if you're a beginner investor or Trader and are looking for a lowrisk way to invest in the markets that still gives you the potential to make very good returns look no further in this video our head of options trading teaches you the strategy and stepbystep detail I'm Mike B Fury and we're one of the top proprietary trading firms located in New York City since 2005 with num seven and even eight figure per year Traders we hope you agree you've found the right place to learn hi I'm Seth freudberg and I'm the head trade of S&B capitals options trading desk here in Manhattan and one thing we hear from Traders all over the world is this impression that options are too risky and that you're better off sticking with just investing in stocks but what if I told you that there are in fact many options trading strategies that are actually safer than trading stocks and can outperform stock performance in a much safer and more sound way than simply buying and holding the shares of a stock that you like well in this video we're going to actually teach you one of those strategies so if that sounds interesting to you then stick around because I think that you're going to find this very valuable before we get into the options strategy that we're going to be teaching you in today's video if you're absolutely brand new to options trading and you don't know much about how options work we put together a video for you to understand options Basics and if you click the video appearing on your screen right now it will lay the groundwork for you to understand the option strategy that we're going to be teaching you in this video Then when you're finished you can come back and watch the rest of this video Let's show you an example of exactly what we're talking about and how in so many cases employing a simple option strategy is going to be the far superior and safer choice to buying stocks so let's go back just about a year ago in 2023 and take a look at chevron's stock the Big Oil Company with the ticker symbol CVX and as you can see the stock had been selling off pretty much all year and closed on the third Friday of July the traditional options expiration day for monthly options which was July 2st and on that day the stock closed at 15869 and so let's suppose that you were bullish on this stock that day for whatever reason well you might buy 100 shares of the stock which would have cost you1 5,689 however there's another approach that we're going to take instead and that is to execute the easiest option strategy that there is and if implemented correctly is one of the safest trading strategies that you can employ to grow your account okay so instead of Simply going out and buying those shares of CVX What If instead we went ahead and pulled up an options chain expiring about a month later on the third Friday in August August 28th and we went ahead to the column entitled Delta which you'll find on your broker platform accompanying each options chain and look for the put option that has has a Delta close to 20 which in this case is the 150 put which has a Delta of 19.94% highly correlated to the probability that an option will expire with value on the day it expires and so the 20 Delta option has about a 20% chance statistically of expiring with value which means that it has approximately an 80% chance of expiring with no value which of course only happens when the stock closes above the put strike price rendering the put valueless because no one is going to sell their shares to the guy who they bought the put from for Less the shares are selling in the open market so the option just expires with a value of zero and since there is an 80% chance of that happening approximately you'd expect that that exact outcome zero value to happen a lot when you sell the 20 Delta option and you're soon going to see why that is so significant okay so first off let's make sure that we understand the cash flow of selling that put and so as you can see the put sold for $130 but remember each options contract represents rights to sell 100 shares of stock at the put strike price so you multiply that by 100 and so that day you'll receive $130 in your account and you'll need to have $115,000 in your account in order to initiate this trade because if the guy you sold the put to does execute the put you'll be obligated to pay him $155,000 at which time you'll own CVX at about an $8 discount to where the shares were trading the day we entered the trade now moving to the day that that put option expires you can see that the stock closed at 16.90 and so as we explained earlier the put expires worthless and so if you think about it that's a good thing because we get to just pocket the $130 that we originally collected when we entered into the trade we're going to be doing this every month for a year and so we're going to be keeping a scorecard of the results of this campaign and as you can see we've started with a $130 win because we collected $130 and just kept it when the option expired worthless and so we'll immediately move to the next month selling the closest to 20 Delta option for the September expiration this time collecting $163 requiring 15,500 in cash and again if we move forward to September 15th when this option expires we'll see that CVX rallied and closed at 16650 which means that again the put option expires worthless more than 10 points below the Stock's closing price and so we update our scorecard for the September win of $163 and so it's not to be too tedious we'll just tell you that the stock closed above the put option strike price for the October trade and we brought in $29 for that put and for November we sold the 155 put which brought in 134 which by the way regardless of the outcome of the trade we still get to keep as our payment for selling that put but something interesting happened in November because we had sold the 155 put but as you can see on the day that the put expired the stock closed at 14446 which is below the put strike price and so we're assigned those shares of CVX at a price of 155 per share and now you can see why we insist that you have a sufficient amount of cash available to you in your account because assignments can and will happen when you are implementing this strategy first off let's update our scorecard for the positive cash flow from selling the October and November puts and then let's move to how our campaign