In this episode of From Theory to Practice, Jim Schultz navigates the current market landscape, discussing significant movements in major indices and commodities. As earnings season heats up, he highlights upcoming reports from major companies and offers insights into strategic positioning. Jim also reviews recent trades and addresses viewer questions. Don't miss this chance to get prepared for a busy trading week!
This episode of From Theory to Practice explains how traders can exploit the phenomenon of rising implied volatility before earnings reports and its subsequent decline post-announcement. We explore strategies for selling premium, including short vertical spreads and iron condors, to maximize opportunities in the market. Learn how to manage risk effectively while navigating this crucial trading period.
In today's From Theory to Practice, Dr. Jim analyzed recent earnings reactions in Tesla and IBM, noting unusual price action where both stocks initially gapped in one direction but quickly reversed. Then, he added a downside Put Butterfly to play the surprise CPI release tomorrow morning.
In this episode of From Theory to Practice, Jim Schultz discusses recent earnings trades, particularly focusing on Netflix (NFLX) and upcoming earnings for Tesla (TSLA) and IBM (IBM). He highlights a successful long put spread on Netflix that yielded a profit, emphasizing the effectiveness of at-the-money vertical spreads for earnings plays. Schultz also shares his bullish outlook on Tesla, planning to use an expected move butterfly strategy. For IBM, he opts for an out-of-the-money put spread for a downside bet. The market remains volatile, impacting various assets, including gold and silver.
In today's From Theory to Practice, Dr. Jim looks at volatility trends over time. In doing so, it becomes very clear that volatility likes to live on the lower end of its range, and it does tend to contract quickly after expansions. Lastly, Dr. Jim puts on a downside play for NFLX Earnings.
In today's From Theory to Practice, Jim Schultz closed an underperforming GLD spread at its max value of $5, demonstrating proper expiration management. He then established new positions by selling a 20-delta strangle in MES futures options expiring November 28th and adding an MNQ position despite challenging bid-ask spreads.
In today's From Theory to Practice, Dr. Jim discusses how much leverage to use in a long delta portfolio, emphasizing a different approach from short delta strategies. Unlike short delta positions where the delta-theta ratio provides protection, long delta positions lack this shield during volatility expansion. For long delta traders, he recommends using SPY as a reference point to measure leverage. A portfolio with beta-weighted delta equal to its notional value in SPY shares (1X leverage) means you're essentially holding the equivalent of being fully invested in SPY. Most traders settle between 1X-3X leverage, with experienced traders occasionally going as high as 5X-6X.
In today's From Theory to Practice, Dr. Jim examines how much leverage traders should use in derivatives trading, emphasizing the importance of the delta-theta ratio for short delta portfolios. He recommends targeting a 0.5 ratio (one short delta for every two positive theta), with portfolio theta levels between 0.1% to 0.5% of net liquidation value based on experience level, account size and market volatility. The session highlights how VIX levels should influence position sizing, with higher volatility periods warranting more aggressive theta deployment.
In today's From Theory to Practice, Dr. Jim was shocked to see Domino's Pizza (DPZ) surged 14% as bank earnings season kicked off with Goldman Sachs (GS) and Citigroup (C) reporting. Then, he managed his Home Depot (HD) calendar spread that was closed for a 15% profit, while a new Bank of America (BAC) butterfly position was established ahead of tomorrow's earnings report.
Dr. Jim managed two struggling positions - closing a HIMS position for a minimal loss and adjusting a GDX position by converting to an inverted strangle. He also opened a new short put on the energy index (XLE) at the $85 strike. With earnings season approaching, traders should prepare for increased opportunities and potential volatility in individual stocks over the coming weeks.
In this educational session of From Theory to Practice, Jim Schultz breaks down undefined risk strategies like short puts, short strangles, ratio spreads, and jade lizards. While these approaches offer superior probabilities and easier adjustments compared to defined risk strategies, they come with the significant tradeoff of unlimited risk exposure and greater complexity.
In today's From Theory to Practice, Jim Schultz explored defined risk strategies for beginner traders, highlighting vertical spreads and iron condors as popular starting points. He emphasized that defined risk's primary advantage is knowing maximum loss at entry, though these strategies offer lower Greek exposure and less flexibility than undefined risk alternatives.
In today's From Theory to Practice, Dr. Jim looks to adjust his PANW Strangle into a Straddle to help improve the break-even point on the upside. With earnings coming up before November expiration, the objective for this position is still to manage it prior to that earnings release.
Bitcoin futures reached new all-time highs at $127,240 during Monday's trading session, marking the sixth consecutive green day. The leading cryptocurrency has surged from $110,000 to $127,240 over the past six trading sessions, with Ethereum showing even stronger performance, up 3.5% on the day. Ryan Grace highlighted that October historically delivers the strongest monthly returns for Bitcoin, averaging 20% gains over the past decade. The fourth quarter generally provides the best performance period for crypto markets. Market participants discussed potential catalysts, including the possibility of new ETF approvals for Solana and XRP by month-end. Notably, Grayscale announced plans to stake Ethereum in their ETF, which could attract dividend-focused investors. Analysts noted Bitcoin market cap dominance has increased to nearly 60%, though some altcoins are showing signs of outperforming Bitcoin. When assessing pullback potential, historical data suggests 10-15% corrections are common, even during bullish phases.
n Monday's market action, AMD surged 30%, highlighting the danger of naked call positions. The hosts emphasized how high-probability trades require discipline during such extreme moves. Liz and Jenny unveil a new options strategy for investors with concentrated stock positions who want defined risk without selling shares for tax reasons. The technique creates a "synthetic zebra" by combining long stock with a long put and specific call spread, offering unlimited upside potential with capped downside risk. The S&P 500 futures (ES) briefly touched the elusive 6800 level, while Bitcoin reached $120,000, setting new highs. In the currency markets, the Japanese yen experienced significant volatility. Through practical demonstrations in Intel (INTC) and Archer (ACHR), the hosts showed how this advanced strategy can protect gains while maintaining long-term tax benefits - particularly valuable for concentrated positions where investors are reluctant to sell.