Show: Fundamental Fridays Episode: 3 Title: Fundamental Fridays Ep. 3 Date: May 02, 2026 Runtime: ~34 min Video ID: Gs-Znfbp0dU URL: https://www.youtube.com/watch?v=Gs-Znfbp0dU ============================================================ Hello and welcome to Options Guide TV. My name is Brian Overby. I'm the author of The Options Playbook. And today is Fundamental Friday and we're going to be following through with our trade in Apple that we put together. And then we're going to talk a little bit about just buying an option contract, the order entry, the process. And that's going to be the next position that we're going to add into our paper trading account. Now, remember, if you go to tradier.com and you sign up for a paper trading account, basically open up an account, you will have access to everything that you will see today on Options Guide TV and you can trade right along with me. On top of that, if you have any questions, if you put them in the chat box, I will try to address them and we will also send you a four-part series on the basics of options. So today, we're obviously focusing on beginning option traders and the trade worked out very well in Apple. It's a very good learning opportunity by following Apple starting with buying the stock, buying protection, buying a put against that, and that would be called a protective put. And then we sold a call to help generate some cash to pay for our protections, to pay for our put. So that strategy is actually called a covered call. So we have in our account, in our tradier.com paper trading account, we have our 100 shares of Apple, we have our long put option that we bought, and we have our short call option that we sold. Now Apple announced earnings yesterday after the close and the stock is up about 5% and it's going to fit really nice in our entire strategy. Now that whole gaggle of positions on Apple is actually called a collar and I'm going to show you that inside my book The Options Playbook at optionsplaybook.com and we'll talk a little bit about what our next steps would be in this position and then we're going to go and say, okay, we made it through earnings that known event and we used options to protect ourselves and now we're going to get long Apple. We're going to get more bullish on Apple and we're going to do that by using option contracts. So that is the theme for the day. That was a long theme, I guess, but in general that's what we're looking to try to accomplish. Run once again, if you have any questions, do put them in the chat box and I will try to address them during the show. So let's run to tradier.com and I'm going to start by looking at the position on Apple. Now inside this is the dashboard at tradier.com you can actually take your position and I'm going to and basically highlight it if you will. This is the Apple position. It says combo which actually is the option position by itself. Once we put the Apple stock in with this, this would be considered a collar and we put these we put this together over the last three fun well last two fundamental Fridays. We started by buying Apple, buying a put and then selling a call. Stock is now actually up down just a smidge. It's at up 4.4.33% It was up 5% a little bit earlier. But on the Apple position, here is Oh, let me highlight this. You can actually use the check marks here, and if you click on this button, you can actually group these positions, and then this is the rest of the positions that we do on Options Guy TV. These are a lot of the other options that we have, but for Fundamental Friday, the only position that we have on is in Apple. And if you click this button, you then get the you can open up the trade ticket. And we're going to talk a little bit about we we went through in the fundamental videos talking about buy to close and buy to open and sell to close and sell to open. But we're going to talk today about market and limit orders. That's what we're going to look to do. But in Apple, here's the stock, here are the options. You can actually unwind the entire position uh if you'd like to by selling the stock and then selling the options, sending it all down to the trading floor at one price. But today, we don't want to do that because we have our position on and we don't look to close it. We are we're going to lean bullish on Apple, but always have to give give this little disclaimer that nothing that we talk about is meant to be a recommendation. So we're going to do some trades that we might not have done uh mainly because we're going to focus on uh the just the basics of options trading more so than what's going on with the position. We're we're still going to make smart moves, you know, we're not going to do something that's egregious. So in this instance, uh with Apple and the entire trade, once we have it all on, I'm going to run over to the Options Playbook, and I'm going to show you the profit and loss graph on a collar. And actually, let's zoom in a little bit here. So this is a profit and loss graph on the collar. Um it it tells you about the setup down below, but we already know this cuz we already bought the put this position on. But, Apple stock is somewhere right in the middle of this profit and loss graph. Now, this is the stock price at expiration. This is the profit and loss on on the position on a generic position. And if the stock goes up to the strike, to the call strike, and beyond, they can call your stock away from you. So, you would have to sell Apple at that price. It would be a much higher price, but you have the obligation to give up your 100 shares. Uh, on the downside, if Apple would have came up and went down as opposed to