Options 101: How To Get At The Money

In this episode, we’ll cover the basics of trading options. Kevin Davitt, Head of Index Options Content at Nasdaq, joins IBKR’s Senior Manager of SEO and Content, Cassidy Clement, to discuss. They look at what the options market is, structure of the contracts, and how they are tied to volatility.

Contact Information:

indexoptions@nasdaq.com

Summary – Cents of Security Ep. 16

The following is a summary of a live audio recording and may contain errors in spelling or grammar. Although IBKR has edited for clarity no material changes have been made.

Cassidy Clement

Welcome back to the Cents of Security podcast. I’m Cassidy Clement, senior manager of SEO and content at Interactive Brokers. Today, I’m your host for our podcast and our guest is Kevin Davitt, the Head of Index Options Content at Nasdaq. We are going to discuss the Basics of Options. We’re going to look at what the options market is, basics of these contracts, some jargon, and then how they are tied to volatility. So, welcome to the program, Kevin.

Kevin Davitt

Thanks for having me on the program, Cassidy, I’m excited to be here.

Cassidy Clement

Awesome. So, just a little background. When I first started it, Interactive Brokers, you, I believe were at Cboe [Global Markets] and I would queue your videos talking about options or volatility for the day while I was eating my sandwich at lunch, I’d be queuing up because you guys were an hour behind us, I believe, and I’d be queuing them up for the midday market recap, so I’m aware that you’re aware of options in the most basic and the most complex states. So, let’s go over some of these basics for our listeners. So, what exactly is an option and what is that market for? Who does the options market exist for?

Kevin Davitt

First of all, thank you for what I’ll take as some flattery. I’m proud of being able to speak and ideally make concepts that could be potentially off putting, more relatable. I think that is the key to growing and understanding, no matter the topic. So, thank you for another opportunity to do that. Specifically to your question, it’s a big one, and I’ll preface it by saying this is my take on why the marketplace exists. And as another preface, I’m a fan of history in general, and I like knowing back stories, and I believe that an understanding of history can make you better in whatever field or work you play in. So, we’re talking about the options market. And the options market could arguably be traced back to ancient Greece, 2500 years ago. Aristotle is a name that is largely familiar, wrote about a guy named Thales who paid olive oil press operators for the right but not the obligation to use those presses on or before a certain date in the future. And what Thales kind of effectively did there was purchase a call option, except the underlying was the use of olive oil presses.

Now, let’s fast forward and understand that in a much more modern context. Back in the late 60s and early 70s, the Chicago Board of Trade was seeing a decline in volumes for a number of their grain futures contracts, and they were interested in ways that they could potentially broaden their product set. Essentially, they wanted to diversify. Now, over the counter, which is different than listed markets, over the counter call and put options had existed in the United States for about 100 years at that point, but they were not standardized and they were not centrally cleared. Now at the same time, also in Chicago, there was some kind of breakthrough work being done where really bright people were applying physics knowledge to capital markets. Fischer Black and Myron Scholes developed a mathematical model to value a European style call option. And this is like really important. And then from 50 years ago, pretty much right now, so also in 1973 the Cboe Chicago Board Options Exchange was launched. In the smokers’ lounge of the Board of Trade, it was a different world. So, back then 50 years ago, only at first call options were listed on 17 underlying equity products and then puts were introduced in 1977. We’re going to talk more about this, but just to give, again a little more context to this market and the evolution: In 1974, average daily volume was around 20,000. And through last year, average daily volume runs around 45,000,000. So, these ideas thrive. This concept was successful, and it brings us to what is the options market today. From my perspective it’s a place where risk transfer occurs. I believe that’s always been the case. So, to be brief, risk transfer involves a contractual shift of pure risk from one party to another. The insurance industry is probably the most widely cited risk transfer business, but there are a number of analogies between the options business and the insurance business at a very macro level. There are differences as well. They’re both driven by an assessment and evaluation of risk based on statistical models, based on math.

