Before we get rolling I want to offer you this slide deck. TheoTrade proprietary study - TheoTrade RSI Laguerre with Fractal Energy

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2 2 Before we get rolling I want to offer you this slide deck. TheoTrade proprietary study - TheoTrade RSI Laguerre with Fractal Energy Access to our nightly video (no commercial interruptions) Visit theotrade.com/don

3 VOLATILITY IS IMMINENT 3

4 Risk Disclosure We Are Not Financial Advisors or a Broker/Dealer: Neither TheoTrade nor any of its officers, employees, representafves, agents, or independent contractors are, in such capacifes, licensed financial advisors, registered investment advisers, or registered broker-dealers. TheoTrade does not provide investment or financial advice or make investment recommendafons, nor is it in the business of transacfng trades, nor does it direct client commodity accounts or give commodity trading advice tailored to any parfcular client s situafon. Nothing contained in this communicafon consftutes a solicitafon, recommendafon, promofon, endorsement, or offer by TheoTrade of any parfcular security, transacfon, or investment. SecuriFes Used as Examples: The security used in this example is used for illustrafve purposes only. TheoTrade is not recommending that you buy or sell this security. Past performance shown in examples may not be indicafve of future performance. Return on Investment ROI Examples: The security used in this example is for illustrafve purposes only. The calculafon used to determine the return on investment ROI does not include the number of trades, commissions, or any other factors used to determine ROI. The ROI calculafon measures the profitability of investment and, as such, there are alternate methods to calculate/express it. All informafon provided are for educafonal purposes only and does not imply, express, or guarantee future returns. Past performance shown in examples may not be indicafve of future performance. InvesFng Risk: Trading securifes can involve high risk and the loss of any funds invested. Investment informafon provided may not be appropriate for all investors and is provided without respect to individual investor financial sophisfcafon, financial situafon, invesfng Fme horizon, or risk tolerance. OpFons Trading Risk: OpFons trading is generally more complex than stock trading and may not be suitable for some investors. GranFng opfons and some other opfons strategies can result in the loss of more than the original amount invested. Before trading opfons, a person should review the document CharacterisFcs and Risks of Standardized OpFons, available from your broker or any exchange on which opfons are traded. No part of this presentafon may be copied, recorded, or rebroadcast in any form without the prior wri\en consent of TheoTrade. No SoliciFng. No Recording. No Photography. 4

5 5 Copyright Disclaimer All rights reserved. This Material may not be reproduced or distributed, in whole or in part, without prior written permission of TheoTrade, LLC. Any other reproduction or distribution, in whatever form and by whatever media, is expressly prohibited without the prior written consent of TheoTrade, LLC. For further information, please contact: TheoTrade, LLC N. Scottsdale Rd. # 410 Telephone: support@theotrade.com

6 6 About TheoTrade TheoTrade, LLC is a trading education firm based out of Scottsdale, AZ, specializing in education for options, futures, and stocks. TheoTrade was started by professional traders who are first and foremost experienced trading educators. We are not a registered advisory service or a brokerage firm. Although TheoTrade provides the best trading education in the business, your results and ultimate responsibility are your own. Individual trading results will vary. Trading has risk. Trading involves real money. TheoTrade is here to help you mitigate the risks in the market, while learning a skill that can last you for life.

7 7 About Don Kaufman Co-Founder TheoTrade Industry-leading options strategist Derivatives Risk Manager 19 year trading career 17 years of thinkorswim platform experience

8 Trading is not about being right or wrong However, when you go up against Mr. Wonderful well, I am right and he is most definitely wrong!

9 9 Before I get rolling I want to offer you this slide deck. A proprietary TheoTrade study - TheoTrade RSI Laguerre with Fractal Energy Access to our nightly video (no commercial interruptions). theotrade.com/ Visit Don

10 10 Risk and Success How you handle your risk is directly correlated to your success in the markets. Too much risk and you will panic and close positions continuously at the worst possible time. At least you re consistent with your panic

11 11 Get Ready, It is Coming We are about to embark on what could be one of the most pivotal periods in our market s history, prediction of risk is easy, timing the onset of this risk is impossible.

12 12 THE VOLATILITY Or lack thereof

13 13 Volatility in the Markets Have you ever spent time looking at the volatility in the markets and compared that with what you believed the risk to be? First what is volatility and what does it measure? Volatility most notably measures risk in the market.

14 14 No Fear or Loathing on Wall Street The degree of complacency in markets considering the myriad of tail risks on the horizon is truly remarkable.

15 15 Volatility = Risk Options markets can be thought of as putting a price tag on risk. Pricing in markets is determined via market participants. Ultimately, options pricing comes down to supply and demand.

16 16 Historical the annualized standard deviation of the past stock price movement Implied Implied Volatility volatility that justifies an option s current market price is found using an option pricing calculator Vol = 20% St. Dev. = % 120

17 17 Get in the Know You may not know where markets are going but you CAN measure how far the markets can move within a given period of time. This normal fluctuation is what we term Expected Move.

