{"id":49848,"date":"2020-05-08T15:17:11","date_gmt":"2020-05-08T19:17:11","guid":{"rendered":"https:\/\/www.smbtraining.com\/blog\/?p=49848"},"modified":"2020-05-08T15:17:11","modified_gmt":"2020-05-08T19:17:11","slug":"how-to-completely-remove-downside-risk-on-a-bullish-play-with-options","status":"publish","type":"post","link":"https:\/\/www.smbtraining.com\/blog\/how-to-completely-remove-downside-risk-on-a-bullish-play-with-options","title":{"rendered":"How to Completely Remove Downside Risk on a Bullish Play with Options"},"content":{"rendered":"

In volatile markets like this one, traders have serious concerns about taking long positions on stocks when one nasty headline can produce a massive sell off that can last for weeks. In this video we show you a very powerful technique to pull the downside risk out of a trade completely while maintaining the potential for very large profit.<\/p>\nView Video Transcript<\/strong><\/span>

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after a huge sell-off like the one we’ve<\/div>\n<\/div>\n<\/div>\n
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experienced in march of this year where<\/div>\n<\/div>\n<\/div>\n
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basically<\/div>\n<\/div>\n<\/div>\n
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every stock gets pummeled even those<\/div>\n<\/div>\n<\/div>\n
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that can actually benefit from this<\/div>\n<\/div>\n<\/div>\n
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pandemic<\/div>\n<\/div>\n<\/div>\n
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eventually traders start to see an<\/div>\n<\/div>\n<\/div>\n
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increasing number of<\/div>\n<\/div>\n<\/div>\n
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bullish opportunities it’s it’s tough to<\/div>\n<\/div>\n<\/div>\n
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go long stocks though<\/div>\n<\/div>\n<\/div>\n
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as the whole market is crashing even<\/div>\n<\/div>\n<\/div>\n
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when doing so makes a great deal of<\/div>\n<\/div>\n<\/div>\n
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sense<\/div>\n<\/div>\n<\/div>\n
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i’m a head trader of s b capitals<\/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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that the traders on our desk are well<\/div>\n<\/div>\n<\/div>\n
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aware of such opportunities but of<\/div>\n<\/div>\n<\/div>\n
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course<\/div>\n<\/div>\n<\/div>\n
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concerned about jumping in too early on<\/div>\n<\/div>\n<\/div>\n
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long stock positions afraid that the<\/div>\n<\/div>\n<\/div>\n
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market<\/div>\n<\/div>\n<\/div>\n
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has not bottomed out as yet and getting<\/div>\n<\/div>\n<\/div>\n
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badly hurt in the process<\/div>\n<\/div>\n<\/div>\n
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that sounds like you then i’d suggest<\/div>\n<\/div>\n<\/div>\n
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you stick around because i’m going to<\/div>\n<\/div>\n<\/div>\n
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show you an options<\/div>\n<\/div>\n<\/div>\n
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trading technique for literally removing<\/div>\n<\/div>\n<\/div>\n
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the downside risk<\/div>\n<\/div>\n<\/div>\n
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of a bullish play on stocks that i think<\/div>\n<\/div>\n<\/div>\n
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you’re going to find amazing so<\/div>\n<\/div>\n<\/div>\n
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stick around hi i’m seth freudberg and<\/div>\n<\/div>\n<\/div>\n
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i’m the head trader of s b capitals<\/div>\n<\/div>\n<\/div>\n
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options trading desk<\/div>\n<\/div>\n<\/div>\n
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smb capital is a proprietary trading<\/div>\n<\/div>\n<\/div>\n
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firm located in midtown manhattan<\/div>\n<\/div>\n<\/div>\n
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and we provide capital for options and<\/div>\n<\/div>\n<\/div>\n
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equity traders from all over the world<\/div>\n<\/div>\n<\/div>\n
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trading both remotely and in our offices<\/div>\n<\/div>\n<\/div>\n
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here in new york city<\/div>\n<\/div>\n<\/div>\n
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now i’d like to suggest that you click<\/div>\n<\/div>\n<\/div>\n
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on our subscribe button right now so<\/div>\n<\/div>\n<\/div>\n
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that you don’t miss any of our free<\/div>\n<\/div>\n<\/div>\n
