with the only rule that i tend to find is not optional is the cutting your losses because you generally want to cut your losses on a credit spread when you've lost 100 of the max gain there's really no there's not a great reason to hold on to it and hope that you're gonna somehow see this big swing back to getting yourself back to break even or maybe profitable on a credit spread like this you're better off taking that loss saving that extra 20 to 30 percent of that spread that you are saving and applying it to the next trade so those are the changes or modifications that you can make to trading a credit spread when you're utilizing uh strategies on an index option versus strategies on an etf or stock option so though that is largely what i wanted to share with you here today what i'll do is i'll show you just quickly you know the fact that you can now bring up x and d on the options play platform you can bring up ndx xnd and qx or qqq you can bring up any of these indices uh ndx like i said a lot very popular uh very widely traded from institutions but you know a 14 000 contract is a 1.4 million dollar contract too large for most investors xnd the new micro uh nasdaq 100 much better suited 139 dollars but like i said these are newly listed so as you can see if you go to modify there are only six expirations available may june july august september october on may 20th so right before the may 21st contract expires the next monthly contract that's when they're going to list out the next six weekly options from my perspective to trade these you should look at trading the weekly options wait till those weekly options are listed you're likely going to see more activity in these types of these products once those weekly options are listed but again be careful understand that just because volume is low and spreads are wide does not mean that there's no liquidity there's plenty of liquidity in these names you can trade them and i mean you can look at time and sales there have been pretty there have been sizable trades that have traded in x and d they're just not it's not a very widely known product yet but it is a product that i think will be very popular because many investors want access to the nasdaq 100 index you clearly see the outperformance of ndx versus spx but those contracts are too large for most traders so having access to a more retail friendly size and access to european cash settled with tax benefits is going to benefit retail traders so i'm going to be doing more content on this particular strat this particular index and some of the strategies around them over the next few months but this was an introductory webinar so that investors can be aware that this product has launched that things are coming out in the next month with weekly options that may provide some flexibility for those of you that like to sell credit spreads on index options so with that that covers what i wanted to share with you here today i hope that this was helpful in giving you a number one a primer on you know an introduction to index options for those of you that are brand new to index options what are their advantages what are their limitations and then for those of you that have traded index options hopefully this provided you with some data to perhaps rethink you know where do you want to trade those index options whether it's on the spx or ndx because the performance advantage is there even though spx is most widely traded index options in the world you might want to take a look at strategies or or indices that provide perhaps a slightly better performance on those trades so with that let's turn over to the questions section there's a chat window and a q a window here at the bottom of your screen if you can type your questions into the q a window and i will try to answer as many questions as possible out of the q a window what is the ideal time frame when selling a put spread and call spread on index options it's the same as the 45 day 50 delta 25 delta credit spread that we always talk about here at options play um kenny's saying nice to hear about this index option do you still exit at the 14 to 21 day rule so i did talk about that and the answer is that that rule is optional optional on a index option do we still have to close the short calls or puts in an index option if the trade is in my favor sanjay you do not so let's say you sell a credit spread and it expires and it's about to expire out of the money worthless you do not have to close that trade the same way that i always tell investors on a stock or etf option close it out even if it's just for a few pennies to remove that exercise risk you do not have exercise risk when you trade in index options so a trade that's going your favor you don't have to close it'll simply settle in cash what about margins margin is exactly the same between etf and index options that does not change when you trade index option how many points of spread is ideal between buy and sell so jag we don't look at points we look at deltas we always look at deltas you sell the 50 delta and you buy back the 25 delta um what is the x and the ticker at interactive brokers it should be xnd and yes xmd is available at options play and i have traded it at tastyworks i have traded it at td ameritrade we have pretty much tested all of the brokers here in the us they all carry xnd uh yes xmd is european style um jack then i would i would reach out to interactive brokers because we definitely did speak to them and they and is available when you sell the 50 delta how often do you end up in the money