Tony: We're back! Back to Cool, Katie!

Katie: Back to Cool.

Tony: I love the little …

Katie: I'm sorry I missed you guys yesterday.

Tony: Oh, that's all right. Don't worry about it.

Katie: I heard it was a great show, though.

Tony: On Back to Where Do I Start?

Katie: Yeah.

Tony: Yeah, we had fun. It was good. It was all about dividends yesterday, which was nice, because …

Katie: I'm going to have to go back and rewatch.

Tony: Okay, good. You should because it was a good, lively discussion, which is always nice. So, how are you?

Katie: I'm good. I'm a little flustered today.

Tony: Me too, me too. I don't know why. Maybe, I don't know. I'm a little flustered to, yeah.

Katie: First full week back after a long break. Maybe that's just…

Tony: Could be, could be. So, there's no better time than… You know when, like, you know something's going to happen, and you do it, and it never works out that way?

Katie: Yeah.

Tony: So, when you're flustered. The best time to trade is when you're flustered.

Katie: When I'm like this and shaky?

Tony: Yes. Exactly. So, I think we should, because we closed a lot of stuff. Let's go into your account real quick. Let's go to the Monitor tab, if we could. Just to go through a little bit of history of what you done.

Katie: Yeah.

Tony: That's your trade page. I noticed that you're making … Wow. You're doing good today.

Katie: Doing okay today, yeah.

Tony: Yeah, you're up 40 bucks. Gold is cooperating a little bit.

Katie: For once.

Tony: DOW volatility must be coming in a little bit there. EWZ, losing a little bit of money.

Katie: Mm-hmm (affirmative).

Tony: GDX coming up a little bit.

Katie: Mm-hmm (affirmative).

Tony: GDX stinks. We got to take a look at that position.

Katie: Right.

Tony: Probably not for today's show. But we'll look at it for Friday's show. And we'll talk about whether we should close it, leave it, or add to it, which is something we won't do.

Katie: Yeah. But we did just add YUM and DOW. So …

Tony: We did just add YUM. YUM is working out good. You're up about 18 bucks in there already. But I closed a lot of positions. Is there any way you can go to the Account Statement tab on that Monitor tab there? You'll have to squeeze it over. I probably didn't load that up for you. Perfect. And then, just get rid of Twitter in there. And then, open it up. And let's see Trade History. You know what? Just go 10 days, because it's going to be too much in there. Very good. And open up Trade History. Okay, so you closed your CMCSA. That was Comcast.

Katie: Mm-hmm (affirmative).

Tony: We sold those calls at about eighty-something cents. Maybe if you open up a couple more days. I'm sorry. Chris, maybe make it 15 or 20 days. I apologize. Very good. Pull it down a little bit.

Katie: CMCSA. Right there.

Tony: Oh, there they are. Yeah, yeah. You bought them at 21 cents, sold them at 42 cents. Okay. Well, we closed a lot of trades. That's your GDX trade that you put on. Go up a little bit. I'm so sorry. I'm having a hard time reading this. Oh, because it's backwards. Click on Time Executed on the left there. All the way on the left. There you go. Just click on that right there. There you go. Now it's in order.

Katie: From most recent to…

Tony: From most recent to the bottom right. So, there you go. So, and XOP, we closed that yesterday. That was a covered call, 1 by 2.

Katie: Right.

Tony: You knew you were long about a hundred shares of stock, short 2 calls. Made about 60 cents, 70 cents on that. That was kind of a bullish position that we had on.

Katie: And that freed up a lot of capital.

Tony: Freed up a lot of capital, was using about 3 thousand, 35 hundred dollars of money. So, that's using a lot. You applied some more capital in DOW. You sold that at a dollar 14.

Katie: Mm-hmm (affirmative).

Tony: I think it's trading around a dollar 5 right now. It got up to a dollar 20. So, it's been equally as much as loss as it has been profit. And YUM was a broken-winged butterfly, which I know, I promised you we would talk about today. It happens to be working out a little bit for us. So, I think we can kind of put it on the shelf…

Katie: Yeah.

Tony: For today. Because you need to add things.

Katie: I do.

Tony: And we're right now at that window of … How many days do we like to put on these trades?

Katie: 45 is ideal.

Tony: 45 is ideal. So, let's go to the charts for a moment. And we're right there, right? We have 44 days. That's Apple.

