1 00:00:00,160 --> 00:00:02,560 Speaker 1: Right now, there is a trading strategy that is so 2 00:00:02,800 --> 00:00:07,240 Speaker 1: dangerous it is virtually guaranteed to ruin the lives of 3 00:00:07,320 --> 00:00:11,160 Speaker 1: anybody who participates. But even worse, this trading strategy is 4 00:00:11,240 --> 00:00:15,800 Speaker 1: gaining in popularity so rapidly that the collateral damage this 5 00:00:15,840 --> 00:00:19,160 Speaker 1: thing causes when it does blow up will impact everybody. 6 00:00:19,200 --> 00:00:25,079 Speaker 1: And this strategy is called selling zero day till expiration options. Now, 7 00:00:25,120 --> 00:00:28,200 Speaker 1: if you've ever heard of the expression picking up nickels 8 00:00:28,280 --> 00:00:31,600 Speaker 1: in front of a steamroller, well, this strategy is like 9 00:00:31,680 --> 00:00:35,519 Speaker 1: picking up pennies in front of a nuclear bomb. And unfortunately, 10 00:00:36,040 --> 00:00:39,000 Speaker 1: I know a thing or two about getting hit by 11 00:00:39,040 --> 00:00:42,920 Speaker 1: a financial nuclear bomb because of trading options. Back in 12 00:00:42,960 --> 00:00:46,280 Speaker 1: twenty fifteen, when I was a stockbroker, i'd recently become 13 00:00:46,320 --> 00:00:49,239 Speaker 1: an options trader. For a time period that lasted probably 14 00:00:49,280 --> 00:00:52,320 Speaker 1: a couple of months, I was selling options like crazy. 15 00:00:52,400 --> 00:00:54,920 Speaker 1: At that time, they didn't have as many zero day 16 00:00:55,000 --> 00:00:58,560 Speaker 1: till expiration options as they do today, but at that 17 00:00:58,640 --> 00:01:01,000 Speaker 1: time they still had some that'd expire in a couple 18 00:01:01,000 --> 00:01:04,160 Speaker 1: of days or a week on the major market indices 19 00:01:04,280 --> 00:01:07,800 Speaker 1: or individual stocks. I would sell both calls and puts 20 00:01:07,880 --> 00:01:10,240 Speaker 1: on individual stocks and on the market as a whole. 21 00:01:10,280 --> 00:01:13,880 Speaker 1: It was almost guaranteed. I felt like I was printing money. 22 00:01:13,959 --> 00:01:16,360 Speaker 1: I felt rich, I felt like a god. I started 23 00:01:16,360 --> 00:01:18,840 Speaker 1: off with just a couple of thousand dollars in my 24 00:01:19,000 --> 00:01:21,840 Speaker 1: trading account, and on every trade I was making a 25 00:01:21,880 --> 00:01:24,440 Speaker 1: couple hundred to sometimes a couple of thousand dollars, to 26 00:01:24,480 --> 00:01:27,160 Speaker 1: the point where sometimes even on a single trade, I 27 00:01:27,200 --> 00:01:30,400 Speaker 1: would make more than I made in an entire month's salary. 28 00:01:30,480 --> 00:01:34,160 Speaker 1: I thought I was taking on zero risk option buyers 29 00:01:34,200 --> 00:01:36,600 Speaker 1: were paying me for I thought they were the suckers 30 00:01:36,640 --> 00:01:39,520 Speaker 1: because they were walking away empty handed, and my account 31 00:01:39,560 --> 00:01:42,479 Speaker 1: was going up and up and up. Just for some context, 32 00:01:42,600 --> 00:01:44,720 Speaker 1: at this time, this was still at the very beginning 33 00:01:44,760 --> 00:01:48,120 Speaker 1: of my career, so I was making forty five thousand 34 00:01:48,200 --> 00:01:50,480 Speaker 1: dollars a year at this point. But in just a 35 00:01:50,520 --> 00:01:52,680 Speaker 1: couple of months, I had traded my account up from 36 00:01:52,720 --> 00:01:55,880 Speaker 1: a few thousand dollars to about twenty five thousand dollars. 37 00:01:55,960 --> 00:01:58,520 Speaker 1: And to me at the time, twenty five thousand dollars 38 00:01:58,720 --> 00:02:01,440 Speaker 1: was a ton of money. In fact, it was literally everything. 39 00:02:01,520 --> 00:02:06,000 Speaker 1: And then disaster struck. Just like the house in a lottery, 40 00:02:06,120 --> 00:02:09,919 Speaker 1: eventually somebody gets the winning numbers and the house has 41 00:02:10,000 --> 00:02:12,680 Speaker 1: to pay out. But in this case, I was playing 42 00:02:12,720 --> 00:02:15,760 Speaker 1: the house without being able to set the odds myself. 43 00:02:15,800 --> 00:02:18,080 Speaker 1: So I had a few trades open that I thought 44 00:02:18,120 --> 00:02:21,079 Speaker 1: there was no way these things could go in the money. 