{"id":49744,"date":"2020-03-20T09:47:36","date_gmt":"2020-03-20T13:47:36","guid":{"rendered":"https:\/\/www.smbtraining.com\/blog\/?p=49744"},"modified":"2020-03-20T09:47:36","modified_gmt":"2020-03-20T13:47:36","slug":"huge-options-blunders-if-i-think-a-stock-is-going-up-ill-just-buy-a-call-its-cheaper-ep-8","status":"publish","type":"post","link":"https:\/\/www.smbtraining.com\/blog\/huge-options-blunders-if-i-think-a-stock-is-going-up-ill-just-buy-a-call-its-cheaper-ep-8","title":{"rendered":"Huge Options Blunders: If I think A Stock Is Going Up, I\u2019ll Just Buy A Call, It\u2019s Cheaper (ep 8)"},"content":{"rendered":"

In Episode 8 of our Huge Options Blunders Series, we discuss the fatal error that many options traders make because they do not have a clear understanding of the risks of buying call options even if they are bullish on a stock.<\/p>\nView Video Transcript<\/strong><\/span>

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okay so today’s video is the 8th in our<\/div>\n<\/div>\n<\/div>\n
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series that we’ve been titled huge<\/div>\n<\/div>\n<\/div>\n
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options trading blunders we decided to<\/div>\n<\/div>\n<\/div>\n
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produce this series for traders are<\/div>\n<\/div>\n<\/div>\n
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serious about trading options for a<\/div>\n<\/div>\n<\/div>\n
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living and badly want to succeed but<\/div>\n<\/div>\n<\/div>\n
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they keep getting sidetracked by<\/div>\n<\/div>\n<\/div>\n
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pursuing strategies with huge flaws in<\/div>\n<\/div>\n<\/div>\n
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them instead of taking the proper steps<\/div>\n<\/div>\n<\/div>\n
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to excel and improve as an options<\/div>\n<\/div>\n<\/div>\n
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trader<\/div>\n<\/div>\n<\/div>\n
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I’m the head trader SMB capital’s<\/div>\n<\/div>\n<\/div>\n
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options trading desk and I can tell you<\/div>\n<\/div>\n<\/div>\n
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for many years of experience that I’ve<\/div>\n<\/div>\n<\/div>\n
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seen every one of the mistakes that were<\/div>\n<\/div>\n<\/div>\n
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describing in these videos and some of<\/div>\n<\/div>\n<\/div>\n
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them I fell for myself when I first<\/div>\n<\/div>\n<\/div>\n
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started trading they’re real and if<\/div>\n<\/div>\n<\/div>\n
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you’re serious about trading for a<\/div>\n<\/div>\n<\/div>\n
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living you really need to pay close<\/div>\n<\/div>\n<\/div>\n
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attention to these videos so that you<\/div>\n<\/div>\n<\/div>\n
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can avoid serious problems in<\/div>\n<\/div>\n<\/div>\n
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unnecessary detours in your trading<\/div>\n<\/div>\n<\/div>\n
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journey so if you’re committed to<\/div>\n<\/div>\n<\/div>\n
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trading full-time as an options trader<\/div>\n<\/div>\n<\/div>\n
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then I urge you to watch this video and<\/div>\n<\/div>\n<\/div>\n
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the rest of the videos in the series so<\/div>\n<\/div>\n<\/div>\n
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that you don’t fall by the wayside<\/div>\n<\/div>\n<\/div>\n
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like so many aspiring traders who don’t<\/div>\n<\/div>\n<\/div>\n
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want to spend the time to learn about<\/div>\n<\/div>\n<\/div>\n
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the actual truth and the rewards and<\/div>\n<\/div>\n<\/div>\n
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challenges of options trading and the<\/div>\n<\/div>\n<\/div>\n
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skills you’ll need to truly succeed we<\/div>\n<\/div>\n<\/div>\n
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want you to take a realistic path to<\/div>\n<\/div>\n<\/div>\n
