What is Gamma in Options trading?

GAMMA is a crucial concept in options trading that often gets overlooked

It measures the rate of change in an option's DELTA in relation to changes in the stock’s price

Let’s dive into it

A brief thread 🧵 👇👇👇 Quick note about Gamma in Options trading:

✅ Selling options = gamma negative

✅ Buying options = gamma positive

For every $1 move in stock price the DELTA moves by the amount of GAMMA

In simple terms:

✅ Gamma measures how quickly delta changes

What is Delta in Options Trading?

In the context of options Delta is a risk metric

It measures the sensitivity of an option’s price to changes in the price of the stock/ETF

A brief 🧵 👇👇 Delta measures the amount an option’s price will change with a $1 move in the underlying stock

The value of a delta can range from -1 to +1

Example:

If a call option had a delta of 0.50 (50 delta) & the underlying stock went up by $1 the option price increases by 50c

If I had $10,000 and I wanted to just passively sell options and earn income?

Here is how I would do it 👇👇👇

$SOXL $HOOD $PLTR $SPY $QQQ

This would generate $245 -$295 in monthly income

That’s more than 30% annual return when compounded

👇👇👇 The idea is to sell these very passively

I wouldn’t need to check these every day

I wouldn’t need to monitor these every day

Very passive trades

No weekly or bi-weekly trades

Monthly trades that are CONSERVATIVE

Rinse and Repeat

If I had $100,000 and I wanted to keep my trading strategy really simple with not much time and effort?

I would pick 3 HIGH quality stocks

$AMZN $NVDA $TSLA

This would generate a 32% annual return plus potential capital gains

Here would be my system: With stocks like $AMZN $TSLA $NVDA that have:

✅ established history

✅ great products

✅ potential future growth

✅ Lots of Cash

You know they are great companies that won’t tank your portfolio

Here is how I would do it:

I make more than $3,000 per week by Selling Options

Here is how I do it 👇👇

🧵 The two primary strategies I use:

✅ Selling Covered Calls

✅ Selling Cash Secured Puts

🚨 Strategy Spotlight: Bear Call Spread 🚨

It's easy to make money when we are in a Bull Market

But how do you make money in a Bear Market?

Here's ONE way to do it:

A Bear Call Spread

A thread 🧵 that shows how to set it up with an example

👇👇👇 What is a Bear Call Spread?

- It's an options strategy designed to capitalize on a decline or neutral movement in the underlying stock

- It's also called a Call Credit Spread

What is Delta in Options Trading?

In the context of options Delta is a risk metric

It measures the sensitivity of an option’s price to changes in the price of the stock/ETF

A brief 🧵 👇👇 Delta measures the amount an option’s price will change with a $1 move in the underlying stock

The value of a delta can range from -1 to +1

Example:

If a call option had a delta of 0.50 (50 delta) & the underlying stock went up by $1 the option price increases by 50c

I love investing in the BIG Tech and small Tech

So you won't be surprised that I love to trade $SOXL and $TQQQ

And invest in $QQQ

I made 18% in less than 2 months trading

Here are my rules to trade these

A thread 🧵 👇 $SOXL is the 3X ETF for the semiconductors

$TQQQ is the 3X ETF for the Tech heavy Nasdaq (QQQ)

$2701 in locked profit using $14,988 of average collateral using $SOXL and $TQQQ

Here are some rules that I follow trading these tickets

I have made an average of $2,954 each week selling options in 2024

I have rules to my system

Here are my 6 rules: It’s no joke I make between $2,500 and $4,000 a week selling options

Let’s get into the rules that frame my repeatable system

Option Selling helps me generate $1000s per week in cash flow

My sweet spot for selling options is Delta 0.15 to 0.25

Let's talk about the benefits of selling options with a delta of 0.15 to 0.25

👇👇👇 What’s delta?

Delta measures the sensitivity of an option's price to changes in the price of the stock

Options with a delta of 0.15 to 0.25 are slightly out-of-the-money (OTM)

Meaning the strike price is above (for calls) or below (for puts) the current stock price

Top 8 mistakes beginner options traders make

And how to avoid them:

Thread 🧵 Options have great benefits

You can cut losses, protect your gains and control big chunks of stocks with a relatively smaller amount

But…

You can also quickly lose more money than you invested with options

A thread 🧵 about Option’s premium

There are two parts to an option’s premium:

✅ the option’s intrinsic value

✅ the option’s extrinsic value (time value)

👇👇👇 The intrinsic value of an option holder (buyer):

It is the difference between the underlying stock’s price and the strike price

Intrinsic Value of a Call option = Current Price - Strike Price

Intrinsic Value of a Put option = Strike Price - Current Price

I traded over 300 covered calls in 2023 and generated more than $51,500 in income

Here are my 10 steps for trading a covered call:

👇👇👇

$TSLA $AMZN $GOOG $COIN $AAPL $SQ $SOFI $PLTR Choose a stock or ETF you like for the long term and are bullish on:

✅ Are they profitable?

