 Hey everyone, in this video I want to talk to you about the best way to buy stocks using options. So we're going to go over five strategies and then we'll go to the platform and take a look at a real example. First strategy, you can simply buy stock. You can simply go long stock. The advantage of this is there's no expiration date. We know that options always expire at some point in the future, but if you're simply buying stock, there's no expiration date. You can hold it as long as you want. The disadvantages are that it requires a lot of capital. You've got to put up margin from your account to hold the stock. If you have a margin account, it can take less capital, but you're still putting up a good portion of the full amount to buy that stock. Also, the risk, the risk is the amount that you paid for the stock, right? I mean, theoretically, the stock could go to zero, so that's your ultimate risk. And it's really just a 50-50 bet. You're not gaining any probabilities on your side by simply buying stock. And because it has no expiration date, there's no premium decay. There's no theta to give you that daily time decay that you get with options. Strategy number two would be to buy a call, to go long a call. The advantages are there's minimal capital required compared to buying the stock outright. You can trade it in an IRA or a margin account. The upside profit potential is undefined. Now we know that stocks don't go up forever, but theoretically, there's undefined, unlimited upside potential. And then the downside risk is defined, so you know exactly what you're risking on the trade when you buy that call at order entry. The disadvantages are that there's negative theta. The premium decay is working against you, so every day you're in that trade, you're losing money unless it's moving quickly in your favor. And then it's really less that buying a call is really less than a 50-50 bet, whereas a stock was about a 50-50 bet, a long call is actually less than that because of that negative theta, because of that premium decay. Strategy three, you could buy a call vertical. You could go long a call vertical. Advantages are there's minimal capital required. You can trade these in an IRA or a margin account. The downside risk is defined, so you know exactly what your risk is at order entry, and you can set these up so that there are higher probability than simply buying the stock. The disadvantages is that the upside is also defined. So you're giving up that unlimited upside potential for a higher probability of success. Strategy number four, you can short puts or you can sell a put. The advantages are that it's minimal capital required compared to buying the stock. You can trade these in an IRA or margin account, keeping in mind that if you sell puts in an IRA, that's going to be a cash secured transaction, meaning that you're going to have to put up just as much capital as you would buying the stock. But you get a higher probability of profit than if you simply short the stock and you get that positive theta. You get that premium decay working in your favor. The disadvantages, the upside is defined. So you're capped on what you can make on the upside as far as profit. And the downside risk is basically the amount you paid for the stock plus the credit you received for the put. So if the stock went to zero, just like buying a stock, you're going to lose that capital and then, but you still get to keep the credit you got for the put. So a little bit more advantageous there. And lastly, you can sell a put vertical or you can short a put vertical. The advantages, minimal capital required, you can trade it in an IRA or margin account. Your downside risk is defined, so you know exactly what that is at order entry and you get a higher probability than just shorting stock if you set it up correctly. Disadvantages, your upside is also capped. So let's go to the platform and take a look at how these really look on an example stock. So the stock that we're looking at is Costco, ticker C-O-S-T. And the reason I want to show this is Costco's really gotten beaten down. It's had a huge pullback recently at the time of this recording on July 24. So this might be a candidate where you say, okay, it's really gotten beaten up. Maybe it's a time to get long Costco. So what's the best strategy to do so? Well, of the five strategies we just went over, let's look at the possibilities of doing each one of those. So let's start with simply buying the stock. So Costco's currently trading at $151.05. So let's take our hash mark and move it to exactly where price is moving, excuse me, exactly where price is trading. And what you can see is if you look at the probabilities, it shows 48% and 51%, basically a 50-50 bet. So buying a stock is about a 50-50 bet. As far as the amount of capital that you have to put up, because it's trading at $151.05, you'd be putting up $15,105 in capital to buy the stock. Now if you have a margin account, you can put up a portion of that. However, it's still a lot of capital just to buy 100 shares of the stock. The other, the next strategy was to simply buy a call. And so what we've done here is we've shown an example of a deep-in-the-money call. If we're going to buy a deep-in-the-money single option in navigation trading, excuse me, if we're going to buy a call at all, it's going to be deep-in-the-money to minimize that theta decay. And you can figure out what that theta decay is by simply taking a look at the difference between the teal line, which is the expiration date, and the pink line, which is the current profit level. We haven't entered this trade, so obviously the current profit level is zero. But if the stock were to just sit right where it is, you can see the theta is negative. So you're losing $1.73 for every day that it just sits here. And of course, the further against you it goes, the more theta decay that you have between now and expiration. So you have to have a move in your direction pretty quickly for a long call to make sense. Next strategy is buying a call vertical. So this would be something you want to do in lower periods of implied volatility because you're expecting an expansion in implied volatility. So this would be an example of a long call vertical. So you can see the downside risk is capped. You're risking about $548 on the downside. But your upside potential is capped to about 452. So you could think of this as a long stock replacement, but you're getting a little bit of a theta component in there. If you move, watch this theta number right here, if you move the price slice, you can see as the price moves in your favor, that theta is increasing. That's benefiting your position. However, if it moves against you, you can see that theta turns negative and can work against you as well. The other option is a selling a put. So here's what the graph looks like if you sell a short put, and we put our price slice to break even, you can see what a high probability play this is. There's 77% chance that between now and expiration, that option will expire profitable. Now the one downside about the short puts is that you have this undefined risk, just like buying a stock. If the stock were to make a catastrophic move down or go to zero, you have to incur that loss. So one strategy that a lot of people like is selling a short put vertical. Still a bullish play, you still got a high probability chance of making money, over 76%. However, your downside is capped. Now you're always giving up something for something else. So if you're going to limit your downside, you're giving up some of that upside potential. As you can see here with a short put, you're collecting a credit of $1.70, whereas with a short put vertical, you're only collecting $1.33, which affects your max profit. So those are the five strategies. There's not a right way or a wrong way. We will use all these strategies at different times in different environments depending on how it fits in our overall portfolio and what strategy makes the most sense at the time depending on if implied volatility is high or implied volatility is low. I hope this helps. If you'd like to learn more about the different strategies that we use to make consistent returns, come see us at navigationtrading.com. We've got a ton of free resources, including the navigation watch list, which is a list of the most profitable symbols to trade for each type of strategy. We've got the volatility indicator, which you've seen on my charts. You can download this directly to your Thinkorswim trading platform, and we've got a free options course called Trading Options for Income, which is a step-by-step guide to get you making consistent trades right away. We look forward to seeing you there.