Risk is valued or priced and an end user is able to manage their exposure to a security, an ETF, an index or other financial products where there are call and put options. The end user can protect against an adverse outcome over the life of the option. You could, we use the term gain exposure to a market or a security of interest. There’s the potential to enhance yield on a holding. You could also manage specific portfolio risk by buying or selling options based on your needs. The really key point here is that options have grown and been so successful, in my opinion, because they’re so flexible, and they are designed to offset a pre-existing price risk. But there are a variety of ways that they can be incorporated into a portfolio. I think the growth in volumes is also a testament to much broader understanding of risks as well as potential benefits and the overall utility of products like this. And I think the work that you do in the Interactive Brokers’ team does to educate potential end users serves that well. These transactions occur on exchanges. All listed options trade on exchange and that’s where a group like Nasdaq, which I work for, comes in. I work as a part of our Index Options business. Nasdaq owns and operates six of the 16 different options exchanges. I think sometimes there’s confusion as to why there’s so much variety there, and I don’t think tremendous detail is necessary there, but I think a little bit is helpful. Owning multiple exchanges is somewhat similar to how Gap owns and operates their namesake brand store as well as [brands like] Banana Republic, Old Navy and Athleta. They appeal to different areas of the retail market. And that’s kind of how exchange operators diversify and target specific end users. So, hopefully that was thousands of years of history in a couple of minutes.

Cassidy Clement

Exactly. Thousands of years by the minute. So, with those exchanges or those opportunities for investors, the two things that they’re probably likely to hear about in the basics of options or just a basic conversation, is the call option and the put option. So, how would you explain those topics to somebody new to the environment?

Kevin Davitt

OK, yes. There are two types of options; there are calls and there are puts and a couple minutes ago I described this ancient Greek paying an olive oil press operator for the right but not obligation to do something, and it remains very similar today, just standardized. So, a call option when purchased, when you buy a call option it gives you the right, but not the obligation to purchase 100 shares of the reference asset. That is kind of jargon; reference asset could be the equity, it could be an ETF, it could be an index. Now, that right, but not obligation, is at a specific price, and on or before a specific date in the case of American-styled options. Now, there’s nuance that needs to be understood. As I mentioned, I work in the Index Options business, and index call options are slightly different for a couple of reasons. They’re arguably simpler in the sense that they are almost all European-styled, so there’s no risk of early exercise or assignment. That’s one less concern that you have with most index options, and index options reference an underlying index. So, for example the Nasdaq 100, and there are not shares, so to speak, of the Nasdaq 100, there’s a methodology and then there’s a level of a price level for that. So, index options are cash settled, whereas equity call options and ETF call options physically deliver at expiration. So, just distilling this, rights but not obligations and in the case of a call option to purchase shares. If you’ll indulge me, I’d give you just one brief example to sort of tease out the nuance here between the two types. So, you could use an ETF product designed to track the Nasdaq 100, buy a call option, and if you have more questions about this I can be reached at indexoptions@Nasdaq.com.

But I’m going to be brief: So, I think a quick example to explain the differences here would be helpful. You have an ETF example, so I’m going to use the QQQ’s, but there are other ETF products designed to track the Nasdaq 100. In this example, the underlying is trading around $343. And let’s just assume you owned one of the 370 strike calls that expires at the end of the week. Now, assuming the option is held, you don’t close it out ahead of expiration, and the underlying closes above 370, what happens because this is an ETF product that physically delivers, is that you need to buy 100 shares of the ETF because of that, right that you had, it has economic value. And so, there’s going to be a $37,000 outlay and then you have risk after expiration. Specifically, you own now this ETF. If it continues higher you make more money and if it moves lower, you’re losing money. That’s relatively simple. The linear exposure of the equity.