45 00:02:21,160 --> 00:02:24,079 Speaker 1: I thought they should definitely expire worthless. But the market 46 00:02:24,080 --> 00:02:26,360 Speaker 1: made a move I did not think it could make, 47 00:02:26,440 --> 00:02:29,639 Speaker 1: and in one trade I lost everything. It completely wiped 48 00:02:29,639 --> 00:02:32,919 Speaker 1: out my entire account. Now again, to many people, twenty 49 00:02:32,960 --> 00:02:35,520 Speaker 1: five thousand dollars isn't a big deal, but think about 50 00:02:35,520 --> 00:02:38,680 Speaker 1: this in terms of percentages, because a one hundred percent 51 00:02:38,800 --> 00:02:41,919 Speaker 1: loss is devastating. I was taken out by it for weeks, 52 00:02:41,960 --> 00:02:45,320 Speaker 1: probably months. Actually, I got sick to my stomach every 53 00:02:45,400 --> 00:02:47,720 Speaker 1: time I thought about it. I had gone from feeling 54 00:02:47,760 --> 00:02:49,320 Speaker 1: like I was on top of the world, like I 55 00:02:49,360 --> 00:02:51,240 Speaker 1: was rich, I was making more money from trading than 56 00:02:51,280 --> 00:02:54,880 Speaker 1: I was making for my paychecks, to overnight feeling like 57 00:02:55,040 --> 00:02:56,919 Speaker 1: a fool, like I was never going to be able 58 00:02:56,919 --> 00:02:58,840 Speaker 1: to financially make it, like I was never going to 59 00:02:58,880 --> 00:03:01,240 Speaker 1: be able to recover from what I had just lost. 60 00:03:01,320 --> 00:03:04,239 Speaker 1: But it taught me a very valuable lesson about trading 61 00:03:04,280 --> 00:03:08,320 Speaker 1: and investing, mainly risk management, like there's a reason why 62 00:03:08,600 --> 00:03:11,200 Speaker 1: the best investors and best traders throughout all of human 63 00:03:11,280 --> 00:03:13,960 Speaker 1: history all have the exact same number one rule, and 64 00:03:14,000 --> 00:03:17,760 Speaker 1: it's never give yourself an opportunity to have a large loss. 65 00:03:17,800 --> 00:03:20,240 Speaker 1: Never expose yourself to something that could blow you up. 66 00:03:20,320 --> 00:03:23,560 Speaker 1: Risk management is always the number one key. It's really 67 00:03:23,600 --> 00:03:26,200 Speaker 1: the only thing that matters in investing. So no matter 68 00:03:26,280 --> 00:03:28,680 Speaker 1: how good the odds seem like they're in your favor, 69 00:03:28,919 --> 00:03:31,440 Speaker 1: if there's a point zero zero one percent chance that 70 00:03:31,480 --> 00:03:34,920 Speaker 1: you'll lose everything, it's a sucker's bet. Stay away. However, 71 00:03:35,240 --> 00:03:38,760 Speaker 1: many people today have not learned that lesson. Let's take 72 00:03:38,760 --> 00:03:42,280 Speaker 1: a look at the specific strategy that individuals are using 73 00:03:42,320 --> 00:03:47,120 Speaker 1: today with selling zero daytail expiration options. Very simply, it 74 00:03:47,280 --> 00:03:51,440 Speaker 1: means that you are selling options that expire on the 75 00:03:51,600 --> 00:03:54,720 Speaker 1: day that you open up the trade. Now, this alone 76 00:03:54,840 --> 00:03:57,480 Speaker 1: gives people a false sense of security because they think, hey, 77 00:03:57,560 --> 00:04:01,040 Speaker 1: there's only a couple of hours until this expires, so 78 00:04:01,080 --> 00:04:03,400 Speaker 1: there's much less of a chance that this could move 79 00:04:03,480 --> 00:04:05,720 Speaker 1: against me. There's just so little time. So here's the 80 00:04:05,720 --> 00:04:08,920 Speaker 1: basics of this strategy. I am going to sell a 81 00:04:09,000 --> 00:04:12,600 Speaker 1: put on something like SPY, SPX or one of the 82 00:04:12,640 --> 00:04:16,000 Speaker 1: Magnificent Seven. Magnificent seven are the big stocks that are 83 00:04:16,000 --> 00:04:20,640 Speaker 1: responsible for all of the stock markets outperformance recently, which 84 00:04:20,680 --> 00:04:25,120 Speaker 1: is Google, Amazon, Apple, Meta, Microsoft, Nvidia, and Tesla. We're 85 00:04:25,120 --> 00:04:26,760 Speaker 1: going to focus on in video, which is up a 86 00:04:26,839 --> 00:04:29,800 Speaker 1: staggering two hundred and thirty five percent last year, because 87 00:04:29,839 --> 00:04:32,400 Speaker 1: this is where most of this trading is taking place, 88 00:04:32,560 --> 00:04:36,120 Speaker 1: and zero day options trading is one of the biggest 89 00:04:36,160 --> 00:04:39,760 Speaker 1: reasons why this is actually taking place. Here's how this works. 