Cashflow Triggers Q&A Episode 1

[00:00:01.630] – Katie: Alright, Josh, this is our very first Q and A for the weekly cash flow triggers. I have a couple of really great questions to ask you today, but first, thank you very much for joining me. Eight. And also, happy anniversary. I know it is your second anniversary today with your wonderful wife.

[00:00:21.170] – Josh: Yes, it is. And I'm excited to get going on the first episode of our Question and Answers here. So I'm ready for the first one.

[00:00:29.790] – Katie: All right, cool. All right, let's dig in then. I got to tell you, some of these people are already getting started and studying, and so these are somewhat over my head, so I might just be reading these straight at you. So what if the strike price you suggest is no longer between the current bid X and the Ask X? So it was between whatever you're recommending from the bid and the asked at the time. I try to mirror your trade.

[00:00:56.390] – Josh: Yeah. So what that meant was the markets move. And when I published or went through the video, that market at the time, I think, was 215 by 220. And that meant that the market was trading on the bid at 214 and on the ask at 220 ish somewhere around there. So when you were able to open up your platform and look at it, it may have been higher or lower. And it probably was higher because McDonald's was trading lower on the day, even though the market was rallying, which is good because you were able to get a better price than what was published on there. So I think it was 232 40 at that. But that's what happens if the market has moved away. So we try to publish this as close to the market as possible. But that is the reason why, when you're looking at it, that it's not the same price. So on Friday, it was higher than what the video or the walkthrough showed, meaning that you got a better price on there. And what you would do from there is that you would then use that and transact at that higher price.

[00:01:58.290] – Josh: So you got a better price.

[00:02:00.230] – Katie: Okay, great. So what was as a follow up to that that I would have is what if the price was, like, lower or at what point do you feel like you would recommend somebody not necessarily take the action? Or would we be sending out an alert to people to let them know if something like that has moved dramatically, doesn't change dramatically like that? The follow up question I would have would be like, well, that was positive because it was higher, but what if it was lower?

[00:02:25.850] – Josh: Yeah, it's a great question, and it's always up to the individual, I would say, or up to you. The great thing about the marketplace is going through the quick start that JP and I talked about is that you get to pick when you want to put risk out. So unfortunately, the market does move, and it doesn't mean that you have to what we refer to as forcing the trade. And that would be similar to in real estate going around the block and finding some property and the owner saying, yeah, I want this crazy price that I see on Zillow. Well, I'm not going to give you that Zillow price. I'll give you this price. And if the owner is still dictating that he wants that Zillow price, well, you can come back later and then next week and offer him something lower. Maybe he'll take it then. So the best comparison is that if it's not too much lower, if you saw on the alert for that specific example, it was 220, and I would say I would take that back at 110. That's where we're looking to buy back at. Something on McDonald's is not going to run wild.

[00:03:24.840] – Josh: It's not going to go hawkamania on anyone. So you're going to get it somewhere around that price that I publish, and we're not too far off there. So if it's trading at, like, where I have, that where I was going to buy back, that's not where we want to be. So you got to have a little bit of fluctuation, and we try to make it as simple and easy to follow as possible. But every moment the market is open, the prices are going to fluctuate on there. So patience in the marketplace is critical. Just like in real estate, patience pays off. It's the same thing. So even though you're not able to get at that price, if it's not too far away, I wouldn't stress about it. If you got a better price, that's great as well. Everyone's going to have different pricing. That's the great thing about the marketplace. Only orders get filled at that order, and then the market moves and may get filled at a different order.

[00:04:13.010] – Katie: Okay, yeah, that's really helpful. I also just realized that I never really introduced myself, so right now I'm just like this nebulous female voice that no one even knows. So we're going to take a quick feed and just to explain to everybody that's listening who I am. So my name is Katie Vogel, and I'm one of the team members on the awesome Rei side. And I got elected and jumped in to do this Q and A call because I've worked with Josh actually in the past. And so we have a little bit of rapport, and I'm really looking forward to joining you and being on these calls on a weekly basis. So moving on to the next question, we have your screencast showed commission of $0.50, but I've got a commission of $0.60 showing up right now on my screen. How come?

