A: Tom typically recommends simple directional options trades. That means he’ll recommend buying call options when he anticipates the price of the underlying stock will go up, and buying put options when he anticipates the price of the underlying stock will go down.
The most complex type of trade Tom will typically recommend is a “loophole trade.” Also known as a vertical spread, the loophole trade is executed by buying one option and selling another option of the same type (either calls or puts) with the same expiration date, but different strike prices.
For example, in a bullish loophole trade, Tom will recommend buying one call option and selling another at a higher strike price but with a lower premium to offset some of the cost (and risk) associated with buying the more expensive option. It’s a net debit trade, meaning your account will be debited the difference between the two options. Both trades are placed with your broker as a single transaction – meaning you pay a single commission for both moves.
If it sounds confusing, don’t worry. Tom will give you step-by-step instructions with each trade, including a trade video where he will walk you through the process of placing the order with your broker.