Now, let’s contrast that with an index option that cash settled. Still a call option. Still an index designed to track the Nasdaq 100. So, I’m going to use XND here. It tracks the same index, but it’s one-100th the size of the full index; smaller notional value. XND at the same point in time is trading around $153. So, let’s say you own the 150 strike call. [It] expires at the same point in time. The value of that index option will be XND’s settlement value on Friday minus 150. So, to make the math relatively easy, let’s say that the index settles at 153. The 150 strike call would be worth 3. The difference between settlement price and strike price. And it would cash settle worth $300. The cash flows in or out of your account based on the position. That’s independent of what you paid for it. If you paid less than 3 bucks, you’ll make money; more than 3 bucks, you’ve lost money. And that does not account for any frictional costs, but there is also no directional exposure after expiration. So, in that sense, the cycle of risk is closed. Many market participants prefer that clean settlement with cash and no post expiration exposure as well as no need to buy 100 shares of the underlying. Others are very comfortable and perhaps want to own the underlying ETF. Hopefully, that was fairly clear. And do you want to talk through put options now to the flip side of the coin?

Cassidy Clement

Sure, yeah. I was going to say, I mean, I’ll tell you the way that I thought about these as the most basic way when I was studying for my Series Seven I think. So, when I was studying, I looked at the call option and put option like, “all right call option I’m calling you to buy this, where put option I am putting this over to you”, and that was kind of how I kept them on one side or the other in my brain as I was reading some of the ‘consumer, what fits them, what fits the investor’ scenarios. So, I guess then how would you explain the put option to the listener?

Kevin Davitt

Sure. Just to maybe close the loop on the call side, this may not work for everyone, but I think about coupons, and I know the world has evolved where we’re not clipping coupons from the Sunday paper really anymore. But if you think of a coupon for a pizza, right, it gives you the right but not obligation to pay $10.00 for a pizza, and coupons have expiration dates. The right does not exist in perpetuity. And I think call options at a really basic level are somewhat similar to coupons that you need to pay something for. That price is fixed and there’s an expiration date. Now, if we turn our attention to put options, I think the way that you described it when you are studying for your licensures was really, really helpful. So, a put option, sort of the legalize side of it, is a contract where, when purchased, it gives you the right but not obligation to sell 100 shares of that reference asset, so that, to use your lingo, “I’m going to put this to you”. And again, it’s at a specific price on or before a specific date in the case of American style options. And I know, when you finish the sentence like that with specific price, specific date, American styled options, that’s where the lingo gets sort of like glassy eyed. But understanding that is important. I think a long or a purchased put option is typically viewed as a way to protect against a potential decline in the value of something that you already own. So, you could buy a put if you believe a security or index is likely to decline ahead of the options expiration. In that situation, you’re getting downside directional exposure, OK, but if you buy a put on a security that you own, that combination is protecting you against an adverse outcome. And that’s another situation where the sort of insurance analogy comes in. It’s not perfect, but it’s helpful.

Just like I mentioned before, all ETF and equity put options are American styled and physically delivered, so they could be exercised or assigned early. And you end up selling shares of the underlying index options index, put options cash settled. So, if we go back to our earlier example with XND at 153, if you bought that 150 strike put option, just for the sake of example, let’s say you paid $0.50 for that option, and then the index falls and settles at 148. That put would be worth $2.00. The right to sell the index at 150 when it settled at 148, and it would settle the cash. So, because you paid $0.50 for it, it settled worth $2.00 you’re up 150 bucks per option with no directional exposure after expiration. And again, that does not include frictional costs. But hopefully I’d love to know what, if anything, helped you understand puts, because I think they tend to be a little bit more confusing than, “Oh I get to participate on the upside with a call”. People generally don’t think, “I have the potential to make money if markets go lower”. It just runs a little bit counter to how we typically view capital markets at an introductory level.

Cassidy Clement

Well, correct me if I’m wrong. When you have your put contract in place, it’s essentially saying, “Hey, if I put this to you, you’re going to pay me X”, right?