so about 40 of the time in a 50 delta is in the money uh why don't the bigger markets split the indices so that it's more retail investors can participate there's even more liquidity in wayne that's a good question but you know nasdaq is listening and nasdaq heard you know because i've been doing education for nasdaq for about five years now and the overwhelming feedback that i've received from you guys that i've passed on to nasdaq is the fact that the contract sizes are too large and they are listening granted these guys this is large financial institutions they don't move as quick as startups um but they are listening and they're moving in this particular direction and this is in my opinion the you know the the result of the feedback that you guys have provided that the um that the exchanges have listened to jack is saying what's your back testing platform the back testing platform i use is called orats it stands for its options research and technology something um so uh o rats o r a t s dot com is my back testing strategy uh or back testing platform uh my broker shows 25k on on ndx and only 108 on nqx that doesn't seem like much volume so again volume doesn't mean a whole lot we were talking about the nasdaq 100 index this is something that just launched last week so i'm not expecting a ton of volume on something that just launched last week but you know you have to start somewhere right every brokerage firm every single index every single etf started from zero this just launched last week like i said the weeklies will launch on may 20th you're going to see a little bit more volume on may 20th and i'm hoping that that will continue to increase and as volume increases spreads will tighten but despite the fact that there's no volume the spreads are fairly wide liquidity is there you can trade these these are very very liquid because it doesn't matter the size of the contract the nasdaq 100 index is one of the most widely and most liquid tradable products in the world so market makers have no problems hedging your you know fifty thousand hundred thousand dollar trade in terms of an options contract so don't worry about liquidity but because spreads are wide you need to be careful of where you place your orders because the midpoint may not be exactly where the theoretical value is which is why i'm saying to you for those of you that are new to index options i would wait until the weekly options are listed before you trade but this is more of a session to let you know number one what are index options what are their benefits and to also let you know that some new products are coming out that are better suited for retail traders between 50 and 25 delta how many points of the spread so jack that completely depends on the volatility of the stock and the price of the stock again there isn't a hard you should not ever use a point spread when you're trading an option use the delta spread um if you roll it in the money option to avoid assignment if your thesis can you roll an in the money option to avoid settlement if your thesis is the same um you certainly can there's nothing stopping you from rolling but you're not rolling it to avoid settlement per se yes your delta selections are the same for when you make a role can you confirm the notional value of x india is fourteen thousand dollars yes the notional value is fourteen thousand dollars it's the same as trading a stock that's trading at a hundred an option for a stock that's trading at a hundred and forty or an etf that's currently valued at 140 and how should we think about notional value you don't really need to think about notional value honestly it's just to give you a relative comparison of 1.4 million versus 14 000 what is the margin requirement is different from trading etf and equities no it is not is exactly the same so for example if you sell this credit spread that i was showing you here before if you sold the credit spread on a on a stock a 140 145 stock your margin requirement is the max risk 275 dollars when you trade an index option your margin requirement is also 275 they are identical do you take the net gain or loss of the credit position to exit your ex to calculate your exit positions um you don't take the net gain or loss of the credit position you take the maximum reward um that is the percentage that you use to calculate that so my my take profit on this would be one one two five so 125 dolla you know fifty percent of 225 and my max risk here would be uh 450 i'm sorry i'm not saying my max risk my take profit level would be if this spread trades at 450 that would be a 100 loss of the of the max gain and i would try to take profits at a dollar twelve um so if a credit spread currently trading at two dollars and twenty five cents decreases to a dollar twelve that would be my my area to take profits but if it increased to let's say four dollars and fifty cents that would be my um my stop loss level here on this particular trade are iron condors better for index options well iron condors are just two credit spreads so for those reasons yes iron condors you know have the same advantages that you have when you're selling credit spreads on an index option versus selling an iron condor on an etf in closing the credit score example wouldn't the stop loss be two dollars not four dollars so just to be clear the two dollars is not a two dollar loss the two dollars is a four dollar debit right so if you sold something if you sold something for two dollars a move when an ounce of four dollars is a two dollar loss right so the the four dollars is