hey what's going on youtube welcome back
to tech conversations
as always i am your host guillermo and
as always i am not a financial expert no
licensed professional
if you plan on investing in the stock
market please consult with one first and
invest at your own risk
so hope for having a great day today it
is november 15th
and it is finally sunday which means the
stock market will be open tomorrow
hopefully we can all see some great
gains this week
let me know in the comment section below
if you think tomorrow will be a red day
or a green day in the stock market
now yesterday i talked about selling put
options on robinhood to generate
consistent
income every single week and so in
today's video i want to talk about
selling
call options to generate income every
single week
and so in my opinion selling call
options is one of the safest
option trading strategies that is out
there
and it just allows you to collect
premium and build
some slow and steady gains but again
in my opinion slow and steady always
wins the race
so before i get into selling call
options just a reminder that i will be
doing a giveaway here once i reach 20
000 subscribers
it's been an insane journey thank you
guys so much for your support
if you'd like to enter that giveaway all
you need to do is hit the like button
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and let me know in the comment section
below what your favorite stock
in the stock market is right now and
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link to it will be in the description
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000 members today a bunch of great
traders bunch of great resources and
it's just a great environment for those
who want to learn more about investing
in the stock market so again guys if
you're interested in joining the discord
link to it will be
in the description below let's go back
to robinhood and let's get into selling
call options as you can see currently
i'm selling one
two three four five call options
and so a couple of things firstly before
we get into this
first you're going to have to have a
hundred shares of
a stock okay on robinhood we're selling
covered calls
meaning you have to have a hundred
shares of that stock that you're going
to be selling
uh the call on secondly when it comes to
that stock
make sure it's a stock that you would
not mind holding those 100 shares of
for quite some time uh and
make sure that it's also a stock with
good upward
trend good growth and
lastly this is more optional but try to
find stocks that pay
dividends because if you are going to be
holding on to 100 shares of a stock for
quite some time potentially
and it's just nice to collect some extra
money from the dividends
while you're holding those shares and
selling covered calls
okay so one of my favorite stocks for
that is microsoft
another one of my favorite stocks is
apple now i don't own 100 shares of
either of those stocks right now but i
will here very soon
so instead i'm just going to use one of
the stocks i do have 100 shares of
ttcf tattooed chef okay
tattooed chef is uh you know it used to
be fmci and it just recently merged into
tattooed chef
okay and so as you can see i have 110
shares of tattooed chef so i have at
least 100 shares so
i'm fine with that in my opinion in the
long term this will have
good upward trend and high growth uh it
doesn't have
dividends right now but again that's
more optional but again i do try to find
stocks that do pay out dividends and so
let's go to trade
options for ttcf let's talk about how
selling call options works so again
we're not buying options we're gonna be
the seller okay we're gonna sell
calls and so here we are and when it
comes to tattooed chef remember the
first thing you want to do is
choose your expiration date i always
choose the closest expiration date
to me which is november 20th which is
this friday
now remember some stocks will have a
weekly option
some stock will have monthly spy has it
every other day right it just really
depends on the stock so tattooed chef
has monthly options
uh so i'm just going to leave it as
november 20th now as you can see i've
already
have one right you can see that by this
uh you know
minus one that you see right here and so
as you can see
here's here's how this is gonna work
okay so
we have our strike price so when it
comes to choosing the strike price you
want
for selling your call you're going to
want to choose a strike price
where you're comfortable potentially
selling
your 100 shares of okay and so
i chose 22.50 because i'm comfortable
selling 100 shares of ttcf at
22 and 50 cents i would not be
comfortable selling ttcf
at ten dollars a share so i'm not going
to choose that one
okay even though it has pretty big
premiums
i'm not gonna choose that one okay
because i'm not comfortable if ttcf were
to
somehow skyrocket to thirty dollars
and i'd have to sell them at ten dollars
you know you're gonna be losing a lot of
money
and so the way this works okay is
if on this expiration date so november
20 let's say november 20th comes
uh the market day ends if ttcf at that
time
is above your strike price
you're going to be forced to sell your
100 shares
so if november 20th came the market day
ended
and ttcf was 23.
