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Learn my top options trading strategies in today's option trading how-to tutorial. Robinhood options

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Coming in at number 5 on the list is using options to enter and exit stock positions. Now you may be asking yourself well Alex how do you use options to buy or sell stock - well if you didn’t know, options were essentially created and are still used very much for this purpose. This is what the big institutions use - this is what warren buffet uses - if they want to buy a stock they would use options - if they want to sell out of a stock, they would use options. So how do we do that? The answer is by selling options. See when you sell options - as the option seller you take on the obligation of having to buy or sell stock at the strike price. Buy selling options we can enter and exiting stock positions.

Number 4 on the list - Selling covered calls and reinvesting. I put this at number four because it goes hand in hand with the previous strategy. When you own stock of a company and have at least 100 shares of that company you can sell covered calls on your position and instead of using it to exit your position you are going to use it just collect premium. Now this is one of the most popular methods of collecting passive income on your portfolio and in fact the returns that you can make selling covered calls on your stock beats dividend investing or any other income method generated from your portfolio. So how are we going to do this? Well the first rule of selling options in my opinion is to trade based off the probability of success. You sell a call and collect a premium - do this consistently.

So the wheel strategy consists of having enough cash to start selling cash secured puts. You sell puts on a stock that you think will go up in the long run at a strike price below the stocks current price. You do this over and over again as many times as possible collecting as much premium as possible. Now at some point the stock price will drop below the strike price and you’ll be force to buy the stock. Ok we have the cash and we buy the stock. Now we own the stock. We will now sell covered calls on the stock that we just purchased. Selling these calls with a strike price above the current stock price - and again, each week, each month we are selling these calls and collecting premium.

LEAPS stands for Long Term Equity Anticipation Securities. These are any options contract with an expiration date of 1 year or more. So when looking at expiration dates, if the date is more than 1 year from the current date then that would be considered LEAPS. Now what makes LEAPS so special? Well the first advantage is that they expire so far out into the future you don’t have to worry about theta decay in your option. Theta is the rate of change in your option price through the passage of time - so if you have an option that is worth $4, theta will eat away at that price everyday until the expiration date. If you have a weekly contract that theta decay decreases your option very quickly - but if you have an option expiring 1 or 2 years out then the theta decay of your option is much smaller, almost unnoticeable

Ok so let me explain what an iron condor is and then you can go ahead and watch the full explanation of the strategy along with my other videos. An iron condor is a trade consisting of 4 separate option trades. It looks like this. You are selling a call above the stock price, you are selling a put below the strike price, you are then buying a call above the call you sold, and you are buying a put below the put you sold. Now the idea of setting up this trade is to make a bet on a stock trading between 2 points. So if I look at a stock that’s trading at $100 I might say- hey I think this stock will stay between $95 and $105 - let me put on an iron condor trade and if the stock trades between those 2 points by expiration I get to collect a nice big premium. Now just like selling options, we are using probability to determine our success with this trade. We are picking 2 points of which its most likely the stock won’t reach and placing the trade. You are going to collect a premium on both sides - so double the premium

I am not a financial advisor - none of the above video is meant to be taken as investment advice. I am just showcasing MY own strategy and my investments should not be tried and duplicated based solely off the information in this video for risk of losing money.