Greedy's Vault - Volume 8

LevWedge Studios Presents

SUNDAY DECEMBER 3, 2023

WHAT'S INSIDE:

Puppets | Perspective | Finance

ARE OPTIONS?!?

VOL.8

Options - come swimming with me The Pro’s and Cautions to consider Decoder- WTF?! does that mean??

Case Study- PayPal / PYPL Market Update

Welcome to the Leverage Labyrinth

In this edition of Greedy's Vault, we're dissecting 'leverage', a potent force in the financial world that, when wielded wisely, can amplify your gains. But beware, for it's a treacherous tool that can just as easily magnify your losses.

Leverage Unleashed: Leverage, in its essence, involves using borrowed capital for investment, boosting potential returns from an investment. It's like a financial lever, giving you the power to lift heavier amounts than your own capital would allow.

Options as a Form of Leverage - **Selling Calls and Puts for Income:** This strategy involves selling options to generate income, essentially collecting premiums from buyers. It's akin to renting out your stocks, earning you money regardless of market moves.

- **Buying Calls for Upside Hedge:** Missed out on a stock's rise? Buying call options allows you to capture the upside without committing the full price for the stock. It's like an insurance policy against FOMO* in stock moves.

- **Buying Puts as Downside Protection:** Fear a stock drop? Puts are your defensive play. They work like insurance against a downturn, safeguarding your portfolio value.

Leverage for Speculation Beyond hedging, leverage can be the gambler's roll of the dice, speculating on market moves. It's a highstakes game that can lead to significant payoffs or losses.

The Greedy Approach to Leverage: Greedy advocates and Implements In his own practices, a balanced use of leverage. It's a powerful addition to your arsenal but must be used with caution. Understand the risks, manage them wisely, and remember, the market respects boldness, not recklessness. *FOMO: Fear of Missing Out

www.greedyshow.com

VOL.8

Options: a place where leverage can send your profits soaring like a rocket or sink your capital like a stone.

The Basics of Options Contracts: - **Contractual Nature:** Unlike stocks, when you purchase an option, you're not buying a tangible asset. Instead, you're securing a contract—a promise, if you will—that gives you certain rights pertaining to stocks.

- **One Contract's Power:** Remember, a single options contract typically corresponds to 100 shares of the underlying stock, amplifying your market presence.

Leverage in Action: - **Magnified Movements:** Options embody leverage. A modest 10% rise in the stock price could translate to a 40% gain in your options value if you're using 3-4 times leverage. But this jet fuel works both ways—gains and losses are both amplified.

A Word of Caution: - **Experience is Essential:** Options are not for the faint-hearted or the inexperienced. Before venturing into options, one should have a solid foundation in stock trading. The volatility and complexity of options require a deft hand and a keen understanding of market forces.

- **Respect the Risks:** While it might be tempting to dive into the high stakes world of options, remember that this is a domain where professionals thrive. Options can serve as a powerful ally in both bull and bear markets, but only if you can accurately read the market's true trend.

Greedy's Thoughts: Options are like a high-powered drill. In the right hands, they can carve out financial success; in the wrong hands, they can cause havoc. Take your time to learn, practice, and understand the stock market before you let options into your trading toolkit.

www.greedyshow.com

Options trading can seem like navigating a maze of complexity, but it's equipped with high-powered potential. In this issue, we explore the pros of options that can turn them into a formidable ally in your investment arsenal.

Pros of Trading Options: 1. Higher Returns Potential: - Options can provide a significant return on investment due to their leverage nature. A small move in the stock price can lead to a disproportionately large move in the price of an option, offering the chance for heightened gains.

2. Hedging Your Positions: - Think of options as a form of insurance for your portfolio. They can be used to protect your holdings against adverse price movements, mitigating risk. If you're worried about potential losses in your stock positions, buying puts can offer a safety net.

3. Control Larger Positions with Less Capital: - With options, you can control a much larger amount of stock for a fraction of what it would cost to purchase the shares outright. This 'small down payment', known as the premium, gives you the right to buy (call) or sell (put) shares at a predetermined price within a set time frame.