Katie: Right.

Tony: Let's take a look at EWW. Now you've had a position in EWW.

Katie: Right.

Tony: You've taken it off.

Katie: Right.

Tony: I believe it was…

Katie: Iron Condor.

Tony: Iron Condor that we had on in there. And the stock has been going sideways. The IV rank is…

Katie: 79%.

Tony: 79%. So, it's a large IV rank, right?

Katie: Right.

Tony: I mean, we've been having a hard time finding high volatility. Price change has been, basically sideways.

Katie: Right.

Tony: I mean, you could certainly … Look at it. That's a 6 month chart that's been going sideways inside a pretty tight range of 62 and 68. That means nothing to me, except a picture of what it's done in the past.

Katie: Right.

Tony: So, it's got a high IV, which is nice. It's been going sideways. I think that sets up for sideways type trade, like the Iron Condor that you already did.

Katie: Yeah.

Tony: Or a Strangle.

Katie: Okay.

Tony: What do you want to do?

Katie: Well, since we did an Iron Condor last time, let's live a little wildly…

Tony: Good.

Katie: And do a strangle.

Tony: Okay, cool. Let's do it. Let's go to the trade page. What month are we going to go into?

Katie: January.

Tony: Because it's 44 days to January. That's the parenthesis.

Katie: Okay.

Tony: You'll notice that the volume in here, although the markets are 5 or 6 cents wide, the volume's not that great.

Katie: Oh, just over a million.

Tony: Just over a million shares.

Katie: Mm-hmm (affirmative).

Tony: That's actually okay, but the option volume's not that great. You'll notice that …

Katie: Right.

Tony: You know, 10, 20 lots, that kind of thing. Not too much. So, what type of size do you think we should do in here, then? Should we do more than we normally do or less than we normally do?

Katie: I don't know. What should we do?

Tony: Okay. So if there's not a lot of volume in the options, you should pair it back.

Katie: Okay.

Tony: Now, we've been trading 1, 2, or 3 contracts. So, let's err to the side of less contracts.

Katie: Contracts?

Tony: 1 contract.

Katie: Sure.

Tony: And let's also, what strikes do you think you should use for… Chris has got Probability of In The Money on the right there.

Katie: Mm-hmm (affirmative).

Tony: What probability of In The Money do you think we should look at?

Katie: For the calls or the puts?

Tony: Either one. Give me the percentage.

Katie: For the calls, probably the 69 call.

Tony: The 69 calls that have a 27%, just over 27%, chance of being In The Money.

Katie: Right. And then, put side, if we want to stick around 27, 28 again, maybe the 62 put.

Tony: I think you're spot on. And I think you're a hundred percent correct. And we didn't talk about this ahead of time, and I like what you're doing. Now, you could have gone to a full 1 standard deviation, which would have been…

Katie: 15%.

Tony: Probability of On The Money, around 15%, which would bring us to the 59 puts, approximately.

Katie: Right.

Tony: And the 71 calls. And that brings in, just about a dollar there, too. So…

Katie: So, just to, kind of, backtrack a little bit.

Tony: Mm-hmm (affirmative).

Katie: With standard deviation, why exactly would we want to do that?

Tony: Well, a full standard deviation on each side gives us a much higher probability of success.

Katie: Okay.

Tony: Standard deviation is right around 68%.

Katie: Right.

Tony: Let's just round it to 70%.

Katie: Right.

Tony: Now if you go to 70 cents …

Katie: Just a larger range for you to fall in…

Tony: That's correct. And everything is relative, so you collect less money. You collect right around a dollar, which is what we like to see, right around a dollar. But, you know what? I want to be a little bit more aggressive here, since we just took off a lot of other trades. And we're not feeling that sure about things today, right? We talked about it when we first started, how you're kind of a little off.

Katie: Uh-huh (affirmative).

Tony: So, there's no better time to get a little bit aggressive. If you're going to lower the amount of contracts you're trading, than now. So, let's go, like you said, to the 69 calls. So, left click on the 69 calls. Okay, that's fine. Just left click on the 69 calls. That's fine. And then hold down your control key and click on the 62 puts. And if you hold down the control key, that brings up both sides, a strangle.

Katie: Mm-hmm (affirmative).

