Every Options Trading Strategy Explained - Professional Investor Reacts

0:00I just came across this video called every options trading strategy explained. And I want to do a little series on this channel. They've got this video here. It's going to be a two part series for this one. And then we're going to do another two part series about every options Greek explained. So you'll finally understand it. Now, I think this is important, right? If you are going to trade options, there's a myriad of different ways that you can do it. Because at the end of the day, let's break it down. There are four possible things you can do with options. You can buy a call, sell a call, buy a putt, sell a putt. That's it. Everything is a combination of those four items. Now, because it can be complex, people have made it complex, right? Because it can be made in a way where you can do all kinds of fancy little things. People have made it that way. I like it the simple way. I like a deep in the money long call. And that's all I trade. But it may not be right for you. And like I say all the time, you want to find a plan that fits your personality in your portfolio. And so we're going to go through all these today.

1:00Now, I actually wrote a book on this. It's called The Hang On. I had let me grab it off the shelf real quick. It's actually called The Secret Investing Book. And most of these strategies we're going to go through is in this book right here. This book is out of print. If you can find it, good luck. But I don't trade like that anymore, which is why I was like, you know what, I don't want to keep pushing this out there. So let's jump into it. And I'm going to give you all the pros and cons that I can on each one of these scenarios. And I've traded all of them. Every single one of these I have traded. So I have experience, not just theory about how to trade with them. And not all of them I made money with, that's for sure. Let's watch this together. Every options trading strategy explained. Long call. With every strategy we go through, we're going to define three elements of the trade. First, what is the trade? Is it a debit or a credit? In the options market, there's only those two types of trades. A debit means money's leaving our account. We are buying something, a credit. So and don't don't overconfuses.

2:02A debit means you're buying something just like if you were to buy a stock. Right. Let's say you buy what stock did I have pulled up here? Let's say you bought RSP for $260. You would pay a debit of $260 per share of RSP. Okay. And just like if you were to buy a call, you're going to pay a debit to do so. It trade means money's coming in. It's actually cash flow that we receive. Also, what is your outlook? Most traders think, oh, there's three. Now, before we get too deep, I want to go back to the credit part. Back in 2021, there was an issue with Robin Hood where they had a glitch in their system. And when he says cash that you received, it would literally go into people's accounts and then they could trade with it. So basically, it was taking leverage on leverage, on leverage on leverage. And there was a point where the internet caught on. And it was like, this is an infinite money glitch. And it was. Robin Hood was broken for a minute. And it was so broken that there was a young man

3:03who who offed himself because he got into a unbelievably over leveraged trade. And the trade didn't work. And according to Robin Hood, he owed $800,000. So when we get to the credit parts, a lot of the options seller, options seller gurus will tell you how it's money into your account. It's not your money. Don't even think about it. A good broker will not let you trade with that money. Does it go into your account kind of, but it shouldn't ever even cross your mind like it's not even there until the trade is closed, then it's yours. Redirections of stock can go up, down in sideways. In reality, there are five directions. We're gonna define those. And finally, when would I use this? So the long call trade, and you can see the risk graph over here. So the risk graph on all of these, you can find your break even, which is the dotted line. You can see your max loss area and your max gain area.

4:04Now, here's what's really cool about the long call, just buying call options. This line would extend into eternity. There is, Right, what's cool about this is this is what's called the asymmetric risk reward, right? The amount of risk is defined right here. Let's say if you paid $500 for it, right? The total amount of risk you could lose is 500 bucks. If everything goes sideways, or the total amount you could gain is literally infinite. That was not a bad infinity sign. Literally infinite. Now, it grows linearly, right? It's a straight line. It's not an asset or an exponential line like that, but your portfolio could look like that by using these type of asymmetric risk reward trades. And that's what we're after. We are always, always, always, 100% of the time after a asymmetric risk reward trade, that's in our favor. Now, we are gonna come across this at some point. I'm gonna set this out right here. The golden rule of leverage is never put yourself in a situation where you can lose more than you can make. This fits the golden rule of leverage

