11-Hour Options 2.0 The Next Evolution of Success

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1 presented by Thomas Wood MicroQuant SM Identifying Key Support and Resistance Levels 11-Hour Options 2.0 The Next Evolution of Success

2 Risk Disclaimer Trading or investing carries a high level of risk, and is not suitable for all persons. Before deciding to trade or invest you should carefully consider your investment objectives, level of experience, and ability to tolerate risk. This content is subject to change at any time without notice, and is provided for the sole purpose of education and assistance in making independent investment decisions. ValueCharts.com has taken reasonable measures to ensure the accuracy of the information contained herein; however, ValueCharts.com does not guarantee its accuracy and is not liable for any loss or damage which may result directly or indirectly from such content or from an inability to access such information or any delay in or failure of the transmission or the receipt of any instruction or notification in connection therewith. Any past performance results are shown for illustration and example only, are hypothetical and as such have many inherent limitations. No representation is being made that any account will or is likely to achieve profits or losses similar to those shown. Past performance is not necessarily indicative of future results.

3 CFTC Rule 4.41 (Hypothetical Disclaimer) U.S. Government Required Disclaimer - Commodity Futures Trading Commission Futures and Options trading has large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in the futures and options markets. Don't trade with money you can't afford to lose. This is neither a solicitation nor an offer to Buy/Sell futures, stocks or options on the same. No representation is being made that any account will or is likely to achieve profits or losses similar to those discussed on this web site. The past performance of any trading system or methodology is not necessarily indicative of future results. CFTC RULE HYPOTHETICAL OR SIMULATED PERFORMANCE RESULTS HAVE CERTAIN LIMITATIONS. UNLIKE AN ACTUAL PERFORMANCE RECORD, SIMULATED RESULTS DO NOT REPRESENT ACTUAL TRADING. ALSO, SINCE THE TRADES HAVE NOT BEEN EXECUTED, THE RESULTS MAY HAVE UNDER-OR- OVER COMPENSATED FOR THE IMPACT, IF ANY, OF CERTAIN MARKET FACTORS, SUCH AS LACK OF LIQUIDITY. SIMULATED TRADING PROGRAMS IN GENERAL ARE ALSO SUBJECT TO THE FACT THAT THEY ARE DESIGNED WITH THE BENEFIT OF HINDSIGHT. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFIT OR LOSSES SIMILAR TO THOSE SHOWN. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL, OR IS LIKELY TO ACHIEVE PROFITS OR LOSSES SIMILAR TO THOSE DISCUSSED WITHIN THIS SITE, SUPPORT AND TEXTS. OUR COURSE(S), PRODUCTS AND SERVICES SHOULD BE USED AS LEARNING AIDS ONLY AND SHOULD NOT BE USED TO INVEST REAL MONEY. IF YOU DECIDE TO INVEST REAL MONEY, ALL TRADING DECISIONS SHOULD BE YOUR OWN.

4 Evolution of 11-Hour Options Trade Selection making the trade Easier Trade Management adaptability & flexibility to the moving price Risk Control Progressive Delta Neutral Strategy

5 Evolution of 11-Hour Options

6 Evolution of 11- Hour Options Over the past 20 months, 11-Hour Options has produced an overall win rate over 95% & a weekly return over 5%/week. Opportunities for improvement are in : Trade Selection Trade Management Risk Control

7 Evolution of 11- Hour Options Trade Selection : Making the trade EASIER Use a Trade checklist : Trade Hierarchy Take into account the most important success factors Develop an awareness of Intra-Day price movement. Expand Entry Trade Timing from 12 Noon

8 Evolution of 11- Hour Options Trade Management : ACTIVE Role IntraDay Flexible Stop Loss levels 2xgain 3xgain How to actively Fix counter trade price moves When right look for Bonus Directional Trade Adapting Current Spread Position (Defensive) Rolling-Out and Rolling-Up/Down Spreads

9 Evolution of 11- Hour Options Risk Control : Progressive Delta Neutral Strategy Progressive take action only when price moves against you, small action in parts. Defensive position designed to slow rate of losses, and if necessary nullify Delta moves against current position Used to prevent Large Blow up moves, and manage overall Position risk.

