MarketHeist’s Jeffrey Lin interviews Pablo Navarro, Options Strategist for Hamzei Analytics’ HFT Stocks & Options. Any investor's stock portfolio can greatly benefit from simple uses of stock options. With much of your savings invested, it's smart to use options to both protect your portfolio as well as earn extra income from your portfolio assets. Pablo Navarro shares some easy ways to start using options as an investor.
Jeffrey: What's the most basic and simplest way to start trading and investing with options? If people just want to look into it, what's a great way to start?
Pablo: OK. I think the best way to start is just try to change from stocks to options. If you just want to be in options player without the stocks, I would choose to do the leaps, or long term calls, or puts if you think the stock is going to go up by a year or two year out of time call options. That would be pretty much like buying stock. You'll have almost the same exposure, you're going to have the same movements. A little bit of leverage around one or two times, so that's going to be bad for you at the start.
Maybe try to begin to see how options change. Try to write options up or calls instead of buying stock. That could be a good way to start, but make sure you give time to your trade. Don't buy the next month out because then you're going to have to be worried about Delta, Theta, vega. So just go out in time a year, just while you get comfortable with the movements in the option. Then you'll see how the volatility starts to work. I think that's a good way to start.
Also another good way to start, maybe trying to sell calls against your stock. You already have some stock positions. Maybe you are going to want to lower your cost basis. Sell some out of the money. Call options you want to do on the front month because Theta is going be the fastest. Theta decay is going to decay the fastest down the front month down the back months.
Jeffrey: Just to clarify, Theta is time decay, correct?
Pablo: Yes. Theta is going to be the amount an option's price will change for every day that goes on. So when you are short Theta that means that every day that goes by, the option is going to be worth less which means you are going to be able to buy it for less if everything else remains constant.
Jeffrey: OK. Great. Thank you.
Pablo: I'm Pablo Navarro for HamzeiAnalytics HFT Stocks and Options. You can find me at HamzeiAnalytics.com or follow me at @pnavarro88. Thanks for watching MarketHeist.com.
Learn more from Pablo at HFT Stocks & Options:
Follow Pablo on Twitter:
Follow us on twitter:
Follow host Jeffrey Lin on twitter:
ABOUT PABLO NAVARRO
Majored in Economics and Communications with a minor in business from Texas Christian University. Pablo graduated from OptionsAnimal and completed all levels that the CBOE Options Institute offers. Pablo actively manages his own accounts trading options, futures, and stocks for over 3 years. He is always pushing beyond the limits to achieve his goals. He is convinced that its all about going that extra mile and always having a plan for each scenario.
Earnings Disappointment (Miss),
Earnings Surprise (Beat),
Download Our Free eBook
And subscribe to our MarketHeist Guides newsletter!