5:05because maybe you could lose 500, but you could potentially make 5,000, okay? That's when leverage is on your side. Never, ever, ever put yourself in a situation where you can lose more than you can make. And it is a thing that I know we will be coming out across very soon. The infinite upside, as high as a stock goes, the more it goes up, the more we make in these call options. Yet our risk is defined to what we paid for the trade. This is often referred to as a stock replacement strategy. I'm gonna buy. Ooh, okay. Now, a deep in the money long call, that is referred to as the stock replacement strategy. That's where I live. That's where I live. I didn't just make this up on my own. I actually learned it from a billion dollar hedge fund manager. The very first billion dollar hedge fund manager, Larry Height, specifically taught me this exact thing, deep in the money, basically 75 or greater deltas. And the way he described it to me is, think of it this way. You can have futures type leverage on every single stock out there by going deep in the money on long calls.

6:06And I was like, really? And it's true. It's so true. Let's do this. Let's pull up the liquid stock. Let's go for like Apple. And I'll give you some examples over here. Let's pull up Apple. And let's go for like a 80 delta, 75 delta, anything greater than that I would consider deep in the money. Now, Apple is trading for $316. We know that. For effect, Apple's share price right now is $316.22 at the time of this recording. If I were to buy, let's go with 80 delta. If I were to buy one 80 delta contract, it would cost me, let's use mid price, $423. We're 230 divided by the price of Apple right now. $316.22 is 13%. So for 13% of what the Apple stock price costs, I can control 100 shares. Now, is it a perfect one for one? No, because it's 80 delta. It's going to move from like a four for five, an eight out of 10.

7:07But it's close. It's close. And so for me, I'm looking at this like my capital just went so much farther. If I were to buy 100 shares of Apple, it'd be $316.22 times $100, $31,600. If I bought one contract here, it'd be $4,030. So we divide this $423. So basically seven times leverage in this case. Seven times leverage. Meaning I can put on seven times as many trades. Then I would if I were just buying the stock outright. Does that make sense? If that makes sense, type a one in the chat. There are going to be lots of audience participation today. Type a one in the chat. Now, I know what you're thinking as well. Well, dude, if that's true, then I can come over here and I can go out of the money and buy a long call. Let's say I go with like the 16 delta. No, no, let's go with that 20 delta. OK. It's still $4. So 405 divided by $316.22.

8:09That's 1%. Chris, you got to go out of the money. The problem with going out of the money is you no longer have intrinsic value. We have no intrinsic value. So all of this is time decay. A 100% of this will decay on you every single day. Every single day, 100% is at risk of decay. However, if you go deep in the money, like I said over here, $6.08 divided by $423. That's my price. 14% is extrinsic value. Only 14% is extrinsic. So only 14% is decayable, if that makes sense. If that makes sense, type of 2 in the chat. It's important to understand, yes, both of these control 100 shares of stock, either at the 80 delta. In fact, let's click on here and just keep track. Either at the 80 delta or at the 20 delta. Both of these control 100 shares of stock. But this has a delta of 20, meaning for every $1 at the underlying price moves, this only moves by 20 cents. For every $1, the underlying price moves,

9:11this moves by 80 cents. So this is four times more effective. This is four times more effective to go over here than over here. So now I know what you're thinking. Well, I'll just buy four of them. It should be great, Chris. I'll buy four of them, right? Because 405, 405 times 4 gets me to 1620. That 1620 is still way less than your 4230, Chris. I get that too. I totally understand that. But remember, the point of going deep in the money is the extrinsic value decay becomes a very, very, very small portion of the overall cost. You may have a similar 80 delta net, but you now have just, I mean, if this is 405, right, 1620 is decayable. Whereas this one over here is $6. That's decayable. For the approximate same amount of delta, this one has a decay value of $4 times 4 1620, where this one has a decay value of 608 total. So it's actually really close.

