 Testing. Can you guys hear me now? Sorry about that. It was awkward. I have to get through that whole spiel again. But yeah, sorry about that. I checked the settings and apparently, it wasn't set onto my microphone for the setup, so it wasn't providing sound. Here we go again. Welcome to our option seminar course for Xtrades. This is a free seminar and it's going to be about covered calls today. If you haven't heard about Xtrades before, come and join us. It's a great chat room. We provide alerts and signals, but we mostly focus on providing education and basically improving our strategies as traders. For anybody who's new to Xtrades, we do have a free trial, so come check us out. Let's see. For this particular seminar, we're going to be going over covered calls. Last time we did go over ER calendar spreads as well as some option basics. I'm going to go into this particular seminar with the assumption that you do have that basic knowledge of what are option Greeks, what are options, etc. If you're not so familiar with that, I'll try to answer some questions as we go through, but I'm sure there's a few helpful folks in the chat who can also help you with that. But otherwise, go check out that previous video from two weeks ago. It was on February 6th, so that was on the Saturday as well, and we went over options basics as well as the ER calendar spreads that time. That is available. I think Twitch is expiring that video today, but I will be uploading that video elsewhere, probably to our YouTube channel. I'll also be uploading these slides for today's seminar as well as last session's slides on our Discord channel. So definitely go check that out if you are not already a member. Just brief introduction. I'm going to try to go through these as quickly as possible. I'm Timehawk again. I'm an analyst with Xtrades. I've been trading for about seven years, mostly focusing on swing trading, and I do do some scalps and day trades. This particular month, I've been focusing more on alerting in the chat ER calendar spreads. That's just because that's what we were talking about in our last seminar, so I wanted to give more examples of how to do it and how to use it to our chat, and that's why most of my alerts this month have been ER related, but mostly for my own personal trading. I mostly focus on swing trading, and I have a few different accounts. Some of those accounts are dedicated to these particular strategies that we talk about in these seminars. Then we will generally focus more on just going through the lesson plan or the seminar as we go through the slides, and I'll try to answer questions as we go along, of course. Feel free to ask those questions, and then we'll focus more on practical aspects or actual examples towards the end of the seminar. Theory first, and then application, and so that's the general layout for this course. Today's contents are what we're going to talk about today and before I forget, I mentioned this earlier, but I was muted everything on this stream is basically for educational purposes. Nothing constitutes a buy or sell recommendation. It is just my own opinion. I do think that these strategies are great to take advantage of, to build your toolkit, to make you a more successful trader, and results are conditional on the markets, right? But I do have good success with these strategies, and I'll share with you what I know about them. So that's just my little disclaimer blurb there. So today's contents, what are income strategies? So some of those are going to be things that we talked about last time and as well as a new topic today, which is going to be the covered calls. I'm also going to do a brief recap of the previous seminar on the ER calendar spread strat, just because I had a lot of questions about it and a lot of people still aren't really sure how to utilize them. So I just wanted to share some additional thoughts about it after I've received some questions on it. So those are the things that we'll be going over today, and then we'll have a question and answer session at the end. Estimated time for this seminar is probably going to be about an hour to an hour and a half. I was thinking about that last time too, and the stream ended up being three hours. So take that with a grain of salt, but this time I'm going to try to stick with my guidelines on time here. As for rewatching, thanks, young bull, for answering that. But for Twitch, since we are a higher tier, we do get 14 days. We are applying for a partnership, so hopefully we can get that extended longer. But yeah, we'll be trying to upload to the YouTube channel. All right, so these are just the definitions. I left these in the slides from last time, just in case that some people might not be familiar with the terminology. I'm not going to be going over these definitions this time. I'm going to assume you already know these, but they're here for you if you need to see them. All the definitions, all right. So what are options, income strategies? So option income strategies, they mostly include selling or in other words, writing options, right? So this is as opposed to buying options where we are essentially betting that a stock is going to go up, down, sideways, whatever, right? For income strategies, it's more focused on less risk, higher chance of success to provide a steady stream of income. So that's why it's called an income strategy, right? And the key factor is the one thing that is always constant with options. The one thing that we know is always there, and that's data, right? So for data, for those of you who aren't familiar with what data is, it's the decay of options premiums over time. So the T in data stands for time, pretty simple straightforward there. If you come from a science background or math background, then you're probably already familiar with data. But yep, it's just one of the Greeks for options. And the one constant we have is time. Time is always moving forward, right? Someone has a time machine, let me know. I'd like to try one, but yeah. Time is always moving forward and given that time is always moving forward, that means that your options premium is always going to be decreasing. And so that's why income strategies sell options because it is the one guarantee that options are generally going to be losing value over time. So example of income strategies that take advantage of this are covered calls, which we'll be talking about today, patch secured puts, credit spreads and calendar spreads. There are other more crazy and advanced options out there that also work for this. To pull in that income, but these are the basic ones that we are going to be mostly focusing on here and in the future. Let's see, we talked about calendar spreads last time. So we'll probably talk about the other two in future sessions. For the calendar spreads, these are different than the ones I talked about last time because last time I was focusing on them as a ER kind of play. But for these ones, calendar spreads is the more traditional use of it. Not the niche example that I talked about last time. Okay. So why data matters for income strategies for options? So here's a little chart here. It shows over time and option value. So we kind of already know that options decay over time and they lose their premium value, especially if they are out of the money, right? Or even at the money. So we know that the closer an options contract is to expiration, the higher that data value is, right? The higher that the faster is going to be losing that money, right? So here on this chart, you can see that general curve. It's just a theoretical curve. Actual options pricing doesn't always follow the exact theoretical predicted outcomes that we expect to see. But generally speaking, this is what we see, right? So we see here that the biggest drop in data, more than half of the drop in option value is gonna occur in the last 30 days of a option contract expiring. And so this is important for us to pay attention to and because that's how we're gonna capture our income with these strategies. So data and strike and their relationship, right? So this is taken from tasty works. It's a options brokerage that I like to use and that aside, here it shows basically the data decay. So we see that at the money options actually lose value the quickest, right? And the reason for that is because at the money has the most value to lose because it has the highest probability of becoming in the money at expiration, right? So because it has more value, when it gets closer to expiration, that value decreases even faster because it's just at the money. If it's out of the money or in the money, then that decay is still fast, right? Especially for out of the money calls, the data decay is still high, but because the value or the premium extrinsic value of the out of the money calls is decreasing so quickly, there isn't as much data decay to take advantage of. So that's why when we pick our strikes for our options, which is the price that we expect, you know, the underlying asset to reach or hit, we wanna try to pick something that we think is gonna be just right at or right under, right? So that will give us the best income revenue from this strategy. So we wanna pick something that we think has a chance of going in the money, but not quite, right? So just at the money, okay. So we have our income strategies here, little table here. And generally speaking, not sure why it organizes chart this way, probably could have organized it better. I should have put the spreads together and the column puts on one side, right? But basically spreads are usually a little bit higher risk compared to our covered calls and cash secured puts, okay? So less risky covered calls, cash secured puts, and then higher risk is credit spreads and calendar spreads. I do wanna note that this is just relative, right? A spread is still less risky than say doing naked calls or naked puts, which would be basically selling calls, for example, without having any protection. So which is a naked call. Using a spread still gives you some form of protection, it doesn't have as much protection or at this higher risk than say covered calls, because it's more volatile. So remember that these risk aspects are just on a relative spectrum here. In this table, I also describe when you would use it or when I would use it, as well as the cons. So just go through them, going through them one by one, we'll start with covered calls here. We're gonna be using covered calls to generate steady income on stocks that we own long-term or want to own long-term. The cons of covered calls is the higher cost. And the reason for that is because in order to do covered calls, again, we have that protection, right? So that means that we have collateral. So that collateral in this