Good Kids Trading (GKT) wants you to think about ways you can reduce your initial purchase price of your shares (the cost basis), and it doesn't always have to be from buying more shares at a lower price. The more you reduce your cost basis the less risk you have. This is a very important concept that has made me a lot of money. I'm going to share with you a trade I took in Cardinal Health (ticker is CAH). I'm telling you all my 'secrets' so you can also build a plan you like, and/or you can copy some of my ideas. Keep in mind this is NOT financial advice, this is education from someone who's been doing this a while, but I'm not a professional and I'm not a certified advisor! Why CAH you might ask? Well CAH is a dividend aristocrat. You remember those, I wrote a whole series on GKT's way of trading Dividends. If you haven't read the series you should. I broke down exactly what I look for when finding dividend stocks for my portfolio. The power of dividends, other than some income, is that every time I collect CAH's .50 dividend that effectively reduces my cost basis by .50. I admit that doesn't seem like a lot but it adds up to 2.00 in cost basis reduction a year! Remember to zoom out, don't get too focused on the daily candles! When to buy shares What if you make a simple plan to buy a stock every time they touch the red/blue line? Which are the daily 100 and 200 moving averages. Create a watchlist of 5 or 10 stocks you REALLY like, create alerts for when they hit the price levels of the moving averages, that's as simple as it gets! I wrote about the power of moving averages . Look at the chart below if you bought CAH every time it hits the red line does that look profitable to you? I zoomed out because I want you to see how well this works. Back to my example from this year. I bought CAH in March at about $69.50 a share. As we look at the chart below do you see the double bottom that formed right on the 200 daily MA? To be clear, I didn't know it was a going to be a double bottom at the time I bought it. But I knew it hit the red line and I knew it was a possible double bottom. This is why GKT believes you should combine technical analysis with math based trades, or value investing. CAH was bouncing off the daily 200 moving average, retesting and bouncing again. BULLISH! Now zoom out to the weekly. We are buying off the weekly 50. That means we're buying off support. ALWAYS remember to zoom out to the weekly chart! This is additional information to help you build conviction to take a trade (or not take the trade.) The more checkmarks you get the better! I saw good things on both the daily and the weekly chart. I was feeling good about this, doesn't mean it will work, but I feel good about taking this risk. Be willing to take appropriate risk! Appropriate risk by GKT standards is 1% (maybe 2%) of your account. I use moving averages as an easy way to help you find a good place to buy a stock, I like this buy off the red line method because I am buying when a stock has reverted to the mean and it's at support. If you decide to buy a stock I encourage you to ensure you are buying at support! I want you to create a watchlist of stocks you like, look for stocks in a bullish trend that tend to bounce off the red and blue lines! Hint look at AAPL! Share your list with me justin@goodkidstrading.com or post it in our discord. Next time we'll walk through how I reduced the cost basis of this trade, but your assignment if you want to learn the GKT ways is: Setup your charts with the 100 and 200 moving averages, the 50,20,10 ema. If you need help ask us on discord! Build a watchlist of dividend aristocrats. Set alerts around the 100 and 200 MA on your chart (alerts mean you don't have to watch the chart). Setup some trades when your stocks hits these levels (remember you can paper trade these). You should paper trade before you trade real money. See you next time, we'll walk through this trade so you can see how I reduced my cost basis even further and you will build your plan to reduce cost basis! If you want more information you should join the GKT discord to discuss these tips in more detail and connect with like minded people who trade the stock market! Happy Trading Good Kids! Disclaimer: this is NOT financial advice. I’m basically just some dude on the internet who’s been trading a while, and I use the stock market as my primary source of income. None of this is financial advice it’s purely educational!

I love when a quality company gaps down after earnings. Let's take a look at a nice trade we took this week in Good Kids Trading on Schwab. Many traders use the Think or Swim software, which Schwab acquired when they purchased TD Ameritrade. Schwab is a very large financial services company, so they were on my earnings watch list. As the Good Kids know, every week I post the most anticipated upcoming earnings in our Discord! This week was no different, here's a screenshot from our GKT discord : On Tuesday, Schwab reported an earnings beat; they did miss revenue, and the stock was gapping down premarket. I was able to set up this trade in my head and put it into my broker in less than 5 minutes, but I want to break it down for you step-by-step so you can learn my process as well! You might think you don't have time, but practically everyone has 5 minutes. I opened TradingView and saw SCHW was gapping down! Good, I thought. The only way to buy low and sell high is when a stock has a down day. If you don't know what TradingView is, this is a web based software that many technical traders use. I will write an article for you on how I use the software and how I have customized my charts in an upcoming blog post. You should subscribe to the website for real time updates! Next, I looked for the moving averages on the same chart; I have my moving averages on my chart by default. As I've previously mentioned, I pay close attention to moving averages for many of my trading decisions . The daily 100 moving average was 58.65 (the blue line below), the daily 200 moving average was 57.32 (the red line). I circled the level on the chart below. Since both these moving averages were close to previous support around 56, I don't mind owning shares of SCHW here. I've drawn red boxes showing the support/resistance I see on the chart below: Next, I opened my broker and looked at the option chain. The options chain is a graph that looks slightly intimidating at first. I'll break this down for you in an upcoming article so stick around and subscribe! We like to sell options around 45 days to expiration as this is the ideal time frame to benefit from theta decay. Theta decay is a fancy term that measures how the value of options loses value over time. It's mid January so I had two real choices, February or March. I mainly choose monthly options for put sales. So, as you see below (I drew red boxes around the two most reasonable expirations.) February has 30 days before expiration, March has 58: My thought process is this. If there is enough premium, I'm going to sell my puts in February because if I'm wrong, I can roll that short put to March for a credit. When I say is there "enough premium" I'm looking for more than 1% premium for every 30 days. I want to get paid 1% of the stock's current price as my reward for taking on the obligation to potentially buy the stock. There also needs to be enough reward, so ideally I would like to receive about $100 in real money for each put I sell knowing my profit would be $50. I know this might not seem like a lot of money, but it is when you consider it takes 5 minutes of your time it really adds up when you trade with enough frequency. Let me oversimplify what a roll is just in case you don't know. If I sold the puts in February and SCHW kept going down, I'd be obligated to buy the stock. As my the stock reaches the strike price of my put I would perform a 'roll." Rolling the put I sold would mean I buy to close the February put I sold for a loss. But I would then sell a new put in March for a larger credit than what I just paid to close the February put. If I time it right, I could very likely move the strike from 57.50 to 55, meaning if I were put the shares, they would have an even better cost basis! Since time and uncertainty are priced into an option, i get paid for going further out in time because I'm selling not buying! So again, I decided in about 15 seconds that going to target February, and I'll be a little more aggressive with the strike of my put because March is my backup plan! I can probably roll down to March 55 puts if I end up being wrong and