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your trading goals which are attainable<\/div>\n<\/div>\n<\/div>\n
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if you’re serious and willing to put in<\/div>\n<\/div>\n<\/div>\n
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the work to succeed<\/div>\n<\/div>\n<\/div>\n
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[Music]<\/div>\n<\/div>\n<\/div>\n
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hi I’m Seth Freuburg and I’m the head<\/div>\n<\/div>\n<\/div>\n
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trader of SMB capitals options trading<\/div>\n<\/div>\n<\/div>\n
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desk SMB capital is a proprietary<\/div>\n<\/div>\n<\/div>\n
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trading firm located in midtown<\/div>\n<\/div>\n<\/div>\n
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Manhattan and we provide capital for<\/div>\n<\/div>\n<\/div>\n
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options and equity traders from all over<\/div>\n<\/div>\n<\/div>\n
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the world trading both remotely and in<\/div>\n<\/div>\n<\/div>\n
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our offices here in New York City I’d<\/div>\n<\/div>\n<\/div>\n
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like to suggest that you click on our<\/div>\n<\/div>\n<\/div>\n
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subscribe button right now so that you<\/div>\n<\/div>\n<\/div>\n
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don’t miss any of our free trading<\/div>\n<\/div>\n<\/div>\n
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videos that we produce for traders and<\/div>\n<\/div>\n<\/div>\n
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investors all over the world they’re<\/div>\n<\/div>\n<\/div>\n
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really very valuable ok so today we’re<\/div>\n<\/div>\n<\/div>\n
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going to be looking at options trading<\/div>\n<\/div>\n<\/div>\n
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blunder number eight in our series on<\/div>\n<\/div>\n<\/div>\n
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options misconceptions and huge mistakes<\/div>\n<\/div>\n<\/div>\n
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that you can make in your journey<\/div>\n<\/div>\n<\/div>\n
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towards becoming hopefully a full time<\/div>\n<\/div>\n<\/div>\n
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options trader and today’s lesson is one<\/div>\n<\/div>\n<\/div>\n
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of the most frustrating lessons for new<\/div>\n<\/div>\n<\/div>\n
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options traders because they’ll often<\/div>\n<\/div>\n<\/div>\n
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say analyze a stock or index brilliantly<\/div>\n<\/div>\n<\/div>\n
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properly pick the direction and<\/div>\n<\/div>\n<\/div>\n
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magnitude of a move time that move<\/div>\n<\/div>\n<\/div>\n
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perfectly and still manage to screw up<\/div>\n<\/div>\n<\/div>\n
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the options trade they made to express<\/div>\n<\/div>\n<\/div>\n
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their view on that particular stock ok<\/div>\n<\/div>\n<\/div>\n
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so the trade we’re going to describe in<\/div>\n<\/div>\n<\/div>\n
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this video involves buying a call in<\/div>\n<\/div>\n<\/div>\n
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other words going long a call so before<\/div>\n<\/div>\n<\/div>\n
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we get into the lesson let’s just review<\/div>\n<\/div>\n<\/div>\n
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the basics of what a call option is so<\/div>\n<\/div>\n<\/div>\n
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that there’s no confusion when I explain<\/div>\n<\/div>\n<\/div>\n
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how this strategy works so if you’re<\/div>\n<\/div>\n<\/div>\n
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already know how a call option works<\/div>\n<\/div>\n<\/div>\n
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don’t worry this will be quick and then<\/div>\n<\/div>\n<\/div>\n
