Hey everyone. This is Kirk here again from Option Alpha and welcome back to the daily call. Today, we’re going to be talking about how to bet against the market and going over three ways in which you can do that. Again, there’s essentially three things that you can do to bet against the market or basically take advantage of or profit from the market moving lower. The first and most obvious way is you can actually short stock. Now, this is the default mechanism for many investors because they...

Hey everyone. This is Kirk here again from Option Alpha and welcome back to the daily call. Today, we’re going to be talking about why ignorance in trading is actually bliss. And don’t get me wrong and don’t start sending me a bunch of emails about this. I’m not talking about ignorance when it comes to market risk and position sizing and trying to pick tickers and strategies. What I’m talking about is once you actually have a system in place, you know what strategy you’re going to use, you...

Hey everyone. This is Kirk here again at Option Alpha and welcome back to the daily call. Today, we’re going to answer the question, “What happens when you close an option?” This is actually a question we get often and the short answer is nothing. Nothing happens when you close an option because if you are closing the option order, whether it was on the buy side or the sell side, if you have now completed the trading loop as we like to refer to it here at Option Alpha, then nothing happens...

Hey everyone. This is Kirk here again from Option Alpha and welcome back to the daily call. Today, we’re going to answer the question, “How do you short an option contract?” Shorting an option contract is very much a new term for a lot of people when they get started trading, this idea that you can actually sell something that you don’t even own yet in the marketplace and then collect a premium. But of course, there’s always a little bit of a catch and the catch is that you always have to...

Hey everyone. This is Kirk here again from Option Alpha and welcome back to the daily call. Today, we’re going to answer the question, “Do you get paid dividends with options?” The simple answer to this question is no. You do not get paid dividends with option contracts like you would normally in a scenario where you are long the underlying shares of stock. When you have ownership in a stock that pays dividends and you get through the dividend’s period and it goes X dividends and you actually...

Hey everyone. This is Kirk here again at Option Alpha and welcome back to the daily call. Today, we’re going to answer the question, “What happens when a call option expires in the money?” There’s a couple of keywords in there that you should be paying attention to if you’re listening to this right now and that is that you have a call option and it is expiring in the money. If a call option expires in the money, it means it has intrinsic value and it will be exercised and/or assigned....

Hey everyone. This is Kirk here again from Option Alpha and welcome back to the daily call. In honor of Halloween, I want to talk about the scariest thing about selling options and actually, the reality is I’m going to talk about two things that should really scare you when selling options. Not that they should scare you enough to completely walk away, but it should be scary enough that you should try to build in some sort of model or strategy to counteract some of these things in the market....

Hey everyone. This is Kirk here again from Option Alpha and welcome back to the daily call. Today, we’re going to answer the question, “What causes the stock market to fluctuate?” The simple answer to me is only one word and that’s expectation and if we were to expand this out to just two words, it would be future expectation. I think this concept is a little hard for people to wrap their heads around, especially if you’re new to stock trading or stock investing or new to options trading....

Hey everyone. This is Kirk here again from Option Alpha and welcome back to the daily call. Today, we’re going to answer the question, “How do you calculate daily volatility?” There’s actually two things we’re going to cover here. Daily volatility, we’re going to cover annual volatility and they’re actually pretty easy to do. Most broker platforms do this for you already, so you don’t really have to do anything on your end. You just have to know where the numbers are inside of your specific...

Hey everyone. This is Kirk here again from Option Alpha and welcome back to the daily call. Today, we’re going to answer the question, “What happens when an option contract is assigned?” Option assignment is something that a lot of people actually fear, but the reality is that it’s part of the options trading business. In fact, I would even argue to say that at some point in your career, if you actually do this for a while, you’re going to be assigned potentially multiple times. But it...

Hey everyone. This is Kirk here again from Option Alpha and welcome back to the daily call. Today, we’re going to be answering the question, “What causes implied volatility changes?” Implied volatility is so very important as an options trader and this is a really interesting concept because I don’t think a lot of people understand what actually causes implied volatility to change and it’s simply this. Implied volatility changes only because of expectation and that’s it, the expectation that...

Hey everyone. This is Kirk here again from Option Alpha and welcome back to the daily call. Today, we’re going to answer the question, “Do stocks expire like options?” The simple answer to this is no. Stocks actually don’t expire. As long as the company stays solvent, stays viable, stays valuable to the public market, then its stock price does not expire. It can keep trading for decades and in some cases, hundreds of years. Right now, we’ve got a bunch of companies that have been trading for...

Hey everyone. This is Kirk here again from Option Alpha and welcome back to the daily call. Today, we’re going to answer the question, “Why are stock prices so volatile?” I think this comes down to a basic understanding of just the difference between individual company expectations and broad market dynamics or structure and expectations and so, today, I want to look at Tesla and say the S&P 500. And so, the S&P 500 broad market index comprised of 500 individual components, so...

