Trading Options on Fidelity - Basic options and how they work with live examples on Fidelity

[@crewdogz356af5]

I've watched tons of different people's videos to try to get a grasp on what all this means, and you made it so simple to understand using the "insurance example". Now I finally feel like I might be able to actually make some kind of progress with my account using this platform. Thank you, Thank you, Thank You!

[@wealthadventures]

That is really great to hear. Thanks!

[@akshaysingh1786]

+1

[@darrencarter8468]

Thanks for the video. You have a way to explain complicated concepts in a way that is very understandable. Just in time to begin experimenting buying puts in this market. You have a new subscriber. Cheers!

[@wealthadventures]

Thanks Darren! Appreciate it. I have added some PUTs myself recently in SPY and XLI. Any question, just shout.

[@brenttravers5178]

I have watched countless videos on options and such.. Every one of them felt like a sales pitch or were as clear as mud.. Yours are clear, informative and enjoyable. Please keep them coming.. Great work!

[@wealthadventures]

Thanks Brent! I really appreciate the positive feedback... and now I want to go watch Stripes.

[@kevin_brown_dc3423]

Thank you very much for this video. I am learning options and I have Fidelity so this helped me to understand greatly how it works on that platform.

[@wealthadventures]

Great! Any questions, just ask.

[@solarmandave]

This is exactly what I need to start. I'll "pull the trigger" soon after I Pratice on paper for awhile. Please keep them coming!!

[@wealthadventures]

Glad it helped! If you have any questions just ask and good luck on your first trade.

[@mikec6247]

excellent video, the best one out there. I was able to follow along step by step with my fidelity account. Thank you very much

[@wealthadventures]

Great! Thanks for the feedback.

[@babygamer405]

I have fidelity and been studying options for two months now. Your tutorial went right into the much needed detail. I feel like I'm ready now. Will be buying my first option "sell to open" in the next couple of days. Thanks a million! Sub and followed.

[@wealthadventures]

Thanks for the feedback! I'm glad it helped and good luck on that first trade. Any questions, just ask.

[@khafreahmose8768]

Good luck! Just found his channel and I'm super green!! What will you write contracts on? Etf's, stocks, indecies?

[@Catmain1]

Thanks for the video. Probably the best explanation with visual on basic options I have seen.

[@wealthadventures]

Thanks Felix! Appreciate the feedback and thanks for watching.

[@shipj091]

I have been with Fidelity since 2017 And I’ve certainly missed out. Had no idea you were doing videos. glad I found you

[@wealthadventures]

Glad it helped!

[@nlalami]

I have been trying to understand what option to choose if I already own a stock through Fidelity and you have explained it clearly with step by step visuals. Especially the Max Loss, which can be scary to see. Thank you

[@wealthadventures]

Welcome! Any questions, just ask.

[@peterhaywood4111]

Best video I've seen on this subject! Much appreciated!

[@wealthadventures]

Thanks! I'm about due of an update.

[@khafreahmose8768]

Very good explanation in clear and concise language without the jargon. You got a sub from me buddy!

[@wealthadventures]

Thanks!

[@sangm1561]

Everything I needed: Trading on the Fidelity platform and the process of following through with my intended trade. Looking to review more of your videos. Thanks.

[@wealthadventures]

Glad it helped and thanks for the feedback! If you run into any questions, just ask.

[@AlpacaCheese]

Subscribed as this video was well made and you describe the components of the options in a very clear and detailed manner, much appreciated

[@wealthadventures]

Hello and thanks! I appreciate the feedback and thanks for subscribing.

[@ampiciline]

Greetings dear coach , I am sooooo sorry for this stupid question but when you look at the summarized chart ( list ) for example at 25:10 , when someone looks at this table , far left column ( the name of ticker and strike value and type option ( for example : APPL 148 PUT ( sep/24/2021) ( the very first one from top ) , HOW DO I KNOW IF THIS is " SELL to open " PUT OPTION OR BUY to open PUT OPTION , just by looking at the provided information ( without seen the rest of the table ) ? i mean I know base on your explanation in video all your apple and Boeing are " sell to open put option ) ( that means you are the seller ) but my question just by looking at the APPLE 148 PUT , how can i say is this sell or buy put ?

