1. SMB CAPITAL Broken Wing Butterfly

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 are 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 All trading conducted by contributors on Virtual Trading Floor is done through T3 Trading Group, LLC. 6.. Any information contained in this presentation is for educational purposes ONLY. Loehr Consulting, LLC, Greg Loehr, nor its 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 Loehr Consulting, 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).

3. Broken Wing Butterfly
Video One: Overview

4. Overview Must-have strategy for every option trader
Can work in any market; up, down, stagnant, volatile
Broken wing butterfly is variation on popular professional trader strategy
Theta trade; make money over short time frames
Make money if wrong on stock move; make MORE money if right on the stock move
General entry guidelines

5. The Professional Trader’s Trade

6. The Professional’s Trade+$
- $
1. Buy one call for $6.00

7. The Professional’s Trade+$
- $
1. Buy one call for $6.00
2. Sell higher strike call for $3.00

8. The Professional’s Trade+$
- $
1. Buy one call for $6.00
2. Sell higher strike call for $3.00
3. Sell a total of two calls
1x2 Trade
Ratio

9. The Professional’s Trade+$
- $
100
110
120
Cost: Even money
Buy 100 call for $6.00
Sell 110 call twice at $3.00 each
Risk:
Unlimited, but only with stock higher
None if stock goes lower
Reward:
$1,000

10. The Professional’s Trade+$
- $
100
110
120
Risk:
Unlimited, but only with stock higher
None if stock goes lower
Naked short one 110 call
Not allowed to trade, or
Huge margin requirement

11. The Retail Trader’s Trade

12. Butterfly The Retail Trade +$ - $ Cost: $1.00 Buy 100 call for $6.00
110
120
Butterfly
Cost:
Buy 100 call for $6.00
Sell 110 call twice at $3.00 each
$1.00
Buy 120 call for $1.00

13. How it Makes Money

15. The Retail Trade...Made Better
Call Butterfly +$
- $
100
110
120
Insurance Leg
Do we want this option to make money?
No!

16. The Retail Trade Made Better
Call Broken Wing Butterfly +$
- $
125
Move insurance leg further OTM
100
110
120

17. Benefits of Broken Wing
Lower cost of insurance wing:
Entry cost can be a credit
Profit even if wrong on stock direction
Increased theta - can lead to faster profits
Trade off: faster stock movement isn’t good

18. General Entry Criteria
Use OTM options in direction you think stock will go
If no opinion, can still trade it
Profit from time and expected stock range
Strike selection
Support, resistance, expected stock range
Place body at end of expected stock range (16∆)
16∆ call for bullish; 16∆ put for bearish

19. General Entry Criteria
Time
1-6 weeks till expiry
1-3 weeks is ideal
Great trade for weekly options
Volatility
Vega negative
Higher vol leads to higher credits and/or wider butterflies

20. Review Broken wing is a variation of the butterfly
which is a retail version of 1x2 ratio trade
Makes money primarily through theta
Can work in just about any market
Make money even if wrong on stock move if executed properly

21. Preview of Video 2 Trading Bullish Broken Wing Butterflies
Specific examples
Management rules
Deeper look at risk graphs
“Knowing” when to get out