Kevin Davitt

Yeah!

Cassidy Clement

So, the way that I kind of thought of it was, and I actually used this same reasoning when I was studying for shorting stocks was, I thought in terms of popular shoes. So, let’s think Jordan Elevens or Ugg boots, if you’re like me and was a person who was part of the Ugg craze in their youth. If I had these shoes, and I knew that at the time they were worth a lot, but it looks like that trend is starting to decline, I know that I can make some money off of these if I get you to be obligated in paying me the higher value and that’s kind of how I saw it in the most easy way, I’m also kind of a visual learner. I remember sitting at my desk studying and our director of trading education, Andrew Wilkinson, came over and helped me through because some of the Series 7 examples are very complex and it’s a lot of what fits the investor specifically. And there are some trick questions. And sometimes, like you said, it can be so complex that you’re missing the actual elements that you need. The real key ingredients to the meal you’re making, instead of cutting through all that brush, you just get confused by it. So, he would draw out some examples, and that helped me. But that really is what helps solidify some of the basics of options markets. To me I kind of looked at it that way, but you actually said what leads me into my next question. You had brought these up many times in your explanations. I think maybe we could do this kind of lightning roundish. Some of these jargon pieces. So, what is strike price?

Kevin Davitt

OK, strike price is the price at which an option is struck, and that right, an obligation in the case of your shoes where you could put them to someone. In the case of a security where you get to buy or sell that security. Same thing in the Index. That is your strike price. It is unchanged.

Cassidy Clement

So, then an expiration date which you use a coupon which was brilliant, but what about the expiration date in an options contract?

Kevin Davitt

Yes. So, I think at a really basic level, the coupon example is generally a good one. And typically if you look at those, it’s like at the end of a calendar year for a pizza business. The thing in our business is that the number of expirations have grown fairly significantly over the course of the past 10-15 years and even over the past two years. So, expiration date is the point at which a contract stops trading and it either has economic value or it’s worthless. So, in the case of the coupon, it’s that December 31st end of the calendar year. In the case of options, it could be the end of today for a number of index products. For some of the most active equity and ETF products, there are often weekly options. Those are almost all Friday afternoon. Now, that assumes that we don’t have a Friday holiday, which typically the only one is Good Friday, in which case that would be shifted to Thursday. And then historically, I’m a dinosaur in this business, when I started, there were only expirations on the third Friday of the month. Those are the standard expirations, so every option expires, any derivative contract expires. There’s a point at which it settles either to the security or to cash, and knowing your expiration date is imperative before using any call or put option.

Cassidy Clement

Got it. Of course, like you said, you need to know your timeline before you start signing a contract. That’s very important. The last three are probably the most referenced in financial media, that is the money phrasing; in-the-money, at-the-money, out-of-the-money. What about those? How do you explain those bad boys?

Kevin Davitt

 You’re right. Hopefully I can. We’re talking about another sort of jargon term which is moneyness of an option and all options are either in-the-money, out-of-the-money or at-the-money. If you understand intrinsic value, and I wouldn’t imagine that everybody listening does, but when you do, you’re going to get this and it’s going to stick. The moneyness concept then tends to come quickly. Intrinsic value is the value an option would have if it were exercised or expired today. All in-the-money options have some intrinsic value. And all out-of-the-money options have no intrinsic value. They have only time or volatility value. You could use those terms sort of interchangeably, so I’m going to stick with our earlier example. The 150 strike call in XND with the index at 153 has $3 in intrinsic value. It’s an in-the-money option. Now, the 150 strike put has no intrinsic value with the index at 153: Nobody wants to sell something for $153 if everyone is willing to pay 153, OK no intrinsic value, it has only time value or volatility value. OK, if a call option has intrinsic value, then the same strike put option will have no intrinsic value. That’s a somewhat easy rule of thumb and then you have these at-the-money options and that’s where a lot of trading activity tends to concentrate. An at-the-money option is a call or a put that strike – that is struck – pretty much right where the market is trading. So, using our XND index example, XND is $153, then the 153 strike call and 153 strike put are both at-the-money and for those that do think in Delta terms, that’s not going to be everyone, at-the-money options typically have about a 50-delta, so if you think in Delta terms 51-delta or higher likely is in-the-money option. Likely. Keep in mind that interest rates and dividends or the future value of the asset plays a role there, but I’m not trying to confuse too much. And options with, let’s say, 49-delta or lower, are likely out-of-the-money.