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trading videos<\/div>\n<\/div>\n<\/div>\n
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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<\/div>\n<\/div>\n<\/div>\n
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okay so we all watched as the market<\/div>\n<\/div>\n<\/div>\n
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crashed day after day as a result of the<\/div>\n<\/div>\n<\/div>\n
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covid19 pandemic in march of this year<\/div>\n<\/div>\n<\/div>\n
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and like the rest of the world the only<\/div>\n<\/div>\n<\/div>\n
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way that most of us were able to<\/div>\n<\/div>\n<\/div>\n
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shop for anything but food is online and<\/div>\n<\/div>\n<\/div>\n
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so<\/div>\n<\/div>\n<\/div>\n
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it would not take albert einstein to<\/div>\n<\/div>\n<\/div>\n
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realize that it’s possible<\/div>\n<\/div>\n<\/div>\n
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that amazon may actually be benefiting<\/div>\n<\/div>\n<\/div>\n
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from the fact that they are about the<\/div>\n<\/div>\n<\/div>\n
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only game in town for shopping<\/div>\n<\/div>\n<\/div>\n
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during a pandemic and that the stock<\/div>\n<\/div>\n<\/div>\n
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getting beaten down like the rest of the<\/div>\n<\/div>\n<\/div>\n
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market<\/div>\n<\/div>\n<\/div>\n
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may not make a whole lot of sense okay<\/div>\n<\/div>\n<\/div>\n
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so let’s take a look at a chart of<\/div>\n<\/div>\n<\/div>\n
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amazon<\/div>\n<\/div>\n<\/div>\n
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up through the end of february 2020 and<\/div>\n<\/div>\n<\/div>\n
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you’ll see<\/div>\n<\/div>\n<\/div>\n
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that amazon was up in the 2060 area it’s<\/div>\n<\/div>\n<\/div>\n
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all-time highs before<\/div>\n<\/div>\n<\/div>\n
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kovid19 fear started to grip the world<\/div>\n<\/div>\n<\/div>\n
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markets causing amazon to sell off down<\/div>\n<\/div>\n<\/div>\n
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below 1900<\/div>\n<\/div>\n<\/div>\n
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which is a 300 point drop from its peak<\/div>\n<\/div>\n<\/div>\n
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to its trough so<\/div>\n<\/div>\n<\/div>\n
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suppose you were thinking that the<\/div>\n<\/div>\n<\/div>\n
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market had this all wrong that amazon is<\/div>\n<\/div>\n<\/div>\n
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going to actually<\/div>\n<\/div>\n<\/div>\n
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benefit from this situation because<\/div>\n<\/div>\n<\/div>\n
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people will be sequestered in their<\/div>\n<\/div>\n<\/div>\n
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homes and<\/div>\n<\/div>\n<\/div>\n
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they won’t be able to go out shopping so<\/div>\n<\/div>\n<\/div>\n
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amazon will almost have a monopoly<\/div>\n<\/div>\n<\/div>\n
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on the retail space which is a pretty<\/div>\n<\/div>\n<\/div>\n
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big deal yet at the same time<\/div>\n<\/div>\n<\/div>\n
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there’s a reality and that is that the<\/div>\n<\/div>\n<\/div>\n
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market is really scared and so the<\/div>\n<\/div>\n<\/div>\n
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chance of a market sell-off<\/div>\n<\/div>\n<\/div>\n
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taking all stocks down regardless of<\/div>\n<\/div>\n<\/div>\n
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their strategic positioning in the<\/div>\n<\/div>\n<\/div>\n
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marketplace<\/div>\n<\/div>\n<\/div>\n
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was a distinct possibility and so going<\/div>\n<\/div>\n<\/div>\n
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along a major stock like<\/div>\n<\/div>\n<\/div>\n
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amazon would for most traders be a<\/div>\n<\/div>\n<\/div>\n
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pretty high risk thing to do so<\/div>\n<\/div>\n<\/div>\n
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what i’d like to show you is a different<\/div>\n<\/div>\n<\/div>\n
