By the end of this video you will have a complete understanding of three of my favorite and I think most effective strategies for beginners in the stock market. Now these are going to be strategies that you have no excuse not to execute on as you can do them regardless of the level of time commitments you have. but it is going to take effort to master these. And of course the only thing that I ask in return for this video is that you hit that ravishing like button and also subscribe for more short, sweet and simplified videos on how to trade the stock market.

Okay, so the first option strategy that we're going to be covering is selling Iron Condors. Now this is one of the most basic, but in my opinion one of the easiest to be consistent on strategies within the options trading sphere. So what does selling Condors mean? Well, when you are selling Iron Condors, you make a profit if your price action stays within two lines of your strike prices that you sell your options at. While we as traders generally need volatility to trade off of when it comes to Iron Condors, we're hoping for the exact opposite.

We wanted to stay within this range so that we make money. We don't want volatility here and you lose if the price action moves out of this range. But in this strategy you also set up what is essentially an insurance policy. If it moves too far in one direction or the other, by buying protection on the bottom end and at the higher end, we're going to be talking about what that means in a second.

But effectively, what happens is that your actual risk, the risk to you is the price area between your sold options and your insurance options. So how is this actually executed? How would you do this on actual price action? Well, if we think I BM is going to stay between 125 and 155 based on previous price action, you'd sell a put option at 125 and sell a call option at 155 and these would be 65 days out. That's how we do the Iron Condor strategy. But what does that actually do? well? Selling a put option here means that you are essentially selling someone a contract that makes them money if the stock goes below the strike price at expiration.

and selling a call option here means that you are essentially selling someone a contract that makes them money if the stock goes above the strike price at execution. so it's basically the opposite. But with these two setup, it means that if we stay between the two strike prices, that spiration, both options expire worthless and you make money, you get to keep the premium from selling those two options. When you sell options, you get premium and each day that the option is held, the option loses money and you receive that premium and then at the end, if it's not executed, that premium is all yours.

So that means that if it stays between the two strike prices at expiration, both options expire and you just made profit. And of course, you can close your position before expiration date as well if you so choose to. But the reason that I Love selling options is because selling options means that every single day that passes, the contract that you sold is essentially losing value. The value of its decay is known as its Theta.

Since we sold the contract, we wanted to expire worthless so that we can keep all the revenue from that contract, All of the Theta that decays the contract value, which essentially is our premium. In selling options, we are essentially making money each day by having these options. prices decay. But in buying options, we are losing money each day by having the options that we bought.

Their value decays as well. It works on both ways, but one side were selling options so we're receiving the premium and on the other side were buying options. so we're paying the premium and we pay the premium again. In the fact that our option is now decaying, the value of our options contract is now decaying.

If we had salty option and it was decaying, that would be good because we're losing value of something that we sold and most options expire worthless anyways. But we are selling options like this so that we can profit off both sides if the price action stays within this designated range. If say, we closed at 135 that contract expiration. That means that both the call option we sold and the put option we sold end up expiring worthless and thus we get to keep the value of the contracts we had originally sold.

On the other hand, if it breaks out, it's a different story and that's why we have insurance policy setup. So going back to our execution setup, we buy a put here and a call here to protect ourselves from the price action suddenly going way out of direction and thus making us lose money on one of our options we had sold. Because again, we lose money if the options that we sold get executed and they get executed if they go either below or put option or above our call option. So we need to protect ourselves from that risk.

So the way that we do that with the Condorcet up is by buying a put option. In buying a call option in between our risk area standard practices. to do this about five to ten points below and five to ten points above your sole options, but they need to be equal in order for this to be a true iron. Condor For this example, we'll say we bought our insurance options at the following price points ten points away: 115 for our put option, we bought a put option at 115 and 165 for our call option, We bought a call option at 165 since the options we bought aka our insurance policies step in after the price action crosses into the territory across them.

That means that the actual risk that we bear for selling these options is the difference between where we bought the put and the call options and where we sold the other put in call options. This area is the risk and be more risk-averse you are for the position. the closer you may feel you should put your bought options to your sold options. A Qab, more insurance you're going to need.

But the problem with this is that the closer you put them, the less potential for profit you have and these more expensive the contract. So the less premium you're getting before their part they are aka the more risk you take, the less you have to pay to buy these insurance policies and be more potential for profit you have your ultimate profit. If the price stays within your sole options is going to be dictated by the cost you sold the contracts for - the cost that you bought the insurance policies for and the farther apart the more risk you take on. But the less you will pay for that insurance.

