1. Web’s Weekly Roundup April 4, 2015 Twitter: @MarketWebs Presenter: Web Begole

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3. Web’s Weekly Roundup -- April 4, 2015 Analysis of /ES (S&P 500 Futures) and forecast Analysis of /TF (Russell 2000 Futures) and forecast The Ins & Outs of Legging Option Strategies Legging into an Iron Condor Managing the Condor Complications of Legging Out Q&A Time

4. /ES Futures (S&P 500) YTD 2015 4 Opening Price: 2047.25 Current Price: 2039.75 High: 2110.00 Low: 1962.50 O/C Change: -7.50pts H/L Range: 147.50 Notable Pattern: Resistance at April POC, now trading back at April’s value area low. But has not traded below the value area yet. Forecast: I can’t help but think the topping pattern continues. At the moment we’re looking to break below value. I look for near term support at 2020 with 1990 coming in below that.

5. /TF Futures (Russell 2000) YTD 2015 5 Opening Price: 1199.40 Current Price: 1236.60 High: 1265.20 Low: 1134.90 O/C Change: +37.20pts H/L Range: 130.30pts Notable Pattern: Unlike the /ES, /NQ, /YM, The Russell had strength above value through much of March. But it has broken into April’s value again at the end of trading Friday. Forecast: This action leads me to believe the Russell will continue sliding to at least 1229.80 and potentially further to 1205 in April.

6. Looking Ahead Overall: Things are starting to look weak, with only the Small Caps seeing any strength. A large sell-off in the early morning on Friday after a particularly bad Non-Farm Payroll number has put things technically into a weaker stance with the Small Caps looking to drag everything down in the near term.

7. The Ins & Outs of Legging Option Strategies Last week we discussed managing Iron Condors. I got a lot of responses with concerns: – What about all the commission charges throughout the management process? – What about legging into the Iron Condor instead of establishing it from the beginning? – Why aren’t you using technicals to establish the trade instead of just the option chain? So I thought we’d spend this week looking at all of these things and discussing all of this further! We’ll use TSLA which is not currently at its highest levels of Implied Volatility, but certainly still higher than KO has ever been. We’ll leg into an Iron Condor, manage into an Iron Butterfly, and discuss the options for legging out of the butterfly. We’ll assume a commissions rate of $1.50 per option contract per trade, no ticket charge. We’ll use the MarketWebs to establish are technical readings. Remember, the expectation of an Iron Condor (selling a call spread, and selling a put spread) is that the price will stay within a certain range between now an expiration. For the sake of discipline in the messy process of legging, I must bear in mind the parameters of the Iron Condor I would sell today if I weren’t legging in over time. 7

8. The Ins & Outs of Legging Option Strategies TSLA Friday, February 20 th, 2015, End Of Day (TSLA closes at 217.11) 8 Call DeltaCall MarkStrikePut MarkPut Delta 1.00$51.97170$0.38-.03.94$47.02175$0.48-.04.93$42.17180$0.65-.06.91$37.37185$0.91-.08.89$32.90190$1.34-.11.85$23.95195$1.89-.15.80$19.75200$2.73-.20.73$15.87205$3.85-.27.65$12.40210$5.37-.35.56$9.40215$7.37-.44.46$6.92220$9.85-.54.37$4.90225$12.87-.63.28$3.40230$16.32-.72.21$2.29235$20.22-.79.15$1.51240$24.35-.86.11$1.00245$29.05-.89.08$0.67250$33.87-.91.05$0.46255$38.77-.92.04$0.33260$43.25-.96.03$0.24265$48.12-.98 March Option Chain (28 DTE) The narrow strangle is pricing an expected move of +/-$19.25 IE: Either $198 or $236 at expiration. I think TSLA has a lot of premium in it, and I think I want to go for an Iron Condor on it. But I want to leg into it and maximize my reward potential. So the question is, which side of the condor do I establish here? And secondly, how much risk do I want to take with it?

