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OPTIONS TRAINING PROGRAM

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Presentation on theme: "OPTIONS TRAINING PROGRAM"— Presentation transcript:

1 OPTIONS TRAINING PROGRAM
SMB TRAINING OPTIONS TRAINING PROGRAM Presents:

2 Disclaimer 1.       SMB TRAINING is NOT a Broker Dealer.  SMB TRAINING engages in trader education and training.  SMB TRAINING offers a number of products and services, both electronically (over the internet through Smbtraining.com) and in person.  Through Smbtraining.com, SMB TRAINING offers the “Virtual Trading Floor”, a community through which independent traders (subscribers), as well as T3 Trading Group, LLC traders, observe a virtual trading floor environment (as described below) for educational purposes.  SMB TRAINING also offers web-based, interactive training courses on demand. 2.       The seminars given by SMB TRAINING are for educational purposes only. This information neither is, nor should be construed, as an offer, or a solicitation of an offer, to buy or sell securities. You shall be fully responsible for any investment decisions you make, and such decisions will be based solely on your evaluation of your financial circumstances, investment objectives, risk tolerance, and liquidity needs. 3.       This material is being provided to you for educational purposes only. No information presented constitutes a recommendation by SMB TRAINING or its affiliates to buy, sell or hold any security, financial product or instrument discussed therein or to engage in any specific investment strategy. The content neither is, nor should be construed as, an offer, or a solicitation of an offer, to buy, sell, or hold any securities. You are fully responsible for any investment decisions you make. Such decisions should be based solely on your evaluation of your financial circumstances, investment objectives, risk tolerance and liquidity needs. 4.       SMB Training and SMB Capital Management, LLC are separate but affiliated companies. 5.       T3 Trading Group, LLC is a Registered SEC Broker-Dealer and Member of the CBOE Stock Exchange (CBSX www.CBOE.com). All trading conducted by contributors on Virtual Trading Floor is done through T3 Trading Group, LLC Any information contained in this presentation is for educational purposes ONLY. Neither Locke In Your Success, LLC, John Locke nor it’s subsidiaries nor any of their respective officers, employees, representatives, agents or independent contractors are, in such capacities, licensed financial advisors, registered investment advisors or registered broker dealers. Neither do they provide investment nor financial advice nor make investment recommendations, nor are they in the business of transacting trades. Nothing in this communication constitutes a solicitation, recommendation, promotion, endorsement or offer (buy or sell) by Locke In Your Success, LLC, or others described above, of any particular security, transaction or investment. 7. The risk of loss in trading securities, options, futures and forex can be substantial. Customers must consider all relevant risk factors, including their own personal financial situation, before trading. Options involve risk and are not suitable for all investors. See the Options Disclosure Document: Characteristics and Risks of Standardized Options. Trading foreign exchange on margin carries a high level of risk, as well as its own unique risk factors. Please read the following risk disclosure before considering the trading of this product: Forex Risk Disclosure. Futures and forex accounts are not protected by the Securities Investor Protection Corporation (SIPC). 8. No relevant positions.

3 Hypothetical Trades Disclaimer
Please note: Hypothetical computer simulated performance results are believed to be accurately presented. However, they are not guaranteed as to accuracy or completeness and are subject to change without any notice. Hypothetical or simulated performance results have certain inherent limitations. Unlike an actual performance record, simulated results do not represent actual trading. Since, also, the trades have not actually been executed; the results may have been under or over compensated for the impact, if any, of certain market factors such as liquidity, slippage and commisions. Simulated trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any portfolio will, or is likely to achieve profits or losses similar to those shown. All investments and trades carry risks.

4 Locke in Your Success, LLC.
The ROCK Trading System Part 3 High IV Entry and September 2011 Expiration Trade Brought to you by SMB Training A World Leader in Options Education Created and taught by John Locke Locke in Your Success, LLC. “Know what you want, make it happen!”