10 Trade Selection Making the Trade Easier

11 Trade Selection Making the Trade Easier Over the past 20 months, 11-Hour Options has produced an overall win rate over 95%. It will would require tremendous time and effort to optimize that even higher. We want to focus on being more selective in the trades we take, and picking trades that are easier to manage for their duration.

12 Trade Selection Making the Trade Easier 11-Hour Options : Trade Hierarchy Checklist 8 Factors - In order of importance Momentum direction & strength - 60 min chart Price Action setups on 60 min: reversals/breakouts Support/Resistance (S/R) from 8 or 50 Day EMAs On reversals : Fibonacci Retracement levels S/R based on Weekly lows & highs Momentum on Daily chart Price levels from previous day - High & Low *S/R from Monthly lows & highs (rare/important)

14 Trade Selection Making the Trade Easier Develop an awareness of Intra-Day price movement. Range-Bound When range bound and using the Opening Range criteria, Sell Bear Call CS (bearish) when price is in the Upper half of the daily range Sell Bullish Put CS (bullish) when price is in the Lower half of the daily range.

16 Trade Selection Making the Trade Easier Extra Tools that can help Range-Bound EveryDay Profits workshop Fibonacci Trading workshop Fibonacci Price Retracement levels (std. in TS & TOS) MQ Pivot Trend Want more info & buy : support@microquant.com

17 Trade Selection Making the Trade Easier Develop an awareness of Intra-Day price movement. Break-out When price is breaking higher (from a consolidation, or UP through a resistance level), Sell Bullish Put CS (bullish), just below consolidation When price is breaking lower (from a consolidation, or DOWN through a support level) Sell Bearish Call CS (bearish), just above consolidation

19 Trade Selection Making the Trade Easier Extra Tools that can help Breakout EveryDay Profits workshop MQ VBT Indicator Fibonacci Price Extension levels (std. in TS & TOS) MQ Pivot Trend (helps you stay in) Want more info & buy : support@microquant.com

20 Trade Selection Making the Trade Easier Expand out the Entry Trade Timing from 12 Noon Origin of 12 Noon The 12 Noon timing was created so that Credit Spreads were sold after the Morning Session If we waited too late, we d run into the afternoon session, and it would be likely we would lose some potential premium we could be selling.

21 Trade Selection Making the Trade Easier Expand out the Entry Trade Timing from 12 Noon Expanded Trade Entry +/ minutes This expansion would cover 10:30AM 1:30PM eastern Also, you would not have to do all your Credit Spreads at the same time. You can time the entry for each Index/Stock that would be most beneficial to each position. Usually, bearish trades & bullish trades would be about the same time, because of Index movement

23 Questions? Trade Selection Making the Trade Easier

24 Trade Management Trade Management Adapting & being Flexible to the moving price

25 Trade Management How to actively Fix counter trade price moves Friday AM Gap: *** DO NOT *** have Active Stop Loss trade set on online order system. Crazy initial Option Pricing can produce very wide spread pricing, triggering Market purchase order. Gauge if Gap is due to low pre-market volume, or an overall moderate index gap Look for 50% and 100% gap fill trades

27 Trade Management Original recommended stoploss: - Old Stop loss rule = 2x max profit - New : flexible so that loss = 2x 3x max profit Example: $100 target profit = limit risk = -$200 to -$300 If your premium is $0.30 2x mark is $0.90 : $0.90-$0.30 = $0.60 3x mark is $1.20 : $1.20-$0.30 = $0.90