9. The Ins & Outs of Legging Option Strategies TSLA Friday, February 20 th, 2015, End Of Day (TSLA closes at 217.11) 9 On the weekly chart, we can see TSLA in a down channel, consolidating at the bottom of yearly value (below the POC). Today it’s closing near the top of the channel (or what will be the top come Monday’s opening) On the daily chart we see some strength in TSLA, with a sell-off on earnings but a rally ever since. Notably it is at the top of the value area for the month of February at the end of the day here and looking to potentially break out above. Combining the two charts, I think that TSLA is near upward resistance and don’t believe the expected upside move (to $236) is in the cards in the near term. So I think it’s best to establish the credit call spread first, but where? The top of the channel should be around 220 next week, so we’ll start there…

10. The Ins & Outs of Legging Option Strategies TSLA Friday, February 20 th, 2015, End Of Day (TSLA closes at 217.11) 10 Call DeltaCall MarkStrikePut MarkPut Delta 1.00$51.97170$0.38-.03.94$47.02175$0.48-.04.93$42.17180$0.65-.06.91$37.37185$0.91-.08.89$32.90190$1.34-.11.85$23.95195$1.89-.15.80$19.75200$2.73-.20.73$15.87205$3.85-.27.65$12.40210$5.37-.35.56$9.40215$7.37-.44.46$6.92220$9.85-.54.37$4.90225$12.87-.63.28$3.40230$16.32-.72.21$2.29235$20.22-.79.15$1.51240$24.35-.86.11$1.00245$29.05-.89.08$0.67250$33.87-.91.05$0.46255$38.77-.92.04$0.33260$43.25-.96.03$0.24265$48.12-.98 March Option Chain (28 DTE) The narrow strangle is pricing an expected move of +/-$19.25 IE: Either $198 or $236 at expiration. So the question is, which side of the condor do I establish here? The credit call spread. And secondly, how much risk do I want to take with it? I think 220 is a safe bet based on the technicals, but how wide of a spread do I want? The 220/225 Call Spread is marking a $2.02credit ($3.98 risk) so a 2/4 reward/risk ratio. (50%) The 220/230 Call Spread is marking a $3.52credit ($6.48 risk) so a 3.5/6.5 reward/risk ratio. (54%) If I am extremely daring, I could look at the 215 strike…. The 215/220 Call Spread is marking a $2.48credit ($2.52 risk) so a 2.5/2.5 reward/risk ratio. (100%) The 215/225 Call Spread is marking a $4.50credit ($5.50 risk) so a 4.5/5.5 reward/risk ratio. (81%)

11. The Ins & Outs of Legging Option Strategies TSLA Friday, February 20 th, 2015, End Of Day (TSLA closes at 217.11) 11 Call DeltaCall MarkStrikePut MarkPut Delta 1.00$51.97170$0.38-.03.94$47.02175$0.48-.04.93$42.17180$0.65-.06.91$37.37185$0.91-.08.89$32.90190$1.34-.11.85$23.95195$1.89-.15.80$19.75200$2.73-.20.73$15.87205$3.85-.27.65$12.40210$5.37-.35.56$9.40215$7.37-.44.46$6.92220$9.85-.54.37$4.90225$12.87-.63.28$3.40230$16.32-.72.21$2.29235$20.22-.79.15$1.51240$24.35-.86.11$1.00245$29.05-.89.08$0.67250$33.87-.91.05$0.46255$38.77-.92.04$0.33260$43.25-.96.03$0.24265$48.12-.98 March Option Chain (28 DTE) The narrow strangle is pricing an expected move of +/-$19.25 IE: Either $198 or $236 at expiration. Because I think the technicals are lining up for resistance and TSLA should fall lower from here, I’ll be daring and take the best reward/risk. So I sell the 215/220 Call Spread: I sell the 215 Call for $9.40 credit I buy the 220 Call for $6.92 debit I receive a net credit of $2.48 I pay $1.50x2 commissions Max Reward: $245Max Risk: $255 Notional Buying Power Reduction: $500 Thus the first leg of an iron condor is established. I will bear in mind that on this day, the expected low is at $198. If we reach that level before expiration, I will look to establish the put spread side of the trade. Let’s move forward a week….

