TheoTrade€¦ · · 2016-11-07The Rebel’s Guide to Trading Options 3 ... , nor does it direct client commodity accounts or give commodity trading advice tailored to any particular

www.TheoTrade.com

TheoTrade

2TheRebel’sGuidetoTradingOptions

TheoTrade TheRebel’sGuidetoTradingOptions

HowtoProtect&ProfitinAnyMarket

©Copyright2015-2016TheoTrade,LLC.Allrightsreserved.

EditionV2

UnauthorizedduplicationofthiseBookisstrictlyprohibited.Nopartofthispublicationmaybereproduced, translated into any language, or transmitted in any form or by any means,electronic, mechanical, recorded or otherwise, without the prior written permission ofTheoTrade,LLC.

TheoTradeisaregisteredtrademarkofTheoTradeLLC.LEAPSarearegisteredtrademarkoftheChicagoBoardOptionsExchange.

16427N.ScottsdaleRd.

Ste.#410

Scottsdale,AZ85254

TheoTrade.com

www.TheoTrade.com

TheoTrade


Disclaimer and Waiver of Claims WeAreNotFinancialAdvisorsoraBroker/Dealer:NeitherTheoTrade®noranyofitsofficers,employees,representatives,agents,orindependentcontractorsare,insuchcapacities,licensedfinancial advisors, registered investment advisers, or registeredbroker-dealers. TheoTrade ®doesnotprovideinvestmentorfinancialadviceormakeinvestmentrecommendations,norisitin the business of transacting trades, nor does it direct client commodity accounts or givecommoditytradingadvicetailoredtoanyparticularclient’ssituation.Nothingcontainedinthiscommunicationconstitutesasolicitation,recommendation,promotion,endorsement,orofferbyTheoTrade®ofanyparticularsecurity,transaction,orinvestment.

SecuritiesUsedasExamples:Thesecurityusedinthisexampleisusedforillustrativepurposesonly. TheoTrade® isnot recommending that youbuyor sell this security.Pastperformanceshowninexamplesmaynotbeindicativeoffutureperformance.

Return on Investment “ROI” Examples: The security used in this example is for illustrativepurposes only. The calculation used to determine the return on investment “ROI” does notinclude thenumberof trades, commissions,oranyother factorsused todetermineROI.TheROI calculation measures the profitability of investment and, as such, there are alternatemethodstocalculate/expressit.Allinformationprovidedisforeducationalpurposesonlyanddoesnotimply,express,orguaranteefuturereturns.Pastperformanceshowninexamplesmaynotbeindicativeoffutureperformance.

Investing Risk: Trading securities can involve high risk and the loss of any funds invested.Investment information provided may not be appropriate for all investors and is providedwithoutrespecttoindividualinvestorfinancialsophistication,financialsituation,investingtimehorizon,orrisktolerance.

OptionsTradingRisk:Options trading isgenerallymorecomplex thanstock tradingandmaynot be suitable for some investors. Granting options and some other options strategies canresult inthelossofmorethantheoriginalamountinvested.Beforetradingoptions,apersonshouldreviewthedocumentCharacteristicsandRisksofStandardizedOptions,availablefromyourbrokeroranyexchangeonwhichoptionsaretraded.

Nopartofthispresentationmaybecopied,recorded,orrebroadcastinanyformwithoutthepriorwrittenconsentofTheoTrade®.

www.TheoTrade.com

TheoTrade


Contents. TheoTradeMission.........................................................................................................................6

Introduction...................................................................................................................................7

TheoTradePrinciples..................................................................................................................7

IntroductiontoOptions..............................................................................................................8

TheoTradeMantra......................................................................................................................9

TheoTradeCharacteristicsofTraders..........................................................................................10

UnderstandingOptions................................................................................................................11

AncientRootsofOptionContracts...........................................................................................11

Definition..................................................................................................................................11

OptionAdvantages...................................................................................................................12

OptionsDisadvantages.............................................................................................................12

OptionBuyer’sRightsandOptionSeller’sObligations.............................................................12

OptionParticulars.....................................................................................................................14

UnderstandingOptionPremium..............................................................................................18

IntrinsicValueFormula.............................................................................................................19

RelationshipofStockPricetoOptionPrice..................................................................................21

The“Money”isthestockprice................................................................................................21

IntrinsicValueofanOptionWhentheStockisat$50.............................................................21

TimeValue(ExtrinsicValue).....................................................................................................23

FactorsthatInfluenceTimeValue............................................................................................24

ATMOptionshavethemosttimevalue...................................................................................25

Volatility...................................................................................................................................26

OptionPositions.......................................................................................................................28

ClosingOptionPositions...........................................................................................................37

ExercisingOptions....................................................................................................................38

EnhancingReturnsandManagingRiskwithOptions...................................................................40

HedgingYourLongTermPortfoliowithPutOptions...............................................................40

UsingOptionstoBenefitfromPriceMovements(Speculating)...............................................43

www.TheoTrade.com

TheoTrade


Risk-RewardAnalysisofOptionsversusStocks........................................................................43

TradingwithSpreads................................................................................................................44

StockandATMOptionEquivalentsandRelatedRisks.................................................................46

StockMarketTerminology...........................................................................................................48

www.TheoTrade.com

TheoTrade


TheoTrade Mission. Youwanttolearnaboutthemarketsandthat'swhatgetsusupinthemorningatTheoTrade.We do it for the love of the trade. Forgetwhat you think stocks are going to do and startfocusingontherighttradeswiththerighttradelogic.Wearenotsomerunofthemilltalkingheads,wetrade,andwedothistoevokechange intheflawedrealityofclassicalWallStreetfinance. Stepup to theplate, commityourself to learning themarkets fromourexperience,andjoinusinourpursuitoffinancialrevolution.

DonKaufman

Co-FounderTheoTrade

Learn.Chat.Trade.

www.TheoTrade.com

TheoTrade


Introduction. Congratulations on beginning your journey towards learning the options markets withTheoTrade!Youareabouttoembarkona learningexperiencethatwill teachyouriskaverseconcepts for tradingknownandusedby less than1%of thepeople in thestockmarket. TobeginweshallintroducetheTheoTradePrinciples:

TheoTrade Principles 1. TradeLogic

2. CapitalAllocation

3. DirectionalBias

TradeLogic

AtTheoTradeweputyourstrategyandtradelogicfirst.Thevastmajorityofpeopleinvolvedinmarketsare infatuatedwithmarketdirection,attempting topredict thenextmoveastock isgoingtomake. Thereality,whatyou“think”astockisgoingtododoesnotalwaystranslateintoprofits. Many investorsandtradersalikeplace far toomuchemphasisonbeingrightorpicking the next move a stock might make. Our veteran traders dictate the right strategycoupled with established entry and exit criteria you do not need to be “right” in picking adirectioninastockorthemarketsinordertobeprofitable.

CapitalAllocation

Howandwhereyouallocatecapitalshouldbestronglyconsideredasaviableportionofyourtradingmethodology. AtTheoTradeCapitalAllocationtakesprecedenceoverbeing“right” inthemarkets. Why you ask? Experience andwatching order flow for decades has taught usinvaluablelessons.Haveyoueverbeenstoppedoutofatradeorbailedoutofapositiononlyto see themarkets turnaround shortly thereafter? Howandwhereyouallocate capital candefinenotonlylossesbutitcanbethedefiningfactorinyouroverallsuccessorfailureinthemarkets.Ourwarcryis“durationoverdirection”,youneedtobecapableofsustainingtradeslongenoughtobeprofitable.

www.TheoTrade.com

TheoTrade


DirectionalBias

We are not anti-charts. Rather we recognizewhere you “think” a stockmight go does notalwaysmean themarkets will agree with your sentiments. Being right directionally cannotdefineusasinvestorsortradersforwemaynotbe“right”oftenenough.AtTheoTradewearerealistsofthemarketplaceandwemustplaceourcapitalatriskONLYwiththecorrecttradelogicandacomfortableallocation.

Introduction to Options ThisTheoTradeIntroductiontoOptionsisdesignedhelpyoubecomefamiliarwithsomebasicWallStreetconceptsandthefundamentalsofcallandputoptions.Understandinghowoptionswork is paramount to becoming a more effective trader. The fact that options are widelyregardedasrisky is ironic,asoptionswereoriginallydesignedasriskmanagementtools.Likeany tools one must learn how to use options. A power saw has many advantages over ahandsawforcuttingwood.However, ifyoudon’t learnhowtouseapowersaw,youcancutyourfingersoff.Similarlytoapowersaw,thosewithoutanunderstandingofoptionscanputthemselves at risk. For themostpart, brokers are right in advising their clients to stay awayfromoptions.Theyknowmostwillwanttograbholdofthe“saw”withoutlearninghowtouseit.However,onceapersonisproperlyeducatedontheproperuseoftheseriskmanagementtools,optionscanbethequickest,easiest,andsafestroutetofinancialsuccessinthefinancialmarkets.

The strategies taught in our online classes, chat rooms, andworkshops are used by tradingprofessionalsaroundtheworld.Andyouwillbelearningfromsomeofthebesttradersintheworld. Our instructors have a minimum of 15 years’ experience working within the financeindustryastraders,marketmakers,orbrokers.Theywillteachyouhowtohedgeyourstocksandmutual fundstoenhanceyourreturnsandminimize lossesonmajordownturns.Youwilllearnhowtoplacetradesthatcanproduce largemonthlyreturnswithverysmallmoves inastock.Allthiscanbedonewithminimalcapitalandinonlyafewhoursperweek.AtTheoTradeourcoursesandcoachingwillprovideyouwithstep-by-stepcriteriaforeachstrategythatwillhelpyouselectandvalidatecandidates,establishlosslimitsandprofitgoals,andenterandexiteach trade.You’ll learn ina very short timewhat takesmost tradersmanyyears todiscoverthroughtrialanderror.Thegreatestexperienceisothertrader’sknowledgeandlearningfromtheirmistakes.

www.TheoTrade.com

TheoTrade


Ifyouhavelittleornoexperiencewithoptions,someofthematerialinthisstudyguidemaybedifficulttograspatfirst.Don’tletthatworryyou.Itisourjobthroughonlineclasses,coaching,andworkshopstohelpyouunderstandtheconcepts. Ifyoumerelybecomefamiliarwiththematerialitwillhelpshortenyourlearningcurve.