10:11Let me see if I can get both of these on the same page right here. Yes, I can't cool. Look at this. So both of these are essentially, they're really, really, really close. But yet the delta's are unbelievably different. 80 delta versus 20 delta. $4 versus $6. Now I know that's 50% more. I get that. But if you think about the grand scheme of how much the price is, it's really just a tiny bit more. And this is 14% of the total price that's going to decay. This is 100% of the total price that's going to decay. So to me, the out of the money options are significantly more expensive on a decayable basis than the in the money options. So I know that that's pretty deep right there. If that's pretty deep and you understood, put it to. If it's pretty deep and it didn't quite come through, put a question mark. If it's pretty deep and you got it, hit it to. If it's pretty deep and you didn't quite get it,

11:13hit a question mark. Let's keep going. Calls to maintain upside, but I have less risk. If the stock were to just absolutely get clobbered, the stock holders would lose infinite amounts all the way down until the stock is zero, but we wouldn't. We would only lose what we paid for the calls. This is a debit transaction. Money is leaving our account when you spend money for a trade. Think about anything that you buy. If I buy a house, I want its value to go up over time. If I buy a stock, I want its value to go up over time. Debit trades are by their very nature, directional trading strategies. When you do debit trades, you are more dependent on getting the direction right. Now here's the bad news. Now hang on, before you tell us what you think the bad news is, I want to pull up my slide deck over here because one of the rules from a two-time US investing championship winner, one of the market wizards, one of my personal friends and Mark Minervini is,

12:15let me see how you find her real quick. Always, it's something about being directional. Hold on. Hold on. Oh, there's the 5080 rule. Okay, I don't remember where that is right now, but one of the things that he talks, one of Mark's rules, and I may not have it as part of my side deck, is being directional. The idea of being neutral sounds really, really sexy. I get it. I totally get it. Why wouldn't you want the stock to go up, down, or nowhere, and make money? Well, because if you're directional, you're going to get paid so much more, let me make this a different color. You're going to get paid so, so, so much more. Because anytime you have a neutral position, which is why I think he's about to say it's the better place to be, your win rate is going to be higher. Absolutely, your win rate is going to be significantly higher, maybe even 80 plus percent, right?

13:17Maybe even 80 plus percent. But if you are neutral, you also are taking a decent amount of risk in this case, which is where we start to break the golden rule of leverage. The golden rule of leverage we mentioned earlier, has never put yourself in a situation where you can lose more than you can gain. Okay? Now, when you are neutral, the idea here is it doesn't matter which way things go. I'm still going to make money. What does matter is the passage of time. The only way you get to make money on those neutral traits is through time passing. So if you're in a stock, and it's already starting in a big trend, and you're like, eh, it's fine. I'll be neutral on it. And then the stock bloos to the upside. Whatever you thought it couldn't do, it's like hold my beer, just runs like crazy. You're in a whole world of hurt. But then there are, take the leap by amp futures. But then there are times when the market goes sideways, which is not that often, where a neutral trait makes sense. Absolutely, I will tell you for sure,

14:18these two areas right here would have been tremendous for neutral traits. Absolutely tremendous for neutral traits. And this is where trend traders like myself get chopped up. It's real. Right? So what you do in this case is you take your small losses. Maybe you lose a buck, maybe you make a buck, you just have a little loss, a little loss, a little loss. And then by the time the next big trade comes around, the next big trend comes around. Instead of worrying about little bitty baby winners and losers, you just ride that big trend and make big old bucks. When you buy call options, you might think, well, I just need the stock to go up. If it goes up, I'll make money. That's not always true. As stock going up 2% might still lose money in these call options. We might need the stock to go up 5, 6, 7%. We really need a plus two would be ideal. Maybe we can get away with a plus one reaction in the stock. But I'll see what he's doing here. Okay, okay. Now, I actually have a great example of this. So I believe it was the second time I blew up my account. Was the election night between Donald Trump and Hillary Clinton?

15:22Let's go back to that. So this is early November of 2016, I want to show you on the chart. It was on NASDAQ, hang on. I remember specifically, I have my entire account into what's called a call ratio backspread. I'm assuming it doesn't show on this, it isn't show on this, but I'm assuming he'll get to a call ratio backspread. Hold on. November 2016, hold tight. So, wait. Hang on, hang on. Let me work with it. Here we go. Okay. So November, I think it was November 4th, 2016. Tuesday, November 4th. November 1st. Was it... Okay. So I wanted to be a favor in the chat. Look this up for me. What was the election day in 2016? I believe it was right here. I believe it was Tuesday, November 1st. Now, why do I bring this up? Why do I care?