Tony: And you can hold down the control key and click all over the platform. You can bring up to 4 different options if you wanted to, at one time.

Katie: Okay.

Tony: Now, I looked at this earlier, and it was trading at around a mid-price of 2 dollars and 9 cents. So, I'm going to go in right at 2 dollars and 1 cent.

Katie: Okay.

Tony: Because the mid-price was around 2.09, and I think it's already kind of contracted a little bit. So, I don't want to be too aggressive with the pricing. We're going to do it one time. Hit Confirm and Send. And you'll notice that you're using a thousand dollars…

Katie: Okay.

Tony: Worth of buying power. So, even less than what you were in KOP.

Katie: Mm-hmm (affirmative).

Tony: But I think that's the thing to do here.

Katie: Okay.

Tony: Sound good to you?

Katie: Okay, yeah. Sounds good.

Tony: Okay. Click send.

Katie: All right. I did, kind of, have a question, just on capital in general.

Tony: Mm-hmm (affirmative).

Katie: How much should I be using? And other people have e-mailed me about it. How much should I be using at any given time for my portfolio? I mean, I'm sure it depends on the size.

Tony: Sure. If you have a 35 thousand dollar portfolio, 5 thousand of that portfolio is your money. So, it's your money first in, first out. And then tastylive was kind enough to put 25 thousand dollars into this aggregated account, so that you can get margin and be able to do all the trades that are available to you.

Katie: Right.

Tony: Because once you have over 25 thousand dollars in your account, you can basically do anything in the eyes of the broker, within the amount of money you have in your account.

Katie: Right.

Tony: So, we usually talk about no more than 1 to 3% of your capital in any 1 trade.

Katie: Okay.

Tony: So, around 3 thousand dollars is about as much as you would want to use.

Katie: For any given trade or overall?

Tony: For any given trade.

Katie: Okay.

Tony: For any given trade. I would love to see you, at some point, have about a third of your account, in this volatility environment that we have now, which is low.

Katie: Okay.

Tony: I'd like to see you use anywhere between 20 to 33% of your available buying, about 10 grand.

Katie: Okay.

Tony: Higher volatility?

Katie: Right.

Tony: I'd like to see you use all of your account.

Katie: I'll see.

Tony: Okay.

Katie: Time will tell.

Tony: Oh, we definitely will get there. You had … Go back to her trade page. You had short calls in Comcast.

Katie: Right.

Tony: Which was a bearish position.

Katie: Mm-hmm (affirmative).

Tony: Let's look for another bearish position. Can you go to the chart page for a moment? And can you go into GM? And I found GM from somebody who actually sent me an e-mail. GM, IV rank 62%. Just had earnings last month, there.

Katie: Mm-hmm (affirmative).

Tony: So earnings are not going to be an issue.

Katie: Right.

Tony: Stock is, for the last 6 months, high, low, or mid-range?

Katie: Looking pretty high.

Tony: Looking pretty high. So, we like to sell into strength. We're contrarians.

Katie: Right.

Tony: So, it just made an all time high, well not an all time high, a 6 month high here, today, at 3962.

Katie: Mm-hmm (affirmative).

Tony: You'll notice that from one of the game changing studies that we did, the price change is right around 5% over the last 10 days.

Katie: Right. Pretty close.

Tony: So, it sets up…

Katie: Right.

Tony: For us. If that number's over 5, then it kind of works for us. That's good.

Katie: Okay. So, we want to sell into strength?

Tony: That's correct. So, what are we going to look to do here if we're going to look to sell into strength?

Katie: Do we want to sell calls?

Tony: Sell calls or sell a call spread, right?

Katie: Right.

Tony: So, let's go into GM. Trade page, please. Awesome. You can get rid of the 20 strikes and just make it like 4 or 5 strikes if you want. We're going to stay in January, right?

Katie: Yeah.

Tony: And I apologize, we need more strikes than that. Make it 8. I apologize. Very good. Okay. So, look at the volume in here. Much better…

Katie: Right.

Tony: Than what we had before, right?

Katie: Right.

Tony: In EWW.

Katie: Mm-hmm (affirmative).

Tony: So, stock's up a dollar 24. It's trading about 30 cents off of its high from today. Great option volume. If you're usually doing 1 to 3, 1 to 4 contracts, how many contracts you want to do here?