TheoTrade Mantra Traders,speculators,andinvestorswhodonotutilizerisk-managementtechniquesareatthemercyofthemarket.Theymayfallvictimtomarketcorrectionsandreversals.Thebesttraders--theonesthatlast--utilizestrategiesdesignedtoreducerisksandprotectcapital.

www.TheoTrade.com

TheoTrade


TheoTrade Characteristics of Traders WeatTheoTrade:

§ haterisk.

§ useanytoolavailabletoreducerisk.

§ useoptionstoreduceriskandenhancereturns.

§ neverputallourmoneyononetrade.

§ nevertradeontips.

§ sleepatnightbecauseourpositionsarecovered.

§ doourhomeworkbeforeexecutinganytrade.

§ usemarginonlywhentheyarehedged.

§ buyonweaknessandsellonstrength.

§ aredisciplined.

§ Planourstrategies.

§ arealwayspreparedtoexecuteourplan.

§ stickwithourplan;wedon’tpanic.

§ knowwhentoexit.

§ thriveonchaos.It’stheirmanna.

§ identifyourmaximumlossbeforeenteringatrade.

§ factorincommissionsandinterestwhenevaluatingreturns

§ arealwaysreadytopounceonvolatilityandopportunity.

www.TheoTrade.com

TheoTrade


Understanding Options. Note:Payparticularattentiontothissectiononoptions.Youwillneedtounderstandhowtouseoptionstotrade inthemarketwithreducedrisk. It isnotunusual tobeconfusedbythismaterial.Theconceptsareabstractandhardtograspatfirst.Thegoodnewsisthatthisisasdifficultas itgets!Andwewill leadyou intoa fullerunderstandingat theTheoTradeclasses.Themorefamiliaryouarewiththissectionattheoutset,themorequicklyyouwillmasterourcoursesatTheoTrade.

Ancient Roots of Option Contracts Althoughmanybelieveoptionsarea recent innovation, theyactuallydateback thousandsofyearsasoptionsoriginatedasrisk-managementtools.EvidencethattheuseofoptioncontractswasstandardinancienttimesappearsduringtheGreekcivilization.

All option contracts that tradeonU.S. exchangesare issued, guaranteed, and clearedby theOptionsClearingCorporation(OCC).Foundedin1973,OCCisastand-aloneclearinghousethatissuesandclearsoptionsandfuturesoncommonstocks,indices,currencies,andinterestratecompositeslistedon12participatingexchanges,ofwhichfiveareshareholders.SinceJuly18,2012, and as part of the Dodd-Frank financial overhaul, OCC was designated a systemicallyimportantfinancialmarketutility.Assuch,theFederalReservehasbecomeathirdregulator,along with the Commodity Futures Trading Commission and the Securities and ExchangeCommission,withsomeformofsupervisoryrole.

Definition

Astockoption isacontract thatgives theholder theright tobuy (acall)orsell (aput)onaparticularstock,atapredeterminedprice(thestrike price),onorbeforeaparticulardate(theexpiration date). For everyonewho buys stock, there is someonewho sells it. Likewise, foreveryoption(callorput)buyer,thereisanoptionseller.

www.TheoTrade.com

TheoTrade


Option Advantages § Optionsgivetheholdertheopportunityofmaximumgainthroughleverage.

§ Optionscanbeusedasrisk-managementandloss-preventiontools.

§ Optionscanbesoldtoearnpremiumsandcreatecashflow.

Options Disadvantages § Thebuyer/ownercanlosehisorherentireinvestment.

§ Thelimitedlifeofanoptionisadouble-edgedsword:adisadvantageifyou’reabuyer,

butadistinctadvantageifyou’reaseller.

Option Buyer’s Rights and Option Seller’s Obligations Calls

Thebuyerorholderofacalloptionpaysapremiumfortheright,butnottheobligation,tobuyaparticularstockatthestrikepricepriortoexpiration.Hemayalsochoosetoselltheoptionpurchasedatany timeprior toexpirationor let itexpireworthless.Thecallbuyerwants thestocktogoup.

Buyingacallissimilartohavinganoptiontobuyahouse.Ifthehousegoesupinvalueyoucaneitherexerciseyourrighttobuythehouseorsellyouroptiontosomeoneelsewhowouldlikethe right tobuy thehouse. If expiration approaches and thehousehas gonedown in value,below your agreed to right to purchase, you can let the option expirewith no obligation topurchasethehouse.Yourlossislimitedtothepremiumyoupaidfortheoption.

Youcouldbuyacallforspeculationhopingtomakeaprofitbysellingthecallataprofitshouldthestockgoup.Callscanalsobeusedtohedgeashortsale.Theriskofsellingshortisthatthestockcouldgoup.However,owningacallwouldlimityourpricetobuythestockatthestrikepricepriortoexpiration,regardlessofhowhighthestockwouldgo.

www.TheoTrade.com

TheoTrade


Thesellerorwriterofacalloptioncollectsthepremiumandisobligated,ifcalleduponpriortoexpiration,tosellaparticularstockatthestrikeprice.Thisislikelytohappeniftheoptionis“inthemoney”(i.e.,ifthestockpriceishigherthanthestrikeprice)atexpiration.He/shemaybuythecallbacktopreventthisfromhappening.Ifthestockstaysbelowthecallstrikeprice,thecallwillexpireworthlessandthesellerofthecallwillkeeptheentirepremiumreceived.Thecallsellerwantsthestocktogodown.

Thesellerofthecall is likesomeonewhohassoldyouanoptiontobuyahouse.Heorsheisobligatedtosellyouthehouseanytimeyouexerciseyourright.Ifthehousegoesdowninvalueandyoudon’texerciseyourrighttobuythehouse,thecallsellerkeepsthepremium.However,ifyouexerciseyouroptiontobuythehouse,heisobligatedtosell ittoyouattheagreed-toprice.

Onedoesnotneedtoownthestocktosellacalloption.Thiswouldbereferredtoassellinganuncoveredcall(alsofrequentlyreferredtoas“sellingnaked”)andtheriskcanbeunlimited.Ifthecallisexercised,thecallsellerwouldhavetobuythestockatthecurrentpriceandresellitat the strike price to the call buyer. If a trader has sold a call on a house and expirationapproachesandthehousehasgonedowninvalue,belowyouragreedtorighttopurchase,youcanlettheoptionexpirewithnoobligationtopurchasethehouse.Yourloss is limitedtothepremiumyoupaidfortheoption.

Youcouldbuyacallforspeculationhopingtomakeaprofitbysellingthecallataprofitshouldthestockgoup.Callscanalsobeusedtohedgeashortsale.Theriskofsellingshortisthatthestockcouldgoup.However,owningacallwouldlimityourpricetobuythestockatthestrikepricepriortoexpiration,regardlessofhowhighthestockwouldgo.

Puts

Thebuyerorownerofaputoptionpaysapremiumfortheright,butnottheobligation,tosellaparticularstockatthestrikepricepriortoexpiration.Hemaychoosetoselltheoptionpriortoexpirationorsimplyletitexpireworthless.Theputbuyerwantsthestocktogodown.

Thinkofbuyingaputlikebuyinginsuranceonacar.Ifthecarisdamaged,youhavetherighttofileaclaim.Theinsurancecompanyistheselleroftheput.Ifyouexerciseyourrighttosell,theselleroftheputisobligatedtobuythestockattheagreed-toprice,evenifthestockshouldgotozero.Justthesame,theinsurancecompanymustgiveyouthedollarvalueofyourcarevenifit isdemolishedandworthless.Ofcourse, the insurancecompany ishopingyouneverwreckyourcarsotheycankeepthepremium.Likewise,theputsellersishopingthestockstaysabovethe strike price of the put so you never exercise your right to sell the stock and the puteventuallyexpiresworthless.Insuchcases,theputsellerwillkeepthepremiumreceived.

www.TheoTrade.com

TheoTrade


Youcouldbuyputsforspeculationhopingthatastockgoesdownandtheputsgoupinvalue.Orputscanbeusedtohedgeastockposition,givingyoutherighttosellthestockatthestrikepriceregardlessofhowlowastockshouldgo.

Thesellerorwriterofaputoptioncollectsthepremiumandisobligated,ifcalleduponpriortoexpiration,tobuyaparticularstockatthestrikeprice.Thisislikelytohappeniftheoptionis“inthemoney”(i.e., ifthestockpriceis lowerthanthestrikeprice)atexpiration.Hecouldbuyback theput toprevent this. If thestockstaysabove thestrikeprice, theputwillexpireworthlessand theput sellerwill keep theentirepremiumreceived.Theput sellerwants thestocktogoup.

OptionBuyer(Holder) OptionSeller(Writer)Buysoptioncontracts SellsoptioncontractsCall=righttobuy Call=obligatedtosellPut=righttosell Put=obligatedtobuyPaysthepremium Receivesthepremium

Option Particulars

OptionHoldersandWriters

Thebuyerofanoptionisreferredtoastheoptionholder.Thesellerofanoptionisreferredtoastheoptionwriter.