the debit amount it's not the loss amount the loss amount is the difference between the two which is two dollars um is this similar to trading futures no futures is like trading just futures is closer to trading stocks this is trading options so the question is just whether you're trading an index option or an etf option they're all options so i would not say that this is similar to trading futures uh where do you find these symbols um you know the symbols are right here i have it on the spreadsheet and we'll i'm sorry on this doc on this um presentation and when you when we send you the recording it will send you the um this presentation so that you have these symbols if a european settle at 12 30 for my commodity option and i do not want to get a sign is it best to close it out on thursday's close uh yeah well any type of option that you don't want to be unsigned on you have to close uh just wondering how are you coming along with the unusual volume report you're working on rory um that's already on the options play hub so when you go to the options play hub which is on the education and resources section on the top of your options play screen when you click on that the bottom report here is the unusual volume report right here so this is already available to you uh within the options play hub the delta on debit spreads still remain the same or not yes deltas on a debit spread on an index option is still exactly the same there's nothing that changes when you're trading an index option it's just that the characteristics of the options themselves change but the strategies don't change what brokers deals with micro options reuben you know we've tested this across all of the major brokers here in the us they are now all carrying and you can trade ndx and i've personally traded them at tastyworks and ntd ameritrade uh what are the tax benefits it's the 1256 contract so they're they're 60 capital uh 60 short-term capital gains i'm sorry 60 long-term capital gains 40 short-term capital gains which puts a cap of 26.8 on index options if you're in the highest tax bracket uh xmd technical score so because xnd just launched they they've only calculated a fairly small amount of history so there is no technical score but i will say that you can just use qqq because it's the exact same index uh and you can use that technical score for now it's just that x and d doesn't have enough does not have um any uh doesn't have any um enough history to calculate that uh i suspect no tax advantage for canadians ronald that's a great question but i actually do not know the answer to that question you would have to speak to your tax representative in canada for that do calendar spreads benefit from european settlement xmd um i suppose it does because the short option does not have any assignment risk and so for those reasons yes calendar and diagonal spreads do benefit from european settlement versus trading uh you know it on qqq what's your technical chart rule for selling put credit spreads so generally speaking any type of oversold condition it doesn't matter what you use to measure oversold you know momentum stochastics rsi macd you know when you see that oversold buy signal that's your in theory the best time to sell a put credit spread slightly off topic what's the difference between etf and spider spiders are etfs spiders is just a company that lists etfs i can assume debit spreads can be done as well yes all strategies can be done i'm just saying that the vast majority of strategies that are traded on index options are credit spreads um can we do the trade from canada if you have a broker that offers us securities then yes you can trade this from canada if i use the credit spread spreadsheet from options play to hub to enter trades i find that very often the premiums are not the same as in the spreadsheet is there a plan to refresh the spreadsheet more often morale um thank you for that feedback um that's something that we can look into of you know and we're also working on making that something that you can actually run in real time uh pr it'll be you know something that's gonna be in q3 but we're working on making these all these different reports potentially customizable and stuff that you can run in real time uh do i have to pay tax and x and d in my tfa tax-free account so frank if you're trading them in a tax-free account then no i mean tax-free account are by definition tax-free so uh tony is the performance difference fairing ndx being more profitable that is selling call credit spreads versus ndx versus spx so gail um i don't think selling call credit spreads is a good strategy especially on an index you know indices tend to only have better performance than like put credit spreads because indices generally drift higher so i can do the test but um i don't think that you would have a profitable trade i think you're likely going to lose money on that trade every stock has been giving a score what is that for um if you're talking about the score here it's the technical score the technical score is our relative strength ranking it ranks stocks from one to ten ten are the stocks that are outperformed in the market one are the stocks underperforming the market it just gives you a sense for whether a stock is beating the market or underperforming the market can you find difficult to close a position due to liquidity so again joe you know whenever you're talking about the s p 500 and nasdaq 100 liquidity is never the problem the problem is the price that you want right um you know it's like saying that it it's like