12. The Ins & Outs of Legging Option Strategies TSLA Friday, February 27 th, 2015, End Of Day (TSLA closes at 203.34) 12 Call DeltaCall MarkStrikePut MarkPut Delta.92$33.87170$0.46-.05.91$29.15175$0.70-.07.89$24.40180$1.07-.10.84$20.12185$1.68-.15.78$15.92190$2.58-.22.69$12.17195$3.90-.31.59$9.07200$5.70-.41.48$6.40205$8.05-.52.37$4.37210$10.95-.63.27$2.86215$14.55-.72.19$1.83220$18.35-.81.14$1.18225$22.75-.87.09$0.76230$27.32-.92.06$0.48235$32.02-.95.04$0.33240$36.50.03$0.23245$42.07-.95.02$0.18250$47.00-.96.02$0.14255$51.62.01$0.11260$56.90-.97.01$0.08265$61.55 March Option Chain (21 DTE) Current Position: Max Reward: $245Max Risk: $255 Notional Buying Power Reduction: $500 With the stock trading near 205, I’m not down to my target for putting on the put credit spread. The call spread is now marking $1.03 (less than 50% of what I originally received) I could roll down the call spread to the 210/215: Buying back the 215/220 for $1.03 Selling the 210/215 for $1.51 credit Commissions of $1.50x4 Max gain of $42 Position would be: Max Reward: $287Max Risk: $223 Notional Buying Power Reduction: $500 Let’s leave it alone for now… and move forward another week…

13. The Ins & Outs of Legging Option Strategies TSLA Friday, March 6 th, 2015, End Of Day (TSLA closes at 193.88) 13 Call DeltaCall MarkStrikePut MarkPut Delta.93$24.22170$0.59-.07.88$19.87175$0.95-.11.81$15.57180$1.60-.18.73$11.45185$2.68-.27.62$8.12190$4.35-.39.48$5.42195$6.60-.52.35$3.37200$9.57-.65.24$2.02205$13.27-.75.16$1.16210$17.42-.84.10$0.65215$21.92-.90.06$0.37220$26.65-.93.04$0.25225$28.92-.97.02$0.15230$36.37-.97.02$0.10235$41.22-.99.02$0.10240$46.20-.99.01$0.07245$51.00.01$0.07250$55.95.01$0.06255$63.15.01$0.06260$66.22-.99.01$0.04265$70.65 March Option Chain (14 DTE) Current Position: Max Reward: $245Max Risk: $255 Notional Buying Power Reduction: $500 With the stock trading near 195, I’m at my target for putting on the put credit spread. The call spread is now marking $0.28 (less than 15% of what I originally received) Let’s look at how the charts are lining up…

14. The Ins & Outs of Legging Option Strategies TSLA Friday, March 6 th, 2015, End Of Day (TSLA closes at 193.88) 14 On the weekly chart, we can see TSLA still in the down channel, ending the week below the yearly value area, we may find support at this level. On the daily chart we see TSLA breaking below March’s value area and looking to possibly head lower. Combining the two charts, I think that TSLA is still overall weak. I remember that I only have two more weeks left in the March option chain and may want to look for TSLA to find some temporary support again at the bottom of the yearly value area.

15. The Ins & Outs of Legging Option Strategies TSLA Friday, March 6 th, 2015, End Of Day (TSLA closes at 193.88) 15 Call DeltaCall MarkStrikePut MarkPut Delta.93$24.22170$0.59-.07.88$19.87175$0.95-.11.81$15.57180$1.60-.18.73$11.45185$2.68-.27.62$8.12190$4.35-.39.48$5.42195$6.60-.52.35$3.37200$9.57-.65.24$2.02205$13.27-.75.16$1.16210$17.42-.84.10$0.65215$21.92-.90.06$0.37220$26.65-.93.04$0.25225$28.92-.97.02$0.15230$36.37-.97.02$0.10235$41.22-.99.02$0.10240$46.20-.99.01$0.07245$51.00.01$0.07250$55.95.01$0.06255$63.15.01$0.06260$66.22-.99.01$0.04265$70.65 March Option Chain (14 DTE) Current Position: Max Reward: $245Max Risk: $255 Notional Buying Power Reduction: $500 So I’ll stick to my plan and sell a put credit spread here. I only want to sell a 5pt wide spread because it won’t take up any extra buying power. So I look to sell the 190/195 Put Spread: Sell the 195 Put for $6.60 Credit Buy the 190 Put for $4.35 Debit I receive $225 – $1.50x2 New position: Max Reward: $467Max Risk: $33 Notional Buying Power Reduction: $500 But what about that call spread…. Let’s look at the chart again….