OptionContract

Options Trade in Contract and not shares. All option contracts are bought and sold in one-hundred-sharelotsonly.One call or one put is a contract to buy (a call) or sell (a put) one hundred shares of an underlying stock.Onecallistherighttobuy100shares;twocalls,200shares;threecalls,300shares;etc.Note:arecentinnovationinmarketsareMinioptions.MiniOptionsareoptioncontractswheretheunderlyingsecurityis10sharesofastock.Thisisthemain difference betweenmini options and standard options, which have 100 shares as theunderlyingsecurity.

www.TheoTrade.com

TheoTrade


OptionPremium

Thepremiumisthepricethatthebuyer/holderofanoptionpaysandtheseller/writerofanoption receives for the rights conveyed by the option. It is the price set by the holder andwriter,ortheirbrokers, inatransactioninanoptionsmarketwheretheoptionistraded.Thepremiumdoesnotconstituteadownpaymentoracredittowardsthepurchaseofastock;itissimply a nonrefundable payment in full from the option holder (buyer) to the optionwriter(seller)fortherightsconveyedbytheoption.

Thepremiumisalwaysquotedonaper-sharebasis.Ifthe120strikepricecallsaretradingat$5,thismeans$5pershare.Sinceonecallcoversonehundredshares,onecalloptionwouldthereforecost$5x100or$500.

www.TheoTrade.com

TheoTrade


StrikePrice

Thestrikepriceisthepriceatwhichtheoptionallowstheholdertobuyorthewritertoselltheunderlyingstock.Thestrikepriceisnotnegotiable.Toestablishamoreorderlyandliquidmarket,strikepricesarefixedin$.50,$1,$2.50,$5,or$10increments.IndexProducts,ETF’s,andStockswithheavyvolume(liquidity)oftenoffermovestrikepricevariety.Everythingfrom$.50 increment strike prices are now available on hundreds of liquid products. Below is anexampleofstrikepriceincrementsfromDecember2015expirationinaprominentETFproduct.

Expiration StrikePrice

December2015 205

December2015 205.5

December2015 206

December2015 206.5

December2015 207

December2015 207.5

December2015 208

December2015 208.5

December2015 209

Exceptionstotherule:Optionsonstocksthatsplitmaytradeinvariousincrementstoaccountforthesplit.(Forexample,one,95calltradingfor$4,willbecometwo,$47.50callstradingfor$2ona2:1stocksplit.)

www.TheoTrade.com

TheoTrade


Expiration

Equity (Stock)OptionsexpiretheSaturdayfollowingthe3rdFridayof themonth.Theclosingprice of the stock on the 3rd Friday of themonth at 4:00 Eastern Standard Time is used todetermine whether an option has value or not at expiration. Effectively therefore, equityoptionsexpireat4:00p.m.,EasternStandardTime,onthe3rdFridayofthemonth.Inaddition,Weekly Options or “Weekly’s” are now available on over 400+ underlying’s and offerexpirations every Friday! Weekly’s should be regarded as optionswith shorter lifespans butsimilarattributes.

OpenInterest

OpeninterestreferstothenumberofoutstandingoptioncontractsofaparticularstrikepriceandexpirationdatethathavebeenboughtorsoldtoopenapositionIforwhenanoptionisboughttoopenaposition,theopeninterestincreasesbyone.Iforwhenthatoptionissoldtoclosetheposition,theopeninterestdecreasesbyone.Likewise,ifanoptionissoldtoopenaposition,theopeninterest increasesbyone.Whenit isboughtback,openinterestdecreasesby one. Open interest is calculated at the end of each business day. Open interest is anindicatoroftheliquidityofaparticularoption.

OptionVolume

Option volume is the number of option contracts that have been bought or soldwithin aparticulartimeperiod.Volumeisdisseminatedonarealtimebasis.

www.TheoTrade.com

TheoTrade


Understanding Option Premium Thepremiumismadeupofintrinsicvalueandtimevalue.

Premium=IntrinsicValue+TimeValue

IntrinsicValue

IntrinsicValue=Premium-TimeValue

Theintrinsicvalueisthevalueoftheoptionwithnoconsiderationfortime.Itisthevalueoftheoptionatexpiration.Therefore, it isthevalueoftheoptionwhenthereisnotime.It istheREALVALUEofanoptionscontract.Itreflectstheamount,ifany,bywhichanoptionis“inthemoney.”Theintrinsicvalueisusuallytheminimumvalueanoptionwillhaveasanoptionwillrarelytradebelowitsintrinsicvalue.

Tounderstandintrinsicvalue,thinkofhavinganaccidentinsurancepolicy(aput)onyourcar.Youpaidapremiumof$3,000toinsureyour$50,000autoforoneyear.Ifyouweretosellyourcarwithintheyearyoucouldgetarefundonpartofthepremiumbecauseyoudidnotuseallofthetime.(Theputwouldstillhavesometimevalueinit.)However,pretendonthedayyourpolicyexpires,youtotalyourcarandyouareunconsciousforaweek.Whenyouwakeupyoufindoutthatyourcarwastotaled.Eventhoughthepolicyexpiredaweekearlierandthereisnotimevalueleftinit,youarestillcovered.Thisisbecausetheaccidenthappenedbeforethepolicyexpired.Yourpolicyexpiredwithanintrinsicvalueof$50,000.Youcanstillfileaclaimandreceivethefulldifferencebetweenthefacevalueofthepolicyandthecurrentvalueofthecar. Inthisexample,youhada$50,000policyandtheautowastotaled. Therefore,youwillreceive$50,000. This is thepolicy’s (theput’s) intrinsic value and it doesnot go awayeventhoughthepolicyhasexpired.

If,atexpiration,anoptionisin-the-money,thatis,hasintrinsicvalue,equaltoorgreaterthanone penny per share ($.01 in themoney), then the Options Clearing Corporation (OCC) willautomatically exercise that option on behalf of the option buyer. To determine the intrinsicvalueofanoption,usethefollowingformula:

www.TheoTrade.com

TheoTrade


Intrinsic Value Formula Whatistherighttobuy/sell_________ CallPutCompany

for/at$________worth,atexpiration,StrikePricewhenitscurrentmarketpriceis_______?

StockPriceForexample,todeterminethe intrinsicvalueofthe$50strikepricecallwhenXYZstock isat$52,wewould ask ourselves, “What is the right to buy XYZ for $50worth,when its currentmarketpriceis$52?”Itisworth$2.Therighttobuythestockfor$50whenthestockisat52savesus$2.Withthe50call,wecouldbuythestockfor$50andimmediatelysellitfor$52andmakeaprofitof$2.Therefore,the50callhasanintrinsicvalueof$2.

Therighttobuythestockfor$50whenitscurrentmarketpriceis$49wouldbeworthnothing!Whypayfortherighttobuyat$50whenyoucanbuyfor$49.

Now, let’sdetermine the intrinsicvalueof the50putwhenXYZ is trading for$52.Using theformula abovewewould say, “What is the right to sell XYZ at $50worth, when its currentmarketpriceis$52?”Itisworthnothing.Thestockistradingfor$52,sowhypayfortherightto get only $50?However, if the stockwas at $49, the $50 putwould beworth at least $1intrinsicallyandevenmore,iftherewastimesometimevalueleft.

Theintrinsicvalueofacalloptionequalsthestockpricelessthestrikeprice.However,itcanneverhaveanegativevalue.Anoptioneitherhasvalueornot.

Intrinsicvaluecannotgobelow0. StockPrice $52 $53 - StrikePrice -$50 -$55 Call’sI.V. $2 $0 Theintrinsicvalueofaputoptionequalsthestrikepricelessthestockprice.

www.TheoTrade.com

TheoTrade


The intrinsicvalueof the55putwhen the stock is tradingat$57 is0,not -2. Intrinsicvaluecannotgobelow0.The55putwiththestockat57wouldbe$2out-of-the-money.Whenthestockisat$53,theintrinsicvalueofthe55putwouldbe$2.The55putwiththestockat$53wouldbe$2in-the-money.

StrikePrice $50 $55 - StockPrice -$52 -$53 Put’sI.V. $0$2

www.TheoTrade.com

TheoTrade


Relationship of Stock Price to Option Price. The “Money” is the stock price. At-the-Money (ATM) Call or Put:Thestock’sprice is thesameas thestrikeprice. Intrinsicvalueiszero.

Out-of-the-Money (OTM) Call: The stock’s price is below the strike price. Intrinsic value iszero.

Out-of-the-Money (OTM) Put: The stock’s price is above the strike price. Intrinsic value iszero.

In-the-Money (ITM) Call:Thestock’spriceisabovethestrikeprice.Intrinsicvalueispositive.

In-the-Money (ITM) Put:Thestock’spriceisbelowthestrikeprice.Intrinsicvalueispositive.

Intrinsic Value of an Option When the Stock is at $50 Strike IntrinsicValueIntrinsicValue

Price ofaCall ofaPut

65 0 (15 OTM) 15 ITM

60 0 (10 OTM) 10 ITM

55 0 (5 OTM) 5 ITM

50 0 ATM 0 ATM

45 5 ITM 0 (5 OTM)

40 10 ITM 0 (10 OTM)

35 15 ITM 0 (15 OTM)

www.TheoTrade.com

TheoTrade


ITM=inthemoney,OTM=outofthemoney,ATM=atthemoney

www.TheoTrade.com

TheoTrade


Time Value (Extrinsic Value) Thetimevalueofanoptionisthatportionoftheoptionpremiumoverandaboveitsintrinsicvalue. Generally speaking, the more time before expiration and/or the more volatile theunderlyingstock,thehigherthetimepremiumwillbe.Suchfactorsincreasetheprobabilityofastockreachingacertainpricepoint.Thus,timevaluewillbehigherwhentheoptionisfurtherfromexpirationandwilldecreaseastheoptiongetsclosertoexpiration.AMayoptionwillcostmorethananApriloptionbecausethereismoretimeforthestocktoreachorgobeyondthestrikeprice.Out-of-the-moneyoptionscarryonlytimevalue,iftheyhaveanyvalueatall.Timevaluecanbedeterminedbysubtractingtheintrinsicvalueofanoptionfromthepremium.