it's like going on to you know for example i always like to go back to cars right because think about toyota camrys you have millions and millions and millions of toyota camrys and you have ferraris there are very few ferraris are very rare right so when we talk about liquidity we're talking on the s p 500 and the nasdaq 100 we're talking about toyota camrys and honduran core it's literally the most popular cars in the world so if you want to buy and sell a toyota camry or honda accord there's almost a dealer on every single corner that will buy from you a used one or sell to you a used one so if you if you sit there and let's say toy you have a toyota camry that's worth ten thousand dollars and you want to pay eight thousand dollars for that toyota camry and no one wants to sell you a toyota that that car for eight thousand dollars and you say there's no liquidity in toyota camrys no one wants to sell me a toyota camry is that a problem of liquidity or is that a problem of your price i would tell you that it has nothing to do with liquidity it has to do with the fact that you're asking to pay something that's below fair value so the car is worth ten thousand dollars you only want to pay eight guess what you're going to think there's no liquidity because no one wants to sell you the car for eight thousand dollars so when you trade any type of index option um you know etf option like spoi or qqq and your order is just sitting there and it's not getting filled it's not because of liquidity it's because of the price that you're asking to be filled at no one wants to deal with you at that particular price so be very diff be very careful about understanding the difference between liquidity and the price that you want um and whenever you're you have and anything related to the nasdaq 100 and spy we're literally talking about the two most widely traded indices in the world if you have an order that's sitting there it's not because there's not enough liquidity because i can tell you you can trade thousands and thousands and thousands of these contracts without moving the markets in these types of markets we saw a 1.4 billion dollar trade in spy at the close yesterday on i'm sorry on tuesday and that was in a single order 1.4 billion dollars so if you're concerned about liquidity then you're thinking about the wrong thing it means that the price that you want is simply a price that no one wants to trade with you at so hopefully that helps you understand the difference between the two but liquidity is never a problem in one of these products if someone could trade a 1.5 billion dollar trade in a single order in this particular market you should not ever have to worry about liquidity uh which is preferable credit or debit spreads for index options um you know i wouldn't say one that is preferable it depends on first of all i think to if you're asking the question debit versus credit spreads that's almost assuming like they're the same and you just want to know which one's better they're very very different from each other credit spreads are for when you have a more neutral slightly mild move debits first are when you expect a big move right so you can sell credit spreads all the time but you should only buy debit spreads in very select times when you think the stock or etf is going to make a big move so you should never be comparing should i sell the credit spread or should i buy the debit spread because that's like saying are you really bullish on the stock or are you sort of bullish on the stock those two are two very different things you're never both very bullish and mildly bullish at the same time right so ask yourself first do i think that the index or the stock that i'm trading do i think it's going to make a big move if i think so i should trade a debit spread if i think it's going to be more of a small mild move or maybe i just think that it's near a support level it's not going to move any lower that's when you want to sell a credit spread you should never be kind of thinking why should i do one or the other it's it's real it should be fairly clear which one you want to trade what is the symbol x and d is the symbol uh where do i find the delta in options play the delta is on your strike drop down so when you click on the strike drop down you have your strike price you have your premium and then you have your delta so those are the three numbers that you see on your strike drop down when you're using options play can you name some other indices that trade with the 1256 tax advantage all index options are 1256 contracts when do you do a credit spread when when do you do a credit put spread why do you sell the short legs so close to the current stock price uh scott because back test shows us that is where you have the highest gains um you know i can show you the back test of all the different strike prices but you know when you're selling a pre when you're selling options you want to maximize the income that you're receiving and you want to reduce the risk as much as possible selling the 50 delta and buying back the 25 delta maximizes the income that you're receiving at the same time minimizes the risk that you're taking that is why the numbers are are so clear as to why those are your optimal deltas uh candy's saying tony i was with interactive brokers was closing out a credit spread trying to buy back my short leg however the bid asked spread showed on the drop down manual could only see the ask price but no bid price ended up closing at market i got a crappy fill i was wondering anybody make the same