MAKE $1000 WITH LONG STRADDLE OPTION STRATEGY! | STRADDLE EXPLAINED

heyo - and on YouTube welcome back to tech conversations as always I'm your host Guillermo and as always I'm not a financial expert nor a licensed professional if you plan on investing in a stock market please consult with one first and invest at your own risk so another pretty bad day and the stock market looks like we're down 2.4 percent today I think this week I'm down in total but $1,800 right and you know I saw this coming a long time ago I just wasn't sure when it would happen and it's you know but I have no fear fortunately you know using this wheel concept will you know keep making money every single week keep in mind this is not a get-rich-quick scheme you know it will take time you know unless the stocks start to go back up but at the end of the day we will keep making money every single week and eventually we will you know get back to where we were plus making more profits so I'm not worried about that looks like I'll be assigned a hundred shares of AMD as well a and B was around 50 51 today and so I'm pretty excited to own Auditors of AMD really good stock and you know we'll start selling calls with that next week as well you know and so it's good to you know utilize this concept because at the end of the day we still have the hundred shares of some sort of stock as opposed to people who maybe bought some calls this week you know that money's pretty much gone you know depending on what stock you chose but anyways enough about that today I want to talk about the straddle it's another options trading strategy now again just like the strangle there's two types of the straddle there's the long straddle there's the short straddle so today we take a look at the long straddle and you'll be able to see that it it almost resembles the long strangle and you know are a couple of differences which you know all cover in a different video but as always remember to smash that like button and subscribe guys it really helps on my channel if you're new to trading options I'll put a couple of videos in the description below where I discuss trading options in more detail check out those videos as well or none of this will make much sense to you so just like I have been doing with my previous videos I will be using American Airlines for this example and so let's go into this treat American Airlines options and let's see what we're gonna do so again we're gonna be time with the long string the long straddle today and so this is gonna involve buying a call and buying a put at the exact same strike price okay and so our goal here is to have the price of the stock shoot either up or down from that strike price right and before they're up it goes or the farther down it goes the more money you're gonna make and so we'll actually visualize that and try to understand what's happening but again we're gonna end up buying one call you know so if you were to use American Airlines we're gonna buy this call at 12:50 and then we'd buy a put at that exact same strike price okay and so again like we've been doing with the previous videos we're gonna hop on over to the options profit calculator really useful and really handy to visualize what's gonna happen right any long straddle this will graph out everything for you I'll put a link to it in the description below if you want to follow along and like you'll always I really recommend that you come you know if you could you come and look check this calculator out and just play around with it you know try different basic you know put calls or try out spreads keep in mind the straddle is a more advanced trading strategy on so I'd become more familiar with the basic stuff the spread so I made a couple of videos on those things as well so I definitely recommend you check those out but again we're gonna be looking at the long straddle so we're gonna go to at Advanced section alright where you see the straddle click on that link and it will take us to a straddle calculator ok so again this is gonna really help us visualize what could potentially happen because again before you get into any sort of trade you need to know what your you know your potential risk is where your potential gains are and so this is gonna help us do that without us having to go out and do the math ourselves and so all we're gonna do is we're gonna come to this symbol text box here and you're gonna enter the symbol of whatever stock you're you know trying to visualize this straddle on alright so again I've been using American Airlines so the symbol for that is 8l and then I'll click on yet price and so the price of American Airlines right now according to this is twelve dollars and thirty seven cents per share and so that's fine until again remember the straddle long straddle in particular we're gonna buy a call and I'm gonna buy a put at the exact same strike prices so let's start off with buying our call so we're gonna click on select option and so as you can see puts R on the right and then calls are on the left and so since we're buying a call we're gonna stay on the left and remember you can choose whatever expiration date you want for this contract so let's just choose July 10th and so again we need to choose a strike price that that's the same for both the column to put and so in this situation remember you're gonna benefit when a stock price is shoots above the strike price it's good to be low that strike price and so you kind of have figured out what price American Airlines most likely won't be it right and so just for this demo we'll choose a thirteen dollar strike price okay so let's say that I'm pretty confident that you know I'm not sure whether it's gonna shoot down or up but I'm pretty sure that it won't be thirteen dollars right and so you you choose this $13 strike price and so as you can see they're asking 92 cents so we'll click on that and so 92 cents per