works if we own the shares which we now do and what you'll see is that that in this case because we own and bought those shares at $155 which was our assignment price under the put contract then if we go ahead and sell this time a call at the same strike price as we were signed the puts in other words if we sell the 155 call then if the stock rallies and closes above 155 then those same shares will be sold to the guy we sold the call to in other words those shares will be assigned away at the exct exact same price that we bought them for and so we won't experience either a realized gain or loss on the shares we'll just break even on them and as you can see we only collect $42 for that call because the market doesn't seem to think it's too likely that CVX can in fact get to 155 by the next month December 15th and in fact the market was right because on December 15th the stock closed at 14935 so the call expired worthless resulting in a just pocketing the $42 and so updating our scorecard for the December call you can see that for the opposite reason the fact that the stock closed below the call it expired worthless because there's no value to the right to buy your shares at 155 when they're trading way below that and so that expires worthless which is the same thing that happens for that same 155 call for the expiration months of January and February of 2024 we're in both cases the stock closed below 155 and so we just kept collecting cash against the shares we owned selling those calls against those shares now for the March expiration we again sold the 155 call at a price of 345 this time which by the way was much higher price because the stock closed just very slightly below 155 the day the previous call expired and when we move to the day that that March call expires you can see that the stock just made it above 155 closing at 155.5 five that day and so those shares get sold at 155 they're assigned to the guy that we sold that call to and so we can update our scorecard for that win now at this point in this campaign which is known to options Traders as a wheel campaign because you sell puts until they're assigned then eventually sell those assigned shares once the calls you were selling against those shares get assigned as as exactly just happened and so just like a wheel you return back to where you started and start selling puts again at 20 Delta which we in fact did for the April expiration selling the 20 Delta call which was located at the 150 strike for April selling for 137 and sure enough on the April expiration the stock closed at 160 5 Points above the put strike price and so the put expired is worthless as it did in all of the remaining months of the campaign and so after 12 months of implementing this simple option strategy we collected $1,659 now on the final day of the campaign CVX closed at 15915 which was only 46 cents higher than where the stock closed when the campaign first started it's important to note that if you owned the stock for the entire 12 months you would have also collected all of the dividends paid out by the company during that period whereas using this option strategy you only held the shares for a limited period of time and were therefore only eligible for just the February dividend because the rest of the time you didn't own the shares and were simply making profits selling the puts while during the call selling period of the strategy you actually own the shares and collect any dividends that you're entitled to depending upon whether you own own the shares before the stock dividends exate which in this case means that you would only have been eligible to receive just the February dividend and so if you look at the entire profit of owning the shares and collecting the dividends or running the option strategy and collecting the dividend only when your puts have been assigned and you own the shares against which you're selling covered calls you can see the option strategy was far superior with a return of 4.25% for the share ownership while the option strategy yielded over 11% and it's also important to realize that as a practical matter you're going to be able to invest the funds while you're just selling puts and not owning the shares and those money market rates have been over 5% for over a year now thus you really should think of the return on the option strategy as meaningfully higher because you own the shares a lot less than half the time in this example and so what I'd like you to take away from today's video is that if you feel very good about the long-term prospects of of a stock like you may feel about a big goil company like CVX and if you're happy to own the shares of CVX for most likely a short period of time while its price drops and then most likely recovers then this very simple option strategy becomes a very safe approach for you to take if you consider that you can make very nice cash returns employing this strategy and the only time that you own the shares is when they've dropped much lower than the market expected at which point you can either hold the shares that you've scooped up cheaply and wait for the stock to bounce and perhaps press higher as you expect with any stock that you're comfortable with or alternatively like we did here you could just sell covered calls against the shares you own at the strike price that you were sign the shares and end up breaking even owning the shares and just collecting the option income and in this case also the dividend income which as you can see can be a superior outcome on its own professional options Traders are fully aware of the power of cash secured puts and the wheel strategy and utilize these strategies all the time to improve their trading returns now if you'd like to learn three more option strategies that our prot Traders use including the unique options trick that allows you to make money while you wait to buy stocks or ETFs at the price you want and the options income strategy that allows you to make consistent money whether the market goes up or down or sideways and how to make money on a stock or index trade even if you're wrong on the direction then click the link that's appearing right now at the top right hand corner of your screen that will open up the free Workshop registration page in a new window so don't worry you won't lose this video or you can register directly for free at options.com