case of covered calls is gonna be 100 shares in order to sell one contract. So the cost is a lot higher for covered calls than other types of plays, for example, a spread. So going into that credit spread. So in this case, with a credit spread, we are selling a spread. So two different strikes on the same day, right? For a credit. In other words, we're receiving money for that spread. So usually, just for example, if it's a, if you're doing calls, then you would sell the closer strike and then you will buy the further strike. Because the further strike is gonna be cheaper than the closer strike, right? So you're gonna receiving the net difference of that as credit. But that's also a reason that there's a higher risk. If your stock is highly volatile and for some reason it goes in the money, then you have to pay the width of that spread. So for example, if you say sold ADC, so $80 call strike, right? And then you bought 85 strike and then you got a net credit of $1 which is $100, right? Then for some reason, say the stock goes to $85 or $86, as long as it's above that further strike you sold, then now you're on the hook to pay it back $500, right? So basically you would have a net loss of $400. So it's higher risk, more volatile, but it's a lot cheaper to play than covered calls. So this is all just relative again. The disadvantage of a credit spread is also that you cannot wait it out. So for example, with covered calls, you hold shares and with shares, as long as you're bullish on the stock, you can hold long-term and just wait until your position recovers. So with a credit spread, you don't have the option because you have an expiration date. If on that day it's a certain price, then that's it. You either owe money or you collected that premium, right? So that's that. Cash secured puts for this kind of play, it's useful for value investing. Similar to covered calls, it's a little bit different and it's also good for income place. I know Warren Buffett likes to use this a lot. And I'm trying to think of an example here, but let's just say for example, you wanted to buy Apple, right? Say that Apple is, I'm not sure what the stock price close on Friday, but let's just say it's $130 per share. And let's say that you think it's too high or actually let's rewind back. Let's say that Apple is at $140, $150 and this was two weeks ago or something like that. And let's say that you would like Apple long-term, but you think that the price is just too high right now. You don't wanna buy in at all-time highs on the market. So what you do with cash secured puts is that you sell a put at the price that you're willing to pay for the shares. So say that I sold 130p for February 19th or yesterday. And I actually don't, I think Apple actually closed below 130. Somewhat anybody know. Let me see, switch to my regular watch list here from Crypto. Where's Apple? Yep, so Apple actually closed at 129.87, right? So it closed below 130, right? And one thing that was bearish about Apple to me was I broke her trend line from March, 2020. I had been holding this the whole time and then it broke last week. But anyways, that aside, say that you, it was over here at 140, right? About two weeks ago, two to three weeks ago. And you like Apple long-term, but you think it's too expensive. So you sold 130p, or 219, because you're like, I'm willing to buy Apple at $130, but I'm not willing to buy it right now at $140. And then say that you sold, I have no idea what the premiums were at that time. So this is just a total random guess, but say that it was worth, those puts were worth, I don't know, a dollar. So you would have collected that $100 premium for those cash-secured puts. And to play the cash-secured puts, the reason why it's called cash-secured is that you have enough money to buy 100 shares of Apple at $130 each. So you would have $13,000, right? So in order to do that, you would want that, because you don't wanna sell these things naked. Otherwise, you'll owe a lot of money. And that's just really risky. But going back to this example here, you collected that $100 in premium. If Apple yesterday actually closed above $130, we would have just collected that $100 for free. Not really for free, because we took on the risk, right? But basically what that premium would be ours to collect and that would be income generation there. That's how it works into the income strategy. Now for value investing, which is what Apple is doing, our value investing, which is what Warren Buffett does, is because Apple closed under $130, that means that we are now obligated to buy 100 shares of Apple at $130. So we would pay $13,000, but we collected that premium of $100. So our net basis is actually, the total we pay was $12,900, or our cost basis is $129. And as you can see, Apple is actually $129.87. So we actually had a profit from that if you had sold, you know, $130.219 for at a $1 cost, right? So this is a good example of, you know, how to do value investing. It's like you want to buy the dip, but you don't know when the dip is, you can sell cash covered or cash secured puts. And then, you know, if the price hits that point, great, you're in at a cheaper price. And you also collected that premium, so you got a discount. And then if it's above it, oh, well, you didn't get into the position. It was more expensive than you wanted to pay for the stock anyways. And guess what, you collected income, right? You collected that $100 premium. So this is a, you know, it's a really good strategy as well, along with covered calls to generate that income if you have the account size to buy 100 shares of these stocks that you want to sell puts or do covered calls, right? Anyways, great strategy. If you ever want to enter something on a dip and you get a discount, right? Okay, moving on, calendar spreads. So calendar spreads, usually use it in low volatility situations similar to the credit spread. And that's just because it's more predictable, right? You know what's going to happen? You want the stock to stay flat-lined because you just want to collect premium on the front-dated option while the front-dated option loses value and the back-dated option maintains value. And this is mostly just collecting data difference, right? So the cons is that it's non-directional and again, you can't wait it out or at least not as long because you have expiration date, right? But for calendar spreads, you know, you can take leaps and that will give you more time for your play to pan out and then you can just sell shorter-dated options against your leap calls. And a leap call is something that is, you know, one year out or more. I mean, you can also do, you know, a few months out if you want to sell shorter-dated options that works as well. We kind of talked about that last time. So going back to the recap of it, so basically you might have noticed that there is a very big similarity between calendar call spreads and covered calls. Basically a calendar call spread is a poor man's version of a covered call because you don't need to own 100 shares. You can just use a leap call, for example, as your collateral, right? And it's a lot cheaper to own a leap contract on options than to own 100 shares usually, that's the case. I'm going to try to catch up with chat. I know some folks have been helping out like JTW and 007. Thanks for helping out. I think you guys have got the chat covered, so thanks a lot for your help. So again, quick recap of this. I'm not going to try to go into too much detail on the calendar call spread because we talked about this last time. Just recapping, since it's related to the income strategies that we're talking about now. Usually when you use it when you're neutral bullish, there are the Greeks not going to go through those. You achieve max profit when the asset is at the strike price when the front-dated option expires because if it's above that, then that means it's in the money and you need to pay up 100 shares, right? Because we're short that contract. So we don't really want to do that. So usually we prefer it if it's, you know, right at the strike or right under the strike. And you mean mostly you're getting value on this because of data, right? We're just trying to crush the premium on the front-dated option while the back-dated option maintains its relative value. Since data is always going to be higher on the front-dated options, just like in that graph we showed earlier. So my version that we talked about last time is a little bit different from this typical income strategy. My version is the ER calendar spread and it's more of a really, really specific use case, right? I haven't really seen other people use this strategy before and I don't really see it online. I think I've seen like one mention of it being used like that, but usually when I look up calendar spreads online, it's basically the typical income strategy. They want low volatility situation. My version is, you know, a lot more volatile and I'm just trying to take advantage of Ivy Fresh. So, you know, this is just a recap of my February ER calendar spread account strategy. So over the month I had 15 plays and I try to size about, you know, approximately 2K each. Sometimes it was a little bit less depending on my risk tolerance and a big tip for you all. You know, my, this strategy is really risky, right? Any ER play can always be considered a lotto and that's why I always just size in, you know, I always say, oh, I'm only sizing in half of my normal position or sometimes I say I'm sizing in a quarter of my normal position because all these ER calendars spread place are risky. You never know what's going to happen with the ER. Stock can shoot up a lot, stock can crash a lot or it can stay flat, which is what we want. So anyways, that's why I always size in, you know, equal amounts, try it as close as possible and I try to play multiple ERs because that increases my chance of success because overall I've had about an 80% win rate with this type of play and that's 80% win rate is just based on from holding overnight. So I buy it at close right before ER, like an hour before maybe max and then I sell the next day and market open or within, you know, an hour or two, right? Okay. So just going over my recap of my stats. Cost for this month was about 29K. So again, about 2K each for each play. My total profit was $9,300 and my total loss was $2,350, right? So my net profit was about $7,000 or about 24% of the total amount that I risked. So pretty good strategy and this is why I always say if it opens up at 30% or more at open, I just sell it right away even if we can take advantage of data decay on those ER calendar spreads. You know, sometimes it goes up from 50% to 100% by the close of the day but I don't like taking that risk if I don't have to if