So the more risk - the more potential for reward, but also the more potential for loss. But this is just one calculation for risk. If you're very good at technical analysis and you've determined that this stock is likely to stay within a certain region, then the risk might be worth taking. But anyways, the way that this is factored in is this essentially means that if the price moved above our sold call option upon expiration, we are protected from more losses.

and if the price moved below our solve put option upon expiration, we are protected for more losses. Our losses are just limited to the risk area. Okay, so those are essentially the main points of selling Iron Condors, but there are a few more factors that affect options. Pricing increases in implied volatility indicate that option prices are getting more expensive because the stock price becomes less predictable when it's jumping up and down rapidly, much like kangaroos on drugs.

We want to avoid this since options are essentially insurance policies. Would you rather ensure your bratty sixteen-year-old son Joseph who has emotional issues and road rage? Or would you rather insure a middle-aged professional who's been driving with a clean record for twenty years? Obviously, Joseph is going to cost more to insure, it's more likely that he's going to have a problem. So the implied volatility increases the amount of risk of contracts being executed. and thus it makes sense that the prices for these contracts would go up.

And this is bad in the sense that it is now less likely that your Iron Condor will expire profitable. And it is also bad in the sense that that option contract which you already sold just went up in value. Thus, the buyer now holds a more valuable contract and you are now indebted a more valuable contract. So implied volatility increases are great for folks who have already bought options, but bad for folks who already sold them.

However, obviously more costly options contracts benefit the sellers before they sell because they can sell at a higher premium. Okay, so what does the risk profile for an Iron Condor look like? Well, for options, we have a risk profile that demonstrates probabilities and scenarios for us to evaluate our position and thinkorswim. this is under the risk profile tab after you've set up your options. Now, the blue is your profit at expiration If you hold the contracts until expiration, and they stay between the tea strike prices that we talked about, the options all expire worthless and you're up $200 if you bought just one contract of each.

If you move slightly above or below one of our sold strike prices, you still make money, but it goes down until you break even here. And the risk profile also calculates the chance of it falling between your designated range using standard deviations and the normal curve. So say, we wanted to calculate the chance of us breaking even or making profits if we held until expiration. The probability lines on the red breakeven lines are showing that we have a sixty four point three percent probability of staying within the profitable range if we hold until expiration.

On the other hand, we don't have to hold until expiration. Like I said earlier, we can simply close our position before it expires. But look at the difference of probabilities and profit potential. if we do close our positions earlier, this purple line designates our profit if we sell before expiration, and as you can see, the amount of profit and probability of being profitable is much lower than if we had simply held until expiration.

Putting the probability lines upon these breakeven points gives us a 30% probability of it falling in this range and the highest point is in the middle, whereas the entire profit health at the expiration date is much higher and the highest potential for profit is much lower, whereas the entire profit health at expiration date is much higher and consistent at the $200 range. and there's a much larger probable chance. So anyways, there's a lot more that goes into selling Iron Condors. but since this is a beginner's video, I Wanted to give you all the steps that you need in order to immediately go out and start practicing using a simulated trading platform.

I Don't want to overwhelm you with all the little details and complexities because as a beginner, you're going to learn those better by simply taking the strategy and applying it to a simulated platform. There's a lot of little details that I could talk about and they can talk about theories and stuff like that, but it's not really going to hit home unless you actually go out and take action and practice. So for now we're going to leave it at that. Okay, so the next strategy is selling calendar spreads.

Now the idea behind the strategy and any strategy where we sell options is to make money off the premium that the buyers pay. And as you know, the value of a contract decreases each day exponentially as you get closer to expiration. So that means each day you collect more premium. And here at Zip Trader, we love premium.

So say our analysis leads us to the conclusion that Netflix won't trade above its highs at 385 anytime soon. We are slightly bearish on the stock. Our technical analysis leads us to believe that the general price action is downwards, or if anything, it's sideways. So then we go forward and take advantage of this by selling call options to folks who believe it is going to go above 385, Those suckers.