share is 100 shares per contract you won't want contract so that'll be $92 that we're gonna have to pay to buy this call right and remember when you buy a call you told me that the price of the stock goes up when you buy a put you're hoping the price of the stock goes down and so we're gonna buy the put as well now so again it has to be the exact same strike price has to be the exact same expiration date thankfully this calculator already knows that in so it'll it'll automatically put you to that exact same expiration date but we do need to buy the foot so again puts it on the right and since we chose a $13 strike price for the call we bought this has to be a $13 strike price as well so it looks like the ask is one dollar and 77 cents per share since there's a hundred shares and we want one contract that'll cost us a hundred and seventy seven dollars so as you can see here our net debit so we're gonna have to pay two dollars and 69 cents per share and since there's 100 shares any contract we're gonna have to pay two hundred and sixty nine dollars for this long straddle and that's actually gonna end up being again the more your your biggest risk that's the motion of the lose potentially from this straddle and so then we can choose what range we want to graph for the share prices so let's just that's cool low let's go like you know three dollars and then let's go high let's go like nineteen dollars right all right so look calculate this and so this is gonna help us visually see what's happening and again this this almost looks like the long strangle okay if you have not seen my video on the long strangle I highly suggest you do this almost looks like it I'll make a video on what the differences are but again right like I mentioned before you can see all the green above and all the green below this is your gonna benefit from this when the stock market is pretty volatile and you know the price of a stock is gonna shoot up and you don't even have to be correct on what direction it's gonna be as long as it goes up or down are you gonna make some good amount of money so honest again start off with this estimated return section just to understand what's happening so again like I mentioned your max risk on this long straddle will be 269 dollars that's the most you can lose and again you always have to make sure that that's well-defined before you enter into into any trade know what your max risk is know what your max benefits are okay and so again here we're gonna lose $269 that's mostly loose and it also gives you your breakeven points on the date of expiration keep in mind this is on the date of expiration 1569 and 10:31 so again that's also helpful to help you understand what the prices need to be within so that you know you can at least break even on expiration date now look at them actually turn right again the same with the long strangle it's infinite from the upside right and it's all it's capped on the bottom right because again the price of American Airlines can only drop to zero dollars and then it stops but on the upside American Airlines you know the price of it could potentially go to infinity right and so you know your max return is infinite going up going down it is capped but you know the higher up the strike price is the more the more you can make you know if it falls all the way down and so let's take a look here on expiration date what's happening and again I highly suggest you come in here and you know there's mess around about what the price is try to understand why these prices are what they are because that really helps you in the future with your trades but let's look at expiration day let's look at what we don't want to happen right so again we bought a we bought a $13 call we bought a $13 foot so let's look at 13 here's 13 look at this on expiration date if it falls at 13 that's when you lose the most amount of money right and that makes sense because at $13 both of those contracts would expire worthless right you wouldn't make any money because when you buy a put you know the price needs to move down when you buy a call the pregnancy's to move up but if you let it expire you know if you had a go until expiration date and it's $13 they didn't do either of those it just sat there so it expires they both expire worthless and so this is where you lose the most amount of money you can which is $269 okay now let's let's go one direction and understand like what's happening here right so as you can see as you start to go above thirteen you start to lose less and less money and then eventually you start to make more and more money and it's exactly the same thing going down right again it's like a mirror image of itself if you want to draw a line here be like an image of itself right this is basically the same thing you've seen over here and so let's understand what's happening so let's say that on expiration date the price of American Airlines ends up being sixteen dollars so according to this calculator we made about thirty one dollars profit right so let's understand where that number is coming from because again it's important to understand how this works and so well it's if there were sixteen dollars on expiration date right the put that you bought had a $13 strike price also this put right here would expire worthless right because again when you buy it putting what the price tag will be well that strike price and since it's 16 it did not so then that expires worthless so we can just forget about that but how about the callout you bought well that does not expire worthless right because when you buy a quality with the price to go above the strike price all right so don't make an airline's ends up being 16 dollars on expiration date 16 is above 13 right and so at 16 you can exercise this contract I didn't make some money off of it and so it's gonna happen at 16 dollars is when you buy a call oh you're gonna you're gonna