[00:05:05.090] – Josh: Well, I'm not sure if that was in your paper trading account or if it was a real account, but that would be the commission that you have now. Now I'm a preferred customer. And that was the commission rate that I've been able to negotiate with, thinking or Swim. Now, it doesn't mean that you're not able to get it, but if you contact support so we're whining back. If that's in your paper trading account, that's just a default price that they're giving you. If it's in your real account, it's $0.10 off. I wouldn't stress too much about it because that's still a great commission. Now, my preferred commission is, again, JP and I talked about in The Quick Start is fifty cents per contract and no ticket charge. And ticket charge means that executing the order. So I pay fifty cents per order, and that is a fair commission. What I would do to get that commission is I would contact support at Bigger Swim and I would ask them for that rate. Now, again, everything in the marketplace is negotiable, especially in the finance industry. Doesn't mean that they'll give it to you. But starting out at $0.60, if you can get the ticket charge dropped, that's a big thing as well.

[00:06:11.320] – Josh: And depending on how many people we have here in the program, now we have some influence. I could go to them Think or Swim, which is owned by Schwab, aka TD, and give them a wink wink nod and say, hey, can you give our people a break? So I'm glad you asked that question because that is a good thing that I should reach out and.

[00:06:33.950] – Katie: We should just keep that in mind. Okay. So for anyone who listens. And they might have a similar experience where they're seeing the commission at $0.60 instead of step. Is to reach out to customer support and point it out and ask if you could get the commission dropped on our side. We'll also be aware of that and potentially try to help you guys out on our side in any way that we possibly can.

[00:07:02.560] – Josh: Just to jump in there for anyone else. Maybe you're not on Thinker, so maybe you have Fidelity or a different platform. The commission rate is going to change. So you're seeing, that was my real account, that's what I really pay is fifty cents per contract. So some firms are going to charge more and you have to call in or type into support. And it's always negotiation and they may give you a pushback, it may take a few times. It's kind of the knuckleheadness of the industry, but you see that you can get fifty cents per contract. It's just getting there. So that's why it's always going to be different. Again, we don't want to pay no more. $50 is desirable. I would say no more than a dollar and no ticket charge because at that point you started eating to the profits. Commissions are part of the business, but you don't want them to take away from any of your future profit potential.

[00:07:52.550] – Katie: Yes. Thank you so much. That's like great advice. Okay, so moving on to our next one, can you please explain again the buying power effect that I see in the thinker swim order confirmation dialogue? What does it really mean for me? And thank you very much.

[00:08:09.350] – Josh: Well, depending if you have a margin account or cash account, that is indicating how much at that moment on my McDonald's position, that was one contract. On my one account there that was going to take about, I think it was about $2,500 in buying power. So that would take away what I have available. So buying power is what you have available. So if you have 100% cash, whatever that amount is, is what you have with margin. So if you have a $40,000 account and it's just cash, your buying power is $40,000. Now, if you have a margin account, then we learned that you get up to $80,000 in margin and that would be considered your buying power. So when you look in the tab there executing order that's indicating on that moment in time, if you click the submit button and you get filled on that order, then at that moment in time, that's how much buying power is going to be taken away from your account and how much you would have available.

[00:09:10.610] – Katie: Okay, so I want to just ask them, make sure kind of repeat it back since it's like this. I'm a newbie to the options world as well. Although I've been around it for like 15 years now, I have not personally traded it. So I think I'm a good person to kind of bounce this back at you. So from what I understand, your buying power is how much you have and what your account is worth and how much you can buy. So that can either be the actual cash on hand if you had $40,000, like the example you gave, and none of that was tied up necessarily, then you would be $40,000. If you have a margin account, then that would be doubled to $80,000 buying power. Am I right so far?

[00:09:56.070] – Josh: Yes.

[00:09:56.820] – Katie: Okay. The buying power effect that you're seeing when you're executing these trades is if you had to buy the stock, the effect on your buying power would be X. Is that accurate?

[00:10:14.280] – Josh: Yeah, it's indicating what's going to be taken away from there. What would be taken away? So let's say the position took $20,000 of buying power and you didn't have any other buying power positions on your cash account, then that would take $20,000 and you would have 50% of buying power or $20,000. Now, if you were using margin, well, then that margin would be much different and the buying power on that margin would be shown differently. But again, 50% of a margin account with $40,000 of capital would be $40,000 because you have the other 40,000 margin at that point.

[00:10:54.820] – Katie: Okay, that's clear to me now. Okay, thank you. Next question is.