SCHW doesn't bounce. Since the moving averages were 58 and 57, what better strike than the 57.50. I would own shares of SCHW at this level in the worst case scenario. Do you see the little blue dotted line in the Tasty Trade platform (I highlighted it with a red line above) that is referred to as the standard deviation. The Tasty Trade platform shows you this on their options chain. Not all brokers do. In simple terms, standard deviation in an options chain helps us get a sense of how much a stock's price might fluctuate. The orangish highlight in the middle (i added the red box) is the expected move of the stock. It's essentially a forecast for how much a stock is expected to change, calculated by market makers using mathematical models. Tasty Trade shows it this way, not all brokers display it so simple. I know this is a lot of words, but I'm really spelling this out step-by-step so you can understand my method here. Let's recap: if I sell the 57.50 put, I have 2 moving averages that should act as support, I am 1 standard deviation away, and I'm outside the expected move for the stock in the expiration that I chose. I also have a backup plan of rolling my put out in time to give me even more time to be right. All of these makes this a high probability trade in my mind. Does it always work? NOPE nothing always works, is this a nice setup and is taking this trade good risk management? YES I thought so! You can literally do this in a couple of minutes after you do this a little while. If it's not obvious to you this is a high probability trade let me show you how Tasty Trade will actually calculate your probability of profit as well. The cool thing about many of our 'math based trades' is you don't even have to do the math. The broker will do it for you! I highlighted the P50 of this trade, which is the probability of this profit hitting 50% of the premium received. There is a 72% chance this option expires totally worthless, but I don't like to keep naked options open that long due to what is called a tail risk. That's fancy jargon meaning the risk to reward isn't good, I'm not going to get into a bell curve discussion here, just Google if it you are a nerd like me :) This trade was a nice math based trade, as I always do I post my trades (for free) and for everyone to see to the GKT Discord . Do all our trades win? NO! We show you how we manage our trades, and we show our losing trades as well. Never are we making recommendations you should take these trades, we're doing this to help educate you so you can start making trades on your own! Below is the post I put in discord 1 minute after open. The lingo of the post is Sell To Open (STO) Schw February 57.50 puts for .95 in premium. You can see the actual trade setup in the tasty trade brokerage. I collected $95 for every put I sold We also have a trade idea's section, you can see that I let everyone know exactly my plan before the market even opened! For the SCHW trade, my profit target is 50% of the credit I received. I got .95 for the puts I sold. I went ahead and just set my closing order for .45 as that's easy math (so a little over 50%). This trade closed right over 1 hour. I set a GTC order so I had already walked away from the computer. A good to cancelled order mean the broker will handle buying the puts (which closes the trade) for you at your profit target. There is literally no reason to sit and watch this trade. Was it guaranteed that I was going to win this trade? Absolutely not, and there is zero reason for you to overleverage or sell too many of these. If you can't afford to own 100 shares of SCHW, then you should NOT be doing this strategy. I also do not think you should be selling 10 of these either, unless you REALLY want 1,000 shares of SCHW, which for some people that's possible and they can still be diversified. If this trade went bad, I would have taken the shares of the company. I have extensive experience hedging my positions, and I would have sold covered calls to reduce cost basis . Another strategy I've explained in a previous blog. Here's the real life example. Post earnings put sales is one of my most 'successful' strategies and something I do often. They don't always close the same day, but with a long enough timeframe, I can turn almost every one of these into a winner. It took me 5 minutes to set up and execute this trade, and I went on to get other things done while the stock market provided me income. You can do the same thing. You can follow along and join a community of supportive traders by joining our discord . If you want more information you should join the GKT discord  to discuss more and connect with like minded people who trade the stock market! I hope this article was valuable to you. We want to help educate and show you trading doesn't have to be complicated, and you can do this. Happy Trading Good Kids! Disclaimer: this is NOT financial advice. I’m basically just some dude on the internet who’s been trading a while, and I use the stock market as my primary source of income. None of this is financial advice it’s purely educational!

Continuing the series on reducing the cost basis with an example! Last week we discussed covered calls . If you haven't seen the previous articles we've already covered why reducing your cost basis is essential  and discussed a straightforward method for determining where to buy shares . Let’s get back into the example.  I owned 100 shares of CAH, remember I bought it off the red line at 69.50 a share. About a week later I collected a dividend of .50 a share.  This means my effective cost basis is now $69. In the chart below you can see I sold a covered call using the logic I shared above. This is my actual trading plan. Look at the graphic below:     Below is the premium I collected. The graphic below is an options chain. It looks super complicated. Don’t worry I felt like I would never understand this either. It’s really not that bad. I’ll do an article on this soon. Just focus on the red squares for now. The red square on the right is the price I’m willing to sell my shares (80) and the red square on the left is what you click to actually sell a call. I collected $115 which is the middle of those two numbers. This means I just reduced my cost basis by another 1.15 I’m agreeing to sell my shares at 81.15 (the strike of the call plus the premium collected). You are about to see what happens with a covered call goes ‘wrong’ in terms of capping my upside. But you will also see how I generate income.   As you can see below CAH kept moving up, past my covered call. The purple line is the covered call I sold. Do you see how CAH went below the purple line? I had an alert to notify me, so I didn’t have to watch the chart!   I figured that unless there was a trend change my shares are about to be gone before the next ex-dividend date. If you have a call in the money on the ex dividend date you will likely have your shares “called” away early. Because the person who bought that call you sold wants to collect the dividend, by converting the calls to shares! So when my covered call went out of the money I decided to roll this for a credit. I roll for credits to keep reducing the cost basis! I had the 80 May Call, I rolled it out to June, the options chain is below. So I closed the current covered call, by ‘buying it to close.’ I then sold the June Call. I closed the may call for $1.50 and I sold the June call for 3.00. So once again I reduced my cost basis by 1.50. That is 3 dividends! The options chain is below: Look  at the chart below. My June call was deep in the money. Meaning the stock is trading at 85, and I sold the 80 call. I knew my shares would get called away on the ex dividend date.   So what I did was roll out my covered calls one more time, I collected about 1.00 which was again another 2 dividends!     So this is an example of where I capped my upside on the 100 shares. I could have sold the shares at 94, but you never really know if a stock is going to go straight up. I made $365 on the covered calls and $50 on the dividend. Next time lets look at another options strategy I love to use to reduce my cost basis: covered strangles. If you want more information you should join the GKT discord  to discuss these tips in more detail and connect with like minded people who trade the stock market! Happy Trading Good Kids! Disclaimer: this is NOT financial advice. I’m basically just some dude on the internet who’s been trading a while, and I use the stock market as my primary source of income. None of this is financial advice it’s purely educational!

