Page 1 @ Copyright 2013. All rights reserved. Sheridan Options Mentoring, Inc. www.SheridanMentoring.com Jun 29, 2013 Hoffman Estates Dan Sheridan
Page 1 @ Copyright 2013. All rights reserved.
Sheridan Options Mentoring, Inc. www.SheridanMentoring.com
Jun 29, 2013
Hoffman Estates
Dan Sheridan
Page 2 @ Copyright 2013. All rights reserved.
Options involve risk and are not suitable for all investors. Prior to buying or selling an
option, a person must receive a copy of Characteristics and Risks of Standardized
Options. Copies are available from your broker, by calling 1-888-OPTIONS, or from The
Options Clearing Corporation at www.theocc.com. The information in this presentation
is provided solely for general education and information purposes. Any strategies
discussed, including examples using actual securities and price data, are strictly for
illustrative and educational purposes. In order to simplify the computations,
commissions and other transaction costs have not been included in the examples used in
this presentation. Such costs will impact the outcome of the stock and options
transactions and should be considered. Multiple leg strategies involve multiple
commission charges. Investors should consult their tax advisor about any potential tax
consequences. No statement within the presentation should be construed as a
recommendation to buy or sell a security or to provide investment advice. Supporting
documentation for any claims, statistics, or other technical data is available from
Sheridan Options Mentoring at www.sheridanmentoring.com. Chicago Board Options
Exchange, Incorporated (CBOE) is not affiliated with Sheridan Options Mentoring or
OptionNet. This presentation should not be construed as an endorsement or an indication
by CBOE of the value of any non-CBOE product or service described in this
presentation.
Disclaimer
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Dan Sheridan
+1-800-288-9341
Sheridan Options Mentoring, Inc.
http://www.SheridanMentoring.com/
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Get the PowerPoint Slides Emailed to You
Send an Email to
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Directional or Non-Directional Trading?
Speculative
Strategies
Long Term
Strategies
Income
Strategies
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Directional or Non-Directional Trading?
Long Calls/Puts,
Diagonal Spreads
OTM Butterflies
Vertical Spreads
Directional Calendars
Long Straddles
Calendar Spreads
Double Calendar Spreads
Double Diagonals
ATM Butterflies
Condors
Collars
LEAPS
Covered Writes/Straddles
Long Stock
Long Term Calendars
Income
Strategies
Long Term
Strategies
Speculative
Strategies
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$30,000 Portfolio 8 Trades Per Month
$ 5,000 Speculative – 2 trades
$10,000 Long Term – 3 trades
$15,000 Monthly Income – 3 trades
Speculative
Strategies Long Term
Strategies
Income
Strategies
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What Type of Trading Account?
Retirement account
Regulation T (Cash Account)
Customer Portfolio Margin
– Risk Based Margin
– $100,000 minimum equity (FINRA requirement)
Brokers may have higher requirements:
$150K Broker W
$125K Broker X
$110K Broker Y
$100K Broker Z
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What is My Edge (Advantage) for this Business?
Time decay
Standard deviations
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Time Decay
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Using the Right Vehicles
Liquid stocks or indexes that you would own in your
retirement account
Over $70
Under 30% Implied Volatility
Lots of strikes
Lots of option liquidity
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What Brokerage Firm?
Commissions
Execution
Platform
Customer service
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Number of Trades Each Month? Sample Plan for a Newer Trader
Month Size
Live Trades
Per Month
Monthly
Profit
1-6 $10,000 3-4 Break even
7-12 $20,000 3-4 at least 3%
13-18 $40,000 3-4 4-5%
19-24 $80,000 3-4 4-7%
How many different strategies should I trade?
How many different vehicles should I trade?
Should I do the same trade every month?
How important is it WHEN you enter a trade?
Monthly Income part of portfolio
What’s the practical way to increase your capital?
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Yield Expectations Each Month?
What is the yield based on?
– Yield on entire trading account?
$50,000 Account
Which Yield do I use?
1-2 % per month?
5-8% per month?