28 Trade Management When to use 2xMax, and when to use 3xMax Use the 3x Max stoploss : Give more wiggle room Intraday Moves are in a Range-Bound day When the current adverse price move is about to hit a protective Support/Resistance level When the adverse price move is about to hit a 50% or 61.8% protective Retracement level When the current move is the last gasp move of a clear divergence, about to turn and move favorably

30 Trade Management When to use 2xMax, and when to use 3xMax Use the 2x Max stoploss : Tighter stop When Intraday Move, is starting to move against you, and the price action setup is changing on the 60 min, and starting to not look so good Current Breakout trade, has faked out, and is starting to move against you The 60 min momentum is changing direction The Daily chart momentum is starting to go flat

32 Trade Management How to actively Fix counter trade price moves Friday Mid-Morning Reversal: Look for intraday trading opportunities to bring in more revenue, buying more directional options If Opening Range move is against you, watch for the AM reversal. Trade the Reversal for more $ Revenue Look to see if the Reversal has strength if it s weak or non-existant, look for more price movement against you.

34 Trade Management How to actively Fix counter trade price moves After Lunch: 1. Watch for continuation of the Morning Move If it was Range-Bound : (1) Look for continuation of back/forth price movement (2) Watch for breakouts as price approaches the Support/Resistance levels If it was Breakout : (1) Look for strength of continuation of the move in original direction, (2) Look for a pull-back into the Opening Range, (3) Possible late-day Snapback

36 Directional Trade Bonus Trade Management Usually Friday AM Some of the Time, we are so correct in our trade selection, not only does price move in the direction we called for, it really starts to accelerate, building into a big profit. Credit Spread, will usually hit 100% Profits Fri Open

37 Directional Trade Bonus Usually Friday AM 11-Hour Options 2.0 Trade Management Need to look for entry for additional Directional Options or Debit spread, for extra Profits Look for Last Kiss move (Entry) then momentum acceleration in expected direction Look for Continuation pattern on 2-3min charts, opportunity to Jump On developing move Watch for multiple opportunities to add more Contracts (snowball growth)

40 Trade Management Adapting Current Spread Position (Defensive) Situation : Stock price is moving against you Overall Market is moving against you. Individual stock price is moving against you. Not looking to recover spread. Looking to generate more Profit than Loss

41 Trade Management Adapting Current Spread Position (Defensive) Buy back Short Options / Let Long Options run Use in daily BREAKOUT situation Both Index and Stock are Gapping against you Likely that Short strike will be touched Larger timeframe shows large potential run Buy back Short Options first pullback (stop the loss) Leave Long Option, watch for lunchtime or afternoon pullback, take some profits

43 Trade Management Adapting Current Spread Position (Defensive) Keep Original Spread / Buy more Long Options Use on Opening Gap, but neither Index/Stock extreme Not likely that Short strike will be touched Larger timeframe shows consolidation Slowly buy more Long Options, 2 or 3 additions Leave CS alone, looks like it will still expire worthless

45 Trade Management Adapting Current Spread Position (Defensive) Rolling-Out (expiration date further away) When a Credit Spread just needs more TIME Larger time frame still shows potential of move, and it just needs more time to develop Buy back current Spread, and sell same Spread (same strike prices) 1 or 2 weeks out Moderate risk

47 Trade Management Adapting Current Spread Position (Defensive) Rolling-Up/Down (expiration date further away, selling option with a strike price further away) When a Credit Spread needs more TIME & Distance Larger time frame still shows potential of move, and it just needs more time to develop, and slight adjustment of strike prices further away Buy back current Spread, and sell new Spread at more distant strike prices, 1 or 2 weeks out High risk : Don t be fooled when stock has really changed direction. Use sparingly better to take loss