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we’ll jump into the guts of the lesson<\/div>\n<\/div>\n<\/div>\n
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so what’s known as a call option on a<\/div>\n<\/div>\n<\/div>\n
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stock entitles the buyer of that option<\/div>\n<\/div>\n<\/div>\n
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to purchase 100 shares of that stock at<\/div>\n<\/div>\n<\/div>\n
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a certain price called the strike price<\/div>\n<\/div>\n<\/div>\n
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of that option regardless of what price<\/div>\n<\/div>\n<\/div>\n
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the stock is trading at before that<\/div>\n<\/div>\n<\/div>\n
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option expires the buyer of a call<\/div>\n<\/div>\n<\/div>\n
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option pays what’s called a premium to<\/div>\n<\/div>\n<\/div>\n
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the seller of the option because the<\/div>\n<\/div>\n<\/div>\n
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seller of that option is taking the risk<\/div>\n<\/div>\n<\/div>\n
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that the stock will go past the strike<\/div>\n<\/div>\n<\/div>\n
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price of the option in which case the<\/div>\n<\/div>\n<\/div>\n
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buyer can exercise his option but if the<\/div>\n<\/div>\n<\/div>\n
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stock on the expiration day of the<\/div>\n<\/div>\n<\/div>\n
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option is not beyond the strike price of<\/div>\n<\/div>\n<\/div>\n
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the option then the seller just pockets<\/div>\n<\/div>\n<\/div>\n
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the premium that he was given by the<\/div>\n<\/div>\n<\/div>\n
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buyer he walks away completely free of<\/div>\n<\/div>\n<\/div>\n
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any obligations the option in other<\/div>\n<\/div>\n<\/div>\n
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words expires worthless because it was<\/div>\n<\/div>\n<\/div>\n
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never triggered so let’s say<\/div>\n<\/div>\n<\/div>\n
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hypothetically that XYZ stock is trading<\/div>\n<\/div>\n<\/div>\n
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at 100 so let’s say that there’s an<\/div>\n<\/div>\n<\/div>\n
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options chain 30 days out from today for<\/div>\n<\/div>\n<\/div>\n
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XYZ and we<\/div>\n<\/div>\n<\/div>\n
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find that the option to buy XYZ for $105<\/div>\n<\/div>\n<\/div>\n
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in 30 days costs 80 cents then that<\/div>\n<\/div>\n<\/div>\n
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option would cost the buyer $80 because<\/div>\n<\/div>\n<\/div>\n
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because it represents the right to buy<\/div>\n<\/div>\n<\/div>\n
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100 shares of XYZ and so you need to pay<\/div>\n<\/div>\n<\/div>\n
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100 times 80 cents to buy the option<\/div>\n<\/div>\n<\/div>\n
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which is $80 now moving out 30 days.if<\/div>\n<\/div>\n<\/div>\n
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XYZ stock closes on the day the option<\/div>\n<\/div>\n<\/div>\n
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expires at 105 or less the option<\/div>\n<\/div>\n<\/div>\n
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expires worthless and the seller of the<\/div>\n<\/div>\n<\/div>\n
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option just pockets the $80 in the buyer<\/div>\n<\/div>\n<\/div>\n
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of the option just lost $80 on the<\/div>\n<\/div>\n<\/div>\n
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transaction however if the stock trades<\/div>\n<\/div>\n<\/div>\n
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up to say 107 then the seller is<\/div>\n<\/div>\n<\/div>\n
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required to sell to the buyer his shares<\/div>\n<\/div>\n<\/div>\n