we're already up 30% because that's already above my average win. So I always just close those out as soon as I can. It is up 30%. Another note I want to talk about here is this loss of $2,349. This is assuming that the plays still holding are going to $0. So if you've been following the alerts that I've been posting on ER calendar plays this includes Fastly as well as COTY. So I'm still holding both of those. I think COTY actually has a chance to go in the money. We left the front options expire already so we collected the full premium on those and now we're just holding the long calls because I think the only chance that the play basically recovers is value, right? Because both of those stocks drop pretty heavy and that's usually what I expect with ERs is that in the opening hour we usually see a really, really wide range and that's why I play these is because at some point in that first hour you're very likely to have profits, right? Doesn't always work out as we know but yeah, this loss is assuming that those are going to zero. That they still have a chance but I'm just chalking it as a loss for the purpose of this recap. And then in the example of the ER calendar spreads I'm still holding, you can also treat that as if you are getting a discounted long-term call. And just some more additional advice is usually I'm only playing one week out on these ER calendar spreads. In other words, it's very high risk, right? If you wanted less risk then a recommendation I would have would be to actually put it to a monthly or further out. You would still sell the ER, I mean sell the options contract expiring closest to the ER because that will have the greatest IV and then you would sell a further dated contract however long you want because that IV will be more normal, right? And then we're trying to take advantage of that IV crushed basically on the front option as well as the IV, sorry, as well as data. And this is why these ER plays are a little bit different and they offer more lucrative reward as well as higher risk compared to your normal cover or sorry, not cover call calendar spreads. But getting that further calendar spread that leap call or monthly calls when doing those ER calendar plays basically allows you to get a really discounted call for a long-term hold because you can just hold that call now after your front option expires worthless if you are bullish, long-term bullish on a stock. So it's just a good way to get a cheaper discounted long-term call and that's one way to take advantage of that as well when the IV is really high. Okay. This lesson will be recorded, yes. And how far out of the money do you usually go on cover calls? So that's just dependent on your risk tolerance. Usually I'm going to be assessing the technical as well as fundamental analysis to determine what I think is good and then I'll be looking at the Greeks as well. I'm going to be going over all these variables and guidelines and general recommendations of what to look for on how to identify a good play for these in a couple of slides. So just hang on for that. And yeah, as 116 life said, perfect. You're right. You know, as long as you're comfortable selling your 100 shares at that strike price, it doesn't really matter, right? Of course, we want to pick an optimal strike price so we can get the most value out of our play. But I mean, you know, if you're selling a covered call and it hits that strike, it's not a big deal. You're in green, right? That's the most important thing. As long as you're green, it's good. But yeah, we'll go over and a little bit again. So a rich man's calendar spread, right? Because the calendar spread is a poor man's covered call. I was like, maybe a covered call is a rich man's calendar spread. But what is a naked call? So selling calls are margin without collateral. So that would be not recommended. Highly not recommended. Why? Because you have unlimited risk. If you sell a naked call and it goes into money, say, I don't know, say you sold, say you sold 1,000 C on Tesla or something last year before the split. Because you're like, there's no way Tesla is going to $1,000. For example, right? And then now suddenly, you know, post-split, it's like $800. I don't even remember what the split was. I don't remember if it was a 1 to 4 or 1 to 5 split. Or did I get that backwards? But anyways, you'd be on the hook for a couple thousand dollars, right, per times 100. So you'd be on the hook for a lot of money. And basically, we don't recommend selling naked calls. I don't recommend it. I mean, if you really want to risk it all, go ahead. But I highly discourage you from doing that because you have unlimited risk and it's just not worth it. The chances of losing so much is just so much greater than what you're getting from selling a naked call. Just do cover calls. So what is a cover call? It's the opposite of a naked call in that sense because we do have a risk limit. We're writing calls and we have shares already as a collateral. So the only thing that we can lose are those shares, which we already own. So in other words, with a naked call, you're selling on margin. In other words, you might not have that money, a.k.a. that can go after your assets, your house, your car, whatever, if you don't have enough money to pay up right. With a cover call, of course, you can still lose that much money, but you have shares as a collateral. You already own the shares. Technically, you can't really, you know, if it goes into money, you're not going to be losing any money. You're just going to be getting less money, right? So that's that. When do you use it? Usually you're going to be using cover calls when you are neutral to bullish and you want to own shares of a particular stock for long-term or you already own shares of a stock for long-term and you want to produce additional income. So if folks probably, you know, if you have, like, any kind of retirement account or whatever, you probably have a lot of shares of something in there. You can produce extra income on it by selling options against it, right? Just to collect that extra income. And you can sell far out of the money if you want, just to provide, like, an extra, you know, I don't know, 1% a year or whatever it might be, if you don't want to be as quote-unquote risky, right? But it is a advantageous thing to do if you own something for long-term and, you know, you don't think that you're going to sell anytime soon. It also is useful for providing a little bit of downside protection for your long-term assets, because that premium that you're collecting on that call you're selling basically says that, hey, I can lose whatever this premium is on the stock price and I will still be green on the play as a whole, right? The cons to this is that you limit your upside, because you have a strike on your call. Say, again, going back to Tesla, say it's $800 right now. I don't remember what I closed on Friday, actually, but say it's $800. And say that I sold those $1,000 strikes against my shares. That means that if Tesla goes above $1,000, I am obligated to sell to the buyer of those calls. Those Tesla shares are $1,000. So say, for example, it goes to $1,500, then I'm missing out on the profits of $500 per share, right? You do have that premium collected as well, though. So technically it's not a $1,500 versus $1,000 difference in profits as well as because of that premium collected. But you do limit your upside. On the other hand, you know, it's a game. A win is a win to me, right? And so I think this strategy is still a really, really safe alternative. And then with going along with what I just said earlier, I just mentioned that, but you can have your shares called away. So that's what happens when the buyer exercises the calls. Because so exercise the calls if the calls are in the money, right? And then another factor to consider in all this is your tax, right? So if you hold your, any position, right? Any asset for longer than a year, and then you sell it, you get charged long-term capital tax gains, right? So that's less than short-term capital tax gains, which is higher. So you pay more taxes if you're only holding something for less than one year. So for example, in the case of selling covered calls, if you just bought your shares of Tesla, for example, last month and then for some reason, the covered calls you sold, go in the money within two months and they exercise those calls, then that means that you're selling your shares within two months. So that means you're going to be charged those short-term capital tax gains. And if you had intended for that to be a long-term play and you weren't planning on paying, you know, short-term capital tax gains, then this could be a factor to consider, right? Again, to me, I don't think it's a huge deal. Just make sure that you're selling something that probably isn't going to be going into money. But regardless, a green play is green. Tax isn't going to charge you more than what you're profiting, right? So minor issue, but it's still something to think about for those of you who care about the taxes. It requires, and then our comment, again, is it requires you to own 100 shares, which is expensive for some high-profile stocks. Amazon, for example, right? Over $3,000 per share. That means if I want to sell covered calls on Amazon, I'm going to be shelling out more than $300,000 for that position, right? And I think most people probably can't afford a position like that. And this is why stock splits are kind of bullish, because people can buy those shares cheaper. It looks cheaper. It's not realistically cheaper, because the market cap doesn't really change. There's nothing to say that the market cap should go higher. But it looks cheaper. It looks more attractive to investors. And now you can more easily do covered calls. And this is why I think, you know, if Amazon does a stock split for some reason, I know Bezos said that he never wants to do one or whatever, but he used to do them. I mean, Amazon has done them in the past, but it's been quite some time since they did that. It will be super bullish for that stock and probably a big boost for the general market as well. That's just my opinion. But anyways, that's one of the kinds of covered calls is the expensive for it. And thanks, JTW, for answering all the questions again. A rich man's calendar spread continued. So how do you open a covered call? Kind of went over this as I kind of went over the example earlier with Tesla. But basically you're going to buy to open 100 shares of a certain stock. And in this example, I said XYZ. I don't know if XYZ is actually a ticker. I hope it's not. But say that we bought XYZ at $40 per share. And then we're going to sell to open the March 19, 50C, and say that is $1.50. And so the math behind this, right? So you're going to be paying $4,000 total for those shares. And then we sold premium. So we sold that contract for 319.50C at $1.50. So that's $1.50 times 100. So we collected $150 in credits when we opened this position. So that means our cost basis per share is $38.50. Meaning that this is also another way, an alternative way to get this counted shares in a sense. If you don't think that that strike is going to hit, then this is a way that you can get shares cheaper than what it currently is at than what the actual price is. So the max theoretical profit is going to be when XYZ is at or even over $50 at a close of 319. And the reason why even over is because we're already saying that we're going to sell the shares at $50 if that's in the money. So that means that no matter what it's pegged, the max profit is going to be $50 per share. And then whatever we collected on the premium. So that means that, and I think I accidentally deleted a line here. Yeah, I did. But the max theoretical profit would be 50 minus 40 equals 10. 