Hey everyone, this is John, and welcome to the free video. What a crazy day! Yet fun. Starting off, we had earnings on Google. You see here on a daily chart, it popped up to new all-time highs. From there, it pretty much sold off. Let's put this down to a 15 minute chart. Overnight, it actually got even higher, like $830, and then it fell, fell, fell, fell, fell.
From an options perspective, what's a way to play this? For us, we held some calls into earnings, which was good, and then we sold them, and from there, sold put credit spreads, with the idea that we would go up. We did. That was great. And then, after we popped up like this, we looked at the nice round number, $800, and sold an iron fly.
Okay. So on something like that, what you're doing is selling the $20 call, selling a $20 put, and then buying protection on either side, with the idea that it ultimately turns into profits, right? After a big move like that, with something like Google, you're looking for a quieting down of those options and you want to be on the selling side of it, so that you actually benefit from that. If you've ever bought an option for $5, and it goes to $1, that money is not disappearing. It's going into somebody else's account. That's what we want with this strategy.
On the other hand, Facebook (FB) here has had a crazy move. After it had earnings, we looked for opportunities to participate in potential additional upside. You can see here, we had the pop up in earnings here, okay? And then traded sideways for a little bit. And once you trade sideways, you build up energy for the next move. So in this case, we bought directional calls to hold, and target up to the $114 level. Okay? At the $114 level, we want to take some risk off the table. So what do you do?
In this case, the options that we bought at $6.90 are now worth $11.94. So we got a nice open profit of $5,000. These are 17 days out, meaning we can hold them for 3 more trading weeks, give or take. Although with an option, you kinda want to catch the big part of a move and then get out of it. But just in case there's a bit more upside here, it's like, well, at the $114 level, we saw that the potential to start trading sideways is high. We don't know if that will last 1 day, or 3 days, or 4 days. So while we're holding the $17 call, we sold the $114 call that expires this week, for $2, with the idea that we can consolidate here for a couple of days. If this expires worthless, we get to keep that money. That's kind of an insurance policy against this call.
Of course, if FB takes off and goes higher, we would limit our gain here. For example, if it went to $120, we would still make some nice money. It would just be capped out because of that $114 call. But anyway, there's a lot of things like this with options. What's nice is, there's a ton of things you can do, once you get a hold of the basics.
One thing we haven't done for a while--and now we've got a lot of newer people with us--is just: What are the basics of options? We are going to do a free webinar. Monday, Feb 8, from 7pm to 8pm CST. Henry and I. It's called Getting Started With Options. Maximum Leverage Strategies With Minimum Risk.
Now, if you are an intermediate to advanced trader, this is not a webinar that you will enjoy. This is if you know absolutely nothing about options! Maybe you've only been trading them for a couple of months. Maybe you've never traded them at all. That's what we're going to be talking about here. About why options have far greater profit potential than stocks, with lower risk, how even beginners can use options for income, and wealth generation, when to buy options, and when it's more lucrative to sell them instead, why you only need to know a few key strategies, (you could ignore the rest), and how to easily avoid the common mistakes that new options traders make. If you just finished up our live event here in Austin, you will find this quite boring.
Have a great night, and we'll see you at the next update.