16:23Or maybe it was even the next Tuesday, Tuesday, November 8th. This was probably it right here if I had to guess. Okay, let's zoom in and let's talk about that. So on this date, I had what's called a call ratio backspread. This candle right here. Okay, this candle right here. I believe, let me double check that. Tuesday, November 8th. Okay. So this right here was when Chris was like, you know what? I know what I'm doing, which I didn't. I'm going to go whole hog. Thank you, Steve. I'm going to go whole hog on this candle right here. So that night, I don't know if you guys, I remember this vividly, vividly. That night, the market was locked limit down. It may be in the first time I've ever seen it, locked limit down. Donald Trump was expected to win. And the market was like, well, we got to sell everything off. Because that was the consensus was if Trump wins, the market will crash. If Hillary wins, the market will go up. I don't know why. Don't put your political bias on me. I don't care. I'm just telling what I knew at the time.

17:23And she was more likely to win. So what I was looking at was a call ratio backspread. And a call ratio backspread has an unlimited upside potential, just like a long call. Okay, just like a long call. It also has on the opposite end, a small profit potential. So this was this was Chris's like genius plan. Listen, if the market goes up, I'm going to make so much money. If the market goes down, I'll make some money. So I went to bed that night thinking, hey, you know what? Not so bad. I'll be okay with that. Now between Tuesday and Friday, let's put on here Friday. Great, I'll take it between Tuesday and Friday. So this is the day I open the trade. This is the day the trade closed on me. Now a call ratio backspread looks something like this where year, okay. So if this is the area where I wasn't going to make any money, that was roughly this example right here.

18:27It was roughly exactly where I didn't want it to make money. Now, I mean, it basically went up for the next four years straight, but because I didn't set up my trade correctly, I was directionally right, but I lost money on the trade. I don't want you to ever be in that situation. And because I had only given it until that Friday, I didn't make money on it. Right. If I had given it to the next Friday, maybe over here, I could have made money on it. But because it went from here to here between Tuesday and Friday, my entire account had to make a break within those days. And guess what? It didn't make it didn't make it definitely broke. But a plus two is needed. Now what does that mean? Let me show you how we define directional trading in this fashion. The five directions. OK, so I'm here in thinkorswim. And most online brokerages will give you something along these lines. I've pulled up a stock called win resorts. This stock is very close to $100 per share. In addition, you'll notice that this area says 68%.

19:28So I'm going to pull up win right now as well. Just so we can track it. Now, I want to do today, give me today, go to today, there we go. OK, this is where we're at today. Now, before we get too deep into it, right, if I were to look at win right now, first off, I would be bearish because the 10 is under the 20 prices under the 50. So it is moving in a bearish direction. It is a confirmed bearish trend. How long will it go on this trend? I don't know. I don't claim to know. All I know is this is direction. I can't show you duration nor magnitude. Now you'll also notice here that it seems to have found a bottom and it's even created a bullish order block down here. And it just got rejected multiple times off of these order blocks over here. Tell me order blocks don't work. It's pretty amazing to see them work like that. If I had to place a bet on this trade, I would not be betting to the long side. I wouldn't be betting at all on this trade. In fact, I would just skip on to the next one. So just want to set that context on here,

20:29because I don't know where he's going on this. 68% is key. That is in statistics, the bell curve, the one. OK, now, before he gets too deep into it, he's going to keep into this, which is why I like this video. This is going to teach you all kinds of stuff. One thing I want you to understand is that the efficient market theory is just a theory. Why do I bring that up now? Because what he's about to talk about is the probability of distribution of, look, Chris nerds out so hard on options. I don't think you understand just how much I love trading A and love options even more B. OK, so the probability curve that he's about to talk about is called a normal distribution and a normal distribution looks like this. A normal distribution, well, not quite as lopsided, but generally looks like this. So one standard distribution gets you 68.24% of the time. That's what he's about to say, 68.24% of the time. OK, now, the reason that they bring this up, that people bring this up, is to say in the quote, efficient market theory, and it is a theory,

21:30and the efficient market theory, you can predict where prices will be 68% of the time. We all know just how unlikely that is to be the case, right? Especially given more and more time, the more time, the more uncertainty there is with anything. Right, just like your insurance contract on your house, if you had an insurance contract for today, it's sunny, it's 100 degrees in Texas, it's unlikely to be damaged by a storm. But let's say we get into storm season, like springtime, let's say that there's a big cloud moving in, and you're like, I got to get insurance today. That insurance that you get on that stormy day is going to cost a lot more, because there's a lot more uncertainty than on a clear day. And then given more time, right, if I'm going to take a 10 year policy on my insurance, it's going to cost a lot more than a one year or even a one day policy. So to that point here, 68% of the time, he's about to say, it falls within one standard deviation. And that's just not the case. That's just not the case.

