Learn Options Strategies Options Basics & Greeks For Stock Trading By Technical Analysis

By Gaurav Sanjiv Kalangan

Learn how to trade options and become a big profit with little initial investment! Let's examine what options there are. "Options are a potent instrument that can improve your portfolio because they can be utilized to create recurring income and serve as a useful hedge against a falling stock market to reduce downside losses. When utilized appropriately, they provide numerous benefits that stock trading by itself cannot.

Options are securities that are part of the derivatives group, and their value is determined by the value of another asset. Butter, for instance, is a milk derivative. Crude oil is the source of diesel. A stock's derivative is a stock option.

Despite all of the wonderful things that can be said about them, a lot of individuals steer clear of them because they think they are too complicated to grasp, and a lot more have had negative experiences with them because they or their brokers were not adequately trained in their usage.

However, you will learn the simplest way to trade options with this Book. The most well-liked and practical options strategies, the math underlying them all, which strategy to apply in various market conditions, and even how to create your own strategy based on market conditions are all covered in this Book.

I appreciate you taking the time to read through this Book's description so thoroughly. I have no doubt that you will have a great experience as a student in this Book because you have already invested part of your very valuable time in reading it.

• Language: English
• Publisher: Gaurav Sanjiv Kalangan
• Release date: Nov 1, 2023
• ISBN: 9798223681199

Book preview

Introduction

2500 years ago, a Greek philosopher named Salewicz predicted that the annual olive harvest was going to be larger than normal families at the time, could not purchase his own olive press. So what they did was, he went to the local olive merchants, purchased the right, but not the obligation to their olive presses at the time the harvest was going to happen. They ended up being correct. The olive harvest was considerably larger. And what they listed at the time was to say, I don't need all of these olive presses, so I'm going to sell the right, but not the obligation to the prices to the other merchants in town. What Thérèse did at that time was create the first call option. I would like everyone to have a greater understanding of what all of the different complexities are without having the confusion.

Ultimately, two main goals that I would like to have happen is get everyone's emotional aspects of how to trade options with both greeting fear in place. And I'd like to emphasize putting a trading plan together because I believe that that's where most option traders fail is they do not have their emotions in check, nor do they have a trading plan in place. Thank you again for taking the time to read this chapter. And I hope the Book is exactly what you were looking for. Take care.

Trade Options To Retire Early

Welcome. I appreciate you signing up for my Book. I hope you find it helpful. What we are going to learn is, simply put, everything regarding the options market from the ground up. We are going to learn the history of the market, why it was created. We are going to try to explain in simple terms how to profit from stock options, how to implement certain strategies that will allow you to achieve your ultimate goals when it comes to either speculation, generating income, hedging a portfolio, or just taking a position that you feel will be profitable. I will be available for questions via email throughout the Book. You will have the ability to continue to look at the Book as many times as you would like. And if you find something that you would like to add as far as a change, you think that needs to be made.

Please let me know, because any type of feedback is absolutely welcome. So one of the things that will allow you to retire early is trading options. My company and my clients were really surprised when they saw the ability to retire early with far less money than they thought they would need in society. On the Internet, most people will say the number one million dollars is what you need. However, as we go through the Book, we're going to talk about the current market, the current economy, current policies that are put in place and why things are different these days and why the traditional.way of retiring is not necessarily going to work now or at any time in the near future. Let's move on to chapter one. We're going to talk about the history of the NYSE, otherwise known as the New York Stock Exchange. So what is the New York Stock Exchange?.We're going to talk about and discuss the origin of the options market, because I really feel that it's important to have a ground up approach similar to the way in math class.

When we were all in fourth grade, we were required to do the math from the textbooks without a calculator. Our teachers wanted us to know how to do the math, how to understand the fundamentals of it, rather than just taking the shortcut, putting it in the calculator, still getting the correct answer, but not fully understanding what goes into how to solve the math problem. I think that when people look at stock options, you tend to skip all the way to the end, which is to purchase them rather than understanding what causes the option to go up and down, what information you should be looking for in order to pick the correct option and how to put a trading plan in place that will first and foremost set parameters that allow you to.

Remain disciplined in order to ultimately either, like I said, generate the monthly income you need, hedge your portfolio or take a speculative position on a specific stock or exchange traded fund. Finally, in chapter one, we are going to discuss the emotions of trading. And in my opinion, this is the most important part of investing, trading, whether it be stocks, options, mutual funds. Simply put, your emotional response to the fluctuations of your portfolio value. And when I say portfolio value, I mean the money, the actual money that you transfer into your trading account.

