How to Buy Options at ZERO-COST (While Keeping BIG Profit Potential)

#optionsstrategy #optionstrading #daytrading

[kroanosm]

Very confusing but after go over it a few times I think I get it.
Buy a put at a given strike.
Later on when the stock goes down you create a spread by by selling a put at a lower strike which now cost more than the original put you bought at a higher strike on the same expiration.
You've secured some profit and have a free ride to gain more.

[KT-zxjr]

Thanks Seth. Nice trade. The key: buy puts at the market top, and buy calls at bottoms. Then, sell the short side when the market reverses sharply. Then spread = riskless profit. The key is timing!! You need a little luck on your side. Thanks.

[christophranaweera]

The Put which I bought at 89.25 is now trading at 179.50. So selling this Put would create a profit of 9025 safe and instant.
Making the short leg makes sense when you expect the long downward trendline of lower heights to continue, so in half year it's around 1750. On the other hand, there is a trendline of higher lows at the same time. From my perspective, the risk reward ration does not work opening the short leg. If there would be lower lows at the same time, I would see this differently.
From a chart perspective, I would expect a rebound, so close the long put and open a bullish position, most likely using a CPS.

But as usual, an excellent example of what is possible with options, and you have to choose your strategy depending on your expectations.

[Aevykin]

The key for this to work is that your initial indicator for buying a $9000 put must be correct, if the market continues to rally, you just lose 9k or get stopped out at a certain loss %.

[Normancito]

You guys have great strategic ideas. I don't do much directional trading but this is a great technique to lock in profits.

[kevinmunz]

How are you getting cash flow buying a put higher than where you are selling the put?

[XquiziteX]

Very imp thing - we must understand here - to make this work …
First HAVE TO OPEN a PUT position take the risk and Wait for underlying position to drop. ONCE your PUT IS UP ITM : profitable THEN SELL THE SECOND LEG. Only then you lock the profit. This spread is NOT executed @same time. So we have to take one side position first, risk & wait out the time till the positions gets in your favor. NOT SUCH A EASY FREE LUNCH. - however there are many other way:like
Selling high volatility moves and that’s a free lunch😊

[somewhereinsthlm]

There is no free lunch. Sure you can offset option premium cost by increasing risk. Yes you can open the position for free, but you will on the other side lose more if wrong.

[InspireNewGeneration]

I’m bit confused. Why is 1910 put option cost less than 1770 put? Is this debit spread on both ITM puts?

[minoffame]

Thank you for this video Seth. Jon Najarian always says he'll wait for appreciation/decline after he buys a Call/Put before legging in the sell part of the spread but he never explained why. Now it makes sense! (3/17/23)

[shanenorth]

Question, how would you manage trade if had moved against you before you legged in to the spread, as that is where the risk is.

[tonycrouse]

This is a standard vertical spread. Paper trade these types for awhile to get a better understanding.

[ronsexton]

Managing those trade legs is very important!

[Jamesjonessofy]

Zero Cost ….it does not mean ZERO RISK !!!…be careful !!!

[rickshen]

How can a higher strike price put option cheaper than the lower one?

[markl]

Great strategy. Thanks for posting it. one question. What would be your stop loss if Russell didn't drop but kept going higher? Mine would have been just above the latest swing high around 2, 000. Of course in that case, this would be a loss.

[hscelza]

Good tip Seth! Why don’t you just sell the PUTs on March 13th? Today (Thu 16th) those 1910 PUTs are sold at 151.80, so you could realize 151.80-89.25 = $6, 200 gain with no further risk

[gghappychannel]

Can you advise me brokers for foreigner to trade options in USA ?

[AgentCashback]

As many comments indicated. You must get the direction right, or you potentially face a 100% loss if you never get a chance to sell the short put. That being said, which indicator would you use that has the highest success rate of getting the short to midterm direction right?

[DeviantFox]

People think he overexplained and he really didn't, if anything he kept it tight. First, the bearish thesis was put in place during a "lower" IV environment with a long put making the long put relatively cheap, all things considered. The rally then the sell-off with the binary news combined to get an IV expansion. This IV expansion is what drove up the price of the short put making selling the short put lucrative and allowing the trader to lock in profit not matter what happened further. That's what you see in scenario 1-2-3. The point of the video is, first if you have a directional bias you have to be right about your directional bias. And second, you need to use the right tool for the trade. Had the trader tried to buy a long call at the bottom this would have not been as successful because the cost of the long call was inflated by the same IV that made the short put worthwhile.