Continuing the cost basis reduction series , today I’m talking about covered strangles. A covered strangle combines two of my favorite options trades into one. You sell call and you sell a put around your shares. Next week I'll take the CAH example where I sold the covered calls and show you how a covered strangle would have been even more profitable! Risk: A covered strangle doubles the premium since you are selling a call and a put! Please realize that when you increase the reward you are also increasing your risk.  More premium, more risk—that's the stock market's mantra! So, before you decide if a covered strangle is a good strategy or ‘right’ for you let’s talk about the risk and discuss what I like about covered strangles. I wrote about how the covered call’s only "risk" is capping your upside. That still is true with a covered strangle. The good thing is the stock price can’t be at two different strikes at expiration so the short put you sold would be worthless so if you were called away your premium collected would be a little more with the short call. The bigger risk with a covered strangle is on the put side of the trade. Just like selling a naked but you are agreeing to purchase more shares if your short put expires in the money. We all know that a stock can go to zero, its not likely but it’s possible and so you need to account for this. Mechanics: I generally sell a 20 or 30 Delta Strangle. I use the same rules I use for covered calls and puts in terms of looking at the chart for support and resistance. This is a great way for me to not only reduce my cost basis, but also dollar cost average! If I am assigned more shares from the put I will be ‘forced’ to buy low. I will sell options in the monthly expiration closest to 30 to 45 days to expiration. Is there support and resistance at these strikes? Usually there is! Is there enough premium at these strikes? Sometimes you have to bend your roles a little bit because you may not get as much premium as you want, but remember you are getting a dividend as well! You can also think about how we trade strangles using math-based principles. Math based traders normally sell strangles in high volatility environments and collect the premium without owning shares. So this strategy is similar to that except for you still have shares. If you see a lot of volatility or you don’t mind owning more shares consider a strangle instead of just a covered call! Trade Plan: As with any options trade the premium needs to justify the risk you are taking. In terms of your trading plan you have to determine how to manage a strangle. If you can’t don’t want more shares perhaps you consider a rule to close the strangle at 200% of the premium received. Make a plan for when the stock goes up, down or sideways! If the stock goes above my covered call I roll as long as I can for credits then I let the shares go. If a stock trades sideways this is great! I keep selling strangles over and over again reducing my cost basis. OR I close the trade and take my profits to buy something tangable. If the stock drops, my rule is to keep rolling the short put as it is tested. Meaning as the price touches my stirke I keep rolling for hope. I keep collecting credits closing my current put and selling a put further out in time and away from the money if possible. Remember you get paid for time. I'll do this until I am assigned shares or the stock bounces and my GTC order hits target. This does require buying power as you are agreeing to purchase another 100 shares for each put you sell. You should create rules that make sense for your plan and your account.  For example, if IVR of the stock is high, maybe you sell a strangle instead of a covered call, assuming your account can handle another 100 shares of the underlying. Everyone says they want to buy low and sell high, a strangle helps you do just that on a smaller timeframe. The put is forcing you to purchase more shares, the covered call will sell your shares higher. Advanced stategies For the more advanced and active traders you can also leg into a covered strangle. I previously discussed waiting for multiple up days or for the stock to reach resistance to sell a call. You can follow this rule, and also wait for some down days or the stock to reach support to sell a put. You do collect more premium doing this but there are some down sides as well first of all you have to actively be watching or monitoring the stock through alerts. But sometimes you don’t get the move you need to sell the option. If the stock traded sideways a 30 Delta strangle is going to give you the theta decay you wanted. You would never have a chance to leg into the strangle so you missed out on that premium. That’s just a tradeoff of waiting for more premium. Ultimately the choice is yours. You can also sell 2 puts instead of just 1, but this obviously increases your risk and obligation to buy more shares. It is something I do not do very often unless i have a strong conviction on the stock or I want more shares. Conclusion:   I do like selling strangles against my shares because it doubles the premium I receive. It also increases my risk so I make sure I have a plan and understand what could happen if the stock were to drop significantly. I know how to hedge my shares using long puts if necessary. Keep in mind no strategy is ever going to work all the time you will have to manage some losers so it’s important to have a plan. I will say this strategy has been successful for me throughout the years. After all it is combining two of my most favorite options trades. The covered call and the naked put. When one of the option’s strike price is being challenged the other strike is winning. So you are reducing some of your loss. By understanding your biggest risk is to the downside, and if you are buying at a support zone a covered strangle make a lot of sense. This is an amazing way to reduce your cost basis quicker than just selling calls. After the CAH example of a covered strangle I will discuss a collar and a super collar. Both of these can reduce your cost basis, but they also are a nice way to hedge your position as well. We’ll jump into all the details next time. Happy Trading Good Kids! Disclaimer: this is NOT financial advice. I’m basically just some dude on the internet who’s been trading a while, and I use the stock market as my primary source of income. None of this is financial advice it’s purely educational!

