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1 TRADING COURSE – SESSION 6 www.optionstradingiq.com © Copyright 2014. Options Trading IQ. All Rights reserved.

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Presentation on theme: "1 TRADING COURSE – SESSION 6 www.optionstradingiq.com © Copyright 2014. Options Trading IQ. All Rights reserved."— Presentation transcript:

1 1 TRADING COURSE – SESSION 6 © Copyright Options Trading IQ. All Rights reserved.

2 2 Any information contained in this presentation is for educational purposes only. Neither IQ Financial Services, LLC, Gavin McMaster nor its subsidiaries nor any of their respective officers, employees, representatives, agents or independent contractors are licensed financial advisors, registered investment advisors, or registered broker dealers. Neither do they provide investment advice, financial advice or make investment recommendations and they are not in the business of transacting trades. Nothing in this communication constitutes a solicitation, recommendation, promotion, endorsement or offer to buy or sell by IQ Financial Services, LLC or other described above of any particular security, transaction or investment. Any trades and / or results covered in this presentation may or may not be live trades. All trades and trading results are believed to be accurately presented. However, since the trades may not have been executed in the market, the results may have been under or over compensated for the impact, if any, of certain market factors such as liquidity, slippage and commissions. Therefore there can be no guarantee of accuracy or completeness. The risk of loss in trading securities and options in particular can be substantial. Customers must consider all relevant risk factors, including their own personal financial circumstances, before making any financial transaction. Options involve risk and are not suitable for all investors. See the Options Disclosure Document: Characteristics and Risks of Standardized Options, available from © Copyright Options Trading IQ. All Rights reserved. DISCLAIMER

3 3 © Copyright Options Trading IQ. All Rights reserved. OUTLINE Market UpdatePosition Update The Wheel Strategy

4 4 © Copyright Options Trading IQ. All Rights reserved. HOLDING PATTERN Bounced From Oversold on Daily TimeframesQuarter End BoostOversold On 30min Negative Divergence On WeeklySemiconductors Still StrongRotation – AMZN, FB, PCLN, TSLA, TWTR > UtilitiesWhipsaw. Dead Cat Bounce?

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11 11 © Copyright Options Trading IQ. All Rights reserved. IRON CONDOR UPDATE Around $900 Profit. Overadjusted??Good Day Today – Negative Delta Helped Short Put Delta -8.00Short Call Delta 7.06

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14 14 © Copyright Options Trading IQ. All Rights reserved. BEARISH BUTTERFLY UPDATE Around $260 ProfitRight At The Centre Point Greeks Looking Good

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16 16 © Copyright Options Trading IQ. All Rights reserved. IRON TRAPDOOR UPDATE Around $320 ProfitNeed A Big Move Down. It’s Possible Though Short Put Delta 3Short Call Delta 7

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19 19 © Copyright Options Trading IQ. All Rights reserved. POTENTIAL TRAPDOOR ADJUST.

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21 21 © Copyright Options Trading IQ. All Rights reserved. COMBINED POSITION

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24 24 © Copyright Options Trading IQ. All Rights reserved. THE WHEEL STRATEGY Similar to Covered Call Strategy Longer Term Strategy With Monthly Income Buy Stocks For LessNeed Strict Trading Rules

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26 26 © Copyright Options Trading IQ. All Rights reserved. SELLING PUTS Sell a Put. In Other Words, You Are Short A Put You Have The Obligation To Buy At The Strike Price You Receive Premium

27 27 © Copyright Options Trading IQ. All Rights reserved. WHY SELL PUTS Great Way To Get Long A Stock Purchase Stock For Less Than The Current Price If Stock Is Flat Or Rises, You Collect Premium Income Can Keep Collecting Premium Income

28 28 © Copyright Options Trading IQ. All Rights reserved. TAKING OWNERSHIP If The Stock Falls Below The Strike Price, You Are Assigned on 100 Shares Now You Can Start Your Wheel Trade

29 THE PROCESS Have To Be Willing To Own 200 Shares of The Stock Sell 1 Put. If the put expires worthless, revert to step 1 and sell another put. Once assigned on the short put, you hold 100 shares. If you are still bullish on the stock, write another put. At the same time you sell a covered call on the 100 shares. If the stock falls, the 2nd put is assigned, completing the investors’ total order of 200 shares.