Cassidy Clement

Right. OK. So, really the keyword in those phrases are “money”. Where are we at with the “money” of the options contract? That’s something, I guess, that would be the key thing if you’re like, I’m a little confused. Look at that. Think of that. Think of the number line. Where is it falling? Are we falling at something above where we’re getting…. Or below where it’s not worth anything or we’d be losing money if we tried to sell it. Which like you said then has no value.

Kevin Davitt

Going back to your example about the the power of visuals. There’s a reason that many of us are visual learners. We can understand visuals something like 50,000 times faster than us rambling through these words, so reinforce these concepts with visuals and it will stick better.

Cassidy Clement

Absolutely. It’s honestly so much easier if you truly just even wrote it on post-it notes and put it out in front of you and was like stock one, stock two or contract one, contract two and you move things around, you start to understand the concept of moving things. Like I said, how I looked at it was I’m going to put this over there to you. It helped me understand that. But you talked about options, we’ll call it fraternal twin volatility, so when you look at a company’s share price, how can you tell how volatile it’s been? Implied volatility is another word that floats around a lot, but how exactly does that play out in the options market? Because volatility kind of impacts it kind of like, you know, ships in the night, but they impact each other.

Kevin Davitt

OK. Yeah, you are absolutely right. So, we’re evolving, this is an important concept. And I think an understanding is important, but understanding the basics and sort of applying it first you will back into a better understanding of volatility, whether we’re talking realized or implied. But let’s work through this. To address your question, a company share price alone is not indicative of volatility. You could look at a chart that showed, for example, daily moves, right, you’re on your Interactive Brokers platform and you look at daily moves for some time frame and you might be able to estimate volatility if you have a good sense of the mean value and a couple other math concepts. But thankfully the world has evolved and Interactive Brokers has tons of tools built into your platform that give us really quick access to historical volatility calculations as well as implied. But let’s understand these piecemeal. So, we don’t need to go too much into the math side of things.

Volatility is a calculation in capital markets. It is a calculation. It is a number, but in in the real world, it has this negative connotation, but volatility numbers are almost always annualized so that you can compare of apples-to-apples. Now, also understand that the time frame that you evaluate is going to matter. Shorter time frames are more susceptible to swings and volatility. I’m a fan of examples, but again going on and using the Interactive Brokers’ platform and looking for historical volatility data is really going to reinforce this, especially with the visuals. You can plot it. I’m going to use the Nasdaq 100  index as an example. And I’m using closing data as opposed to intraday using a 10-day window and a one-year time frame. Historical volatility on a 10-day basis has been as high as 50% and as low as 11.2%. That’s a wide range. Now, as of right now, that 10-day historical or realized volatility number is 19%, but it’s a noisy measure. If you widen that time frame window and evaluate a 30-day volatility over the past year, that’s ranged between 38% and 15%. My point here is not really the numbers, it’s just that it’s a much narrower spread; that’s normal. A longer time window typically exhibits smaller changes in volatility. And then if you broaden it out for like a panoramic view 360-day historical volatility for the Nasdaq 100 has ranged between 25.5% and 29.75%, a much narrower range. OK, so going back to your point, price is not indicative of volatility and your window, it is a measurement of how much variation there has been from a mean over a given time frame, and understanding that the time frame you evaluate is going to influence that output is really, I think the foundational concept that needs to be understood. Before you move into something like implied volatility, where we’re bringing in option values to the conversation.

