Weekly Paycheck LIVE Workshop. June 20, 2016

Transcription

1 Weekly Paycheck LIVE Workshop June 20, 2016

2 Welcome to the Weekly Paycheck Workshop Video check can you hear me and see the slides type yes This Live Workshop is being recorded Use the Question box to ask questions Presentation will run about 75 minutes Save Questions until the end we will get to them all

3 Complete Workshop Experience Live Workshop 7:30 PM Eastern Access to the Recording this Live Workshop Session plus slides Wednesday Live Trading Session 12:00 PM Eastern Friday s Closing Trading Session 12:00 PM Eastern Customer Care: support@tradersreserve.com or

4 Options Income Blueprint Strategy Michael Shulman, Founder and Editor of Options Income Blueprint Selling Options Expert and Coach Developed strategy out of a desire to find higher and safer yields in a low-interest rate environment

5 Tonight s Workshop Learn about the advantages of weekly selling put options Understanding capital risks and assignment My keys for finding the right stocks to sell weekly puts Factors you ll need to select the right put option to sell

6 Tonight s Workshop How to execute the sale of a weekly put The best time to sell a weekly put option Manage your weekly put trade until expiration I will introduce you to a special Roll and Recovery strategy when a trade works against us And finally how to close the trade with extra cash in your account

7 Reminder: Live Trading Session Wednesday Walk through two Live Options Income Blueprint trades from Michael Shulman Step-by-step trade execution in real-time Review of expectations for trade performance and trade management Questions and answers

8 Selling Weekly Put Options Our Weekly Paycheck strategy involves selling weekly put options Selling weekly options can provide investors like you with a great opportunity to generate consistent income from a portfolio with less risk to their capital Weekly options because they can help you efficiently take advantage of short-term trends or market events that lead to a very short, but quick cash pay-off a few days

9 Weekly Paycheck Selling Put Options EXAMPLE: SELL 1 XYZ this week s 60 put and maintain $6,000 of capital MAXIMUM GAIN: Premium received MAXIMUM LOSS: Strike price - premium received

10 Selling Put Strategies Generate and collect cash from time decay Purchase a stock at a discounted price

11 Advantages of Selling Weekly Put Options Since you are here viewing this training program, you have made the decision to at least consider weekly options as part of your selling options for income strategy. That s good, because selling weekly options is another useful tool to have in your income generating strategy. Let me show you the advantages of selling weekly options

12 Cash From Puts Vs Dividends

13 Collect Cash From Option Time Decay Time decay on a weekly option is ferocious as expiration approaches Time decay is option buyer s enemy Time decay is the option seller s friend

14 A Favorable Risk-Reward Ratio The risk reward ratio in selling weekly options is by far the best in the market. This means you have the best chance of generating the most amount of cash in the shortest period of time one week to one or two days

15 Acquire Stock At A Discount They can work in any market even markets where others are seeing their capital take a hit. There are enough names enough choices you can sell puts in any market to generate cash and income and have extremely low risk to your capital

16 Easier To Manage When you sell a weekly option, you target price to buy them back is zero you do no plan on buying them back Only a few days to monitor before they expire worthless

17 Usually Lower Commissions Usually Lower Maintenance and Lower Costs (The goal of the weekly is to expire worthless on Friday which doesn t require a second trade (effort or trading cost)

18 The Odds Are in the Option Seller s Favor The call option buyer is making a bet Stock will rise above their strike before or at expiration The option seller is taking that bet The stock will remain at or below the strike price by expiration As the put option seller (the house), you can still collect cash as long as the stock price stays above the strike we ll show you how to manage this position to profit

19 Weekly Options A weekly option is similar to a regular option contract (monthly) other than it only lasts 6 trading days Monthly option contracts can last months or even years and the always expire after the third week of every month Weekly options (puts and/or calls) are listed usually on Thursdays and expire the following Friday Before weekly options were introduced, you only had 12 monthly option expiration dates and now you have 52 expiration dates with weekly options

20 More Trading Opportunities Only 20 trade opportunities with monthly option At least 80 and possibly 100 with weeklies Better odds of finding the right trade

21 Weekly Options Have Exploded Over 450 individual stocks and ETFs have weekly options listed Some only have them during earnings or known news events Now account for over 35% of all daily trading volume in equity options Flexibility and allow us to maximize the benefits of the acceleration of time decay

22 Weekly Put Option Universe Start with the universe of option contracts that are available on most of the widely traded stocks on the US exchanges

23 Naked Puts? Short Puts? You will hear the terms short puts, cash-secured puts and naked puts That said, this training program is all about selling CASH-SECURED PUTS A cash secured put option reduces risk because you have enough cash in case you are assigned the stock

24 Cash Secured Puts The term cash in cash secured puts means must have collateral cash to purchase shares if they are assigned (or put) to you You are not buying an option and you are not spending capital, but you have to have or leave enough capital it in your account to support the position

25 Capital On Hand To Support The Trade SELL a weekly put on General Motors (GM) for November Week Four 35 strike for $0.41 You will need to have $3,500 (less $41 in trading costs) in your trading account for every contract you sell Why?