16. The Ins & Outs of Legging Option Strategies TSLA Friday, March 6 th, 2015, End Of Day (TSLA closes at 193.88) 16 On the weekly, TSLA may move back into value, if it doesn’t it will run into resistance around 198, if it does, upside is unknown. On the daily chart we see the POC at 203, if TSLA breaks back into value, that’s likely going to be it’s stopping point by March expiration. Combining the two charts, I think that TSLA is still overall weak, with limited upside momentum remaining. Given this, I feel safe rolling down the call spread to 205/210 or perhaps 200/205 if I’m aggressive.

17. The Ins & Outs of Legging Option Strategies TSLA Friday, March 6 th, 2015, End Of Day (TSLA closes at 193.88) 17 Call DeltaCall MarkStrikePut MarkPut Delta.93$24.22170$0.59-.07.88$19.87175$0.95-.11.81$15.57180$1.60-.18.73$11.45185$2.68-.27.62$8.12190$4.35-.39.48$5.42195$6.60-.52.35$3.37200$9.57-.65.24$2.02205$13.27-.75.16$1.16210$17.42-.84.10$0.65215$21.92-.90.06$0.37220$26.65-.93.04$0.25225$28.92-.97.02$0.15230$36.37-.97.02$0.10235$41.22-.99.02$0.10240$46.20-.99.01$0.07245$51.00.01$0.07250$55.95.01$0.06255$63.15.01$0.06260$66.22-.99.01$0.04265$70.65 March Option Chain (14 DTE) Current Position: Max Reward: $467Max Risk: $33 Notional Buying Power Reduction: $500 The call spread I have on is marking $0.28. The 205/210 Call Spread is marking $0.86 The 200/205 Call Spread is marking $1.35 Rolling to either call spread removes all risk from the position and makes the play profitable no matter what. So I’m aggressive, and will take the max available. I sell the 200/205 Call Spread for $1.35 I buy the 215/220 Call Spread for $0.28 I receive $107 - $1.50x4 = $101 New Position: Max Reward: $568Max Risk: $0Min Reward: $68 Notional Buying Power Reduction: $500 On we go another week….

18. The Ins & Outs of Legging Option Strategies TSLA Friday, March 13 th, 2015, End Of Day (TSLA closes at 188.68) 18 Call DeltaCall MarkStrikePut MarkPut Delta.92$19.02170$0.27-.05.89$14.22175$0.56-.10.81$9.82180$1.15-.19.65$6.05185$2.38-.35.46$3.25190$4.52-.54.27$1.50195$7.87-.73.14$0.66200$12.00-.86.07$0.30205$16.62-.93.03$0.13210$21.40-.98.02$0.09215$26.32.01$0.01220$31.15.01$0.00225$36.20.01$0.00230$41.30.01$0.00235$46.22.01$0.00240$51.30.01$0.00245$56.25.00$0.00250$61.22.00$0.00255$66.27.00$0.00260$71.20.00$0.00265$76.50 March Option Chain (7 DTE) Current Position: Max Reward: $568Max Risk: $0Min Reward: $68 Notional Buying Power Reduction: $500 The call spread I have on is marking $0.36. The put spread I have on is marking $2.65. The Iron Condor now is marking $3.01 So, now what? I can’t lose on this position, yay! But this has been a lot of work over a month for $68…. Let’s look at the charts…

19. The Ins & Outs of Legging Option Strategies TSLA Friday, March 13 th, 2015, End Of Day (TSLA closes at 188.68) 19 On the weekly, TSLA doesn’t look like it’s going back to value. On the daily TSLA also seems to be in a continual down path. Combining the two charts, I think that TSLA is still very weak, the only option to amplify my reward now is to continue being short (ie: get shorter).

