The Option Alpha Podcast

Dive into the world of options trading with an insightful trader who mastered disciplined, probability-driven strategies. Discover the art of balancing long-term investments with quick trades through a dual-track approach. Learn about effective position sizing, the smart use of bots for automation, and the importance of managing emotions in trading. Hear about the mindset shifts that come after losses and get top-notch advice for new traders on humility and risk management. It’s all about sustainable success in the trading game!

In this comeback episode, I’ll catch you up on the biggest updates inside Option Alpha, the major shifts in today’s options market (hello, 0DTE), and what to expect from the show going forward.The options landscape has changed dramatically in the past year. From 0DTE dominating SPX volumes to a flood of new retail traders, the environment today looks nothing like when this show last aired. This reboot of the OA podcast recaps the biggest trends shaping options right now, explores the major updates we’ve released at Option Alpha, and previews what’s ahead for the podcast, including interviews, mini-series, and unique case studies.See the full show notes here

We're joined by Adam Cohn, Vice President and Head of Trading Operations at TradeStation, an award-winning trading platform known for its comprehensive trading tools, advanced charting capabilities, and extensive market analysis features. Adam brings a wealth of experience, not just from his role at TradeStation but also from his extensive background in options trading in the Chicago pits and as a market maker. His deep understanding of market structure and dedication to best execution have made him a trusted figure in the industry. In our conversation with Adam, we discuss trading operations, market structures, and the complexities of order execution. You’ll learn about order routing and execution, what factors determine fills, payment for order flow (PFOF), the role of market makers, and so much more. This episode is a must-listen for options traders looking for a deeper understanding of trading options!See the full show notes here

Navigating options expiration is essential for traders today. Discover the top automated tips for managing your portfolio effectively. Key strategies include adjusting exit options as expiration approaches and monitoring extrinsic value. Learn about the importance of using defined limit orders rather than market orders. Additionally, setting alerts for low liquidity conditions and critical levels between strike prices can optimize your trading performance. Enhance your skills with these practical insights!

Show Notes: https://optionalpha.com/show231This week we explore the latest and most pressing challenges emerging for investors who have embraced autotrading.As automation revolutionizes the financial markets, traders find themselves navigating uncharted psychological territory. From trusting bots and algorithms, coping with reduced decision-making control, and the novel complexities of autotrading that demand a new style of adaptation and resilience. With help from our team, I’ll peel back the proverbial onion on the evolving mindset of options traders and shed some light on these new psychological challenges popping up.See the full list hereObsessive-Compulsive Overriding (OCO)Strategy StraitjacketingCurrent Events FallacySweeping Conclusion AnxietyShiny Object Syndrome FreezeBot ScapegoatingFeature CreepEmotional HedgingVersion Control DisorderIdentity Panic Disorder

Dive into the fascinating world of automated trading, exploring how cognitive biases hinder human decision-making in volatile markets. Discover the three forces driving autotrading's rise: collapsed latency, expanded choices, and the necessity for agility. Learn how technology democratizes trading and contributes to better risk management. Kirk argues that automation empowers traders by eliminating emotional pitfalls and allowing faster exploitation of market inefficiencies. Get ready for a revolutionary shift in how we approach investing!

AI is the hot new buzzword these days, sparked by the release of ChatGPT a few months ago. Since then, it seems everyone has used OpenAI’s software in fascinating (and sometimes scary) ways. So, I jumped into ChatGPT and asked it to come up with the top questions that new and advanced traders ask about options trading.  This week's podcast explores the 15 questions - and answers - that options trades want to know.See all 15 answers hereWhat are options and how do they work?How much money do I need to get started in options trading?How do I select the best options trading strategy?What are the key components of an options contract?What is the difference between a call option and a put option?What is the difference between buying and selling an option?How do I determine the strike price for an options contract?What is implied volatility and how does it impact options trading?What are the risks involved in options trading?What are the different options trading strategies I can use?How do I calculate profit and loss for an options trade?How do I manage risk in my options trading portfolio?Should I use technical analysis to inform my options trading decisions?Can you use charts and graphs to trades options?What are some common mistakes to avoid when trading options?

How long does it take a stock to get back to even after a large daily move down? And does the magnitude impact how long it takes the position to recover the loss?We’ve all been in losing trades and wondered if we should hang on to the position for a little longer or cut it loose. So, to help answer the question, we studied the short-term performance of stocks and ETFs after different daily loss totals.The study analyzed 324 assets over a 20-year period. We calculated the 5-day returns following single-day losses up to 5%.See the full research report here.

Stocks have been described as a rubber band, and we often assume they will snap back and revert when prices become overextended. So, we wanted to know: How likely is a security to continue or reverse its momentum above and below major moving averages in short, medium, and long-term timeframes? And does the security’s proximity to a moving average impact its performance?We researched 20 years of data on 286 symbols, using short, mid, and long-term trends to analyze the ticker’s 30-day return relative to its simple moving averages.I'll be honest, the results surprised me.Click here to see the full research report.

"The trend is your friend." It’s a popular saying amongst traders, and we hear it all the time. But is there validity in the statement?We backtested directional option selling strategies with a long-term trend filter to see if there is a significant impact on performance.We used Option Alpha's backtester to review the data for  SPY, GLD, and TLT short put spreads and short call spreads. Short put spread tests included a filter to only enter trades above the 200-day moving average. Short call spread variants included a filter to only enter trades below the 200-day moving average.Click here to see the full backtest results.Important Note: This podcast is for educational purposes only. Past performance does not guarantee future results. This data is presented objectively and is not financial advice or a suggestion to use these strategies. We encourage you to always do your due diligence and test your strategies.Let's take a closer look at the performance of these strategies using different trend filters. This is a great baseline when considering how to set up your trades, and we hope this inspires you to backtest your ideas for strategy optimization.