26 Assignment - Being Assigned Because in selling an option contract, the buyer of your option has the right to assign the stock to you the seller if and when the stock price is falls below the strike price The buyer of that option doesn t have to assign, but he has the right to assign or put the stock to you

27 If The Underlying Moves Against You In our example, if you sell that GM November, Week Four 35 Strike on Monday and the price of GM stock declines below $35 to $34.50 or lower by Friday, you could be assigned the GM stock at $35 per share or $3,500 for one option contract sold

28 Cash Supporting A Position For the purpose of this training program, we will focus on maintaining cash in your account to support the sale of a put Your cash or margin is sitting in your account supporting a put position. This is very different from owning shares

29 Getting Started With Selling Weekly Puts Core stocks with weekly options Short-term direction Potential events Option Characteristics Rich premiums Strike risk/reward Rates of Return

30 Start With Trends Trends I ve identified and overlooked by Wall Street Banks BioTech Food Oil/Energy Near Luxury iworld Travel Sub-Sectors of housing

31 Great Companies Good Stocks Solid companies Growth stories Investment thesis

32 Potential Core Stocks Great companies with weekly options American Airlines (AAL) First Solar (FSLR) Apple (AAPL) General Motors (GM) Bank of America (BAC) Gilead Sciences (GILD) Blackstone Group (BAC) Netflix (NFLX) CVS Health (CVS) Southwest Airlines (LUV) EOG Resources (EOG) Starbucks (SBUX) Expedia (EXPE) Tesoro (TSO)

33 Narrow Down Your Choices 200 day M.A. 100 day M.A. 50 day M.A. 20 day M.A. Three month - volume support One month - volume support 10 Day - volume support 5 day - volume support 3 day - volume support

34 Support And Resistance Look for support and resistance points before entering weekly trade

35 Beware Of Upcoming Events Must be aware of external events that week Can impact your underlying price direction If event expected take a pass on trade There s always another trade next week

36 Earnings Reports Company is announcing earnings this week Risk of extreme directional change High volatility Buying or selling pressure

37 Other Expected Events Ex-dividend dates Mergers and announcements Product or personnel announcements Legal or regulatory decisions

38 Unexpected Events Analyst downgrades or estimate changes Bad news on company Bad news on sector

39 Option Characteristics Option Volume Bid/Ask price spreads Out-of-the-Money options At-the-Money options Rich premiums Risk/reward

40 Option Contract Volume Open interest of 200 contracts or more Daily volume of 100 contracts or more Need to get your trade filled Need volume to exit early if needed

41 Bid-Ask Spreads Look for tight bid-ask spread pricing $.01 to $.05 ideal $0.06 to $0.10 good $0.11 to $0.20 ok $0.21 to $0.50 minimal $0.51 or more beware!

42 Out-of-the-Money We usually sell Out-of-the-Money (OTM) options (Strikes below the current stock price)

43 At-the-Money Or, we sell At-the-Money (ATM) options (Strike at the current stock price)

44 Rich Premiums

45 Strike Risk/Reward More premium available to strikes closer to ATM (Atthe-money) Probability of OTM (Out-of-the-money) ROC (Return on capital)

46 Calculating Your Rate of Return Premium collected divided by the capital required to support trade Annualize by multiplying # of periods i.e. Weekly x 50, Monthly x 12

47 Return Calculations Sell SBUX March 50 Put for $0.50 per share or $50/contract Expected Return: $0.50 / $5,000 =.010% Annualized return:.010% x 50 = 50%

48 Calculations Calculations will help you get into a better weekly put strike price with confidence

49 Entering Your Trade Tesoro (TSO) Stock: Trading around $74 SELL TSO June (6/17) Weekly 73 Put Premium: $0.56 per share or $56 per contract 2 1/2 Days to Expiration

50 Online Broker Order Entry ACTION: Sell to Open EXPIRATION: June (weekly) STRIKE: 73 Put

51 Order Entry Screen BID-ASK: $0.50 to $0.60 PRICE: Midpoint of $0.56 ORDER TYPE: Limit Orders TIME-IN-FORCE: Day

52 Confirm Your Order A chance to review your order Take the time to check your trade settings Click Place Order

53 Goal of Weekly Paycheck Trade Option contract to expire worthless Keep all of the premium No additional action to take