Katie: Let's do more.

Tony: Let's do more.

Katie: Like that AT&T commercial with the little girl. I really really like it, but I want more.

Tony: I tend to agree with you. What strike would you like to look at?

Katie: If we're selling calls, we want a probability of 30% … Tony: Mm-hmm (affirmative).

Katie: On The Money, roughly. The 42 calls?

Tony: The 42 calls would be correct.

Katie: Okay.

Tony: Or the 43 calls, right? Right around that 1 standard deviation, that 15%.

Katie: Mm-hmm (affirmative).

Tony: So, since we're only going to do 1 side, Let's go to the 43 calls.

Katie: Okay.

Tony: Since we're being more directional here. The other one, we're taking in more premium, and being more neutral.

Katie: Right.

Tony: Here we're being much more directional. So, let's err on the side of caution. Collect less money and have a higher probability of success.

Katie: Okay. So, are we doing a spread, or just selling calls?

Tony: Let's just sell calls. Since it worked in Comcast, let's see if it works in GM.

Katie: Okay.

Tony: So, left click on the 43 calls, and let's go in at mid-price at 53 cents.

Katie: How many do we want to sell?

Tony: Let's do 3. Let's see what the buying power is on that. Hit Confirm and Send one time.You're looking at about 13 hundred bucks, same buying power that you had on the other one.

Katie: Okay.

Tony: Hit send.

Katie: What did you put the price in as? I missed that. Really quickly. 53?

Tony: 53 cents.

Katie: Okay. Just want to make sure I got that right.

Tony: Mm-hmm (affirmative).

Katie: And send.

Tony: You're in? You're in.

Katie: All right.

Tony: It filled.

Katie: Okay, so …

Tony: So, let's close that order.

Katie: Is there an ideal to, kind of, I don't know. We talked about, we got… We opened up a lot of capital…

Tony: Correct.

Katie: I just don't know. I mean, the most positions I've had out at any given time has been like 8-ish or so. Should I be doing more?

Tony: You know, the restrictions of the show, being on Monday, Wednesday, and Friday…

Katie: Uh-huh (affirmative).

Tony: The restrictions of the market. I mean, you know, sometimes it's hard to find trades …

Katie: Right.

Tony: Limits the amount of trades that you're going to have on. I mean, a matter of fact, we made trades when you weren't on.

Katie: Right.

Tony: We had a holiday that we were closed for. So we weren't even on the show when we made some of them. Yesterday, we got out of XOP, which turned out to be a nice trade.

Katie: Mm-hmm (affirmative).

Tony: By getting out of it, because XOP has gone a little bit lower. So, yeah, you probably should have more trades on.

Katie: Okay.

Tony: But, you know what, it's okay to be going slower, the way that we are right now. Matter of fact, today, maybe when on the break we'll come up with another trade. We'll look at maybe a covered call or maybe a naked put to do, which we'll tweet out.

Katie: Okay.

Tony: You're not on Twitter yet, right? You should try the social media. All the young kids are doing it.

Katie: It's on my to-do list, okay?

Tony: Okay. And you are in Dough?

Katie: I'm in Dough.

Tony: So everybody can see your portfolio on Dough if they don't catch here, right? That's D-O-U-G-H dot com.

Katie: Correct.

Tony: Which anybody can sign up for. It's still in beta right now…

Katie: Yup.

Tony: If you sign up on Dough, you'll be able to see your account, your probability of profit, your return on capital, POP and ROC.

Katie: Right, which you guys talked about this morning.

Tony: Which we did talk about this morning. Ooh.

Katie: Oh.

Tony: That means we're out of time. Or did you just get filled?

Katie: I got filled.

Tony: In EWW?

Katie: In GM.

Tony: Oh, in GM. Well, you're a little bit late.

Katie: Would you look at that.

Tony: We knew that. All right, what comes next?

Katie: Liz and Jenny.

Tony: Liz and Jenny is next.

Katie: Indeed.

Tony: And then?

Katie: And then …

Tony: Then lunch!

Katie: Yeah, that, too. Of course, and Slim.

Tony: And Slim. We let him eat lunch late.

Katie: All right. I normally say, "Peace." That was really good. I'm glad we had fun today. Did we have fun today?

Tony: Yeah. I had a good time.

Katie: Peace.

Tony: Bye.