What Is Option Trading – How To Trade Options Video 37 part 2

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Once we get down a little bit, we can try to cover a little bit of our shorts, anyway, and make some money today. Some money is better than no money. Let’s go ahead and put it in there. It’s just sitting there and not doing anything.

We sold 100 shares. Our Delta is back to neutral again. We made a little bit of money on that. It didn’t help our open position at all, but we made a few hundred bucks. If it continues to trade down, we’re still 400 shares short. Of course, we have our long calls, in case we get a big move on the up-side. One way or the other, tomorrow at the open, we only have six minutes before the close.

We’ll take a look at GILD. It did start moving. It really started trading down here, later in the day. It’s been moving sideways, but it did move down, a little bit. Let’s take a look at our analysis tab, and see what it’s doing.

We have a small profit. Remember, we had a profit when we actually put it on, the first time. Now, we’re short 103 Deltas. I could actually go in and buy 100 shares here. I’m already long 100 shares. I could end up with another 100 shares, if I wanted to, just to get Delta-neutral.

Let’s go over to our Trade tab. With some of these, you just don’t know when you should actually go in and buy or sell. I try to do it every 100 shares. If the stock doesn’t move that much, or if you think there’s a potential for it to move down – we’re down 218 points now, on the Dow. I might be better off just leaving it, and seeing if it runs down again, before I actually get to a Delta-neutral position.

I’m already long 100 shares, but of course, I have the puts to protect me. If we open up down tomorrow morning, I could make some profits on the downside, and then go in and adjust my Deltas, so that I’m Delta-neutral again, and trade off of that.

I don’t have a profit on my 100 shares, certainly, when I bought them. It seems like it’s trading down. I might just let this trade down, and see how it opens tomorrow. If it opens up way higher, then I missed an opportunity to hedge that position.

You take your chances. You don’t know which way it’s going to go. Of course, you can’t tell the future, so normally, you should probably hedge these Deltas. Sometimes you can wait until it’s minus 200 Deltas, and then you can buy 200 shares, so you’re not trading too often. It doesn’t really matter, actually. As long as you’re Delta-neutral, as long as the stock is moving up and down across your Delta-neutral position, you’ll be able to make money.

We have about 4 more minutes before the close. I’m just going to take a look and see how it ends here. I’ll make sure I have my Trade tab set up to buy 100 shares, if I have to. Let’s go and analyze this. That will bring me right back to Delta-neutral.

I’ll take a look at my quote screen, and see what’s going on. If need be, I can put this in at the last couple of minutes, just to get Delta-neutral, or close to Delta-neutral. It seems to be selling off pretty well. Let’s take a look at a longer-term chart here, to see where we are.

It doesn’t look good here. I could actually be a little bit Delta-negative here. I think the potential for the stock to move down… I could be a little Delta-negative here. If it does trade down, I’ll make some profit.

You can play it that way. It doesn’t have to be exactly Delta-neutral every single second. It looks like it’s getting into a resistance area here, and you have these bars, where it’s in the middle – which is an indecision of the market as to which way it’s going to go. The bears are fighting against the bulls. They end up right in the middle here.

You can let it go, and see if it drops off. You’re already Delta-neutral, so that’s… Right now, it’s 121 Deltas short. The change in the Delta will increase your wealth by $121. For each point the Gamma is going to change, the Delta is, by $232. If we trade down another dollar from here, I should be up around $300.

We’re getting a profit, because it is trading down. The volume seems to be pretty heavy at the close. Let’s go into a shorter-term chart here. The volume is picking up on the close here. That will put us in a little bit of a Delta-negative position.

Also, what we want to do is take a look at Adobe, before the close. We’re down 214 points on the Dow. I’m still 400 shares short, and we’re at a perfect Delta-neutral position. Hopefully, we’ll get some movement. I don’t need much. A dollar up would give me a nice profit. A couple of dollars would be even better.

We’ll see what happens. On the long-term chart on Adobe… Let’s go to a 3-month. It looks like it’s coming down, underneath this trend line, and going into this flag pattern here. Whether or not this is actually going to start trading down from here… The flag pattern is usually a continuation pattern. Or it could continue from this pattern, and go up. You just don’t know.

It looks like it’s going into a tight pattern here. Eventually, it’s going to break out, one side or another. Whether I want to wait for that to happen or not, I’m not so sure.

There’s the closing bell. We’re down about 209 points on the Dow. What will happen is, the erosion of the straddle. I don’t have much of an opportunity. If it’s going into a little triangle like this, it means tighter and tighter trading patterns, if it doesn’t break out.

After tomorrow, I’m going to have to make a decision on Adobe and see. If it doesn’t move, I may have to just cut my losses and get out of that one. Right now, with Adobe, I’ve gotten about $147. It doesn’t take much to make a profit on this, if it moves.

Let’s take a look and see how Gilead ended up. We’re up about $63 for the day, so we had a nice little profit on that first day. You can’t complain too much. Hopefully, if it’s going to continue to go down, we make more profits. We’re not perfectly Delta-neutral here, but it looks like it’s starting to lean towards the downside.

The reason that we do Gamma Scalping in the first place, is because we don’t have an opinion on the market. A little technical analysis might help you, or it might hurt you. I don’t know. You can wait. You don’t have to become Delta-neutral every single minute. With Adobe, I was trying to get Delta-neutral about every 100 Deltas I was short or long. You don’t have to. You can wait until you’re 200 Deltas long or short, and then become Delta-neutral.

We have a little profit on Gilead, for the first day. We have a small loss on Adobe. I’m hoping that Adobe is going to move for us. Hopefully it will move big.

That’s it for today, guys. Go out there and trade with confidence.

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