Time Value = Option Premium - Intrinsic Value

Ifthereissometimeleftbeforeexpirationanoptionmaybeworthmorethanitsintrinsicvaluebyanamountequaltoitstimevalue.Anoptionthatstillhastimevalueleftpriortoexpirationwillrarelybeexercised,asitwillbringtheholderagreatervaluebysimplysellingit.

Forexample,let’ssayXYZstockistradingat52withaweekleftuntilexpiration.The50callistrading at $2.50 because it has $2 of intrinsic value and $.50 of time value. If one were toexercisethecallandbuythestockfor50andthenimmediatelysellthestockat52,hewouldrealize$2.00.However,ifhesimplysoldthecall,hewouldrealize$2.50.Evenifthecallholderwantedtoownthestock,hewouldbebetteroffsellingthecallandthenbuyingthestock.Bydoingsohewouldbeabletobuythestockforfiftycentslesspershare.Thisiswhyanoptionthatstillhastimevalueremainingisrarelyexercised.

Atexpirationallthetimevaluegoesawayandonlyintrinsicvalueremains.Timevalueusuallydiminishesasanoptiongoes further ITMorOTMor,as itmovescloser toexpiration, to thepoint where it will eventually be reduced to nothing. If, prior to expiration, an option hasintrinsicvalue(ITM)andthereis littleornotimevalueremaining,thereisahighlikelihooditcouldbeexercised.Suchanoption isnowtradingat“parity.”Anoption is tradingatparitywithitsstockifitisin-the-moneyandhasnotimevalue.

Forexample,ifthe50callwastradingfor$2withthestockat52itwouldbetradingatparity.Iftheoptionholderwanted toown the stock, he/shewould exercisehis option as there is noadvantage in selling the callwhen there is no time value remaining.However, if he/shewasmerelyspeculatingwiththeoptionanddidnotwanttoownthestock,he/shewouldstillsellthe option to avoid being automatically exercised and owning it. Remember, if an option

www.TheoTrade.com

TheoTrade


expires with intrinsic value equal to or greater than one penny per share ($.01) it will beautomaticallyexercisedby theOptionsClearingCorporation (OCC). If a longcall isexercised,theoptionholderwillnowhavealongstockposition.Ifhewantstoavoidthis,hewillselltheput,evenifthereisnotimevalueremaining.

Factors that Influence Time Value The primary factors that influence time value are the length of time remaining untilexpiration,theunderlyingstock’svolatility,andanoption’ssupplyanddemand.

TimeDecay

Justlikethepremiumwouldbemoretoinsureacarfortwomonthsthanonemonth,sotoo,thetimevalueofaMayoptionwillbemorethananApril.Thetimevalue isawastingasset.Otherfactorsbeingequal,thetimevaluedecreasesastheoptionapproachesexpiration.

Thisdecreaseacceleratesinanonlinearfashiontheclosertheoptiongetstoexpirationasthefollowingtimegraphillustrates.Thisprocessisreferredtoas“timedecay.”Atexpirationonlythoseoptionsthatarein-the-moneywillhaveanyintrinsicvalueremaining(Rememberintrinsicvaluedoesnotchangewith time,)butnooptionswillhaveany timevalue remaining. If theoptionis“out-of-the-money”andisnotsoldorexercisedpriortoitsexpiration,itwillbecomeworthless.

Timedecayisadvantageoustosellersofoptionsandadisadvantagetobuyersofoptions.Forexample,thesellerofacalloptionmay,duetotimedecay,beabletobuybacktheoptionatalower price than he originally sold it for, even if the stock does not drop in value. In suchsituations,theoptionsellercanmakeaprofitandeliminatetheriskofbeing“assigned”.Iftheoption iswellOTM, the sellermay allow theoption to expireworthless and keep theentirepremium.WhenhesellsanOTMoption,anoptionselleriscollectingmoneyfortime,asthereisno intrinsicvalue. Shouldthestockatexpirationbebelowthestrikeprice, if it isacall,orabovethestrikeprice,ifitisaput,thesellerwillretaintheentirepremium.

www.TheoTrade.com

TheoTrade


Timedecayisdisadvantageoustoanoptionbuyerbecausehenowownsawastingordecayingasset.Evenifthestockdoesn’tmove,theoptionwilldecreaseinvalueeverydayduetotimedecay. Theoptionbuyer ishopingthestockmovesupquicklysohecanretainasmuchtimevalueaspossible.

ATM Options have the most time value. Anoptionwhosestrikepriceisat-the-money(ATM)willhavemoretimevaluethantheotherstrike prices because there ismore uncertainty as to its closing in-the-money or out-of-the-moneyatexpiration.Thisuncertaintydiminishesastheoptionmovesmoreintoorout-of-the-money.Anoptionthatisalreadyinorout-of-the-moneyhasagreaterprobabilityofremainingso thenonethat isat-the-money.Thetimevaluewillbeapproximately thesameforoptionsequaldistanceITMandOTMbecausetheyhaverelativelythesameamountofuncertainty.

In the following table notice for example that the 120 call, that is five dollarsOTM, has thesametimevalue($3)asthe110calls,whichisfivedollarsITM.However,the110callhasatotalpremium value of 8 because it also has 5 dollars of intrinsic value. As the following table

www.TheoTrade.com

TheoTrade


illustrates,thetimevalueforoptionsequaldistanceinorout-of-the-moneyonthesamestockwillbeapproximatelythesame.

CallPremium30daysPriortoExpirationwithStockat$115

StrikePrice premium intrinsicvalue timevalue

95 20.375 20 0.375

100 15.75 15 0.75

105 11.5 10 1.5

110 8 5 3

115 5 0 5

120 3 0 3

125 1.5 0 1.5

130 0.75 0 0.75

Volatil ity

Volatilityisthemeasurementoftheamountbywhichthepriceoftheunderlyingsecurityisexpected to fluctuate over a givenperiodof time. Generally speaking, stocks that fluctuateover awideprice rangehavemore volatility. Typically,withall other factorsbeingequal, anoption’stimevaluewillbehigheronastockwithgreatervolatility.Earthquake insurancewillcost more in San Francisco than in Chicago, because San Francisco can “move” more. Forexample,taketwostockstradingat100.The105Maycallsonbothstocksare$5out-of-the-moneyand thereforehaveno intrinsic value, just timevalue. Thepremium for the105Maycalls is at $1 for Stock A and $2 for Stock B. Even though both options have the same timeremaining,StockB’scallsaretrading$1higherthanStockA’s.ThisisbecauseStockBismorevolatile.ThemarketissayingthatStockBhasagreaterchanceofmovingto105thanStockA.Therefore,StockBdemandsahigherpremium.

www.TheoTrade.com

TheoTrade


HistoricalVolatility

Historicalvolatilityisastatisticalmeasurementofastock’spricemovementsbasedonhistory.Typically,itiscalculatedbytakingthestandarddeviationofthestock’sdailyclosingpriceoverthepast21tradingdays.

ImpliedVolatility

Impliedvolatilityisthevolatilityderivedfromlookingatthecurrentmarketpriceofanoption.Optionpricesdon’t implyadirectionofmovement for thestock.Theyonly implyaprobabledistributionorvolatility.Increasedvolatilityincreasestheexpectedvalueofanoption,butnottheexpectedvalueofastock.

Althoughtherearemore technicalmethodsofmeasuringvolatility, it isageneral rule that ifthestockisflat,volatilityshouldbelow.Ifthestockisfluctuatinggreatly,volatilityshouldbehigh. Thehigher the volatility, thehigher the risk, and thusoption sellerswill demandmoreOptionpremium.

The market ultimately determines an options price. The “market” includes market makers,liquidityproviders,hedgefunds, institutional investors,thepublic,andevenYOU.Remember,theintrinsicorrealvalueofanoptionwillalwaysbeconstant.Theintrinsicvalueofthe50callwiththestockat51willalwaysbe$1.00.However,theoptionswillmostlikelybetradingfor

www.TheoTrade.com

TheoTrade


morethan$1duetoitstimevalue.Thetimevalueisdeterminedprimarilybythedistancetheoption’s strike price is to the stock price, the stock’s volatility, the current demand for theoption, and the volatility of the stock. Themore a stock canmove in price themoremoneyoptionsellerswillwanttoreceiveandthemoreoptionbuyerswillhavetopayforanoption.Themarketplace,whichfactorsinallthesevariables,determinesatwhatpricewecanbuyorsellanoptionforinthesamefashionitestablishesstockprices.

Option Positions BuyingNakedCalls

Onewhobuysacalltoopenaposition(goeslong)wantstheunderlyingstocktogoup.Thiswilltypicallyincreasetheoption’spremium.Ifthestockpricegoesabovethestrikeprice,thecallbuyercaneitherexercisetheoptiontobuythestockorsimplysell theoption.Hisrisk islimitedtowhathepaidfortheoption,pluscommission.

The followinggraph illustrates thevalue, atexpiration,of a30 call bought for$3. Thegraphillustratesaworstcasescenario,as theoptionwillusuallybeworthmoreprior toexpirationwhen there is some timevalue remaining. The stockmust go to$33at expiration, tobreak-even,andthecallpositionbeginsmakingmoneyabove$33.Thepotentialprofit isunlimited(minusthepremiumpaid);alossislimitedto$3ashare.

www.TheoTrade.com

TheoTrade


SellingNakedCalls

Whenonesellsacalloption(short)toopenaposition,withoutowningtheunderlyingstockor another call (long) on the same security, it is called a naked or uncovered short callposition. It iscalleduncoveredbecausethesellerhasnoprotection iftheunderlyingsecurityrises in price.When you sell (go short) a call, you are giving someone the right to buy theunderlyingstockatthestrikepriceinreturnforthepremium.

