11 Minute Read

Tackle Today: The Challenge of Buying Options

February 11, 2022

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«Far enough, Fast enough.»

Traders,

Buying options can be a wonderful substitute to trading stock. But the leverage and limited liability do come with a drawback. This should hardly be surprising for those that understand the financial markets, though. Wall Street is a world of tradeoffs and you never get something for nothing.

So, in exchange for the lower and higher leverage of long calls and puts – you have a lower probability of profit. We are specifically talking about a lower probability than that available with long stock.

And, I know what you’re thinking. “My odds of success when buying stock is only 50%. You’re telling me long calls and puts are lower than that?”

Yes. Yes, I am. Here’s why.

Why you buy a stock, your breakeven (now and forever) is the purchase price. If the stock goes up one penny (today or in 3 years), you’re profitable.

Calls and puts aren’t so generous. Because of what you’re paying for time and volatility, the stock must move far enough, fast enough to break even. You don’t have to just be right on direction. You must be right on direction, time, and magnitude.

And that makes using them successfully more difficult.

Not impossible, mind you. But definitely more difficult.


🛑 Upcoming Options Trading 101 Webinar: How to Swing Trade with Options with Coach Tyler Craig | February 14th, 2022 at 8:30 PM EST on YouTube

Join us to learn how to use two simple options trading strategies – the Long Call and Long Put – when Swing Trading. Traders use Technical Analysis in price charts to determine when to buy and sell. Many traders use the stock itself, but options are a great product to consider as well, as they bring leverage, complexity, more dynamic reward to risk ratios, and more.

In this webinar you will learn:

✅ What is Swing Trading
✅ How to use Technical Analysis to identify entry points
✅ What is a Long Call Option
✅ Long Call Risk Graph
✅ What is a Long Put Option
✅ Long Put Risk Graph
✅ How to Swing Trade with Options

Click on the button below to go to YouTube and set a reminder so you won’t miss it when Coach Tyler goes LIVE.


Video of the Day: Fundamental Focus – Understanding Market Cap

Coach Greg explains what Market Cap is and how traders and investors can use this important fundamental concept.


Chart of the Day: S&P500 Fails at Resistance

Chart of the Day: S&P500 Fails at Resistance

Inflation fears reared their ugly head again on Thursday, driving the S&P 500 down from another key resistance test.


Options Theory Blog

When Naked Puts get Assigned

When you get assigned on a short put, it turns into a higher-cost stock position. If you tie up too much capital, then it limits your ability to enter other trades. Here’s how I think through the decision.


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.

Cash Flow Club Replay

If you missed last night’s episode when Coach Gino Poore talked about Cash flow from long calls by hedging 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.


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.


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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.

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