CLIMBING THE MARKET WITH AN OPTION LADDER. SNIDER ADVISORS SNIDER

Transcription

1 CLIMBING THE MARKET WITH AN OPTION LADDER SNIDER ADVISORS SNIDER

2 DISCLAIMER: The intent of this presentation is to help expand your financial education. Although the information included may be relevant to your particular situation, it s not meant to be personalized advice. When it comes to investing, insurance, and financial planning, it s important to speak to a professional and get advice that is tailored to your unique, individual situation. All investments involve risk including possible loss of principal. Please see our Performance Discussion and Owner s Manual; they are an important part of this discussion.

3 Special Thanks PRESENTATION SLIDES Immediate download of today s slides FREE SPECIAL REPORT How to Climb the Market with an Option Ladder ONLINE COURSES Option Investing 101: Calls, Puts, and Beyond

4 Snider Advisors is a boutique, registered investment advisor, based in Dallas, Texas. Helping our clients strive to be better investors has been priority number one since we opened our doors in September of SNIDER ( ) support@snideradvisors.com

5 A long-term strategy that uses a combination of stocks, covered calls and cash-secured puts, and cash management techniques in a uniquely powerful way in an effort to generate portfolio income.

6 Types of Calls COVERED You OWN the stock You SELL a CALL You re obligated to SELL SHARES at the strike price on or before the expiration date You receive OPTION PREMIUM, which you get to keep, regardless of the expiration outcome.

7 HIGHER VOLATILITY = HIGHER OPTION PREMIUM

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9 LADDERING: THE CONCEPT BONDS AND CDS BOND MATURITY STOCK PRICE COVERED CALLS The goal is to try to smooth fluctuations in interest rates. After the first bond matures, you invest the proceeds into a new five-year bond. 1-year Bond 2-year Bond 3-year Bond 1 st Purchase 2 nd Purchase 3 rd Purchase The goal is to try to smooth fluctuations in stock prices. If you re are called away above your cost basis, you close position at a profit. As bonds mature, you re spreading out the distribution of income. 4-year Bond 5-year Bond 4 th Purchase 5 th Purchase You may be able to sell calls against your lower-priced shares.

10 THINGS TO CONSIDER STOCK SELECTION POSITION ALLOCATION

11 STOCK Stock SELECTION Selection BUSINESS ANALYSIS OBJECTIVE SPECIFIC PORTFOLIO CONSTRUCTION PORTFOLIO DESIGN

12 THINGS TO CONSIDER STOCK SELECTION POSITION ALLOCATION

13 POSITION Stock ALLOCATION Selection SUFFICIENT CAPITAL TO: Have a share price high enough to generate richer option income Have a share price high enough to accommodate possible price decline. Make future purchases. Cover potential trading costs.

14 Placing the Trade XYZ Sell to Open 1 October $40 Call XYZ Oct Call Oct Buy 100 shares of XYZ at $37 a shares

15 TIME PASSES SEPTEMBER OCTOBER

16 Possible Expiration Outcomes OUTCOME 1 Call EXERCISED SELL 100 shares Option Expiration is typically the third Friday of the month.

17 Possible Expiration Outcomes $50 Above $40 $40 $30 $20 $37 XYZ Closes Above Strike Call EXERCISED 100 shares SOLD $10 $0 SEPT OCT

18 Possible Expiration Outcomes $50 $40 $30 $20 $37 Below $40 XYZ Closes Below Strike Call EXPIRES Still OWN 100 shares $10 $0 SEPT OCT

19 TIME PASSES OCTOBER FEBRUARY

20 Where you stand now $50 $40 Average Cost: $30.83 $30 $20 $10 Each month you ve purchased 100 shares Today s Purchase: $23 $0 SEPT OCT NOV DEC JAN FEB

21 Sell Covered Calls March Calls $23.00 March Puts Bid Price: $0.00 Strike Price: $32.50

22 Where you stand now $50 $40 $30 $20 $10 Lowest Priced Shares: $23 $0 SEPT OCT NOV DEC JAN FEB

23 Sell Covered Calls March Calls Bid Price: $1.25 $23.00 Strike Price: $25 March Puts

24 Sell Covered Calls $50 $40 TRADE: Sell 2 Calls at $25 Strike Price $30 $23.50 $20 $10 $0 PROFIT POTENTIAL: Gross Option Income $1.25 x 200 = $250 Gross Capital Appreciation if Calls are Exercised $1.50 x 200 = $300 SEPT OCT NOV DEC JAN FEB

25 Sell Covered Calls Sell to Open 2 March $25 Calls Mar Call Mar

26 TIME PASSES FEBRUARY MARCH

27 Summary $50 $40 $30 2 $25 Calls $20 Average Cost: 600 shares at $30.83 $10 $0 SEPT OCT NOV DEC JAN FEB

28 Possible Expiration Outcomes $50 $40 $30 2 $25 Calls $20 $10 BELOW Strike: Calls Expires You still own 600 Shares $0 SEPT OCT NOV DEC JAN FEB MAR

29 Possible Expiration Outcomes $50 $40 $30 2 $25 Calls ABOVE Strike: Calls Exercised Sell 200 Shares 400 Shares Remaining $20 $10 $0 SEPT OCT NOV DEC JAN FEB MAR

30 PROCEED WITH CAUTION To avoid this... Try to look like... Limit the number of purchases you make within a particular price range.

31 PROCEED WITH CAUTION MUST KNOW FACTS: While you hold the position, you may experience an unrealized loss. If you sell while the stock price is below your average cost, you will experience a loss. You may not be able to sell calls against your stock every month.

32 More Positions Greater Consistency

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34 DISCLAIMER: The intent of this presentation is to help expand your financial education. Although the information included may be relevant to your particular situation, it s not meant to be personalized advice. When it comes to investing, insurance, and financial planning, it s important to speak to a professional and get advice that is tailored to your unique, individual situation. All investments involve risk including possible loss of principal. Please see our Performance Discussion and Owner s Manual; they are an important part of this discussion.

35 Special Thanks PRESENTATION SLIDES Immediate download of today s slides FREE SPECIAL REPORT How to Climb the Market with an Option Ladder ONLINE COURSES Option Investing 101: Calls, Puts, and Beyond

36 SNIDER INVESTMENT METHOD ONLINE COURSE WHAT YOU GET 6 Months of Snider Method Online Training Monthly Bonus Training Office Hours and Support Resources. Software. Recordkeeping Tools One-on-one portfolio review TOTAL VALUE: $5,175 COST: $299 PER MONTH FOR 6 MONTHS TRADEKING SPECIAL: $199 PER MONTH FOR 6 MONTHS