49 Questions? Trade Management Trade Management Adapting & being Flexible to the moving price

50 - Risk Control - Progressive Delta Neutral Strategy

51 Risk Control Progressive Delta Neutral Strategy Risk Management #1 Job: Easily 75% of 11-Hour Option Trades are profitable by Friday AM Friday noon For the 20%-25% of Trades that have price volatility, it may be suitable to start some type of defensive action Option Greeks => Monitor and Manage Risk: By monitoring overall Position Greeks (Theta, Delta), we can manage and adjust the overall risk of the spread Limit Risk within reasonable bounds

52 Risk Control - Progressive Delta Neutral Strategy Time Decay (Theta) : Your Profit Machine Theta : Is always moving forward Selling Credit Premium : Theta is (+) Positive Therefore, holding a CS creates profits from (+)Theta

53 Risk Control - Progressive Delta Neutral Strategy Option Greeks => Monitor and Manage Risk: By monitoring overall Position Greeks (Theta, Delta), we can manage and adjust the overall risk of the spread

54 Progressive Delta Neutral Strategy Bullish Put Credit Spread

55 Risk Control - Progressive Delta Neutral Strategy Price Movement (Delta) : Active Greek in weekly CS = For 11-Hour Options, Delta is the only other major factor that dictates P&L Delta Greek effect: Bullish Put Credit Spread Delta is Positive Number, As prices increase (+ number) x (+Delta) = Positive Profit Gain Example : Price goes up $2 $2.00 x $11.05 = $22.10 Profit

56 Risk Control Progressive Delta Neutral Strategy When things start to go wrong Bullish Put Credit Spread (want prices UP) Problem : Prices start falling Delta is growing Positive Number, As prices fall (- number) x (+Delta) = Position loses value Example : Price goes down -$1.50 -$1.50 x $11.05 = -$16.58 LOSS SOLUTION : Buy (- Negative, Deltas) Buy Puts

57 Risk Control - Progressive Delta Neutral Strategy Bullish Put Credit Spread (want prices UP) Problem : Prices start falling Delta is growing Positive Number, SOLUTION : 11-Hour Options 2.0 Buy more (- Negative, Deltas) Buy Puts : -Negative Delta50 Delta70 Usually it s around a [5 spreads : 1 put] Ratio Buy Longer Dated Puts : 2-3 weeks until expiration

58 Risk Control - Progressive Delta Neutral Strategy Bullish Put Credit Spread (want prices UP) Buy more (- Negative, Deltas) : Buy PUTS

59 Risk Control - Progressive Delta Neutral Strategy Bullish Put Credit Spread (want prices UP) Buy more (- Negative, Deltas) : Buy PUTS

60 Risk Control - Progressive Delta Neutral Strategy Bullish Put Credit Spread (want prices UP) Buy more (- Negative, Deltas) : Buy PUTS Action Guidelines : WHEN : P/L Loss = 2x Max gain # Buy 1 or 2 PUTS, this reduces overall Position Delta by 50%

61 Risk Control - Progressive Delta Neutral Strategy Bullish Put Credit Spread (want prices UP) Buy more (- Negative, Deltas) : Buy PUTS Guidelines : WHEN : P/L Loss = 3x Max gain # or more Buy 1 or 2 additional PUTS, this reduces Delta to near 0.

62 Risk Control - Progressive Delta Neutral Strategy Bullish Put Credit Spread (want prices UP) Buy more (- Negative, Deltas) : Buy PUTS

63 Questions? Progressive Delta Neutral Strategy - Fixing Bullish Put Credit Spread -

64 Progressive Delta Neutral Strategy Bearish Call Credit Spread

65 Risk Control - Progressive Delta Neutral Strategy Price Movement (Delta) : Active Greek in weekly CS = For 11-Hour Options, Delta is the only other major factor that dictates P&L Delta Greek effect: Bearish Call Credit Spread Delta is Negative Number, As prices decrease (- number) x (-Delta) = Positive Profit Gain Example : Price goes down $3 -$3.00 x (-$15.15) = $45.45 Profit

