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I was breaking down some Intel options the other day, and it hit me…
Most of you are picking strikes based on gut feeling instead of understanding the actual risk-reward math. And that’s a recipe for disappointment.
So let’s walk through exactly what I mean using a live example that’ll change how you think about strike selection forever.
The Real Cost of Being Wrong
Here’s what most traders miss…
When you’re wrong on out-of-the-money options, you’re likely to lose well over half of your investment, while being wrong on in-the-money options might only cost you about a third.
I was looking at Intel (INTC) puts recently — the $23.50 puts carried a 58% downside risk if wrong, compared to just 35% on the $26 puts. Intel was up 6% that day, so anyone holding those cheaper, further out-of-the-money puts got crushed even harder.
But here’s the flip side — when you’re right on those out-of-the-money plays, the payoff can be massive. I’ve seen setups where the cheaper options deliver 39% gains while the safer, in-the-money plays only give you 24% on the same underlying move.
Know Your Trading Personality
It really comes down to your personality and what you’re trying to achieve. Do you want to be right more often, or do you want to maximize profits when you are right?
If being right matters most to you, then deep in-the-money, longer-dated options are your friend. You’ll have a higher probability of success, but your percentage gains will be smaller.
If you’re hunting for those big percentage wins and can handle being wrong more often, then those cheap, out-of-the-money, short-dated options are where the action is for you.
The key is being honest about your risk tolerance and trading goals. Don’t pick strikes randomly — understand the probability and potential outcomes first. That’s how you turn options trading from gambling into a calculated business.
Order Flow:
This is for informational and educational purposes only. These are not official alerts issued by Lance, but rather some interesting orders picked by the team at Lance Ippolito Trading.
When you look at these plays, always take the market maker move into consideration.
You can be right on the direction but still lose money if the stock doesn’t move enough. That’s where the market maker move comes in clutch.
With puts, they’re often downside hedges in case a stock tanks, especially around earnings. The further out of the money they are, the more likely they are to be hedges.
Also be sure and check when the company’s earnings date is because many of the plays we post here are centered around earnings!
And finally, always remember the golden rule when it comes to buying calls: Buy dips, sell rips — and don’t chase!
If a stock’s moved a ton already today, maybe wait for a pullback.
There is inherent risk in trading. Trade at your own risk.
Note: If no date is listed after the month, it’s the monthly expiration (third Friday).
The team at Lance Ippolito Trading
Lance doesn’t want the CCP spying on him, so you’ll never find him on TikTok. Same goes for other social media sites, which are filled with impersonators, scammers and crypto bros.
You can only find him on his personal YouTube Channel — smash that Subscribe button! https://www.youtube.com/@LanceIppolito
And in his private Telegram channel: https://t.me/+-gVwEIwGJhplMTgx
Important Note: No one from The TradingPub team or any of its associated brands will ever contact you directly on Telegram.
*This is for informational and educational purposes only. There is inherent risk in trading, so trade at your own risk.
P.S. This $500 Discount Expires at Midnight!
Just checking in because this deal is about to disappear…
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