20. The Ins & Outs of Legging Option Strategies TSLA Friday, March 13 th, 2015, End Of Day (TSLA closes at 188.68) 20 Call DeltaCall MarkStrikePut MarkPut Delta.92$19.02170$0.27-.05.89$14.22175$0.56-.10.81$9.82180$1.15-.19.65$6.05185$2.38-.35.46$3.25190$4.52-.54.27$1.50195$7.87-.73.14$0.66200$12.00-.86.07$0.30205$16.62-.93.03$0.13210$21.40-.98.02$0.09215$26.32.01$0.01220$31.15.01$0.00225$36.20.01$0.00230$41.30.01$0.00235$46.22.01$0.00240$51.30.01$0.00245$56.25.00$0.00250$61.22.00$0.00255$66.27.00$0.00260$71.20.00$0.00265$76.50 March Option Chain (7 DTE) Current Position: Max Reward: $568Max Risk: $0Min Reward: $68 Notional Buying Power Reduction: $500 The call spread I have on is marking $0.36. The put spread I have on is marking $2.65. The Iron Condor now is marking $3.01 Options: Buy back the Iron Condor for $3.01 After commissions, $307, I pocket $261. Buy back the call spread After commissions I spend $39 Max Reward: $529Max Risk: $0Min Reward: $29 Roll the call spread and create an Iron Butterfly Roll to the 195/200 call spread: Sell the 195/200 Spread for $0.84 Buy back the 200/205 Spread for $0.36 After commissions receive $42 Max Reward: $610Max Risk: $0Min Reward: $110 I choose this option… increase reward. Let’s move forward ½ a week….

21. The Ins & Outs of Legging Option Strategies TSLA Wednesday, March 18 th, 2015, End Of Day (TSLA closes at 200.71) 21 Call DeltaCall MarkStrikePut MarkPut Delta 1.00$30.20170$0.02-.00 1.00$25.17175$0.02-.01.94$20.85180$0.05-.01.93$15.92185$0.11-.03.91$11.02190$0.31-.08.78$6.67195$0.91-.21.54$3.22200$2.55-.46.28$1.20205$5.55-.72.12$0.45210$9.60-.91.05$0.15215$14.37-.98.02$0.05220$19.32.01$0.01225$24.85-.92.00$0.01230$29.85-.93.00$0.01235$35.20-.91.00$0.00240$39.32.00$0.01245$44.47-.98.00$0.00250$49.22.00$0.00255$55.12-.94.00$0.00260$59.65-.97.00$0.00265$64.65-.97 March Option Chain (2 DTE) Current Position: Max Reward: $610Max Risk: $0Min Reward: $110 Notional Buying Power Reduction: $500 The call spread I have on is marking $3.45. The put spread I have on is marking $0.60. The Iron Butterfly now is marking $4.05 Options: Buy back the Iron Butterfly for $4.05 After commissions, $411, I pocket $199. Buy back the put spread After commissions I spend $63 Max Reward: $547Max Risk: $0Min Reward: $47 Do nothing… Roll the put spread and invert my position Roll to the 195/200 put spread: Sell the 195/200 Spread for $1.64 Buy back the 190/195 Spread for $0.60 After commissions receive $98 Max Reward: $208Max Risk: $0Min Reward: $208 I choose this option… lock in reward. Next day…..