Cassidy Clement

Got it. And I think what’s important too is for people getting started in this space is to remember that we’re talking about volatility we’re talking about as a noun, as a figure, versus just saying as an adjective, “Oh, hey, that’s stock is volatile. That item’s volatile”. This is actually adding a metric to that phrase and turning it into something that you can actually, as you said, plot it visually, see it, look at a larger timeframe for.

Kevin Davitt

You’re so right that you just explained the difference between the denotation, what volatility means in capital markets and how we typically hear it, the connotation, and it’s really important to understand it. It is a calculation in this context.

Cassidy Clement

Right. And that’s starting out, at least from the business degree perspective, before I started getting to the options chapter in my Series 7 years ago, initially seeing that being like, “Oh yeah, I know stocks are volatile. I know that”. And then you start to read and you’re like, “Oh, no, this is actually a whole field in and of itself. It’s taking that adjective, turning it into a noun, and then building an entire industry off of it. So, it’s a lot deeper than just saying that a stock is having peaks and valleys. But why is that volatility aspect, metric area so important when it comes to the pricing of options?

Kevin Davitt

Yeah. So, that’s our transition into implied volatility, which again, this is not necessarily basic stuff, but it is important as you evolve your understanding of the options market. Alright, here I’m going to date myself again, but I’m going to talk about Donald Rumsfeld, who was a Secretary of Defense. And he gave a speech 20 years ago about known knowns, and unknown unknowns. He wasn’t talking about options, but I think it’s applicable, so let me explain that, just base level. There are either 5 or 6 inputs to any options value. There are 6 for an underlying that pays a dividend and five inputs for ones that don’t. The five are, and you’ve seen this in a book and we know it, but like hearing it in this context is hopefully helpful. The underlying price of the security or index that’s known, you look at your Interactive Brokers’ platform and you see the price where the underlying is trading, it’s known. The Strike Price, a term we discussed. It doesn’t change. It is known. The type of an option, whether it’s a call or a put. That is known it. It doesn’t change. Interest rates; that impacts the value of options. It is known. It can change, typically at a predictable rate. We know when Fed meetings are, we can assess the probability of a change in the direction, but it is known. Future volatility is an estimate and it is unknown. It is that real crux when you put together an understanding of options and how and why these things move and why they’re so valuable, why we’ve seen volume growth like we have. It’s that more and more people understand the power that you can harness, that unknown in all these options, so future volatility is an estimate. It’s unknown and the price of an option we can back out and your Interactive Brokers platform backs it out at every point in time, the implied volatility for that option. Now putting this together, hopefully, the implied and the historical volatility are typically related. So, in general what I mean by that is that options that expire in a month will typically have an implied volatility that is similar to the realized volatility for the past 30 days. And I was looking up some metrics before we went live on this, and the 30-day realized volatility for the Nasdaq 100 is around 19%. The at-the-money options that expire one-month from now are trading with an 18.2% implied volatility. My point there, and this typically holds true, is that the there tends to be a relationship between say 30-day historical vol and 30-day forward-looking vol, and so when you put those together, that is really where I think the distillation and this really boils down to like when you understand implied volatility, its influence on the price of an option when implied volatility goes up the price for options increases when implied volatility decreases, the value of options across the board decreases. That is super-duper important and then you get into the nuance about like well, what about options that expire a year out in time? Those are more sensitive to these changes. I don’t think that’s super key to this discussion now, but implied volatility ultimately is that unknown that we estimate and it influences the value of every option. The price that we pay, it’s a reflection of the supply demand dynamic in the market that and you can use these awesome tools that Interactive Brokers makes available to say what is implied volatility on this option. Now, what range has that moved within and what’s normal. So, you have a benchmark for the implied volatility over time.

