Presents. SPY the MARKET. With. Bill Corcoran

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1 Presents SPY the MARKET With Bill Corcoran

2 I am not a registered broker-dealer or investment adviser. I will mention that I consider certain securities or positions to be good candidates for the types of strategies we are discussing or illustrating. Because I consider the securities or positions appropriate to the discussion or for illustration purposes does not mean that I am telling you to trade the strategies or securities. Keep in mind that we are not providing you with recommendations or personalized advice about your trading activities. The information we are providing is not tailored to any particular individual. Any mention of a particular security is not a recommendation to buy, sell, or hold that or any other security or a suggestion that it is suitable for any specific person. Keep in mind that all trading involves a risk of loss, and this will always be the situation, regardless of whether we are discussing strategies that are intended to limit risk. I am not subject to trading restrictions. Myself and other instructors could have a position in a security or initiate a position in a security at any time.

3 Let s Talk I was reluctant to do this class. This strategy relies heavily on Day Trading. Day Trading is deceptive. It can be a lot of work.

4 Why Day Trade? Are you attracted to Day Trading? Most Day Traders like avoiding overnight Headline Risk Money is at risk for a short period of time. Profit (and loss) can be generated very quickly. There are almost always opportunities somewhere in Day Trades.

5 Why Not Day Trade? Are you afraid of Day Trading? Day Trading typically requires big leverage to exploit small moves. Margin requirements can be large (PDT rule). Commissions and bid x ask spreads eat up profit. Swing and Trend Trades generate bigger profit.

6 Day Trade vs. Swing Trade Day Trade Swing Trade Shorter time frame Smaller moves in price Bigger position size Lower Reward to Risk Higher win to loss Focus on 5 and 1 min. chart Daily chart as a reference Longer time frame Bigger moves in price Smaller position size Higher reward to risk Focus on Daily Chart 5 min. chart to refine entry and exit

7 Swing Trade Entry

8 Swing Trade Exit Days

9 Day Trade Entry

10 Day Trade Exit minutes

11 Sooooo? Day Trading can offer opportunity when the markets are choppy, unpredictable or flat. Day Trading can offer quick profits. The short time frame can mean quick exits which can increase win to loss ratios. Day Trading is exciting and can be fun. I will share how we can address commissions and bid x ask spreads.

12 Normal? Traditional day trading involves taking big positions in cheap stocks to exploit a small move. 10,000 shares of a $3 stock and looking for a $.05 move would be a typical trade. That s $30,000 chasing a $500 profit minus commissions and spreads. If it goes against you, you could lose more.

13 Options Day Trading Options can provide better leverage. 1 option contract controls 100 shares of stock. Option prices around $1/share on $200 stocks are not unusual. A $200 stock is likely to move more than a $3 stock. That means 100 contracts controls the same 10,000 shares but for around $10,000 on a stock that will move more.

14 The Catch Better leverage can have it s costs. While stocks may have $.01 to $.05 bid x ask spreads, option spreads are frequently more than $.60/ share. Options that have time left before expiration are costly, sometimes very costly. Commissions for trading options can be higher than they are on stocks.

15 The SPY The SPY is an Exchange Traded Fund (ETF) that tracks the S&P precisely at 1/10 the cost. While you cannot purchase the Market (S&P), you can buy and sell shares of the SPY. You can trade options on the SPY.

16 Why Day Trade The SPY? The SPY and it s options trade until 4:15 PM EST, 15 minutes past the rest of the market. SPY weekly options expire twice a week, one on Wednesday and one on Friday. The proximity to expiration means a higher delta at a lower price. The bid x ask spreads on the SPY options are typically $.01 and rarely more than $.05. The daily volume on SPY options is HUUUUGE.

17 Multiple Weekly Expirations

18 Volume and OI

19 SPY Swing and Trend Trades? You should be looking at the chart of the S&P every day. We tend to Day Trade inside of and in the direction of, Swing Trades. The bid x ask spreads on the SPY options are typically $.01 and rarely more than $.05. The daily volume on SPY options is HUUUUGE. This makes the SPY an ideal Swing and Trend trading candidate.

