BY ANDREW GIOVINAZZI 

September 27, 2023 

Yo Pit Crazies,

There was a time when I was a young floor trader, 30+ years ago, but we don’t mention that, and I soaked up all the info from the crowd and traders that had decades of experience before me.  When I started in options a lot of guys had come from the stock side and wanted to check out options.  Options had been around for about 14 years when I got going.  The Cboe celebrated 50 years just recently.

I take this trip down memory lane because time passes, fast.  Time also happens to be one of the inputs to trading options that is so important.  Most people come to options wanting direction but in the back of their minds they want to cheat time.  I teach my students about trading options, you want to have an edge in time, price or volatility.  Preferably all three.

If I circle back to what my mentor told me way back when, “You can pick the position, as long as I can pick the price.”  30+ years later that concept still brings home the  bacon. Look at Apple Inc (Ticker: AAPL) recently.  Most would ask. “Should I get in, is this the bottom?”

AAPL 3 month chart with 30 day implied vol and 20 day realized vol below

But the better question to ask is this…

What Do the Options Cost Me?

If I am looking at this chart, AAPL looks terrible.  It failed from a high and keeps going lower after fits and starts.  Mark and I recommended a trade in Trading Desk just scalping the moves up and down.

If I am looking at this chart, which I am, options seem fair because AAPL has bigger candles and is moving a lot.  That means it is easier for options buyers to collect because the realized vol is so high.  What has set AAPL going sound from 2 months ago has not changed.  I think strangles work well here, leaning short. I did the same thing in Amazon.com Inc (Ticker: AMZN) yesterday in the Easy Button.

While trading options I can play many games. I prefer to play the game when the prices are in my favor.  More on that as the week progresses. You can learn all of this in Pro of course.  Sign up now, and save yourself years of grief figuring it out yourself by calling Ted or Andrew at (888) 872 3301.

To your trading success,

AG