>>>>>>>>>> For More Free Videos Click Here <<<<<<<<<
Good afternoon, tradeologists!
I think it would be helpful to go over some of the trades that we do that form the portfolio that we’re trying to build here.
In the videos, in the modules, I talk a lot about some different types of trades that we use to build our portfolio, and manage those by the numbers. Those trades are iron condor, calendar, double calendar, and vertical spreads. We haven’t talked about double diagonals, but we have talked about the iron condor, the double calendar, the calendar, and the vertical spreads.
It might be helpful to do this video, just to show you exactly what those positions are, what kind of trades those are, how they make money, and why we use them.
That’s what I’m going to try and do today – go over each one of those individual trades, and give you a sense of how those trades are put on, and why we do those.
Let’s go to our trade tab, at Think or Swim. I use Think or Swim platform. This is pretty much the way you’re going to see the Think or Swim platform, when you open it for the first time. If you don’t, you can go to this setup tab, in the top right hand corner. Just click “setup.” You can have it display all of your accounts, some of your accounts, which default account you want it to go to. I have two accounts on here.
The position main layout – you really want to see the Delta, the Gamma, the Theta, and the Vega. You can also select “Net Shares, Strike Price, Net Change, and Percent Change,” and I’l show you what that looks like. If you say “Okay,” it changes these. We no longer have our Greeks here. Instead, we have “Net Shares, Strike Price, Net Change, Percent Change,” etc.
I don’t like that setup, because what we do is, we manage by the numbers, and the numbers are the Delta, the Gamma, the Theta, and the Vega. That’s how I have that open. Also, we want to see the profit and loss open in the day. You can go open year-to-date, percentages, and so forth, but I like the open and the day.
You can also set the margin requirement, or the buying effect of the positions that you have on – so, in other words, how much it reduces your buying effect, or how much it increases your buying effect, etc. I like to see the margin, because I calculate my returns based on the return on margin.
Group positions by the instrument, or you could do it by the trade time that you did it. You can also select whether or not you want to mark the ITM – which is “in the money” positions – two weeks before expiration, a week before expiration, four weeks before expiration. I just selected, as a default, 2 weeks before expiration.
Lines in the position table. I really don’t play around with that. Volatility strategy – I want the individual implied volatility. You can also select volatility smile approximation, or fixed volatility per expiration date. I like the implied volatility on the individual options. I just selected that.
My default stock order quantity is 500. You can select whatever instrument – but you can always change that. You can select 500 to begin with, and then increase that as you go. The stock order quantity increment is 100, so if you toggle up – if you select a stock that you want to buy, it automatically puts 500 shares in as your initial buy, into the trade order tab. If you toggle up, it will go up by 100 shares at a time.
The default futures – I don’t do anything with futures yet. I don’t really care for futures that much, to be honest with you. The default option order quantity is one. Then it allows me to either put in there 1, 2, 3, or 5, or 10, or whatever. Then, what I do, is I just toggle the number that I want.
Some other things here – you want to show the order confirmation tab. You want to show that. You don’t want to submit orders automatically. You want to make sure that always says “Yes.”
Then, you clear the order after the send. After you send it, the order is cleared from the tab, but it’s still in the order queue, so you can still see it.
I want real time; no delay on the quote speed. Some of these other things, the hints on the mouse – yeah, you can use those, and your nickname.
You just click “Okay,” on that, and that sets everything up for you. That’s the way I have my Think or Swim platform set up. I think it’s the easiest one for me to use. When I go into a trade, we go from the “monitor” tab over to the “trade” tab, when we want to place orders. Let’s say I wanted to place an order in LMT. I just put in LMT and then I hit “Enter.”
What it will do is, it will bring down all of the options available for LMT at any given time. Right now, the June options are available, and the July. What they do, is they do the Junes, and they do the year that they are in. There are some options that are in January of 2009, and there are some that expire in January of 2010.
Those are the leap options – really, really long-term options. If you just click these little arrows, you can open up and see the available number of strikes that are available for that option. You can set the number of strikes that are open by this little box over in the right-hand corner here. If you only want 10 open, or you only want the ones right around the money open, you can just open two of those. I like to open up as many as possible, so I can see all of the available options.
If you want to close that up, you can just right click on the little blue arrow, and open up another one. If I wanted to see September’s options, I could open that up, and take a look.
Specifically, now, let’s go to an index and take a look at IWM, which is one of my favorite index options to use. I currently have a position on the IWM now, which is way up here. That’s because usually, I do spread positions. When we talk about doing an iron condor, a calendar, a double calendar, or a vertical spread, those are all spread positions. A spread position is simply the sale of one option and the purchase of another option. Normally, the purchase of another option is there, and then the purchase of another option is to protect the sale of that option.
Most brokerage firms, unless you have a great deal of equity in your account, or you have professional experience, do not allow you to sell options that they call “naked.” What that means, is you’re selling an option without having a corresponding option that you’ve purchased in order to protect the sale of that short option. They don’t allow you to do that unless you’re a professional trader, or you have a large equity in your account.