30 30 © Copyright Options Trading IQ. All Rights reserved. THE PROCESS Now that you own 200 shares, sell 2 covered calls against those shares The chosen strike price and expiry month will be determined by the investors’ outlook on the stock Once the stock rises and the 200 shares are called away you can repeat the process

31 BENEFITS OF THE WHEEL Put and call selling helps generate significant monthly income Shares can be purchased for less than their current price Option premium effectively reduces the average cost of the share purchase Dividends received from holding the shares will produce another source of income By adhering to a strict process, you can take some of the emotion out of your investment decision making

32 32 © Copyright Options Trading IQ. All Rights reserved. RISKS OF THE WHEEL Losses can mount up quickly if you do not have stop losses in place Traders should be wary not to be enticed by stocks that have high option premium. High option premiums mean the stock is more volatile This strategy should only be attempted on stocks you are willing to own

33 33 © Copyright Options Trading IQ. All Rights reserved Stocks Continuing To Fall End Up Selling Calls For Less Than Your Cost Basis Wheel Still Performed Better Than Outright Stock OwnershipNeed To Use A Stop Loss

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35 35 © Copyright Options Trading IQ. All Rights reserved. SOME GUIDELNES TO CONSIDER Sell First Put When IV Is In The Higher End Of The 6 Month Range Wait For A 5% Pullback Before Selling First Put Stop Loss 15% Below Where The Stock Was Trading When First Put Was Sold Adjust Stop Loss If Multiple Puts Have Been Sold?

36 36 © Copyright Options Trading IQ. All Rights reserved. SOME GUIDELNES TO CONSIDER Sell Puts 5% OTM? Delta? Sell Call 5% OTM. Or Near Initial Stock Price Sell First Put When RSI < 30Stick To Low Beta, High Dividend Stocks

37 37 © Copyright Options Trading IQ. All Rights reserved. SOME GUIDELNES TO CONSIDER If The Stock Continues To Fall, It’s Ok To Sell A Call Below Cost Only If You Have Received Enough Put Premiums To Offset The Cost Basis If You Have Sold Numerous Puts, Your Actual Cost Basis Can Be Very Low

38 38 © Copyright Options Trading IQ. All Rights reserved. WHICH STOCKS? JNJ, KO, MO, KMB, SPY, WMT, IBM, MSFT Other High Dividend Stocks. Industry Leaders EEM, EWZ?TSLA, TWTR? AAPL, GOOG?Stocks You Are Happy To Own In Your 401K

39 39 © Copyright Options Trading IQ. All Rights reserved. EXAMPLE JNJ Trading at $98 at April 2 Sell $95 June Put for $1.50 JNJ Falls Below $95, You Get Assigned And Own 100 Shares With A Cost Basis Of $93.50 Now Sell Oct $97.50 Call For $1.50 and Oct $90 Put For $1.50 Received $450 In Premium. Bought Shares for $9,500

40 40 © Copyright Options Trading IQ. All Rights reserved. EXAMPLE Cost Basis Is $9,050 or $90.50 Per Share At October Expiry, JNJ Is Below $90. Below $90 You Get Assigned On Another 100 Shares At $90 Now Sell 2 Oct $95 Calls

41 41 © Copyright Options Trading IQ. All Rights reserved. EXAMPLE Bought 100 Shares At $95 and 100 At $90 Total Paid For 200 Shares $18,500 Ave $ x $150 Received From Puts And CallsNet Cost Basis Is $17,750 or $88.75 Per Share

42 42 © Copyright Options Trading IQ. All Rights reserved. EXAMPLE At October Expiry, If JNJ Is Below $95, Sell 2 More Calls. Collect Dividends If Above $95, Your Shares Are Called Away Total Profit = $95 - $88.50 x 200$1,300

43 43 © Copyright Options Trading IQ. All Rights reserved. EXAMPLE - GE Tough Trade But Worked Well In The End In A Massive Hole, But Worked My Way Back Ignored My Stop Loss Finished With 20% Return Compared to -42% For The Stock

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45 Can help generate monthly income and gain exposure to a stock while reducing average cost. Can produce a gain, even when the underlying falls. There are risks involved and you need to stick to your trading rules. CONCLUSION

46 46 THANK YOU! © Copyright Options Trading IQ. All Rights reserved.


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