mistake as me why could i not see a bid price so uh kenny i mean especially if this is something that's fairly out of the money there's no requirement for a bid price you know bid price could very well be zero and it sounds like this might be something that was perhaps near expiration um this is why we generally advocate closing options that you want to close out before expiration or well before expiration um you know i usually don't have any options in the last week or two before expiration for this very reason um you know but still i think that i don't think you should use a market order to get a fill on something that doesn't have a bid price anything that doesn't have a bid price tells me that market orders you're going to get screwed on that you should only use limit orders in my opinion when you see that i understand that an equity option price will change based on supply and demand do supply and demand have the same impact on index options so the pricing of these do not change and and the and i would argue that the that the value of an in of an equity option price doesn't change so much on supply and demand um i mean everything in theory changes based on supply and demand but uh index options you know it doesn't so just be clear it doesn't matter whether you're trading on an etf or an index option the supply and demand's the same right because it's the same it's the same product it's all the nasdaq 100 index which is the same 100 companies so whether you you you trade it through an etf or you trade it through an index option or you trade it through a mutual fund the demand is for the same item the question is just the vehicle at which that you access it through right you can go out and buy 100 all 100 companies in your own portfolio outright i mean it's not very cost effective for most people to do that uh you can buy the etf which is much more convenient you can buy a nasdaq 100 mutual fund which is just not as liquid or you can trade an index option or you trade a future right but they're all based on the same 100 underlying companies so it doesn't matter which one of these products you access it through they just have different characteristics so today what we're trying to highlight is the different characteristics between accessing the want and asset 100 index using an etf option versus using an index option and hopefully this helps you understand the differences to help you choose which one is best suited for you about tqq compared to x and d uh aware that x and d is derivative of ndx tqqq is three times bullish qqq so i mean you've just said it yourself one is three times the leverage of x and b so i i don't i mean that's exactly it sounds like you were able to answer your own question um is there anything we need to consider with doing credit spreads on stocks versus index so stocks and etfs are the same the same risk that you have with etfs you have with stocks unfortunately i know i do not know the tax implications for canadians um mark you know your question about uh uh best buy i'm sorry bed bath and beyond you know i i actually i'm in a very similar trade myself and it's not that you know you're you have to really look at the uh the reason it has nothing to do with your breakeven price it has to do with how the stock has moved since you've entered the trade right so if you entered the trade and was trading at 28 now trading at 26 dollars the trade has gone against you if you held it through expiration your that will be profitable meaning as long as the stock is above your break-even price at expiration you will be profitable but prior to expiration you're going to lose money what other indices have good liquidity so i mean if again the s p 500 and nasdaq 100 the russell 2000 these are going to be the ones that are most liquid because those are the ones that you hear on every single tv channel that are quoted those are the most widely traded indices uh cell 50 delta and by 25 delta calls are bearish what what do you recommend for a bullish strategy the exact same deltas 50 delta put 25 delta put how high is this market going to go ken if i knew the answer to that i wouldn't be sitting here what do you think about trading spx in the morning on each day using credit spread so michael you know this is also a strategy that we've back tested you know people selling zero days to expiration credit spreads the success of that strategy is completely depending on is completely dependent on luck and which year you started trading that strategy if you started trading that strategy in 2010 you would have done very well for the past roughly nine ten years if you started trading that strategy in 2019 you would likely have gone bankrupt by now um so it it really just depends on when you started it and what luck you have with retire with respect to the business cycle um and because selling zero date to expiration options are simply just riskier you have a high amount of risk for a very small amount of income for someone who knows nothing about options which broker do you recommend how much to open an account with so neil i would say i would recommend td ameritrade or tastyworks as a good starting point for uh you know for a platform that's low cost that provides a lot of tools a lot of powerful tools and a lot of education at the same time will you email the slides yes steve on all of our youtube videos so if you go to our if you go to our youtube channel youtube.com optionsplay um every single video that we produce that we show you that we provide you the recording with uh so for example when we did this