up, and it went below your put strike, you could then take your stock and you could put it to somebody at that strike price, limiting your downside. Well, Apple actually was very kind to us today in that it stayed right in the middle. Uh, we own 100 shares of Apple. The price right now is 283.62. And we sold the 290 strike call. So, if the stock stays below 290, we don't have to sell it to somebody. Now, if it was above and beyond 290, well, that's awesome because then we made seven more points, approximately, on Apple based off of where the stock price is at. So, we're okay with it getting called away, but at this point in time, it doesn't look like it's going to. So, we have we are profitable on Apple. Uh, up 5% since the beginning. Our call option is not going to be profitable. Why? Because the underlying stock went towards our strike price, making the option contract more valuable, and we want it to be less valuable. Why? Because we sold it without owning it, and we would have to buy it back to close the position. But, at this point in time, we're going out to the May 15th expiration. Today is May 4th. So, we have 14 more days left in the life of this option contract, and we'll just let the time decay work for us. So, as um as time erodes, this position will slowly become more and more profitable. Uh we sold the call option, and we brought in $1.57 or $157. And right now, that option contract is trading for $2.90. So, if we bought it back right at this moment, we would actually be down on the call. But, it's offset by the profits that we have on the 100 shares of stock. So, we are down $133 on the call. We are up $1,425 on the stock. Now, on this position, we have a we have more of a decision in my mind in that We did Apple. It's the 265 put, so it's quite a bit away from where the underlying stock is trading right now. Uh we have 15 We have about 18 points rounding off from 285 down to 265. We still have till May 15th, same expiration as our call. And this option is now trading for 73 cents. And that's you know, that's $75 per option contract that we have. Uh we put the position on when we put it on, we received $5.75 cents or $575. And obviously, that position is down at this point in time. So, what I would do, because this did did our work for us. We were worried about earnings. And now we have turned bullish on Apple, not based off of the earnings or what we heard on the earnings. This isn't a show about uh talking about the fundamentals of a company. But because we were able to protect it, we decided to ride Apple into earnings and remove that risk in our mind, right? That earnings risk of a potential downturn in the underlying stock. So, what I would like to do right now is I'm going to uncheck these boxes. And our first trade that we're going to do in our Apple combo is we're going to actually close out Let's reset this. Let's take this. Well, we're going to uh uh We're going to close out our our position on Apple here. There we go. On our Apple option contract. And we're going to put it in and now we're going to talk a little bit about the order entry on on this trade. So, let's remove this. And let's take our Apple put, click it here. And There we go. And we're going to close the position and we're going to do it uh how We're going to think talk about a lot about how we would enter this order. Okay. So, once you get it in the trade ticket, you go over to the trade summary and it tells you here's where the underlying stock is at. Our put protected us through that earnings report. Whenever I'm looking at doing an option trade, I never consider the market. Um it would have to be an extremely tight market, but if we look at most even on a very liquid stock like Apple, the bid if we are going to sell it is 71 cents, the ask is 77 cents. So you still have 8 cents between the bid and the ask and that means that uh if you were to come in and place an order at market, you would be selling to close this position at 71 cents and then if you turned around and you wanted to buy this position, you would be buying to open at 77 cents. So that is the market. The difference between the bid and ask is the spread and that's what the market makers are trying to make. The difference between they want you to sell it to them cuz they'll buy it from you at 71 cents and then they want to go around and they want have somebody to uh come in with a buy order and they will sell it to them at 78 cents on the ask. That is what the market makers are trying and and I mean this is a very simplistic form of saying it, but that is the goal of the market makers. We're trying to buy the call option and hope Apple goes up 5% and then sell the call option, right? So in this instance, our put option did our work for us. We made it through the earnings report. Now we're going to put in a sell to close and we're going to get out of the position and we're just going to remain remain long Apple and long the call option. So the very first thing that we that we want to do is actually change this to a limit order. Now, with stop and stop limit, we will address those at a later date, but the two main ones order entries that we have when we're looking to just close a position is market and limit. And we're almost always going to use the limit order. Now, once you do this, this is a real nice feature inside trader.com is we have the bid and ask over here, but we actually highlight the bid, the mid, and the ask. Now, a really good fill if you put it in right now and it got executed would be right at the midpoint. And that's a little bit hard it's hard to do especially in a a paper trading application, but in general it's hard to fill