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way to have handled this trade which<\/div>\n<\/div>\n<\/div>\n
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incredibly completely eliminates the<\/div>\n<\/div>\n<\/div>\n
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downside risk on a long amazon trade<\/div>\n<\/div>\n<\/div>\n
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even as the rest of the market<\/div>\n<\/div>\n<\/div>\n
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is crashing as a result of pandemic<\/div>\n<\/div>\n<\/div>\n
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fears now before we get into that we’ve<\/div>\n<\/div>\n<\/div>\n
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got to make sure that everyone listening<\/div>\n<\/div>\n<\/div>\n
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understands how<\/div>\n<\/div>\n<\/div>\n
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call options work for those of you<\/div>\n<\/div>\n<\/div>\n
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already familiar with call options<\/div>\n<\/div>\n<\/div>\n
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please hang in there as this will be<\/div>\n<\/div>\n<\/div>\n
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brief and then we’ll get back to the<\/div>\n<\/div>\n<\/div>\n
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structure of this trade<\/div>\n<\/div>\n<\/div>\n
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okay so most of you have probably heard<\/div>\n<\/div>\n<\/div>\n
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of a call which is a security that<\/div>\n<\/div>\n<\/div>\n
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allows a trader to buy the right<\/div>\n<\/div>\n<\/div>\n
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to purchase 100 shares of a stock at the<\/div>\n<\/div>\n<\/div>\n
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strike price of that option<\/div>\n<\/div>\n<\/div>\n
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before that option expires so for<\/div>\n<\/div>\n<\/div>\n
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example the april 29th<\/div>\n<\/div>\n<\/div>\n
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amazon 2100 call entitles the buyer of<\/div>\n<\/div>\n<\/div>\n
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that call to purchase<\/div>\n<\/div>\n<\/div>\n
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100 shares of amazon at 2100<\/div>\n<\/div>\n<\/div>\n
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per share anytime before that option<\/div>\n<\/div>\n<\/div>\n
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expires<\/div>\n<\/div>\n<\/div>\n
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on april 17th even if amazon is trading<\/div>\n<\/div>\n<\/div>\n
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at a price much higher than 2100 however<\/div>\n<\/div>\n<\/div>\n
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if amazon closes at less<\/div>\n<\/div>\n<\/div>\n
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than 2100 on april 17th and that call<\/div>\n<\/div>\n<\/div>\n
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expires worthless and the call<\/div>\n<\/div>\n<\/div>\n
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seller gets to just pocket the entire<\/div>\n<\/div>\n<\/div>\n
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options premium which is the cash<\/div>\n<\/div>\n<\/div>\n
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that he sold the call for and he has no<\/div>\n<\/div>\n<\/div>\n
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further obligation at that point<\/div>\n<\/div>\n<\/div>\n
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and remember your broker will allow you<\/div>\n<\/div>\n<\/div>\n
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to buy calls<\/div>\n<\/div>\n<\/div>\n
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but your procore will also allow you to<\/div>\n<\/div>\n<\/div>\n
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sell calls<\/div>\n<\/div>\n<\/div>\n
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and receive that premium for entering<\/div>\n<\/div>\n<\/div>\n
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into that<\/div>\n<\/div>\n<\/div>\n
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obligation to deliver 100 shares of<\/div>\n<\/div>\n<\/div>\n
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amazon at the strike price of your call<\/div>\n<\/div>\n<\/div>\n
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at any time between when you sold the<\/div>\n<\/div>\n<\/div>\n
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call and when that call option expires<\/div>\n<\/div>\n<\/div>\n
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and so<\/div>\n<\/div>\n<\/div>\n
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naturally as a call seller you’re hoping<\/div>\n<\/div>\n<\/div>\n
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that the market<\/div>\n<\/div>\n<\/div>\n
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never reaches the level of your call<\/div>\n<\/div>\n<\/div>\n
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because if it<\/div>\n<\/div>\n<\/div>\n
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doesn’t then you can just pocket the<\/div>\n<\/div>\n<\/div>\n