✅ Are their earnings growing?

✅ Do they have a GREAT product or provide great service?

✅ Do they pay a dividend?

✅ Would you want to own it for 5yrs?

📊 Considering a Cash Secured Put?

Buckle up for some trading insights! 🛡️📉

A thread 🧵 that you will enjoy 😉

👇👇👇

#OptionsTrading #Optionselling ✅ Intro to CSPs

Cash Secured Puts – a savvy trading strategy where you agree to buy a stock at a price you're comfortable with

What are Covered Calls?

Covered Calls are a popular options strategy that can be used to generate CASH 💰

How?

From your stocks that you already hold

I sell CCs on $AAPL $GOOG $AMZN $TSLA $AMD $SOFI $DDD $QQQ $SQ $JNJ $TQQQ

Basics of Covered Calls

👇👇👇

#OptionsTrading Basics of Covered Calls:

✅ Sell a Covered Call Option

✅ Collect your cash!

✅ Repeat

If you like CASH, Covered Calls are for you 💸💰

How do you start? 👇👇

Let's explore the world of buying LEAP calls and weigh their advantages and disadvantages

LEAPs offer exciting opportunities

But it's essential to understand both sides of the coin before diving in

Let's get started! 💡📈

A thread 🧵 👇👇👇

#OptionsTrading 📆 Extended Timeframe

LEAP calls provide a longer expiration period typically more than a year

This extended timeframe gives you ample time for your investment thesis to play out

This allows for more price swings and potential profitability

Example: $TSLA 1/17/25 $200C

I am primarily an Options Seller

But I also buy Options from time to time

Selling options is much more consistent then buying options

Options Selling vs. Options Buying 📈📉

Pros and Cons

A thread 🧵

👇👇👇

#OptionsTrading #Optionselling #Optionbuying 🔥 Options Selling

Selling options involves writing (creating) options contracts for a premium

It can offer several advantages:

✅ Income Generation

Selling options allows you to collect premium income upfront providing a consistent revenue stream

Using delta in options selling?

It involves understanding its significance in determining the sensitivity of an option's price to changes in the underlying stock price

A brief thread 🧵 on how you can utilize delta in options selling

👇👇👇

#OptionsTrading #Optionselling ✅ Delta as Probability

Delta can be interpreted as the probability of an option expiring in-the-money

For example: a delta of 0.30 implies a 30% chance that the option will be in-the-money at expiration

Lower the delta lower the odds of the option ending up in-the-money

I got assigned $AMD at $122 on June 22

When $AMD was at $109

I had already made $425 in premiums in 2 weeks so my cost basis technically is lower than $122

Now I will sell Covered Calls on this assigned lot

A brief thread 🧵 on my process

👇

#OptionsTrading #Optionselling When the current price is much lower than my cost basis I can’t really sell weekly Calls at my cost basis

Not much premium

I have to sell below my cost basis

But isn’t that risky?

I might lose my $AMD shares at a loss below your cost basis

Not really

👇👇👇

A thread 🧵 about selling $TSLA puts

It’s from the week ending June 23

These puts are sold on margin without the intention of getting assigned

On June 16 I sold puts below delta of 0.09 - 10 contracts

✅ Premiums: $1220

👇👇👇
#OptionsTrading #Optionselling On June 20 $TSLA was climbing up from the low $260s to high $260s

I rolled the $TSLA puts from $240 to $245 strike

Same expiration

✅ Added Premium: $330

#OptionsTrading #Optionselling

If you have $100,000 in cash you can safely generate $450/week of income

Doesn’t sound much?

That translates to a 23% yearly return

How do you do this?

By selling Cash Secured Puts at a 85% success rate

A brief thread with example trades

👇

#OptionsTrading #Optionselling… twitter.com/i/web/status/1… $AMZN

Income: $37
Capital: $12,100
Time: 1 week

Success rate: 85.5%

A big tech still with big growth prospects