22. The Ins & Outs of Legging Option Strategies TSLA Thursday, March 19 th, 2015, End Of Day (TSLA closes at 195.65) 22 Call DeltaCall MarkStrikePut MarkPut Delta 1.00$25.37170$0.01-.00 1.00$20.20175$0.02-.01 1.00$15.57180$0.02-.01 1.00$10.62185$0.05-.02.90$5.80190$0.24-.11.56$2.00195$1.42-.44.16$0.37200$4.80-.85.03$0.06205$9.47-.99.01$0.03210$14.42.01$0.02215$19.37.01$0.02220$24.15.01$0.04225$29.17.00$0.01230$34.00.00$0.01235$39.02.00$0.00240$43.87.00$0.01245$48.97.00$0.00250$53.82.00$0.01255$58.82.00$0.00260$63.82.00$0.00265$68.92 March Option Chain (1 DTE) Current Position: Max Reward: $208Max Risk: $0Min Reward: $208 Notional Buying Power Reduction: $500 The call spread I have on is marking $1.63. The put spread I have on is marking $3.38. The position is now is marking $5.01 Options: I don’t really have any. I will try to buy back the position for no more than $5.00 and keep $202 profit after commissions. Let’s say I didn’t go inverted and instead I kept the Iron Butterfly intact…

23. The Ins & Outs of Legging Option Strategies TSLA Thursday, March 19 th, 2015, End Of Day (TSLA closes at 195.65) 23 Call DeltaCall MarkStrikePut MarkPut Delta 1.00$25.37170$0.01-.00 1.00$20.20175$0.02-.01 1.00$15.57180$0.02-.01 1.00$10.62185$0.05-.02.90$5.80190$0.24-.11.56$2.00195$1.42-.44.16$0.37200$4.80-.85.03$0.06205$9.47-.99.01$0.03210$14.42.01$0.02215$19.37.01$0.02220$24.15.01$0.04225$29.17.00$0.01230$34.00.00$0.01235$39.02.00$0.00240$43.87.00$0.01245$48.97.00$0.00250$53.82.00$0.01255$58.82.00$0.00260$63.82.00$0.00265$68.92 March Option Chain (1 DTE) Current Position: Max Reward: $610Max Risk: $0Min Reward: $110 Notional Buying Power Reduction: $500 The call spread I have on is marking $1.63. The put spread I have on is marking $1.18. The position is now is marking $2.81 Options: I can buy back the butterfly for $2.81 After commissions I pocket a profit of $275 I can leave it as is and hope we expire at 195 tomorrow, attaining near maximum profits. I could buy back one side of the butterfly, but which side? Let’s say I hadn’t kept the Iron Butterfly intact and instead bought back the put spread yesterday…

24. The Ins & Outs of Legging Option Strategies TSLA Thursday, March 19 th, 2015, End Of Day (TSLA closes at 195.65) 24 Call DeltaCall MarkStrikePut MarkPut Delta 1.00$25.37170$0.01-.00 1.00$20.20175$0.02-.01 1.00$15.57180$0.02-.01 1.00$10.62185$0.05-.02.90$5.80190$0.24-.11.56$2.00195$1.42-.44.16$0.37200$4.80-.85.03$0.06205$9.47-.99.01$0.03210$14.42.01$0.02215$19.37.01$0.02220$24.15.01$0.04225$29.17.00$0.01230$34.00.00$0.01235$39.02.00$0.00240$43.87.00$0.01245$48.97.00$0.00250$53.82.00$0.01255$58.82.00$0.00260$63.82.00$0.00265$68.92 March Option Chain (1 DTE) If I had bought back the put spread on Wednesday for $0.60, this is my situation: Current Position: Max Reward: $547Max Risk: $0Min Reward: $47 Notional Buying Power Reduction: $500 The call spread I have on is marking $1.63. The position is now is marking $1.63 Options: I can buy back the call spread for $1.63 After commissions I pocket a profit of $381 I can leave it as is and hope we expire below 195 tomorrow, attaining near maximum profits. Let’s look at all these options tomorrow on Expiry…