Let’s continue our series on cost basis reduction with the same example I showed previously on Cardnial Health stock ticker CAH. As you recall I only sold calls in the last exmple. Today I’m using the exact same timeline same stock, we are just selling a put as well as the call to compare the difference in cost basis reduction of selling calls and selling strangles. Full disclosure I did not sell strangles against this position in real life, I just sold the calls, so this is hypothetical but still very informative.  As we discussed last time selling strangles adds additional risk which increases your reward but also increases your possibility of losses. We already know that CAH was very bullish so selling coverage strangers is going to look like the best strategy using hindsight. If the stock went down this example would look different.   So once again we bought CAH off the red line (Yes, trading can be this simple). 100 shares a 69.50 we collected the dividend of .50 a share a week later making our cost basis $69 a share This is the power of dividend stocks . Read my entire series on them! Remember a covered strangle is selling a call and a put around your shares, so instead of just selling a call, we're going to sell a put as well. Look at the chart below. The purple line is the strike of the covered call. Do you see how it's above the 100 moving average (the blue line)? Do you see how the covered call is at resistance, how all those previous candles stopped around $80? Let's agree to sell our shares there! Now look at the orange line, this is where we'd sell a put which obligates us to buy more shares. Do you see that's where we bought the stock originally? Do you see how we just setup an agreement to buy on the red line again? But this time someone is paying us even if it doesn't hit that red line through the premium I received. This is what the option chain looks like. The red squares show the delta, and the place we'd click to sell each option. We are looking for a 20 or 30 delta strangle.We are going to sell the 80 call for $1.15 just like I showed last time, BUT we’re also going to sell the 70 put for $1.20. So with this options trade we are effectily agreeing to sell our shares 80 and we are agreeing to buy more at 70, we collected $2.35 in cost basis reduction. Someone paid us 235 to obligate us to sell high or buy low for the next 50 days! The covered strangle doubled our premium received from the covered call example! Keep in mind more risk gave us more reward. CAH continued to run, the covered call part of the strangle was being tested the entire time. but with a stangle when half of your strangle is being tested the other half is winning! So as my 80 CC is being tested, the 70 put is 100% a winner. This is the chart: Earnings are coming up soon. This is my rule, you don’t have to do this, but you can avoid a LOT OF PAIN if you decide to avoid undefined risk over earnings, especially if you can get out for a win! So as CAH had earnings coming up I closed the short put. Lets look at the options chain so I explain my decision making process. The put option we sold for $1.20 is trading at $0.15. That means I can buy that option back and lock in $1.05 in premium and cut ALOT of risk. If CAH drops, I can always buy more shares or I can sell another put! This is an easy descision for me. Its not worth $0.15 or $15 to keep that put open. As CAH dips on earnings we have a new opportunity we did NOT have with just the covered call. We can move our covered call from 80 to 85 for a credit if we start a new covered strangle! This is the chart. Do you see how CAH touched the green line which is the 50 EMA? Moving averages are SO important to me. Read about the power of Moving Averages Of course, you have the choice to sell another put and make another strangle or just keep rolling the covered call. The decision is something you need to decide based on your timeline and account size. When a stock makes a big run it's fine to let the shares go. A 20-30 delta strangle is awesome for reducing cost basis if you are willing to hold the stock long term this is what it would look like to enter another strangle. So instead of just rolling the covered call if we start another strangle we would collect a .50 credit to agree to sell our shares at 85 (instead of 80), so a gain of 5.00 a share or $500! if you agree to buy more shares down at 75. More risk, more reward!   This is what it looks like on the chart. Do you see another strangle is just agreeing to buy more CAH off the red line?? I'm going to stop this example now, but as you see CAH keeps running. You can keep doing this repeatedly. I would stop doing this when a stock starts making new highs look at the weekly or monthly chart to see this . Eventually stocks pull back. It might take a long time or it could be sudden, so part of selling high means you actually need to sell your shares! You can always wait for a pullback to start another position. Covered strangles are a very powerful options trade to reduce cost basis when a stock is bullish or trading sideways. The power of the covered strangle is you have a bullish and bearish position around your shares so when a stock does take a temporary dip the covered call helps further reduce your cost basis. When the stock takes off bullish your short put helps you collect more premium. It’s like double dipping, but you need to understand the additional risk of course.   I hope you enjoyed this example. I know this was a long example, but I'm giving you years of experience and a lot of education I paid a lot of money to learn. If you want more information you should join the GKT discord  to discuss these tips in more detail and connect with like minded people who trade the stock market! Happy Trading Good Kids! Disclaimer: this is NOT financial advice. I’m basically just some dude on the internet who’s been trading a while, and I use the stock market as my primary source of income. None of this is financial advice it’s purely educational!

I'm starting a new series on Reducing Cost Basis because I think reducing your cost basis is a powerful concept many traders/investors miss. It's important you don't just focus on your original purchase price, but instead think: "how can I reduce my cost basis", and you don't always have to buy more shares to do this! For me cost basis reduction is always on my mind. It's why I sell premium against my shares I want to reduce the effective purchase price to as little as possible. When we think about buying stock it easy to just focus on the trade price, but in the Good Kids Trading (GKT) universe, our perspective goes beyond that initial entry point. It's all about reducing your risk, and ultimately, enhance your profitability. If you know me, I’m always focused on the simplest way to achieve my trading objectives. This series isn't about selling you a shiny or complex solution; it's about sharing simple techniques I use, so you can learn, implement, and make better decisions. Over the course of this series, I’ll show you a few simple yet powerful tactics I use to reduce cost basis. We'll discuss the importance of dividend income, particularly from dividend aristocrats – companies with a history of consistent dividend payouts. These dividends aren't just pocket change; they are tools to help shave down your cost basis over time. We'll also explore selling premium, a strategy that includes covered calls and strangles. It's about generating income while gradually decreasing the cost basis of your stock holdings. And let's not forget the concept of pyramiding – buying more shares as a stock's price dips. It's not just about getting a good deal; it's about utilizing market dynamics to your advantage. So, if you're excited to discover the "secrets" of reducing cost basis without the need for complex formulas, stick with me! My next article is a real-life example involving Cardinal Health (CAH) . It's all about learning, understanding, and taking your trading to the next level. Ready to dive in? See you next time Good Kids! Disclaimer: this isn't financial advice. I’m basically just some dude on the internet who’s been trading a while, and I use the stock market as my primary source of income. None of this is financial advice it’s purely educational!

