My Stock and Options Trading Secret Weapon: Risk Reversals

My Stock and Options Trading Secret Weapon: Risk Reversals
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Chapters
0:00 Intro
0:18 What is a risk reversal option trade?
0:28 Best technical setup for a risk reversal
1:08 Why should you sell put options on down days?
1:26 Example risk reversal trade we did in DIS
1:58 Why I did this risk reversal option trade
2:56 When should you exit a risk reversal?
4:02 Does technical analysis work?
4:56 How much can you make with a LEAPS risk reversal option position?
5:44 How to win with a risk reversal if the stock doesn't go up?
6:12 Can you use a risk reversal instead of buying stock outright?
6:28 Advantages of a risk reversal versus owning stock outright

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Would you like to know an option trading strategy that has the potential to pay off in a huge way if you're correct, and yet, the stock can actually move against you in a big way but you can still walk away with a small profit? In this video, I’m going to show you how we use risk reversals to generate very high returns and cash flow.

This extremely powerful option trading technique I’m about to show you is known as a risk reversal. A risk reversal is an option position in which you sell an out of the money put option and buy an out of the money call option, both of which have the same expiration date. Before I show you the trade we did using this risk reversal strategy in Disney, let me show you the technical chart set up that prompted us to enter this position.

Here is an important point to keep in mind. One of the reasons why I went so far out in time is because I wanted our short put option to be pretty far away from Disney’s current price. If Disney went as low as $75 per share, I’d be ecstatic to own it at that price. But if it rebounded, that call option could pay off in a big way, especially if it rebounded fairly quick.

Keep in mind that when you enter these longer term LEAPS positions, just because they expire a year and a half from now, it doesn’t mean you have to stay in them until expiration. If the position moves in your favor, you can always exit it early and that’s exactly what we did.

Happy investing!
Randy Perez

#retirementincome #stocktrading #financialmarkets

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Disclaimer: I am not a financial planner and am not offering investment advice. This is an opinion channel only and should not be taken as any form of financial advice. The ideas and strategies that I discuss should never be used without first assessing your own personal/financial situation, or without consulting a financial and/or tax professional. There are financial risks involved in taking on any monetary transaction that I discuss in my videos. I may receive a small commission from the purchase of any item from using the links listed above.