90 00:04:39,880 --> 00:04:44,320 Speaker 1: Everybody is selling puts on these stocks. If I sell 91 00:04:44,400 --> 00:04:48,200 Speaker 1: a put to somebody, I have the obligation that I 92 00:04:48,240 --> 00:04:51,159 Speaker 1: may have to buy that stock from the put buyer 93 00:04:51,600 --> 00:04:55,080 Speaker 1: at any time between now an expiration. Usually that'll only happen, though, 94 00:04:55,160 --> 00:04:58,800 Speaker 1: if the stock price drops below the price specified in 95 00:04:58,800 --> 00:05:01,120 Speaker 1: the put contract, which is called the strike price. So 96 00:05:01,200 --> 00:05:03,640 Speaker 1: let's look at a concrete example. As of the day 97 00:05:03,640 --> 00:05:06,480 Speaker 1: of this recording, in Vidia closed at six hundred and 98 00:05:06,520 --> 00:05:09,680 Speaker 1: ten dollars per share. So maybe when the day opened, 99 00:05:09,800 --> 00:05:13,359 Speaker 1: I would have sold a put contract with a strike 100 00:05:13,400 --> 00:05:16,520 Speaker 1: price of six hundred five dollars per share. Now, at 101 00:05:16,560 --> 00:05:18,960 Speaker 1: some point in the day, I very easily could have 102 00:05:19,240 --> 00:05:22,240 Speaker 1: sold this put contract for about a dollar fifty. Now 103 00:05:22,240 --> 00:05:25,280 Speaker 1: you're probably thinking a dollar fifty that's nothing. But with options, 104 00:05:25,440 --> 00:05:30,000 Speaker 1: every contract represents one hundred shares, so that one dollar 105 00:05:30,040 --> 00:05:32,839 Speaker 1: and fifty cents is the per share price. So we 106 00:05:32,920 --> 00:05:35,320 Speaker 1: multiply that by one hundred to get one hundred and 107 00:05:35,320 --> 00:05:38,440 Speaker 1: fifty dollars. And I'm probably gonna sell ten contracts, so 108 00:05:38,760 --> 00:05:41,880 Speaker 1: it'll be one thousand, five hundred dollars. So the market 109 00:05:41,880 --> 00:05:44,760 Speaker 1: opens around six ten, it goes up and down, but 110 00:05:44,839 --> 00:05:47,719 Speaker 1: it closes around six to ten as well. I sold 111 00:05:47,720 --> 00:05:51,000 Speaker 1: my puts at six oh five, which means I am safe. 112 00:05:51,040 --> 00:05:54,040 Speaker 1: Within just a few hours, the market closes in Vidia 113 00:05:54,160 --> 00:05:58,000 Speaker 1: closes at six ten. My put option at six zho 114 00:05:58,080 --> 00:06:01,919 Speaker 1: five expires worthless, and I walk away the lucky seller, 115 00:06:01,960 --> 00:06:05,359 Speaker 1: getting to keep the entire one five hundred dollars that 116 00:06:05,440 --> 00:06:08,279 Speaker 1: I collected by taking on the risk of selling that putt. 117 00:06:08,320 --> 00:06:12,360 Speaker 1: And for a stock that only goes up, this seems 118 00:06:12,520 --> 00:06:16,159 Speaker 1: like a risk freeway to print money, right, Okay, So 119 00:06:16,680 --> 00:06:20,679 Speaker 1: here's the problem with this. Everybody's doing this trade right now. However, 120 00:06:21,080 --> 00:06:25,440 Speaker 1: we know that any time somebody sells something, that means 121 00:06:25,480 --> 00:06:28,840 Speaker 1: somebody else is buying it. Right For every seller, you've 122 00:06:28,880 --> 00:06:31,720 Speaker 1: got to have a buyer. So if everybody is selling 123 00:06:31,760 --> 00:06:35,200 Speaker 1: these puts, who is buying that? While the answer is 124 00:06:35,440 --> 00:06:39,080 Speaker 1: market makers. You see, a market maker's job is to 125 00:06:39,800 --> 00:06:42,600 Speaker 1: make the market in the security in which they are 126 00:06:42,640 --> 00:06:45,440 Speaker 1: a market maker, which means they are responsible for making 127 00:06:45,520 --> 00:06:49,880 Speaker 1: sure that at some price, if somebody wants to buy 128 00:06:49,960 --> 00:06:52,520 Speaker 1: or sell something, that they will take the other side 129 00:06:52,560 --> 00:06:55,440 Speaker 1: of that trade. But here's the thing. Market makers do 130 00:06:55,600 --> 00:06:59,599 Speaker 1: not make money on market movements. They're never gonna just 131 00:06:59,680 --> 00:07:02,080 Speaker 1: take one side of the trade and hope it works 132 00:07:02,080 --> 00:07:05,200 Speaker 1: out in their favor. They will always stay market neutral. 133 00:07:05,200 --> 00:07:08,400 Speaker 1: They'll always be one hundred percent hedged because they make 134 00:07:08,480 --> 00:07:12,000 Speaker 1: their money on the spread between the bid and the 135 00:07:12,200 --> 00:07:15,440 Speaker 1: ask on anything. They're basically operating like a middleman. Like 136 00:07:15,480 --> 00:07:18,320 Speaker 1: when you go to Walmart and you buy something, you're 137 00:07:18,360 --> 00:07:21,119 Speaker 1: paying a higher price than what the whole saler sold 138 00:07:21,120 --> 00:07:24,200 Speaker 1: it to Walmart for. Walmart is taking the spread between 139 00:07:24,280 --> 00:07:26,880 Speaker 1: the whole saler and you, the retail buyer, in the 140 00:07:26,880 --> 00:07:29,520 Speaker 1: same way the market maker is taking the spread between 141 00:07:29,520 --> 00:07:32,720 Speaker 1: the buyers and the sellers of anything. So that's their 142 00:07:32,760 --> 00:07:35,400 Speaker 1: whole business is just to make money on the spread. 143 00:07:35,680 --> 00:07:39,160 Speaker 1: They will not maintain a book that will profit or 144 00:07:39,240 --> 00:07:41,680 Speaker 1: loss based on market movement. They will always be one 145 00:07:41,720 --> 00:07:44,320 Speaker 1: hundred percent hedged. So this is where it gets crazy. 