SK Investing Show

Check out the video version on Youtube: https://www.youtube.com/watch?v=SF1OKOCMj28

Subscribe to my channel: https://www.youtube.com/c/samkling?sub_confirmation=1

What if I told you that you can have the capital appreciation of a growth/value portfolio, and the income of a dividend portfolio? Well with options you can do just that! This is just one of the reasons why I find options fascinating and underutilized by the average long term investor. This video is all about options contracts. What they are, how they change, what they do, and how we can make money trading them. I will describe everything you need to know in order to master the basics of options. I consistently make between $500-$1000 per month selling options on high quality companies with no more risk than just buying shares. And you can too! Watching this video is the first step of learning how to do it! Options are used in order to take a leveraged position in an underlying stock, but the intent behind taking the position isn’t always the same. One option contract could be a bullish position and at the same time a bearish position depending on how you enter the position. In the next series of videos I am going to take a step back and talk about the basic mechanics of options and how anyone can use them to increase their returns in the market. So make sure you are subscribed to the channel to get notified when the next videos come out! I’m trying to get to 1,000 subscribers by the end of the year so I would really appreciate it! Options contracts have 3 basic components: The expiration date, The strike price, and the option premium. The expiration date designates the time period for which the contract is valid. The strike price designates the price in which the underlying shares of the contract are exchanged. The premium is how much the contracts are bought and sold for. In short, when buying options I go for 6 months or longer expirations. When selling options I go for shorter term 30-60day expirations. I will talk about why more in depth in dedicated videos coming up, so make sure you’re subscribed so you don’t miss it! When picking the strike price of an option contract there are important things to know about the moneyness of the contract. Specifically the terms Out of the Money, At the money, and In the money. Both of these concepts of Intrinsic vs Extrinsic value, I will go deeper on in another video, but now we know the basic difference between at the money, in the money, and out of the money contracts. For me when selling options I only sell at the money or out of the money contracts. When buying options (which rarely do) I prefer to purchase in the money options. (options with intrinsic value) -- The final piece of the options contract is the “Option’s Premium”. This is the price we actually buy and sell the contracts for. You can see the current premium for each option contract by looking at the bid and ask columns in the apple example. Let’s say for example I want to purchase an apple call option with the $140 strike price. I would pay somewhere between the bid and ask spread. Likely right about $6.00. Since an option contract represents 100 shares I would actually have to pay $600 because $6.00 per share x 100 = $600. I typically don’t buy options, but as part of my investing strategy I frequently sell options every month to generate income from my portfolio. Describing option selling is a slightly more complex topic because the mechanics of it don’t necessarily have to do with price movement.