Onewhosellsacall (toopenaposition)wantstheunderlyingstocktogodown.Thesellercollects the premiumand realizesmaximumprofit at the time of sale. Typically, if the stockpricestaysthesameorgoesdown,thevalueofthecallwillbereduced.Thecallsellercanthencloseouthispositionbybuyingbackthecallatareducedprice.Theprofitisthenthedifferencebetween what was originally received for selling the call less the price paid to buy it back.Alternatively, if the stock price is below the strike price at expiration, the seller can let theoption expireworthless and keep the entire premium. However, should the stock price riseabovethestrikeprice,thesellerrunstheriskofbeingexercisedandhavingtodeliverthestockatthestrikeprice.

Thefollowinggraphillustratesthevalue,atexpiration,ofthe30callsoldfor$3.Ifthestockisat$30orbelow,thecallsellerwillkeeptheentirepremiumreceived.Maximumprofitislimitedto $3 per share. However, if the stock goes above $30, the seller begins giving back thepremiumandbreaksevenat$33.A loss is incurredasthestockclosesabove$33,and itcanbecomeunlimited.Sellingcallsnakedcancauseextremerisk;TheoTradeadvisesclientelehaveextensiveexperiencepriortosellingcallsnaked.

www.TheoTrade.com

TheoTrade


SellingCoveredCalls

Whenonesellsacalloptiontoopenaposition,andownstheunderlyingstock,onehassoldacovered call. The risk of owning a short call, as shown above, is covered by the underlyingstockposition. Intheeventthestockgoesabovethestrikepriceof thecall,onewouldmostlikelybecalledtodeliverthestockatthestrikepriceofthecallsold.Ratherthanbeingforcedtobuythestockatahigherpriceandsellanddeliverthestockatthestrikeprice,onesimplystockequaltothestrikepriceofthecall.Whenonesellsacoveredcall,he/shelimitstheupsideon the stock,while only slightly reducing the downside risk of owning the stock. In variousTheoTradeclassesyouwilllearnhowtoreducetheriskofcoveredcallstrategy.

BuyingNakedPuts

Onewhobuysaputwantsthestocktogodown,whichusuallyincreasesthepriceoftheput.Thebuyer’sgoalistoselltheputataprofitorexercisehisrighttosellthestock.

Thefollowinggraphillustratesthevalue,atexpiration,ofthe30putboughtfor$2.Tobreak-even, the stockmust go to $28. Below $28, the put increases in value dollar-for-dollarwitheverydollardropinthepriceofthestock;thiscancontinueallthewaytozero.However,alossis realized at expiration if the stock stays above $28. Themaximum loss of $2 per share isrealizedat$30orabove.

www.TheoTrade.com

TheoTrade


SellingNakedPuts

Whenonesellsaputoptiontoopenaposition,withoutbeingshorttheunderlyingstockorlonganotherputoptiononthesamesecurity,itiscalledanakedoruncoveredshortput.Theputsellerwants thestock togoupsohecankeepallorpartof thepremium.However, thepotentialrisk ishigh.Thepotential loss isthedifferencebetweenthevalueoftheunderlyingstock(whichcouldgotozero)andthestrikeprice,lesswhatwasoriginallyreceivedforthesaleoftheput,pluscommission.

Onewhosellsaput(toopenaposition)wantsthestocktogoup.Thesellerrealizesmaximumprofitatthetimehesellstheput.He/shewill retainmaximumprofit if thestockclosesatorabovethestrikepriceatexpiration.Shouldthestockgobelowtheputstrikeprice,thesellercouldbeobligatedtobuy thestockat thestrikeprice, ifexercised.Typically,he/shewillbuybacktheputpriortoexpirationtoavoidthis.

Thefollowinggraphshowsthevalue,atexpiration,ofthe30putsoldat$2.Amaximumprofitof$2pershareisrealizedifthestockisat$30oraboveatexpiration.Break-evenisat$28.Theputsellercouldloseupto$28shouldthestockgotozeroatexpiration.

www.TheoTrade.com

TheoTrade


SellingCoveredPuts

Whenonesellsaputoptiontoopenapositionandisshorttheunderlyingstock,he/shehassoldacoveredput.Also,ifoneownsaputandsellsanotherputonthesamestock;heisnolongernakedbuthedged.

VerticalSpreads

Averticalspreadisonestrategytousewhenyouareconfidentastockwillmoveinacertaindirection.Itdoesnotemploytheuseofstock,onlyoptions,makingthisarelativelyinexpensivemethodtobenefitfromstockmovement.Theyarecalled“vertical”becausetheyemploystrikeprices of the samemonth that are higher or lower than each other vertically.With verticalspreads, you are paying a premium to buy one option, while at the same time collecting apremiumbysellinganotheroption.Withaverticalcallspread,youbuyacallatonestrikepriceandsellanothercallatadifferentstrikeprice.Withaverticalputspread,youbuyaputatonestrikepriceandsellanotherputatadifferentstrikeprice.

VerticalSpreadFormula:

§ Buyonestrikeoption

§ Sellanotherstrikeoption

§ Sameseries(callswithcallsorputswithputs)

§ Sameexpirationmonth

§ Sameunderlyingasset(stock,index,ETF)

A vertical spread is an alternative strategy to a costly or risky naked long or short optionposition.Theprofitpotentialremainsrelativelyhighwhileriskisdramaticallyreduced.Buyinganakedcallorputcanbeexpensive.Theverticalspreadreducescostbysellinganotheroption.Sellinganakedcallorputtoopenapositioncanbeanextremelyhighriskstrategy.Howeverthesaleofverticalspreadtoopenisamuchlessriskystrategy.Ratherthanbeingnakedshortacallorput,onesimultaneouslybuysafurtherout-of-the-moneycallorputtoreducetherisk.These positions are called spreads because the risk is “spread out”, instead of beingconcentratedononenakedlongorshortposition.

www.TheoTrade.com

TheoTrade


Averticalspread’smaximumvalue,whetheritisacalloraputspread,canonlygoashighorlowasthedifferencebetweenthetwostrikepricesused.Therefore:

Maximumvaluea2.50spread(i.e.,17.50-20)couldgotois2.50,or$250perspread.

Maximumvaluea5spread(i.e.,25-30)couldgotois5,or$500perspread.

Maximumvaluea10spread(i.e.,75-85)couldgotois10,or$1,000perspread.

Maximumvaluea15spread(i.e.,75-90)couldgotois15,or$1,500perspread.

Profitorlosswhenbuyingaverticalspreadtoopen:

Whenbuyingaverticalspreadtoopenaposition,maximumprofitislimitedtothedifferencebetweenthestrikepricesoftheoptionsboughtandsold,lessthecostofthespread.Maximumlossislimitedtowhatyoupayforthespread.Thatis,thepremiumoftheoptionbought,lessthepremiumoftheonesold.

MaximumPROFITwhenBUYINGaVerticalSpread

Maximumprofit=Diff.betweenstrikes-costofspread

MaximumLOSSwhenBUYINGaVerticalSpreadMaximumloss=Netcostofspread

BuyingtheVerticalCallSpread(BullCallSpread)

Thisisabullishplay.Bydefinition,youwanttheunderlyingstocktogoup.

Formula:buynear-the-moneycalls(lowerstrikeprice)andsellanequalnumberofcallsfurtheroutofthemoney(higherstrikeprice)inthesameexpirationmonth.

MaximumRisk:thecostofthespread.

MaximumProfit:thedifferencebetweenthetwostrikes,lessthecostofthespread.Ifyoupay$1forthe30-35callspread,yourmaximumprofitis5-1=4.

Break-EvenatExpiration:thestockmustgoabovethelowerstrikepricebyanamountequaltothe costof the spread. If youpaid$1 for the30-35 call spread, the stockmust go to$31atexpirationtobreak-even.Asthestockincreasesinvaluefromthatpoint,youmakemoney.

www.TheoTrade.com

TheoTrade


Example:

XYZstockistradingat$28.TheAug30callis$2,andtheAug35callis$1.Ifyoubuyone,Aug30callsandsellone,Aug35calls,thespreadcosts$100.

-$200 PaidforAug30call+$100 ReceivedforAug35call- $100 Totalcost(beforecommissions)

Youarerisking$100foranopportunitytomakeupto$400,a400%returnoninvestment.Thefollowingchartshowstheprofitorlossonthistradeatexpiration.Ofcourse,thispositioncanbeclosedatanytimepriortoexpiration.Toclosethisposition,youwouldsellthecallsthatyoubought,andbuybackthecallsthatyousold.

Valueof30-35CallSpreadatExpiration

Toopentheposition,buythe30callandsellthe35call.

Toclose,sellthe30callandbuybackthe35call.

www.TheoTrade.com

TheoTrade


Stock Sell BuyDebitLess Gain 1x%Price 30C 35CCreditCost Loss $__Return290 0 0 -1 -1-100-100300 0 0 -1 -1 -100-100311 0 1 -1 0 00322 0 2 -1 1 100100333 0 3 -1 2 200 200344 0 4 -1 3 300 300355 0 5 -1 4 400 4004010 -5 5 -1 4 400 400

BuyingtheVerticalPutSpread(BearPutSpread) Thisisabearishplay.Executeitwhenyouexpectastocktogodowninprice.

Formula:buyaputatornearthestockprice(higherstrikeprice),andsellanequalnumberoffurther-out-of-the-money(lowerstrikeprice)putsinthesameexpirationmonth.

MaximumRisk:thecostofthespread.

MaximumProfit:thedifferencebetweenthetwostrikeprices,lessthecostofthespread.Forexample,ifyoupay$1forthe30-35putspread,yourmaximumprofitis

5-1=4.

