Most Traders Buy One Call. Here's What Two Long and One Short Actually Does.

NVIDIA

The trade involves buying the 220 strike call for $1,300 and selling the weekly cycle for about $2 and change. The implied volatility is on the lower end, with an IV rank of 37 and 1/2. The trade is designed to capitalize on potential pre-earnings rallies and the upcoming earnings announcement. The total package is a net debit of $1,031, with the potential for a better entry if the stock moves favorably. The trade is structured to benefit from the volatility expansion and the potential for a rally in the stock.

GDX

The speaker is looking for a pullback in GDX due to the momentum seen in the metals. The short strangle strategy is considered ideal as it allows for potential upside buffer while profiting from a range-bound trade. The speaker believes the rally is likely to stabilize or trade in a range, making the short strangle a suitable trade.

QQQ

If the pullback is short term and near completion, selling naked puts on QQQ at 66867 (20 delta for October 2022) and 6665 (23 delta) can provide a 10% return. The strategy assumes the pullback is nearing its end and the market will stabilize. The risk is if the pullback continues significantly, invalidating the assumption of a short-term pullback.

Zebra Strategy for Long-Term Bullish Positions

The zebra strategy involves buying two in-the-money calls and selling one at-the-money call, effectively creating a position that acts like stock with limited downside risk. This strategy is particularly effective for stocks in the $50 to $100 range that have the potential for significant price movement. The zero extrinsic value from the at-the-money call and the decent delta on the in-the-money calls make this strategy appealing for long-term bullish trades. The break-even point is calculated as the strike price of the sold call plus the premium paid, and the upside is uncapped.

Optimal Strike Selection for Options Trading

The speaker emphasizes the importance of selecting optimal strike prices based on buying power and credit requirements. By comparing different strike prices, the speaker highlights that lower strike prices (e.g., $45) require more buying power but offer better credit, while higher strike prices (e.g., $50) require less buying power but offer less credit. This insight suggests that traders should evaluate the trade-off between buying power and credit when selecting strike prices.

Trade Strategy Based on Implied Volatility and Price Levels

The speaker suggests trading strategies based on low implied volatility and price levels, particularly for stocks like Nike and Walmart. The strategy involves using covered calls or the poor man's covered call due to low IVR. This approach is applicable when the stock has experienced significant price drops and low IV rank, indicating potential for a rebound with limited risk.

What is the break-even point for the zebra strategy?

The break-even point for the zebra strategy is 105.65, which is the strike price of the sold call plus the premium paid.

TakeawayThe break-even point is calculated as the strike price of the sold call plus the premium paid, which is 105.65 in this case.

What is the cost basis for the trade?

The cost basis for the trade is $47.50, with the speaker having a working order at $50.

TakeawayTraders should be aware of their cost basis when entering trades to understand their potential profit or loss.

What is the most interesting trade you can find?

The most interesting trade is the GDX, which the speaker considers the most intriguing trade they can find. They also mention QQQ as a long-term trade option.

TakeawayThe GDX is highlighted as the most interesting trade, with QQQ as a long-term alternative.