1. TO PUT OR NOT TO PUT… THAT IS THE QUESTION WHETHER ‘TIS NOBLER IN THE MIND TO PUT THE PHONE DOWN, OR JUST KEEP CALLING… McKinney, Texas M-STREETBOYS

2. What are Put Options? A Put is a contract on a particular stock, index or other security that allows the investor to sell the underlying stock at a set price (strike price). The holder of his option has paid a premium (cost of the contract) to buy it. Put options are profitable when the market is in decline. If the investor has a put on a stock that has now fallen enough to cover the cost of the premium, the person would be profitable. Ways to Profit with Put Options Trading them: If the Put is profitable, the investor can sell or trade the contract back to the market. The profit on the contract is shown by the premium increase on the option. As the market declines, the premium increases. This premium increase allows the investor to sell the contract. He is not "exercising the option". He is trading it out. This is how most options are done vs. exercising. PUT OPTIONS 11.13.10 M-STREETBOYS McKinney, Texas

3. M-STREETBOYS McKinney, Texas A PUT Option gives you the right to sell a set number of shares of stock at a given price until the option expires at the expiration date.

4. M-STREETBOYS McKinney, Texas You can sell a Put option to purchase shares at a the Investor at today’s price. Sell a Put for stock at $50 strike to be exercised at any time until expiration. If the stock stays the same or increases you will not be exercised and you keep the Premium at expiration. If the stock moves down, you may be called to buy the stock at your strike price. (Higher Than market. Selling a PUT

5. M-STREETBOYS McKinney, Texas Selling a Call If the Stock stays the same or decreases, You keep the money you paid for the Call. However, If the stock goes up, you may be called to deliver the Stock at the lower strike price. An important note:

6. “Exercising” them: When an investor exercises a Put Option, he or she is selling a stock they already own. The right of a put holder is the right to sell the stock at the strike price, regardless of the actual price in the market. If you owned a Put with a strike price of 50, and the market has declined to 40, you could purchase the actual the stock in the market at 40 and then exercise the put at 50. You would make 10 points on that stock, minus the premium paid. [ $1000 for 100 shares, minus the $300 = $700 profit.] The break-even for investors who own put options (disregarding commissions) is the strike price minus the premium paid. In the above example, if the investor paid $300 for the option - his break- even would be 47. Since the market in our example went down to 40, the actual profit for that person would be $700. M-STREETBOYS McKinney, Texas

7. Writing [SELLING] a Put Option When you sell or short a put option, you are "writing" the contract. The writer is someone who is bullish on the market. The seller collects the premium (as opposed to the buyer who pays the premium) and is hoping the option expires worthless. The premium is the writer's maximum gain. So, obviously if the premium is all that he can make - having the option expire is the best case scenario. Put option writing [SELLING] does carry risk. If the option is exercised (by the holder/buyer – the other side), the writer must purchase the stock from the holder at the strike price. In the example above, the writer would have had to buy the stock at $50 (the current price), while the market was at $40. He would be stuck with a stock 10 points above the market. His loss would be lessened by the premium received. The writer can buy back the put before it is exercised, but if the put has gained value, the purchase price would be higher than the premium he originally got - so, it would be a loss either way. The option is expiring is the best bet. M-STREETBOYS McKinney, Texas

8. M-STREETBOYS A note about “selling” puts (and calls). When selling or writing a put, since the puts go up in value as the stock moves down, you don’t want the stock to move down, because then the put will be higher in value, and you will pay more to buy it back, and lose the credit you received whenyou “sold” the put. For example, if a put was “selling” at $10.00 when the stock was, say $200, and the stock dropped to maybe $150, the Put will go up to maybe $12.00. so you would lose $2.00 or $200 on 100 contracts when you BOUGHT the PUT when closing out. Similarly, when “selling” a Call, you really want the stock to go DOWN, so the Call decreases in value. Then when you “close out,” the Call will be at a lower price, and you will keep the difference in premium paid.

9. Covered Put Option Writing Since the seller or writer of puts must purchase the underlying stock at the strike price, he must have the cash to do that. Selling stock short and using the proceeds to cover an exercised option can be done. Also, the premium received for selling the put option can assist a short position to get greater profit. As with any option, time is the biggest factor. Put options expire monthly. All options carry large risks, but can present large profits. Educate yourself further and talk to your broker. M-STREETBOYS McKinney, Texas

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11. Time $$ Value Usually 7 to 10 days…. 4 to 7 weeks Acquire an Option at least 4 to 7 weeks ahead of expiration Get Rid Of an Option at least 7 to 10 days ahead of expiration OPTIONS “Time decay” McKinney, Texas M-STREETBOYS Expiration