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premium you got for selling that call<\/div>\n<\/div>\n<\/div>\n
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and that’s the end of the trade okay so<\/div>\n<\/div>\n<\/div>\n
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those are the basics<\/div>\n<\/div>\n<\/div>\n
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of buying and selling call options let’s<\/div>\n<\/div>\n<\/div>\n
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go back<\/div>\n<\/div>\n<\/div>\n
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to amazon on february 27th after it had<\/div>\n<\/div>\n<\/div>\n
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dropped<\/div>\n<\/div>\n<\/div>\n
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300 points and it would have been pretty<\/div>\n<\/div>\n<\/div>\n
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logical at that point to be in the<\/div>\n<\/div>\n<\/div>\n
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mindset that amazon’s going to bounce<\/div>\n<\/div>\n<\/div>\n
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once people realize that they can’t go<\/div>\n<\/div>\n<\/div>\n
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shopping anywhere else<\/div>\n<\/div>\n<\/div>\n
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but as we mentioned before there’s a<\/div>\n<\/div>\n<\/div>\n
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legitimate concern the market<\/div>\n<\/div>\n<\/div>\n
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may really crash further with the world<\/div>\n<\/div>\n<\/div>\n
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economy<\/div>\n<\/div>\n<\/div>\n
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effectively shutting down so you’d be<\/div>\n<\/div>\n<\/div>\n
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pretty concerned about going flat out<\/div>\n<\/div>\n<\/div>\n
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long amazon shares at that point so what<\/div>\n<\/div>\n<\/div>\n
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we can do is to construct<\/div>\n<\/div>\n<\/div>\n
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what is known as a diagonal call spread<\/div>\n<\/div>\n<\/div>\n
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in options terminology so what we can do<\/div>\n<\/div>\n<\/div>\n
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is<\/div>\n<\/div>\n<\/div>\n
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specifically sell five amazon 2060 calls<\/div>\n<\/div>\n<\/div>\n
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on the april third options chain and buy<\/div>\n<\/div>\n<\/div>\n
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the 2100 calls<\/div>\n<\/div>\n<\/div>\n
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on the april 17th options chain for<\/div>\n<\/div>\n<\/div>\n
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amazon<\/div>\n<\/div>\n<\/div>\n
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now why am i saying that this trade is<\/div>\n<\/div>\n<\/div>\n
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risk free<\/div>\n<\/div>\n<\/div>\n
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to the downside well let’s break this<\/div>\n<\/div>\n<\/div>\n
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down as you can see from the calculation<\/div>\n<\/div>\n<\/div>\n
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we were paid<\/div>\n<\/div>\n<\/div>\n
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29.63 for those five april third calls<\/div>\n<\/div>\n<\/div>\n
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but remember those represent 100 shares<\/div>\n<\/div>\n<\/div>\n
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of amazon stock<\/div>\n<\/div>\n<\/div>\n
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so you multiply that by 100 and we sold<\/div>\n<\/div>\n<\/div>\n
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five of those so the total cash received<\/div>\n<\/div>\n<\/div>\n
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is actually fourteen thousand eight<\/div>\n<\/div>\n<\/div>\n
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hundred fifteen dollars at the same time<\/div>\n<\/div>\n<\/div>\n
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we bought those april 17 2100 calls<\/div>\n<\/div>\n<\/div>\n
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40 points higher and expiring two weeks<\/div>\n<\/div>\n<\/div>\n
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later for 27.64 now<\/div>\n<\/div>\n<\/div>\n
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when you consider that we bought five of<\/div>\n<\/div>\n<\/div>\n
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those you’ll see<\/div>\n<\/div>\n<\/div>\n
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that the cost is thirteen thousand eight<\/div>\n<\/div>\n<\/div>\n
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hundred twenty dollars so now<\/div>\n<\/div>\n<\/div>\n
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and this is the crucial point think<\/div>\n<\/div>\n<\/div>\n
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about what happens<\/div>\n<\/div>\n<\/div>\n
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if amazon closes at any price below 2060<\/div>\n<\/div>\n<\/div>\n