18 18 What to Expect with Expected Moves Expected move does NOT tell us which way the markets are going to move but DOES tell us the approximate movement an equity or index product is likely to encounter within a defined period of time.

19 Expected Moves Explained 19

20 20 Expected Move and Probability Expected move defines a one standard deviation move (68.3%) in a given underlying. Therefore, there is a 68.3% probability of an underlying closing inside of the expected move by the designated expiration. Expected move is a probability of expiring inside a given range by a specified date.

21 21 Expected Move Not every trading application has expected move. You can use the at-the-money straddle as an alternative to the expected move. Add the ATM call and the ATM put for any selected expiration cycle.

22 22 ATM Straddle At the Money Straddle can suffice for expected move.

23 23 THE ISSUES Yes we ve got issues

24 24 A Few of the Looming Risks FMOC and Central Bankers interest rate policy Central Banks Buying of Corporate Debt and ETFs New Administration $11 trillion of negative yielding debit (negative interest rate policy) Chinese Debt at 270% of GDP Chinese banking system grew 1000% in 10 years $1.3 trillion in Student Load Debt with 42% delinquent, postponed, or in default European Elections and Brexit Global Currency Devaluations Correction: these are not looming risks, these are current events

25 25 THE SUPPRESSION OF RISK Changes in Market Structure

26 26 Central Banks Produce Volatility Suppression Thanks to the Central Bankers Banks, Proprietary Trading firms, and Hedge Funds anywhere in the world can borrow capital with near zero interest. The world financial systems are bursting with cheap money. In many circumstances negative interest rate policy is forcing lending; and yes folks this is by design!

27 27 Trillions Seeking Returns A global financial systems flush with FREE money is causing asset managers and traders to seek returns ANYWHERE. The GLUT of capital is smashing volatility as market participants throw caution to the wind in the search of returns.

28 28 Markets are Irrational on Free Money Money pouring into the financial system has inadvertently suppressed volatility and price discovery. On a broader time frame you need to forget about: Charts and Technicals Fundamentals are meaningless Volatility readings are deceased

29 29 Down the Rabbit Hole We Go! All of the aforementioned factors are relatively transparent. Now let us dig deeper and examine a few changes to market structure that are deeply influencing the suppression of volatility in today s marketplace. Seat back in the upright and locked position we spent MONTHS looking at data sets to discover what is at the roots of the low volatility.

30 30 The Most Important Product in the Markets The SPX is the single most important product in today s marketplace. The SPX is a 2200 OPTIONS only product There is NO stock and this is NOT an ETF. Why is the SPX the single most important product? Allow me to present to you some invaluable data.

31 31 Why do SPX Options have so much importance? In 2017, the YTD average daily options volume has been million contracts per day in all products. Data provided by the Options Clearing Corporation.

32 Feb 21 st 2017 SPX Volume 1.6 Million Contracts 32

33 33 16 million Options contracts traded per day in 2016 The SPX options in 2016 are averaging approximately 1 million of those contracts. The SPX is trading for 2300!!! The SPX contracts are roughly 20 to 30 times the size of the average options contract traded! The SPY tracks the SPX accounting for an additional 3 million plus contracts per day.

34 34 Do the Math!!! Ok do the MATH.. 1 million SPX contracts + 3 million SPY contracts = 4 million contracts Of the 16 million contracts traded per day over 25% of the daily options volume on any given day is directly related to the SPX and the expected moves. However, in terms of notional value, the SPX options are well beyond 60% of the total value traded per day! (Recall the SPX options are 20 to 30 times the size of standard options contracts)

35 What Changed in the Markets? 35

36 36 Behold! The SPX Options have Changed the Game Years from now, traders will likely be discussing how the addition of multiweek (Monday and Wednesday) weekly options in 2016 changed the game. No one is talking about how the efficiency of the markets is FAR beyond than ever recorded in the history of this business. Our research attributes the level of efficiency to the onset of multiple weekly expiration (Monday, Wednesday, and Friday) options as market makers, hedge funds and risk managers are hedging their collective risk using these options, and market are moving directly to what is expected.

37 37 Summation of the SPX Options The SPX options are now expiring 3 times per week. The additional options expirations; Monday, Wednesday and Friday have changed market behavior via creating relatively measurable market moves via looking at the Expected Moves. TheoTrade has developed a LOW risk strategy to envelop these expected moves.

38 38 THE OPPORTUNITY Suppression of Risk presents OPPORTUNITY

39 39 Risk is Good Fear is Better! You do NOT want to be a SELLER of PREMIUM in the current market environment. Recognize ALL of these issues for what they are YOUR OPPORTUNITY. You need a strategy whereby you will NOT substantiate inordinate risks yet you want to position yourself for an onslaught of volatility.