[@wealthadventures]

Hi. Not stupid at all. This is all confusing at first. Most people are just to scared to ask! It says "AAPL 148 Put" on the left. Think of that as the ticker symbol. It just tells us we have a position. Under "Quantity" it says -1. That means I am short 1 option. If I wanted to close it, I would have to "buy to close" one AAPL 148 Put. If I had a long position (bought an option) it would show the same "ticker" but quantity would show +1. Make sense? You can also tell by looking at the current value column - A sold option will show as negative because that is the estimated cost to close it while a bought option will be positive since you can sell it for some price. Good question!👍

[@ampiciline]

@@wealthadventures awesome coach ! it make sense now

[@MYlearning-f7l]

Excellent video! Thank you.

[@wealthadventures]

Thanks!

[@Padmavenu]

Dave one of the best basic options trading i have seen. Simple and straightforward explanation.

[@wealthadventures]

Thanks!

[@armandowalls6831]

Thanks again for dropping these jewels. I will be watching this video over again a few times. Keep putting fresh milk in our cereal, 💯 💪🏾 💪🏾 💪🏾 🤘🏾 🤘🏾 🤘🏾 🔥 🔥 🔥

[@wealthadventures]

Ha! Thanks Armando. I appreciate it and thanks for watching. Enjoy that cereal!

[@ampiciline]

I am very sorry , my last question : at 17:09 example of Boeing " Buy to open put option with strike point of 200 $ , and premium of 191.65 $ , if the stock price instead of going down ( as i was predicting ) start going up and keep going up from base 216.98 , till the expiration date , do I ONLY lose my premium 196 or how much i am going to lose in addition to the premium ??? lets say Boing goes to 1000 $ and I was predicting 200 $ ( buy option put ) , then what happens , how much total I lose ?

[@wealthadventures]

Your max loss when you BUY an option is the premium you pay for that option. So $191.65 is the max you will lose if the stock stays above the strike price or goes to $1000/share.

[@ampiciline]

@@wealthadventures wow ....that's amazing ....thank you so much for this priceless information ....i have watched so many videos to understand these concept and finally ( you were the one that explained it really well .....your example were very helpful .

[@chriscarey1476]

Great explanation, it really helped pull it all together!

[@wealthadventures]

Glad it was helpful!

[@tdiler12]

@@wealthadventures Hello I like this platform but do you happen to know if Fidelity has a feature that tells you how much collateral an options strategy will require prior to placing order? I don't think they do and that's a big deal . I know the max loss is an indicator of sorts but not enough . Only after you purchase can you see this in the Options Summary Page, unless I am mising something. Thanks

[@solarmandave]

So I get buying calls and puts. That said closing them out or rolls or what ever happens before they expire is a little clear to me. You definitely helped some. I could still use a little more on what to do before expiration. Thanks again, GasmanDave

[@wealthadventures]

Gotcha. Probably the most important part is to understand that once you open a position, you can close it. The value of the option will follow the underlying stock movement but with the added factor of time decay (and implied volatility). I will try and go into more depth in a video soon. Lots of options with options! Check out 2-3 that you like and write down the cost today to buy 1 contract. Check back in a week and see how much it would cost to close the position. Might get you more acclimated.

[@slotmachineluv]

Do we have to close the cover options ?

[@wealthadventures]

If you sell a call or put, it will execute at expiration without you doing anything. It will either expire or shares will be assigned if they are in the money (have value). If you buy a call or put, it is the same. Does that help? You do have the choice to close bought or sold options prior to expiration.

[@pullbackbaby]

Great channel and tutorial. I always thought if you buy a put or a call and it is out of the money, it would just expire worthless as long as it's in your possession.. I feel as though if you are the original person writing the put or call, then you would be exposed to more risk like you are speaking about in the video. I'll be watching more of your videos in the future, as fidelity is probably the best platform out there..

[@wealthadventures]

Hi. If you own an OTM put or call at expiration, it will expire worthless. You don't have to do anything. It will just expire. If you are the seller you do have more risk exposure. A large move against you will result in a large loss where the buyer is only exposed to their initial investment. Thanks for watching!

[@jwills8822]

At 6:01ish you say "If you take this 184 and you add that to this 198, you get 200" and you lost me there. I've tried using fidelity to explore setting up options but I can't tell how to know if I want a strike price above or below the current market value. I'd like to simply collect the premium and let the option expire. Do I use a strike price above or below the market value for a put? Since I am selling and hoping for expiration I'd think I'd want the strike to be above the market value not below but you example chooses a strike below. Thanks for making this video and using Fidelity to show it.