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on april 3rd then at that point those<\/div>\n<\/div>\n<\/div>\n
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five<\/div>\n<\/div>\n<\/div>\n
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options just expire worthless you’ve not<\/div>\n<\/div>\n<\/div>\n
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you’ve got no further obligation<\/div>\n<\/div>\n<\/div>\n
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and the april third options just die<\/div>\n<\/div>\n<\/div>\n
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as a result you have locked in a minimum<\/div>\n<\/div>\n<\/div>\n
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profit<\/div>\n<\/div>\n<\/div>\n
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of 995 dollars on this trade<\/div>\n<\/div>\n<\/div>\n
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why well just think about it if amazon<\/div>\n<\/div>\n<\/div>\n
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closes below<\/div>\n<\/div>\n<\/div>\n
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2100 on april 17th then the five<\/div>\n<\/div>\n<\/div>\n
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calls that we own that were long those<\/div>\n<\/div>\n<\/div>\n
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will also expire<\/div>\n<\/div>\n<\/div>\n
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worthless but then we are still left<\/div>\n<\/div>\n<\/div>\n
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with the two dead options<\/div>\n<\/div>\n<\/div>\n
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but the original 995 dollars that we<\/div>\n<\/div>\n<\/div>\n
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received at the beginning of the trade<\/div>\n<\/div>\n<\/div>\n
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we just keep that original cash and the<\/div>\n<\/div>\n<\/div>\n
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trade’s over we win so if you think<\/div>\n<\/div>\n<\/div>\n
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about it<\/div>\n<\/div>\n<\/div>\n
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if right after we sold the diagonal<\/div>\n<\/div>\n<\/div>\n
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amazon<\/div>\n<\/div>\n<\/div>\n
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went down to a thousand and stayed there<\/div>\n<\/div>\n<\/div>\n
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until expiration<\/div>\n<\/div>\n<\/div>\n
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we would not even have broken a sweat<\/div>\n<\/div>\n<\/div>\n
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because we had that original 995 dollars<\/div>\n<\/div>\n<\/div>\n
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so there literally is no downside risk<\/div>\n<\/div>\n<\/div>\n
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to this trade<\/div>\n<\/div>\n<\/div>\n
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if both options expire worthless we win<\/div>\n<\/div>\n<\/div>\n
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and that’s the beauty of a call diagonal<\/div>\n<\/div>\n<\/div>\n
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in a market situation like this<\/div>\n<\/div>\n<\/div>\n
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now before we get into that exactly how<\/div>\n<\/div>\n<\/div>\n
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this trade worked out<\/div>\n<\/div>\n<\/div>\n
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which i think you’re going to find<\/div>\n<\/div>\n<\/div>\n
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intriguing i wanted to let you know that<\/div>\n<\/div>\n<\/div>\n
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there really are<\/div>\n<\/div>\n<\/div>\n
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sound viable long-term techniques for<\/div>\n<\/div>\n<\/div>\n
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trading options for income and in fact<\/div>\n<\/div>\n<\/div>\n
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we’re currently running<\/div>\n<\/div>\n<\/div>\n
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a two-hour free intensive workshop at<\/div>\n<\/div>\n<\/div>\n
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the moment where we’ll be teaching you<\/div>\n<\/div>\n<\/div>\n
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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<\/div>\n<\/div>\n<\/div>\n
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a really simple but incredibly effective<\/div>\n<\/div>\n<\/div>\n
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technique<\/div>\n<\/div>\n<\/div>\n
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that some of the greatest investors in<\/div>\n<\/div>\n<\/div>\n
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the world like warren buffett use<\/div>\n<\/div>\n<\/div>\n
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all the time plus an options trading<\/div>\n<\/div>\n<\/div>\n
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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<\/div>\n<\/div>\n<\/div>\n
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plus an option strategy that you can<\/div>\n<\/div>\n<\/div>\n