5 John Locke President of Locke In Your Success, LLC Options Trader
Success Coach Options Trading Mentor

6 September 2011 Expiration Risk Management and Profit Targets
Planned Capital - $50,000 Profit Target - $10,000 Max Loss - $10,000 Profit Target may be adjusted up or down as trade progresses Max Loss may be adjusted down but will not be increased

7 Model put butterflies and check Delta We want to know what our Delta is 20 points over our short strikes (at 670). Currently, we are showing -90 at RUT 663. Therefore we need to check the analyze graph to see if Delta is greater than -200 at RUT 670

8 Excessively flat Delta indicates the market is too volatile for a normal entry and we should use a high IV entry modification

9 High IV Entry Guidelines Once we have determined we will do a High IV entry….
Model entry adding10 OTM calls with sufficient Delta to cut your position significantly Delta under -50 Check to see if the calls are under 10 Delta IF the calls are under 10 Delta, then proceed with Modified ROCK entry IF the calls need to be more than 10 Delta, then an M3 entry needs to be considered using M3R guidelines for timing the trade conversion back into ROCK configuration. IF you could go either way, check the chart to see if the market is experiencing excessive chop or it is trending. If market is excessively choppy use Modified ROCK entry. If market is trending, use the M3 entry

10 Buy 10 OTM calls that cut Delta to under -50

11 Sept 2011 Expiration Entry

12 Modified ROCK Configuration Upside Guidelines
In this configuration you should regularly be checking both your un- hedged Delta and your hedged Delta. We want to reconfigure to normal ROCK or M3 ASAP. If un-hedged Delta climbs to over -200 and underlying is LESS than 20 over short strikes, sell the hedges and reposition to normal ROCK configuration. If hedged Delta climbs to over -200 and underlying is MORE than 20 points over short strikes, roll up the put butterflies to between 10 and 20 points under price and then test to see if numbers work for a normal ROCK entry. If so, reconfigure to normal ROCK, IF not, we will either reposition our modified ROCK or reconfigure to M3

13 Modified ROCK Configuration Upside Guidelines
If underlying exceeds 40 points past short strikes OR trade goes negative Theta, roll up the put butterflies to between 10 and 20 points under price and then test to see if numbers work for a normal ROCK entry. If so reconfigure to normal ROCK, IF not either hold modified entry or reconfigure to M3

14 Modified ROCK Configuration Downside Guidelines
When Delta exceeds +100, sell position Test to see if Normal ROCK, M3 or Modified ROCK entry is appropriate for re-entry Re-enter position as appropriate

15 August 24 (6 days) – RUT at 691, up about 30 points, and trade has gone negative Theta

16 Graph Prior to Adjustment

17 Test to see if we can shift to normal positioning RUT at butterflies and Delta is -92, still well under -200

18 At RUT 700 Delta is -112, still too low for normal positioning

19 Roll butterflies up 30 points and reposition calls

20 New Position

21 August 30 (6 days) – RUT is at 728, up another 30 points, and trade has gone Theta negative

22 Existing Position

23 Test to see if we can go into normal positioning

24 Roll butterflies up 30 points and reposition calls

25 Graph after adjustment

26 September 2 (3 days) – RUT dropped to 683, down 45 points, and maximum positive Delta is exceeded

27 Existing Position

28 Test to see if we can go into normal positioning

29 Nope, not yet Delta is still only -167

30 We could think about a transition to an M3 but, considering we are getting 75 point swings in the market, it is probably safer to stay in Modified ROCK position

31 Roll butterflies back 40 points and reposition calls

32 New Position

33 September 7 (5 days) – 9 DTE RUT back to 707, up 25 points and theta has gone negative

34 Current Position

35 Test to see if we can go into normal positioning… YES! Finally at 9DTE

36 Reposition put butterflies and sell calls

37 Add in 730 call butterflies as needed to bring Delta into range

38 New Position Now if only the market will settle down for a few days!

39 September 9 (2 days) - 7DTE Maximum Positive Delta is Exceeded

40 Existing Position

41 Roll the put butterflies back 20 points

42 New Position Maybe the market will settle now?

43 September 14 (5 days) – 2 DTE

44 We are 2DTE and we should really just close the trade

45 We are getting chopped back and forth and having large movements near expiration. Let’s just widen out the position and see if we can make a little more.

46 MEOW

47 This is it. Expiration Thursday

48 Now the market can gap all it wants

49 Summary In this section we covered: September 2012 Expiration Trade
Modified ROCK Entry Transition from Modified ROCK to Normal Rock Adjustment into ½ ROCK with 1 roll back Adjustment into CAT from ½ ROCK with 1 roll back Removing risk for expiration

50 In Part 4…… M3 Entry Go though February 2012 Expiration Sample Trade

51 Locke In Your Success, LLC
John Locke Facebook: Locke in Your Success Twitter: locke4success


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