Break-EvenatExpiration:stockmustgobelowthehigherstrikepricebythecostofthespread.Ifyoupaid$1forthe30-35putspread,thestockmustgoto$34atexpirationtobreak-even.

Example:

XYZ is trading at $37. TheApril 35 put is trading at $4.50, and theApril 30 put is trading at$3.50.IfyoubuytheApril35putandselltheApril30put,youarepaying$1forthespread.

-$450 BuyoneApril35putfor4.50+350 SelloneApril30putat3.50-$100 Costofthespread=-$1

www.TheoTrade.com

TheoTrade


Thefollowingchartshowstheprofitorlossyouwouldrealizeifyouweretoclosethispositionatexpiration.Toclosethisposition,youwouldselltheputsthatyoubought,andbuybacktheputsthatyousold.

Valueof30-35PutSpreadatExpiration

Toopentheposition,buythe35putandsellthe30put.

Toclose,sellthe35putandbuybackthe30put.

Stock Sell Buy Debit Less Gain 1x % Price 35P 30P Credit Cost Loss $ Return 36 0 0 0 -1 -1 -100 -100 35 0 0 0 -1 -1 -100 -100 34 1 0 1 -1 0 0 0 33 2 0 2 -1 1 100 100 32 3 0 3 -1 2 200 200 31 4 0 4 -1 3 300 300 30 5 0 5 -1 4 400 400 25 10 -5 5 -1 4 400 400

www.TheoTrade.com

TheoTrade


Closing Option Positions Buyers and sellers of option contractsmay close out their positions in one of the followingways:

1. Lettheoptionexpireifitisout-of-the-moneyandworthless.

2. Offsettheoptionbydoingoneofthefollowing:

a.Buyingbacktheoptionsthatweresoldwhenopeningtheposition.

b.Sellingtheoptionsthatwereboughtwhenopeningtheposition.

3. Exercisetheoptionifitisin-the-money.

4. Automatic exercise. If, at expiration, an option is in-the-money, that is, has intrinsic

value, equal to or greater than one penny per share, then the Options Clearing

Corporation(OCC)willautomaticallyexercisethatoptiononbehalfoftheoptionbuyer.

Ifacall isautomaticallyexercised,onthenextbusinessdayafterexpiration(usuallyMonday,afterexpirationFriday),thecallholderwillnowhavealongstockpositionandwillberequiredto pay for the stock at the strike price of the call purchased by the close of business day.Alternatively,theholdercouldelecttosellthestocktopayforit.Theholdergetstokeepanyormustmakeupany lossresultingfromastockmovementbetweenexpirationandthetimethestockissold.Ifaputisautomaticallyexercised,onthenextbusinessdayafterexpiration(usuallyMonday,afterexpirationFriday), theputholderwillnowhaveashortstockpositionandwillberequiredtodepositthemarginrequirementforashortstockpositionbythecloseofthebusinessday.Alternatively,theholdercouldbuythestockbacktoclosetheshortposition.Theholderkeepsanyprofitsorwillhavetomakeupanydeficit.

Mostoptionsareeitheroffsetorexpireworthlessatexpirationandarenotexercised.Thevastmajorityofoptionsexercisedaredonesoontheexpirationdate.Theriskofanoptionbeingexercisedpriortoexpirationisminimizedwhenthereistimevaluestillleftinitspremium.Thisisbecauseonewould receivemoreby simply selling theoption to retain the timevalue.Forexample,saythe50callistradingat$3.50withthestockat$53.Ifyousellthecall,youreceive$3.50.Ifyouexercisethecall,youbuythestockat$50andsellitfor$53,thusnettingonly$3.

www.TheoTrade.com

TheoTrade


Inthisexample,ifthecallbuyerwantedtoownthestock,hewouldbebetteroffsellingthecallandusingtheadditional50centspersharetobuymorestockortoreducehisbasisinit.Thus,itisrareforanoptiontobeexercisedwhenitstillhastimevalueremaining.Conversely,whenanoptionistradingatparitywithnotimevalue,itrunsahigherriskofbeingexercisedpriortoexpiration.

Optionsmaybeoffset (sold if theywereboughtandboughtback if theyweresold)atanytimepriortoexpiration.Let’srepeatthissentence.Optionsmaybeoffset orclosedoutatanytimepriortoexpiration.Typically,anoptionwillbeoffsetwhenaprofitcanbemadeortoreducealoss.Note:theprudentinvestoralwaysmakenoteofexpirationdatessohe/shecanavoidleavinganyprofitsatexpiration.

Exercising Options

Buyersofoptioncontractshavetherighttoexercisetheiroptionpriortoexpiration.Sellersofoptioncontractsareobligatedtodeliverthestock(callseller)ortoacceptdeliveryofthestock(putseller)ifcalledupon(assigned)priortoexpiration.

ExercisingCalls

Whenyouownorholdalong(buy)callposition,youhavetherighttoexerciseyouroptiontobuythestockprior toexpiration. If, forexample,youown1 IBMJan85calloption,youmaychoose to exercise your option to buy 100 shares of IBM stock at $85 per share pluscommission. IfyouareaselleroftheIBMJan85call,theOCC(OptionsClearingCorporation)maycalluponyoutodeliverthestock.Astherecipientofanexercise,youareassigned.

If youhavesold thecallwithoutowning theunderlying stock, youarewhat is referred toasnakedshortthecall(i.e.,uncovered).Youarenowshortthestock(naked),andwillhavetobuyitatthecurrentpricetodeliverit.Youwilllosethedifferencebetweenwhatyouareforcedtopayforthestockandthestrikepriceofthecall,lessthepremiumreceivedwhenyousoldthecall.Ifyouhavesoldthecallandown(long)thestock(covered),yourstockisnowgone.Thisiscommonlyreferredtoashavingthestockcalledaway.Ithasbeendeliveredtothecallownerwhoexercisedhiscall.

www.TheoTrade.com

TheoTrade


ExercisingPuts

Thissameprocessworksforputs.Ifyouarelong(bought)1IBMOct95put,youmaychoosetoexercise your right to sell IBM at 95. You tell your broker to exercise the put, he in turn,instructstheOCC.TheOCCthenmakesarandomselectionfromitslistofsellersoftheIBMOct95putsand informs thatperson to takedeliveryof100sharesof IBMat$95per share.Thefollowingmorningyouhaveasell transaction for100sharesof IBMat$95pershare inyouraccount(i.e.,$9,500lesscommissions).Becauseyouexercisedyourput,yourpositionofbeinglong 1 IBMOct 95 put is noweliminated. If you own the stock and choose to exercise youroptiontosell,youareforcingtheselleroftheputcontracttoacceptdeliveryofthestockyouownattheagreeduponstrikeprice.

Ifyouaretheseller(short)ofa95put,youmaybecalledupontoacceptdeliveryofIBMstockat$95pershare.Astherecipientofanexercise,youareassigned.Whenyouareassigned,youbecometheowner(long)ofthestock.Thisiscommonlyreferredtoashavingthestockputtoyou.Youmusthaveall themoney inyouraccountthenextdaytopayforthestock.Youarenowflatifyouwereshortthestock(i.e.,acoveredput)whenyouhadthestockputtoyou.

TransactionCosts

Thetransactioncostsofoptionsinvestingconsistprimarilyofcommissions(whichareimposedin opening, closing, exercise and assignment transactions), butmay also includemargin andinterestcostsinparticulartransactions.

www.TheoTrade.com

TheoTrade


Enhancing Returns and Managing Risk with Options. Hedging Your Long Term Portfolio with Put Options Would youdrive a carwithout insurance?Would you even thinkof owning a homewithoutinsurance?Mostpeoplebuyinsurancetoprotecttheirinvestmentsfromloss.Oneneverwantsto collect on a policy, but buying insurance is prudent, regardless. Options, like insurancepolicies,canbeusedtolimitrisk.

Professionalsbelievethattheonlywayonecansafelybeinthemarketforthelonghaulisbybeinghedged.Putoptionscanbeusedasaninsurancepolicytoprotectstockormutualfundholdings.Asagoodrule-of-thumb,whenyoubuystockormutualfunds,youshouldbuyputs.Buyingputstohedgeastockpositionisreferredtobytheprofessionalsas“marriedputs.”YouwilllearnatTheoTradehowtohedgeamutualfundbyusingindexoptions.Amutualfundisabasketofstocks,asisanindex.Youshouldbuyenoughputstocoveryourlongstockposition.(Remember, one put contract gives the holder the right to sell 100 shares of the underlyingstock, at the strike price, before the expiration date.) By purchasing puts, youminimize thepotentiallossonastockormutualfund,shoulditdeclineinprice.

ForExample: Youbuyorown1,000 sharesofXYZat$31and ten30 strikeputs,onemonthfromexpiration, at $1.Bypurchasing theput, youhave increasedyour investment inXYZ to$32.(TheoTradephilosophy:Ifthestockisnotworth$32withprotection,itisnotworthpaying$31without.YouarebuyingXYZbecauseyouthinkthestockisgoingup. Ifyoudon’tbelievethestockormutualfundwillgoupbyat leastthecostoftheputinthetimeremaininguntilexpiration,it’snotworthowning!)

Buying puts for protection is obviously a bullish strategy. If you thought a stock was goingdown, why own it. However, you don’t mind paying insurance for something you feel willcontinuetogoupinvalue.Therefore,itisimportanttounderstandthatbuyingmarriedputsisnot a cure for poor performing stocks. If you own a stock that is not going up,why do you

www.TheoTrade.com

TheoTrade


continuetoownit?Sellit,andbuyoneyouareconfidentwillgoup,alongwithamarriedput,incaseyou’rewrong!Withmarriedputs,youshouldbeconfidentthatthestockwillincreaseinpriceandalsobewillingtogiveupalittleupsideprofittooffsetyourdownsideriskprotection.Bypurchasingputs,yousetthemaximumlossonthestockattheputstrikeprice,lessthecostoftheput.Inourexample,youareguaranteed$29forthestock(theputstrikeof30,lessthe$1premiumpaidfortheput)evenifitgoestozeropriortoexpiration.