10 times 100 is $1,000, which is what it says. It just shares, right? That's your max profit. If it was just shares of it hit $50. And then you would collect the additional dollar or sorry, $150 on top of that. So that means your max game would be $1,150 on the plate, which is more than 25%. Now you're break even. So this is the downside protection of a cover call is going to be 40 minus $1.50 because that's what you got as credit for selling the contracts. So that's 3850. So as long as the shares remain above 3850, you don't lose on this play. Whereas if you just had shares, if it was at 3850, then you would have lost $150. So really cover calls are a great way if you plan on having 100 shares plus of anything using cover calls is a great method for generating that additional downside protection as well as additional income stream. Of course you do limit your upside again, right? So our max profit is $1,150. That means that our next upside, I'm not sure if it's called a break even, but your max upside that you will want to see the stock at would be 50, 150, right? Because that's how much our max profits would be. If it's over 5150, then that means that we missed out on some profits. Okay. So how to find good cover calls? I'm going to go over the variables that I look at as well as provide my general guidelines or suggestions. And remember that these are not absolutes in trading. There aren't really, I guess there probably are some absolutes as well. But I mean, really it's just up to your risk tolerance, right? It's up to you how you want to play. And this is just the strategy as I see it and how I think that it could be type that's taken advantage of. But again, everybody's got different trading styles. So if you find something that fits your trading style and it works well for you, then that's what you do. So usually these strategies you refine as you go because the more you do it, the more you see, the more you'll realize that maybe certain types of tickers have a certain type of trend, then you can take advantage of that. So it's just like the calendar spreads. Normally you do that in low volatility situations when low IV because you don't want it to move. You just want to collect the premium on data. But I took advantage of high IV skewed during ERs. And I only do it when there's a high IV skewed because I want that IV crush on that front option in order to collect that profit. This is a really, really specific example that is unusual. And so again, remember, these are just general guidelines. If you find a specific unique strategy that works really well for you, then that's what you should go with. So all right, let's go through the variables now. Delta. So usually for Delta and Delta is essentially the probability that those strikes are going to go in the money. So if you see a Delta of 25, that means there's a 25% probability that those strikes are going to go in the money by expiration. And the other thing that Delta represents is the amount that your options premium price is going to go up per dollar includes in the underlying asset. So if it's 20.25, for example, that means that every single dollar that the underlying asset is going up, the premium is going to increase by 25 cents. So that's the general relationship when it gets close to 1 or 100%. Basically, that means that it's super deep in the money. And so that's because the probability of it being in the money expiration is really, really high at that point, because it's so deep in the money. So that's what Delta is. Just to highlight that again. And usually for Delta for cover calls specifically, we're going to be aiming for 25 to 45 is my general ballpark range. Dirty is a well-established Delta that's researched in the industry. And there are actually some funds that track this. They track the spy or not spy, but they track the S&P 500, the Center for 500. And they sell out of the money strikes on that. And there's already ETFs that do this regularly. So you can check those out too if you don't want to do the process yourself of say owning a S&P 500 ETF equivalent and selling covered calls. There's already ETFs that do this. So we'll take a look at some examples later when we go into the more practical application. IV, so that's implied volatility. So usually we don't want IV to be too high because if the IV is too high, that means that the stock might be going like parabolic or something. And it's just really, really volatile. So it might be hard to have a good risk-reward ratio for those cover calls. Again, this is just a suggestion, right? So usually we like to see about two times your Delta. So for example, if I picked a Delta of say 30 on my strikes, then I want to see the IV maybe about 60%. Being over or under that is fine. It doesn't really matter too much. But this is just a general guideline. But typically we do want to sell high IV. And here I mentioned, but not when IV is always inflated. So the IV is always inflated. That means the stock is basically acting like a penny ticker or some kind of hype stock. Good examples of that would probably be GME from last month or any of those other high short-interest stocks. And then now it's a couple of weeks ago, and still now kind of now was marijuana stocks, right? All of those have really, really shut up IVs. And then now the next big buzz is the crypto stocks. We got Riot, Mara, et cetera. I mean, those have been going up for a while already. But those are things that have pretty high IV right now. And they just, it goes up and down. I think Riot was open at like 70-something or whatever. It dropped to like 60-something and they went back up again. Basically, because it moves so much, it's hard to predict. So these guidelines are for finding good covered calls that are reliable to generate that steady income. If you want to play covered calls on the high volatility stocks, that's also okay. But that kind of play is different than the income strategy type of play. In that case, we're just trying to capture more premium crush, et cetera, that kind of play. But general sell high IV, but not when IV is always inflated just for that risk-reward ratio aspect. The next important thing is strike or money-ness. So we want to pick a strike that is out of the money. Why? Because we don't want to get our shares, you know, called away immediately, right? And we also want to find something with good premiums so that we can sell our shares at that price, right? And also collect that premium. So for these things, you just use technical and fundamental analysis, look at the charts, look at what's the news is behind it. Can this price hit? Another consideration, I mentioned this as point number six, other consideration, ER and volatility event. If they have an ER on a particular strike day, that is going to throw this income strategy off because usually before ER, the IV is going to start spiking up and it will maintain relative premium even though data is supposed to be decayed options, they might maintain value throughout the whole entire week until the actual ER event. And that's just because the interest or demand for those strikes is so high because people are always expecting big things from ER or say Apple Day or some other kind of volatility event, even at PR event, right? So that's something you're important to consider when you're considering those strikes as well and the expiration. We're going to be aiming for expiration, monthly calls usually 30 days to, I put 60 days here, but I think 45 days is better. Usually about a month out to write is pretty good because that has a good premium. And we know that in the last 30 days of the options expiring, data starts kicking in big, right? See a sharp drop in premium value from data. So that's why we pick those and then demand. So this goes back into those other things of expiration. The reason why we're doing monthly calls is again because of demand. You might notice that for a lot of tickers, usually if you played a monthly calls, which would be, you know, February was 219 for March is 319 for April is 416. Those are the monthly calls, right? Those will always have higher volume and higher open interest than your weekly calls. And that's because your big institutions are usually going to be playing those monthly calls. They don't double so much with the weeklies. And the reason why this is important is because it affects the bid ask spread. So you might notice that on low volume tickers, things that aren't traded as much, and even in those yard calendar spreads that I've been alerting, sometimes it's really hard to get a fill. And I mean, spreads are usually hard to get fills anyway, because you have two different strikes that you're trying to get in on. But if you did that, like on a very high volume ticker, for example, spy, that doesn't matter what day you're picking. You can pretty much get a fill any time because that bid ask spread is probably only one cent apart, right? But for these covered calls, we're aiming usually for those monthly calls because there is better volume on them and the spread will be less and that will allow you to get a more, a better entry for your premium. So, you know, don't hit that mark and buy button all the time. Make sure you're getting a good price for your premium because that's all calculated into your probability of success. If you're, you know, if you're spread is 60 cents wide and, you know, say the cost 30 to 390 and that's the width and you're hitting the ask at 390, you're paying an extra 30 cents. That's almost 10% more. That's going to significantly affect the probability of success. So make sure you're using limit buys or sorry, limit buys, limit sells, those kinds of things when you're playing options with wide spreads. That's