20 SPY Trend

21 TECHNICAL ANALYSIS

22 Technical Analysis If you suck at chart reading you will suck at trading. The chart tells us all we need to know. Patterns tend to repeat. Charting is scalable and transferable. Most trades should be in the direction of the daily chart. (there are exceptions)

23 The Chart A picture is worth a thousand Dollars! A picture of the market psychology. Tells us what the market is thinking. Pure supply and demand in picture form.

24 The Chart Chart patterns occur in multiple time frames. Chart patterns occur in all asset classes. Anytime there is a buyer and a seller there is likely a chart pattern being created.

25 Candlestick Charts Break down individual trading periods. Can identify market sentiment in each trading period. Patterns can emerge within individual candlesticks or even groups of candlesticks.

26 Bullish Candlestick HIGH CLOSE OPEN LOW

27 Bearish Candlestick OPEN HIGH CLOSE LOW

28 Candlestick Reversal Patterns Evening Star or doji reversal Morning Star or doji reversal Bullish Engulfing Bearish Engulfing Bullish Harami Bearish Harami Bullish piercing Bearish Dark Cloud

29 Evening Star Reversal Pattern

30 Doji Reversal (Engulfing)

31 Morning Star Reversal Pattern

32 Bullish Doji Reversal

33 Bearish Engulfing Reversal Pattern

34 Bearish Engulfing

35 Bullish Engulfing Reversal Pattern

36 Bullish Engulfing?

37 Bearish Harami Reversal Pattern

38 Bearish Harami

39 Bullish Harami Reversal Pattern

40 Bullish Harami

41 Continuation Patterns

42 Rising Three Method Pattern

44 Falling Three Method Pattern

46 Volume Bullish Price is rising Volume is rising Bearish Price is falling Volume is rising

47 Reversal Volume Potential Bullish Reversal Price is falling and approaching support Volume is falling Watch for reversal patterns Potential Bullish Reversal Price is rising and approaching resistance Volume is falling Watch for reversal patterns

48 The Bullish Blow Off Potential Bullish Reversal Stock price has been falling sharply Stock Price starts to reverse, leaving long wick below Volume is spiking to unusual highs, typically 1/3 or more higher than the opening volume for the day. Volume spike occurs when massive buy orders are triggered due to the sell off.

49 The Bearish Blow Off Potential Bearish Reversal Stock price has been climbing sharply Stock Price starts to reverse, leaving long wick above Volume is spiking to unusual highs, typically 1/3 or more higher than the opening volume for the day. Volume spike occurs when massive buy orders are triggered due to the rally.

50 Blow Off

51 Bollinger Bands Bands measure Volatility Can act as Support or Resistance BB mean can act as support/resistance. Can signal changes in momentum

52 Bollinger Band Top Stock price moves aggressively above the upper band. Price retraces below the upper band. Stock price rallies but fails to reach the upper band before retracing lower. Can signal a loss in momentum.

53 Bollinger Band Top

54 Bollinger Band Bottom Stock price moves aggressively below the lower band. Price retraces above the lower band. Stock price sells off but fails to reach the lower band before retracing higher. Can signal a loss in momentum.

55 Bollinger Band Bottom

56 Bollinger Band Channel Bollinger Bands and the 20 SMA are moving essentially sideways. Stock price moves below the lower band or above the upper band but fails to stay beyond the band. The stock price is likely to revert to the opposite band.

57 Bollinger Band Channel

58 Bollinger Band Channel

59 Multi Time Frame Confirmation We are day trading in very compressed time frames. The daily chart is a reference. The five minute chart is our primary tool for observing price activity. The one minute chart is used to confirm price activity observation on the five minute chart to confirm good entry and aggressive exits.

