Marc Lichtenfeld’s Options Masterclass

Hello, I’m Marc Lichtenfeld, Chief Income Strategist here at The Oxford Club. Welcome to Marc’s Options Guide: YOU Can Trade Options!

I’ve designed this class to help you gain confidence as an options trader. Getting started is nowhere near as complex and time-consuming as you might think. In fact, it’s really simple.

If you’ve never traded an option and you find the idea intimidating, don’t worry. I made this video just for you.

I feel it’s my job to help individual investors take advantage of every lucrative trading tool available in today’s market. And I believe there’s no better way to gain an edge than by supercharging your portfolio with options.

Now, this doesn’t mean you should stop trading stocks. On the contrary, I suggest you supplement your stock trades with option trades. It’ll help you dampen the overall volatility of your portfolio and gain some leverage… not to mention the increased potential for massive short-term winners.

And that’s exactly what I mean by “supercharging” your portfolio.

An additional benefit is that with options, the cost of entry is generally much lower than with stocks. And much less movement in the underlying stock needs to take place to score those big gains.

Here’s what I mean.

Usually, an option will trade for much less than shares of the corresponding stock. If a stock is trading for $30 and its option is trading for $2.50, the option needs to go to only $5 for you to double your money. And for the option to move $2.50, the stock may need to rise only a few points.

Now, for the stock, which is priced much higher, shares would have to go from $30 to $60 to see the same return.

The bottom line is that when I recommend an option play, it allows you to take a position at a lower upfront cost than buying the shares outright. Additionally, options can help you minimize your risk, which is something most people have difficulty wrapping their heads around. Let me break this down a little bit more to help you understand exactly what I mean.

When I recommend a stock play, I’ll recommend an option as well. Here are some key distinctions to keep in mind.

A “call” option gives the buyer the right – but not the obligation – to buy a stock or exchange-traded fund (ETF) at a specific price by a certain date.

For example, let’s say you bought next month’s $70 calls for $1. That means that at any time between now and the third Friday of next month – because options expire on the third Friday of the month – you have the right to buy the underlying stock or ETF at $70 per share. For that right, you paid just $1 per share, or $100 per contract since each option contract controls 100 shares.

Now, if the stock were trading below $70, you wouldn’t buy the stock or ETF at $70 because you could get it cheaper in the open market.

But if the stock or ETF were trading at $75, you could exercise your options contract to buy the stock at $70.

That being said, when speculating with call options, we’re not going to be interested in exercising contracts. We’ll sell the calls for a profit. But it’s important to know where the value of options comes from.

In this service, we often trade biotech stocks. Take Gilead Sciences (Nasdaq: GILD), for example. Right now, it trades for just under $70. If Gilead’s price went to $75, our call option would increase in value significantly. At $75, we’d be able to sell the call for which we originally paid $1 for at least $5… maybe even more depending on how much time is left until expiration and current market volatility.

When I recommend a call option, I’ll always give you the exact month and the strike price of the call that I suggest you buy, as well as the maximum price you should pay. That’s important because you don’t want to pay too much for a call, as that would lower the amount of profit you can make.

Another thing most traders who are new to options fail to realize is that your risk is limited to a certain amount. What is that amount? It’s the value of your options premium, or the money you paid to enter the position. If you bought five contracts of an option that costs $2.50, your premium would be $1,250. That’s $2.50 multiplied by five contracts, which is $12.50 multiplied by 100, because each option contract controls 100 shares of stock.

In essence, when purchasing a call option, you’re betting that the stock or ETF is going to rise in value.

On the other hand, there are also put options. A put option gives the buyer the right – but not the obligation – to sell a stock or ETF at a specific price by a certain date.

In the same way that a call option is a bet that the underlying stock or ETF is going to go up, a put is a bet that the stock or ETF price is going to go down.

Back to our example…

Let’s say you bought next month’s $65 puts for $1. That means that at any time between now and the third Friday of next month, you have the right to sell Gilead at $65 per share. And it cost you just $1 per share for that right.

Now, if Gilead were trading above $65, you wouldn’t sell it at $65 because you could get a better price in the open market.

But if Gilead were trading at $60, you could exercise your options contract to sell the stock at $65.

Now, again, I’m not interested in exercising contracts.

So if Gilead’s price went down to $60, our put options would go up a good deal, at least 400%.

Options allow us to take advantage of short-term volatility regardless of what direction the market is heading… as long as you know which side to play.

So if you’re interested in trading options, you want to make sure your brokerage account is equipped to do so. That just means having adequate trading capital and letting your broker know that you’d like to trade options. There’s no margin requirement or account balance minimum. All you need to do is apply for Level 2 options trading with your existing brokerage account. The application process is very simple, and approval usually takes less than two days.

But letting your broker know in advance will ensure that you have access to all of the available options when you wish to execute one of my trades in the future. It will also allow you to learn what the fees are in advance.

Thank you for joining me, and I look forward to a profitable year ahead.

For a more in-depth look at options, please refer to the “Technical Pattern Profits Options Guide” here.