the share price was 23. then i'd be
forced to sell
my 100 shares of ttcf at 22.50 cents a
share
and so that's why i mentioned that it's
important to choose a strike price
where you're comfortable selling your
shares because if you choose this 10
well as long as ttcf is above 10 by
expiration
you're going to be forced to sell your
100 shares at 10
a share right and so what do you get in
return
for selling this call option well again
you're going to receive
money you're going to receive a premium
and that's shown under the price
okay so if you were to sell this exact
same call right now
you'd be getting 13 cents now remember
this is going to be
per share each one of these contracts
controls 100 shares that's why you need
to have 100 shares to sell a covered
call
and so you're going to receive 13 cents
per share or
13 per the contract so if you sold this
call right now
you'd only get 13 now i sold this call a
long time ago
so i actually received 250 dollars and i
pretty much
made most of that already and i'll show
you guys that here in a minute
uh but remember uh you know the way this
works is
every time that uh ttcf
well there's a couple of greeks here
right that we need to understand so we
have delta
we have theta and we have vague those
are the three most important important
ones here
so the way this works the way you're
gonna make money here is that you know
delta is going to measure how much the
the premium
changes with a one dollar change in the
stock
right so if ttcf if the share price of
ttcf goes
up by one dollar the premiums
on this are gonna go up by
uh this times 100 okay because again
these are per share so you can multiply
these by 100
so 9.14 cents if ttf goes up
by one dollar the premium on this will
go up by nine dollars and fourteen cents
if ttcf goes down by one dollar
then this is gonna go down uh by nine
dollars and fourteen cents and
ultimately what that means
is that if ttcf goes down by one dollar
you're gonna make nine dollars and
fourteen cents right that would be added
to your total return
so in other words this is a bearish
strategy
uh you do want the price to go down
now you also have time working for you
right which is going to be theta so
theta remember is how much
uh how much value this contract
loses just from time decay every single
day
so in a day this uh
contract is going to lose 3.88
in premium which again will be yours so
you're going to be making 3.88 cents
because you're
selling this option uh and this contract
will go down
by that much and then vega
is how much this option goes up or down
by with a one percent
increase or decrease in implied
volatility so implied volatility goes up
by one percent here then the value of
or the value of this contract will go up
uh
by this times 100.
and then it's the opposite right if this
goes down by one percent
the value of this contract will go down
by this times 100.
uh so that's what vega is so vegan is
going to measure uh the change in
implied volatility one percent
theta is how much the you know how much
value this is going to lose every single
day
keep in mind theta does get bigger the
closer you get
to expiration date and then again delta
is you know how much this is going to
change with a
one dollar change in the share price of
course remember that you do add gamma to
delta after that happens
that's kind of a quick brief overview of
the greeks
and so ultimately right two things can
happen here
on expiration date either ttcf will be
above the strike price
or it won't be again if it's above the
strike price
you're going to be forced to sell your
100 shares at the strike price
remember you always keep the premium
though right if you sell this call right
now you're going to get 13
that's yours you keep it no matter what
now if ttcf uh on november 20th right at
the
end of the market day if it's below
22.50
then you also keep your 100 shares and
then you can just sell a call
for a different period right you can
continue to do that
again eventually you probably will be
forced to sell your 100 shares
at which that point you can continue the
whole wheel strategy and start selling
puts okay and so again uh since i chose
the 2250 i don't think
ttcf will be above 22.50 by november
20th
which means i'm gonna keep my 100 shares
and i'm also gonna make 250 dollars
from from having sold that call right
and we can actually take a look here at
the option
uh so here was the call option that i
sold on tattooed uh tattooed chef
2250 and as you can see my total return
now is 237 dollars right because when i
originally sold this i got
250 dollars right now it's only worth 13
which means i've made 237 and remember
you don't have to wait until expiration
date
for you know to to get out of this
contract you can always
exit a contract early so since i sold
this call to exit it i'd have to do the
exact same
opposite thing which would be buy that
exact same call
so same expiration date same strike
price again on this
on desktop robin hood already has it
here for you right so i'll just buy to
close it since i sold it
if i had bought it i would have sell to
open it
so i would buy to close you know and i
do one contract because that's how many
i have and then i could enter my limit
price
which you know says market value is 13
so you know i
i could try 15 and you know probably
close out of it at 15
and again i'd still have me i still
would have made 235 dollars
okay so that's how selling call options
works again it's important that you're
choosing stocks with good
upward trend again ideally with
dividends to collect some extra money on
the side while you're selling your
covered calls
and again guys the most important thing
make sure you're choosing strike prices
uh that you know you're not or that
you're comfortable potentially selling
your 100 shares of
you have no idea how many people reach
out to me telling me that they chose
such a low strike price and you know now
tattooed or whatever stock is
just skyrocketed past that price another
now they have to sell their 100 shares
at a loss okay so be careful with that
that's one of the biggest important
things to that so if you have any
questions about
anything that i just talked about feel
free to leave them in the comments
section below i do try to answer most
questions
remember to join the discord guys if any
of you plan on using robinhood in the
future feel free to use my referral link
which is also
in the description below if you sign up
using my referral link both you and i
will receive one free stock
which is basically free money for both
of us so let's help each other out guys
and as always hope you enjoyed the video
let me know what you guys think and i
will see you guys next time