22:31And the efficient market theory works like this. This is the basis of the efficient market theory. All available information is already priced into, I hate the word, priced in. All available information is already priced into the stock, and that everybody acts rationally, because everybody gets the same information at the same time, and they all make the smart move that most benefits them, that it Google it. You're going to see the efficient market theory is basically this. Is that reality? Of course not. Of course not. We are rational human beings. And when it comes to our money, we act even more rationally. We're driven by fear and greed. The efficient market theory doesn't want to admit that humans are irrational beings. So, okay, all that to continue on. One standard deviation. So, this is actually telling us that between now and this expiration date, there is a 68% chance that win resorts will be between 90, 70, and 110, 50. Now, take this with a big, big, big grain of salt, huge grain of salt,

23:33because the efficient market theory doesn't account for trends. I would imagine that the efficient market theory, when you looked at it on this date here, when you looked at win resorts on this date here, and you were like, you know what? Let's go out into the future by 100 days. Do you really think that it had a 54% probability? Let me revise that. Do you actually think that a 54% move was in the cards on this candle? No. Of course not. And this right here can't, this is going to blow people's mind. This right here, this big old trend right here, cannot exist in the efficient market theory. Would you mean Chris? Because people act rationally. Everybody has the same information at the same time. How could a trend ever exist if everyone has the same information at the same time? They should all act rational. I think that this way, the efficient market theory means that prices should never move.

24:37In a nutshell, that's what the efficient market theory means. Because it's efficient. Why would it move? Everybody knows the same thing at the same time. So, there's no point to ever move. Yeah, no. But to that, what are you saying right here? Right? And this is why I say, take a big, big giant grain of salt with this. Given the information we know on this date, June 18th, 2025. Do we expect it to go up potentially? Yeah. Do we expect it to go down potentially? Yeah. Do we expect it to go up 54%? No way. No way. But then the market's like, hold my beer. Now, this is the perfect time. This is the perfect time to get into a long call. Because you're only going to risk so much to see if it works. And if it does work, you can just let it run and run and run and run. Let's keep it going. So, if we were to look at win resorts and look at where it's trading right now,

25:40wouldn't it be fair to say that if it stays really close to 100 inside this range, we really have a zero outlook. That's neutral. We're going to call that a zero. If we're expecting the stock to go up, but we're not crazy bullish, we're just thinking it'll still stay within the 68% probability range. Nothing out of this world. There are strategies better suited to profit from an upside move, but not the crazy, crazy upside move, right? So a normal upside move, a normal bullish run to 106, 107, 108, we call that a plus one outlook. And if the stock is going to go violently higher, we call that a plus two outlook. So if you look at this stock and you say, do it in my analysis, looking at the chart, whatever it is, it will be here. I got to get you to understand something. The market gives no monkey donkeys what your analysis is. The market does not care what your analysis is.

26:40At all, imagine your analysis told you, imagine your analysis told you that when was going to go from 88 down to 78. Imagine if that's what your analysis told you. What are you going to do? Are you going to be like, the market's not listening to me? Oh, that's not fair. How could it do this to me as it just rockets the other direction? You get absolutely cooked on your shorts. No. Here's one thing I want you to do. First off, stop trying to predict. Just stop trying to predict. You can't predict. Nobody can predict. And that's okay. If you want to be successful in trading, you have to stop trying to enforce your beliefs on the market. Do not try to predict anything. Embrace the uncertainty. Once you understand that in order to be successful, you have to embrace the uncertainty. Because listen, let's say that you were right.

