≈ Options made easy. ≈
Just like in the “Omelet & the Eggs” story—available here —, there is another trading story entirely inspired by a conversation I had with a friend over WhatsApp. I won’t say his name for obvious privacy reasons, but Anderson has not only been a friend of mine for almost 25 years, but we were also colleagues and co-workers in the veterinarian practice. Although we live oceans apart today, we still keep in contact with each other. He even came to pay a visit to me here in Italy.
So, one evening we were sitting at my dining table and he started asking me a bunch of things about the financial markets. He got excited about starting investing and as soon as he got back to Brazil he started studying.
— It’s quite interesting this options thing. Can you teach me something really basic? How to profit? How do they work?
That’s is when we begin having problems: How to go really, REALLY basic with options? It is such a complex world: Greeks (Delta, Theta, Gamma, Vega, Rho), open interest, volume, bid/ask price, ITM, ATM, OTM, beta weight, DTE, GTC orders, calls, puts, assignment, exercise, rolling up, down, in and out, credit, debit, spread, calendar, vertical, LEAP, covered, naked, condors, butterflies, strike price, strangles and straddles, long, short, inverted, volatility, growth, speculation, portfolio design, risk management, contracts, rights, obligations, net liquidation, trade price, mark price.
I gotta be honest: for a moment I thought that was it. Game over. Not gonna work. I will be damned, doomed and sink into oblivion.
In the end, the M.I.S. approach—Make It Simple—, worked out pretty well.
Chart of the Day
Table of Spreads
For those of you who struggle with the difference between vertical, horizontal and diagonal spreads, check this table (redesigned from the original one). The credit goes entirely to Micah Brooks, a great educator. One image, 100 hours saved (possibly, millions of neuron cells saved too).
Video of the Day
Introduction to the Black-Scholes formula | Khan Academy
If you are interested in learning the Black-Scholes formula, I strongly recommend you watch the video below, from Khan Academy on YouTube.
Today’s line up
Traders Lounge 11 PM EST
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Halftime Report 12:30 PM EST
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