12. JCP2010 Vert 33/34 Using Marks dateVert callVert putstockcallput 18-Oct484233.33194215 19435732.73160245 20445632.96166225 21396132.42133252 22406132.55134237 25415932.71134224 26425832.77138217 27356632.26112251 28 7331.6981285 29237631.1864320 1-Nov217831.1357325 2248031.4565300 3227931.2456310 4336932.3261217 5366532.5991195 8435733.13119162 9317032.1973220 10376432.6788186 11366532.2283224 12 8831.1320293 1597631.2215266 M-STREETBOYS McKinney, Texas

13. aep verts36/37 nov,10,strk v-cv-pstkc-36p-37 26-Oct545536.6680110 27565936.85 28953537.21 29852037.44 1-Nov1004037.2814060 2902537.63 3942537.55 4972537.59 51101737.7017032 8742536.93 9703336.90 10553536.60 11503536.54 12554536.527055 M-STREETBOYS McKinney, Texas

14. BIDU-Oct 19 to 11/12 nov.10.st rk 100/105 v-lst-cv-lst-pstk $100-c105-p 192053051007951010 201903051007501065 21229275102875900 22305182107950410 253651301091130288 26415921121365198 27420911131370174 28405921121300189 293801171101100224 1345150107870300 23811071091055209 3410891101120158 4405911101065158 5385104108930172 8440671101060110 937071109900115 1045037111118060 1148515114142030 1246041111109061 M-STREETBOYS McKinney, Texas

15. This strategy is to realize a profit by making cash that is a net credit formed by the difference in a SOLD PUT price and a BOUGHT PUT price. While the stock goes up, the investor keeps the net credit (difference in premiums). SELL a PUT at or near money (higher strike price). BUY a PUT one or more strikes below #1 PUT in the same month, this provides the downside safety. The margin requirement is the difference between the strike prices, usually 5 points/dollars. The maximum risk is the difference between the strike prices, less the net credit (difference in premiums). The maximum profit is the net credit (difference in premiums). The break even point is the higher strike price (#1) minus the net credit. Profit is realized when the stock price rises above this number. Maximum profit is made when the stock price rises above the higher strike price (#1 PUT). A profit is realized at any stock price between the break even point and the net credit. BULL PUT CREDIT SPREAD – stock to go up M-STREETBOYS McKinney, Texas

16. Max Loss is the delta strike, minus net CREDIT. Max profit is net Credit BULL PUT CREDIT SPREAD STOCK SHOULD GO UP Sell a PUT, Buy PUT below Margin requirement is delta strike prices M-STREETBOYS McKinney, Texas

17. Cautions with this strategy: Anytime the underlying stock/index price is below the short put strike price, there is a chance that you may have to purchase stock to meet the short put obligation. Were this to happen you could sell the shares at the market pricing, or use the long put to sell the shares at the long put strike price. The credit you receive for the trade is generally much smaller than the max risk of the trade, therefore it is prudent to close the short option before the position is at max loss. Many traders do this when the short option is near-the-money. If you have closed the short option half of the trade you may want to consider holding the long option to possibly profit from continued directional momentum in the underlying. However, the danger is that the underlying will correct and whipsaw in the other direction. BULL PUT CREDIT SPREAD M-STREETBOYS McKinney, Texas

18. Bull and bear credit spreads offer a trader a limited-risk strategy with limited profit potential. The key advantage to credit spreads is that in order to win they don't require strong directional movement of the underlying. This is because the trade profits from time-value decay. Vertical credit spreads can thus profit if the underlying remains in a trading range (stationary), freeing the trader from problems associated with market timing and prediction of the direction of the underlying. BULL PUT CREDIT and BEAR CALL CREDIT M-STREETBOYS McKinney, Texas

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20. Bull CALL DEBIT Spread - Stock upward datestk prcdeltabidaskstrikenet 9-Sep59.827827227657.5 4895986095-276-181max loss 60.328331031557.5310-27634 561141176095-117-2212 61.058737538057.5375-27699 671621656095-165-7029 61.579041542557.5415-276139 731951996095-199-10435 20-Sep62.19046548557.5465-276189 792362406095-240-14544 61.949045547057.5455-276179 21-Sep782272316095-23113643 5-Oct62.89253054057.5530-276254 592852906095-290-19559 10-Oct63.239557059057.5570-276294 743203306095-330-23559=32% kok M-STREETBOYS McKinney, Texas

21. Bull CALL DEBIT Spread - BUT Stock fails down datestk prcdeltabidaskstrikenet 30-Sep162.1657830850160 max loss 46595615165 595-850-255 1-Oct154.6639420435160420-850-430 29273288165595-288307-123 4-Oct156.3943450465160450-850-400 31293305165595-305289-111 5-Oct156.1642415430160415-850-435 30280271165595-271324-111 6-Oct150.2725192199160192-850-658 16111117165595-117478-180 10-Oct149.6418102107160102-850-748 115456165595-56539-209 ymgo M-STREETBOYS McKinney, Texas

22. M-STREETBOYS CLEAR AS CRYSTAL, NOW, ISN’T IT ? McKinney, Texas