dan sheridan option trading for incomeoption trading …docs.hamzeianalytics.com/ds_031709.pdfdan...

Dan SheridanDan Sheridan

Option Trading for IncomeOption Trading for IncomeOption Trading for IncomeOption Trading for Income

March 17, 2009March 17, 2009

Sheridan Options Mentoring, Inc.www.SheridanMentoring.comg

The views of third party speakers and their materials are their own and do not necessarily represent the

DisclaimerDisclaimerThe views of third party speakers and their materials are their own and do not necessarily represent the views of Chicago Board Options Exchange, Incorporated (CBOE). Third party speakers are not affiliated with CBOE. 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.

O ti i l i k d t it bl f ll i t P i t b i lli tiOptions 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 (ODD). Copies of the ODD are available from your broker, by calling 1-888-OPTIONS, or from The Options Clearing Corporation, One North Wacker Drive, Suite 500, Chicago, Illinois 60606. The information in this presentation is provided solely for general education and information purposes. Any strategies discussed, including p y g p p y g , gexamples 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. Investors should consult their tax advisor about any potential tax consequences No statement within the presentation should be construed as a recommendation totax consequences. No statement within the presentation should be construed as a recommendation to buy or sell a security or to provide investment advice.

Multiple leg strategies involve multiple commissions charges. Brokerage firms may require customers to post higher margins than the minimum margins specified in this presentation.

AcknowledgementAcknowledgement

Page 2@ Copyright 2009. All rights reserved.

Screen shots of OptionVue 5 or 6 Software courtesy of OptionVue Systems International. www.optionvue.com

Laying the Foundation for Laying the Foundation for y gy gIncome TradingIncome Trading


Insurance CompanyInsurance Company


Normal Distribution Bell CurveNormal Distribution Bell Curve

Standard ProbabilityDeviations Probability

1 68.2%1.5 86.6%1 96 95 0%


1.96 95.0%2.33 98.0%2.58 99.0%

RangeOne Day

Standard Deviations

Standard Deviations (Sigma)Standard Deviations (Sigma)

Price 100.00$ Volatility 19.1%1 σ 1.00$ 99.00$ to 101.00$

RangeStandard Deviations

$ $ $2 σ 2.00$ 98.00$ to 102.00$ 3 σ 3.00$ 97.00$ to 103.00$


FREE STANDARD DEVIATION CALCULATOR AT: http://www.sheridanmentoring.com/sigma

Portfolio PlanPortfolio Plan

SpeculativeStrategies

IncomeStrategies

Long TermStrategies


Portfolio PlanPortfolio Plan

Long Calls/PutsLong Calls/Puts,Diagonal SpreadsOTM ButterfliesVertical Spreads

Calendar SpreadsDouble Calendar SpreadsDouble Diagonals

Directional CalendarsLong Straddles

ATM ButterfliesCondors

CollarsCollarsLEAPSCovered Writes/StraddlesLong StockLong Term Calendars


Income StrategiesIncome Strategies

Calendars and Butterflies focus on Time decay

I d f b bilitiIron condors focus on probabilities


New Era since Sep 30, 2008New Era since Sep 30, 2008-- VIX 35VIX 35--40 40 60% long Vega and 40% short Vega 60% long Vega and 40% short Vega g g gg g g $10,000 Portfolio $1000 in cash for adjustments

$5400 in Calendars and Double Diagonals $5400 in Calendars and Double Diagonals

$3600 in Condors, credit spreads and Butterflies

Maximum 6-7 positions, gets a bit crazy to manage more than 6-7 positions

Minimum positions 3-4.

Until economy stabilizes would always have some downside insurance


New Era since Sep 30, VIX 55New Era since Sep 30, VIX 55--606060% short Vega and 40% long Vega60% short Vega and 40% long Vegag g gg g g $10,000 Portfolio $1000 in cash for adjustments







New Era since Sep 30, VIX 42New Era since Sep 30, VIX 42--53, 55% 53, 55% short Vega, 45% long Vegashort Vega, 45% long Vegag , g gg , g g

$10,000 Portfolio $1000 in cash for adjustments







Big Picture PortfolioBig Picture Portfolio-- Sample Portfolio Sample Portfolio $500,000 ( 50%, 40%, 10% Mix)$500,000 ( 50%, 40%, 10% Mix), ( , , ), ( , , )

$250,000 Long Term Strategies ( 180 days or longer)- Collars, Covered Writes, Long Stock, Long Term Calendars

$200,000 Monthly Income Strategies ( 25-60 days)-Condors , Credit Spreads, Calendars and Multiple Calendars, Butterflies, Double Diagonals

$ S S ( ) $50,000 Speculative Strategies (1-90 days)-Straddles, Earnings Plays, Long calls and puts, Debit spreads, Reverse Calendars, Back spreadsp , , p

How would I make my percentages?


SPY Price ChartSPY Price Chart


CondorCondor-- Monthly IncomeMonthly Income


IBMIBM


IBM CalendarIBM Calendar-- Monthly IncomeMonthly Income


SPY ButterflySPY Butterfly-- Monthly IncomeMonthly Income


Long TermLong Term-- AAPL today 99.66AAPL today 99.66


SpeculativeSpeculative-- Slightly Bearish TodaySlightly Bearish Today


SpecSpec-- Slightly BullishSlightly Bullish


Free Standard Deviation CalculatorFree Standard Deviation Calculator

http://www.sheridanmentoring.com/sigma


Dan SheridanDan SheridanDan SheridanDan Sheridan

+1 678-262-8898

[email protected]@SheridanMentoring.com

Sheridan Options Mentoring, Inc.S e da Opt o s e to g, chttp://www.SheridanMentoring.com/


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