146 00:07:44,720 --> 00:07:48,000 Speaker 1: How do you hedge when you've bought a put. We'll 147 00:07:48,040 --> 00:07:50,800 Speaker 1: consider the profit and lost scenarios of being on the 148 00:07:50,840 --> 00:07:53,600 Speaker 1: buying side of a put. If you buy a put, 149 00:07:53,920 --> 00:07:57,040 Speaker 1: you will profit if the stock goes down, and you 150 00:07:57,040 --> 00:07:59,720 Speaker 1: will lose if the stock goes up. So in order 151 00:07:59,760 --> 00:08:03,600 Speaker 1: to hedge that, you need something that will act completely opposite. 152 00:08:03,800 --> 00:08:06,320 Speaker 1: If the put loses money when the stock goes up, 153 00:08:06,400 --> 00:08:08,679 Speaker 1: you need something that will make money when the stock 154 00:08:08,720 --> 00:08:11,080 Speaker 1: goes up. And if the put will make money when 155 00:08:11,080 --> 00:08:13,400 Speaker 1: the stock goes down, you need something that will lose 156 00:08:13,440 --> 00:08:15,440 Speaker 1: money when the stock goes down. That way, no matter 157 00:08:15,480 --> 00:08:18,680 Speaker 1: what happens, you're perfectly hedged. So the question is what 158 00:08:18,760 --> 00:08:22,040 Speaker 1: type of instrument can you use to make money when 159 00:08:22,080 --> 00:08:24,160 Speaker 1: the stock goes up and lose money when the stock 160 00:08:24,240 --> 00:08:27,720 Speaker 1: goes down. It's very simple, just buy the shares. And 161 00:08:27,760 --> 00:08:30,920 Speaker 1: that's exactly what market makers are forced to do. When 162 00:08:31,040 --> 00:08:34,560 Speaker 1: everyone starts selling puts. They have to take the other 163 00:08:34,640 --> 00:08:37,400 Speaker 1: side of that trade. Because there's nobody else out there 164 00:08:37,559 --> 00:08:41,040 Speaker 1: who's buying those puts. They have to buy the puts themselves. 165 00:08:41,240 --> 00:08:43,640 Speaker 1: In order to hedge, they have to turn around and 166 00:08:43,800 --> 00:08:47,280 Speaker 1: buy the shares of the stock. Itself. That way, they 167 00:08:47,320 --> 00:08:51,640 Speaker 1: stay market neutral and maintain a market in those options. 168 00:08:51,760 --> 00:08:55,600 Speaker 1: So put those pieces together. This means that as the 169 00:08:55,640 --> 00:08:58,640 Speaker 1: stock goes up and more and more people pile into 170 00:08:58,960 --> 00:09:02,560 Speaker 1: selling puts, that causes market makers to have to turn 171 00:09:02,600 --> 00:09:06,000 Speaker 1: around and buy shares, which drives the price up even more, 172 00:09:06,040 --> 00:09:09,040 Speaker 1: reinforcing the trading behavior. But that's not even the worst part. 173 00:09:09,160 --> 00:09:13,160 Speaker 1: These individuals who are selling puts are not just stopping there. 174 00:09:13,400 --> 00:09:16,679 Speaker 1: They're taking the thousand dollars, the two thousand dollars they 175 00:09:16,679 --> 00:09:19,640 Speaker 1: collect from selling the puts, They're turning around and they're 176 00:09:19,760 --> 00:09:23,520 Speaker 1: using that to buy calls. So buying a call and 177 00:09:23,679 --> 00:09:27,360 Speaker 1: selling a put are both two different ways to make 178 00:09:27,440 --> 00:09:29,800 Speaker 1: money on the stock going up, and they're both two 179 00:09:29,800 --> 00:09:32,200 Speaker 1: different ways to lose if the stock goes down. So 180 00:09:32,240 --> 00:09:34,920 Speaker 1: people are selling a put taking the cash from that 181 00:09:35,240 --> 00:09:38,320 Speaker 1: to buy a call. So now you have no money down. 182 00:09:38,480 --> 00:09:41,559 Speaker 1: You financed your purchase of a call to make even 183 00:09:41,679 --> 00:09:44,199 Speaker 1: more money. As the stock goes up, and as more 184 00:09:44,240 --> 00:09:47,160 Speaker 1: and more people buy calls, who are they buying those 185 00:09:47,200 --> 00:09:50,920 Speaker 1: calls from market makers? Market makers have to sell the calls, 186 00:09:51,040 --> 00:09:53,960 Speaker 1: which means they have to hedge those short calls. And 187 00:09:54,040 --> 00:09:56,280 Speaker 1: how do you do that the same way you hedge 188 00:09:56,320 --> 00:09:59,400 Speaker 1: a long put, which is buying the shares. So both 189 00:09:59,520 --> 00:10:03,560 Speaker 1: of these trading strategies that feed in on themselves individuals 190 00:10:03,600 --> 00:10:06,800 Speaker 1: selling puts, collecting cash and then buying calls are both 191 00:10:06,960 --> 00:10:10,000 Speaker 1: forcing market makers to turn around and have to hedge 192 00:10:10,080 --> 00:10:12,760 Speaker 1: their books by buying the shares, which is pushing the 193 00:10:12,800 --> 00:10:15,320 Speaker 1: stock price up to crazy heights. Now, by the way, 194 00:10:15,559 --> 00:10:18,240 Speaker 1: one of the things that I teach members of Harisey 195 00:10:18,320 --> 00:10:22,319 Speaker 1: Financial University how to do is how to properly use options. 