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of XYZ company for $105 even though<\/div>\n<\/div>\n<\/div>\n
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they’re trading at 107 so in that case<\/div>\n<\/div>\n<\/div>\n
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the buyer would make a profit from<\/div>\n<\/div>\n<\/div>\n
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having bought the call because he paid<\/div>\n<\/div>\n<\/div>\n
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two dollars less per share for stock<\/div>\n<\/div>\n<\/div>\n
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than it’s actually worth and he paid 80<\/div>\n<\/div>\n<\/div>\n
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cents for that but that option so he<\/div>\n<\/div>\n<\/div>\n
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made out on that one so those are the<\/div>\n<\/div>\n<\/div>\n
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basic dynamics of a call option okay so<\/div>\n<\/div>\n<\/div>\n
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with that said options trading blunder<\/div>\n<\/div>\n<\/div>\n
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number eight starts out like a lot of<\/div>\n<\/div>\n<\/div>\n
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these trading blunders and that is with<\/div>\n<\/div>\n<\/div>\n
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what on the surface is a very logical<\/div>\n<\/div>\n<\/div>\n
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premise initially and that is that<\/div>\n<\/div>\n<\/div>\n
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buying a call is much cheaper and less<\/div>\n<\/div>\n<\/div>\n
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risky way of executing the bullish trade<\/div>\n<\/div>\n<\/div>\n
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then outright buying the 100 shares of<\/div>\n<\/div>\n<\/div>\n
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that stock in other words you commit<\/div>\n<\/div>\n<\/div>\n
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options trading blunder number 8 by<\/div>\n<\/div>\n<\/div>\n
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concluding that if I think a stock is<\/div>\n<\/div>\n<\/div>\n
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going up I’ll just buy a call it’s much<\/div>\n<\/div>\n<\/div>\n
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cheaper and it is true that calls are<\/div>\n<\/div>\n<\/div>\n
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much cheaper than buying the shares so<\/div>\n<\/div>\n<\/div>\n
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you’re probably wondering how this<\/div>\n<\/div>\n<\/div>\n
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premise could turn into a blunder well<\/div>\n<\/div>\n<\/div>\n
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it becomes a blunder very frequently<\/div>\n<\/div>\n<\/div>\n
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because many traders do not have a clear<\/div>\n<\/div>\n<\/div>\n
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picture of the nature of options and so<\/div>\n<\/div>\n<\/div>\n
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they think that the price of a call will<\/div>\n<\/div>\n<\/div>\n
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always go up if a stock rallies and the<\/div>\n<\/div>\n<\/div>\n
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price of a put will always go down if<\/div>\n<\/div>\n<\/div>\n
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the market sells off well unfortunately<\/div>\n<\/div>\n<\/div>\n
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it’s not that simple and today we’re<\/div>\n<\/div>\n<\/div>\n
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going to share with you a vivid example<\/div>\n<\/div>\n<\/div>\n
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to drive this point home so let’s take a<\/div>\n<\/div>\n<\/div>\n
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look at CMG stock Chipotle Mexican Grill<\/div>\n<\/div>\n<\/div>\n
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and we’ll see that back in November of<\/div>\n<\/div>\n<\/div>\n
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2019 it was trading up around 816 and<\/div>\n<\/div>\n<\/div>\n
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looking at this chart you you might have<\/div>\n<\/div>\n<\/div>\n
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been of the opinion that by<\/div>\n<\/div>\n<\/div>\n
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early next year CMG was gonna rally and<\/div>\n<\/div>\n<\/div>\n