27:41Let's say you had a quote, you know, moderate positive outlook. And it went from 88 to 98. Let's say that. And you're like, well, I'm out. That was a great trade. And then it just rockets all the way up. And you had no other reason to get out. And I got up to 135. You just lost like, let's use your own numbers. You just lost $40 a share. You just lost a 40% additional gain. Because you said this is my analysis. The market has to listen to me. So up. Yeah. I love when people are mad at the weatherman. It's if you would know. Stop trying to be the weatherman. There you go. Exactly. Stop trying to be the weatherman. Just let the stock move. And if it runs and you're in it, go with it the whole way until it stops going. If it doesn't go, that's fine too. Just get out of the way. But to claim that you would know, oh, it's a plus one move.

28:41Guys, listen, be chill. Okay. It's going to be a bullish move. But it's only going to be a plus one move. Don't ever try to tell the market what to do. Just go along with their trend. Ride the rip, as we like to say. Hashtag ride the rip in the chat. Ride the rip as far as it'll go. Sometimes it doesn't go very far at all. Right. Sometimes it might pop up in the pipe, pop right back down. Then other times, it's going to run hundreds and hundreds of dollars. We expect it to go up here to 113, 114, 115. We should be putting on a plus two option strategy. If we expect, no. Here's what I want you to take away from this. Number one, we cannot control the outcome. So, if you are going to put on the trade, and it does move the plus two, you want to be there for it. If you put on the trade, and it doesn't move a plus two, you still want to be there for it. And if it continues on, you're golden.

29:43And if it doesn't, you still made money. All right. Don't try and overcomplicate this, because last I checked, neither one of us could see the future. So, if I'm going to put on a trade, I'm going to be ready for a plus set up that goes to the moon. Just my opinion, just my opinion. Expect the stock to fall, but normal rounds of volatility. Just a normal fall that stays inside of the one standard deviation. I move down here to 93, 94 per share. We should put on a minus one option strategy. But if we think the stock is going to violently move lower, down into the 80s, we should be putting on a minus two option strategy. So notice, there are five directions that a stock can move. Three of them are inside of the normal standard deviation, the normal expected range. Two of the five directions are extreme. By defining these five, it's going to help you to understand all of the strategies

30:46we're going to talk about today. So, as we said, the long call is a debit trade. We spend money for the trade, but with the long call, we really would love the plus two. If we get a plus one move, as long as it happens quickly and we can exit the trade early, we could make money here, but we definitely make money if there's an extreme upside move. So, the long call strategy. Why do we use it? Stock replacement strategy. And we are very, very bullish on the stock. We think this thing is going sharply higher. Long put. The long put like the long call is a debit transaction. We spend money when we buy. Now, I don't do a lot of puts. I think about two puts in 2025. I hadn't bought any puts in 2022. A lot of people like the idea of being able to be agile. And I get that being agile in both directions, like right here. Imagine that you got to put. Right. You bought a call on this side. You bought a put on this side. Oh, you're making money on both sides. I get that.

31:47But if the market rips higher, if the market rips higher like this, there's about the last, in fact, it was February 2025. It was the last time I bought puts. That's the only time, in my opinion, that should even be considering puts. If the market is ripping higher, go with things that are working with the trend of the market. Don't try and pick the one stock that's falling. Go with the easy money. If we're talking about the market's moving higher, the sector's moving higher, and the stock is moving higher, that's way easier. And way more common than trying to find the one stock that gets absolutely killed in your buying puts while the market and sector are both growing higher. By the put options. So that's our max loss. We can only lose, see the flat bottom here. We can only lose what we spent for the put options. Yet as the stock falls, we can make more and more and more money.

32:47So this has an arrow. It just keeps. It's worth my gateway drug into options, though. Absolutely. I told this story just yesterday, but when I was doing consulting, we were in the office one day. So I did consulting for a dozen years with financial institutions, showing them how to make more money and have less risk due to changes in interest rates. So I'm an actual finance bro. But we were in the office one day, and my boss at the time was talking about Deutsche Bank. And somebody they was talking with was talking about how they thought Deutsche Bank was going to go down. And he's like, well, if you think Deutsche Bank is going to go down, go buy some puts on it. And so that that moment was my gateway drug into options. It's making more money as the stock price is going down, down, down, down. We lose if the stock goes sideways. And we certainly lose buying puts if a stock goes up. We might even lose if the stock only goes down a little bit. That's the damn double misery of time decay and volatility, crushes and so on. I was 100% right.