Greedy's Insight: While the allure of high returns and strategic hedging is strong, it's essential to balance enthusiasm with prudence. The leverage that options provide can be a double-edged sword, amplifying both gains and losses.

Mastering options trading takes time, patience, and a solid understanding of market dynamics. As with any powerful tool, it's the skill and knowledge of the wielder that determines its effectiveness. So, approach options with the respect they command, and they can become a pivotal part of your trading strategy.

Stay tuned to Greedy's Vault for more on options, and remember, while seeking higher returns, control, and hedging are all appealing, they must be pursued with a calculated and educated approach. Stay informed, stay calculating, and stay Greedy!

www.greedyshow.com

VOL.8 Here at Greedy's Vault, we’re going to balance the scales and look at the other side of options trading. While options can be lucrative, they come with their own set of risks that can't be ignored.

Cons of Trading Options: 1. **Risk of Total Loss:** - The leverage that can amplify your gains in options can also lead to total loss of your investment. If the market doesn't move in your favor, the option can expire worthless, meaning the premium you paid is lost.

2. **Time Decay:** - Options are time-sensitive instruments, with expiration dates ranging from a day to over two years.

The closer an option gets to its expiration date without being in-the-money, the less valuable it becomes. This phenomenon, known as 'time decay', can erode the value of an option, particularly for those with shorter expiration periods.

3. **Premiums and Time Decay:** - The premiums paid for options not only reflect the intrinsic value but also the time value. As time ticks down, the time value diminishes, which can lead to a decrease in an option's premium even if the stock price remains static.

4. **Sensitivity to Volatility:** - Options are highly susceptible to market volatility. This sensitivity means that changes in the market's expectation of future volatility can significantly impact the price of options, sometimes in unpredictable ways.

Greedy's Thoughts: Options are not a playground for the inexperienced. The very elements that make options an exciting prospect—the potential for high returns, the leverage—are the same factors that can lead to quick and total loss.

Before venturing into the realm of options, it's critical to have a firm grasp of market mechanics and a clear risk management strategy. Always be aware of the time horizon of your options and how volatility can affect their pricing.

Dabble in options with caution, and ensure you're not putting more on the line than you can afford to lose. It's better to miss out on a trade than to jeopardize your financial health. So, learn, practice on paper, and understand fully before you commit real capital to options trading.

Stay vigilant, stay educated, and as always, stay Greedy—but responsibly so!

www.greedyshow.com

VOL.8 We’re diving into the nitty-gritty of options, and we’re just getting started. These contracts can be a powerful tool, whether you're looking to boost income, wager on market moves, or hedge against potential losses. **Options 101:** Options are essentially contracts that grant you the power to trade an underlying asset at a predetermined price before a set deadline. They're called derivatives because their worth is linked to something else, be it stocks, bonds, currencies, or commodities. **The Essence of Options Contracts:** - **Call Options:** Think of a call option as a golden ticket that lets you buy shares at a 'strike price' before the contract expires. The beauty here is choice—you're not obligated to make the purchase.

- **Put Options:** Conversely, a put option is like an escape hatch. It gives you the right to sell your shares at the strike price, offering a safety net if you expect the stock to take a dive. **How Options Gain Value:** - The value of options is all about the odds of future price moves. The higher the chance of the stock moving in your direction, the more valuable the option.

- As the underlying stock climbs, so does the value of a call option. For a put option, the opposite is true—it gains value as the stock price falls. **The Impact of Time:** - Time is of the essence with options. The closer you get to the expiry date without any movement in the stock, the more the option's value decays—hence why options are known as 'wasting assets'.

- The more time you have until expiration, the higher the value, since there's a greater chance for the stock to move favorably. **Volatility's Role:** - The price of uncertainty, or volatility, can also hike up the value of an option. More volatility means higher chances of substantial price moves, which can push up the price of both call and put options. **Options in Your Portfolio:** - **Income Strategy:** Selling options can be a way to generate income through the premiums paid by buyers.

- **Speculation:** Options allow you to bet on the direction of the market with less capital upfront.