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employ with a stock that you like where<\/div>\n<\/div>\n<\/div>\n
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you’ll make your target profit<\/div>\n<\/div>\n<\/div>\n
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whether the stock goes up goes nowhere<\/div>\n<\/div>\n<\/div>\n
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or even goes down a small percentage so<\/div>\n<\/div>\n<\/div>\n
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if those strategies would be of interest<\/div>\n<\/div>\n<\/div>\n
\n
\n
to you then you should check out<\/div>\n<\/div>\n<\/div>\n
\n
\n
the free options class that we’re<\/div>\n<\/div>\n<\/div>\n
\n
\n
currently running just go ahead and<\/div>\n<\/div>\n<\/div>\n
\n
\n
click the link that should be appearing<\/div>\n<\/div>\n<\/div>\n
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\n
now<\/div>\n<\/div>\n<\/div>\n
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\n
at the top right corner of your screen<\/div>\n<\/div>\n<\/div>\n
\n
\n
that will open the free registration<\/div>\n<\/div>\n<\/div>\n
\n
\n
page in a new window<\/div>\n<\/div>\n<\/div>\n
\n
\n
so don’t worry you won’t lose this video<\/div>\n<\/div>\n<\/div>\n
\n
\n
or you can just head on over to<\/div>\n<\/div>\n<\/div>\n
\n
\n
optionsclass.com<\/div>\n<\/div>\n<\/div>\n
\n
\n
to register for this free intensive<\/div>\n<\/div>\n<\/div>\n
\n
\n
workshop it’s a rare opportunity<\/div>\n<\/div>\n<\/div>\n
\n
\n
for retail traders and investors to<\/div>\n<\/div>\n<\/div>\n
\n
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learn directly from wall street traders<\/div>\n<\/div>\n<\/div>\n
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but that’s exactly what you’ll be<\/div>\n<\/div>\n<\/div>\n
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getting<\/div>\n<\/div>\n<\/div>\n
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through this free online workshop so<\/div>\n<\/div>\n<\/div>\n
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click the link to sign up now and don’t<\/div>\n<\/div>\n<\/div>\n
\n
\n
miss it now let’s move forward<\/div>\n<\/div>\n<\/div>\n
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\n
from february 27th the day that we put<\/div>\n<\/div>\n<\/div>\n
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this trade on and we’ll move to april<\/div>\n<\/div>\n<\/div>\n
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3rd and you can see that amazon closed<\/div>\n<\/div>\n<\/div>\n
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at 1906 so as we mentioned earlier<\/div>\n<\/div>\n<\/div>\n
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if that happened then we now know we<\/div>\n<\/div>\n<\/div>\n
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can’t lose money on this trade period<\/div>\n<\/div>\n<\/div>\n
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we have a minimum profit of 9.95 why<\/div>\n<\/div>\n<\/div>\n
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well as we explained before<\/div>\n<\/div>\n<\/div>\n
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we received 995 at the beginning of the<\/div>\n<\/div>\n<\/div>\n
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trade<\/div>\n<\/div>\n<\/div>\n
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and the short calls have expired so even<\/div>\n<\/div>\n<\/div>\n
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if the long calls expire<\/div>\n<\/div>\n<\/div>\n
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worthless two weeks later we’ll make at<\/div>\n<\/div>\n<\/div>\n
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least 995 dollars no matter<\/div>\n<\/div>\n<\/div>\n
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what the market does and that is the<\/div>\n<\/div>\n<\/div>\n
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\n
beauty of this trade<\/div>\n<\/div>\n<\/div>\n
\n
\n
so you can now think of the long calls<\/div>\n<\/div>\n<\/div>\n
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as lottery tickets you can decide<\/div>\n<\/div>\n<\/div>\n
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to sell them at this point if you want<\/div>\n<\/div>\n<\/div>\n
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to get some value from them<\/div>\n<\/div>\n<\/div>\n
\n
\n
or you can hold them to see if your<\/div>\n<\/div>\n<\/div>\n
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\n
thesis that amazon will be the business<\/div>\n<\/div>\n<\/div>\n
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\n
winner from the pandemic is true and<\/div>\n<\/div>\n<\/div>\n
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possibly<\/div>\n<\/div>\n<\/div>\n
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make a lot more than if you had decided<\/div>\n<\/div>\n<\/div>\n
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to sell them<\/div>\n<\/div>\n<\/div>\n
\n
\n
today and so you could have easily done<\/div>\n<\/div>\n<\/div>\n
\n
\n
that on april 3rd and<\/div>\n<\/div>\n<\/div>\n
\n
\n
sold the april 17 long calls at 2100 and<\/div>\n<\/div>\n<\/div>\n
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\n
whatever you receive to those<\/div>\n<\/div>\n<\/div>\n
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\n
as we just mentioned would be an<\/div>\n<\/div>\n<\/div>\n
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additional profit on top of what you<\/div>\n<\/div>\n<\/div>\n