66 Risk Control Progressive Delta Neutral Strategy When things start to go wrong Bearish Call Credit Spread (want prices DOWN) Problem : Prices start climbing Delta is growing Negative Number, As prices increase (+ number) x (-Delta) = Position loses Example : Price goes up $2.50 $2.50 x (-$15.15) = -$37.88 LOSS SOLUTION : Buy (+ Positive, Deltas) Buy Calls

67 Risk Control Progressive Delta Neutral Strategy Bearish Call Credit Spread (want prices DOWN) Problem : Prices start climbing Delta is growing Negative Number, SOLUTION : 11-Hour Options 2.0 Buy (+ Positive, Deltas) Buy Calls : + Positive Delta50 up to Delta70 Usually it s around a [5 spread : 1 Call] Ratio Buy Longer Dated Calls : 2-3 weeks until expiration

68 Risk Control Progressive Delta Neutral Strategy Bearish Call Credit Spread (want prices DOWN) Buy (+ Positive, Deltas) : Buy CALLS

69 Risk Control Progressive Delta Neutral Strategy Bearish Call Credit Spread (want prices DOWN) Buy (+ Positive, Deltas) : Buy CALLS

70 Risk Control Progressive Delta Neutral Strategy Bearish Call Credit Spread (want prices DOWN) Buy (+ Positive, Deltas) : Buy CALLS Action Guidelines : WHEN : P/L Loss = 2x Max gain # Buy 1 or 2 CALLS, this reduces overall Position Delta by 50%

71 Risk Control Progressive Delta Neutral Strategy Bearish Call Credit Spread (want prices DOWN) Buy (+ Positive, Deltas) : Buy CALLS Action Guidelines : WHEN: P/L Loss = 3x Max gain # or more Buy 1 or 2 additonal CALLS, this reduces Delta to near 0.

72 Risk Control Progressive Delta Neutral Strategy Bearish Call Credit Spread (want prices DOWN) Buy (+ Positive, Deltas) : Buy CALLS

73 Questions? Progressive Delta Neutral Strategy - Fixing Bearish Call Credit Spread -

74 Risk Control Progressive Delta Neutral Strategy For the 20%-25% of Trades that have price volatility, it may be suitable to start some type of defensive action Monitor your Position Delta & Theta As you approach -2xgain stoploss, and -3xgain stoploss Look to add the appropriate, 2-3 week out Put/Call This added directional option will reduce destructive Delta factor, and dampen the position loss from Delta. Many instances will still have a Positive Theta! Profits from Time!

75 Risk Control - Progressive Delta Neutral Strategy Overall Portfolio with Full Delta Neutral Trades

76 Risk Control Progressive Delta Neutral Strategy Limit Risk within reasonable bounds A Delta Neutral Strategy is designed to reduce/remove losses due to Price Movement (Delta) If we can limit the effect of Losses, keep them small, then over the long term, much higher Win% rate, will power Long-Term Trading Success

77 Questions? Progressive Delta Neutral Strategy

78 Success Moving Forward

79 Evolution of 11- Hour Options Over the past 20 months, 11-Hour Options has produced an overall win rate over 95% & a weekly return over 5%/week. 11-Hour Options WINNERS will take care of themselves, usually without much attention from traders.

80 Evolution of 11- Hour Options Focus on Improved Trade Selection to make the trades easier. Utilize intraday Trade Management to manage current spread positions. Additional Risk Control can be attained by utilizing a Progressive Delta Neutral Strategy when price starts to move against you. toward position s short strikes.

81 TSLA, GOOGL, NFLX, AMZN, PCLN, CMG, AAPL, SPX, SPY, QQQ, FB, LNKD, BIDU, NDX, RUT

- My 4 Favorite Trades - Essential Trades of a Professional Trader

presented by Thomas Wood MicroQuant SM Divergence Trading Workshop Day One - My 4 Favorite Trades - Essential Trades of a Professional Trader Risk Disclaimer Trading or investing carries a high level of