Cassidy Clement

So, taking those pieces of volatility, some of the jargon, most of the basics that we covered here, let’s take it a little bit real world to give people a little bit more color to this picture. So, most people know of the meme stock activity that happened three years ago 2020-2021-ish. There were many different conversations going on with the word volatility and options. So, how would you add a little bit more of a perspective on to why those things were occurring, why people said, “Oh, let me go towards options”, I guess, when it comes to those stocks for that active.

Kevin Davitt

OK. So just to be somewhat clearer, context matters and and it is a unique case study, there’s a lot of nuance, but like I referenced a minute ago, ultimately in consumer markets it boils down to the prevailing supply demand dynamic. Now, you don’t want an ECON 101. But really, that understanding remains helpful because implied volatility is a reflection of the supply demand dynamic here and now. Let’s use a consumer example from the same point in time. Do you remember what was happening to the price of things like toilet paper and sanitizer at the same point in time? There was an imbalance between supply and demand, and then price reflects that. You saw imbalances in the supply demand dynamic in the options market for a handful of securities. And overtime that normalized. Now if I think about this through the lens of an option dealer, which would be like the store that you go to to get your toilet paper or your sanitizer, right, they need to keep these stocked. If I’m an options dealer and I continue to sell options in XYZ security over and over, the marketplace is telling me that my volatility needs to be higher. The price needs to move up for this to reflect that demand. The same thing with toilet paper and sanitizer. Demand overwhelming supply. Prices change and so it’s going to fluctuate and that’s why I think understanding that typical implied volatility range for whatever security you focus on is helpful. Because there are situations where you see these big, big swings and then ultimately if you are paying up for that option and the underlying market doesn’t continue to realize that outsized volatility, that option will likely lose value over time, and that’s a very real risk. Ultimately, what you pay for something matters, and it’s reflected in the options market. And there are unusual swings that can happen very quickly. Typically, they normalize over time just like other consumer markets.

Cassidy Clement

While we covered a lot of the basics, there’s still so many other concepts and things to learn. So, what would you say to listeners who want to learn more about options and the options space?

Kevin Davitt

I would say that your firm does a fantastic job of prioritizing education, making it available, and I’m grateful for opportunities to do stuff like this. I think the world, writ large, we’re sort of bombarded with information and for curious listeners, I would recommend curating a relatively shorter list of firms or people that you believe genuinely provide valuable insights that aren’t necessarily motivated differently and stick to that and look for depth as opposed to breadth, right? You want to understand these foundational topics as well as you possibly can, because like any sort of construction site, if your foundation isn’t laid properly, whatever you put on top of that is not likely to do well. So, establish that foundation, and then I think there’s no substitute for applying that knowledge for giving it a shot. I grew up caddying and people would go to the range and hit balls and they might hit them nice and straight, but when they get on the course they behave differently. And I think it can be similar in the options market. Use small, one option and learn something from it and have a plan and stick to that plan. Discipline tends to work almost no matter where it’s applied with anything that’s difficult. I am very, what’s the term I’m looking for? I would be very careful to put any stock in a person that says this isn’t difficult. This can be difficult but difficult things are worthwhile. And so, finding a firm or a handful of people that provide valuable information, establishing a plan actually going and applying, like getting into the market and giving this a shot on a small, manageable basis with risk capital and then sticking to that plan, but being open to an evolution, you will continue to learn. And then I also should point out that Nasdaq, that I put out content that I try to make relatable and understandable and hopefully helpful to people that continue to come to this market and want to learn because people that understand this market continue to use it and that benefits both of our firms and exchanges, as well as a brokerage firm. And that is my goal. So, thank you for this opportunity, and thank you for educating listeners on the basics.

Cassidy Clement

Yeah, and thanks for joining us, Kevin. Those are all really great points. So as always, listeners can learn more about an array of financial topics for free at IBKRCampus.com follow us on your favorite podcast network, and feel free to leave us a rating or review. Thanks for listening. Bye everyone.