Hey everyone. This is Kirk here again from Option Alpha and welcome back to the daily call. Today, we’re going to answer the question, “Is volatility a good measure of risk?” We’ve recently actually said in our covered calls paper when we were writing up the research that volatility is but one side of a two-sided coin. There’s returns in our opinion and then there’s volatility and those are the two sides of the coin that you should be aware of as a trader. Volatility is just one way to...

Hey everyone. This is Kirk here again from Option Alpha and welcome back to the daily call. Today, we’re going to answer the question, “What are the different types of brokerage accounts?” For me and the way that I think about this, I really think that there’s probably three main types of accounts and then there’s sub-labels or categories within each. The three main ones for me I would say are cash accounts, margin accounts and then a discretionary account, so an account that might be managed...

Hey everyone. This is Kirk here again from Option Alpha and welcome back to the daily call. Today, we’re going to be answering the question, “Does opening a brokerage account affect your credit score?” The short answer to this is no. Opening a brokerage account does not affect you credit score and it’s because you are not taking on liability or taking on debt. When you open up a brokerage account, your intention is to actually invest the money that you have and to buy securities, trade...

Hey everyone. This is Kirk here again from Option Alpha and welcome back to the daily call. Today, we’re going to answer the question, “What is the value of a call option on its expiry date?” This is a very simple answer. The value of any option contract at expiration, whether it’s a call or whether it’s a put option, is simply the intrinsic value. Once you get to expiration, there’s no more extrinsic value component left in the option contract. That means no more time value, no more...

Hey everyone. This is Kirk here again from Option Alpha and welcome back to the daily call. Today, I want to answer the question, “Can I have multiple brokerage accounts?” I think the short answer to this is yes, you can and should have multiple brokerage accounts. Now, don’t go crazy with this, obviously. But because all brokers are now effectively at zero commissions, there’s no reason why you can’t have multiple accounts and therefore, have the ability if you need it, to more quickly...

Hey everyone. This is Kirk here again from Option Alpha and welcome back to the daily call. Today, we’re going to answer the question, “What does buy to open mean in options?” Buy to open, buy to close, sell to open, sell to close, all very confusing terminology when you start getting into the world of options trading. Now, this is different than stock trading because what most people are used to is simply just buy stock at a low price and sell stock at a high price. But in the world of...

Hey everyone. This is Kirk here again from Option Alpha and welcome back to the daily call. Today, we’re going to answer the question, “Do penny stocks ever go up?” And this is really a two-part thing. It’s more of a question that we’re going to try to answer on my side, just what I’ve seen before and then two, just the solicitation of feedback and resources. If anybody’s out there that has seen any conclusive research, real research on penny stocks, I’d be interested just to see it. I don’t...

Hey everyone. This is Kirk here again from Option Alpha and welcome back to the daily call. Today, we’re going to answer the question, “Should I pay for a financial advisor?” I know this is going to be a touchy subject and it’s going to probably ruffle some feathers for some people, but I have all the world of respect for financial advisors, I just frankly don’t think that people are using them the right way. I think that the value of a financial advisor is more on the strategic planning...

Hey everyone. This is Kirk here again from Option Alpha and welcome back to the daily call. Today, we’re going to be answering the question, “What does out of the money mean?” When we’re talking about stock options and in particular, the strike price of an option contract relative to where the underlying stock price is, you will often hear the terms “out of the money” or “in the money” be talked about. And so, what out of the money means is that there’s no intrinsic value in that contract. It...

Hey everyone. This is Kirk here again from Option Alpha and welcome back to the daily call. Today, we’re going to answer the question, “What happens in a short squeeze?” A short squeeze is actually a really popular thing with people to talk about. You often hear about a short squeeze happening or potentially happening after a stock has had a big run down and then potentially gets some news that could turn it the other way. All that really happens in a short squeeze is that there becomes a...

Hey everyone. This is Kirk here again from Option Alpha and welcome back to the daily call. Today, we’re going to answer the question, “Do you pay capital gains on stock options?” And we’re specifically talking about stock options that an employee might get in a company. If you’re an employee of a company and you get stock options, how do they get taxed as gains? Well, there’s two kinds of stock options for employees. There’s nonqualified stock options which are called NSOs and those are...

Hey everyone. This is Kirk here again from Option Alpha and welcome back to the daily call. Today, we’re going to answer the question, “What is the difference between a full-service broker and a discount broker?” This question came up recently because of the podcast we just did a couple of days ago which is talking about all these commission-free brokers and now, we’re starting to see differentiations in marketing between one broker and another. Some brokers are saying, “Hey. We’re a...