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blast through its all-time high so let’s<\/div>\n<\/div>\n<\/div>\n
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say that you went out to the options<\/div>\n<\/div>\n<\/div>\n
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chain that was to expire in the first<\/div>\n<\/div>\n<\/div>\n
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week of the new year on January 3rd and<\/div>\n<\/div>\n<\/div>\n
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you’ll see that that 860 call which is<\/div>\n<\/div>\n<\/div>\n
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about 10 points above its all-time highs<\/div>\n<\/div>\n<\/div>\n
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was selling for six dollars and sixty<\/div>\n<\/div>\n<\/div>\n
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six cents which means you’ll have to pay<\/div>\n<\/div>\n<\/div>\n
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666 dollars to have the right to buy 100<\/div>\n<\/div>\n<\/div>\n
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shares of CMG stock at 860 in the first<\/div>\n<\/div>\n<\/div>\n
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week in January now this could be a very<\/div>\n<\/div>\n<\/div>\n
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attractive idea to you if you thought<\/div>\n<\/div>\n<\/div>\n
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that CMG had a really good chance of<\/div>\n<\/div>\n<\/div>\n
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getting to 700 by then let’s take a look<\/div>\n<\/div>\n<\/div>\n
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at the math on that to see why a trader<\/div>\n<\/div>\n<\/div>\n
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might be further lured into making this<\/div>\n<\/div>\n<\/div>\n
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straight so if CMG makes it to 900 by<\/div>\n<\/div>\n<\/div>\n
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January 3rd then if he shelled out<\/div>\n<\/div>\n<\/div>\n
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roughly 81 thousand dollars for 100<\/div>\n<\/div>\n<\/div>\n
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shares then he could sell them for 90<\/div>\n<\/div>\n<\/div>\n
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thousand dollars on January 3rd making a<\/div>\n<\/div>\n<\/div>\n
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10 point 2 percent return on his<\/div>\n<\/div>\n<\/div>\n
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investment if he’s right but if he buys<\/div>\n<\/div>\n<\/div>\n
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the 860 call he’d be buy the option for<\/div>\n<\/div>\n<\/div>\n
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666 dollars and then on January 3rd he’d<\/div>\n<\/div>\n<\/div>\n
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have the right to buy them for 860 when<\/div>\n<\/div>\n<\/div>\n
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they’re trading for 900 dollars so he<\/div>\n<\/div>\n<\/div>\n
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could buy the shares at 860 turn around<\/div>\n<\/div>\n<\/div>\n
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and sell them 1 second later for 900<\/div>\n<\/div>\n<\/div>\n
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dollars and make a $40 per share profit<\/div>\n<\/div>\n<\/div>\n
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immediately 100 100 shares which becomes<\/div>\n<\/div>\n<\/div>\n
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a gain of $4,000 in total which is over<\/div>\n<\/div>\n<\/div>\n
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a 500 percent gain the concept is<\/div>\n<\/div>\n<\/div>\n
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obviously very attractive on the surface<\/div>\n<\/div>\n<\/div>\n
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I wanted to let you know that there<\/div>\n<\/div>\n<\/div>\n
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really are sound viable long-term<\/div>\n<\/div>\n<\/div>\n
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techniques for trading options for<\/div>\n<\/div>\n<\/div>\n
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income and in fact we’re currently<\/div>\n<\/div>\n<\/div>\n
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running a to our free intensive workshop<\/div>\n<\/div>\n<\/div>\n
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at the moment where we’ll be teaching<\/div>\n<\/div>\n<\/div>\n