webinar on on um on cover calls you will always in the description see a link for the slides uh so we always post the slides in all of the descriptions in our youtube channel so if you go to our youtube channel hit subscribe and make sure you click on the notification bell here on the upper right hand corner because when you do that we'll send you a notification every single time we upload a a new video and you'll receive the um email notification that we've uploaded a new video and the the slides are always in the description so remember that whenever we send you a youtube video the slides are in the description are will we be able to trade these index options after hours oh that's one other thing that i think investors are not aware of but you can trade index options up until 4 15. so you have an extra 15 minutes to trade index options after the close so you do have that ability to trade after the 4 pm when will the new weekly options release when will the new weekly options release so that will be on may 20th may 20th is when um the weekly options will be listed uh they're offering strikes at 50 cents would you say there's a benefit to trading the whole dollar strikes versus the mid dollar strikes not at all there is zero difference between the different strike prices uh you know the only difference you're going to see is that there's going to be more volume in the dollar strikes people like to trade dollar whole values you know that's why if you look at spy the 330s will always has more volume than the 331 than the 332 people just like to trade round numbers but from a trading perspective there is zero difference between the different strikes for the platforms that don't support index options what would you recommend for s and uh nasdaq and spx um and s p uh i would say spy and qqq but i would then say that you should probably trade with a brokerage platform that does offer index options if you want it i actually don't know many brokerage platforms that don't offer index options what are other optionable indices that are that are retail friendly honestly i don't know of any in this there's none that i know of in this size this is the first um because this really is uh the first time that we i have seen index options size perfectly in my opinion for retail even the ones that are quote unquote retail friendly like xsp which is the um mini spx is still at 421 that's the same price as spy you know that's a 42 000 contract so you know if you have a few hundred thousand dollars in your portfolio that's totally fine right but if you're starting with you know five thousand ten thousand twenty thousand you know forty thousand dollar contract is a sizable contract the margin requirements on that will likely be you know seven hundred to a thousand dollars to trade a credit spread and if you have a ten thousand dollar account that's ten percent of your portfolio on a single trade um you know that in my opinion is quite a bit of risk here as you can see with this and with this x and the example i just showed you your max risk is 275 dollars so even if you have uh you know a ten thousand dollar account that's only about two point seven percent of your total portfolio's value that is in my opinion far more suitable for retail i find that the fees on index options to be higher which could reduce the tax benefits depending on your tax bracket um michael there should not be any higher fees to you to trade index options um if you do you should look at your brokerage firm and see um so i take that back it depends on which index option you trade so for example with x and d there's no additional fees to trade x and d versus trading qqq so if i'm not mistaken there are some indices index options that do carry higher fees but x indeed there's no fees to customer so meaning as a retail investor trading x indeed there are no higher fees than trading any other product like qqq how do you learn to make the most of options play that's a really great question i've recently posted a video about a few months ago about all of options place tools and services i'll post a link here into the chat window for those of you that want to learn more about this but you know i did a comprehensive video on all the different services that we kind of provide i think it's a good way for investors to learn more about what we have to offer i just posted it i'm posting it into the chat window here right now how do you access the hub you access the hub from the options play tool which is um [Music] uh whoops i like it to my tool so when you're on the options play platform at the top of your screen there is a link that says education and resources right here at the very top of your screen if you click on that link that will take you to the hub can you find it difficult to close a position due to liquidity again when you're trading the nasdaq 100 index if you're if you're if you think that there's not enough liquidity in the nasdaq 100 index then you must be a sovereign wealth fund with about 50 billion dollars in your in your account you need to liquidate 25 billion at one time and you find that the nasdaq 100 index does not provide enough liquidity for you again as a retail trader liquidity is never the problem it's always the price that you want to get filled at that's the problem meaning if you want to buy something below the fair value guess what no one's going to want to sell to you below fair value if you're trying to sell something above fair value guess what you're never going to find enough liquidity to do that so it's not a matter of liquidity