But since options pay more in premium, be closer they are to our expiration date. That means that we can sell a contract that is close to the expiration date, profit from that rapid decay, meanwhile protecting ourselves from being wronged by buying a longer-term option and this is called none other than the beautiful calendar spread. A long term option decays much slower than a near expiration option, and thus the decay from the option that you bought the protection option is a lot smaller and it's a small price to pay to be able to profit off the rapid decay of your near expiration option while limiting your downside. Since your risk is the debit spread.

your risk is limited to the price of the option you bought in. Your profit potential is the amount, the amount of the premium you're able to collect before you reach the expiration of your purchase contract. You can also do this on the other end. If we thought based on previous price action that Netflix would stay above, say 298, then we can sell a short term expiration put option to folks who think it is going to be below 298.

Those suckers. We can then buy a long term put option to protect our downside, and then once we've collected the premium, we can then go ahead and close our long put that had a shorter decay than the put we had sold short and keep the difference. So in summary, remember that a calendar spread means your profit is going to be based on the difference between what you sold your options for and what you ended up paying in premium for the options that you bought in order to protect yourself. But let's go ahead and look at the risk profile.

We can see that we are going to be maximizing our profits at our sole contract if it expires at the strike price, but that is unlikely to happen. That's not very common that you get right there, but we could still measure the amount we would gain at each price level. Using this risk profile, I should also mention that during periods of high volatility, option prices are going to expand unless time decay will be less on the purchased options the ones that you used for your insurance policy. the long options unless you will have more of a difference between your sold premium and your purchase premium.

And that's excellent because that means more profit and it zip trader. We love profit. But anyways, that was basically the calendar spread. In a nutshell, of course, let me know if I can clarify on anything in a future video by commenting below.

Let me know if you want to know more about any of these strategies. Okay, so the third Options trading strategy is one that is going to help many of our swing traders that follow this channel. For those of you who take swing trades and often hate finding that your swing trade barely moved in a matter of weeks or worse, it decreased slightly. This is a great strategy for you.

The covered call strategy will allow you to profit in many different scenarios when your swing trading. Now basically how this works is you take say 100 shares of Tesla that based on the previous price action you were slightly bullish on I have tons of other videos explaining why or why not you'd be bullish on the stock. So I don't want to go into that right now, but let's just say you're bullish on Tesla. You can then proceed to buy 100 shares of Tesla at say 2 one and sell a call option against your shares for Tesla at a strike price that's a 250.

And remember, we're selling. That means we're going to be receiving premium. Since each call option covers 100 shares, one option would be enough for your 100 shares of Tesla And essentially what you just did was set up a covered call that allows you to profit not just if the share goes up, but it also makes money when the stock price remains flat and it loses less money if the share price. Falls It also amplifies gains you see by selling a call option, you are receiving the price of the option that you sold even if the shares you own don't make any money.

So if the stock price remains flat, the option expires worthless and boom you made money. If the stock price goes up, your shares went up and your option expires worthless. And Boom you made money. If these thought price goes up past the point of the call, Boom You get to sell your shares at a much higher strike price than you bought them, got to collect your premium and Boom you made money.

And if the stock price gets beat down like a rabid dog, you lose less money because you at least get to collect your option premium from the contract you sold that now expired worthless since the price went down. And last but not least, your breakeven price is now slightly negative because again, you sold premium which accounts for more revenue. which means that you can sell out of your shares that you purchased at a slightly lower price and you would still breakeven. So you can see how using covered calls are great tools for increasing your profits when buying stocks.

Anyways, folks, this was a fairly basic rundown on three of my favorite options: Trading Strategies for Beginners I Could easily make hundreds of hours of content on any one of these strategies about for many different complexities, many different experiences, and many different little Manute details that you don't really understand until you're actually executing them on the market. The point is, there's a ton of material that I didn't cover in this video because the idea was to get you started practicing with some concrete strategies that will be effective for you as a new trader. Make sure to practice all of these using a simulated trading platform and only then once you've proven to yourself that you can do it using that platform, then you can go on the market and use real money, but make sure to hone in your skills. Practice makes perfect and you're not going to get out of this without any hard work.

The reason that I made this video is because a lot of people were asking for more options content only have one options trading video so far and that was on day trading options which is a completely different strategy that's all about amplifying the movements. So if there is something that you'd like us to cover, make sure to comment below. If enough people say the same thing, all usually just make a video on it because I see that there's demand and if you have any questions below, make sure to let us know or reach out to us on the free zip traitor Circle Facebook group link in the description anyways. thanks folks and I'll see you in the next video.