Theadvantageofbuyingputsoverstop-lossorders:

Stop loss orders are poor protection against sudden downturns in a stock. Bad news, poorearnings, political problems, andmany other factors can cause a stock to gap down. In ourexample,shouldthestockgapdownfrom31to20,a30stop lossorderwouldsell thestocknear20notat30sincethestockneverhitapricebetween30and20. Ifyouhavea30stoporderoncethestockhits30orbelow,thestockisimmediatelysoldatthemarketprice.Ifyouhada“stoplimitorder”at30,youwouldn’tbesolduntilthestockgoesbackto30.However,the stock could continue to drop. Stop and stop limit orders, therefore, provide very littleprotection.But,ifyouownthe30strikeput,youhavetherighttosellthestockat30anytimepriortotheoption’sexpiration.Astop-lossordercanalsoforceanuntimelysale.Whenastockpricereachesthestop,itissoldautomatically;therebyeliminatingthechanceofparticipatinginupwardmovementsshouldthestockturnaround.Owningtheputsallowstheholdertorideoutthesedownturns.

The options of the married-put holder: Should your stock decline in price, you have twooptionsasamarried-putholder:

1. Youcanexerciseyourrighttosellthestockattheputstrikeprice.

2. You can sell the put option and keep the stock and then re-hedge the positionwith

anotherput.Youwill thenownthestockat thecurrentprice,but thesaleof theput

optionwillgiveyouthedifferencebetweentheputstrikepriceandthecurrentpriceof

thestock,plusanyremainingtimevalue intheput.Thefollowingtablewill showyou

thevalueoftheputoptionatexpirationbasedonvariousstockprices.Noticethatifyou

keepthestockyouwillownthestockatthecurrentprice,plushavecashequaltothe

www.TheoTrade.com

TheoTrade


intrinsicvalueoftheoption.Addingthetwotogether,yournetlossinthisexamplewill

neverbemorethan$2,nomatterhowlowthestockgoes.

Profit or Loss on XYZ stock bought for $31with 30 strike put purchased for $1 for a totalinvestmentof$32.

StockPrice+30PutValue -Cost=NetGain/Loss $40 $0 $32 $8 $35 $0 $32 $3 $32 $0 $32 $0 $28 $2 $32 -$2 $20 $10 $32 -$2 $15 $15 $32 -$2 $5 $25 $32 -$2 $0 $30 $32 -$2

MaximumLoss:Thedifferencebetweenthepriceyoupaidforthestock,lessthestrikepriceoftheput,plusthecostoftheputandcommission.

Whenyoubuyaput,youarebuyingtherighttosellthestockatthestrikeprice,lessthecostoftheput.Ifyourstockdeclines,youcanselltheputandbuyalower-strike-priceputforthenextmonth.Ifthestockmovesup,youcanlock-inprofitsbypurchasingahigherstrikeput.

AttheTheoTradeyouwilllearnspecificcriteriaonwhatstrikepriceputandexpirationmonthtopurchasetoproperlyhedgeyourstocksormutualfunds.Thenyouwilllearnspecificcriteriaforre-hedgingthepositiontolockinprofitsshouldthestockormutualfundincreaseinpriceorminimize lossesshouldthestockormutual funddrop inprice.TheoTradeemphasizes“TradeCriteria”andisworththeinvestmentinourcoursematerials.

www.TheoTrade.com

TheoTrade


Using Options to Benefit from Price Movements (Speculating) Traders can use options to benefit from price movements in underlying stocks without theexpenseorriskofowningorshortingstock.

SupposeABCistradingat$98,andyoubuyone100strikepricecallforapremiumof$4.Sinceonecall isanoptiontobuy100shares,yourtotal investmentwouldbe$400(4x100). Ifthestockweretogoto$105priortoexpiration,the100callwouldbeworthatleast$5pershare,or$500percontract.Sellingthecallwouldresultina$100profit,earning25%returnona$400investment. By comparison, the stock owner would have realized only $700 on a $9,800investment. This is only a 7% return for the samemovement in the stock. The stock ownercouldloseupto$98pershare,foratotalof$9,800,shouldthestockdeclineinvalue!Thecallholder’slossislimitedto$4pershare,or$400foronecontract,regardlessofhowfarthestockdeclines.

Risk-Reward Analysis of Options versus Stocks Buy100sharesABC@$98=$9,800or

Buy1ABC$100call@$4=$400

Thestockdropsto$80:

Thestockownerloses18%,or$1,800

Theoptionownerloses100%,or$400

Thestockgoesto$105:

Thestockownergains7%,or$700

Theoptionownergains25%,or$100

www.TheoTrade.com

TheoTrade


Trading with Spreads Although options can be purchased naked for speculation, TheoTrade believes that mosttradesshouldbehedged.Ratherthanbeingnakedlongorshortanoption,TheoTradepreferstoloweryourriskbyusingacombinationofoptionsinoneposition.These“spreads”,astheyarecalled,canbeusedtoestablishlower-risktrades.AVerticalSpread,forexample,iscreatedbysimultaneouslybuyingoneoptionandsellinganotheroptionofthesamestockatadifferentstrikeprice.

Suppose,inourpreviousexample,withABCstockat$98,threeandahalfweeksfrom expiration, you buy ten near-month 100 calls for $4 and simultaneously sell ten near-month105callsat$2.25.YounowhavetheABC100-105aVerticalCallSpreadforanetcostof$1.75,or$1,750fortenspreads:

Buy(Open)100-105VerticalCallSpreadwithStockat$98:

Buy100callfor -4.00 - 10(4x100)=-4,000Sell105callat 2.25 10(2.25x100)=2,250CostofSpread -1.75 - 10(1.75x100)=-1,750

Valueof100-105CallSpreadatExpirationwithStockat$105:

Sell100callfor 5 - 10(5x100) =5,000Buy105callat -0 10(0x100) =-0SaleofSpread 5 10(5x100) =5,000LessSpreadcost -1.75-10(1.75x100) =-1,750GrossProfit 3.25 10(3x100) =3,250

Younowowntherighttobuythestockfor$100andhavesoldsomeoneelsetherighttobuythestockfor$105.Ifthestockisclosetoorabove$105atexpiration,youcouldberequiredtosellthestockfor$105.However,youcouldexerciseyourrighttobuythestockfor$100,thusreceiving$5pershare,foratotalof$5,000onthetenspreads.

www.TheoTrade.com

TheoTrade


Alternatively, youmight also receive close to $5,000 by simply selling the spread at or nearexpiration.Whenyousubtractthe$1,750youpaidforthespread,youareleftwitha$3,250profit.Thatisa185%returnfora7%moveinthestock!Inaddition,youhavelimitedyourrisktoonly$1.75pershare,or$1,750fortenspreads,pluscommissions.

www.TheoTrade.com

TheoTrade


Stock and ATM Option Equivalents and Related Risks. The following compares 4 bullish and 4 bearish positions and the associated risk with eachposition. You should note the risk of owning stock and selling stock or options short incomparisontothelimitedriskofspreadsandbuyingoptions.

BullishPositions

TradeType

BuyStock@100

Sell100Put@3

Buy100Call@3

Buy100-105CallSpreadfor1.50

Risk/share $100 $97 $3 $1.50

StockBreakEven 100 97 103 101.50

MaxProfit/share Unlimited $3 Unlimited $3.50

TheoTradewillcoveranumberofstockandoptioncombinationstrategiesdesignedtolimitriskandincreaseprofitpotentialinbullish,bearish,volatile,orneutralmarketsincluding:

§ Straddles

§ Strangles

§ VerticalBullCallSpreads

§ VerticalBearCallSpreads

§ VerticalBearPutSpreads

§ VerticalBullPutSpreads

§ IronCondors

§ CalendarBullCallSpreads

§ CalendarNeutralCallSpreads

www.TheoTrade.com

TheoTrade


§ CalendarBearPutSpreads

§ CalendarNeutralPutSpreads

§ HedgingStockwithMarriedPuts

§ HedgingaMutualFundorPortfolio

§ Collars

§ WritingCoveredCalls

§ HedgingaShortSale

§ LockinginStockPrices

§ LockinginStockProfits

§ UsingOptionstoBuyStock

§ UsingOptionstoSellStock

www.TheoTrade.com

TheoTrade


Stock Market Terminology. The following are some of the most common terms used in trading that will be usedthroughout thismanual and Theotrade coursematerials. Your familiaritywith these termswillbehelpful.

§ Bull/Bullish:Movingup.

§ Bear/Bearish:Movingdown.

§ Bid:Thehighestpriceabuyeriswillingtopayforastockoroption.

§ Ask:Thelowestpriceaselleriswillingtosellastockoroption.

§ PriceSpread: Thedifferencebetween thebidandask. Forexample if thebidprice is

2.50andtheaskpriceis2.75,thepricespreadis.25.

§ MarketOrder:Anordertobuyorsellatthecurrentmarketprice.

§ LimitOrder:Anordertobuyorsellataspecifiedpricelimit.

§ DayOrder:Abuyorsellorderthatisgoodonlyforthedayandifnotfilled,canceled.

Typically,buyorsellordersareconsidereddayordersunlessotherwisespecified.

§ GTC:Anorderthatis“GoodTillCanceled”.

§ StopOrder:Anorderusedtolimitloss.Whenastockreachesthespecified“stop”price,

thestockissoldatthemarketprice.

§ StopLimitOrder:Anorderalsousedto limit loss,exceptthestockwillbesoldat the

limitprice.

§ OCOOrder:OneOrderCancelsOther.