54 Times You May Close Early Sudden spike in stock price Uncertainty in the overall market heading into the week-end May not be availble to monitor trade on Friday

55 Target Buy-Back Price Execution ACTION: Buy To Close ORDER TYPE: Limit PRICE: $0.26 TIME-IN-FORCE: Good to Day (6/17) GTD or Good Til Cancel (GTC)

56 And Remember Many online brokers do NOT charge commissions when buying back an option with a price of a nickel or less

57 Confirm Your Closing Order A chance to review your order Take the time to check your trade settings Click Place Order

58 Timing Remember, weekly options are open for weeks ahead of expiration Weekly Paycheck Strategy: Tuesday or Wednesday of the week of expiration

59 Managing Your Weekly Put Position The stock market is unpredictable and full of surprises Don t sell a weekly put option and totally forget about it Monitor your trade position

60 You Can Set Trade Alerts Most online brokers offer an alert system Alerts can be sent via , text, or to your smart phone or tablet Set the alert up when you execute your trade Trigger when stock price is within 2% - 4% of being in the money

61 Underlying Moves Against You Price of underlying sells off below your strike Decision Time

62 You Will Be Assigned Buyer decides to exercise their option to sell stock to you you must buy

63 Close Your Put Position Early 1. Close with a small profit 2. Close at breakeven 3. Close with a small loss

64 Roll And Recovery Avoid taking a loss on the trade position Increase cash and profit potential Avoid being assigned the stock

65 Rolling a Put Option is One Transaction 1. BUY back your put position 2. SELL a new put position

66 Roll to New Expiration Same number of contracts Same strike New expiration date

67 One Transaction With Your Broker Can select Roll transaction with most online brokers Still have two transaction costs of buying and selling Can fill with a credit limit order

68 Weekly Put Option Roll Trade Example Opening Trade: April 8 First Solar (FSLR) SELL FSLR April (4/8) 61 Put Received $0.80 per share or $80 per contract

69 FSLR Stock Sells Off Below $61

70 Roll Forward Instructions Buy-to-Close FSLR April (4/8) 61 Put strike Cost: $0.85 or $85 per contract Sell-to-Open FSLR April (4/15) 61 Put Strike Collect: $1.10 or $110 in cash

71 Net Credit From Roll Trade Original Weekly Put: + $.80 Less Buying Back Put: -$.85 Sale of New Weekly Put: +$1.10 NET CREDIT (in order) +$.25

72 Rolling Works Rolling extends time value to let underlying work for you Provides flexibility to avoid assignment Opportunity to generate additional income Chance to roll down to lower strike

73 Adding Cash Roll out and collect more cash but you will need to support with your capital Time frames are considered when we make a decision Tying up capital vs. redeploying capital to a new position

74 Flexibility

75 Weekly Paycheck Trade Case Studies Two recent weekly paycheck trades made in Options Income Blueprint One trade we buy back the option back early The second trade it expires worthless

76 Netflix (NFLX) Trade Set-Up Support NFLX at 95

77 Netflix (NFLX) Trade Initiate Trade on 4/20 Sell April 94 Put (right at-the-money) $9,400 required Collect $0.61 or $61 per contract Potential 0.6% or 33% annualized

78 Closed Early on 4/22 Expiration Day Bought to close at $0.23 $38 Profit for 0.40% or 21% annualized

79 Expedia (EXPE) Trade Set-Up See Support at $105 level

80 Expedia (EXPE) Trade Initiate on 4/27 Sold April (4/29) 95 Put (9.2% Out-of-the-Money) Collect $0.85 per contract 0.90% potential return or 46% annualized

81 The Alerts Expired Worthless on 4/29 Keep $85 per contract

82 Reasonble Income Goals How many weeks a year you can sell weekly puts How much capital you are committing to this strategy What impact commission may have on your profits How many times you believe you will need to extend or roll a position, reducing your return on that position.

83 Guidelines For Selling Weekly Puts Put positions on forty times a year Do not not allocate all your capital to this strategy Do not put all your capital in support of one position Assume 1-to-2 out of ten positions will need to be extended a week

84 Workshop Recap Collect an extra weekly paycheck selling week puts Take advantage of ferocious time decay Constructing a simple weekly put option trade Roll and Recovery Roll with potential to collect even more cash

85 Reminder: Live Trading Wednesday Two Live Weekly Paycheck trades Step-by-step trade execution in realtime Questions and answers 12:00 PM Eastern Time,Wednesday, June 23 Plus, Closing Live Trading Session Friday, 12:00 PM, June 25

86 Time For Your Questions

87 Weekly Paycheck Live Workshop June 20, 2016