196 00:10:22,559 --> 00:10:26,079 Speaker 1: Everything we're discussing in this video is literally the exact opposite, 197 00:10:26,080 --> 00:10:29,040 Speaker 1: most dangerous way to use options. In reality, there are 198 00:10:29,080 --> 00:10:32,760 Speaker 1: some very very simple, very low risk strategies that you 199 00:10:32,840 --> 00:10:36,560 Speaker 1: can implement using options to hedge your portfolio so you 200 00:10:36,640 --> 00:10:40,080 Speaker 1: limit your downside risk if the market crashes your portfolio doesn't. 201 00:10:40,120 --> 00:10:43,200 Speaker 1: You can also use options to produce safe and steady 202 00:10:43,240 --> 00:10:46,840 Speaker 1: income on a stock portfolio, even if those stocks are 203 00:10:46,840 --> 00:10:49,160 Speaker 1: not dived into paying stocks. You can also play small 204 00:10:49,200 --> 00:10:53,400 Speaker 1: bets that have asymmetric upside potential to where if it 205 00:10:53,440 --> 00:10:56,320 Speaker 1: doesn't work out in your favor, you maximum could lose 206 00:10:56,320 --> 00:10:58,600 Speaker 1: a very small amount, but if it does work out 207 00:10:58,600 --> 00:11:00,360 Speaker 1: the way you think it is, you could make a lot, 208 00:11:00,360 --> 00:11:02,800 Speaker 1: you know, ten one hundred one thousand times what you 209 00:11:02,920 --> 00:11:05,040 Speaker 1: paid for the option. And beyond that, I teach you 210 00:11:05,120 --> 00:11:08,760 Speaker 1: how to use all these different strategies inside how to 211 00:11:08,880 --> 00:11:12,040 Speaker 1: fit it inside of your overall portfolio allocation strategy. On 212 00:11:12,080 --> 00:11:15,360 Speaker 1: top of that, members get access to live coaching calls, 213 00:11:15,440 --> 00:11:18,319 Speaker 1: the community, and tons of other training material. If you 214 00:11:18,360 --> 00:11:21,000 Speaker 1: join now, you can get thirty percent off your membership 215 00:11:21,040 --> 00:11:23,800 Speaker 1: for life. You just need to use code YouTube thirty 216 00:11:24,120 --> 00:11:27,680 Speaker 1: link is below, and there's limited slots available, so don't wait. 217 00:11:27,720 --> 00:11:31,160 Speaker 1: So traders right now are selling puts, using that cash 218 00:11:31,240 --> 00:11:34,320 Speaker 1: to buy calls, putting zero money down, profiting on the 219 00:11:34,360 --> 00:11:37,360 Speaker 1: stock going up, and zero risk right because there's no 220 00:11:37,600 --> 00:11:40,440 Speaker 1: chance this stock actually goes down. Well before I show 221 00:11:40,440 --> 00:11:43,480 Speaker 1: you how badly this could blow up, and how terrible 222 00:11:43,520 --> 00:11:46,240 Speaker 1: the collateral damages that this thing could cause when it 223 00:11:46,280 --> 00:11:50,600 Speaker 1: does blow up, consider how rapidly this trading strategy is 224 00:11:50,640 --> 00:11:53,680 Speaker 1: gaining in popularity. Number One banks on Wall Street have 225 00:11:53,760 --> 00:11:56,960 Speaker 1: their quants warming up to using these themselves, and they 226 00:11:57,000 --> 00:12:00,000 Speaker 1: cite the same fallacy that for something with a show 227 00:12:00,040 --> 00:12:04,199 Speaker 1: heelf life shorter than twenty four hours, it minimizes risk 228 00:12:04,520 --> 00:12:08,200 Speaker 1: of being caught out by unfavorable overnight market moves, except 229 00:12:08,200 --> 00:12:11,760 Speaker 1: it does nothing about unfavorable intra day market moves. On 230 00:12:11,840 --> 00:12:15,160 Speaker 1: top of that, we have a giant list of right 231 00:12:15,240 --> 00:12:19,800 Speaker 1: now a dozen or so ETFs that are all designed 232 00:12:20,080 --> 00:12:23,680 Speaker 1: to use these exotic options trading strategies in a way 233 00:12:23,960 --> 00:12:26,600 Speaker 1: that will catch most people off guard. Taking a look 234 00:12:26,640 --> 00:12:29,880 Speaker 1: at the investment strategy of just one of these funds, 235 00:12:29,960 --> 00:12:32,520 Speaker 1: you can see this is exactly what they do. They 236 00:12:32,679 --> 00:12:36,200 Speaker 1: sell call options and they sell put options. This one 237 00:12:36,240 --> 00:12:39,280 Speaker 1: specifically does it on the S and P five hundred index, 238 00:12:39,440 --> 00:12:43,240 Speaker 1: and it is a daily strategy for these zero day options. 