Options Trading Pricing: GREEKS (Delta, Theta, Gamma & Vega)

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Why I don't look at IV (implied volatility) and options Greeks. David Jaffee with BestStockStrategy.com where
i earn around a million dollars a year by trading stock options. You can go to
BestStockStrategy.com, enter in your email address and receive over $400
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Please like, comment, share and subscribe to this video it helps me help more people
and improve their education and it also helps spread the word so I appreciate
that the reason why I don't look at any options Greeks such as implied volatility or
Delta, I do occasionally look at theta just more out of curiosity but I also
don't read any research articles like I don't go on seekingalpha .com and I
don't read any articles I don't look at any of the Greeks that I'm looking at
implied volatility and the reason is very simple all of those metrics are
reflected in the current option price that you will receive by selling that
specific strike price so just, as simple as possible, all of those metrics, the greeks,
they are inputs in the price in the current price of the option that you're
looking to sell so there's really no point for me to look at Facebook
when it's trading at $157 and recognize that it has very high implied volatility
when I know that if I just simply look at the price I can make a determination
and actually use my brain and say okay if I sell this $145 put that expires six
weeks from now and I receive $3 dollars per share so therefore my
break-even cost is $142, do I think that I'm being amply compensated
for me to assume that risk of agreeing to buy
Facebook at 145 if the answer is yes then I make that trade if the answer is
no and I'm not comfortable with the 145 minus the three dollars in premium that
I'm receiving therefore the break-even point is
$142 then I don't make that trade but it doesn't make any sense to me to trade
solely based upon high implied volatility or even to look at the greeks
because it's just like you're taking away a lot of the thought process that
goes into trading and I think that one of my main criticisms of tastyworks and
Tom Sosnoff and Tony Battista what's-his-name
that I forgot his name but like Batista and you know Tom Sosnoff is that sometimes
they lose track of their positions because they trade so many positions
just predicated on, Tony Batista, they lose track of their positions simply
predicated upon trading them because they have high implied volatility but to
me not all the opportunities are the same so for example if facebook falls
from $218 all the way down to a $157 which is where it's trading at right now
as of Monday October 8th 2018 I believe that that represents a much better
opportunity when you trade a $500 hundred billion dollar extremely liquid
company then if you trade Tesla which has been everywhere from 420 dollars a
share of three weeks ago to 260 dollars a share and I don't even know where it's
trading now because it's not on my watch list and I don't I don't check it but
the point is that Tesla might have higher implied volatility well that's
really weird that's never happened before but Tesla might have higher
implied volatility right now but that does not mean that it's a better
opportunity behind Facebook the chances if you were gonna sell puts on Tesla
with a strike price of like 235 you can collect probably just as much premium
selling at 235 put on Tesla let's say Tesla's trading in 265 I have no idea
what else is trading I just made that up I haven't looked at and like one or two weeks
but with Facebook when it's trading at 157 if I sold that 145 put I believe
that the probability that Facebook trades down to 145 is significantly less
than the probability that I Facebook that Tesla is going to trade down into
$235 so when you sort your trading opportunity solely based upon
high implied volatility you are really doing yourself a disservice because
you're not taking into account the into account the value of the actual
underlying like I believe that Amazon Facebook and like Lockheed Martin
Raytheon JP Morgan those are really high-quality underlines that are going
to have relatively low volatility and when they're trading down on the low end
of their of the low end of the range of the trading range that they've had over
the past few weeks like when Facebook is trading over the
past few weeks from like 157 or 172 and it starts trading down to around 160
that is an excellent opportunity for you to sell puts but even though something
like Tesla has much higher implied volatility than Facebook just three
weeks ago is trading at 420 and now it's turning it around to 60 to 70 I mean
that's so much volatility that you can be right and you can get scared out of
your position if you sold calls and then Facebook a rather Tesla wouldn't then
suddenly be like 40 or 50 dollars in the money you would then flip that around
and sell puts with a strike price are like 320 and now you're probably going
to be like 50 or 60 dollars underwater there's no point
selling indiscriminately based upon high implied volatility the only reason I
look at I look at theta is just because I'm kind of curious I'm like okay this
is cool like for every day that goes by I'm gonna make like $4,000 in premium
decay that makes me feel good right that means that even if the stock market
doesn't move at all and none of my securities move I'm gonna make $4,000
just on option premium decay and that's why we sell options and we don't buy
options but I definitely don't look at any of the deltas I don't look at the
theta numbers besides just that curiosity I don't look at the Vega
numbers or the implied volatility I definitely don't read articles on
seekingalpha.com because all you're doing when you're reading those articles
is it's just for entertainment purposes you're just seeking validation that the
trade that you made is correct I mean there's nothing that you're gonna learn
on SeekingAlpha.com that is not publicly available especially for like on huge
like Amazon or Facebook or JPMorgan like these companies are hundreds of billions
of dollars Amazon is a trillion dollar company there's nothing that you're
gonna learn on seekingalpha for that's going to help you make a better decision
all you're doing is wasting your time so if you really want to be successful then
you're gonna get shit done you're gonna create things and you're gonna build
good habits if you want to act like you're busy then you're going to read
bullshit articles on seeking alpha and you're gonna try to compete on a
knowledge gained meaning like sending the emails and asking me oh do you look
at it implied volatility and Delta like no fuck that like I focus on maximizing
my returns and actually making money right I don't try to distract myself
with all these Greeks like I don't even know what yeah I'm sure that probably 10
or 15 percent of my readers out there know more about Greeks and I do like I
don't even know like what some of the Greeks mean that some people tell me but
like I don't give a shit like I worked as an investment banker and when they
would ask me to do with DCF analysis I remember having to Google how to do it
because I only did DCF analysis maybe like five times in the five or six years
that I worked as an investment banker so it's like all the stuff that they teach
you in college which is super important then the reality is that you barely use
that stuff in the real world so if you want to sound really smart to your
friends and hang out at the bar and like talk to them and try to make yourself
look good by spitting out all this computational bullshit and citing
definitions okay fine do it but if you actually want to make money then you're
gonna focus on using your brain and making good decisions and that's the
reason why I don't read articles on seekingalpha.com and why I don't look at
higher implied volatility or volatility I don't screen things based upon high IV
nor do I look at Delta or theta or anything like that because all of those
inputs are reflected in the current price so this is David Jaffee from BestStockStrategy.com
BestStockStrategy.com you can go to BestStockStrategy.com and enter your email
merci $400 worth of free training if you have any questions leave a comment below
please like comment share subscribe and here to help you
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Options Trading Pricing: GREEKS (Delta, Theta, Gamma & Vega)

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