With these 6 tips I've built a life where I trade for roughly half an hour daily. And yes, my account is decent sized. And yes, trading is my primary income source. It's been a journey of learning, growing, and adapting, but with the right tools and mindset, you to can pave your path to building passive income through trading. 1. Build Watchlists (and keep them updated): I keep watch lists of my 'top' companies. I have watchlists for multiple sectors, companies that make money, and the most liquid stocks in the market. It's VERY important to draw weekly support and resistance lines for quick reference on the stocks you trade the most! 2. Set Alerts: Instead of watching for a pull back or relying on technical indicators, like the MacD Cross, I use tradingview and or my broker's alerts to notify me. These notification are highly customizable and go directly to my phone, so I'm always in the loop even if I'm not near the screen. 3. Quick Morning Review: Every morning I take a brief look at pre-market data for SPY and QQQ. No one knows where the market is going to go, but looking every morning gives me an understanding of where the moving averages lie, and keeping up with the market every day (even if it's just for 2 minutes) is crucial for building market awareness, spotting support and resistance points, and staying informed. 4. Plan Ahead: I familiarize myself with the key events for the upcoming week. This includes earnings reports, federal reserve meetings, or significant economic data. Being proactive keeps you prepared. Even though we don't know exactly what will happen, knowing that a binary event is coming up is key to my trading. We discuss this in our discord ! 5. Trade the plan: I stick to my plan, I go through my watchlists and look for trades using a plan I've build and believe in . I change my plan as the market conditions change , but knowing the plan, believing in the plan, and executing my plan is like second nature to me. It's become mechanical so there is no emotional trading ! 6. Immediate GTC Orders: Once my trade fills, I instantly set a Good Till Cancelled (GTC) order for my profit target. This ensures I capitalize on price movements, while I'm not watching in real-time. I have GTC orders sometimes fill the same day while I'm doing other things not even looking at the market. These tips are how I make money in the market. I have a lot of experience, and I've optimized my trading routine to fit into just about 30 minutes a day. I've been doing this a while so it might take you longer at first, but this is exactly the things I do to minimize my screen time and make money in the market! If I can do this you can too. If you found this useful let me know ! I love talking to people interested in trading (a quick thanks is always nice too). If you want more information you should join the GKT discord to discuss these tips in more detail and connect with like minded people who trade the stock market! Happy Trading Good Kids!

Learning to modify your rules based on market conditions is an important skill to learn to be a successful and profitable trader. Almost every strategy works better with certain market conditions and realizing this and making adjustments to your strategy can make you far more profitable. You might be taught a strategy that works extremely well in a bullish market, but doesn’t perform as well if the market is bearish or sideways. This does not automatically mean you shouldn’t use the strategy, you just need to make some adjustments to your trading strategy. This is why you shouldn’t total write off a strategy that has stopped working, sometimes the person teaching doesn’t even realize this, so let’s go through a couple of simple strategies I use all the time to illustrate what I mean and help you think about when and how to modify some of your strategies to help make you a better trader who is more profitable and mechanical! Covered Calls I’ve talked about selling covered calls to reduce cost basis . Check out the article for all my “secrets”. I also frequently sell covered calls on a weekly basis for income generation. You might see someone teaching a strategy of rolling covered calls on a weekly basis for income and they teach you that as soon as your current covered call reaches 90% recapture, close that and sell your next covered call immediately at a 20 or 30 delta. This is an excellent strategy if your covered call is expiring due to theta decay, meaning the stock is still bullish and your call no longer has any time value left. But if your call reaches 90% recapture due to a large decline in the stock price, going out and immediately selling the 20 or 30 delta covered call is not going to be as profitable or advisable as it would if the stock were in an uptrend and your call was near zero DTE. Here are some factors that I consider when selling weekly covered calls: The direction and trend of the stock price. Is it bullish, bearish, or sideways? The volatility of the stock and the option. Is it high, low, or average? Will my shares still be profitable if I get called away, or do I need to sell a call further out of the money. Where are the moving averages compared to the current trading price of the stock? Depending on these factors, I  might modify myr strategy by: Choosing a different strike price or perhaps a different expiration date for the covered call Waiting for a better entry point to sell the covered call Rolling the covered call up or down, or choosing a delta further away from the money. Closing covered call early during bounces in bearish markets. Hedging your covered call with another option or a stop loss on the shares Selling Puts My most favorite strategy is selling puts . Multiple articles here about this. We know that selling puts on down days brings in more premium, but it’s also important to consider the overall market conditions including Vix (which measures volatility) VIX can be used to gauge fear in the market. If you have a general rule to sell puts each time a stock has a pullback of more than 5% and you don’t check if the stock is 5% off of an all time high (ATH )or 5% away from support or resistance, you are actually setting up two very different trades following the same ‘rule’. If you don't pay attention to VIX, selling puts can have more risk at certain times. It doesn't mean your strategy is bad, it just means it's not exactly the same strategy all things considered! Here are some factors that you should consider when selling puts: The direction and trend of the stock price. Is it bullish, bearish, or sideways? The volatility of the stock and the option. Is it high, low, or average? Where is SPY and the relevant indexes for the stock your are selling puts on. Are they at all time highs? Maybe they are making new lows? The delta of the option. Is it in the money, out of the money, or at the money? The support and resistance levels of the stock. Depending on these factors, you might want to modify your strategy by: Choosing to not sell puts at all time highs Waiting for support as a better entry point or resistance as a better exit point for your put Rolling your put up or down, based on the how the stock is trading Closing your put early in bearish markets or looking for a bigger profit target in bullish market. The point of today’s post is to remind you that sure, have a simple set of rules that are easy to execute, but understand why a strategy is working (or not working) right now, and take the overall market conditions, the market cycle and volatility into account when you review your strategies. Nothing works all the time, but you can make small changes to your strategy to make your trades more profitable and get a better success rate. It’s very rare any strategy works exactly the same and has exactly the same rules. I hope you enjoyed this post and learned something new. If you did, please share it with your friends. And if you want to learn more about trading strategies and how to apply them in different market conditions, join our discord! Subscribe for our weekly newsletter. It's all free! Happy Trading Good Kids! Disclaimer: this is NOT financial advice. I’m basically just some dude on the internet who’s been trading a while, and I use the stock market as my primary source of income. None of this is financial advice it’s purely educational!

