Tackle Today: Probability vs. Payout | Tackle Trading: The #1 rated trading education platform

Tackle Today: Probability vs. Payout

Tackle Today Probability vs. Payout

«Picture a teeter-totter

Traders, Coach Tyler here.

The longer I trade, the more impressed I am by the efficient and straightforward nature of the market. It offers trade-offs but never something for nothing. Take probability and payout, for instance. Raising one will necessarily lower the other. To be clear, I’m talking about the probability of profit versus the potential reward.

Allow me to explain what I mean by comparing three common positions: long stock, covered calls, and naked puts

Long Stock: Probability of Profit = 50%. Unlimited Reward

Wouldn’t it be nice to elevate that probability of profit to 60%? You can, but there’s a cost. You’ll have to limit your reward. Suppose you sell a 40 delta covered call. The stock position would shift to something like this: 

Covered Call: Probability of Profit = 60%. Limited Reward (let’s say $500).

Now, let’s lift the probability to 80% by selling a 20 delta naked put. 

Naked Put: Probability of Profit = 80%. Limited Reward (let’s say $100). 

Do you see what happens? You increased the probability of profit, but in so doing, you decreased the amount of profit

I view long stock, covered calls, and naked puts as birds of a like feather. They’re all similar bullish positions that offer different probabilities versus payouts. 

Isn’t it wonderful that we have so much control over the trade metrics depending on how we structure the position? 


Chart of the Day: Metals & Mining ETF goes BOOM!

Chart of the Day: Metals & Mining ETF goes BOOM!

Metal stocks are riding the inflationary wave. XME just blasted through major resistance, completing a six-month basing pattern. You know what they say – the longer the base, the higher in space.


Video of the day: Gino’s Gems: How to use StockCharts Seasonality Tool

In today’s Gino’s Gems, Coach Gino Poore teaches how to use Stock Charts Seasonality Tool.


Today’s line up

Traders Lounge 11 AM EST

Join the coaches in this live lounge, ask questions, discuss ideas or just sit back and listen to veteran traders discuss market conditions.

The Coaches Show Replay

If you missed last night’s episode where Coaches Mark Justice and Greg Holmes talked about Portfolio Protection or would like to watch it again, check it out here.

Halftime Report 12:30 PM EST

The Halftime Report starts at 12:30 EST and covers what news is driving the market, chart analysis from the movers and shakers of the day, and fun in a way that only Matt and Tim can deliver.

Trade Masters 7:00 PM EST

Every Wednesday at 7 PM EST join us on the Trade Masters where two Coaches go head-to-head to see who can find the best trading setup.

Cash Flow Condors MasterMind Group 8:30 PM EST

The Condors for Cash Flow system is a high probability option selling strategy designed to generate passive income over time. Join us tonight to go over next month’s orders.


Trading Justice Podcast

Trading Justice 463: Swing Trading with Options

In this episode, Coach Tyler Craig teaches the principles of swing trading with options during our feature presentation. Swing trading is a commonly used time frame for many traders, and options are the product that traders love to learn about because of their complexity, reduced cost, and leverage.

https://open.spotify.com/episode/03coJN7a18ichfmIWVwmiu?si=gc8hdzmvS76cobPpof7l0g

Tackle Trading: Financial Freedom is a Journey. Sign up now for a 15-day free trial.

Financial freedom is a journey

Sign up now and gain unfettered access to all of the quality content and powerful Scouting Reports that our Pro Members enjoy for 15-days absolutely free with no strings attached and let us show you what your trading has been missing.


Legal Disclaimer

Tackle Trading LLC (“Tackle Trading”) is providing this website and any related materials, including newsletters, blog posts, videos, social media postings and any other communications (collectively, the “Materials”) on an “as-is” basis. This means that although Tackle Trading strives to make the information accurate, thorough and current, neither Tackle Trading nor the author(s) of the Materials or the moderators guarantee or warrant the Materials or accept liability for any damage, loss or expense arising from the use of the Materials, whether based in tort, contract, or otherwise. Tackle Trading is providing the Materials for educational purposes only. We are not providing legal, accounting, or financial advisory services, and this is not a solicitation or recommendation to buy or sell any stocks, options, or other financial instruments or investments. Examples that address specific assets, stocks, options or other financial instrument transactions are for illustrative purposes only and are not intended to represent specific trades or transactions that we have conducted. In fact, for the purpose of illustration, we may use examples that are different from or contrary to transactions we have conducted or positions we hold. Furthermore, this website and any information or training herein are not intended as a solicitation for any future relationship, business or otherwise, between the users and the moderators. No express or implied warranties are being made with respect to these services and products. By using the Materials, each user agrees to indemnify and hold Tackle Trading harmless from all losses, expenses and costs, including reasonable attorneys’ fees, arising out of or resulting from user’s use of the Materials. In no event shall Tackle Trading or the author(s) or moderators be liable for any direct, special, consequential or incidental damages arising out of or related to the Materials. If this limitation on damages is not enforceable in some states, the total amount of Tackle Trading’s liability to the user or others shall not exceed the amount paid by the user for such Materials.

All investing and trading in the securities market involves a high degree of risk. Any decisions to place trades in the financial markets, including trading in stocks, options or other financial instruments, is a personal decision that should only be made after conducting thorough independent research, including a personal risk and financial assessment, and prior consultation with the user’s investment, legal, tax and accounting advisers, to determine whether such trading or investment is appropriate for that user.

Share this

X
Facebook
LinkedIn
Reddit
Pinterest
Telegram
WhatsApp

More Insights

Join the #1 Rated Trading Education Platform

Learn to generate monthly cash flow from the financial markets and how to grow long-term lasting wealth. Tackle Trading is an amazing online community for active traders that is led by seasoned market professionals. Tap into the power of Tackle Trading’s proven trading system and learn how easy it is to make money with the proper coaching and education.

8,800+

Members

100+

Reviews

Ready to take your trading to the next level?

Get in touch today and receive a FREE complimentary consultation.

Let us help you start trading!

Our Pro Membership gives you the tools to tackle all your trading obstacles.

Register for the Master Trader Live Workshop and get the First 15 Days on Us

Book a FREE Consultation

Sign up for a free consultation to build your Educational Plan.