- **Hedging:** Like insurance, options can protect your investments from unexpected market downturns.

It’s Important to equip yourself with the tools to harness the power of options effectively. Understand the mechanics, respect the risks, and you could find options to be a versatile addition to your investment strategy.

As always, tread wisely, and let your wealth grow with knowledge. Stay savvy, stay strategic, and stay Greedy!

www.greedyshow.com

PayPal (PYPL) Let’s break It down by looking at a specific options strategy using PayPal (PYPL) as our case study. Understanding the anatomy of an options contract can help us make more informed decisions. **Decoding the Options Contract:** - **Ticker Symbol:** PYPL (PayPal Holdings Inc.) - **Expiration Date:** 1/16/2026 - **Call Option:** C (meaning you have the right to buy the stock at the strike price) - **Strike Price:** $55 (the price you can buy the stock at if you exercise the option) - **Premium:** $18.22 (the cost of the option per share, which for this contract is paid upfront) **The Break-Even Analysis:** - **Total Cost per Share at Execution:** Strike price ($55) + Premium ($18.22) = $73.22 - **Break-Even Price at Expiration:** $73.22 per share (PYPL must be above this price at expiration for the trade to be profitable) **The Bet:** By purchasing this call option, you're speculating that PYPL will rise at least 25% above its current price within the next 24 months. It's a bet that the stock has reached its bottom and is currently undervalued. **Leverage and Control:** This option gives you control over 100 shares per contract for the price of the premium, allowing for a more significant position with less capital compared to buying the stock outright. **The Risk-Reward Equation:** - **Upside Potential:** Unlimited growth potential as PYPL rises above the break-even point.

- **Downside Risk:** Limited to the total premium paid if PYPL fails to rise above the strike price by the expiration date. **Greedy's Takeaway:** This move is not for everyone. It's crucial to consider if a 25% increase in PYPL's stock price is realistic based on your analysis of the company's value and market conditions. Remember, with options, your upside grows, but so does the risk, especially when betting on short to mid-term stock movements.

Before you consider a similar options strategy, ensure you have a thorough understanding of the stock's fundamentals, the broader market trends, and your risk tolerance. And as always, in the world of options, it pays to be Greedy—but smartly so.

When considering an options strategy based on a bearish outlook for a company, put options can indeed be a powerful tool. Here's how it works using PayPal (PYPL) as an example for a bearish bet: **Decoding the Put Options Contract:** - **Ticker Symbol:** PYPL (PayPal Holdings Inc.) - **Expiration Date:** 1/16/2026 - **Put Option:** P (meaning you have the right to sell the stock at the strike price) - **Strike Price:** $55 (the price at which you can sell the stock if you exercise the option) - **Premium:** $8.80 (the cost for the put option per share, which is paid upfront) **The Break-Even Analysis for the Put:** - **Total Cost to Break Even:** Strike price ($55) - Premium ($8.80) = $46.20 - **Break-Even Price at Expiration:** PYPL must be below $46.20 at expiration for the trade to be profitable, as that would cover the cost of the premium paid for the put option **The Bet:** By purchasing this put option, you're speculating that PYPL will decline significantly, at least enough to surpass the break-even point of $46.20 per share within the next 24 months. Essentially, you are wagering that PayPal is not just overvalued but that it's a 'value trap'—a stock that appears to be cheap but is actually fundamentally flawed or facing significant downturns. **Risk-Reward Equation for Puts:** - **Upside Potential:** Profit increases as PYPL’s stock price drops below the break-even price, up to the point where PYPL reaches zero.

- **Downside Risk:** The maximum loss is limited to the premium paid if PYPL stays above the strike price of $55 by expiration. **Walking the Tightrope:** Options are like a tightrope walk; they can be extremely profitable, but there is little room for error. You need to be confident in your analysis and bearish outlook to take such a position on PYPL. The risk is substantial because if PYPL does not decline as expected, the option could expire worthless, resulting in a total loss of the premium paid. **Greedy's $.02:** When it comes to put options, timing, and accuracy are everything. Ensure your bearish stance is backed by solid research and market analysis. And remember, while lucrative, these bets are not without risk. In the world of investing, it's not just about being right; it's about being right at the right time.