If you do not have your emotional and mental training in place and have not really decided what you would like to lose, but more so the ability to. Fight against the natural tendencies that we all have now. If I mastered it or anybody else in the world mastered it, they would make money all the time. They would have a one hundred percent success rate. It is not something that is easy to do. It takes practice, but it is the most important thing if you are not prepared emotionally.

You should not put any money into the market. You need to have your greed and fear feelings in check prior to moving any money into your accounts, otherwise you are almost certainly going to start off losing money, which is typical. That's what most people do. They allow their emotions to make their decisions rather than their trading plan, their research, their preparation, as well as their ability to do what is counterintuitive as well as uncomfortable. There's a saying that I tell most clients is in finance, in investing, and especially in buying options or selling stock options.

The overall practice of trading options, doing what feels uncomfortable is usually the right thing to do and. I think that this Book will allow you to build the confidence to understand when you should and should not get out of a stock option position, it will allow you to use information that is confusing but critical in order to pick the correct stock option and allow you to have the confidence and hopefully.build your confidence because you understand exactly why they were created, exactly why we should be.using them and exactly what your goals are.

So what is the New York Stock Exchange? So what is the stock market? A stock exchange or a stock market is simply a platform where buyers and sellers can come together and trade financial products or buy and sell financial products. Something that makes you think that you are not going to potentially need to use money, but we are actually going to a marketplace on our computers that will allow you to take the money you have in your account and purchase something from someone that would like to sell it.

And the price that they are selling it for and the price that you are buying it for is not set by either.party. It is set by the marketplace as a whole. So why is the stock exchange required? It's a facilitator for companies to raise capital from the public. So what does that mean once a company is created and proves that it is successful? Most times, once it hits a certain number in revenue, they will. And when I say management and the owners will potentially say to themselves, we would like to expand,.we would like to hire more staff, we would like to expand our marketing, we would like to expand into.different marketplaces.

And when I say marketplaces, I mean potentially selling products overseas. They may want to improve their technology, potentially buy a new building, any type of. Investment that a company will make is going to require money, and if they don't have that cash or capital, one of the things they will do is list their company for sale on the particular stock exchange, in this case, the New York Stock Exchange or one of the other exchanges. Now, what that means is they are listing. Their stocks and what you are purchasing is a percentage of ownership of the company, you will sometimes hear the phrase shareholders will vote on a particular decision.

And the more shares you own, the more your vote is worth another feature of a stock market. Is it really reducing the risk of fraud from counter parties to a trade? And simply put, if there was no marketplace and there was no regulation of the marketplace, then sophisticated investors or investors that have information that the counterparty does not have could set a price point that is inaccurate. They may be able to set a price point that the overall market does not agree with. Therefore, the marketplace really allows there to be fairness across the board for all buyers and sellers, the transparency and recognition of the different prices in regards to whether it be a stock, an exchange traded fund, a mutual fund, and in this case, options is something that you can count on.

Now, as we go through the Book, we are going to really dive deep into why options are priced, the way they are priced, what causes them to move up and down. And we are going to really discuss one of the things that I get questioned by my clients all the time. The stock moved in the direction that I wanted it to move, but the option that I purchased did not.move in value or it went down in value. And that makes no sense to me. I will. Explain that in a way where you will not only understand why that is taking place, but you will be able to pick an option based on the information available to you that will cause that type of scenario not to happen.

So the market efficiency aspect of it and the word arbitrage means that the person that you are trading or buying is selling the instrument from can't. Put in place a way to. Quickly buy and sell something and allow the price to change in their favor without the market having enough time to really pinpoint the actual value of the underlying instrument, the regulators and the.systems that are put in place really are very good at making sure that that does not happen.

The regulation aspect of the market is so important and it's so critical because when you move money into your account, you are going to be doing the same exact thing that the largest investors, what some people consider the, quote, smart money are doing. You are going to be in the same market as them and you are going to be buying and selling stocks and options from them. And what the regulators are here to do is make sure that there is a fair playing field for everyone involved because we're not going to know who is on the other side of our trade. We are going to know what information is valuable that will allow us to really understand why people and other investors are taking a certain side rather than just guessing or hoping that we pick the right side.

And it's ultimately a platform that allows shareholders to have control of their investment choices. When you invest in your companies for one K plan, one hundred percent of the time, you are restricted to investing in mutual funds or exchange traded funds. If you have an individual account, you will have access to every possible investment that you would like and every possible investment that is offered in every marketplace around the world. And what I think that allows investors to do is really decide on what they feel they're comfortable with, what they would like to have as far as risk, if they would like to speculate what their goals are.

And it will allow them to put in place a trading plan that aligns with their emotional aspect and their ability to stay invested and reach their ultimate goals. So the story of the stock exchange, I thought was interesting, I felt it was important to really start from the very beginning. This way we have an understanding of really why it was created, how it was created. And we are not going to just fast forward to what I hear often is a person tells another person how much money they made in buying an option or how successful they are with selling options. But one thing that I will say is that I am going to emphasize selling options just because of the percentages of success.

I did write a book on why selling options will allow you to retire early, and we will go into that in a little bit more detail than buying options. However, buying options is a little bit easier to explain and understand. So the New York Stock Exchange created on May 17, seventeen ninety two, was created by twenty four stockbrokers and they signed the agreement on Wall Street in New York City under a buttonwood tree. I thought that was so interesting. I thought, what were those guys thinking and how were they able to come up with the idea that in order to facilitate and grow America through capitalism, it was required to invest back into it? And it's a two fold situation where individuals are able to take their money and.

Lend it to a company, become a part owner with the idea that the company will use that money to expand their operation and eventually give the investor back more money because they were able to earn more money with their products or with their services. And when I say they, I mean the different companies. It was not in New York, but it was actually in Philadelphia, referred to the Philadelphia Stock Exchange, currently in Philadelphia. And to this day, it still exists. It was in the heart of all the business and trade in the United States, as well as the domestic base for most banks and large corporations, by setting listing requirements and demanding fees, the New York Stock Exchange became known as a wealthy institution.

Now, what does that mean? That means that. We as a country were able to identify a way to enhance and grow the economy in a way that will benefit both the company and the investor. And what was created was this atmosphere where people could actually go to trade, buy and sell. It was an actual marketplace, but it wasn't a market that we currently think of. It was not a business like Wal-Mart. It was not a company like Amazon. It was a place where two individuals could speak to each other and actually trade or buy. A percentage of a company. I want to thank you again for choosing this Book. I hope that we will together both understand the value of trading options and that. Starting from the ground up and really starting from the origins of both the stock market and the options market, we will allow ourselves to really get a very, very in-depth understanding of the options market. So thank you again. And I will see you in the next chapter.

Origin of the Options Market

As we move forward, I'd like to discuss the origin of the option market. I found this fascinating. I thought to myself this was something that. Took a genius to recognize, understand and then create. Two thousand years ago. What was the first ever option and options trade. The first options were used to speculate on the olive harvest by a Greek philosopher, Thalia, by studying the stars. Liese predicted there would be a vast olive harvest in his region. And he felt and thought there would be a significant demand for olive presses. So what? Our olive presses.

It's very interesting, I traveled to Spain and I at that point never gave much thought to how olive oil was created. And as we were traveling through the hills of Spain, you would see these different farms and they all were growing olives. And my thought was at that point, how do olives create olive oil? And what happens is they obviously pick the olives and they put them in these machines that spin them around so fast that it pulls all of the oil out of the olives. And depending on how fast the presses spin and depending on what kind of olives are in the presses, you create the different types.

However, Thalia's did not have enough money to buy one of these olive presses. So what he did instead was he paid the owners of the olive presses a certain sum of money to secure the rights to use them at the harvest time. As expected, it was indeed a huge harvest, Thalia's resoled his rights to the olive pressies and made a sizable profit. So let's really break that down. What did he think and what did he create and what ended up happening? Because it is going to be the exact same thing that happens in today's marketplace. And it is the exact same thing that happens with stocks or ETFs that we purchase options on.

He went to the owners of different olive presses and said, I would like to pay you whatever the value was at that time for the exclusive right to use your presses for what I believe is going to be an outsized olive harvest and I will be the only person that is allowed to use them. Unless I decide, because I'm not obligated to use them, I just purchased the right to use them if I decide to. However, if I decide not to, I am given the right to then resell my right to pressies to someone else, and depending on whether or not I'm right, the price of those olive presses and the use of those olive presses could skyrocket.

And as we can see, he was correct and he eventually sold his right to use them to another party and clearly made a profit because there were so many olives that needed to be converted into olive oil that the presses became in demand at a much higher rate than anybody expected. Therefore, he has effectively created the first call option with olive presses as the underlying security. I thought that was very interesting and I thought that it would really give everyone a true understanding without using all of the current investment terms to try and figure out what a call option is or what a put option is. He simply said, I want to have the exclusive right to use your olive presses. I'm going to sell it to you today.

I'm going to give you what you would like today, and I'm not quite sure where and what kind of harvest we are going to have. But if I'm right and there is an outsized