Delta is a fundamental Greek we focus on at Good Kids Trading (GKT). If you want to make successful options trades understanding delta is crucial! Delta measures how an option price will move in relation to a one-dollar change in the underlying stock price. I like to think of delta in terms of MPH of a car. The higher the delta, the faster the option price moves as the underlying moves. But we use delta for more than just trading individual options, let me explain. Decoding Delta: Essential Insights for Options Traders For calls, the range of delta is from 0 to 1. A delta of 0.60 means that the option price will go up or down by 60 cents for each dollar that the underlying stock moves. On the other hand, for puts, delta ranges from -1 to 0. A delta of -0.532 means that the option price will increase by 53 cents if the underlying stock moves down by one dollar. We can also use delta to indicate the probability of an option being in the money (ITM) at expiration. If we sell a put that has a Delta of 30, it indicates a 30% probability of the option expiring in the money. As premium sellers, we want options to expire out of the money, so a lower Delta corresponds to a higher probability of success! If you're thinking about selling a covered call and want to know the probability of the stock reaching the strike of your covered call you can check the delta of the call option. Let's look at this example: If you wanted to sell a covered call on your Apple shares at 180, you can see the delta is .25. This means there is a 75% chance this call will expire worthless. To be clear, we look at more than just delta when selling calls at GKT, but I want to illustrate how delta works. If you want to read more about covered calls checkout this blog I wrote with all my "secrets" delta is a very important factor I consider as well. By adjusting the expiration date you can see how the probability changes. The call in the example above expires in 45 days. What happens if you choose a closer expiration date? This covered call that expires in 10 days, as you can see the 175 strike is the closest to .25 delta. So the strike moved by $5. The premium collected also changed. Delta of options are impacted by many factors including days to expiration. The more time you have on an option the more time (Theta) and uncertainty (Volatility) is priced into the option. GKT uses delta for our put sales as well! If you're interested in buying the dip on Apple and you want to know the probability of getting shares (based on delta) you can look for a strike in the -20 to -30 delta range. Meaning there is an 80-70% chance this option expires out of the money. You can see that the 160 strike put has an 80% chance of expiring worthless, and the 165 strike put is closer to 70% in terms of expiring worthless. We do not just look at delta when selling puts, but it is part of our consideration! Read more about how I g enerate income using put sales . Understanding Exposure to Market Movements Delta can be used as a share equivalent to measure directional bias or exposure. A position with a Delta of 40 would behave like owning 40 shares of stock, even though the contract is for 100 shares. Keep in mind that shares never expire, and options always do! Conversely, a Delta of 80 would feel more like the full contract size and weight. You can monitor your options delta to understand how your position compares to owning shares of stock. Delta of your Entire Portfolio At the portfolio level, Delta provides a broad market view of directional exposure. For example, if portfolio deltas were 200 and beta weighted to the SPY, it would suggest an equivalent of owning 200 shares of SPY in the overall portfolio. This is a powerful way to determine how much you account will move up or down as SPY moves. We will write an entire article on portfolio hedging. In the mean time you can checkout our discord and you will see why I sometimes setup put spreads to hedge my delta when the market looks like it might pull back! I monitor my total delta's and I add put verticals (which have negative deltas) to help my account from moving as much. I'm looking to neutralize my deltas! Navigating Returns with Delta in Options Trading Delta's relationship with returns is a classic give-and-take dynamic. Selling options with higher Delta values, such as 45 (meaning close to the share price) over a 30 delta option, will generate higher returns. This is because options with higher Deltas have higher premiums. However, this higher return comes at the cost of a lower probability of profit and more risk that your option expires ITM. Deltas represent probabilities, and selling options with higher Deltas means accepting lower probabilities of profit. You know I love to sell strangles, I wrote why I love strangles to reduce my cost basis now that we've discussed delta, you understand that selling a 20 delta covered call and a -20 delta short put has a better chance of expiring worthless, than a 30 delta covered call and a -30 delta short put. Of course selling a 20 delta strangle pays less premium, there is no free lunch in the stock market. Mitigating Risk with Delta Management The stock market is random and unpredictable, and as option traders, we have a number of advantages to mitigate risk. When it comes to Delta, the key to reducing risk is controlling your size. Whether at the individual position level or the overall portfolio level, it is crucial you make sure your Delta is manageable. Understanding our directional exposure is essential in managing risk. It's natural to have a bias and take positions based on hunches, it's important to remember that the market is unpredictable. Staying small and staying informed about Delta can help you control your risk in this uncertain market. Understanding Delta allows us to assess the potential movement of option prices as stock prices change. Delta serves as an approximate probability gauge and a share equivalent to measure directional bias. When it comes to returns, Delta can help us determine the optimal options to sell. And in managing risk, controlling our Delta and understanding our directional exposure is key. By staying small and being equipped with the knowledge of Delta, we can make better decisions in the options market. I hope you enjoyed this post and learned something new. If you did, please share it with your friends. And if you want to learn more and how to apply them in different market conditions, join our discord! Subscribe  for our weekly newsletter. It's all free!   Happy Trading Good Kids! Disclaimer: this is NOT financial advice. I’m basically just some dude on the internet who’s been trading a while, and I use the stock market as my primary source of income. None of this is financial advice it’s purely educational!

