Options Trading for Beginners: How To Find Winners

Outline

A. Introduction

  • John introduces himself as the options trading instructor at Top Trading Pros. He has over 20 years of experience as a professional options trader, both on Wall Street and trading his own capital.
  • He joined Top Trading Pros to enhance their options trading program. He encourages viewers to check out their website and subscribe to their YouTube channel.

B. Current Market Conditions – “Nowheresville”

  • John shows charts depicting choppy, directionless trading in the S&P 500, Nasdaq, and Russell 2000. He coins this type of market “Nowheresville.”
  • He explains that traders without a plan for sideways markets will struggle. Providing one strategy or trade ideas via email is insufficient.
  • At Top Trading Pros, traders get coaching on strategies for all market conditions, a community to discuss ideas, and guidance applying strategies.

C. How to Trade Sideways Markets

  • John demonstrates a call butterfly options strategy using Alibaba stock, which has been range-bound.
  • The call butterfly allows traders to profit from sideways price action. It costs little to establish the trade, while providing a potential 2-3x return.
  • The key is choosing stocks/sectors that are exhibiting sideways trading and employing options strategies meant for those conditions.

D. Conclusion

  • John reiterates that Top Trading Pros provides education and coaching on diverse options strategies tailored to any market environment.
  • He directs viewers to free resources on their website and YouTube to learn more about their approach.
  • John closes by encouraging careful risk management and thanking viewers.

Summary

A. Introduction

Summary: John introduces himself as John Napolitano, an options trading instructor at Top Trading Pros. He has over 20 years of experience as a professional options trader, both on Wall Street and trading his own capital. He joined Top Trading Pros to enhance their options trading program.

B. Reason for the Video

Summary: John explains that the markets have been choppy and range-bound lately, exhibiting intraday volatility but no clear direction. He states that traders without strategies for going long, short and sideways will struggle in this environment. He notes that getting trade ideas for one strategy via email is insufficient. At Top Trading Pros, they offer comprehensive coaching and a community to become well-rounded traders.

C. Speaker’s Market Analysis

Summary: John shares his market analysis, grading the overall market a B- this week. He sees the market as unwilling to break out higher or lower right now. He reiterates that the choppy, sideways price action requires adept trading.

D. Example Sideways Options Trade

Summary: To illustrate trading sideways, John walks through an example called butterfly trade on Alibaba stock. With Alibaba range-bound between $90-100 lately, these options trade profits if the stock stays near $95 through expiration. He explains the structure of the trade and its defined risk/reward.

E. Conclusion

Summary: In conclusion, John emphasizes that this example illustrates how his program teaches traders to be adaptive, structuring trades to match market conditions. He invites viewers to explore Top Trading Pros’ free resources and paid coaching programs to become skilled, versatile traders.

Transcript

Good morning to everybody here at Top Trading Pros. This is John Napolitano here with you. I hope everybody’s doing well.

Just a quick introduction. I’m the Options trading instructor here at Top Trading Pros.

I’ve been a professional options trader for well over two decades. I come to you from institutional experience,and I’ve been trading my own capital for about five, six plus years now from leaving that business. So I have bothWall Street as well as individual retail experience to bring to the table.

And I joined Top Trading Pros to enhance their options. Trading program. They already have an extremely successful stock trading program, and if you’re interested in learning more about us, please check us out at toptradingpros.com.

Please like and subscribe to this channel if you like the material that you see. So the reason for this video, it’s pretty interesting. I’m going to jump right into it and share my screen with you. Basically the markets have kind of been choppy after a little bit of a downturn that we’ve had the last couple of weeks, the markets are basically, right now,what I like to call in Nowheresville.

And what I mean by nowheresville, as you can see, you get a lot of intraday choppiness. Look at these three charts right here of the S&P, the Nasdaq and the Russell. You can see exactly what I’m talking about.

And if you have no plans, let me explain something to you guys. If you don’t know how to not only go long, not only goshort, but also have sideways strategies, in this type of environment, you’re going to get chewed up. And I see a lot of novice traders.

What happens is they look on YouTube or they do some research and they partner with an options instructor who basically gives them one strategy. They say, you know, if you subscribe to me, I’m going to basically trade ideas in your inbox for this one strategy that I have or this one algo that they have, or so on and so forth. And you know what? That might work for like a month or two.