have you're gonna purchase a hundred shares of american airlines at that strike price that you bought it and that was thirteen dollars so we're gonna purchase 100 shares at $13 per share so it's gonna be thirteen hundred dollars that we're spending to bible shares since the price and the beaten it up at sixteen dollars we can turn around and sell it for 1600 and so since we've bought the shares for 1300 but we're selling them for 1600 that's a $300 profit that we're making right but keep in mind for this straddle I'm paying two hundred sixty-nine dollars up front all right so three hundred dollars - $259 that's the $31 that you see here right and so that's how you uh that's how these numbers come into play and again it's really important that you know how you know these numbers are being calculated now let's call the opposite direction right just to again hope you guys understand what's happening from a math standpoint so let's say that on expiration date it actually ends up being $10 per share well again the call that we bought expires worthless because the price of American Airlines did not end up being above 13 dollars but the put that we bought does it right you know it since the price of American Airlines ends up being $10 per share and we bought this at a $13 strike price we can exercise a right to exercise this contract and so what's gonna happen at that point then is it ends up being ten dollars we're gonna purchase 100 shares of American Airlines at $10 per share right and so we're gonna pay one thousand dollars but since we had the put that we bought at a strike price of $13 per se what that's gonna let us do is sell those shares at $1300 at $13 per share or $1300 right and so again since we bought 100 shares for $1000 but we're gonna sell the 100 years for $1,300 again we're gonna make up a $300 profit but again since we did pay two hundred and sixty nine dollars we kind of have to subtract that to see what our net profit is and so again three hundred minus two hundred sixty nine dollars is thirty one dollars and that's what you see here right and so again it's it's really nice to come and just visualize what's happening if you don't want to do that math but yeah I think it is important that you guys understand why these numbers are what they are so I definitely suggest again coming into this calculator and I'm just messing around right there's a lot of other things you can look at there's a lot of basic stuff there spreads you can even start taking a look at the more advanced trading strategies although I'll try to go over more of these in the future but it's actually going to Robin Hood and create one of these long straddles so let's go to Robin Hood again and so remember we're gonna Alice will try to make this exact same straddle so we're gonna buy a collar on a bad foot with an expiration date of July 10th and it looks like we chose a $13 strike price so let's go do that right now so let's go to July 10th and so we're gonna buy a foot and remember we chose a $13 strike price as you can see right here so we're gonna buy this $13 strike price foot and then we're gonna buy call again the same strike price any night right and again you know you're doing this correctly if you see that Robin Hood automatically recognizes that as a straddle so that's good that that enforces the fact that you're doing this correctly so always check that before you continue but again as you can see right here it cost us two hundred sixty nine dollars over here it's gonna cost us two hundred fifty three dollars because the price of American Airlines is different over here than it is over here but basically it's almost pretty much the same thing we see over there so we're gonna continue again you can decide how many contracts you want so in this case we just want one you can you know try to change the limit price so that you don't have to pay as much and then you would go review order and so then you would be able to submit this and you've had your straddle right and as you can see we're buying to open one put a $13 strike price we're buying to open one call out of $13 strike price and so that's the straddle and again this is the long straddle there's also a short straddle which again I'll go over that in the future but anyways I hope you guys can understand that if you have any questions for me feel free to leave a comment in the comment section below if you want to get a hold of me directly best ways to get a hold of me to my discord I'll put a link to it in the description below go ahead and draw and I also have a premium version of it if you want to subscribe I'll flip you plan on using Robin Hood in the near future feel free to use my referral link in the description below if you sign up using my referral link both you and I will receive one free stock which is free money for both of us so let's help each other out also check out the books in the in the in the description below they've really helped me understand how all of these concepts work and you know I think you guys can get something from them so at the very least just check them out and you know see if you you know something might fit you and might help you guys understand this more and as always guys thank you for watching and I'll see you guys next time

Channel: TechConversations

Views: 7,977

Rating: 4.818182 out of 5

Keywords: long straddle, long straddle option strategy, long straddle option strategy live, long straddle adjustments, long straddle robinhood, long straddle strategy, long straddle option strategy robinhood, long straddle option, long straddle explained, straddle option strategy, straddle option strategy robinhood, straddle option, straddle option strategy explained, straddle options before earnings, straddle option strategy earnings, straddle option example, robinhood, robinhood app

Id: nxy9yFapPWI

Length: 18min 17sec (1097 seconds)

Published: Fri Jun 26 2020