When you first start listening to Tom & Tony, it’s easy to get lost in their conversation if you aren’t up on all of their lingo. I remember when I first started watching, I heard quite a few terms I was not familiar being thrown around - things like "problem child," or "selling premium til' your hands bleed." We thought, "why not put together a blog post that tries to encapsulate all of their terminology into one place?" - which turned into this post!
Some of the following terms on this list are "tastytrade originals." Some are terms that are often found in the trading world, but that you may not be familiar with if you're new to options trading.
Read through this list and you will be well on your way to joining in on the conversation with Tom and Tony!
20 Trading Terms Commonly Used By Tom and Tony
Buy Into Weakness, Sell Into Strength
When the stock market or a particular underlying is at or near its low, the tastytrade methodology is to "buy" into a long position (and inversely, close out of a short position). When the stock market or a particular underlying is at or near its highs, the tastytrade methodology is to "sell" into a short position (and inversely, close out of a long position).
Having a contrarian viewpoint means that you reject the opinion of the masses. This is where buying into strength, selling into weakness comes from - it is a contrarian way of thinking. Despite market trends, contrarians like to buy when the market is performing poorly and sell when the market is performing well.
Market efficiency looks at to what degree the price of a particular underlying reflects all relevant and current information which could impact the price. Essentially, the school of thought behind efficient markets (you can learn more about the efficient market hypothesis here) is that markets factor in everything that could impact stock (and option) pricing - this includes everything from Federal Bank announcements, to volatility, to earnings.
This means that Tom/Tony do not have a position in an underlying they are discussing. Flat can also mean that the deltas in a particular underlying are zero.
I Do Not Like The Tape Action Here
This term refers to the fact that the market isn’t behaving in its typical way, and Tom/Tony is unhappy about the diversion (which is easier to spot for them than newer traders because of their decades of experience).
Johnny One Lot
This refers to putting on a small trade. For example, if you normally trade 5 lots, then if you put on a trade with only one contract, you are trading a Johnny one lot.
Keep Your Hands In Your Pocket
This means not making any trades right now. There are certain times when it is best to keep one's hands in one's pockets and not participate in the market. This might be because the market is behaving in a way that is unusual or the market isn't moving in a trend that matches a particular trading style.
These are the professional investors (compared to us retail investors), who are actually "making the market." Making the market means that a dealer or a broker holds high volume of shares of an underlying to help facilitate the buying and selling of that security. In the past, the stock exchanges had Open Outcry Trading Pits, where the professionals yelled out prices at each other and set the market in that manner. Nowadays, computers set the prices based on the market activity, thereby making the professional investors and/or brokerage firms the figurative market makers.
On The Dance Floor
Being on the dance floor means that a trade is almost at the money (or for spreads, in between strikes). When Tom and Tony use this phrase, it typically involves a discussion about whether or not to roll a trade because it is at the money.
When a particular underlying has been overbought, this means that the demand is really high (but supply is not) so those on the buying end will have to increase their bids to get filled. On the contrary, if a particular underlying has been oversold, it means that the supply is really high (but demand is not) so those on the selling end will have to decrease their asking price to get filled.
Tom & Tony typically refer to a trade that is not going their way as a problem child.
This refers to the commission fees charged by your brokerage account. It is different depending on the institution that your brokerage account is held at, the country you are trading in, the number of times you trade a month, and so on.
Run Like A Thief In The Night
This means, take profits off of the table before the cyclicality of the market changes those profits into losses. Also, a lot of times this refers to closing trades that have been losers for quite awhile, but that have suddenly turn profitable.
This refers to making a quick profit on small/large price changes.
Selling Premium Until Your Hands Bleed
This one is pretty much implied by the name, which means to sell premium in underlyings that fit the tastytrade strategy, until there are no more trades left (without breaking one's mechanics).
This refers to dollars. This term actually comes from the book The Richest Man In Babylon by George S. Clason, a book on finance told in story form.
When Tom and Tony talk about being long or short, short refers to selling premium, and long refers to buying premium. Short and long have directional implication as well. i.e. Tom may say he's long Twitter ($TWTR) but he might be selling (short) puts. Remember that with these terms you have to account for both the trade direction and type in order to understand the trade.
Tape Action Is Heavy
This typically means that orders being placed are not being filled as quickly, and the market is generally moving slowly.
This refers to the size of a trade. A tranche can be different for every investor, but refers to the number of contracts that are typically traded based on one's account size. i.e I have a small account and always trade 1 lots, so my tranche would be a one lot in stock $XYZ. Tom and Tony have larger accounts, so for them, we can assume a tranche involves more contracts.
This refers to the liquidity of the particular underlying. If the bid/ask spreads is really wide for an underlying, then it can be very difficult to get in or out of the trade. Bid/ask spreads that are a penny wide (up to 5 cents) are ideal. In this state, an underlying is considered extremely liquid, meaning that is should be easy to get in and out of a trade.
Check back as we will be updating this post with additional terms requested by you, the viewer!
Can you think of other phrases or terms that Tom & Tony use that I missed? Add them into the comments below!