Stay cautious, stay critical, and as always, stay Greedy—with wisdom and wariness in equal measure.

VOL.8

Time Frames In Options Trading

We're honing in on the significance of time frames in options trading. We've discussed long-term options with a 2-year horizon, but now let's contrast that with short-term, even micro options that expire within a week or even the same day. **Short-Term vs. Long-Term Options:** - **Premiums:** The cost to buy an option, known as the premium, is significantly less for short-term options because the time you have control over the shares is much shorter. Remember, time is a commodity in options trading, and you pay for the potential that comes with it.

- **Micro Options:** These are options that expire very quickly, sometimes within the same day they are purchased. They can be cheaper but are incredibly risky due to the short time frame for the underlying asset to move in your favor. **The Allure and Danger of Micro Options:** - **Popularity:** Micro options have become popular due to their low upfront cost and the thrill of quick results. However, this is where many inexperienced traders can stumble, lured by the potential for quick profits.

- **Risks:** The short lifespan of these options means they are highly sensitive to time decay. They can expire worthless if the stock doesn't move as predicted within a very tight window, leading to a total loss of the premium paid. **Greedy's Perspective:** What's "all the rage" in the markets is often where the unwary get burnt. While these short-term options strategies can win big, they can also lead to rapid losses. It's like playing with financial fireworks - spectacular if handled correctly, but potentially disastrous if not. **Patience and Learning:** If options still seem like a foreign language after this week's YouTube video and issue, that's okay. I didn't grasp all these concepts in one go either. These are powerful tools, and exposure to them is the first step in understanding how to wield them effectively. **Consistent Learning:** Keep following along. With repetition and continued discussion, the fog will clear, and these strategies will start to make sense.

In time, you'll see how options can fit into your investment strategy and how they can be used not just to chase gains but to manage risk.

As always, in Greedy's Vault, we’re about building wealth wisely. So, absorb the knowledge, ask questions, and keep tuning in.

Stay patient, stay eager to learn, and, as always, stay Greedy!

What’s coming next week? Here’s what Greedy and Petey are thinking about...

Welcome back to Greedy's latest market insights! With the recent impressive performances across major indexes, let's take a closer look at the potential turbulence ahead and strategize our next moves. **Current Market Performance:** - **Nasdaq:** +0.38%, showing modest gains.

- **S&P 500:** +0.77%, maintaining a strong upward trend.

- **Dow Jones Industrial Average:** +2.42%, leading the charge with significant growth.

The markets have been blazing, recording the hottest month of the year so far. **Greedy Ticker Scans Insight:** - A bullish domination is evident with 1423 Bulls towering over 112 Bears, signifying a market riding a strong upward momentum. **Anticipating Market Turbulence:** - Despite the recent heat, signs point towards potential turbulence in the market. The VIX, currently at a low of 12, suggests an increase in volatility might be on the horizon.

- Remember, volatility doesn't necessarily imply a correction; it indicates more frequent and more significant price swings – both ups and downs. **The VIX Perspective:** - A month ago, the VIX was hovering around 21, correlating with less volatile market conditions. Its recent dip aligns with the market’s rise but could signal upcoming choppy waters. **Greedy’s Outlook:** - As we approach December, traditionally a bullish month for stocks, the past performance could lead to a more tumultuous phase, even without a full-blown correction.

- It's essential to interpret this as potential market turbulence rather than a downturn. Volatility can be unnerving, but it can also open doors to new investment opportunities. **Preparation is Key:** - Brace yourself for this expected volatility. Such market conditions require a keen eye for both risk management and opportunistic plays.

- Don’t let turbulence shake your long-term perspective. Maintain a balanced approach, and be ready to adjust your strategies as needed.

Remember, market turbulence is part and parcel of the investment journey. Stay alert, stay informed, and as always, stay Greedy – ready to capitalize on the ebbs and flows of the market!

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Episode 8 Streaming NOW! YouTube & GreedyShow.com