Lets discuss an alternative strategy to just buying stock. The wheel strategy is one of my favorite ways to generate income without using as much buying power as just buying 100 shares of a stock. I will compare the wheel strategy to buying stock so you can see if it fits your risk profile, capital requirements, and trading style. We’ve talked about how to pyramid into a position instead of just buying all the shares at once, but I think the wheel strategy is something you should also consider. The wheel strategy enables traders to buy stocks in a more controlled and strategic way. Understanding the Wheel Strategy Instead of immediately buying 100 shares of a stock, the wheel strategy involves selling puts at the delta and expiration of your choice. Dr Eric wrote about put sales last week ! By selling these puts, we collect premium immediately, generate income and potentially reduce our cost basis. Depending on the delta of the put you choose you get a cushion in case the stock goes down. If the put expires out of the money you will keep the premium, if the option goes in the money at expiration the premium reduced your cost basis by the amount of premium received. Comparing the Wheel Strategy to Buying Long Stock Let's compare the two scenarios of buying 100 shares of a stock versus implementing the wheel strategy. For this comparison, I will use the example of the stock SPY, which is close to $500 a share. If we were to buy 100 shares of SPY at $500, the cost would be $50,000. On the other hand, if we were to sell an at-the-money put with a 45-day expiration, the capital requirement would be $10,000. So, the wheel strategy requires significantly less capital compared to buying long stock. Understanding Deltas in the Wheel Strategy Deltas play a key role in the wheel strategy. When buying 100 shares of a stock, each share has a delta of 1.00. This means that for every $1 movement in the stock price, the value of the position changes by $100. On the other hand, when selling an at-the-money put, the delta is around 0.50. This means that for every $1 movement in the stock price, the value of the position changes by $50. Understanding deltas is important for managing directional risk and potential profits in the wheel strategy. If you sell a 0.30 or 0.20 delta put you are decreasing your premium received, but you are also agreeing to buy the underlying at an even lower price. The Importance of Cost Basis Reduction Cost basis reduction is a key concept we discuss at GKT. By consistently selling puts and collecting premium income, traders lower their cost basis over time. Cost basis reduction is similar to buying a house and renting it out. The rental income reduces the overall cost of the house, providing a financial advantage. Similarly, in the wheel strategy, selling puts reduces the cost basis of the stock position. If the stock continues to drop and you are assigned shares of the stock that you were going to buy anyway, you can start selling covered calls against your shares to get called away at a higher price! Of course, this depends on your trading style and assumes you do not mind capping your upside. Selling the call also generates more income, which is one of my primary focuses for my active trading account. The reason it’s referred to as a wheel strategy is you continue to sell calls until you get called away, then you can go back to selling puts again. The cycle continues where you sell puts, until you get shares, then you sell calls until you are called away, then you keep this cycle going over and over. The wheel strategy offers several benefits over buying long stock. 1.     it requires less capital, making it accessible to a wider range of traders. 2.     it provides a cushion in case the stock goes down, potentially reducing losses. 3.     it allows for cost basis reduction, which can lead to increased profitability over time. However, it's important to note that the wheel strategy also has some risks. If you do not own any shares you are missing out on appreciation of owning shares. If the stock price goes up significantly, traders miss out on potential profits. Additionally, if the stock price keeps going down, the wheel strategy requires active management and adjustments to avoid losses, but that is the same as owning shares. Implementing the Wheel Strategy To implement the wheel strategy, traders should follow these steps: Sell a put to collect premium income and reduce the cost basis. If the stock goes down and the put gets assigned, sell a call against the stock position. If the stock goes up and your shares get called away repeat the process by selling another put. Manage the position by rolling the puts and calls as necessary to maintain a profitable and protected position. The wheel strategy offers an alternative approach to buying long stock. By selling at-the-money puts, traders can reduce their cost basis, lower capital requirements, and potentially profit even if the stock price declines. While the wheel strategy requires active management and adjustments, it can be a powerful tool for traders looking to optimize their trading strategies. So, next time you consider buying stock, consider giving the wheel strategy a try! I hope you enjoyed this post and learned something new. If you did, please share it with your friends. And if you want to learn more about trading strategies and how to apply them in different market conditions, join our discord! Subscribe  for our weekly newsletter. It's all free!   Happy Trading Good Kids! Disclaimer: this is NOT financial advice. I’m basically just some dude on the internet who’s been trading a while, and I use the stock market as my primary source of income. None of this is financial advice it’s purely educational!

Today Good Kids Trading (GKT) is identifying 5 common themes that hold you back from being as successful as you want in the stock market. Let's identify and then solve the most common problems so you can make the stock market a bigger source of income and find the time freedom that you so deeply crave! Here's a quick video of today's blog, I've also posted an entire thread in our discord to discuss these obstacles in more depth! 1. Not taking action - The stock market is so confusing to beginners. It can feel overwhelming even if you’ve traded for a while. It's like staring at a mountain of information without a clear path. The complicated terms, options chains that look like a bunch of random numbers, not even sure what a stock really is, or what is the next step. For years I just traded shares of stock because I quite frankly didn’t know the difference between calls and puts. It was confusing you can sell or buy options. The learning curve in the market can feel steep. Too many people let this learning curve keep them from taking the next step. Instead of trying to figure out a complicated strategy, focus on the very next step. If you don’t understand stocks (or options), spend 30 minutes learning a little bit more about the basics. Just keep taking the next step, do not become a victim to analysis paralysis. GKT is a good source of information without the hype. 2. Assuming there is a better way - You can spend a lot of money looking for the easy button , I did it for many years. Trying all of the strategies that promise awesome returns, thinking some other person or group knew secrets I didn’t know. There are millions of people trying to sell you the “best strategy” I have found and I firmly believe the best way is for you to build a strategy and a plan you believe in. If you follow someone else without understanding, you will end up losing money. Trading is mostly managing your emotions more so than managing your trades. You have way fewer emotions when you understand and believe in your plan. Of course, you will have emotions, but it won’t be the same as following a plan you don’t understand or believe in. 3. Thinking someone else knows - Self-doubt, imposter syndrome, or lack of confidence will get in your way if you aren’t careful . Some of my mentors have seemed so confident in their analysis or opinion they shook me out of trades, or I took outsized risks based on their guidance. Realize that no one really knows. This is not as negative as it might sound initially. Yes, people can have informed opinions, but they can and will be wrong. You need to block out the noise and follow your plan UNLESS they have a point of view or concern you did not consider. Just like I mentioned above, it’s easy to believe there’s a better way or someone knows more than you do, but once you realize that no one really knows anything it’s easier for you to just stick to your thesis and trade your plan. 4. Sticking with the same strategy - Let me give you a ‘secret’ (after I just told you there are no secrets) everything works in the market just not all the time. Just because you (or someone else) has a strategy that is making you huge profits right now, it doesn’t mean it will work next week, next month, next year. The market moves in cycles, the market makers and institutions are really smart. It is not a merry-go-round. Do not overleverage or ramp up just because you have a strategy that is working, you want to make note of what is working in which market conditions so you can start building strategies in advance. Keep learning, don’t get caught up in thinking you have found a holy grail because as the market shifts your strategy should also shift. Keep doing what works, but keep notes so you can stay ahead of the market’s cycles. 5. Trying to go too fast - We’ve all heard the fable about the race between a tortoise and a hare, with the tortoise winning by moving slowly and steadily because the hare took a break. I’ve found this to be true in the market. Everyone is a genius in a bull market, you will see people overleverage and make a ton of money, you will see these same people lose big at the first shift in the market and then they disappear because they blow up their account. Don’t be them. You don’t have to learn complex strategies to make money in the market. It’s easier to add complexity than it is to simplify your strategies. The power of compounding over time is powerful, so if you keep hitting base hits you will get a couple home runs and of course you will strike out as well. If you make your trading strategy too complicated and you keep swinging for the fences every time trading will be stressful, your emotions will ruin your success, and you won’t have fun. Every day I get direct messages, text messages, sometimes even phone calls asking for input and help. These are five principles I stress to everyone because I know trading can be simple if you have the right perspective and build enough experience. I think most traders are still struggling with many if not all of these to different degrees, and that’s why I’m here to help you. It’s time we cut through the challenges and remember we are clicking buttons and making (or losing) money, how cool is that? If you need help reach out to me , join our community. I’ll see you here next week, hopefully I’ll catch you in our Discord much sooner than that! Happy Trading Good Kids! Disclaimer: this is NOT financial advice. I’m basically just some dude on the internet who’s been trading a while, and I use the stock market as my primary source of income. None of this is financial advice it’s purely educational!