239 00:12:43,400 --> 00:12:46,360 Speaker 1: And just to be safe, the fund will make sure 240 00:12:46,600 --> 00:12:49,200 Speaker 1: that the options will have a notional value of no 241 00:12:49,280 --> 00:12:52,280 Speaker 1: more than two hundred percent of the fund's net assets, 242 00:12:52,360 --> 00:12:55,199 Speaker 1: which means that in the worst case scenario, the most 243 00:12:55,200 --> 00:12:57,640 Speaker 1: they could lose is double the amount of money they 244 00:12:57,640 --> 00:13:01,760 Speaker 1: have in the entire fund. Well, this means that this 245 00:13:01,920 --> 00:13:04,760 Speaker 1: exotic options trading strategy, which for you to get approved 246 00:13:04,800 --> 00:13:07,480 Speaker 1: to trade options, you usually have to demonstrate that you 247 00:13:07,600 --> 00:13:10,920 Speaker 1: have some sort of experience or knowledge with how options work. 248 00:13:11,040 --> 00:13:14,200 Speaker 1: But these ETFs are going to be made available to 249 00:13:14,480 --> 00:13:19,800 Speaker 1: unsophisticated investors who will not be able to understand these strategies, 250 00:13:19,880 --> 00:13:22,520 Speaker 1: let alone be able to use them in their own accounts, 251 00:13:22,559 --> 00:13:25,400 Speaker 1: but they can buy these ETFs that do it for them, 252 00:13:25,440 --> 00:13:28,520 Speaker 1: which will contribute more and more to these gamma squeezes 253 00:13:28,520 --> 00:13:33,040 Speaker 1: happening all across the market. Now. Usually big money in markets. 254 00:13:33,080 --> 00:13:36,160 Speaker 1: Whenever there are trends like this, big money gets in 255 00:13:36,280 --> 00:13:40,720 Speaker 1: on the trend first and then exits by unloading on retail. 256 00:13:41,120 --> 00:13:43,559 Speaker 1: This happens all the time, but we saw this most 257 00:13:43,600 --> 00:13:47,080 Speaker 1: famously the financial crisis, when banks loaded up on mortgage 258 00:13:47,120 --> 00:13:51,600 Speaker 1: backed securities and then unloaded them on unsuspecting retail investors 259 00:13:51,640 --> 00:13:54,920 Speaker 1: once they knew they were worthless. So anytime new exotic 260 00:13:55,000 --> 00:13:59,600 Speaker 1: strategies start rolling off the factory lines and ETFs just 261 00:13:59,640 --> 00:14:02,719 Speaker 1: popped up out of nowhere, all with the same strategy, 262 00:14:02,800 --> 00:14:06,480 Speaker 1: I get very suspicious because this is exactly how this 263 00:14:06,559 --> 00:14:10,280 Speaker 1: thing blows up. Once you have enough retail money coming in, 264 00:14:10,480 --> 00:14:13,360 Speaker 1: it allows the big boys to get out and exit 265 00:14:13,400 --> 00:14:17,160 Speaker 1: the trade. And as soon as somebody starts exiting the trade, 266 00:14:17,559 --> 00:14:20,640 Speaker 1: now you have a buyer of those puts, so the 267 00:14:20,760 --> 00:14:23,080 Speaker 1: market maker doesn't have to take the other side of 268 00:14:23,080 --> 00:14:25,240 Speaker 1: that trade anymore. Just in case that doesn't make sense. 269 00:14:25,280 --> 00:14:27,880 Speaker 1: Let's look at this from the individual's perspective again. Let's 270 00:14:27,920 --> 00:14:30,640 Speaker 1: say I'm doing this trade today with in nvidio opening 271 00:14:30,720 --> 00:14:33,240 Speaker 1: and closing around six ' ten, and I have sold 272 00:14:33,240 --> 00:14:36,320 Speaker 1: my puts at six oh five. Now, obviously I'm just 273 00:14:36,400 --> 00:14:38,800 Speaker 1: a young dumb trader. I don't have that much money 274 00:14:38,800 --> 00:14:40,600 Speaker 1: in my account. I'm just doing this on my phone 275 00:14:40,640 --> 00:14:42,400 Speaker 1: while I'm not my day job. And so let's say 276 00:14:42,400 --> 00:14:44,480 Speaker 1: I only have twenty thousand dollars in my account. I 277 00:14:44,520 --> 00:14:47,200 Speaker 1: was expecting that day to have twenty one thousand dollars. 278 00:14:47,240 --> 00:14:50,000 Speaker 1: But now let's say even just in the middle of 279 00:14:50,040 --> 00:14:53,080 Speaker 1: the day, in Vidia drops just a little bit more 280 00:14:53,240 --> 00:14:57,360 Speaker 1: to five ninety. Well, now I lost fifteen thousand dollars. 281 00:14:57,560 --> 00:15:00,120 Speaker 1: Or let's say instead of me just selling ten ten 282 00:15:00,480 --> 00:15:03,280 Speaker 1: contracts because I wanted to make thirteen hundred bucks, let's 283 00:15:03,280 --> 00:15:06,600 Speaker 1: say I had sold twenty contracts because I wanted to 284 00:15:06,640 --> 00:15:10,680 Speaker 1: make twenty six hundred bucks. Well, now, if Nvidia starts dropping, 285 00:15:10,840 --> 00:15:13,640 Speaker 1: it could very quickly wipe out the entire value of 286 00:15:13,640 --> 00:15:16,240 Speaker 1: my account and get to the point where not only 287 00:15:16,360 --> 00:15:20,120 Speaker 1: is my money gone, but I actually owe the stockbroker 288 00:15:20,280 --> 00:15:22,280 Speaker 1: more money than I have in my account. That's right. 