Trade
Margin
Profit Yield on
Trade
Yield on
Account
$10,000 $1,000 +10% +2%
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Monthly Income Trade Examples
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GOOG Iron Condor
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GOOG Price Chart
Date: 6/25/2013 Price: $869.40
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GOOG Iron Condor Date: 6/25/2013 Price: $869.40
Options Price IV Delta Trade
990 Calls $2.50 23.0% 8.0 +1980 Calls $3.30 23.1% 10.1 -1770 Puts $5.40 27.9% -10.0 -1776 Puts $4.40 28.2% -8.2 +1
AUG(53)
Delta -0.3
Gamma -0.1
Theta 3.8
Vega -17.0
Credit 180
Margin 820
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GOOG Iron Condor Date: 6/25/2013 Price: $869.40
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GOOG Iron Condor Date: 6/28/2013 Price: $877.10
Options Price Entry Pr IV Delta Trade
990 Calls $2.80 $2.50 23.1% 8.7 +1980 Calls $3.60 $3.30 23.1% 11.0 -1770 Puts $4.40 $5.40 28.3% -8.2 -1776 Puts $3.60 $4.40 28.7% -6.7 +1
AUG(50)
Delta -0.3
Gamma -0.1
Theta 3.8
Vega -17.0
Profit 20 (+2.4%)
Credit 180
Margin 820
Starting Price: $869.40 Days in Trade: 3
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GOOG Iron Condor Date: 6/28/2013 Price: $877.10
Starting Price: $869.40 Days in Trade: 3
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IBM Iron Butterfly
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IBM Price Chart
Date: 6/25/2013 Price: $194.85
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IBM Iron Butterfly Date: 6/25/2013 Price: $194.85
Options Price IV Delta Trade
205 Calls $1.25 22.2% 20.5 +1195 Calls $5.00 24.3% 51.3 -1195 Puts $5.00 24.3% -48.7 -1185 Puts $1.75 26.6% -21.5 +1
JUL(25)
Delta -3.6
Gamma -1.8
Theta 5.6
Vega -11.2
Credit 700
Margin 300
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IBM Iron Butterfly Date: 6/25/2013 Price: $194.85
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IBM Iron Butterfly Date: 6/28/2013 Price: $195.65
Options Price Entry Pr IV Delta Trade
205 Calls $1.12 $1.25 22.2% 20.5 +1195 Calls $4.95 $5.00 24.3% 51.3 -1195 Puts $4.20 $5.00 24.3% -48.7 -1185 Puts $1.31 $1.75 26.6% -21.5 +1
JUL(22)
Delta -3.6
Gamma -1.8
Theta 5.6
Vega -11.2
Profit 28 (+9.3%)
Credit 700
Margin 300
Starting Price: $194.85 Days in Trade: 3
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IBM Iron Butterfly Date: 6/28/2013 Price: $195.65
Starting Price: $194.85 Days in Trade: 3
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RUT 10-Day Calendar
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RUT Price Chart
Date: 6/25/2013 Price: $956.60
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RUT 10-Day Calendar Date: 6/25/2013 Price: $956.60
Options Price IV Delta Trade Price IV Delta Trade
960 Puts $15.00 21.0% -51.1 -1 $22.50 21.0% -48.9 +1
WEEKLY(10) JUL(24)
Delta 2.2
Gamma -0.5
Theta 24.7
Vega 34.8
Debit 750
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RUT 10-Day Calendar Date: 6/25/2013 Price: $956.60
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RUT 10-Day Calendar – 2 Days in Trade Date: 6/27/2013 Price: $974.20
Delta -7.0
Gamma -0.5
Theta 20.0
Vega 40.1
Loss 40 (-5.3%)
Debit 750
Starting Price: $956.60 Days in Trade: 2
Options Price Entry Pr IV Trade Price Entry Pr IV Trade
960 Puts $5.40 $15.00 18.5% -1 $12.50 $22.50 19.2% +1
WEEKLY(8) JUL(22)
Orig IV: 21.0% Orig IV: 21.0%
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RUT 10-Day Calendar – 2 Days in Trade Date: 6/27/2013 Price: $974.20
Starting Price: $956.60 Days in Trade: 2
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RUT 10-Day Calendar – Add 2nd Calendar Date: 6/27/2013 Price: $974.20
Starting Price: $956.60 Days in Trade: 2
Options Price Exist Adjust New Price Exist Adjust New
980 Calls $6.20 -1 -1 $12.90 +1 +1960 Puts $5.40 -1 -1 $12.50 +1 +1
WEEKLY(8) JUL(22)
Delta -7.0
Gamma -0.5
Theta 20.0
Vega 40.1
Loss 40 (-5.3%)
Debit 750
Delta -1.4
Gamma -1.2
Theta 41.1
Vega 79.3
Loss 40 (-2.8%)
Debit 1,450
Before Adjusting After Adjusting
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RUT 10-Day Calendar – Add 2nd Calendar Date: 6/27/2013 Price: $974.20
Starting Price: $956.60 Days in Trade: 2
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Dan Sheridan
+1-800-288-9341
Sheridan Options Mentoring, Inc.
http://www.SheridanMentoring.com/