Strike Prices

Im a curious fellow and wondering if anyone has ever heard GW explain why to ONLY buy the striek prices in the manual? Im guessing this has to do with volumes, but wondering if anyone knows the reasons why?
Zeke

So, I believe that Gary's recommendations are based on his experience and trying to make things easier for students. You could go into a long explanation that involved option greeks and expiration, but from things I've learned since taking the class, Gary's rules are solidly based and should be followed - funny how the more you learn the more you understand that what he says is pretty much accurate

If you are referring to the 1-5 taught classes,
so much of that information is not taught anymore
Gary's explains why in S1-S3 and RTP, especially when it comes to strike prices.
Big changes it this arena.

Thanks, Game0ver. I appreciate the update. When we get out of this pandemic situation I'll have to do retakes since all I had was 1-5 and RTP in the original format. There are lots of reasons to pick particular strikes and expirations, but most of them revolve around option Greeks and probability distributions of price changes over time, all of which Gary did not (and I understand why not) discuss in the earlier classes.

Sure, but how much of this has to do with volume? some strikes see significant more volume than others.

Well, I was considering volume a given. I would never trade a strike that did not have significant open interest and daily trading volume. Volume depends on what is "normal" for the underlying, but I typically look for open interest of hundreds or thousands of contracts with daily volume in the hundreds; but that's just me. Besides, the lower the open interest and daily volume the higher the bid/ask spread in most cases and you'll be paying this spread not only to enter but to close the trade.

Hello, Volume moves the option. It is actually the second thing you should observe if you are doing tech analysis. Understanding that strike prices are a reflection of where a stock may go up or down. Also remember that those who own stocks trade options as well to protect their stock or to make more money therefore volatility and time until expiration are very important. There is so many things that can move a strike price. Note what happened to AMZN when Bezos sold off some shares of the stock. Nothing was wrong with AMZN but see how it fell? Volume.

I know nothing about any classes beyond 1-5 and Advanced. That is all I took. Hope that helps.



Edited 1 time(s). Last edit at 08/07/2020 10:00AM by Darcy3.