a single option contract at the midpoint because you're basically buying the wholesale market if you will if we're thinking about just a a shopping store. You're you're getting the you're you're paying what the you're receiving by selling this what the option is worth. So, we're going to hit the bid. We're going to hit 77 cents here is what our our what we're going to do on this. So, underlying is Apple, expiration date is May 15th, our strike price is 265. We're dealing with a put option. We're going to sell to close. Now, I'm going to click this button to kind of highlight a couple of the other things and we talked about this in one of the fundamental videos, but uh you could sell to open, but we're not selling to open in the in actually the site will stop you because you have a long option position and say you can't sell to open and initiate a new position when you are long a position. So, our only thing that we can really do with this option contract is sell to close or we could add more. We could buy to open. We could add more put options if we wanted to. But our goal here is to sell to close. And we just had it move on us a little bit. So we're going to hit it at 83. I'm going to try to do this for today and we're going to try to get out of the position as quick as possible. Now, if the market were to move, let's say we put it in and this is a great example uh cuz it just happened. And we send it to the floor at 83 and as soon as it gets to the the the floor or to the marketplace, I should say. I'm I'm old school so I say trading floor, but now we trade in cyberspace, right? So if we have this position and we and we hit sell to close and the market were to move on us and let's say it moved instantly to 85 cents, two cents higher, we would take it and the market would fill it at that price. It would give you the higher price. It's going to give you the bid at the second that it hits the floor. Now, if the market tick down and it was trading at 80 cents, it wouldn't fill. It wouldn't It wouldn't take the 80 cents cuz it'd say, "Well, you have a limit of 83 and 80's below 83, so it wouldn't execute the trade." Which means you'd have to do something to try to get out of the position. But so just so you know that if it can get a better price, the website, the trading platform will get you the better price. If you cannot get 83, though that's the worst case scenario that you're willing to take, you will not be filled, but that also means that you're still long your option contract and the underlying or the option price could still go down even further. So limit order will guarantee the price that you will will receive, but it won't guarantee the fill. A market order, if change this up to market, will guarantee the fill, but it won't guarantee the price that you will receive. All right. So, if I had this position on in my account, this is the way that I would trade it today. Uh I'd be very happy about the whole scenario with Apple. I didn't have to have the stock have to be called away from me. I was okay if it did, but I I I preferred to have my Apple. And also, I don't need my put anymore. And there's still some time in it, so I'm going to take advantage of that time. And here we go. We're going to send this trade down to the paper trading floor. And we hit submit. Trade has been submitted successfully, and we will hopefully be out of that position by the end of the day. And so, if we go into the dashboard, we see that we have the order, and we see that it instantly filled. So, we are at an Oh, great. That was a great example. We put a limit order in at 83. This worked out perfectly today. Everything is Everything's going just as planned. And what I mentioned was uh our limit order was 83, but the market, when it got there, could get 85 for it. Meaning that the bid price probably moved up when we sent that order in. And because of that, we actually filled our one contract at 85. So, we got 2 cents more than the 83. So, that means that with our put, we did lose money on the put, but we made money on the stock, and we're looking really good on the on the short call option on this position. Now, if we want to continue this trade, and we're going to move along with the Apple position, I want to talk about buying a call option. So, inside the Options Playbook, here is the long call strategy. And if you ever want to find it, if you go to optionsplaybook.com, you just type in call option or long call and in the search box, and we'll just do that right now. And that position will pop up. And I also want to highlight that we do have a section called the Rookie's Corner. And inside the Rookie's Corner, uh you will you will see a a bunch of different beginning option strategies, uh calling get your feet wet, learning a little bit more about the vernacular, writing cover calls one of the positions that we put on. I consider that a basic strategy. And then buying LEAPS calls as a stock substitute. Now, LEAPS is just a fancy marketing term from the Chicago Board Option Exchange when they first introduced longer-term options. It did it actually is an acronym standing for long-term equity anticipation securities. That's what LEAPS stands for. So, if you actually spell it leap, you're actually misspelling it in in that it is an acronym. So, you always have to add the S. Uh and I'm going to pull up that section right here. So, this is talking about buying options as a surrogate, as a replacement for owning the stock. So, we made it through our position. Uh we might be more bullish on Apple than than than we think or well, than we first anticipated because now we had a strong earnings report. Um but we don't have