it's always a matter of pricing when you're trading something this liquid uh you'd mention rolling down long puts with profits at 70 to 100 percent would you suggest the same in the money index long calls yes that is the same those rules remain the same do they have micro options for spx and iwm so yes uh spx does have micro options but again they're traded they're at 421 right now so that's about a forty two thousand dollar contract do you look for support and resistance levels before delta on any spider trades um so yes you always look at the technicals first but no matter what i only enter the trades on certain you know pullbacks right so but you still always use the same deltas so the deltas never change it's just because the entries also don't change you look for the same technical setup when you're entering these types of trades is this a better vehicle to hedge your market and in a market downturn so i wouldn't say that it's a better vehicle the the it's going to be an identical vehicle the ma the advantage that you have when you're buying a put option with these types of contracts is twofold one because the european cash settled if you want to hold a put or a put spread to expiration you don't have to close it out in order to profit from it so you know you can potentially reduce some transaction costs on the closing side of it that's one aspect the second one is that tax benefit right if you use qqq puts to hedge your portfolio or spy puts to hedge your portfolio you have to pay the short term capital gains in a taxable account here you have to be you have to pay capital gains but you pay a lower rate so those are the reasons why if you're hedging your portfolio and you're thinking about using spy or qqq you may want to use an index option because of those two things is there a difference in index price calculation model between regular options and index options yes there is a slight difference because um black shoals is actually suitable for index options because there's no assignment there's no early assignment black shoals is actually better suited for european than american style american style is better using a binomial tree a cox rubenstein model so yes there is a difference in terms of the fact that there's no early assignment is there a plan to allow credit thread report to be customized based on the selected amount of securities so share that is something that we are working on is is getting these reports into the application more customizable and also being able to increase the time frame at which we scan for those opportunities um the credit spread report is meant to update every single hour because it's meant to tell you when the trades are are suitable right these are new trades that are constantly coming in through the market so what was tradable yesterday is no longer tradable today that's why they update all the time um wallace again i really cannot comment on you know tax tax advantages in canada i simply just do not know to be honest i like to place iron condor credit spreads on index options like spx are there any rules of thumb when it comes to trading iron condors and spx in large quantities you usually enter the put spread and call spread one or as four legs at once so you know i'll be honest i don't trade a lot of iron condors i'm not a big fan of the strategy um you know i have found myself in iron condors as a result of lagging in on the put spread and then lagging into the call spread that is something that i have traded but i've i honestly don't trade a lot of iron condors for the reason that i'm not rarely i'm rarely both bullish and bearish you know the i don't tend to find that iron condors provide much of an edge in in trading i mean i know a lot of people like to trade them but i only like into iron condors i rarely rarely trade iron condors as a whole strategy what is your criteria for credit spread report other than percentage of premium liquidity is number one we only sell credit spreads on something that is very liquid and then premium uh percentage is part of premium that's really the those are the two major ones there's also the technical aspect of it so any bullish credit spread that are on our credit score report are only there because we have a bullish view any bearish ones are there because we have a bearish view so you have liquidity you have premium and you have directional view all three things must align before it shows up on our credit spread report um lonnie that's something that we are working on in terms of potentially offering futures is there a similar one 100th product that tackles spy or the dow there is not as far as i'm aware of um the smallest spx product is xsp which is still a 404 42 000 contract um kenny out of your 15 years of trading experience could you share some mistakes that you've made so we can all avoid so i cannot stress enough the one thing that i think that i from my 15 years of training experience and working with clients for 15 years the one thing that that sets successful traders apart from everyone else is not your strategy it's not your indicators it's not any of those things it's not who you follow it's how you manage risk right this is something i talk about a lot in my trading psychology videos um i highly recommend investors to take the time to learn more about risk management and how you think about risk um here i'll share a link with everyone in this chat window um i'll share the link of that chat of this of that video in the chat window because successful traders think about risk in a completely different