 Welcome. In this video I want to talk to you a little bit about just straight long stock and so just essentially just buying shares of stock. So obviously the market assumption is bullish. You want it to go up if you buy it. As far as the implied volatility goes it doesn't matter because it doesn't really play in. So it can be either high or low. There's no optimal time frame because if you buy stock it doesn't expire or it doesn't have expiration dates like an option. Profit target we like to we still like to manage our winners so we look at a 25 to 50% of the debit paid so what you bought the stock for. Downside risk is obviously the stock could essentially go to zero if the company went bankrupt. So that's your that's your absolute risk and the upside. Upside risk is none because obviously you're making money if the stock is going up and then the probability of profit is approximately 50%. So the trade setup is you just buy 100 shares of stock or how many shares that you're looking to buy or in the case of futures you could you could buy one future contract or or a number of futures contracts. And as you note down here the time decay or theta does not exist with this position. There's no theta there's no time time decay because there's no expiration date. Now I know most of you understand how to buy and sell stock. Okay so that's not what this lesson is about. The lesson is about the probabilities of buying stock and why it's an inefficient use of capital as well as just an inefficient way to to take a directional assumption on a position. So let's just go to a popular stock let's let's look at let's look at Facebook right very widely traded stock. So if we go to if we go to the charts you see here's here's Facebook well let's say you said okay Facebook where's that right now I really think that it's going to continue it's it's it's upside move it's a strong stock good financials I've got a lot of good things going on whatever the reason is you decide that you want to buy Facebook so if we go to the trade tab you simply find the the ask and you can simply just click on that and that'll populate 100 shares of Facebook. Now here's what I really want here's the key that I really want to get across in this and here's the takeaway for this video if we right click on that and analyze the trade you're good at this other stuff here so here's the here's the graph of of buying buying Facebook stock now this was a this was kind of a big epiphany for me and when it really sunk in the value of trading options and that is if we set our slices to break even like we always do with our options trades what you can see is that okay so here's price right here look at what the probabilities are to go up and what the probabilities are to go down okay and then and then we can pick a specific date in the future so for example today is March 8th let's just go out most of our trades are kind of in that 30 to 60 day range so let's just let's just pick a day out in the future of you know let's say April 21st that's about a month and a half right what this gray area right here represents is the expected move during that time so the way that the way that stocks are priced the way that options are priced it's it's based around volatility and the amount of time and what you see here is anytime you buy a stock it's a 50-50 bet okay I don't care what magic indicator you think you're using or or trend lines or support and resistance it's a 50-50 bet okay and so this is by looking at this visually this is what really gave me the epiphany that oh my gosh no wonder I could never make money uh on a long-term consistent basis by just being directional with my trades and that's that's the whole reason that options are so valuable because it adds in the volatility component it adds in the time decay component it which is that theta that gives us kind of that daily paycheck and so what you'll see here is is and you can do this on any stock Netflix Google Facebook it doesn't matter when you buy it it's from that point it's a 50-50 bet whether it's going to go up or down and the gray area represents the expected move which is that one standard deviation move between now and whatever time frame you're looking at so in this case about a month and a half away or a little over a month away so what you can expect and so there's so basically and this and these numbers hold true time after time after time over a large number of occurrences and over a long period of time so you make it you know you may get lucky on if you do 10 trades you may get 7 out of 10 right and take on that's a 70% chance well but if you do this over and over again what you'll what you'll realize is that it really is just a 50-50 bet and and so the gray area represents that expected move or that one standard deviation move so essentially almost 70% of the time the stock is going to stay in this range so in Facebook's case it's currently trading at $130 $137 79 right as you see there so 70% of the time that you do this trade it's going to stay in this range might trade up to 146 plus and down to $129 approximately and so that and again these these models and the pricing is so accurate that over time that is going to play out over and over and over again and so you know if you if you want to buy the stock because you you just want to own it for the long term and then you can utilize options and other things all around it that's fine but just buying a stock a it takes up a lot of capital and be you don't have any real theoretical edge with volatility or theta decay or anything like that so anyway that that's the that's the lesson for today not that stock buying is bad but if you do own stock you need you need to utilize some of the other strategies around that stock that we teach in this course like covered calls covered puts and continually reduce your basis in that stock position over time and that's where you're really going to get the value in in owning stock overall so i hope that was helpful see you at the next lesson