[00:11:02.810] – Josh: Another good thing too. And this is the reason why it's really good to get through this stuff on the paper trading account because it walks through all those specifics as well. You can see them and let's say I make a boneheaded mistake and I thought I reviewed everything and execute an order that was over my buying power limit. Well, the platform will reject that order, so you can't even make it on that mistake. But you always want to make sure that you're reviewing your orders and you know how much buying power is going to be taken away from it. It's just a fancy way of how much money is going to cost you.

[00:11:38.710] – Katie: Yeah, that's kind of the sum of what I was taking away from it as well. Okay, so, yeah, everyone listening. We still very much recommend starting with the paper trading until you get comfortable and you've done all your studying and then moving on to executing from there. So the next question I have is this is actually from the same person that asked the last question. So you don't talk much in your video about the resulting buying power for stock or resulting buying power for options. These selections are at the bottom of the order confirmation box, but I can see from your video that your numbers for each are much lower than the numbers I'm seeing in my paper trading account. So that answers a question. They are on paper trading right now. And why are your numbers so different than what I see in mind? I can repeat that if you'd like. I'm not sure if that came across as clear or not.

[00:12:35.570] – Josh: It is. It's hard to know exactly why because it could have been more than one position. So my video showed one contract, so the numbers could be different because the contract at that time, you could have multiple contracts, he or she, and that's the reason why it's showing differently. Also, it could be he's in an IRA, so I think the paper trading account gives you a couple of different accounts.

[00:13:01.160] – Katie: Okay.

[00:13:01.470] – Josh: And in an IRA, you can't do margin. It's only cash only. So that could be the reason why it's looking much different. There's a couple of different reasons, but those are the two main reasons why it would probably look different. And if he wants to send in a screenshot of what they're seeing the next one, we can cover that as well and make sure we hit it on exactly and avoid any confusion.

[00:13:25.390] – Katie: Okay. I would imagine just because we use two terms for everybody else, the resulting buying power for stock and the resulting buying power for options, those numbers are often different or they're the same.

[00:13:39.650] – Josh: Yes. So when you buy options, you can't use margin. It's cash only.

[00:13:44.520] – Katie: Okay.

[00:13:45.950] – Josh: This is why we don't really want to go too far into it. So if you bought an option, which we're not doing, that would be the buying power for just buying options. But since we're selling options, we're using that leverage, and that's where we're tapping into the stock buying power.

[00:13:59.910] – Katie: Okay, that makes sense.

[00:14:01.350] – Josh: Yes.

[00:14:01.860] – Katie: Okay, so we would be tapping into the stock buying power.

[00:14:06.440] – Josh: Correct.

[00:14:07.150] – Katie: Okay. So the last one that I have for today is for.

[00:14:18.510] – Josh: Interjector. The one way to look at options buying power is just to look at it as cash on hand, because with buying options, you can't use margin because they're already a leveraged instrument. So it's a good way of just looking at it as like, that's the cash that I have available and the stock is what margin I have available completely.

[00:14:38.250] – Katie: Okay, so thinking of the resulting buying power for options as your cash and the resulting buying power for stock, more like margin or credit.

[00:14:49.060] – Josh: Correct.

[00:14:49.840] – Katie: Okay. That's like a good, clear analogy. All right. So the next one I have is very specific to the recommendation and the alert last week. So it says for McDonald's, November 18, 2022, strike place, $230 sell to open, I would need $23,000 for collateral to collect premium of $209. I think there's some questions there. Are they reading that correctly for a cash account?

[00:15:20.640] – Josh: Yeah, that's correct. For a cash account or an IRA, which you can't use margin, it would be cash equivalent, and it would be cash secure. That's what's known as and you would have to put up the full cash amount.

[00:15:33.450] – Katie: Okay, so you'd have to have the $23,000 in collateral in your IRA or in just a straight cash account.