enough money to go out and buy an additional hundreds hundred shares of Apple. Or let's say it this way, we don't want to allocate all the capital to buy 100 shares. So, how can we get long Apple, something that looks like Apple, right? Um and still get a lot of upside and add to our position and have the right to buy 100 shares as opposed to the to actually doing it. So, that's what we're going to do. And how would we do it? Well, we go into the Trade Year platform. We have our position filled and here's our Apple position right now. We're long 100 shares. We're short one call option. We're going to click on the chains. We're going to type in Apple. And we're are going to go out to uh we're going to go a longer time period. So, a lot of people think of buying options as a speculation too. I'm going to buy a a very short-term option. Uh I'm going to buy them the least expensive one. So, we're going to we're going to buy something out of the money and we're going to speculate and leverage our account and buy as many of them as we can to try to take advantage of Apple. What I'm doing today to me is using options as actually they were first intended to limit risk. So, instead of buying that additional 100 shares, we're going to buy a call option that's going to act a lot like that 100 shares. And how do we do that? We use we use a term called delta that we introduced in the basic videos, but we're looking at 168 days out. When you go to the chains and you pull it up, you see the bid and yet the ask on Apple. And then you have the strike prices right down the middle. The 280 strike price is the most at-the-money strike. It's very close to where the stock is at and you will see that uh on the call side of the chains as you go down, it's in a in a light blue color indicating that it's in the money. And then as you go up, these are in a white color indicating that they're out of the money. So, basically just by looking at the chain, you know that Apple is trading somewhere between 285 and 280. So, it's right in that range. Now, here's what we're going to focus on in in this chain is the delta. We want to to buy an option contract that acts as a surrogate for owning the stock. So, we need a lot of stock price representation. And delta has many different meanings, but in this case, I think that is the best stock price representation, uh the best meaning. So, if we turn to the leaps, this is the section in the playbook. If you go down, you'll notice here that when we start talking about delta inside the leap options, uh we always look for a delta of 80 or more. That's .80. If you're buying If you're equating it to the number of shares it represents, each option contract in the Apple chain represents 100 shares. So, 100 * .80 means that you're going to have a position on that's going to act like 80 shares of stock. It's not quite 100 shares if you bought it outright, but the delta is implying that this position will act like 80 shares of stock. Now, you have to pay for that option contract. It's not going to be cheap. It's not going to be a cheaper out-of-the-money option. So, we're going to focus on this number right here, and we have a delta of .79. The option contract is bidding $43.15 and asking 43.70. Now, the markets aren't quite as liquid as the underlying stock. And I'll be blunt with you. This is probably the the one Well, it's the biggest detriment to buying deep in the money options is you don't have as tight of a market as if you bought Apple outright. If the bid ass spread on these option contracts was as small as it is on the stock, I don't think I would ever buy stock bluntly. Apple is a very liquid underlying and that's part of the reason why we choose it. And one of the other things to go along with with trading options is you need to have a very liquid stock in order to accomplish some of these strategies. So, Consolidated Widgets, which I'm just making up the trades once a month by an appointment, um that underlying stock isn't something that I'm going to even if they offer options on it, I'm not I don't want to trade it because I don't want to deal with wider bid ass spreads. This one we can manage. We can work this order if we would like. On the show, we're just going to execute it. We're going to hit the ask price, but you can work it. You can put a little bit of a a limit order in on that trade. And so, let's do it. Let's get this order set. We realize that we're going to go out 168 days and I like this I like this the way that uh trader has us all laid out. Here's the expiration date. Here is the days to expiration. So, we're going out to October 16th, 2026. We go over here. We find a delta that's fairly close to 80. We could actually go down and look at this one's 81, but one of the things that I see on this position is there's a little bit more open interest, a little bit more volume on this option contract. So, I kind of like I like this one just in general. I don't want to pay a little bit more, get a little bit higher delta. We're going to stay right here and we're going to hit buy. And we're going to send it to the ticket. And now here in this position we uh have the October 16th expiration. We have the 250 strike call option. We're going to buy to open this position. And we're going to do this at a limit order. Now, if I was working this order and it was in my own account I would work it a little bit. Uh we I would Right now it's at uh $4.65. And this is where it is over here highlighted. $44.65. So, like I said, it's a real option contract. It's It's going to cost you $4,460 in order to buy that stock. But, let's think about this for a second. And I'm going to do the math