The Option Alpha Podcast

AI is the hot new buzzword these days, sparked by the release of ChatGPT a few months ago. Since then, it seems everyone has used OpenAI’s software in fascinating (and sometimes scary) ways. So, I jumped into ChatGPT and asked it to come up with the top questions that new and advanced traders ask about options trading.  This week's podcast explores the 15 questions - and answers - that options trades want to know.See all 15 answers hereWhat are options and how do they work?How much money do I need to get started in options trading?How do I select the best options trading strategy?What are the key components of an options contract?What is the difference between a call option and a put option?What is the difference between buying and selling an option?How do I determine the strike price for an options contract?What is implied volatility and how does it impact options trading?What are the risks involved in options trading?What are the different options trading strategies I can use?How do I calculate profit and loss for an options trade?How do I manage risk in my options trading portfolio?Should I use technical analysis to inform my options trading decisions?Can you use charts and graphs to trades options?What are some common mistakes to avoid when trading options?

How long does it take a stock to get back to even after a large daily move down? And does the magnitude impact how long it takes the position to recover the loss?We’ve all been in losing trades and wondered if we should hang on to the position for a little longer or cut it loose. So, to help answer the question, we studied the short-term performance of stocks and ETFs after different daily loss totals.The study analyzed 324 assets over a 20-year period. We calculated the 5-day returns following single-day losses up to 5%.See the full research report here.

Stocks have been described as a rubber band, and we often assume they will snap back and revert when prices become overextended. So, we wanted to know: How likely is a security to continue or reverse its momentum above and below major moving averages in short, medium, and long-term timeframes? And does the security’s proximity to a moving average impact its performance?We researched 20 years of data on 286 symbols, using short, mid, and long-term trends to analyze the ticker’s 30-day return relative to its simple moving averages.I'll be honest, the results surprised me.Click here to see the full research report.

"The trend is your friend." It’s a popular saying amongst traders, and we hear it all the time. But is there validity in the statement?We backtested directional option selling strategies with a long-term trend filter to see if there is a significant impact on performance.We used Option Alpha's backtester to review the data for  SPY, GLD, and TLT short put spreads and short call spreads. Short put spread tests included a filter to only enter trades above the 200-day moving average. Short call spread variants included a filter to only enter trades below the 200-day moving average.Click here to see the full backtest results.Important Note: This podcast is for educational purposes only. Past performance does not guarantee future results. This data is presented objectively and is not financial advice or a suggestion to use these strategies. We encourage you to always do your due diligence and test your strategies.Let's take a closer look at the performance of these strategies using different trend filters. This is a great baseline when considering how to set up your trades, and we hope this inspires you to backtest your ideas for strategy optimization.

This discussion dives into the performance of a $3K monthly Iron Condor bot after a year of live trading. It highlights strategies for trading uncorrelated ETFs to minimize risk and explains the mechanics of monthly contracts with specific entry filters. Listeners will learn about the bot's year-to-date results, including its 88.5% win rate and the effects of market volatility on its performance. The conversation also explores potential improvements to enhance profitability and the benefits of automation in trading.

Dive into the world of option spreads with a beginner-friendly guide! Explore key strategies like vertical, credit, and debit spreads. Learn how to assess risks and rewards through practical examples and calculations. Discover the importance of selecting strike prices based on market conditions. Start with narrow spreads and build your confidence before tackling wider ones. This insightful discussion equips new traders to navigate the complexities of multi-leg trades and make informed decisions.

Learn about the Hexabot, an automated trading strategy built by the Option Alpha community. They discuss the process of designing and testing the bot, determining market trends, position sizing, and allocation strategies. They also cover the importance of bid-ask spreads, open interest, and the rate of return threshold in options trading. The episode explores the value of tagging and tracking positions, managing positions based on expiration week timeframes, and different profit targets and strategies.

Dive into the world of option strike prices and discover their critical role in trading. Learn how strike prices differ from breakeven prices, and gain insights on locating them through brokerage platforms. Unpack the complexities of in-the-money, at-the-money, and out-of-the-money options, and see how their dynamics influence profitability as expiration nears. The discussion wraps up with an invitation to engage further through community resources and upcoming workshops on automated trading.

Dive into the world of synthetic covered calls! Discover how this strategy serves as a stepping stone for stock traders into options trading. Learn about the nuances of call credit spreads versus single-leg short calls for better risk management. Explore how to adapt trades for varying market conditions and the benefits of improved margin efficiency. From poor man's covered calls to strategic flexibility, this discussion unpacks key concepts to enhance your trading toolkit.

Show Notes: https://optionalpha.com/show220In today's show, I'll walk through four clever, dare I say "wicked-smart", ways to leverage our proprietary SmartPricing technology for routing orders intelligently to the markets. If you're already trading with us at Option Alpha then you'll learn some new techniques that will help improve the efficiency of your bots and automations. If you're not trading with bots yet and are still manually entering all your opening and closing orders yourself, waiting for your trade to fill, canceling and replacing the order with a different price if it doesn't fill, waiting again for the trade to fill, and on and on, then you'll love how much time you save when you start using SmartPricing.