Access to this webinar is for educational and informational purposes only. Consult a licensed broker or registered investment advisor before placing any trade. All securities and orders discussed are tracked and monitored in virtual trading ( paper trading ) accounts. Virtual account prices and returns may differ from actual trading results. Commission costs are excluded. Neither Top Gun Options (TGO), nor its affiliates nor any of their respective officers, personnel, representatives, agents or independent contractors are in such capacities licensed financial advisors, registered investment advisors or registered broker-dealers. Nothing contained in this webinar, website, or promotional material constitutes a promotion, recommendation, solicitation or offer of any particular investment, security or transaction. Trading options involves risk & options may not be suitable to all investors. Visit the OCC website http://www.optionsclearing.com/ to read Characteristics and Risks of Standardized Options. TGO provides educational and training services that are meant to teach you the risks and potential rewards of trading options, and we are not a service that tells you what to trade. We are not implying or guaranteeing any profit. As always, do not trade with money that you can't afford to lose and make all trades in the TGO program in a paper trading account. Past performance does not equate with future results, and results discussed in this webinar are not typical. Your results may vary. By accessing this webinar you agree to hold the above harmless from any loss or losses you may incur from information discussed in media identified above.
HYPOTHETICAL OR SIMULATED ( PAPER OR VIRTUAL TRADING ) PERFORMANCE RESULTS IN THE MODEL PORTFOLIOS HAVE CERTAIN INHERENT LIMITATIONS. UNLIKE AN ACTUAL BROKERAGE ACCOUNT, SIMULATED RESULTS DO NOT REPRESENT ACTUAL TRADING AND MAY NOT BE IMPACTED BY BROKERAGE AND OTHER SLIPPAGE FEES AND MAY ALSO SEE SIGNIFICANT PRICE DISCREPANCIES. ADDITIONALLY THE TRADES HAVE NOT BEEN EXECUTED WITH REAL CAPITAL, AND THE RESULTS MAY HAVE UNDER OR OVER COMPENSATED FOR THE IMPACT OF BEING PLACED IN A VIRTUAL ACCOUNT. SIMULATED TRADING ACCOUNTS IN GENERAL MAY EXPERIENCE TECHNICAL FAULTS THAT ACTUAL ACCOUNTS MAY NOT, POTENTIALLY SKEWING PERFORMANCE. NO REPRESENTATION IS BEING MADE THAT ANY OTHER ACCOUNT WILL OR IS LIKELY TO ACHIEVE GAINS OR LOSSES SIMILAR TO THOSE SHOWN IN THIS PRESENTATION OR DISPLAYED IN ANY MEDIA.
What is a Trading Methodology? Consistent set of Rules and Procedures Framework to Analyze and Compare Opportunities Feedback for your Trades and Performance
Why have a Method? why not, we have the madness 1. Instill Trading Discipline 2. Improve your Decision Making with Consistent Analysis 3. Control your Emotions 4. Basis for Analyzing your Performance 5. and to Simplify Trading!
Top Gun Trade Plan 1. Identify Opportunity 2. Describe your Commit Criteria 3. Have a Clear Strategic Mindset 4. Engineer the Tactic 5. State your Tactical Employment 6. Lay Out your Mid-Course Guidance 7. Design your Exit Plan
Identify the Target What makes a good Target? Cleary Identifiable Opportunity Understandable Situation Definable Risks Sniff Test Is it too good to be true?
Advanced Targeting There is no edge in options that have a perfect, rational price. When something is off you can gain an advantage. Over/Under Priced Volatility Range Bound or Trending We call this traders Edge Upcoming Event or Specific Risk Unusual Activity Train yourself to spot these situations and you will improve your trading immensely. Remember Hmmm = $$$
Common Targets of Opportunity Clear Trends Flat or Directional, it doesn t matter. Look for predictability. Over Priced Implied Volatility Very common situation Low Implied Volatility Rare but easy to spot. IV at lowest levels. Company Specific Events Earnings, FDA Announcements, etc Technical Setups Opportunities to go long or short trends or inflection points Clear and Strong Support or Resistance
Commit Criteria A clearly stated justification for entering the trade. Why are we taking the trade? Every single trade we take needs a clear reason behind why we are risking our money. Write a short description that defines the situation giving us an edge in this trade.
Advanced Commit Criteria You can t tell if you are right if you don t know what you are thinking Include specific predictions 1. Price Changes of the Asset 2. Changes to Implied Volatility 3. When and why these will happen Be clear and concise.
