Hey Dan Passarelli here! Yesterday we talked about controlling Delta with debit spreads, but I also want to talk about how you can very precisely control one of your other Greeks, in this case Theta. Now the typical approach, like we've talked about in our last video for trading debit spreads is usually buying in at the money or pretty close to the money and then selling it out of the money. I always recommend selling the one closest to the resistance level that you think the stock can maybe get to, but not through. And if we do that, in this case, we'd be buying an option that has a let's see, if you buy the 134 calls, we'd be buying an option that has a twelve cent Theta. So we'd be paying twelve cents a day to carry this and then collecting nine cents a day. So paying a net of 3 cents a day. So that's one of the advantages of spreads is that it does keep our Theta lower straight off to begin with. But if we instead buy a more in the money option, like in this case, maybe the 130 calls, we'd be paying ten cents a day to own this one for Theta and collecting nine cents a day, our Theta drops down to only about a penny, almost a wash. And in fact, if we chose to sell the 137 strike, it would be in exactly zero Theta. So again, we have the same issue as with doing this to control the Delta. We are paying more for the long option. So we do stand to lose more if it goes drastically against us. If it starts going against us, of course we can try and close the position early and limit those losses, but this is a way to stem losses resulting simply from time passing. I hope that helps. This is Dan Passarelli Trade Smart.

Dan Passarelli, CEO - Market Taker Mentoring

Hey, Dan, Passarelli here. I want to give a helpful little tip today for anybody who trades debit spreads. Now, the conventional way to trade a debit spread is: a trader typically buys, usually in at the money, maybe a slightly out of the money call and then goes and sells a higher strike. Now for me and for the way that we teach at Market Taker Mentoring, typically the strike we sell is usually where resistance is. It's some point that, we think, over the next however many days the spread is for (in this case, we're looking at a nine day option, just arbitrarily). If I were to sell the 138 strike, that's where I think the stock won't get up to over the next Nine days, or at least won't go through. But which strike do we buy? Again, most people will buy at the money or slightly out of the money because that keeps the cost down. But if we want to be a little bit more aggressive and we want to be able to make more with A small move higher, then we might want to get a bigger Delta. In order to get a bigger Delta, all we have to do is instead of buying it at the money, we buy a further in the money Delta. If we were to buy this 134 Strike, we'd be buying a 53 Delta. And if we sell the 138 strike, we’d sell a 24 Delta. So that comes out to difference about what, 29? Right. But if instead we buy like maybe a 66 or 71 Delta, that makes our net spread Delta bigger, much bigger. In fact, about 18 points bigger in this example. Right now, the trade off there, of course, is that we end up paying more for the spread. So if we're wrong, we'd lose more. But all it takes is just it takes a much smaller move in order to get a profit out of there. We don't really have to wait for the trade to really take off and to reach that strike price. There are many other advantages of this, and we'll talk about those in a video that I have in store for you tomorrow. This is Dan Passarelli. Trade Smart.

Dan Passarelli, CEO - Market Taker Mentoring

Hey, Dan Passarelli here today! I want to talk about something that's important to every single one of you, EVERY trader. Let me start out by showing this chart of SPY. This is a chart, a one year chart, of the spiders, the S and P 500. And boy, we started the year pretty slow and steady and nice. And then we came into some volatility.

We had some pretty big market swings, some ups and downs. And for some traders, this might as well be a chart of their emotions, right? Have you ever felt that way: where when the market is going well, your confidence builds and you feel really great, and when you're making money, you're on top of the world. But then when you have those drawdown periods or the market goes against you or you have a big loser, it can really just suck the wind out of your sales and really get into your head and make you trade worse. Right?

Emotions are a bad thing in trading. But here's the big thing is that they're a very natural thing in trading. Every single trader has to deal with this in one way or another. And so it's our job as traders to overcome that emotion, to overcome the fear and greed, be more left brained, right? Apply more logic than emotion. Set a plan early and in advance. Know where we're going to get out of a trade before we get into a trade and set it and forget it. As long as we know what our risk is, we know what CAN happen and what we HOPE to happen. We're good with the outcomes and we can move on to the next trade; trade without emotion. And that just makes us trade better.

That's a handy little tip I hope helps think it should help everybody. We all need that little reminder now and then. This is Dan Passarelli. Trade Smart.

Dan Passarelli, CEO - Market Taker Mentoring

Hey, Dan Passarelli here.

Hey, Dan Passarelli here today! I want to talk about something that's important to every single one of you, EVERY trader. Let me start out by showing this chart of SPY. This is a chart, a one year chart, of the spiders, the S and P 500. And boy, we started the year pretty slow and steady and nice. And then we came into some volatility. We had some pretty big market swings, some ups and downs. And for some traders, this might as well be a chart of their emotions, right? Have you ever felt that way: where when the market is going well, your confidence builds and you feel really great, and when you're making money, you're on top of the world. But then when you have those drawdown periods or the market goes against you or you have a big loser, it can really just suck the wind out of your sales and really get into your head and make you trade worse. Right? Emotions are a bad thing in trading. But here's the big thing is that they're a very natural thing in trading. Every single trader has to deal with this in one way or another. And so it's our job as traders to overcome that emotion, to overcome the fear and greed, be more left brained, right? Apply more logic than emotion. Set a plan early and in advance. Know where we're going to get out of a trade before we get into a trade and set it and forget it. As long as we know what our risk is, we know what CAN happen and what we HOPE to happen. We're good with the outcomes and we can move on to the next trade; trade without emotion. And that just makes us trade better. That's a handy little tip I hope helps think it should help everybody. We all need that little reminder now and then. This is Dan Passarelli. Trade Smart.

Dan Passarelli, CEO - Market Taker Mentoring

Hey, Dan Passarelli here.

Well, John and Kathleen and myself, we're all on our way out to Sonoma to the MTM Options Trader options training retreat. That is this weekend. Thursday, Friday and Saturday.

We're super excited because we're going to be talking about some great stuff. And just to set the stage, for those of you who might be going or those of you who might have had to have missed it this year, we are going to be talking about taking your trading to the next level. And I want to share with everyone what my thoughts are and how to do that.

The first thing is to set some goals right? And they don't have to be… in fact, they really shouldn't be: financial goals. Not: I want to make 40% this year or 50% or $10,000 or whatever.

They should be more deep rooted:
• I want to be able to trade with less stress.
• I want to be able to feel more confident in my trading.
• I want to be able to have the confidence in my trading so that I can help put my grandkids through College...

Something simple like that, to give you sort of a longer term and deeper vision of what you really want. And then the next part of that is a plan on how to get there.

Now, this plan, sometimes it's hard to put the plan together in exact pieces. Sometimes you kind of have to build the plane while you're flying it, but you have to visualize somewhat of a path, just sitting there and doing nothing and hoping that you get to that next level. It's not going to work, right? Because the final step is taking action and actually putting that vision into place and making sure that you're following the steps you're taking, the learnings that you've taken and putting those new tools to use.

And that, my friends, is how you get to the next level.

Dan Passarelli, CEO - Market Taker Mentoring

Usually it's hard to predict how the stock market will trade this week in any given week. But I think it's reasonable to expect this this week the stock market will be quiet. There are not a lot of financial data being released until Friday. Friday is the big day for stock investors because that is when the Employment Situation is released. We'll get a look at non-farm payrolls and the unemployment rate broken down by different market sectors. These data will affect how the Federal Reserve Bank affects policy. Whether they raise or lower interest rates and by how much. These changes will affect the inflation rate as well as the prospects for an economic recession. It's a big day. So we're not likely to see much stock trading action until Friday.