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you three of those strategies that real<\/div>\n<\/div>\n<\/div>\n
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professional options traders use<\/div>\n<\/div>\n<\/div>\n
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including a really simple but incredibly<\/div>\n<\/div>\n<\/div>\n
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effective technique that some of the<\/div>\n<\/div>\n<\/div>\n
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greatest investors in the world like<\/div>\n<\/div>\n<\/div>\n
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Warren Buffett use all the time plus an<\/div>\n<\/div>\n<\/div>\n
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options trading strategy that has a<\/div>\n<\/div>\n<\/div>\n
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statistical 80% probability of profit<\/div>\n<\/div>\n<\/div>\n
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month in and month out plus an option<\/div>\n<\/div>\n<\/div>\n
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strategy that you can employ with the<\/div>\n<\/div>\n<\/div>\n
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stock that you like where you’ll make<\/div>\n<\/div>\n<\/div>\n
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your target profit whether the stock<\/div>\n<\/div>\n<\/div>\n
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goes up goes nowhere or even goes down a<\/div>\n<\/div>\n<\/div>\n
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small percentage so if those strategies<\/div>\n<\/div>\n<\/div>\n
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would be of interest to you then you<\/div>\n<\/div>\n<\/div>\n
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should check out the free<\/div>\n<\/div>\n<\/div>\n
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class that we’re currently running just<\/div>\n<\/div>\n<\/div>\n
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go ahead and click the link that should<\/div>\n<\/div>\n<\/div>\n
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be appearing now at the top right corner<\/div>\n<\/div>\n<\/div>\n
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of your screen that will open the free<\/div>\n<\/div>\n<\/div>\n
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registration page in a new window so<\/div>\n<\/div>\n<\/div>\n
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don’t worry you won’t lose this video or<\/div>\n<\/div>\n<\/div>\n
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you can just head on over to options<\/div>\n<\/div>\n<\/div>\n
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class comm to register for this free<\/div>\n<\/div>\n<\/div>\n
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intensive workshop it’s a rare<\/div>\n<\/div>\n<\/div>\n
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opportunity for retail traders and<\/div>\n<\/div>\n<\/div>\n
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investors to learn directly from Wall<\/div>\n<\/div>\n<\/div>\n
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Street traders but that’s exactly what<\/div>\n<\/div>\n<\/div>\n
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you’ll be getting through this free<\/div>\n<\/div>\n<\/div>\n
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online workshop so click the link to<\/div>\n<\/div>\n<\/div>\n
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sign up now and don’t miss it okay so<\/div>\n<\/div>\n<\/div>\n
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we’ve gotten ourselves into this very<\/div>\n<\/div>\n<\/div>\n
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attractive trade where for the same<\/div>\n<\/div>\n<\/div>\n
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expected move we can make a 500% return<\/div>\n<\/div>\n<\/div>\n
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instead of a measly 10% and so we’re<\/div>\n<\/div>\n<\/div>\n
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feeling pretty good about ourselves so<\/div>\n<\/div>\n<\/div>\n
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we move forward to December 20th about<\/div>\n<\/div>\n<\/div>\n
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three weeks later and lo and behold CMG<\/div>\n<\/div>\n<\/div>\n
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has now rallied 18 points up to 835 and<\/div>\n<\/div>\n<\/div>\n
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so we were right CMG’s rally and so<\/div>\n<\/div>\n<\/div>\n
\n
\n
we’re feeling pretty good about<\/div>\n<\/div>\n<\/div>\n
\n
\n
ourselves but then we turn to the<\/div>\n<\/div>\n<\/div>\n