for you. So, I'm going to take uh 44, we'll call it 60, and we're going to divide it by the stock price. We're going to call it 283.56, and we're spending about 15% of what it would cost us to buy 100 shares of stock. So, this also means that our risk is limited to that 15%. And then we could manage our risk if we'd like. If we say, well, if we're down half of that, if we're down uh we'll say 8% on the trade. If we're down 8%, we can just close the trade and get out. We can execute the trade. I always have a rule of thumb that if I put this trade on, if Apple ever did come down to my strike price, I'm going to think hard about getting out of the position. I don't want the stock to go below my actual strike price. But, on the upside if I put the position on, I watch Delta. If the If it gets deep enough in the money and I'm scrolling down on the trains that the Delta is it getting very close to one to me that is a signal that it's time to adjust our option, close it, you'd be profitable on it, and go out and open a new position that might go out longer, but go back to the 80 delta rule. And that's always how I like to trade my deep in the money options. It's not quite all in the stock. You get a lot of stock price representation, but it's still got an expiration date. It's still an option contract. There's still some time premium that's in the option that you have to deal with. And we talked a lot about time premium in the basic videos. All right, so let's enter this order. I would work it a little bit. We cost us a little bit of money because I was long-winded, but it's right at 45. I like that price. Let's put it right at 45. Uh 44.55. This is where if I'm looking, I would probably put this in and go 44.75 uh in my regular account and work and see if we can get filled. And if it didn't, maybe I'll move it a little bit, but I would This is what I call working the order. We're obviously doing it at a limit price, but I'm just going to get this order filled for the show. Uh so we're going to hit hit the ask, and we're going to hit submit here. Trade has been successfully submitted, and we should be filled fairly quickly on the trade. So let's go back to the dashboard. And yes, we filled. Okay, so what did we accomplish today? We had a very Well, it was actually as a scenario to try to learn about basic options strategies, I always like to start with let's use options to enhance our stock portfolio. And we did that this week. We knew there was an event. We knew that earnings were going to be coming out on Apple. We owned 100 shares of Apple. We went out, we bought a put against that 100 shares. We protected ourselves to the downside. We then said, well, that put cost us some money. Let's give up some upside in Apple by selling a call option and help pay for our protection, our put option. We did that. Apple came in, announced earnings, the stock went up. We were profitable on our stock. The option contract that we sold, it didn't quite get to our strike, which is in this in my idea, it would be a good scenario. It's okay if it did. We do be selling it seven points higher than where it's at right now. But, it's hovering around the Where's Apple? Four 283.68 price. That's where it's at. And so then, we sold our put cuz we don't need it anymore. So, we took whatever we could get at the put. We ended up getting 83 cents on it. And then we said, okay, now that Apple has announced earnings, we don't have that huge event that in the huge event that could happen in this marketplace, events happen every day. Obviously, it's very headline driven right now because of the geopolitical concerns. But, with that mentioned, um we decided to get long Apple and instead of using all of our money to buy 100 shares of stock. This is a paper trading account, so we got plenty of cash in it. But, instead of doing that, we decided to do it via a long call option. So, what did we do? We bought a leap option as a substitute Well, it wasn't quite a leap. We're not quite going out nine months. Nine months are the technical term for a leap option. We went out 168 days to the October expiration, but we bought a deep in the money longer-term option as a substitute for owning the stock. We reduced our risk, but gave us a lot of exposure to Apple. And if we're correct on our forecast for every point that it goes up, we should make about 80 cents on our option contract or $80. All right. And I look down and I and I see Kurt, good morning. I want to say good morning to you. Let's go ahead and toss that out there. And please share this with with your friends. Down below there will be depending on when you're looking at the video, there will be a link that's available that you can click that will take you to trader.com or you can go directly to trader.com and open up a paper trading account and you can execute these trades right along with me if you would like. And we're going to add some more positions. We're going to go through a lot of the basic trades and we're going to try to apply it to real life situations. And with Apple announcing earnings, that was actually a really good situation to start our venture on fundamental Fridays. And becoming option traders. All right, my name's Brian Overby. Please check me out on x.com. I handle at Brian Overby and obviously the author of the options playbook. Thanks for stopping in. We'll see you Monday for the more advanced version of options guide TV, but then we'll be back next Friday for another fundamental Friday. Thanks for stopping in. You know how the financial world goes. Here comes the buzzkill. Please make sure to take some time to read this boring disclaimer. We will owe you one.