60 Multi Time Frame Template 12:57 12:55

61 STRATEGY

62 Day Trading the SPY What follows are descriptions strategies specific to day trading the SPY weekly options. Due to the compressed time frame of these options, we will trade the nearest expiration. As we are trading in compressed time frames we will seek options delta of at least.65 or higher. The profit target on these SPY day trades is.10/share. This will require significantly higher leverage to create acceptable net realized profit.

63 General Considerations Day trading is fast! This style of day trading is faster. Be aware of the Pattern Day Trader (PDT) rule and how it can help you. You are not going to learn or see enough in this workshop alone to be successful, you MUST practice.

64 Risk Considerations Stop management, risk management and awareness of win/loss ratios are critical. A higher win/loss ratio changes the risk dynamic and allows for higher risk metrics. A smaller reward to risk ratio is a factor in this type of trading and also affects risk metrics.

65 Position Size Position size should be considered in relation to total account value. Exploiting relatively small moves using high probability technical setups can potentially create higher win/loss ratios. His means we can afford to set up near 1:1 reward to risk ratio trades. The profit target on these SPY day trades is.10/share, therefore the net realized loss can approach.10/share, including the spread. Even with the potential for higher win/loss ratios, potential net realized loss on a single trade should not exceed 7.5%-10% of total account value.

66 The Blitz Trade

67 The Blitz Trade The Blitz is a quick all in/all out trade seeking a.10 move in the option price. This trade can be taken when a more significant move is unlikely or a reversal after a short move is likely. This strategy can work well for the Bollinger Band Channel. Upon confirming a technical entry, a large position in a high delta option is taken, keeping risk management rules in mind. A sell limit order for.10 above the purchase price is entered. A sell stop order for between.05 and.08 is entered as an OCO order.

68 The Blitz Entry In with 100 cts.85 delta,.06 stop

69 The Blitz Exit Out with 100 ctsat.10 profit = $1000 less commisions

70 The 80/20 Trade

71 The 80/20 Trade This trade can be taken when a more significant move is likely and when the SPY appears to be in a momentum move. This strategy can work well for the Day Trend when the SPY is trending between the outer Bollinger Band and the 10 EMA. Upon confirming a technical entry, a large position in a high delta option is taken, keeping risk management rules in mind. A sell limit order for.10 above the purchase price is entered on 80% of the position. A sell stop order for between.05 and.08 is initially entered as an OCO order on the full position. Once the sell order for.10 is triggered, the stop on the remaining 20% of the position size is moved to the 10 SMA.

72 80/20 Entry In with 100 contracts,.73delta,.08stop,.10 sell limit

73 80/20 Exit 80 Out of 80 contracts, remaining 20 have.82 delta,.02 stop

74 80/20 Exit 20 Early exit on BB top for.80 profit Exit 20 ctson the break of the 10 EMA with.60 profit

75 Today and Tomorrow Trade This trade is a hybrid, day/swing trade. This strategy can work well when the Day Trend trade carries into the close and when daily chart indicates a likelihood of continued movement in the direction of the Day Trend. The trade can only be converted on residual positions left over from 80/20 Trade setups. Because the trade will be held overnight, standard swing trade risk metrics apply.

76 Today and Tomorrow Residual 20 ctposition held overnight based on daily chart

77 Magic Minute Trade This trade is an extremely compressed version of the Blitz. This strategy can work well when the SPY goes into a lower volume channel during late morning and lunch. Bid x ask spread must be.01 Delta must approach 1.00 (expiration day) Sell limits are at , stops are similar. Trades are only taken at the upper or lower band on the 1 minute chart.

78 Magic Minute Entry In 100 cts,.95 delta.05selllimit,.04stop

79 Magic Minute Exit Out of 100 cts with a.05profit

80 Magic Minutes

81 Don t Do It! You know enough to be really dangerous. You need practice, a lot of it. I would prefer to teach this to you over and over. We need to spend some time focused on this strategy

Technicals & Time Frame

Technicals & Time Frame Advanced Charting Neither Better Trades or any of its personnel are registered broker-dealers or investment advisers. I will mention that I consider certain securities or positions to be good candidates