\n
\n
pocketed from the original cash flow<\/div>\n<\/div>\n<\/div>\n
\n
\n
just for the fun of it let’s move<\/div>\n<\/div>\n<\/div>\n
\n
\n
forward to april 17th and you can see<\/div>\n<\/div>\n<\/div>\n
\n
\n
that amazon has closed at 23.70 on the<\/div>\n<\/div>\n<\/div>\n
\n
\n
day that the long<\/div>\n<\/div>\n<\/div>\n
\n
\n
call options expire now think about it<\/div>\n<\/div>\n<\/div>\n
\n
\n
if you allow those options to expire<\/div>\n<\/div>\n<\/div>\n
\n
\n
what would happen mechanically is that<\/div>\n<\/div>\n<\/div>\n
\n
\n
you could have bought<\/div>\n<\/div>\n<\/div>\n
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\n
500 shares of amazon for 2100<\/div>\n<\/div>\n<\/div>\n
\n
\n
and then flip them immediately to a gain<\/div>\n<\/div>\n<\/div>\n
\n
\n
of 271 dollars per share because the<\/div>\n<\/div>\n<\/div>\n
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stock is trading<\/div>\n<\/div>\n<\/div>\n
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271 higher than you had the right to buy<\/div>\n<\/div>\n<\/div>\n
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them for<\/div>\n<\/div>\n<\/div>\n
\n
\n
or you could simply sell the 2100 call<\/div>\n<\/div>\n<\/div>\n
\n
\n
for about 270 as you can see which might<\/div>\n<\/div>\n<\/div>\n
\n
\n
be a safer choice because then<\/div>\n<\/div>\n<\/div>\n
\n
\n
you don’t have the risk of amazon<\/div>\n<\/div>\n<\/div>\n
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\n
gapping down the next morning<\/div>\n<\/div>\n<\/div>\n
\n
\n
after you get assigned so selling the<\/div>\n<\/div>\n<\/div>\n
\n
\n
call is what<\/div>\n<\/div>\n<\/div>\n
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most professional options traders would<\/div>\n<\/div>\n<\/div>\n
\n
\n
do at this point so let’s do<\/div>\n<\/div>\n<\/div>\n
\n
\n
the math on the entire trade so remember<\/div>\n<\/div>\n<\/div>\n
\n
\n
originally we’ve see<\/div>\n<\/div>\n<\/div>\n
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we received fourteen thousand eight<\/div>\n<\/div>\n<\/div>\n
\n
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hundred fifteen dollars for those<\/div>\n<\/div>\n<\/div>\n
\n
\n
short 2060 calls that expired on april<\/div>\n<\/div>\n<\/div>\n
\n
\n
third and you remember<\/div>\n<\/div>\n<\/div>\n
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we also paid thirteen thousand eight<\/div>\n<\/div>\n<\/div>\n
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twenty for the long 2100<\/div>\n<\/div>\n<\/div>\n
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\n
calls expiring on april 17th and right<\/div>\n<\/div>\n<\/div>\n
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before<\/div>\n<\/div>\n<\/div>\n
\n
\n
the close on april 17th we sold those<\/div>\n<\/div>\n<\/div>\n
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\n
calls for 270<\/div>\n<\/div>\n<\/div>\n
\n
\n
and 38 cents so we received a total of<\/div>\n<\/div>\n<\/div>\n
\n
\n
135 000 for all the five calls<\/div>\n<\/div>\n<\/div>\n
\n
\n
and when you combine that with the<\/div>\n<\/div>\n<\/div>\n
\n
\n
original cash flow we received<\/div>\n<\/div>\n<\/div>\n
\n
\n
from the original diagonal strategy the<\/div>\n<\/div>\n<\/div>\n
\n
\n
profit on the trade would have actually<\/div>\n<\/div>\n<\/div>\n
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\n
been over<\/div>\n<\/div>\n<\/div>\n
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\n
136 thousand dollars so<\/div>\n<\/div>\n<\/div>\n
\n
\n
the important takeaway from this video<\/div>\n<\/div>\n<\/div>\n
\n
\n
is that if you’re concerned about the<\/div>\n<\/div>\n<\/div>\n
\n
\n
downside risk on a trade<\/div>\n<\/div>\n<\/div>\n
\n
\n
if you structure your call diagonal<\/div>\n<\/div>\n<\/div>\n
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trade correctly<\/div>\n<\/div>\n<\/div>\n
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you can guarantee at the outset of the<\/div>\n<\/div>\n<\/div>\n
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trade that there will be<\/div>\n<\/div>\n<\/div>\n
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zero problems to the downside on the<\/div>\n<\/div>\n<\/div>\n
\n
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trade and if you place your short calls<\/div>\n<\/div>\n<\/div>\n
\n
\n
far enough above the market as we did in<\/div>\n<\/div>\n<\/div>\n
\n
\n
this case by placing them<\/div>\n<\/div>\n<\/div>\n
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160 points above the market<\/div>\n<\/div>\n<\/div>\n
\n
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if they expire worthless then you’re<\/div>\n<\/div>\n<\/div>\n
\n
\n
really in the driver’s seat because<\/div>\n<\/div>\n<\/div>\n
\n
\n
now no matter what happens on the trade<\/div>\n<\/div>\n<\/div>\n
\n
\n
you make money<\/div>\n<\/div>\n<\/div>\n
\n
\n
at that point then you’re going to have<\/div>\n<\/div>\n<\/div>\n
\n
\n
to use your judgment to decide whether<\/div>\n<\/div>\n<\/div>\n
\n
\n
you want to then<\/div>\n<\/div>\n<\/div>\n
\n
\n
hold the long calls to see if your<\/div>\n<\/div>\n<\/div>\n
\n
\n
thesis which was that amazon will bounce<\/div>\n<\/div>\n<\/div>\n
\n
\n
as the pandemic proceeds<\/div>\n<\/div>\n<\/div>\n
\n
\n
works out as you expected and it did in<\/div>\n<\/div>\n<\/div>\n
\n
\n
this case to obviously<\/div>\n<\/div>\n<\/div>\n
\n
\n
spectacular results which you cashed in<\/div>\n<\/div>\n<\/div>\n
