Wednesday, March 23, noon ET. TIG Workshop

Transcription

1 Wednesday, March 23, noon ET TIG Workshop

2 Debby Clowney Workshop Coach: Debby Clowney Our goal today is to provide a workshop where we discuss how to translate the Trade Idea Generator s ideas into profitable trades. We will talk both concepts and practical tips to make and manage the trades. We encourage you to ask questions throughout the workshop. If you have a question, likely others have the same question. MBA, Chicago Booth BA, U. of Pennsylvania 20+ years options experience Worked on Wall Street Consultant for KPMG To get the most out of today s workshop, I will ask that you have your Trade Idea Generator launched. And if you can have your broker s screen in front of you, that s great. But I will also be showing you trades on my broker s screen.

3 Disclaimer Today s webinar is for educational purposes only. Nothing in today s presentation should be considered a recommendation to buy or sell any security. All stocks and options shown are examples only. Any pricing or potential profitability shown does not take into account your trade size, brokerage commissions or taxes which will affect actual investment returns. Stocks and options involve risk and are not suitable for all investors and investing in options carries substantial risk. Past stock or option performance is no guarantee of future price appreciation or depreciation. Prior to buying or selling options, a person must receive a copy of Characteristics and Risks of Standardized Options available at:

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5 Volatility index S&P Dow Volatility has plummeted as markets become less fearful. Nasdaq Daily market moves Russell Markets hit lows of last August and October 2014, and have experienced a big bounce since. Toppy? The S&P isn t moving nearly as much per day, actually slightly below its normal 1%

6 Strategy In the money ITM Up market Flat market Down market Moderate returns, but high consistency Moderate returns, but high consistency Some risk, but still likely to be profitable At the money ATM Good but will almost certainly trail the market Good returns, may beat market, some risk Moderate risk, could result in profit or loss Out of the money OTM Very good but may trail the market More risk, odds favor beating the market Significant risk, profit possible but not likely Previously we were in a down market. Recent action suggests a flat or up market. Any strategy changes should be gradual. STRATEGY FOCUS early 2016 Low cost in the money diagonals on sleepy stocks, defensive stocks In the money covered calls on stocks strong after earnings Consider each of the Featured Trades MODIFICATIONS last workshop Consider legging in to covered calls on positions where you are especially bullish Consider selling ATM or OTM calls rather than ITM calls NOW Be cautious of stocks that are extended. Have GTC exit orders in place on your winners

7 New Features for TIG Subscribers TIG Enhancements for the Trade Finder

8 Investor Observer Features now available to TIG subscribers at no additional cost

9 New chart feature

10 How much would the covered call be worth if it expired today and the price of Masco is unchanged? How much would your profit be? How would you calculate your profit percent? Your annualized profit %? CC SELL MAY 31C, Net dr DIAG B Jan 17 20C, Sell same May 31C, Net Dr Perform these same calculations for the diagonal trade

11 How much would the covered call be worth if it expired today and the price of Masco is unchanged? How much would your profit be? How would you calculate your profit percent? Your annualized profit %?

12 1) Why is this position going against me? 2) How do I feel about the underlying stock or ETF now? 3) What is my objective now that the position has moved against me? New Goal 4) Translate your new goal into an action plan.

13 1) Translating your objective into an action plan We will look at 2 Case Studies today, one for Dean Foods, and one for IWD, the ETF for Russell Value stocks. As you will see, using our methodology led us to different actions in these 2 cases. You can apply this methodology to your own analysis of positions that go against you.

14 1) Why is this position going against me? DF Dean Foods Wal-Mart takes up dairy processing in 2017; in-sourcing milk processing; Wal-Mart accounts for 16% of DF sales. DF plunges 2) How do I feel about the underlying stock or ETF now? 3) What is my objective now that the position has moved against me? New Goal 4) Translate your new goal into an action plan.

15 1) Translating your objective into an action plan DF Dean Foods Game plan: Close position INTO STRENGTH. It is always wise to trade options in the OPPOSITE direction of market sentiment. That is, close weak positions into a bounce, enter long positions into weakness. This will always get you a better price than trading with the movement of the underlying stock.

16 1) Why is this position going against me? IWD Russell Value ETF Stock chart at entry in Nov ) How do I feel about the underlying stock or ETF now? 3) What is my objective now that the position has moved against me? New Goal 4) Translate your new goal into an action plan.

17 1) Translating your objective into an action plan IWD Russell Value ETF Game plan:

18 IWD Russell Value ETF 1 3 6

19 IWD Russell Value ETF

20 Next Workshop: Wednesday, April 6 at noon ET You also may want to check these Blog Posts Calculating the maximum profit and target price for a diagonal What determines the bid/ask spread? Know your order types: Limit or Market Orders, Good til Canceled Orders Know your order types: Can I protect myself with a stop order? Or a conditional order? Taking profits early What is the role of margin in options trading