33:48Our main outlook is a minus two. Why would we use this strategy? This is an alternative to shorting stock. Shorting stock is there. And just like buying stock costs significantly more than buying calls. The wording stock costs significantly more than shorting puts. I don't know, buying puts I should say. Now, also, if you are going to short stock, there have to be shares available. Most liquids stock, you're not going to have any issues with being able to short shares. But there are chances where you want to short something and there are no shares available to borrow. It is a real thing or hard to borrow in fact. And you may even have to pay interest to do so. So in my opinion, if you are going to look for a stock to go down, puts are a great way to do it. A very capital efficient way to do it. Very risky because you have infinite risk. If the stock goes up and you're short, the stock. Oh, great point. Actually, super great point.

34:48Let's go back to win. Really appreciate that point. Because let's say that you were bearish on win right here. You were like, hey, you know what? This random guy on the internet that trusts me, bro, win is going down. And so you shorted the stock out right not buying puts. And then win goes up 54%. Math is weird. But things can go up infinity. But they can only go down 100%. So the most in theory you could make by shorting a stock is 100%. You can't make more than that. It is an impossibility to make more than 100% shorting a stock. However, let's say you went long in stock. You could make 500%, 1000%. Very possible to do either one of those. Now, imagine you have a stock going against you in your short. You can lose 100%, 500%, 1000%.

35:48That's a bad place to be. That's exactly what he's talking about right there. You have unlimited upside risk. And then what happens is people close their shorts. And that is how a short squeeze happens. So let's say that you started shorting right here at, let's just call it $90. Okay. And the price goes up to 100. And you start saying, you know what? I got to cover my shares. I got to cover my position. I have to close my position. So you originally sold to open STO sold to open your trade here. Now you need to buy to close BTC, buy to close the trade. But you're still buying. Okay. You sold the opening and you have to buy back. Now, because you have to buy back, what does that do? Pushes to price higher. And then more people are in that situation. All of these other shorts are having to buy to close. And just like a buy to open pushes price higher, a buy to close also pushes price higher.

36:49And that is what's called a short squeeze. And it can happen brutally fast. Let's go to car, the AR. That was a Davis. Was it was it this? I thought it was bigger than that. Well, that's not it. Was it just car? C-A-R. There we go. Yeah, that's a short squeeze. That is what a short squeeze can look like. It can move big and fast and brutal. And if you don't close your trade because you want to be the hero, you can watch your trade go from literally. Let's look at the math on this. You can watch your trade go from around $100. to at a peak $850. Meaning, how much would you have lost here? Let's get our measurement tool here. There are around 100. Go the way up here. You could have lost 750% of your account. Think about this way. Remember, you can only make 100.

37:50You can lose unlimited. Perfect example. Now, eventually you are right. But you got margin called. And it may have been on this day right here, you got margin called. And then, oh, come on. 48 hours later, you'd been good. That is the reality of life. If you are going to shorts tell something, this can absolutely happen to you. And you have to get out of the way fast before it gets, it just wrecks you. You can lose all that the stock keeps climbing higher. So this is an alternative to shorting. It's buying put options. It's still a bearish transaction. It's still profits from a downside move. But we have less risk than the short sellers covered call. Let's say you own Coca-Cola and you have 100 shares in your account. When you do a covered call, you're selling a call option up above the stock that says, Hey, if it gets up here, I'd be willing to sell. In essence, we're dangling a carrot. We're saying, hey, look up here.

38:50If it could get all the way up here, you can have my coax shares. But we're not giving them the potential to take our coax shares away for free. No, no, no, we're collecting a credit. So watch what happens. Let's say the Coke we're trading at $70 in value per share. If over the next month, I want to dive a lot deeper into this on the next option, Steve Diploin's day. We spent a lot of time just on long calls and a little bit of time on long puts. And I want you to be successful. So you want to subscribe. You definitely don't want to miss out on this. And in fact, in this video right here, dude, if you don't watch this, I'm telling you, you are going to have regrets for the rest of your day, week, month, probably the rest of your life. If you don't watch this video right now. So listen, I'm not going to tell you that you should watch this or else, but you should probably watch this or else. Have a great day. Be sure you subscribe. We'll talk soon.