way uh you know in terms of whether they want to choose to spend the time uh you know working on losers and trying to get them back to winners or do they spend their time on winners to keep keep turning those into bigger winners and just letting their losers go i tend to find that the traders that that don't succeed the traders that are frustrated the ones that that find it difficult to become profitable are focusing on the wrong thing they keep trying to turn their small losers back into winners thinking that as long as i win more often i'm going to be profitable that's the wrong mindset the right mindset is making sure that i never blow up my account that's the number one rule every single focus everything that a successful trader focuses on is not the upside they focus on the downside they focus on preventing downside because if you don't prevent downside if you don't spend enough time trying to mitigate downside the upside will never even be an opportunity because you're going to blow up your account i've seen it over and over and over again investors who don't focus on risk management who don't focus their attention on how do they mitigate risk take on emotional trades because they trade too large or they get emotionally tied to a trade and they just keep throwing good money after bad money until they blow up a serious hole in their portfolio and those holes are what causes you to underperform and not succeed in trading it's not your strategy it's not who you follow it's not what indicators you use those are not the things that cause underperformance it's how you manage risk and how you deal with small losses and letting them go so that you can continue to move on to the next trade um so right now we only offer the nasdaq 100 index index options on options play this all comes down to the market data cost um snp charges us tens of thousands of dollars just to display spx nasdaq has made it much more cost effective for us to offer this product so for those reasons that's why you see ndx and not spx currently on our platform instead of at the money why not in the money spread you never want to sell an in the money spread because in the money options have very little extrinsic value as an option seller you want to sell extrinsic value if you're not selling extra value that value cannot decrease right as a seller you want the value of that option to decrease if you're selling an in-the-money option you're that's mostly intrinsic value very little extrinsic value so that's why you never ever sell an in the money spread sam call interactive brokers i know that they offer x and d i don't know what the symbol is for x and d at interactive brokers so on these index options would you would do weekly put spreads rather than 45 days no you would still do the same 45 days but as you can see when you're trading a monthly option uh when there's only monthly options uh you know you don't have a lot of choice right but like i said on may 20th they're going to start listing the weekly options and you're going to have a lot of choices and you're going to be able to find that 45-day credit spread if closing 21 days to expiration is optional optional do we need to keep in mind with gamma risk you do eric um so but it's really more so that if let's say you have a credit spread that's you know has a 90 probability of profit you've sold the credit spread that's pretty far out of the money those are the ones that you don't have gamma risk on but if you're selling your credit spread and you're still at the money that's when you do have gamma risk so that's where you do want to decide you know do i want to take on that gamma risk if not close out the position is there a difference in price oh i've already answered that question i've had my ass handed to me doing zero days to expiration credit spreads um you know joseph it is uh i understand why it's an enticing strategy you know you think that you're kind of outsmarting the market right i know there's only four hours left i the market has to close you know out of the money i'll be able to make but it's what we call pick up picking up pennies in front of a freight train it's going to work 90 of the time and that's what makes it so attractive right you think oh if i just win 90 of the time i'll be great you know the 10 of the time i don't worry about it and and it's that mentality that causes you to lose huge on those zero data expiration uh credit spreads okay so with that that covers what i can that i have time for here today thank you so much everyone for your time i really hope that this was helpful in giving you a better understanding and a jump start to an introduction to index options like i said this is a new product it's not quite there yet in terms of volume um it's getting there and i'm and i know in the next few weeks as we kind of see more weekly options being listed you're going to see that even more you know when i was looking at this last week spreads are much wider now they're tighter and i only expect this to get better going forward so with that thank you so much we'll send out this recording to everyone as soon as we finish and i hope that this is helpful for everyone otherwise i'll see you guys next tuesday on our tuesday morning market outlook session thank you so much and have a great night

Channel: OptionsPlay

Views: 22,027

Rating: 4.9080458 out of 5

Keywords: options trading, options education, OptionsPlay, Tony Zhang, technical analysis, trading, trading education, CNBC

Id: 83mHyqPjjR4

Length: 81min 10sec (4870 seconds)

Published: Fri Apr 30 2021