just my recommendation there. Okay. Sorry, I'm going on a tangent there. So open interest and volume. We talked about that and we went over the ER and volatility events. There are also probably other considerations I can't think of them right now. These are probably the importance, the importance variables. Reading the chat here one second. I see you guys have been selling, selling, doing covered calls on Riot. I know JTW has been doing that a lot. I'm actually also doing that. So it's been really lucrative. Let's just say that. So even if it's high IV, it can still be really profitable. It's just that there's higher risk and general recommendations are less risky for cover calls, which is supposed to be a more income generation type of play. And I will show you an example actually later of a high IV play that I took for cover calls. Anyways. So I'm actually going into that right now. Actual examples and the practical application. So earlier this week, I actually did a covered call on EBON. I think it stands for eBank technologies, something like that. But basically as a crypto related ticker, they do mining hardware. So they manufacture mining hardware and they sell it for crypto. So basically for Bitcoin, Ethereum, etc. I think they do a few other types of processors as well, but I'm not too clear on that. They recently, or they've been announcing shift in business operations. I think at the end of last year, they announced that they were going to open a crypto exchange. Still nothing on that. And more recently they announced that they're going to go into crypto mining and that's why it's been getting a bit of buzz and volume lately and it's been flying. Again, this ticker is a little bit, I'm a little bit doubtful of it because they don't really have a good track record. They were denied an IPO in Hong Kong, I believe. They had the application rejected and somehow they got accepted here and they raised $90 million as well. But in any case, I'm just playing to hype and if they actually do crypto mining then they can actually turn a profit but I'm a little bit doubtful about the company but that aside, I think all the crypto tickers right now are very, very highly hyped up. Overvalued or not, I don't know. It kind of depends. I haven't really looked into the fundamentals of all of them but EBON is definitely a little bit shady because they don't actually have any crypto mining yet. They just announced that they were going to do it and their stock has literally flown. Here's an example of something I did in my Tasty Works account earlier this week. I opened a covered call on EBON because I felt like it was really bullish and again this is different from the use case that I mentioned earlier with those guidelines. The reason I did it is is because I wanted to hop onto the crypto trading with stocks. They're all going up, right? Right is $60, $70. I felt like I missed the boat on right. I've been doing some calendar spreads and stuff on right. I felt like EBON hadn't really pumped that much yet and so earlier this week I was like, you know what? I think I might, you know, I want to get onto that train of doing selling covered calls on these high IV things and maybe I'll just buy some shares of EBON and we'll go from there. So that's why I did. I bought 200 shares of EBON. I forgot how much I bought it for. It was around $11 something which is pretty high frankly but I sold the March 1915 strike. Actually I don't even know how much I sold it for. What was it say here? $748 So I sold it for $748 for two strikes. I can't do the math on that. $374 so I sold them for $374 each and I bought these 200 shares total for $2,300 ish. Again that's 11 something per share. As you can see on Friday close EBON actually closed below my initial entry price, right? Or actually close above. Never mind I read this wrong. My total gain is about negative $17 so it's still below the price that I bought it at. It picked up again on Friday but we see here that my play is still positive and the reason is because I sold these what I consider expensive covered calls, right? $374 for 15 strike that means that EBON by March 19th has to be at least $18 and I say again $18.74 before I quote-unquote lose potential profit on this play. And in the case of downside I have protection because now I can go down to about $8 or $7 before this play is actually negative because of this collective premium and that's why this play is positive right now even though my shares are negative is because at premium I'm collecting the premium on these 15 strikes so $283 so total gain is $266 and I think my you can see here my total entry price was actually $1,600 ish so for a couple of days hold this is actually a really really good percent gain, right? And the stock went down so you know or actually kind of trade flat to be honest so calendar spreads were actually probably viable there too but in any case this is just an example of using a covered call, a recent example that I did and how it can protect you from downside as well as give you a lot of potential profit so I did the calculations on this and basically I can double my account if Yvonne hits $15 on March 19th exactly I think it's about 90% gain so a lot of potential gain here because as long as it holds above $700 ish I'm not really going to be losing on display so that's something we're going to take a look at now on how to find these covered calls so we're going to go to barchart.com and explore this Bob Manny where do you go to find IV oh JTW answered that yep you can find that on your options chain you can also find it on calculators online which I am actually going to show you right now let's do that first actually before we look at barchart.com on how to find these place right barchart.com is an excellent scanner tool so I do recommend using it it has a free as well as a paid version the premium version is definitely helpful but if you don't want to shell out that subscription price then you know the free version it works perfectly fine as well so let's take a look at optionstrat.com real quick here you can see I use it a lot for all these calendar spreads I've been doing ER calendar spreads on calculate every single one if you're not doing this I do recommend doing this in general for your place and that's just because it's you want to know you want to have a plan for your trade like what is my max probability of even going to hit what's the probability it will hit that kind of thing this helps visualize that a little bit better and you have a graph as well as a table I know I talked about this tool last time already as well so I won't back any deeper into that we're looking at cover calls here so let's go to cover calls cover calls I did was Yvonne Yvonne International Holdings so we are long 100 shares is $11 in 5 cents right now and say that I sold the March 19th strike which is actually what I did and then you have a slider here I'm going to slide over to 15 because that's what I did again this is going to be relative to the current price so it's not actually reflective of my position since I entered in at a different price and I sold these strikes at a different price but it's going to be relative to where we are right now so what's going to happen from now usually again friendly reminder I said it to bid ask instead of mid is what you should be trying to aim for but I always said to bid and ask because that gives you a more realistic picture if you are really desperate into selling a call or something and you just hit the bid and ask right on high spread tickers that matters more so many asked about IV and how to check it so you can check on your broker right you can also check here so if you click on this strike here 15C if you click on that flag it sells you 15C 319 you can change the quantity here you can also change your quantity of shares up here right and you can change the price if you buy at a different price but this is the price it's currently at touching the bid and ask basically all of that that you would expect to see in your options chain and your broker is here this data is delayed though by 15 minutes so you can see IV right here 289% which is very very high but I mean all these high tickers have really high IV right now so again remember we want to sell high IV of course the general IV for this ticker is high already and that's just because it's going parrot mollock right so those are the Greeks there and I do use this tool to find those Greeks sometimes if I'm just trying to theorize good place so here you see the table basically I max my max profit you know $624.50 from here and my break even is $8.76 mine is actually a little bit lower and that's because my entry price and my sole price for the premium is different than what they have here so here they're saying that you're going to collect $230 and that's because that's what the current price of this contract is doesn't tell you doesn't actually tell you how much it costs for your shares because this is already it's assuming here that you already own these shares so if you don't own the shares already be sure to affect that into the cost of your play so it won't be a net credit but it will be a net debit because you're buying the shares as well next loss right so this is assuming that it goes to zero so we just stretch out the table you see your max loss is at zero and then your max profits right so usually when you get really close to max profits you should never wait for max profits because the stock can turn around or do something else if you're close to max profits already just lock it in there's not really any point in just you know I'm going to wait another two weeks for what to collect another $20 or something like if you're collecting most of the profits already I'm just by looking at this you can pretty easily assess that then you know I would recommend looking at profits right so I do use this tool a lot for all my plays just to see what's going on and remember that if your IV drops so for example state crypto is no longer of interest and or even particular has really bad news and no one wants to buy anymore and then you have an initial shock right and say that is a few months later and no one cares about the stock anymore it becomes a dead penny ticker right penny stock ticker then you would drop the IV so when the IV drops it will affect your what your profits look like and at what profit price points right so in the case of for us because we are selling the calls an IV drop is actually beneficial for us and if you click on this little arrow here you will see vega vega is negative so vega is what factors into IV so when IV is dropping then you have that in premium is losing value and that means that we are gaining that money so an IV drop is really really