Commit Criteria - Why To make sure we are clear about why we are taking a trade. During the trade we need to be able to make sure that the reason for the trade has not changed. If the reason to be in the trade has gone away why would we keep the trade? To evaluate our decision process at the end of the trade.
Strategic Mindset Our strategic mindset is the big picture at the time of the trade. Are we bullish, bearish or neutral? Is volatility increasing, decreasing or flat? What are the high level threats or supporting factors in this trade? Take a large to small incremental approach. Analyze news sources and all the information you can, but form your own opinion. Just because someone rings a cowbell doesn t make it real.
Large to Small Strategic Analysis What in the World can affect this trade? What in the Markets will affect this trade? What in this Industry can affect this trade? Finally, what is going on with this Company that can affect this trade?
Some Advanced Hints Continuously develop your strategic analysis skills ***Critical*** Analyze what the MARKET will do, not what YOU think it should do. The market is filled with people who disagree with you. The sum of all those opinions determines what the market actually does. The best way to figure out what the market will do is simply look at what it has been doing. If you personally have a very strong opinion - just step away. Objectivity is critical to making trade decisions. When we lose objectivity we make bad decisions. I don t care how strongly you feel that AAPL is going to come crashing down in the next few weeks, it is a BAD idea to bet half your portfolio on it.
Engineer the Trade When you have a clear idea of what you are trading, how you trade it becomes the next most important decision. Every opportunity has both good and bad ways of trading it. Either could be successful, but a well designed trade gives you the greatest profit vs. the risks you take.
Goals for Trade Design Control your Risks Align the trade to Gain an Edge Use Time Erosion (Theta) to your advantage Effectively use margin (cash = flexibility) Balance your portfolio
Engineer for a Graceful Failure You will be wrong often This part of trading you need to accept and specifically prepare for. Creating trades that fail in a controllable way is critical to having a sustainable trading business. Advanced traders know that trades will fail and design their trades to fail in controllable ways.
Tactical Employment Tactical Employment describes the technical details of the trade. As the trade changes over time it is important to know the details of the trade when we started.
Tactical Employment Details Leg Construction with Contract Details Debit or Credit Amount Max Profit/Max Loss Break Even Points Expectancy or Probability of Success Greeks
Mid-Course Guidance A trade never survives first contact with the markets. We want a clear idea of what we should do when the trade changes.
Basic Mid-Course Guidance Define Stop Losses Asset Price, Historical Volatility or Position Value are good tools for defining stop losses. Set Stop Losses at a point BEFORE the max loss you are willing to take - slippage will happen. Evaluation points are good alternatives like Stop Losses but you evaluate and decide what happens Eject Criteria These limits, when hit, mean you IMEDIATELY get out, no questions asked. Adjust points A plan for making trade adjustments at specific levels
Advanced Mid-Course Guidance Waypoints Plan to periodically reevaluate your plan is the Commit Criteria still valid? are there any new risks? does the trade still make sense? Can the trade be adjusted for an improvement?
Plan for the Exit Exit Plan What is our Profit Target? How will this trade be closed? Leg out or just close down Let expire? Cover assignable positions? If we get a large profit early what do we do? Is there a time limit on this trade?
Plan for Early Exits Advanced Exit Plan Incremental Profit Targets for the life of the Trade Maximize the Time Value of the Trade A small Quick Profit can be better than a Slow Larger Profit Free the Margin up for other Trades
Trade Plan Review Trade Plans make us Better Traders More consistent Better analysis Disciplined Trade Plans allows us to evaluate our performance and learn In hindsight was the plan good or bad? Are our assumptions realistic? How did it succeed or fail? What can I do better next time?
Easy and Valuable A trade plan should only take about 5-10 minutes to create and simplifies your trading Just fill in the sections and you should have the information you need for the trade With use your trading should become quicker and more confident because you know you did a full analysis of the trade Better Management of Failed Trades When a trade is failing you will have a plan ready, saving valuable time and money Reduces the effect of emotions on your trading The process helps to regulate bad impulse trades and poor judgment calls in times of stress
Tips and Tricks Make a schedule for your trading day and make sure to include the following; Market & Economic Review Take time to see what's going on in the world that could affect your portfolio Focus on getting a good handle on the big picture problems in the world Explore and research new trades Find interesting things in the market that could be traded Keep a list of possible trades even if you don t have much margin left Review your current trades Look at every trade you currently have Is the Commit Criteria still valid? Could I take an early Profit? Take breaks away from the market A fresh mind is a powerful tool