Let’s dive right in on things.  In this article, I will answer the question, “How much money do I need to start investing?” I remember struggling with this question. In fact, almost every new investor thinks that they don't have enough money to start investing. They often times view their account size as insignificant because it doesn't compare to the wealth of the Elon Musk's and Warren Buffet's of the investing world. I'm here to tell you that comparisons like those aren't fair to you. Whatever amount of money you do have is significant and has the power to change your life.   Before I answer that question in detail let me tell you a story about how I began investing.    How I Started Investing My “career” in the stock market started out as nothing more than a mental break from studying while in medical school. I have “Dr” in front of my name because I ultimately graduated medical school.  I mention this for two reasons: I am not a professional investment advisor.  In fact, I never took any financial courses after high school.  These articles are for entertainment purposes only.  Before you trade real money, make sure you understand what you are doing and are comfortable with the risks involved. All investments carry some degree of risk! I started trading as a side gig and after a learning curve, I can say that I am a consistently profitable options trader and stock investor.  I also currently have a full time W2 job, as a civilian Medical Resident, and continue to trade.  It doesn’t take that much time!   During my study breaks, I found that learning about various investing strategies challenged me in ways medicine didn’t.  I quickly realized that throughout any day the stock market was open, literally trillions of dollars are traded.  After a lot of reading, mostly in 15-20 minute chunks, I saw a path towards collecting my very small portion of that money. I just needed to get into the game. If you have the desire to start “working” for yourself and to take active ownership of your financial future, then you must learn how to invest.  Financial institutions want to make it seem more complicated than it is.  They earn their fee by taking the “burden” of your financial future off your shoulders.  Now that transaction fees are exceedingly low, and often non-existent, managing your money just takes a little thought and a few clicks of a mouse.   One of the big things we aim to provide at GKT is value to you.  Although it took me hours upon hours of reading articles and books, we want to streamline that process for you.  It took me all that time because there are thousands of people out there with their own opinions and methods of the best way to invest and I wanted to read all of it.  Honestly, a lot of it was time wasted. Over time, I learned several simple strategies that lead to consistent profits.  Join our Free Discord and you can see for yourself how we trade.  There’s no more sales pitch.  No credit card required.  It is literally free.   My First Investment in the Stock Market There I was, sitting at a med school library table on August 20, 2013.  In those days it took half a pot of coffee just to get out of bed and the other half to stay awake long enough to memorize whatever I was studying.  No one can study continuously for hours on end day after day.  During my breaks, I read stock articles.    Long story short, I knew I didn’t have time to day trade.  I also mistakenly believed options were “too risky.”  I eventually became interested in dividend growth investing which relied upon the power of compounding.  Once I narrowed my focus to dividend companies, Wisconsin Energy Corporation (WEC) caught my attention.  Stable industry, regular increases in dividend payments, and a long track record of paying them all made this stock interesting to me.    On that life changing day in August, I set up an account with Computershare.com because it only required an initial purchase of $250 and they didn’t charge transaction fees. In 2013, EVERYONE was charging transaction fees of at least $10 to buy and $10 to sell any amount of shares. So finding this free service made things possible. Today, you can do this same thing in any maker broker. I also signed up for $25 monthly recurring investments in WEC.  Though this startup cost was a stretch, I was able to fit it into my budget.  That $250 bought me 5.976072 shares of WEC.  Two months of automatic investments later, I put in a total of $300 and I received my first dividend check for $2.75! If you've ever found money on the ground, you know how I felt in that moment. I was literally over-the-moon kind of happy. This tiny dividend represented my first steps towards financial freedom.  My investment strategy relied upon compounding interest, so I signed up for the automatic dividend reinvestment plan which was also free.  That $2.75 bought me another 0.066209 shares!  I still have my first stock spreadsheets where I kept meticulous records.    Because I was investing regularly, each subsequent dividend check was bigger than the one before it. Keep in mind the time requirement of this strategy. Once I set up my account, I did absolutely nothing and I was making money.   How Much Money do I Need to Start Investing? Start investing with what you can afford.  I started with $250 and that earned me $2.75 after 3 months.  That isn’t a get rich quick type of money and I’m not here to convince you that it is.  What I am trying to convey to you is that no matter how much money you have, start with what you can afford to lose.    Here at GKT we are VERY transparent.  In the name of transparency, let me break it to you now, you will make mistakes in your investing journey.  You will have to learn some lessons the hard way and you will lose money.  I know this because I made MANY mistakes which caused me to lose money.  I survived and so will you.   When you start your investing journey, start so small that if you lost everything you’d still sleep fine at night.  Make your mistakes when your account is easily replenished.  If I lost $250, I may have had to use store brand coffee instead of Folger’s for a while, but I would have made it.   The Outcome of my WEC Investment My first quarterly dividend with WEC was $0.3825/share.  At the time of writing this article, WEC $0.835/share every quarter, or 218% more.   I've also invested more money throughout the years and the dividend checks have grown to a meaningful amount. Don't scoff small beginnings. You Can do This Too I share this story to say that you can absolutely do this too.  Investing in yourself and in your future can change your life.  You must take active ownership of the process.  Start small with money you can afford to lose.  A $2.75 dividend check wasn’t a large amount of money then and it isn’t now.   The incalculable value of that $2.75 came from the knowledge that I too could earn money in the stock market.   You don’t have to do this alone.  Join GKT and start your investing journey today! Disclaimer: this is NOT financial advice. I’m basically just some dude on the internet who’s been trading a while, and I use the stock market to generate income as my side gig. None of this is financial advice it’s purely educational!