[@wealthadventures]

That is an example of selling a put with the stock at 216.98. I'm selling the 200 strike and collecting a premium of $184/contract. One contract is 100 shares of the stock. So the math for the breakeven is $200-(184/100)=198.16. This is the point where I start to lose money on this trade. Selling a put is giving the right to someone to PUT 100 shares to you at the strike price. If they did that and the stock had fallen to 198.16, I would have to buy 100*200 = $20,000 of stock. However, I would have also collected $184 in premium so my breakeven would be $20,000-$184=19816 or 198.16/share. For a PUT option, you will typically sell it below the current stock price but that is not a requirement. Think of it as a probability. If stock XYZ is priced at $100/share, and you sell a $90 PUT contract, you are offering to have stock PUT to you at $90/share. You will collect a premium for this. Suppose it is $50 for 1 contract. That is a high probability trade for you with low risk so your reward is $50 since stock XYZ would have to fall from 100 down to 90. We call this an OTM option (Out of the money). You could also sell ATM (At the money) and sell a 100 PUT option. That option might be worth $200 of premium when you sell it since the probability is much higher and you are taking on more risk. Make sense? If you sold it above the current price, we would call it an ITM (in the money) PUT and you would collect a higher premium with even more risk.

[@chumychumychoo]

thank you, you demystified everything really well.

[@wealthadventures]

Thanks! Glad it helped.

[@shipj091]

Thank you for this video🙏 I have a Fidelity account and I have signed up for the live training classes that are offered but always ended with 🤦‍♀️🤷‍♀️ . Your pace and explanation perfect and so helpful 👏👏 still afraid to jump in but will keep watching your videos! thank you thank you thank you !

[@wealthadventures]

Thanks for the positive feedback. Absolutely no need to rush into trading options. If you do run into any questions just ask. I'm happy to help!

[@Steppshow11]

@@wealthadventures This is a covered call question..If I my covered call reaches the strike price before expiration, can I avoid it being called away or assigned if I buy to close before the expiration date. In other words if I value my 100 shares because I have them at a great cost basis, then could I use that strategy to keep my shares and just buy to close the contract. Or will it be kept open to give the buyer a chance to call my shares away if they don't decide to sell to close. Thanks

[@wealthadventures]

@@Steppshow11 Hey Shawn. You can always buy to close out a sold contract if you want to keep the shares. Might be expensive to close it if the price has moved up above the strike price but if you have a good reason to keep the stock you can do it.

[@Steppshow11]

@@wealthadventures Ok thanks so much for your help. I knw you're not an advisor but do you knw any reasonable stocks you would buy 100 shares on to do more covered calls? Right now I only have Apple and FB. Apple is brutal bc the contracts are so small. Thanks for all your help. Your videos have helped me tremendously.

[@wealthadventures]

@@Steppshow11 Hmmm... I'm all over the board so this week I sold calls against MS, C, QCOM, WBA, INTC, DOW, XLF, SBUX, JNJ, LYB, WYNN, CSCO, MMM, and FDX. Again not recommending these but they are stocks I've been trading recently. I will also buy 10-20-30 shares of a stock and build up to 100 over a period of time if I feel the market is getting over heated.

[@77msalinas]

Thanks Dave! You are doing gods work! 🙌🏻

[@wealthadventures]

Thank you Mark! Hope it helps!

[@ampiciline]

Another question coach : at 14:20 the example of " buy to open call option " for Boeing at 216.98 $ ....... if i decided to sell at for example 220.98 $ , before reaching my target number or ( strike number 230 ) , and before the expiration date , can I choose " sell to close call option " and take 100 share X 4 $ = 400 $ profit -( primum 205 $ ) ???? in other word , when i " buy to open " a call option , if i see the stock share value is moving up toward my targeted strike value, can I exercise my " sell to close call option " before i reach or pass the target point 230 $ ( in this example ) ???? thank you very much

[@truckerdon1717]

Thank you so much for your video this was what I truly needed, every other video was, giving me a headache, Thank you Thank you Thank you. For making it plain English!! I subscribed and I saved this video and I plan to share it. Do you have any more videos like this?

[@wealthadventures]

Thanks! Appreciate you watching. I have many videos on options so just depends on what you need. I did a full walkthrough for those just learning the basics starting with this one: kzbin.info/www/bejne/Y4vVi6Kbfthrr7c Let me know what you are looking for!

[@knourii]

This is amazing video, just what I needed thanks

[@wealthadventures]

That is great to hear! Thanks for the feedback. I appreciate it.

[@KenLahne2]

16:12 I'm directionally bearish and new to options. I'll be focusing on buy to open puts. How would this work with 0dte?

[@rishabhshah3916]

What fidelity ETFs can you sell covered calls on if any?

[@wealthadventures]

Hi. Are you asking about Fidelity specific funds or just any fund that can trade within Fidelity? There will be many ETFs that offer options with SPY and QQQ being the most popular.