40 40 Positioning Your Portfolio for a BIG Move! Let s get down and dirty; how do you position yourself most effectively for the possibility of an extreme move without exposing yourself to drastic risks? Let s not get cute; this is serious and there are millions up for grabs.

41 41 Risk Twist Spreads You will employ a ratio type option spread to index and equity products known as a Risk Twist Spread. The idea is easy; we want to achieve maximum reward for a minimal upfront cost. The risk twist screams Limit your exposure and maximize your potential!

42 Huge Potential, Minimal Risks 42

43 43 Characteristics of Risk Twist Spreads Increase in value when exposed to heavy volatility. Increase in value when markets sell-off. Significant profit potential in a downside market move. Loses minimal capital if markets rally. Loses minimal capital if markets continue to drift. Need ONLY be placed a few times per year. This is the PERFECT spread to reduce risk of a stock portfolio. This is an excellent tool for those seeking large returns on a big market event.

44 44 Building the Risk Twist Spread Do not let options intimidate you! The spread below is being done for a.90 debit. However, this spread is akin to a massive chainsaw. Used correctly, can be extremely effective in creating returns! Used incorrectly, you may cut off a few fingers.

45 45 Fear NOT the Risk Twist Spread You may not know options OR have limited experience in placing options trades. We can show you HOW and WHEN to place Risk Twist Spreads in a matter of a few hours. TheoTrade creates detailed recipes for every strategy including the Risk Twist Spreads. You would not bake a cake without a recipe, so why trade without one?

46 46 THEOTRADE RECIPES IN TRADING Criteria it s what we at TheoTrade do!

47 47 Trading is about Answering the What Ifs What might be a good stock or ETF candidate for a RiskTwist Spread? What is the correct options expiration cycle to buy my Risk Twist Spread? How much capital do I commit to these Twisted Trades? What Strike Price Options do I sell and how many? What Strike Price Options do I buy?

48 48 TheoTrade is the Answer to Your Questions What is the right probability for my trade? How many options contracts do I trade in for my account size? When do I close my Risk Twist Spread? What if the stock sells off big? What is the correct return for the strategy? What if the stock rallies massively? Can I fix a losing trade?

49 49 TheoTrade Has Your Answers TheoTrade has the answer to your trade related questions! We Build Recipes with definitive criteria and checklists for each strategy and each unique variable you will encounter.

50 50 How, When, Why, at What Price? This is just the beginning of the many variables you will face while buying a Risk Twist Spread!

51 51 The Secret is in the Sauce Now you may be thinking hey I can read about these spreads anywhere and can do this; well think again The following strategy and corresponding criteria requires the utmost attention to detail. We spent MONTHS fine tuning this trade setup and criteria, when we approach the section on criteria FOLLOW the STEPS to build a trade! Would you like the criteria to build Risk Twist Spreads?

52 52 Would You Like Access to EVERY Class We Have Ever Done? And Access to EVERY Class We Will Do for the next YEAR?

53 53 TheoTrade.com/nyc The Next Big Short: Risk Twist Spreads Curriculum Learn to construct Risk Twist Spreads Build your own Risk Twist Spread with detailed step by step entry and exit criteria. Hedge your portfolio from pending market turmoil with these volatility strategies. Read market risk like never before with specific insights beyond ANY classes available ANYWHERE! The only thing we see is risk! Learn how to profit from the coming onslaught of volatility! What is volatility and how YOU can profit from changes in market volatility. Discover how to create trades based on movement in market volatility and NOT purely direction of the market. Learn what implied volatility is and what market instruments you can use to take advantage of changes in volatility. Trades can be done in retirement accounts, with minimal options experience, and with smaller accounts looking for large upside potential.

54 54 TheoTrade.com/nyc $997 Classes you have access to with TheoTrade s TotalTheo: Essential Skills for Consistency in Trading Next Big Short Class: Risk Twist Spreads Guide to Selling High Probability Spreads Surviving the Extreme Volatility Iron Up: Iron Condors for You and Me Sell Premium and Manage Risk Covered Calls: Income Generation for Your Stocks High Probability Trading with In/Out Spreads Weekly Options Class Fractal Energy Trading Class Increasing Vertical Spread Probabilities with Technical Analysis Small Account Options Trading Workshop The Top Ten Skills for Growing a Small Account Weekly Diagonal Spreads for Consistent Income RSI Unleashed Class: Building a Comprehensive Trading Framework Butterfly s Guide to Weekly Returns Pairs Trading: The Final Frontier Day Trading Nasdaq Futures And several more Plus a MINIMUM of 1 class per month!

55 TheoTrade.com/nyc 55

Before we get rolling I want to offer you this slide deck. TheoTrade proprietary study - TheoTrade RSI Laguerre with Fractal Energy

2.27.2017 2 Before we get rolling I want to offer you this slide deck. TheoTrade proprietary study - TheoTrade RSI Laguerre with Fractal Energy Access to our nightly video (no commercial interruptions)