25. The Ins & Outs of Legging Option Strategies TSLA Friday, March 20 th, 2015, End Of Day (TSLA closes at 198.08) 25 Call DeltaCall MarkStrikePut MarkPut Delta 1.00$13.10185$0.00-.00 1.00$8.07190$0.00-.00.99$3.08195$0.00-.00.02$0.00200$1.85.01$0.00205$6.87 March Option Chain (0 DTE) Iron Butterfly: (For me, this remained best option) Max Reward: $610Max Risk: $0Min Reward: $110 Close position for $309.50 Profits: $300.50 If closed on Thursday, Profits: $275 Inverted Position: Max Reward: $208 (Collected total of $708) Close position for $496 Profits: $212.00 If closed on Thursday, Profits: $202 Legged out of Put Spread Max Reward: $547Max Risk: $0Min Reward: $47 Close position for $309.50 Profits: $237.50 If closed on Thursday, Profits: $381 Call DeltaCall MarkStrikePut MarkPut Delta 1.00$13.10185$0.00-.00 1.00$8.07190$0.00-.00.99$3.08195$0.00-.00.02$0.00200$1.85.01$0.00205$6.87 Call DeltaCall MarkStrikePut MarkPut Delta 1.00$13.10185$0.00-.00 1.00$8.07190$0.00-.00.99$3.08195$0.00-.00.02$0.00200$1.85.01$0.00205$6.87

26. The Ins & Outs of Legging Option Strategies TSLA Wednesday, March 18 th, 2015, End Of Day (TSLA closes at 200.71) 26 Call DeltaCall MarkStrikePut MarkPut Delta.93$15.92185$0.11-.03.91$11.02190$0.31-.08.78$6.67195$0.91-.21.54$3.22200$2.55-.46.28$1.20205$5.55-.72 March Option Chain (2 DTE) Current Position: Max Reward: $610Max Risk: $0Min Reward: $110 Notional Buying Power Reduction: $500 The call spread I have on is marking $3.45. The put spread I have on is marking $0.60. The Iron Butterfly now is marking $4.05 I decide to buy back the call spread: I spend $348 after commissions. New Position: Max Reward: $262Max Risk: $238 At expiration: I do not have to manage the position at all as the put spread expires worthless. I profit $262 on the position. If closed on Thursday, Profits: $141 Call DeltaCall MarkStrikePut MarkPut Delta 1.00$13.10185$0.00-.00 1.00$8.07190$0.00-.00.99$3.08195$0.00-.00.02$0.00200$1.85.01$0.00205$6.87

27. The Ins & Outs of Legging Option Strategies TSLA Recap: February 20 th : Sold the 215/220 Call Spread for $245 credit after commissions Max Reward: $245Max Risk: $255 February 27 th : Did nothing. March 6 th : Sold the 190/195 Put Spread for $222 credit after commissions Rolled to the 200/205 Call Spread for $101 credit after commissions Max Reward: $568Max Risk: $0Min Reward: $68 March 13 th : Rolled to the 195/200 Call Spread for $42 credit after commissions Max Reward: $610Max Risk: $0Min Reward: $110 By keeping the 190/195/200 Iron Butterfly to expiration I profited $300.50 after commissions per 1lot. 27

28. The Ins & Outs of Legging Option Strategies Takeaways: Legging into a position can be profitable if the trade assumptions are correct to begin with. If I had sold a put spread at the money to begin with instead, I would have been up the creek. Legging out of a position can cause a mess. While seeming advantageous at the time, it will cost money and reduce the maximum reward thus increasing risk. Rule #1 (and I’m not sure there is any other) I will never pay money to manage a position, but I will gladly accept money to do so. This means I don’t need to worry about commissions, if I can manage the position and after commissions still receive a credit, I will be bettering my reward and reducing my risk. If I cannot do that, I will not alter the position. It is important to retain the information in the option chain on the day the position was established. This allowed me to know that around 195 it was time to sell the put spread. If I had not kept track of the expected move, I would not have been legging into an Iron Condor, I would have been simply playing credit spreads. An Iron Condor can be reduced down to an Iron Butterfly and possibly even inverted, all for credits in the process. It must be recognized that an Iron Butterfly can not be expanded into an Iron Condor for a credit. 28

29. Q & A With Web Follow me on Twitter: @MarketWebs Live YouTube channel with /ES Levels and Market Internals Every Day the Market is Open From 9am EST – 5:15pm EST Other videos include a further discussion of value area and a demystification of the “VooDoo Lines” Search YouTube for MarketWebs and Look for this icon: