The Option Alpha Podcast

Show notes: http://optionalpha.com/show97Today we're going to use our new Trader's Toolbox and options backtesting software to test win rates when selling options. Because the truth is many people have this huge "rub" with options trading and expected vs. actual win rates. They assume that if we place a new trade with an initial probability of success of 70% that the trade will win at exactly 70% over the long-term. As you'll see today, that's just not the case when you account for the implied volatility premium inherent in the options market. So tune in as we look at two different SPY short strangle backtests.

Show notes: http://optionalpha.com/show96Today we wanted to use our new options backtesting software under our Trader's Toolbox to run some credit spread backtests on DIA. Namely, we were trying to determine if selling options during higher implied volatility markets actually generates a higher net credit for the position or not? Plus, we tweaked the allocations just a bit as well to see how different positions sizes impacted returns, drawdowns, and sharpe ratios.

Show notes: http://optionalpha.com/show95It's finally here! After years of research, development, and testing the doors are open to purchase access to our incredible new options backtesting and trade optimization software we're calling the "Trader's Toolbox". Given that we've now got a whole suite of tools and scanners for you to use we have to consolidate it under one roof which is why we believe having a Toolbox is the clearest and logical route. You can learn more about the new software release including demos for by clicking here.

Show notes: http://optionalpha.com/show94Apple (AAPL) is by far one of the most loved and favorite stocks to trade for investors. Often times people will email me asking how they can use option buying strategies to go long AAPL stock. So, in today's show, I wanted to reveal the results from our call bull spread backtest we ran on AAPL and how changing the long strike prices impacted the overall returns and drawdowns of a bullish strategy like this. If you've ever thought of buying options, you need to hear this show.

Show notes: http://optionalpha.com/show93How far out should you go when entering a new options trade? 10 days, 30 days, 60 days? Does it change based on the strategy you are using or the market situation you are in? All great questions we aim to answer and in today's newest case study we'll look at how options trading timelines and duration impacted the returns of this EEM straddle backtest. Plus, we'll cover some of the overall performance and variance metrics we ran on both strategy setups using our backtesting software that launches next week.

Show notes: http://optionalpha.com/show92I've said it for years, position sizing matters in a high probability system. Much more so that you would believe and today's show is the first in a new mini-series we are doing leading up to the launch of our new backtesting software. Inside we'll cover a case study using and iron condor backtest we ran on TLT including the impact on returns that altering the position size had on the portfolio.

Show notes: http://optionalpha.com/show91 In today's show, I wanted to take a step back and give everyone an overview of what we've been working on here at Option Alpha and what we have planned over the next couple months. More specifically I wanted to officially announce that our new options backtesting software will be released publicly on June 1st. And as mentioned before too many people, as soon as the new software goes live the cost of the Lifetime Membership will go up by $1,000. Options backtesting software is something that has been terribly done in our industry and we've worked really hard (and invested a ton of money) to make sure it's done right. After many months of development, I'm proud to say that we've made it not only powerful but simplistic and intuitive enough that anyone can use it. More importantly, it allows you to stress test option strategies before putting real capital at risk. I'll dive more into the details and everything it includes a little more

Show notes: http://optionalpha.com/show90 We're now in the heart of earnings season for the current quarter and with hundreds of companies set to announce their performance, we're presented as options traders with tons of opportunities to profit from the volatility crush that occurs after an announcement. But these fast (and often violent) moves in the underlying stock in the session following the announcement can often scare and confuse investors trading options. In today's show, I want to walk through my strategy for filtering and finding good stocks to trades, strategies we like to use and how to set them up, as well as my thoughts on exiting trades shortly after the market open. If you've ever wanted to jump in and make some earnings trades, you'll want to tune in and take lots of notes. Don't forget, we've also got a free course and PDF guide to earnings trades available for members inside our education platform.

Show notes: http://optionalpha.com/show89It's been over a year since we released our game-changing report on technical analysis indicators called SIGNALS, and since then I haven't talked more about how we are using technical analysis in conjunction with our options trading. So, I wanted to revisit this topic on the podcast today because I still see a lot of simple, easy to correct, mistakes being made by both new and experienced traders when it comes to ready signals generated from technical analysis.

Show notes: http://optionalpha.com/show88Newbie traders and investors who make the transition over from stocks to options often become overly confident and excited that magically they've discovered the "Holy Grail Of Investing" in a high probability option trading system. Surely no system or investing methodology is perfect and options trading has its own challenges. The goal for me today in this new show is to present both the benefits and drawbacks of a high probability investing system like the one we teach (and execute personally) here at Option Alpha.

Show notes: http://optionalpha.com/show87Losing trades are part of the game - they are going to happen and it’s a reality we must all face. And I believe what sets really great traders apart from those who are average at best is the ability to cut a loss by making smart adjustments. Adjustments that reduce risk and extend the trading timeline. In today’s show, I’ll cover the 3 option adjustment principles you should follow if you’re considering adjusting a short premium, option selling strategy like an iron condor, iron butterfly, strangle, straddle, etc. These guidelines will help make sure you’re always focusing on the most important aspect of trades adjustments which isn’t to make money, it’s to cut the size and magnitude of the loss down as much as possible.

Show notes: http://optionalpha.com/show86Trading inverse ETFs and leveraged ETFs are becoming more and more popular with retail traders. Maybe it’s the appeal of quick profits with 2X and 3X leveraged securities like FAZ (Ultra Bear 3X Financials) but the should we adjust our options strategy for these unique products? I think we should for good reason.In today’s newest podcast I’ll cover the three different ways you should adjust your options strategy when trading these products to take advantage of their mostly negative pricing structure and hedging potential. While we don’t trade these often by any stretch here as part of our income strategy, there are instances where they become useful and we’ll cover that specific setups in the show. Enjoy!

Show notes: http://optionalpha.com/show85Legging into spread trades and complex option strategies is a popular way for traders to get quicker fills. However, is this legging technique really the best approach or should we be doing things a little different when entering or exiting trades? In today’s show I’ll discuss my thoughts on approaching legging into and out of spreads and the benefits and risks of doing it or not as part of your trading system.

Show notes: http://optionalpha.com/show84For years we’ve talked about the need for increasing your trading frequency. In today’s podcast, we want to re-introduce the concept of stacking or laddering option trades over time and price. More importantly, we’ll talk about why our extensive backtesting (and current experience) proves that when you break down your trade entry into smaller and smaller chunks, the overall performance of the trading system increases dramatically.

Show notes: http://optionalpha.com/show83A casino's edge ranges from 0.5% for blackjack to as high as 17% for some slot machine games. Now, of course, this edge may or may not play out on the first, second, or tenth roll of the dice. But they are not in it for the short-term game. You see, the casino doesn't have to beat every player every time. They just know that they'll win their mathematical edge so long as enough bets are placed each year. It's precisely why casinos offer huge incentives to get you to come back with free show tickets, free meals or even free hotel rooms. It's why the force table limits on how much you can bet on each hand and why they give you free drinks for playing. While you might think it's just them being nice, it's not. It's an investment they know pays huge dividends. In fact, on average casinos spend up to $45 each hour to keep you sitting in your seat and betting money. Now, I frankly don't care if you like or hate casinos because the

Show notes: http://optionalpha.com/show82We can't control the stock market - yet many of you try to will or hope stocks to move up or down as needed for your position to make money. Eventually, you'll come to realize that it's an impossible dream and the harsh reality of transiting from novice to professional investor requires a more consistent and systematic approach. The question then becomes, "What can I control?" and "How can I adjust or hedge a position that moves against me?"In today's show, we'll look at one of our recent bear call credit spread trades in which we still lost money, but was able to cut the loss by 37% making some simple trade adjustments. Yes, you heard me right, we're going to do yet another case study on the lessons learned from an options trade that overall, net-net lost money. Unlike many other traders who are afraid to show you losing trades, I'm completely open to them because I know it offers an excellent opportunity to learn

Show notes: http://optionalpha.com/show81Fundamental investors are like the wooly mammoth; big, strong, powerful, yet destined to become extinct in the future. And while there is absolutely nothing wrong with the core beliefs and activities of fundamental investors, I just personally believe that the same passion and hard work could be applied to the options market with much better results and less risk. Besides, even Warren Buffett, the biggest advocate for fundamental investing and long-term investment strategy is by many standards the single largest options seller in the market today.Nobody asks him about his $5 billion dollar short option trades, do they? Not yet anyway since we'd love to have him on the podcast.In today's latest show, I want to present the case as to why I believe that more "old school" fundamental investors should become professional options traders instead. In fact, you'll see that there are many similarities between options trading and a long-term, buy and hol

Show notes: http://optionalpha.com/show80Your option strategy payoff diagram is an ever evolving and changing animal. Unlike stocks which have one-dimensional payoff graphs, either upward or downward sloping, and theoretically unlimited holding periods, option strategies are impacted by cubic pricing events. Namely, time decay (Theta), implied volatility (Vega) and interest rates (Rho) which can cause your payoff diagram to shift, mold, and bend as these additional pricing elements change with the market. In today's podcast, I want to help you understand how these three Option Greeks could have a significant impact on the way your payoff diagram looks now vs. at options expiration. In the end, I think it'll help give you more confidence and patience if you understand how option pricing works when holding positions that initially move against you but ultimately will turn out to be profitable.

Show notes: http://optionalpha.com/show79Today's podcast is all about learning how to trade calendar spreads. And while newbie traders might find them a little difficult to understand conceptually at first, I think you'll find our talk today to be incredibly helpful as we break down these time spreads from start to finish. During the show, I'll walk through setting up and building calendar spreads, the impact of implied volatility and time decay, how to adjust and exit as well as the best market setups for these low IV option strategies.

Show notes: http://optionalpha.com/show78I know one of the key elements to successful options trading long-term is maintaining an investment portfolio that is consistently balanced. And when I talk about balance, I'm not talking about 80% stocks and 20% bonds - that's portfolio diversification. Unlike traditional investment strategies that favor 99% of the portfolio invested in long equities and bonds with minimal short exposure, what I'm specifically referring to here is the concept of trading a mix of bullish, bearish and neutral positions all the time which gives us a much smoother and solid equity curve.One of the best ways to measure overall portfolio balance is to beta-weight the portfolio to a benchmark index like the S&P 500 (SPX or SPY). This metric gives us an apples to apples look at how the portfolio as a whole would perform when the market moves higher or lower. And once you start monitoring the beta-weighted portfolio you'll notice that sometimes your positions can become