[00:15:42.720] – Josh: Correct. And that would be like they would put it to the side. You would have it. And a lot of people do that in the beginning just because they want to make sure like, I'm doing it right or I can sleep at night. And once you get up and going again with McDonald's, you have to think about McDonald's risk. And there's risk in the marketplace. And you're always going to hear me every week talk about the risks and what can happen. Now, in the Quick Start video, JP and I talked about selling puts. And I mentioned in there that often times on equities, we don't sell options, but McDonald's sell calls on equities. And the reason why is because there's upside risk. Now, when we look at something at McDonald's, I don't think anyone has taken over McDonald's. Very unlikely. And also it's very unlikely McDonald's, who's lasted 70 decades, is going to go anywhere as well. Certain stocks may make sense to do cash secured to be a little bit more safety if you choose to depends on risk tolerance in the beginning here, you don't know your risk at this point. And that's why it's always best to either paper trade in the beginning to understand what you're doing and executing, to visually see it, or to do cash secured and do it on one contract.

[00:16:55.670] – Josh: Because then at least you're making forward progress. You're falling forward. You're doing things and, yeah, you may not make as much money, but again, the markets have been around a long time. There's always going to be opportunity. McDonald's specifically has been around 70 years, and if you knew about it 20 years ago, you'd probably be doing it. So at this point, it's just taking it slow. And there's nothing wrong with doing cash, but obviously, if you use margin, you're going to be more strategic and create better returns.

[00:17:25.410] – Katie: Okay, so if somebody were to have a margin account, just for my understanding, they wouldn't need that full 23,000 for collateral.

[00:17:39.090] – Josh: No, you would be tapping into the margin, which was about 23 2400 in the video.

[00:17:45.090] – Katie: Okay. All right, so 23 2400. If you're using a margin account, if you're using a cash account or an IRA, which is cash secured, you would need the $23,000. But we understand why, and we actually think that that's not a bad strategy to start off with because it's more secure as you're getting started and you're learning the whole process.

[00:18:06.930] – Josh: Yeah. So I'm looking at this right now, and right now, the market is 187 x 197. So when we're doing this, it's 187 x 197. So it's $0.10 wide. And if I click on Sell at 187 for my margin right here, it's telling me $2,300. The buying power effect would be $2,500. So when you look at this when I'm looking at this, it would tap into what I have available on the cash side and also on my buying power for stock. You would see the change not only in cash available for options, but also on the margin as well, because, again, they're both reflecting something different. Buying power on stock is more focused on the margin versus the options are just simply cash, and it's referred to as options.

[00:18:54.850] – Katie: Okay. I think that that is clear. And if people that are listening have follow up questions specific to that and to those explanations, by all means, please submit them to us, and we will continue this conversation and this, like, education process together on our next Q and A call. And that is it for the questions that I have for today, Josh, so thank you so much, and I'm really excited to see what people submit next and what the alert looks like this week. Last week, you knocked it out of the park. We were all very, very excited, so yeah, thank you.

[00:19:31.630] – Josh: Well, this was exciting. I'm looking forward to next weekend. I'm looking forward to next week. And also, we have a lot of good questions here. These are a lot of questions that are just more on execution, and that's really going to be the basis of it. Like, how do I navigate this? How do I visually see it? And all those questions are going to be welcomed because, again, it's about getting going and moving forward. And there's not any silly questions like, why was it when I saw in the video, it looked like this versus what I saw on my screen. And that's a great question.

[00:20:05.530] – Katie: Yes, I totally agree, because the fear of executing on these types of recommendations or just like anything new is what stops you. So ask all the questions, even the smallest questions, because then hopefully it helps you or whoeverever else get past that hurdle, they might have to just hit that button and try it for the first time. I totally got it.

[00:20:30.980] – Josh: And to follow up on that question specifically, and I should address this in the beginning, if there is an alert that I sent out that is not valid anymore, I will follow up and say it's not valid anymore.

[00:20:41.790] – Katie: Okay. Yeah, definitely.

[00:20:43.460] – Josh: So just assume that the market is going to not exactly reflect what is shown because the markets, again, are open and they move and things happen. Either wait for that price, or if you got better, even better, if it's a little bit away, you can wait. But if it's completely voided, then I will follow up and tell you, hey, look, we're just going to pass on it this week, or we're passing on it and we'll find something else, or we'll wait till next week.

[00:21:10.490] – Katie: Okay, yeah, that's great to know. And we've been packing the alerts with so much, like, additional education that even if, in the worst case scenario, something like that happened, we've still went through the whole process together. And there's still so much to learn from those alerts each week. That's really good. That's good to know and probably put some people's mind to use. All right, I think we're going to wrap it today and yeah. Thank you so much, Josh.

[00:21:37.660] – Josh: Thank you again.