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\n
options gene to find that not only<\/div>\n<\/div>\n<\/div>\n
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\n
hasn’t the CMG call going up it’s<\/div>\n<\/div>\n<\/div>\n
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\n
actually lost 60% of its value so the<\/div>\n<\/div>\n<\/div>\n
\n
\n
stock is up 2.2% but the option is down<\/div>\n<\/div>\n<\/div>\n
\n
\n
60% and you pound your hand on your desk<\/div>\n<\/div>\n<\/div>\n
\n
\n
in frustration I mean your analysis was<\/div>\n<\/div>\n<\/div>\n
\n
\n
perfect and CMG rallied and so the call<\/div>\n<\/div>\n<\/div>\n
\n
\n
should have gone up right I mean calls<\/div>\n<\/div>\n<\/div>\n
\n
\n
go up when stocks rally don’t they and<\/div>\n<\/div>\n<\/div>\n
\n
\n
the reason that you’re confused is that<\/div>\n<\/div>\n<\/div>\n
\n
\n
you don’t understand that options don’t<\/div>\n<\/div>\n<\/div>\n
\n
\n
respond exactly like the asset from<\/div>\n<\/div>\n<\/div>\n
\n
\n
which they’re derived because there are<\/div>\n<\/div>\n<\/div>\n
\n
\n
other factors that affect an options<\/div>\n<\/div>\n<\/div>\n
\n
\n
value and one of them is simple to<\/div>\n<\/div>\n<\/div>\n
\n
\n
understand and that is simply that as<\/div>\n<\/div>\n<\/div>\n
\n
\n
time goes by an option loses value<\/div>\n<\/div>\n<\/div>\n
\n
\n
because of something called time decay<\/div>\n<\/div>\n<\/div>\n
\n
\n
and that simply means that the longer<\/div>\n<\/div>\n<\/div>\n
\n
\n
you go the closer you are to the options<\/div>\n<\/div>\n<\/div>\n
\n
\n
expiring the less likely it is that the<\/div>\n<\/div>\n<\/div>\n
\n
\n
stock can get up to the strike price of<\/div>\n<\/div>\n<\/div>\n
\n
\n
your call you see in this example<\/div>\n<\/div>\n<\/div>\n
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\n
there’s only 15 days to go until we get<\/div>\n<\/div>\n<\/div>\n
\n
\n
to the expiration date which is January<\/div>\n<\/div>\n<\/div>\n
\n
\n
3rd and so the option has to move up<\/div>\n<\/div>\n<\/div>\n
\n
\n
another 26 points for that option to<\/div>\n<\/div>\n<\/div>\n
\n
\n
have any value at all right because if<\/div>\n<\/div>\n<\/div>\n
\n
\n
the stock is at 8:34 and the calls are<\/div>\n<\/div>\n<\/div>\n
\n
\n
at 860 unless the stock gets up to 860<\/div>\n<\/div>\n<\/div>\n
\n
\n
the option has no value at all an<\/div>\n<\/div>\n<\/div>\n
\n
\n
expiration date I mean who’s going to<\/div>\n<\/div>\n<\/div>\n
\n
\n
exercise their right to buy stock at 860<\/div>\n<\/div>\n<\/div>\n
\n
\n
if the<\/div>\n<\/div>\n<\/div>\n
\n
\n
stock is trading at less than 860 in the<\/div>\n<\/div>\n<\/div>\n
\n
\n
open market so that write that call<\/div>\n<\/div>\n<\/div>\n
\n
\n
option becomes worthless on that day and<\/div>\n<\/div>\n<\/div>\n
\n
\n
it expires with no value and so with<\/div>\n<\/div>\n<\/div>\n
\n
\n
only 15 days to go the market is<\/div>\n<\/div>\n<\/div>\n
\n
\n
starting to devalue this option even<\/div>\n<\/div>\n<\/div>\n
\n
\n
though CMG has rallied because the<\/div>\n<\/div>\n<\/div>\n
\n
\n
option is running out of time to have<\/div>\n<\/div>\n<\/div>\n
\n
\n
any value okay you say well still we’ve<\/div>\n<\/div>\n<\/div>\n
\n
\n
got 15 days to go here so let’s just<\/div>\n<\/div>\n<\/div>\n
\n
\n
hang on and let’s see what happens and<\/div>\n<\/div>\n<\/div>\n
\n
\n
sure enough CMG rallies up to 865 on<\/div>\n<\/div>\n<\/div>\n
\n
\n
expiration day five points past the<\/div>\n<\/div>\n<\/div>\n
\n
\n
strike on the option and you start<\/div>\n<\/div>\n<\/div>\n
\n
\n
high-fiving everybody and bragging that<\/div>\n<\/div>\n<\/div>\n
\n
\n
not only did you call this one right CMG<\/div>\n<\/div>\n<\/div>\n
\n
\n
exceeded your price target by five<\/div>\n<\/div>\n<\/div>\n
\n
\n
points so you’re not only a technical<\/div>\n<\/div>\n<\/div>\n
\n
\n
analysis genius you’re rich except then<\/div>\n<\/div>\n<\/div>\n
\n
\n
you turn to your options change for CMG<\/div>\n<\/div>\n<\/div>\n
\n
\n
and you realize that you lost money on<\/div>\n<\/div>\n<\/div>\n
\n
\n
the trade that’s right you lost money<\/div>\n<\/div>\n<\/div>\n
\n
\n
and I want you to understand why you see<\/div>\n<\/div>\n<\/div>\n
\n
\n
the day that you were assigned this<\/div>\n<\/div>\n<\/div>\n
\n
\n
shares and remember your call entitles<\/div>\n<\/div>\n<\/div>\n
\n
\n
you to 100 of those shares you could<\/div>\n<\/div>\n<\/div>\n
\n
\n
have flipped them immediately for 865<\/div>\n<\/div>\n<\/div>\n
\n
\n
dollars per share having bought them for<\/div>\n<\/div>\n<\/div>\n
\n
\n
860 per share so you would have made 500<\/div>\n<\/div>\n<\/div>\n
\n
\n
dollars from selling those shares but<\/div>\n<\/div>\n<\/div>\n
\n
\n
remember you paid 666 dollars for the<\/div>\n<\/div>\n<\/div>\n
\n
\n
shares and so you actually lost money on<\/div>\n<\/div>\n<\/div>\n
\n
\n
the transaction even though you were<\/div>\n<\/div>\n<\/div>\n
\n
\n
right about everything so please don’t<\/div>\n<\/div>\n<\/div>\n
\n
\n
fall for options blunder number eight<\/div>\n<\/div>\n<\/div>\n
\n
\n
and this is not to say that buying calls<\/div>\n<\/div>\n<\/div>\n
\n
\n
is a losing proposition in fact we have<\/div>\n<\/div>\n<\/div>\n
\n
\n
traders on our desk who make a fortune<\/div>\n<\/div>\n<\/div>\n
\n
\n
buying calls strategically at the right<\/div>\n<\/div>\n<\/div>\n
\n
\n
time but those traders are fully aware<\/div>\n<\/div>\n<\/div>\n
\n
\n
of the fact that the stock price must<\/div>\n<\/div>\n<\/div>\n
\n
\n
exceed the strike price of the option by<\/div>\n<\/div>\n<\/div>\n
\n
\n
at least the cost of the option itself<\/div>\n<\/div>\n<\/div>\n
\n
\n
or you’ll lose money on the transaction<\/div>\n<\/div>\n<\/div>\n
\n
\n
as you saw in this case with equities<\/div>\n<\/div>\n<\/div>\n
\n
\n
it’s enough to be right about direction<\/div>\n<\/div>\n<\/div>\n
\n
\n
with options if you don’t understand<\/div>\n<\/div>\n<\/div>\n
\n
\n
them correctly and how they’re priced<\/div>\n<\/div>\n<\/div>\n
\n
\n
you can get trapped into losing money<\/div>\n<\/div>\n<\/div>\n
\n
\n
even if you got the direction the<\/div>\n<\/div>\n<\/div>\n
\n
\n
magnitude of the direction and the<\/div>\n<\/div>\n<\/div>\n
\n
\n
timing of the move right you need to be<\/div>\n<\/div>\n<\/div>\n
\n
\n
educated about the nature of options<\/div>\n<\/div>\n<\/div>\n
\n
\n
pricing to be able<\/div>\n<\/div>\n<\/div>\n
\n
\n
take full advantage of the wonderful<\/div>\n<\/div>\n<\/div>\n
\n
\n
opportunities that options do provide<\/div>\n<\/div>\n<\/div>\n
\n
\n
the professional trader in many cases<\/div>\n<\/div>\n<\/div>\n
\n
\n
now just to remind you as I said earlier<\/div>\n<\/div>\n<\/div>\n
\n
\n
if you enjoyed this video and learned<\/div>\n<\/div>\n<\/div>\n
\n
\n
something valuable from it would like to<\/div>\n<\/div>\n<\/div>\n
\n
\n
learn the details of three real-world<\/div>\n<\/div>\n<\/div>\n
\n
\n
option strategies that professional<\/div>\n<\/div>\n<\/div>\n
\n
\n
options traders use all the time then<\/div>\n<\/div>\n<\/div>\n
\n
\n
you should check out the free options<\/div>\n<\/div>\n<\/div>\n
\n
\n
class that we’re currently running just<\/div>\n<\/div>\n<\/div>\n
\n
\n
go ahead and click the link that should<\/div>\n<\/div>\n<\/div>\n
\n
\n
be appearing now at the top right corner<\/div>\n<\/div>\n<\/div>\n
\n
\n
of your screen that will open the free<\/div>\n<\/div>\n<\/div>\n
\n
\n
registration page in a new window so you<\/div>\n<\/div>\n<\/div>\n
\n
\n
won’t lose this video don’t worry<\/div>\n<\/div>\n<\/div>\n
\n
\n
or you can just head on over to options<\/div>\n<\/div>\n<\/div>\n
\n
\n
class com to register for this free<\/div>\n<\/div>\n<\/div>\n
\n
\n
intensive workshop it really is a rare<\/div>\n<\/div>\n<\/div>\n
\n
\n
opportunity for retail traders and<\/div>\n<\/div>\n<\/div>\n
\n
\n
investors to learn directly from Wall<\/div>\n<\/div>\n<\/div>\n
\n
\n
Street traders but that’s exactly what<\/div>\n<\/div>\n<\/div>\n
\n
\n
you’ll be getting through this free<\/div>\n<\/div>\n<\/div>\n
\n
\n
online workshop so click the link to<\/div>\n<\/div>\n<\/div>\n
\n
\n
sign up now and don’t miss it and please<\/div>\n<\/div>\n<\/div>\n
\n
\n
don’t forget to click on the subscribe<\/div>\n<\/div>\n<\/div>\n
\n
\n
button right now so you won’t miss the<\/div>\n<\/div>\n<\/div>\n
\n
\n
next episode of huge options trading<\/div>\n<\/div>\n<\/div>\n
\n
\n
blunders and all the other free trading<\/div>\n<\/div>\n<\/div>\n
\n
\n
videos that were posting constantly on<\/div>\n<\/div>\n<\/div>\n
\n
\n
our channel to help you to improve your<\/div>\n<\/div>\n<\/div>\n
\n
\n
game as an options trader<\/div>\n
<\/div><\/div>\n<\/div>\n<\/div>\n

\"\"<\/a><\/p>\n

* no relevant positions<\/p>\n","protected":false},"excerpt":{"rendered":"

In Episode 8 of our Huge Options Blunders Series, we discuss the fatal error that many options traders make because they do not have a clear understanding of the risks of buying call options even if they are bullish on a stock. * no relevant positions<\/p>\n","protected":false},"author":290,"featured_media":49746,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"video","meta":{"footnotes":""},"categories":[4189],"tags":[],"class_list":["post-49744","post","type-post","status-publish","format-video","has-post-thumbnail","hentry","category-free-daily-trading-video","post_format-post-format-video"],"yoast_head":"\nHuge Options Blunders: If I think A Stock Is Going Up, I\u2019ll Just Buy A Call, It\u2019s Cheaper (ep 8) | SMB Training<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" 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