good for us and this is why you are supposed to sell high IV options and buy when the IV is low right you are selling the high IV options it is probably overpriced they are expecting a huge move it might not happen and that is why you sell the high IV if you do expect the move to happen though then obviously do not sell those calls right but for example cover calls this is fine because I am okay with selling at $15 in fact I would be happy to sell at $15 plus collecting that premium alright a lot of people talking about CCIV we it is a presentation being blocked I did not realize that the whole entire time but thanks for mentioning that I will think about that for next time I should probably have resized my stuff to fit the screen huh I will think about that for next time thanks for mentioning that alright let's go to bartrad.com bartrad.com has a covers calls screener so if you just go to bartrad.com so this is what it looks like it has some news things they talk about stocks, ETFs options, futures, currency really really useful website if you are looking for scanners or just information about assets and trading in general for us we are going to be looking over here at the options here at the top so you click on that drop down menu they have screeners for pretty much everything right most everything that you need more than what they show here then there is always the premium option so you can customize a scanner to use for our purposes today we are going to be looking at these covered calls here so let's click on that and it will spit out all of these so 1700 results and if you want to see the whole list you actually do have to pay or you have a 30-day trial as well which you can use and try that out but if you want to look for particular things you can only see the first page right so but if you click on a specific criteria that you are looking for or you are focusing more on it then you can rearrange the list and you can get those items filters here on the left of the results button and here you can set those important things or those variables we mentioned earlier so maybe that you don't want to trade a low volume option ticket you are like well I want the option to have at least I can't do it because I am not logged in but say you want the option contract to have at least a thousand pay every single day or whatever then you can increase that here and change that open interest is just how many people are holding those contracts at the close of the day and then you can change the other settings as well so we are going to be looking for 30-45 days or 30-60 days and we are going to focus mostly on monthly expirations you can look at weekly expirations as well I think weeklies are fine just make sure that when you do trade those weeklies that there is enough volume on them the bid-ask spread is not too wide so you can easily get into those places so you are not just hitting the ask on a widespread so weekly expirations are fine too but general recommendations for a covered call as a safe income strategy will be those monthly expirations from 30 to 45 days out so that is what we are looking at there this is how far out of the money those strikes are so you can look for a specific range here 25% just means that the strike is 25% away from the current price of the asset right the bid price if you want to customize that as well those are the settings there and how to use them and going over how to actually use this screener if we are looking here I know somebody mentioned CCIV in the chat earlier and that they were doing CCIV well guess why it shows up on the scanner so I was looking at those too CCIV is SPAC and they have that merger stuff going on with Lucid and whatnot and people are really really gung-ho about the stock and so IVs are completely shot on it you see here is 280% which is really high all of these are really high IVs actually but that is great because we want to sell high IV again remember we want to sell high IV because that means the premium price is really really high so just going over example of how to read this so we are just going to look at CCIV here so we are going to look at this first one we see that the current price is $52.94 the strike that they want you to sell is $60 the moneyiness is 13% negative 13% that means we are 13% away from the strike that means the stock needs to gain 13% before that strike is at the money or in the money the expiration date so again right the bid so that is $13.30 so that means that these strikes for CCIV are currently $13.30 so that means that if I want to play this cover call play it would cost me $39.64 per share so that multiply that by $100 right and we see this is the BE or the break even if you hover over any of these they actually explain what they all mean so if you get confused while you are using this online go for free to hover over and figure out what it is but yeah the break even point is basically where you would break even I mean pretty straightforward there and that is just because this is the net debit right so your net debit is $39.64 that means that we have about 33% drop in the current price before we hit this net debit and that is where we break even so break even is essentially your protection how much protection do you have on the cover call that you are playing so the higher the break even percent is the more downside protection you have because you can drop a lot more on that stock and still be profitable volume again very high open interest is also very high Delta is $58 which I think is okay kind of high on the high side again if you want to go for that more typical income more less risky type of cover calls play on like you know stable stocks like Apple or whatever then we are going to be looking for about 30 right 25 to 45 I think 60 is still okay for our purposes though right 280% IV we want to sell that high IV and then potential return 51% so that means that if this is our max profits that if CCIV is at $60 or higher this is the best case scenario that's our maximum profit 51.4% which is pretty good so if you want to weigh in you'll notice that the break even is directly there's a correlation right between break even and potential return the higher your break even is generally speaking the less your potential return is going to be that's just a relationship right the less risk you have the less reward the more risk you have the more reward this is for any kind of trading you want to take that risk or not right so this is something that you have to decide on your own between balancing out break even as well as potential return if you're more conservative then you're probably going to want to have a higher break even percent and you're also probably going to want to filter for things that have you know a closer delta say 25 to 45 because remember delta is a probability that these strikes go in the money so the higher delta is there's a 65% chance or 64.5% chance that these 1250 strikes I'm selling will go in the money that means I will lose my shares but that also means I will gain this money right because I'm going to be selling at $1250 from $11 and I will also collect the premium of $350 so they're all just factors that you have to balance out for the typical income strategy what you're going to be doing is you're going to have a stock you want to own long term say I don't know Amazon Apple whatever right you have 100 shares of it and you're just going to be selling selling cover calls premium the whole entire time and that's why this is so important for those kinds of plays because you want to hold it long term and you don't want to have that short-term capital text game then you're going to want to have this delta lower between 25 to 45 because you want that you don't want to have to sell your calls you just want to collect the max premium and maybe be right at the strike right under the strike at expiration that'll be perfect so having said all of that and going through this if you click on these little plus marks here it gives you a little bit more detail about the company and shows you the daily chart so not the best chart right this is a line chart we prefer to use candle charts because I'll do more a little bit more analysis on it so we use I mean I use trading view but this does give you a little bit of a brief overview of the company so you can see headlines here they're low and they're high their average volume 52 week range which is really high and low and they give you all the other details here as well but you know click on that if you want to explore more about this particular ticker and you just need some brief info or highlights about the company so usually I use this as a quick brief glance you just determine what's going on with the stock so we see here that you know less than you know about 10 days ago not even 10 days this stock has already gone up 100% that means this strike is if it continues this parabolic motion it's probably going to go into money and that's why this delta is so high and that's why this IV is so high if I just wanted to use cover calls as an income type play say that you have a large account of I don't know say for example a million dollars and you just want to collect income you don't need to have high risk place right you just want to collect that steady income say you know a few percent five percent ten percent extra a year then you're going to be looking for something that isn't going like this you want something a little bit more flat with a steady slow up trend then you can just sell out of money strikes and keep doing that every single month or even every week if you want right and then you just keep collecting that premium in this case the reason why I did a cover call in Yvonne is because I just want to play it for short term right that's my goal is to play this for short term while the hype is up and I want to sell it at at least $15 and that's why I took that strike of $15 and my potential return on that was about 90 something percent so this one 65 percent but yeah so that's those are the things I'm looking at when I'm looking at the ticker and let's go to trading view here so pull up Yvonne right so we can take a look at you know what other things that you can consider when you do your technical analysis so right now the fundamentals of Yvonne are probably pretty bad they're not profitable company at all in fact they had like I think they reported no revenue at some point in the past pretty shady company but they have a lot of hype right now and that's because of crypto and they announced that they were going to do crypto mining whether they actually do that or not I'm not sure so that's why this is not a company that I really want to quote-unquote invest in long term but I only want to play the short term trend and that's