\n
\n
on because your thesis was right<\/div>\n<\/div>\n<\/div>\n
\n
\n
the options traders here at smb because<\/div>\n<\/div>\n<\/div>\n
\n
\n
they’re professionals<\/div>\n<\/div>\n<\/div>\n
\n
\n
and experienced understand these kinds<\/div>\n<\/div>\n<\/div>\n
\n
\n
of structures and<\/div>\n<\/div>\n<\/div>\n
\n
\n
how to take advantage of market<\/div>\n<\/div>\n<\/div>\n
\n
\n
opportunities like these when they arise<\/div>\n<\/div>\n<\/div>\n
\n
\n
if you have the proper theoretical<\/div>\n<\/div>\n<\/div>\n
\n
\n
background these kinds of opportunities<\/div>\n<\/div>\n<\/div>\n
\n
\n
exist throughout the market<\/div>\n<\/div>\n<\/div>\n
\n
\n
if you understand how to trade options<\/div>\n<\/div>\n<\/div>\n
\n
\n
to your<\/div>\n<\/div>\n<\/div>\n
\n
\n
advantage now just to remind you as i<\/div>\n<\/div>\n<\/div>\n
\n
\n
said earlier if you enjoyed this video<\/div>\n<\/div>\n<\/div>\n
\n
\n
and learned something valuable from it<\/div>\n<\/div>\n<\/div>\n
\n
\n
would like to learn the details of three<\/div>\n<\/div>\n<\/div>\n
\n
\n
real world option strategies that<\/div>\n<\/div>\n<\/div>\n
\n
\n
professional options traders<\/div>\n<\/div>\n<\/div>\n
\n
\n
use all the time then you should check<\/div>\n<\/div>\n<\/div>\n
\n
\n
out the free options class<\/div>\n<\/div>\n<\/div>\n
\n
\n
that we’re currently running just go<\/div>\n<\/div>\n<\/div>\n
\n
\n
ahead and click the link that should be<\/div>\n<\/div>\n<\/div>\n
\n
\n
appearing now<\/div>\n<\/div>\n<\/div>\n
\n
\n
at the top right corner of your screen<\/div>\n<\/div>\n<\/div>\n
\n
\n
that will open the free registration<\/div>\n<\/div>\n<\/div>\n
\n
\n
page in a new window so you won’t lose<\/div>\n<\/div>\n<\/div>\n
\n
\n
this video<\/div>\n<\/div>\n<\/div>\n
\n
\n
don’t worry or you can just head on over<\/div>\n<\/div>\n<\/div>\n
\n
\n
to optionsclass.com<\/div>\n<\/div>\n<\/div>\n
\n
\n
to register for this free intensive<\/div>\n<\/div>\n<\/div>\n
\n
\n
workshop it really is a rare opportunity<\/div>\n<\/div>\n<\/div>\n
\n
\n
for retail traders and investors to<\/div>\n<\/div>\n<\/div>\n
\n
\n
learn directly from wall street traders<\/div>\n<\/div>\n<\/div>\n
\n
\n
but that’s exactly what you’ll be<\/div>\n<\/div>\n<\/div>\n
\n
\n
getting<\/div>\n<\/div>\n<\/div>\n
\n
\n
through this free online workshop so<\/div>\n<\/div>\n<\/div>\n
\n
\n
click the link to sign up now<\/div>\n<\/div>\n<\/div>\n
\n
\n
and don’t miss it and please don’t<\/div>\n<\/div>\n<\/div>\n
\n
\n
forget to click on the subscribe button<\/div>\n<\/div>\n<\/div>\n
\n
\n
right now so you won’t miss<\/div>\n<\/div>\n<\/div>\n
\n
\n
free trading videos that we’re posting<\/div>\n<\/div>\n<\/div>\n
\n
\n
constantly on our channel to help you to<\/div>\n<\/div>\n<\/div>\n
\n
\n
improve your game<\/div>\n<\/div>\n<\/div>\n
\n
\n
as an options trader<\/div>\n<\/div>\n<\/div>\n
\n
\n
<\/div><\/div>\n<\/div>\n<\/div>\n

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

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

In volatile markets like this one, traders have serious concerns about taking long positions on stocks when one nasty headline can produce a massive sell off that can last for weeks. In this video we show you a very powerful technique to pull the downside risk out of a trade completely while maintaining the potential for very large profit. * … Read More<\/a><\/p>\n","protected":false},"author":290,"featured_media":49850,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"video","meta":{"footnotes":""},"categories":[4189],"tags":[],"class_list":["post-49848","post","type-post","status-publish","format-video","has-post-thumbnail","hentry","category-free-daily-trading-video","post_format-post-format-video"],"yoast_head":"\nHow to Completely Remove Downside Risk on a Bullish Play with Options | 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\" href=\"https:\/\/www.smbtraining.com\/blog\/how-to-completely-remove-downside-risk-on-a-bullish-play-with-options\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"How to Completely Remove Downside Risk on a Bullish Play with Options | SMB Training\" \/>\n<meta property=\"og:description\" content=\"In volatile markets like this one, traders have serious concerns about taking long positions on stocks when one nasty headline can produce a massive sell off that can last for weeks. In this video we show you a very powerful technique to pull the downside risk out of a trade completely while maintaining the potential for very large profit. * ... Read More\" \/>\n<meta property=\"og:url\" content=\"https:\/\/www.smbtraining.com\/blog\/how-to-completely-remove-downside-risk-on-a-bullish-play-with-options\" \/>\n<meta property=\"og:site_name\" content=\"SMB Training Blog\" \/>\n<meta property=\"article:publisher\" content=\"https:\/\/www.facebook.com\/smbcap\/\" \/>\n<meta property=\"article:published_time\" content=\"2020-05-08T19:17:11+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/www.smbtraining.com\/blog\/wp-content\/uploads\/2020\/05\/bull-play-options-1.jpg\" \/>\n\t<meta property=\"og:image:width\" content=\"1920\" \/>\n\t<meta property=\"og:image:height\" content=\"1080\" \/>\n\t<meta property=\"og:image:type\" content=\"image\/jpeg\" \/>\n<meta name=\"author\" content=\"smbcapital\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:creator\" content=\"@smbcapital\" \/>\n<meta name=\"twitter:site\" content=\"@smbcapital\" \/>\n<meta name=\"twitter:label1\" 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