§ OpeningTransaction:Theoriginalorderplacedwithabrokertobuyorsell.

§ ClosingTransaction:Anorderthatclosesthetransactionbysellingsomethingboughtor

buyingbacksomethingsold.

§ Offset:Theactionofsellingsomethingoriginallyboughttoopenatransactionorbuying

backsomethingoriginallysoldtoopenatransaction.

§ Long:Ownorboughtstocksoroptions.

§ Short:Soldstocksoroptions.

§ Write:Tosellanoption.Theselleriscalledthe“writer.”

www.TheoTrade.com

TheoTrade


§ SellingShort:Sellingastockwithoutowningit.

§ Naked:Apositionwhentheoptionsellerorbuyerdoesn’towntheunderlyingstockor

anotheroptiononthesamestock.

§ Covered: A position when the option seller or buyer owns the underlying stock or

anotheroptiononthesamestock.

§ Call:Anoptionthegivessomeonetherighttobuyastock.

§ Put:Anoptionthatgivesontherighttosellastock.

Thefollowingwilldescribethedifferencebetweengoinglongandsellingshort:

LONG SHORT BuyOpeningTransaction Sell Sell(offset) ClosingTransaction Buy(offset)

Longreferstoapositionwhereonebuysastockoranoptionasanopeningtransaction.Heisnow long thatparticular stockoroption.Heoffsetsorcloses this longpositionbyselling thestockoroption.Thinkofbeinglongasanautodealerwhobuysacarwiththeintentionofoneday selling it at a profit.He is now long a car.Hewill eventually offset this longpositionbysellingthecar.

Shortreferstoapositionwhereonesellsastockoranoptionthathedoesnotown.Thesellistheopeningtransaction.Heisnowshortthatparticularstockoroption.Heoffsetsorclosesthisshort position by buying the stock or option. An auto dealer who receives payment (or adeposit)foracarthathedoesn’thaveinstockisnowshortacar.Hehassoldthecarandhopestobuyoneata lowerprice thanhehas sold it for to fulfill theorder.Hewill lateroffsethisshortpositionbybuyingthecaranddeliveringit.

Technicallyspeaking,whenastockissoldshort,thebrokerhasalreadydeliveredthestocktothebuyer.Theshortsellernowowesthestocktohisbroker.Themoneyreceivedforthestockremainsinhismarginaccountandcannotbewithdrawnuntilthestockisboughttoreplacethestockthebrokerhasloaned.Theriskisthatthestockgoesup.Ifso,theshortsellermustbringinmoremoney(amargincall)sothatthereisenoughtobuythestockatitscurrentprice.Aslong as there is enoughmoney in the account to buy the stock at its current price one canremainshortindefinitely.

“Naked long” refers to a position where one is long (buy to open) with no protection. Forexample,theriskinbeingnakedlongstockisthatyoucouldloseallofyourinvestment.When

www.TheoTrade.com

TheoTrade


youbuyaprotectiveputyouarenow“hedged.”Withoutfireinsuranceonyourhome,youarenaked,noprotection.Howeverifyoubuyafireinsurancepolicy,youarenowprotectedagainstloss.

“Naked short” refers to having a short position (sell to open)without protection. If you arenakedshortstockyourriskisunlimited,asthestockhasnolimitastohowhighitcango.Whenyoubuyaprotectivecall,youarenowhedged.Thecalllimitsthepriceyouwouldhavetopayforthestock.

TheoTradeContinuedEducation

Ourfirstrecommendationwouldbetoshutoffallthenoise.WhileDonKaufmanwasatTDAmeritradetheywouldrunstudiesonthe100softhousandsofthemostactiveaccounts.Theyfoundoutwhatworksandwhatdoesn'twork.Ifyou'resubscribedtoanyotherservice-cancelimmediately.Stopgivingthemmoneytoentertainyouandthenturnarounduseyourmoneytorefundtheirowntradingaccounts.Iknowit'sbrutallyhonest,butsadlytheso-calledtradingeducationcommunityisnothingbutsalesmen.TheoTradehasanall-inclusivemembershipmeaningyouhaveaccesstoalloureducators,indicators,andscanners.Wedon'thave8differentsubscriptionsforyoutogetandyou'llneverfindussellingsomefancyindicator.TheoTradeisallyouneedsosaveyourmoneyfortrading.:-)

Weknowtherearealotofservicesoutthere.TheInternethasmadeitsothatanyonewithanInternetconnectionandsomesalesabilitycanthrowupawebsitetoconvincepeoplethey'retraders(oranythingelse).Thetruthismanyoftheseso-calledexpertsarejustshowmen.Theyshowyouonlytheirwinningtrades,theyputonbothsidesofatradeandshowyouonlythetradesthatworked,ortheytakescreenshotsatonlythemostconvenienttimes.DonKaufmanistheonlyoneouttherewith15yearsinthebrokerageindustrywholedtheentireeducationteam in a $20 billion firm. He was the guy this firm sent out to train fund managers andprofessionalinvestorsandhecantrainyoutoo!

TheoTradeRecommendedBroker

OpenanewaccountwithTDAmeritradeandget90daysoffreetradingclickingthelinkbelow:

https://theotrade.com/tdameritrade

www.TheoTrade.com

TheoTrade


TheoTradeandTDAmeritrade’sthinkorswim®Software

PriortoTheoTrade,DonKaufmanspenttheprevious15yearsofhiscareerworkingfor,tradingon,andbuildingfeaturesforthinkorswim®Youwanttolearnthenuancesofthethinkorswim®tradingapplication,wellthatispreciselywhatwearegoingtodo.Watchthemostrevealing90-minuteonlineseminaronhowtousetheindustry’sleadingtradingapplicationfromsomeonewhohelpedcreateit!

https://theotrade.com/thinkorswim-tutorial/

Duringthisfreeonlineseminaryouwilllearn:

*Charting-DiscoverhowtobuildCustomChartsandtoolsforyourtradingneeds.Sureanyonecanbuildachartandplaceastudyonachartbutcanyoudoitwithoneclick?Ican,andwillshowyouhowtousethisfeature!Loaddozensofchartsandstudiessimultaneouslywith1click.

*Scanningtechnology-Learntoharnessthepowerofthethinkorswim®scanning.Whenyouarereadytostepupyourtradinggameallowmetointroduceyoutothinkorswim’sscanningcapabilities.Whateveryouarelookingforonachartorinoptions,wellthethinkorswim®scannercanfindinunder1second.

*AdvancedOrderTypes.Justwhenyouthoughtyouknewhowtobuildanadvancedtrade…well,Icanshowyouhowtobuildcomplexorderswithinsecondsandusetherighttoolsinattempttobetteryourexecutionpricesonallyourtrades.

*Tradingonthinkorswim®-InsighttoalittleknownOptionAnalyticalToolfoundonTOS.Youhaveplayedwithprobabilityoftouching;nowlearnwhatit’sallabout!

*AnalyzeTab-TheAnalyzetab,fearedbythosewhodonotknowofitsstrengthsandreveredbythosethatdo.FearNOTtheanalyzetabforIshalltakeyouintothedepthsfromwhichthereisnoreturn.Youwilllearnmoreaboutoptionsandanalyticsthanyoubargainedfor!

https://theotrade.com/thinkorswim-tutorial/

www.TheoTrade.com

TheoTrade


TheoTrade’sRevolutionaryIndicators

Yes,weshareallourindicatorsatTheoTrade.Allindicatorsarebasedonfreemarketdata.Theabilitytodevelopcoolbellsandwhistlesisacommodity.Neverpaygoodmoneyforanindicator.Letmeputittoyouthisway.Brokeragefirmsthatareworth10sofbillionsofdollarswantyoutotrademore,right?Iftherewasastudy,indicator,orscannerouttherethatmadeyouabettertraderdon’tyouthinkthesefirmswouldpaytopdollarforthemandmakethemavailabletoyou?Ofcoursetheywould!Thereforesaveyourmoneyfortrading!

Thedirtysecretintheinvestmenteducationworldistheremanyunscrupulouspeoplewillputonbothsidesofatradebasedonamagicalindicatorandthenonlyshowyouthewinningtrade.Thensellyouthemagicalindicatortorefundtheirowntradingaccount.Don’tfallvictimtothis!

Everytrader’sdreamistopickthetop&bottomofthestockmarket.Withtheseindicatorsyoufinallycan!Withouttheseindicatorsyoumightaswellbegamblingwithyourmoney.IfyouwanttogamblegotoLasVegas.Ifyouwanttolearnhowtopicktops&bottomswatchthisfreeonlineseminar.Theindicatorisavailableforfreeforthinkorswim®users.Theindicatorispostedonthepagebelow.Don'tworry,weincludedstep-by-stepdirectionsonhowtoinstalltheindicatorsonyourthinkorswim®platform.It'seasy!

https://theotrade.com/revolutionary-indicators-replay/

TheoTradersareNOTgamblers!That'swhyI'mmakingourTheoTradeindicatorsavailabletoyouatabsolutelyZEROcost.AtTheoTradewearenotabouttonickelanddimeyou!Weareaboutcreatingresults.Makesureyougettheseindicatorsonyourchartssoyoucanlearnthebestwaytousetheminthisfreeonlineseminar.

https://theotrade.com/revolutionary-indicators-replay/

TheoTradeCommitmenttoYou

Ourcommitmenttoyouistocreatethesinglemostsupportiveenvironmentforyourinvestmentandtradingeducation,barnone.Yoursuccessinfinancialmarketsisourhighestpriority;ifyouhaveaquestion,aconcern,orevenarandomthought,contactus.

Email:[email protected]

Phone:1-800-256-8876

TheoTrade€¦ · · 2016-11-07The Rebel’s Guide to Trading Options 3 ... , nor does it direct client commodity accounts or give commodity trading advice tailored to any particular

Documents