why I did what I did so you know again looking at this chart here it's about up before $15 or so on September so that's what we're probably going to be looking for and that's exactly why I picked 15 strike is because the previous all-time high was near that $15 strike so I expect that to act as a potential resistance area right it could also just completely overshoot it because all these crypto tickers right now are just going parabolic but I'd be happy with selling it at $15 from $11 and collecting that during just $70 ish premium that I collected already right because that means it has to go to $18 before I lose our potential profit so to me that's perfectly fine and that's that's why I picked what I did not really much else to analyze in terms of technical for this company because basically it's just all about the fundamentals right now which is big hype on crypto so people are buying it up if you want put some fibs in I always put fibs in just to see what's going on low, high, right so we see $1.618 will be $21 another note of word on EBON is that I did full disclosure I did take some spreads on it from $12.5 to $20 for $319 I don't know if it's going to be profitable or not but it was about a $1.10 per spread so $1.10 for potential of $700 or $750 in profit I was like hey this thing is going parabolic look at the huge volume increased past couple of days it could hit that and then that would bail out once it gets close right but yeah that's why I looked at and why I picked the 15 strikes on my particular cover but basically you should be doing this kind of basic analysis trying to see where it can go where resistance might be there's not a lot of history on EBON to be honest and it's kind of I don't know I guess I would call it a crap ticker but doing analysis on it is just kind of moot because I think it's just one of those parabolic type stocks right now it's like trying to do for example analysis on GME what kind of analysis would have told you hey we're going up to $500 or whatever right this wasn't exactly predictable like I got into GME too because I noticed that there was something going on with it and I knew there was a lot of hype and rumors on it I started picking it up around $30 but there's no way I would have known it would have gone $500 and I was considering selling cover calls on GME but I didn't in retrospect it might have been profitable because it didn't last up here very long and it went back down but you never know with these kinds of things with hype tickers it's hard to say what's going on so I would just use this break even point as downside protection on what you think can happen to the stock for these kinds of more hype tickers I prefer a higher break even percent just because I know that they can easily go back down to zero or a really really low level for E-bond I think that's probably like $380 so it's a lot lower my break even point was about $7 so I can lose like $3 if we just go back to almost but anyways those are the things I look at when I take covered calls and how I use covered calls in the E-bond case for example I encourage if you are looking more for a steady slow income strategy that you do use those variables that we mentioned in the PowerPoint slides 25 to 45 delta IV about double that so you know 50 to 90 or maybe even 100 it's okay if there's some range it's fine is what you're looking for for a steady income covered call play but if you're just playing any kind of hype ticker your day trading you're not looking for long-term investments type of purposes then you know doing these kinds of things looking for these high potential returns could break even numbers acceptable risk is fine and looking at it that way and then if you ever own many other calls long-term calls and you want to provide some protection to yourself or on your shares you want to provide some protection not for yourself consider selling covered calls or converting to a calendar spread and I do that very very frequently right I have arch pay leaps and I regularly sell weeklies and monthlies expiration calls on that when I don't expect the trend to be up so I just keep collecting that premium and it prevents my leap from losing value because I'm collecting that premium right long-term position and sometimes this could be quite net profitable whenever the IV spikes up and then you sell those premiums and if it stays flat then you're probably going to collect a lot more profit at the end when your leaps expired and if you had just been holding those leaps and waiting for that increase in price right so those are selling calls provide catching is definitely a good idea do take a look at the probability of whether it will hit or not that's delta is the probability of whether the strike will go in the money so that's basically the takeaways for today for covered calls or income strategies we'll go a little bit more over some other types of income strategies including selling cash secure puts in future seminar sessions so I do plan on continuing these seminars every two weeks approximately in the x trades discord as well so make sure to join that if you aren't already on there we will be going through questions now I believe let's yep thanks again for attending the second seminar and I'll be taking questions when does arc K not go up by a Spencer so yes I don't know if you notice but this past week the stock market has been kind of either flat or going down so it doesn't always go up so in that case I actually sold a shorter term contracts on it and I collected the full premium on it you know it wasn't much like $70 or something but you know it was something and it allowed me to hold my long-term calls with more confidence because I knew I was offsetting it by selling those calls sometimes if the market is flat or it's even bearish sell those calls against your position to hedge of course my leaps are out of the money so that's why I was able to do that but even if it's not you can do a diagonal spread and sell a further out of the money call just to collect that slight premium difference so yes hmm how far should I buy a bull call spread so for the call spreads I mean it just depends on your analysis right for buying any kind of security or option you should have a timeline in advance when you take a play of when something is going to hit when you think something will hit actually what I do personally is I add time to that so let's take for example let's go back to trading view for a second here take for example pull up the charts so let's say RKK for example right because we were already talking about RK so might as well go back in I actually alerted a buy on RKK earlier this week over here at 140 about 147 I think 146 or 147 I don't remember the exact but I alerted April 16th calls on RK for 160 why because 160 is the top over here right also the reason why I entered calls is because we are in this channel and I expected this trend line to hold so that's why I alerted those calls I did say that I felt like I was getting in early because it could break this right and what is done in the past few times is touch this trend line is I had a couple days where it kind of bounced around the trend line as you can see here and right here breaking below actually on this particular day but bouncing back over so I said I was getting in early when it was over here but I felt like it was it was decent risk reward and so that's why I took April 16th on those and I know I'm answering the question about the bull call spread but this applies to any plan basically what I always do is I estimate based on my chart and my analysis where I think the price can go and when it can hit that right so if we expect that it to fall the same general trend of moving like this I was like okay maybe it's going to hit 160 around March or something it could hit earlier but let's just say that it falls and more a slower slope right or maybe it hugs this support trend line and goes up instead of jumping off of it like it normally does so say it hugs it then we're going to hit my strike price around March mid-March so I always like to add time on top of that so that I'm not playing with my I'm not being killed by data right I don't want that data decay to be eating against my options that quickly so then I'm going to add time at least two weeks out I usually prefer to take monthly so I just was like okay well we're already in mid-March we can't take the March plays because that's too close what if we reject here at 160 and my play doesn't go into money I don't want to be in that situation so we're going to take April 16th which gives me a lot more potential right because on April 16th if this trend still continues we could be at 180 or we could be at 170 if this trend continues right but at least I think it will be above 160 assuming trend continues to hold so that's why I'm going to take April 16th that's why I learned April 16th for 160 strike because this is the previous top right it can act as resistance and you know if all things go well I could be you know 20 something dollars into money and and I played paid about I think I paid I forgot why I learned that but I think I paid about $1,000 per contract or $690 per contract it was around there so if if I expiration we're at like 80 and that means it's worth $2,000 just on intrinsic value alone so that's you know a lot of profit right but basically this was a support bounce play in order to get when you should play or what how far out you should play your contracts this is how I decide right pick a strike that you think it's going to hit and then pick a time that you think it's going to hit based on your analysis and add time to it always add time I always think it's worth the premium of paying for more time on your place instead of having the issue of where you're just right at expiration because then your thing is worth $0 whereas if you had another month on your play and it was at strike you'd have some money on your play right and there's a chance that it will go further up so always add time to your play it's worth the extra premium there's a reason why we're paying the extra premium and that's because the probability will be higher of success if you pay and buy time so that's my general recommendation on how to pick strikes and the time frame for it I hope to answer your question about when you should see your expiration for the bull call spread right let's take a look back at the chat here let's see when should you sell your covered calls okay yeah young bull said that he closes them at 60% profit again this is going to be based on your own risk risk ratio right but the way I do it is that I like to use this right if I have covered calls on ebon again let me reset this IV because I messed around with it a little bit and let's change this