It might work for a particular market situation. My strategy is what the professional hedge funds use. I use something called the basket trading approach, where I look at the market holistically.

I come up with a new watch list every single week. I go long and short at the same time based on my favorite sectors and based on my underperforming sectors. And in markets like this that I’m showing you right now on the screen, I go sideways.

There are sideways strategies that you can do in the options market, which you will not learn just from getting emails sent to your inbox. So what we offer at Top Trading Pros is coaching. We not only have a discord channel with like minded traders that are interacting with one another, you get live coaching from me twice a week.

We have a Sunday game plan meeting where I discuss the markets and how to position yourself going into the week as well as during the week. I have coaching sessions which handle all of your roadblocks, all of your psychological things that are happening, all of your problems that you encounter throughout the week. So we have live coaching as well as trade ideas, discord where we bounce off ideas with one another and so on and so forth.

So I’m going to share with you how I feel about the market right now. So you get a little bit of a taste of what we do at Top Trading Pros. As you can see, I grade the market every single week.

So as you can see, we’re pretty sideways. I have a solid B minus on this market for this week. I really haven’t changed.

And yesterday, it kind of confirmed my opinion that the market just doesn’t want to go higher right now. But at the same time, the market doesn’t want to really go lower right now either. So how do you do something? How do you make money in an environment like this? Jesse Livermore, one of the most famous investors of all time said, youknow, there’s a time to go long, there’s a time to go short, and then there’s just a time to go fishing.

That was before options were invented. That was before sideways was a thing. And I’m going to jump into this and show you exactly what I’m talking about.

So I picked a stock here that I’ve been looking at for a little while called Alibaba. I’m sure most of you have heard ofAlibaba. It’s like basically the Chinese Amazon.

And as you can see, it’s been in this kind of solid range for a couple of weeks here. It kind of bounced out of it a little bit. For the most part, it’s been between $100 and $90.

So if you intraday trade this, it’s possible to try to pick a direction and guess an overbought or oversold situation. Butwhy not just sit back and get paid to wait for time to go by? This is how I set up my trades. So a simple setup that I’m Going to share with you right now is something called a butterfly, which you’ll learn in my classes and you’ll learn in our coaching sessions.

But basically, you’re going to be selling two contracts of the 95 call options. You’re going to be buying one contract of the 100 call options, which is the price on top here. And by buying another call option down here at 90, you’re essentially creating this cone of profit right here.

And all this stock has to do, if you put a trade like that together, is it’s got to sit somewhere in this area. Obviously, 95 is my target. That would be the maximum amount of profit that you would receive, which I’m going to share with you right now.

This entire trade only costs $136, by the way. So Options is a low cost way to trade and to get involved in themarkets. If you were curious about that, the total cost here is $136.

For that whole trade to be put together. You could obviously do more units if you choose to, but for the $136 of total risk you’re committing to the market, your potential for profit is $359. So it’s basically a two and a half, three to one.

Even if you kind of miss it and get over here, it’s basically a two to one if you get like 96.25, or if it lands to like 93.75 or something like that. So you have a really good profit potential. This trade lasts only until next Friday,September 15.

So basically, you just sit back and wait for this thing to kind of bounce around and go sideways. So what you’re essentially doing is you’re imitating the market. The market’s going sideways, Alibaba is going sideways, so you’re going to go sideways.

And that is how I teach my students how to profit in environments that are not always conducive to direction. And You’re having trouble trying to pick names and figure out what to do. There’s no reason why you can’t just do a whole bunch of these and do them sideways while you’re waiting for the market to decide which direction to go in.

That’s what I teach my students how to do. I hope this video is helpful. I’m just trying to show you some small examples of how to potentially profit in markets like this.

Spend some time with us. You will learn how to put together trade strategies like this on your own. You will have weekly coaching as well as all the resources that we have available to you.

Not only that, if you’re a little bit curious, you can check out our website. We have a free ebook. If you sign up, we have a free newsletter that you can also sign up to, as well as just checking out our YouTube channel and checking out our website.

There’s plenty of free content just to get your feet wet as well. Okay, so I hope everybody has a fantastic weekend.Please be careful out there.

Always manage your risk and end up on top. Okay, have a great day, everybody. Take care.

Bye.

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