 Hey, good morning, everybody. Lee Lowell here, smartoptionseller.com. Today is Saturday, October 3rd, 2020. Hey, if you trade Tesla or you want to trade Tesla, you like trading Tesla options, today I'm going to show you how we took Tesla and traded a successful put option credit spread for a 295% annualized return. So if you like trading Tesla, stick around for that. We will show you how we did it. Welcome to another edition of the Saturday Synopsis. We'd like to look at the charts, see what happened over the last week's trading and see what may happen going forward. So let's jump right in. We always take a look at the SPY, which is the exchange traded fund for the SP500. It gives us a broad overview over the whole market. So here's our charts. Each one of these bars is one day's worth of trading. And that we've been talking about last week, this is where we ended up last week, below the 50 day and the 20 day moving average. We always talk about the charts in relation to the moving averages. And this is the 200 day, the MAC Daddy, the big daddy of moving averages, 200 day down here, red line 50 day, blue line 20 day. The market had made all time new highs a few weeks ago, blasted down through the 20 day blasted down to the 50 50 day. I talked about after a big move like that, the market has to digest that move. They have to, it has to figure out where it wants to go. So at the end of last week, Friday was here at this move this day right here. I thought the market would open up this past week. Some sideways action, hopefully moving higher this week on Monday, we actually gapped open higher here right here. These two days, Monday, Tuesday, and then on Wednesday, it was able to get up through both the 50 day and the 20 day. So that was an excellent bullish move. Thursday, continue that move above the moving averages. And then on Friday, of course, we got hit yesterday, Friday, October 2nd, with the news that US President Donald Trump came down with the coronavirus. So that took down the market a little bit. We have to see how that plays out for next week. If everything turns out okay for the president, then I have to leave the market will continue on its upward trajectory. If things take a turn for the worse with President Trump, then we'll probably have some more downside to go. So it's definitely going to be news driven over the next week. Let's take a look at the NASDAQ. See what that did. NASDAQ is the one leading, has been leading the move, all the big name players. NASDAQ, same thing, had the all-time highs here a few weeks ago. Big move down, came down through the 20 day, came down through the 50 day, just like the S&P 500. This was all of last week's trading right down here. And we opened up this week above the 50 day, stayed above the 50 day. And then just yesterday with the news of President Trump came back down on the 50 day. Let's take a look. Let's open this up a little bit more. So this last bar right here, this was one day's worth of trading closed. They just got a dash on the left side of the bar and a dash on the right side. We always want to concentrate on the dash on the right side because that's where the market closed for the day. Closing price is very important. Looks like it closed right on the 50 day moving average, right here. So that's good news. Didn't finish below the 50 day. So once again, news driven market next week, it all depends on depends on President Trump. So if everything's okay, I believe the market's going to start going back up. If things are bad, market will probably go back down, have to consolidate those losses. Let's take a look at the Dow Jones Industrial. Same thing. Here's where we ended last week below the 50 day this week. This whole group of bars right here popped above the 50 day popped above the 20 day. That's good. Looks like the Dow finished above the 50 day. You can see the dash on the right side of this bar. So we finished above the 50 day. That's good. Like to see that same thing. News driven for next week consolidate here. Hopefully we get to move higher. Let's take a look at the VIX, which is the volatility indicator for the markets moves inversely to the market movement. VIX had been trending down. Friday's movement, market was down. So VIX popped up right to its 200 day moving average of this line right here. So it's being held down by the 200 day. But this is really reactionary to where the general market goes. So whichever way the market goes, the VIX goes in the other direction. So it's really dependent on how the market itself goes. So let's take a look at some stocks of note. We always like to take a look at some individual stocks. Mostly usually we look at the NASDAQ stocks because that's where all the biggies are trading. Let's move this up here a little bit. Okay. So let's take a look at, take a look at Apple because we had mentioned Apple last week as a driver. At the end of last week, we got a little bump up and Apple ended right last week right above the right at the 50 day moving average. And I said that if Apple can continue its move higher, it can help drag the rest of the market up. So the rest of this week here is we were had the gap up on money, traded above the 50 day, above the 20 day, and then Friday we had to move down. So it's closing right around the 20 day, 50 day, they're right next to each other. So let's hope that the news is good next week and Apple leads this market higher. Let's take a look at Amazon. Look at the biggies here, Amazon. Same thing had been down below the 50 day, had a good week, got up above the 50 day, trading around the 50 day, 20 day, and then the end of yesterday we had the move down. So this is definitely event-driven, news-driven market sometimes. That can happen, but it doesn't take away from the quality of the company and the earnings that it