[@shipj091]

So sell to open, you don’t have to own any shares yet, correct? For which transaction again, would you use if your already own the shares of the stock or the contract ? That is where I seem to have a mental block.

[@wealthadventures]

Sorry I missed this comment before. Sell to open just means you are selling a contract to a buyer. Buy to open would be the person buying the option. As the seller, you could sell to open a put. I sell cash covered puts which just means I have the money available in case I have to purchase the shares if they get put to me. The other "sell to open" would be for selling a covered call. That is the type where you own the shares and you offer to sell them at a strike price by an expiration date. The confusion is probably from the fact that as the seller, you are offering to buy the stock with a put or sell the stock with a call option. What you are really doing as a seller is selling a contract that says you will buy or sell shares of the underlying stock.

[@westdeaton4127]

So what is the difference between the four options?? I did a put option the other day and i think i used buy to open. Thanks

[@wealthadventures]

You can be buyer (buy a put or a call) or be a seller (sell a put or a call). Buy Put = Pay for the right to PUT stock to someone at a strike price by the expiration date. Sell Put = Sell the right to someone to PUT stock to you by the expiration date at a strike price. Buy Call = Buy the right to CALL shares at a strike and expiration date. Sell Call = Sell the right to someone to CALL away shares at a strike and expiration date. Make sense?

[@Contrarian_Misfit]

Loved this thank you

[@wealthadventures]

Thanks Joshua! I appreciate the comment.

[@jboy1757]

Relative to your Boeing "sell to open call option" example, why would someone buy the option at $230 when they could buy the stock at $216.98? Or is the $216.98 the original stock price, and sometime in the future, the stock has grown to over $230?

[@wealthadventures]

Hi. They are paying $200 for the right to control 100 shares of Boeing at a 230 strike price until expiration. They are paying for leverage. They could buy the 100 shares at 216.98 for $21,698 as an alternative. However, if they are correct and the stock takes off to $240 (for example) they would be able to close the option for $1000 near expiration so they would make 500% on their $200. Compare that to buying the shares where they would make $2302 which would be a 10.6% return. Make sense?

[@jboy1757]

Relative to your Boeing "sell to open put option" example, if the stock drops to $198 on Oct 01, can you wait until Oct 15th to see if the stock goes back up (over $200)?

[@wealthadventures]

Yes. There is a small chance that it gets assigned early but that does not happen often.

[@Swing_Trader_Bro]

So if I buy a call, how do I sell it,? Sell to close, it's not a covered call?

[@wealthadventures]

Hi. If you buy a call, you own the option contract. If you want to sell it prior to expiration, you would "sell to close" your contract.👍

[@Swing_Trader_Bro]

@@wealthadventures Thank you!

[@danielmooney2203]

Wow, you should have a whole lot more subscribers? Everybody has to leave a comment and share this channel. Have you considered a video on Fidelity Margin Accounts? Thanks!

[@wealthadventures]

Thanks! I appreciate the compliment. What are you looking to find out about margin accounts on Fidelity? Anything specific?

[@danielmooney2203]

@@wealthadventures Yes, thanks. When should I start to panic!

[@wealthadventures]

@@danielmooney2203 Oh that... Well, I know margin can be attractive but I steer away from it. Investing and watching the options market daily can be stressful enough so I stick to only using my money. I also cap my options account and when it grows I sweep it over to long term holdings which I ignore for the most part. I'm pretty conservative that way but keeps me sane!

[@willpower4u]

How do you sell to open/call specific shares in fidelity?

[@wealthadventures]

Hello! Great question and I don't have an answer at the moment. Worth a call to Fidelity and I will try to do that and get back to you... unless you already did!

[@annielee9271]

Wow. I have watched so many videos looking for this information. I want to start buying calls and selling them. Only question I have is this: If I buy a call an I sell it at anytime? For example I buy to open a call with exparation next week, how do I sell it?

[@wealthadventures]

Hi. If you "buy to open" a call you can own it till expiration. If you want to sell it back to the market you can at any time. You would just "sell to close" your position.

[@Mechanical3000]

Amazing work as always Dave! Have you gone over the Greeks with options? Would love your thoughts. I’m going to keep studying options, have a clear understanding before I do anything silly lol. Your videos are very helpful.

[@wealthadventures]

Thanks! Option Greeks are on the short list but still a little way out. Only really covered delta in a previous video. Personal opinion is that they are not required but do help to understand options. I think they can confuse an already confusing topic if introduced too early.