chart range I do something a little bit more reasonable with expectations I usually just assess based on this on the timeline how far and we are and how much more time do I have to wait for what kind of gains you know because at some point you're going to be like oh I feel like over here it's pretty optimal in the middle of the chart like 450 like I can gain like another 150 170 dollars but I have to wait like another extra week I don't feel like it's worth waiting that extra time when the stock can pull back on me or etc right so I use this to just assess for myself when I want to take profits but as a general guideline um we're winding back to those ER calendar place ER calendar place I like to take profits at 30% plus that's when I take profits immediately at open if there goes above that open perfect I'll take whatever I can get right I for covered calls usually once it gets closer to the expiration day I will basically I'll just look at it and I'll assess it because I'll probably roll out the option that I'm selling so for those of you not familiar with it rolling out an option contract just means that you're changing the expiration day right so say that I had 15C for March 19 then I will roll out this 15C to say April 16 15C that's if the stock is not moving higher if it is then I'm just going to do 20 so some brokerages such as tasty works for example provide a roll rolling rolling out button and you can just click on that and it will you know do all the setup for you it's the same thing you can just sell your strike sell that contract and then re-buy that contract in two steps it's just that in the other ones you have a one click button it sets it up automatically for you on one operation so it's just more convenient but yeah usually as we get close to the expiration of the contract we're getting close to say $15 and I know I can get more gains out of this right but if I want to hold these shares long term like for example I know JTW has been doing cover calls and write for a long time I want to continue doing that and use it as a purely as an income strategy I don't want to let go of my cover calls so once you hit like you know 30-50% profits I consider you know taking it out and then rolling out that strike that option contract to a further out day or a higher strike you don't want to of course assuming that the bullish run continues right you don't want to get your long-term play or your shares get called away when the strike goes into money on the other hand if you don't mind getting called away and you know it's already in the money for example then I was like okay I mean if you don't mind selling it at $15 and you can just hold and just let it play out but usually yeah you would consider once you get close to the expiration date say one or two weeks out you can consider rolling out to a different strike or even the last week right but this just depends on the price action and how close it is to your strike that you sold again all things go back to the chart right for me I always refer to the chart for my actual decisions the percentage stuff is just general and rules for myself in order to prevent myself from either overextending or over risking or you know giving back profits to the market so that that's those are just general recommendations and what percentage do you close your place if there is a loss so for these I mean in a case of covered calls normally I mean it depends if you care about the company long-term or short-term right or long-term then you don't really care because you know rather it's just a discount in the share price right say that Apple you know right now is at 129 whatever 129.74 I believe and it's dropped from 140 do you sell it or a loss or do you want to just keep holding it and let it rise again right if you are just selling covered calls as an income strategy then we don't really care about that we just keep selling those covered calls provide additional downside protection while we wait for the stock to recover and I do want to mention that along with covered calls and these income strategies there's a more I guess cyclical strategy is called the wheel and we might talk about that later but basically that would use a few different types of plays in order to constantly generate profits in a cyclical fashion so we might talk about that in a future seminar after we go through the other aspects of the wheel because the wheel is basically a composite of different strategies put together in one strategy when I say leap I do mean 12 months or more when it's like a few months out then I consider that like medium term if you are holding a losing call position would you ever turn that into a spread a question by paper trader or 101 what are the pros and cons of doing so so here's the thing with holding a losing call position if it's already negative and then you convert that into a spread by say selling a higher strike a lot of times that you'll find that that basically means that you are limiting your loss but basically your gains are now pretty much is pretty much a losing position because you probably say say for example let's just try to use this calculator to go an example bull call spread just use ebon here for example today you buy ebon 10c for 319 at 360 and then say the stock price or the asset price goes down to 8 or 9 dollars so now all this play is losing so say that instead of 360 and say that this is this was 280 before and so now it's probably even less so let's say it's $2 or something or $1.60 so by selling this this further out strike and converting it into spread you are basically limiting yourself to a max additional gain your max width is 250 right so 1250 minus $10 your max value of your spread is $250 but you bought this at 360 it's now 260 that means you already lost $100 in the play and then now you are selling this at say $2 so you get back $200 so that means that you paid $1.60 for this spread so you paid $160 to make $250 which is not a very good risk you know like it's not good ratio risk reward ratio because you are basically paying a lot for not so great spread so we see here currently this spread would only be worth say $80 so you are paying double what other people are currently paying for that same play and even if the play goes back green you are only going to gain $90 so in that case if you are still actually bullish on Yvonne what I would do is I would just hold the calls and let it right out and see if we get that pick up again in price if you are bearish on Yvonne then you just close the position there's no reason to hold the call if you are bearish on it no reason if you are bearish on it just close it you know it can still go up or it's holding support well here then you know just consider holding those naked but continue holding those long calls and wait for your chance to regain that value because if you do this instead and convert it into a spread you are severely limiting your upside and you're basically quote unquote locking in your losses that's not something I I mean it's fine I would just rather just sell this call instead this is just my personal opinion but yeah hope that answers your question alright I think I'm really really behind on the chat here so I'm trying to quickly scroll through as quick as I can Lord Ants yes covered calls are only for when you own 100 shares of a stock because an option contract is the right you're buying the right to buy 100 shares of that contract at the strike price that you bought the call at that means that if you're selling those calls you're selling that right to somebody else who now has the right to basically buy your shares at that price 100 shares and that's why options are essentially leveraged because it's times 100 right you get a lot more movement out of it than you would from owning shares of the stock yep so I think some people already answered that question actually alright I am all caught up with chat now any more questions otherwise I am going to need to for another meeting I have in an hour I actually have a lot of material I need to study before that meeting so I hope this stream was helpful for you all thanks again for tuning in to Xtrade's seminar we will be doing this again every two weeks I'll be going over new strategies how I use them and then we'll have a short Q&A with some practical applications in the end just like today I hope this session you found helpful this session will be kept up on the twitch channel for about two weeks so you can feel free to check that out again if you need to review something I will be posting the slides up on our Xtrades server as well as the youtube link for our previous session on ER calendar spreads so check that out if you haven't already or you want to refresh on that and you know thanks again for joining if you haven't joined our Xtrades server yet please do so also you know if you guys need a broker for options that is really good you can try out tastyworks and again these are just referral links I'm putting out here but if anyone signs up with those that little bit helps me a lot so I appreciate it but you know that will be all for today thanks again for joining and peace out about the question on the crypto server yep we do have a crypto server as well called crypto traders and it is associated with Xtrades pretty much run by the same folks and I'm on there as well I do have about five years of experience in crypto not quite as much as just the general stock market but yeah if you guys need an exchange to join definitely check out that Kucoin referral link I put up above that would help me out a lot and I appreciate any referrals I can get it's quick and easy to register with them doesn't require any like verification or KYC like a bunch of other exchanges do you can instantly sign up and you start trading pretty much within you know five minutes ten minutes or whatever but yeah you can even use credit card to purchase crypto on there I don't really recommend using credit card to purchase crypto it is an option just use a regular like cash that you actually own is what I recommend and that's true for any trader don't over leverage yourself don't trade on margin don't trade on credit or advance credit or anything like that please for terminology the question from paper trader 101 on the terminology for what was it on different brokers usually brokers have a help that actually talk about all the terminology but if you do need additional help you know just check us out on X trades discord server and we can answer your questions there on any specific questions you might have about a particular broker or just in general options terminology or even stock terminology because we do do stocks as well as options I mostly focus on the options aspect as this is in options seminar so again thanks