generates. So on a daily basis, the market could do anything it wants, could be erratic, but you have to go with the long-term trajectory. We had the down move and I like this little up move that we're starting to see, this kind of stair-stepping upwards. So let's see if that can continue for next week. Let's take a look at Google. We talked about Google last week, how it popped right off the 200 day moving average, right here. Here's 200 day moving average. We had one, two, three, four. Looks like we had four days for Google to try to push through. The bears were trying to push it through the 200 day, couldn't do it, popped up this week, which was nice to see. Had a nice balance off the 200 day moving average. That's what we like to see. And then of course this day Friday ended on a little bit of a down note, but that's what we've been talking about, news-driven market. What else we got? We got Microsoft, another big one. Consolidating, not as big moves as the other stocks. So Microsoft's still kind of hanging around. It's okay. Facebook, we look at sometimes Facebook, same thing, had been down below the 50 day last week, had a good move up this week. And it Friday below the 50 day. So Facebook is in that fang group, those big tech name stocks. And what else? The stay at home stocks, we got Peloton. You know, people like to look at Peloton. That's the bike maker indoor at home bike exercise. Look at this. Look at this strong chart for Peloton. So that's been going up all week, all last couple of weeks, basically since the coronavirus. Look at this. Hasn't stopped yet. So that thing still looks like it's going to keep up there. Zoom, which many of us use to do web conferencing and all that. Zoom, still going strong. Okay. So it's hanging up here. Probably needs to have a little breather here. Wait for these moving averages to catch up a little bit. But I think that if it does happen to come back down to at least the 20 day or close to it, that's probably a good bounce. You can probably get that on a bounce and it'll keep moving up. So we got these stocks that are still making moves, which is good. Let's go back to the SPY so we can take a look one more time, see what's happening for next week. Like I said, it had a nice move from last week's low. Here's the range right here. Small range got above the 50 day, got above the 20 day. So it will depend on how President Trump comes out of this coronavirus. If the news is good, come Monday morning, probably see ticking back up. So we like to see that. Q3 earnings are going to start coming out in the middle of October. So we have that to look forward to, hopefully during the summer. Some of these companies got back on track and Mark will tally back up, move back up. All right. So that's it for the market. That's it for our assessment for next week. Keep an eye on the news and let's move on to our options information for today. We are going to talk about Tesla. People love Tesla, love trading Tesla, but I want to show you how we traded Tesla in our vertical spread trader newsletter. We sell put option credit spreads in our newsletter. We are able to take advantage of these high price stocks. We sell put option credit spreads. That means we sell a put option at one strike, and then we buy another put option at a lower strike price. It gives us a limited risk, limited reward type of trade. Now we're going to take a look at our cheat sheet here. Always look at a cheat sheet. Talking about Tesla, when you sell put option credit spreads, you're taking a neutral to bullish directional assessment. But you don't always have to be right on your direction. That's the great thing about selling spreads is that you can be completely wrong on your directional assessment and still win on the trade. That's what we like to do. So we sell put option credit spreads when we're either neutral to bullish on a stock and that gives us a lot of cushion for error and it allows us to take in a credit, make some money on the trade. So what did we do? So on September 9th, we initiated this trade. Tesla was trading for about $350 a share. Let's go back to the charts and take a look at it before I show you the rest of the trade. Tesla on September 9th, which is let's open this up a little bit more. So September 8th is this bar right here. That's coming down on the 50-day moving average of this bar right here. So the next day, September 9th, we got in the trade because we were looking for a balance. We were thinking the market was going to go back higher. So on September 9th, we entered our put option credit spread. Let's take a look. Go back to the cheat sheet. September 9th, we sold the October 16, 2020, 230 puts. We sold the 230 puts and we bought the 228 puts. Same expiration date and we took that, took in a credit of 26 cents per spread. That means we sold the 230 puts and then we bought the 228 puts against it, created a $2 wide spread and we collected 26 cents per spread. That means money was deposited instantly into our account. For every spread you sell, you collected $26. You sell 10 of those, you get 260 bucks. It depends on how many you want to sell. Then on September 21st, we ended up buying back the spread for 9 cents. That's what you can do. When you sell options, you sell it first and then you can always buy it back to lock in your gains. Just like if you sell stocks, you can sell a stock, you can buy it back. You can do the same thing with options. What we did was actually sold the spread first and then we bought the spread back on September 21st, 12 days later. We bought it back for 9 cents. That locked in a 17 cents per spread profit. That's 17 actual dollars per spread. Sold it for 26, bought it back at 9. That's what we do. Let's take a look at the chart, see what happened on September 21st when we bought it back. Here we are. September 