[@jeff946]

If you buy a call option and you are "in the money", what happens when you reach the expiration date if you haven't done anything with that option. It automatically exercises it then, right? What if you don't have the cash in your account at that time to buy it? Will Fidelity sell some of your other securities so you buy the shares from your call option? Or do you need to make sure you have sufficient cash sitting there when the option reaches expiration? Or something else happens?

[@wealthadventures]

If you own an ITM call at expiration, it should get exercised and you should BUY the 100 shares. If you don't have the money available, they should close the position and give you the proceeds. However, it would be wise to call your broker to confirm.

[@lordbartosz9416]

thank you love your videos

[@wealthadventures]

Thank you! I appreciate the feedback.

[@peterbanachowski]

The best part of this whole video is the a sax riff at the top (clearly played by Dave) to avoid copyright issues

[@wealthadventures]

Lol. Animation by my daughter. Sax riff by my son. I make them breakfast and they make my intros.

[@anthonymanzanares6949]

You said your “Max Gain” plus your “Break Even” is your Strike price. How is 184 + 198 = 200?

[@wealthadventures]

Hi Anthony. The $184 premium is for 1 contract or 100 shares. Per share it is $1.84. So should be $1.84 +198.16 = $200 strike price. For each share you get $1.84 off your $200 strike so the breakeven is $198.16. Sorry for the confusion! Hope that helps.

[@tamaju6666]

if you add 184 to 198 you get 200....... sorry I don't get it at all

[@wealthadventures]

Ahhh yes... At 6:02 I glossed over it a bit. You are getting a credit of $184 for selling the put at 200. That makes your breakeven 198.16. The $184 if for 1 contract which equals 100 shares of the stock (BA). So the math would be 198.16+(184/100)=198.16+1.84=200. Hope that helps!

[@raybodey3011]

not valid in 2023

[@wealthadventures]

Hi. What part? Am I due for an update!

[@Cashcardo1]

@@wealthadventuresplz do a update

[@wealthadventures]

@@Cashcardo1 Will do but it is still pretty much the same.

[@Paragon_Reason]

Ok. I'm new new new. Liking your video & method of explaining so far compared to other people on KZbin. Well done 👍 I have a few questions that will be simple for you to answer however they are long winded so I appreciate it. Q.1) When selling a Put option, am I correct that you do not have to own the stock in order to sell it until the order is executed? Is it kind of like me saying to you: "Hey, I want to buy 100 Snickers bars but they are $2 & I can't afford that but, I will make this contract with you (Put contract ur selling) that I will buy the 100 Snickers bars from you at $1/peice on October 15th. And I'll pay u a Premium Fee for doing this contract. Q.2.) In your first example you did a sell Put Contract, and you discussed if the price falls to 198 then u r forced to execute the contract at $200 worth (20k) even though the stock is at 198 worth (18k)... If u r 'selling' the stock to someone else on oct 15th then why is it an issue? Haven't we already made the $$$ on the put contract? I think/know I'm miss-understanding something. 3.) Isn't the point of Options that you have the option to cancel* the trade whenever u want, even if a day before expiration? Not close but cancel?

[@wealthadventures]

Hi. No worries! We were all new to this at one point. 1) If you sell a PUT, you should have the money available to buy 100 shares at the strike price. You sell the put and collect the premium. If the option you sell ever gets exercised, you will need to purchase 100 shares at the strike price. 2) When you sell a PUT option contract, you are giving the right to someone to PUT 100 shares to YOU (You would have to buy 100 shares) at a strike price. So, if the strike price is 200 and the stock falls to 195, the option you sold gives them the right to make you buy 100 shares at 200 even though the stock is only worth 195/share. They can do this all the way till the expiration date. 3) An option BUYER can EXERCISE an option and follow the language in the contract at any time. They can also SELL the option they purchased back to the market at any time. That is 2 different choices. An option SELLER gives the rights to the BUYER to EXERCISE the option until expiration. However, the option seller can also BUY back the option they sold if it has not been exercised yet until expiration. For example, in the BA trade, you may sell the option and collect a $183 premium. A week later that option may cost $400 or $100 or whatever to close it (or buy it back) so you could pay that amount of money to close out the contract you originally sold. Hope that all helps! If not, I think this video is a good starting point: kzbin.info/www/bejne/Y4vVi6Kbfthrr7c And it is part of a whole series that is in this playlist: kzbin.info/aero/PLO4ykR8OgeRwe0xgLkBUqTRCwizTGA5-Y Good luck! It will start to click. Any other questions, just ask. Dave