289 00:15:22,400 --> 00:15:25,160 Speaker 1: My account balance could go negative here, because if I 290 00:15:25,280 --> 00:15:27,920 Speaker 1: start off with a twenty thousand dollars account and I'm 291 00:15:27,960 --> 00:15:30,480 Speaker 1: expecting to make a grand or two grand on this trade, 292 00:15:30,760 --> 00:15:33,480 Speaker 1: but suddenly it moves against me and I have to 293 00:15:33,520 --> 00:15:36,920 Speaker 1: close out, and it's gonna cost me twenty thirty forty 294 00:15:37,000 --> 00:15:39,440 Speaker 1: thousand dollars to close out the trade. I don't have 295 00:15:39,520 --> 00:15:42,160 Speaker 1: that money anymore. And while that situation can happen, and 296 00:15:42,160 --> 00:15:44,320 Speaker 1: it's devastating, I've seen it. When I was a broker. 297 00:15:44,360 --> 00:15:46,680 Speaker 1: I had to talk to clients who had millions of 298 00:15:46,720 --> 00:15:49,360 Speaker 1: dollars in their account a few days before they got 299 00:15:49,400 --> 00:15:52,840 Speaker 1: themselves into some risky trading positions. It blew up overnight. 300 00:15:53,040 --> 00:15:55,040 Speaker 1: They wake up and now they have a couple hundred 301 00:15:55,080 --> 00:15:58,160 Speaker 1: thousand dollars due and nothing left in their account. I've 302 00:15:58,200 --> 00:16:01,560 Speaker 1: seen it before. It ruins live. It's possible, But what's 303 00:16:01,720 --> 00:16:04,760 Speaker 1: more likely is that your broker will catch it right 304 00:16:04,800 --> 00:16:07,360 Speaker 1: before it happens, because it won't be moving so fast 305 00:16:07,360 --> 00:16:09,680 Speaker 1: that they can't catch it, and they'll just close you out, 306 00:16:09,720 --> 00:16:11,720 Speaker 1: which means that instead of letting you get to the 307 00:16:11,720 --> 00:16:14,040 Speaker 1: point where you're gonna owe them money that they might 308 00:16:14,080 --> 00:16:16,120 Speaker 1: not be able to collect from you. They're gonna go 309 00:16:16,160 --> 00:16:18,200 Speaker 1: into your account and they can do this and they'll 310 00:16:18,240 --> 00:16:20,960 Speaker 1: just sell all your positions so that you're wiped out clean, 311 00:16:21,160 --> 00:16:23,760 Speaker 1: zero dollars left over for you, but you don't owe 312 00:16:23,800 --> 00:16:26,360 Speaker 1: them anything. Now, this is merciful because you don't have 313 00:16:26,440 --> 00:16:28,440 Speaker 1: to end up with a big bill due to them 314 00:16:28,600 --> 00:16:31,320 Speaker 1: with no money to pay. But it also sucks because 315 00:16:31,360 --> 00:16:34,280 Speaker 1: what happens if Nvidia pops that day after they sell 316 00:16:34,320 --> 00:16:36,600 Speaker 1: you out sucks to suck. You should have managed your 317 00:16:36,680 --> 00:16:39,400 Speaker 1: risk better. But this is where the real problems actually 318 00:16:39,400 --> 00:16:43,200 Speaker 1: start unfolding in the broader market, because a small intra 319 00:16:43,320 --> 00:16:46,360 Speaker 1: day move can be enough to force me to have 320 00:16:46,440 --> 00:16:48,480 Speaker 1: to close out my position or my broker do it 321 00:16:48,480 --> 00:16:52,240 Speaker 1: for me. And when I close out a sold put, 322 00:16:52,480 --> 00:16:54,800 Speaker 1: that means I have to buy the put to close 323 00:16:54,800 --> 00:16:58,280 Speaker 1: it out. And when I buy puts now that's more 324 00:16:58,360 --> 00:17:01,320 Speaker 1: puts that the market maker doesn't have to buy. Or 325 00:17:01,360 --> 00:17:04,160 Speaker 1: in other words, that means they have shares that they 326 00:17:04,200 --> 00:17:07,679 Speaker 1: were using to hedge their book that they no longer need, 327 00:17:07,880 --> 00:17:10,760 Speaker 1: so they have to sell those shares so they maintain 328 00:17:10,800 --> 00:17:13,720 Speaker 1: a market neutral book, which means this strategy pushing the 329 00:17:13,760 --> 00:17:16,639 Speaker 1: shares higher and hire suddenly starts to reverse as the 330 00:17:16,680 --> 00:17:19,399 Speaker 1: market makers get to sell. And when the market makers 331 00:17:19,440 --> 00:17:22,280 Speaker 1: sell and the stock goes down, it forced me out, 332 00:17:22,320 --> 00:17:25,520 Speaker 1: which means the next little move down might force somebody 333 00:17:25,560 --> 00:17:28,160 Speaker 1: else out down the street. And when they get forced out, 334 00:17:28,400 --> 00:17:30,800 Speaker 1: they buy to close their puts, which forces the market 335 00:17:30,840 --> 00:17:32,960 Speaker 1: maker to sell the shares, which pushes the shares down 336 00:17:32,960 --> 00:17:35,520 Speaker 1: even more, and we see a complete unwind of the 337 00:17:35,640 --> 00:17:37,800 Speaker 1: entire thing that drove this thing higher to begin with. 338 00:17:37,920 --> 00:17:40,520 Speaker 1: And this is how you get a flash crash after 339 00:17:40,680 --> 00:17:43,440 Speaker 1: a massive run up in the market. It happens all 340 00:17:43,480 --> 00:17:45,880 Speaker 1: the time. You don't know how long it takes for 341 00:17:46,000 --> 00:17:48,879 Speaker 1: that pressure to build, but eventually it can unwind in 342 00:17:48,960 --> 00:17:52,119 Speaker 1: a flash, and not only will it ruin the lives 343 00:17:52,160 --> 00:17:54,800 Speaker 1: of the people who are engaging in this trading strategy, 344 00:17:54,960 --> 00:17:57,600 Speaker 1: but it can also push the market into a new 345 00:17:57,640 --> 00:18:00,600 Speaker 1: bear market, which hurts people who just I have regular 346 00:18:00,640 --> 00:18:04,040 Speaker 1: investing portfolios. Now I'm hoping you will take my word 347 00:18:04,119 --> 00:18:07,000 Speaker 1: for this and you won't need to experience yourself, because 348 00:18:07,040 --> 00:18:10,960 Speaker 1: it is devastating, like I said before, having sleepless nights 349 00:18:11,000 --> 00:18:12,679 Speaker 1: because you don't know how you're gonna be able to 350 00:18:12,720 --> 00:18:16,359 Speaker 1: recover financially from a big mistake thinking about all the 351 00:18:16,400 --> 00:18:18,600 Speaker 1: things you could have done with that money instead of 352 00:18:18,640 --> 00:18:21,160 Speaker 1: just watching it evaporate in front of your eyes. It's 353 00:18:21,280 --> 00:18:25,080 Speaker 1: not fun. So three takeaways. Number one, if you are 354 00:18:25,119 --> 00:18:29,160 Speaker 1: currently engaging in a trading strategy like this that wins 355 00:18:29,440 --> 00:18:31,840 Speaker 1: ninety nine times out of one hundred, and on the 356 00:18:31,880 --> 00:18:36,240 Speaker 1: one unlikely off chance that it doesn't go in your favor, 357 00:18:36,359 --> 00:18:40,320 Speaker 1: it could blow you up. Just stop now, because eventually 358 00:18:40,359 --> 00:18:43,280 Speaker 1: it will ruin you. Get out while you're ahead. Number two, 359 00:18:43,680 --> 00:18:46,639 Speaker 1: if you've already been caught on the wrong side of 360 00:18:46,640 --> 00:18:49,159 Speaker 1: one of these trades. I know how it feels. You 361 00:18:49,240 --> 00:18:51,480 Speaker 1: feel like your life is over. You feel like it's ruined. 362 00:18:51,480 --> 00:18:53,520 Speaker 1: You feel like you'll never be able to recover. Trust me, 363 00:18:53,840 --> 00:18:56,080 Speaker 1: you will. You can absolutely come back. It'll be very 364 00:18:56,119 --> 00:18:58,600 Speaker 1: difficult and it'll probably take you a long time. But 365 00:18:58,600 --> 00:19:01,600 Speaker 1: if you decide to come back, you will take the 366 00:19:01,720 --> 00:19:05,440 Speaker 1: lessons that you learned. Consider it a very expensive college 367 00:19:05,480 --> 00:19:08,000 Speaker 1: course if you will, and start doing things the right way. 368 00:19:08,040 --> 00:19:11,480 Speaker 1: And number three, if you want to learn the strategies 369 00:19:11,480 --> 00:19:15,280 Speaker 1: that the professionals use to manage their risk effectively, and 370 00:19:15,320 --> 00:19:17,320 Speaker 1: you don't want to have to learn these lessons by 371 00:19:17,359 --> 00:19:20,320 Speaker 1: losing tens or hundreds of thousands of dollars yourself, and 372 00:19:20,359 --> 00:19:22,280 Speaker 1: you want to learn how to beat the averages over 373 00:19:22,280 --> 00:19:25,280 Speaker 1: time because remember, like a bell curve, the average performance 374 00:19:25,320 --> 00:19:28,360 Speaker 1: exists because a lot of people underperform and a lot 375 00:19:28,359 --> 00:19:30,879 Speaker 1: of people outperform, So you want to be on the 376 00:19:30,960 --> 00:19:33,199 Speaker 1: side that outperforms. Then it's time to sign up for 377 00:19:33,240 --> 00:19:36,320 Speaker 1: Haresy Financial University because that's exactly what I teach members 378 00:19:36,320 --> 00:19:38,720 Speaker 1: how to do. Remember to use code YouTube thirty that'll 379 00:19:38,720 --> 00:19:41,639 Speaker 1: give you thirty percent off of your membership price for life, 380 00:19:41,680 --> 00:19:43,600 Speaker 1: and there are limited slots available, so sign up with 381 00:19:43,600 --> 00:19:45,560 Speaker 1: the link below before it's too late. Thanks so much, Faunching, 382 00:19:45,560 --> 00:19:46,120 Speaker 1: Have a great day.