9th, sold the spread right here. That means we were bullish to neutral. Then on September 21st, which is right here, this bar right here is when we got out of the trade. When you sell a put spread, it's a bullish trade. You're buying on the low and then you're not selling. You're selling the spread here and then you're buying the spread back here. We're just doing it in reverse. So on September 21st is when we got out of the spread, meaning we bought the spread back on the highs here. And it was a good thing we got out because then Tesla's ticked back down. But you can see how it bounced once again off the 50-day moving average. So we got the spread here, got out of the spread there. Go back to our cheat sheet. September 9th, we sold it. And then on September 21st, we bought it back, locked in 17 cents per spread profit. Now in order to do these trades, when you sell put options or put option spreads, you have a margin requirement. Your broker is going to have a margin requirement. That's just money that you need to keep aside while the trade is active. So $174 that you have to keep aside while engaging in this trade. What does that mean? Well, to calculate the margin requirement, you take the width of the spread, which is $2 wide. And then you subtract the credit that was received, which was 26 cents. So $2 minus 26 cents is $1.74. Multiply that by the 100 share multiplier because there's 100 shares of stock in each option contract. Comes out with $174 actual dollars. That has to be held aside for each spread that was sold. Now you want to know what's the return? How much money can you make doing spreads like this? Or what's the return? Now to figure out your return, you are calculating the profit divided by the margin requirement. That's called your return on margin right here. R-O-M, return on margin. So we're a little bit more clear here. You're risking $174 to make $26. I know that's different. Most people think, well, don't you want to risk the lower amount, $26 to make $174? And no, that's not how it works. When you sell options, when you sell deep out of the money options like we do, you're always going to risk more than you take in. That's because the probability of making that profit is so high. In this case, we had a 90% probability of making a profit. Very, very high. You have to give up something for a high probability of profit. You have to give up something. And in that case, you're risking more than what you can make. But the probability of making that profit is so high. So in this case, we made $17 profit. We divide that by the margin requirement, which is $174. And that turns out to be a 9.7% return on margin in just 12 days time. You annualize that, you get our fantastic return of 295%. Great trade we did on Tesla. Saw the market bouncing off the 50-day moving average, got in and got out up here. Quick and easy. Great trade. Our readers loved it. So let's take a look at the actual newsletter that we sent out and let's see. So on, this is what our vertical spread trader newsletter looks like. On September 9th, here's the newsletter that I sent out. New trade. And everyone can see that getting into Tesla, here's the trade that we executed. We sold to open the Tesla October 16, 2020, 230, 228. Put option required to spend for a limit sell price of 25 cents per spread as an opening transaction. So you sell to open this spread. So in this case, we actually sold it for 26 cents per contract, which was good. And then on September 21st, we bought the spread back. Here's the results next day on September 22nd. This is what we ended up doing. We bought back the Tesla spread for 9 cents per spread as a closing transaction. We bought the close. So this is the newsletter that my readers have got. And so once again, high probability of profit return on margin was 9.7%. How do we figure out that probability of profit? Well, let's take a look at our options calculator, probability calculator. We have this on our website as well. While Tesla was at $350 a share, we had 37 days until the expiration, but we were only in it for 12 days. And we wanted to know what the probability of Tesla falling from 350 down to 230. That's where we would get in trouble if Tesla fell $130 in that short amount of time, which we didn't think would be possible. And here's what happens right here. 90%. This is this bottom right box tells us the probability of Tesla staying above $230. That's our short strike on the spread. So we have a probability of profit of 90%. So we like that trade. It turned out to be a great trade for us. All right. So that pretty much sums it up. We did a great credit spread on Tesla. Put option credit spread. It is a trade, a very safe trade that you can put on if you are neutral to bullish on a stock. So put option credit spreads on Tesla. That's what we talked about today. I hope you liked this video in the YouTube video that you're watching down in the bottom right hand corner. Don't forget to subscribe. Hit that red button. Subscribe. And you'll never miss a video from me. Give me a thumbs up if you can. Give me a comment down below. Tell me what you think. Send me a question. You can always email me at leahatsmartoptionseller.com or you can leave a comment down below the video. And once again, you can always go to our website. You can always go to our website, smartoptionseller.com. Get our free put option selling basics guide right here. Click on the link right here. Or you can go to our services tab. We talked about our vertical spread trader newsletter today. We also have our smart option seller newsletter and our one-on-one coaching if you need any help with that. All right. So that'll do it for me today. I hope everyone has a great weekend and a great trading week ahead. I'll see you back here next Saturday. This is Lee Lowell signing off.