ATTS Weekly Options Weekly Income June 2, 2018 PRESENTED BY: DENNIS W. WILBORN
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 ORDE R 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 OR OPTIONS. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFITS OR LOSSES SIMILAR TO THOSE DISCUSSED IN THIS TRAINING. THE PAST PERFORMANCE OF ANY TRADING SYSTEM OR METHODOL OGY IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS. CFTC RULE 4.41 HYPOTHETICAL OR SIMULATED PERFORMANCE RESULTS H AVE CERTAIN LIMITATIONS. UNLIKE AN ACTUAL PERFORMANCE RECORD, SIMULATED RESU LTS DO NOT REPRESENT ACTUAL TRADING. ALSO, SINCE THE TRADES HAVE NOT BEEN E XECUTED, THE RESULTS MAY HAVE UNDER-OR-OVER COMPENSATED FOR THE IMPACT, IF AN Y, OF CERTAIN MARKET FACTORS, SUCH AS LACK OF LIQUIDITY. SIMULATED TRADING PRO GRAMS 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. ALL MATERIALS PRESENTED ARE FOR TRAINING PURPOSES ONLY. TRADER S SHOULD PAPER TRADE ANY NEW METHOD PRIOR TO RISK OF PERSONAL CAPITAL.
$500 of Weekly/Monthly Income How would this change your life? - $500 per month equates to $6,000 per year - $500 per week equate to $26,000 per year
Income Trading Strategies: 1. Day/Swing Trade Stocks Capital Intense 2. Trade Futures Training for another day 3. Trade Options Strategies - Covered Calls, Spreads, Naked Puts, Directional & Non-Directional Focusing on #3: Each Option Trade can be built with limited downside and a measured potential income
- Trade Options Strategies - Covered Calls, Spreads, Naked Puts, Directional & Non-Directional - Covered Calls - Spreads - Naked Puts - Directional - Non-Directional Which of these is easiest to manage? - Covered Calls but must own underlying at least 100 shares - Spreads Defined Risk & Reward - Naked Puts Limits on type of accounts and must use conditional orders for protection
1. Spreads 2. Naked Puts 3. Directionals a. Show how to choose the underlying b. How to Set Up the trades c. How to Manage the trades
a. How to choose the underlying 1. Choose stock or ETF that trades weekly options with good bid-ask spreads 2. Choose Stocks/ETFS that has a weekly range of $5+ Examples: TSLA, NVDA, BABA (Show Chart) b. How to do the trades 1. OTM-ATM-ITM Spreads 2. Directional Options 3. Naked Puts 4. Daily & 1 Hour Intraday Set Ups Examples: TSLA, NVDA, BABA (Show Chart) c. How to Manage the trades 1. Profit Targets 2. Stop Losses 3. Choose Stocks/ETFS that has a weekly range of $5+ Examples: TSLA, NVDA, BABA (Show Chart)
BABA: Weekly, Daily, Hourly 193.88 167.55 197.12
BABA: Hourly 200.00 197.12 193.88 Th Fri Th Fri Th Fri Th Fri
Take a closer look at BABA What is the three chart timeframes saying? Mixed Weekly Range? $5 or Greater Yes! Is there identifiable technical patterns? Yes Support/Resistance worth waiting for? Yes, 202, 199, 197, 194 Wait for the Daily or Weekly Signals? Not if at Strong Support/Resistance Set Alert or Conditional Order? Will I take action if I set an Alert?
Conditional Orders for BABA Directional Put or Call? Top of Keltner with Over Bought TSI buy Puts Bottom of Keltner with Over Sold TSI buy Calls 1. Buy 8 Jun PUT when price rises to 202.50 ;0.5 0.6 Delta = 200P when price is at 202.5 expected price = 1.85; Expected Move ± 6.732 If price moves ½ of expected move by Tuesday value of PUT would be : $2.56 for a gain of 0.71 or 38% based on buying 3 this would be a profit of $213 Stop loss at 50% of or 0.90 -Copyright If I m willing 2007-2018 to Active risk Trend loosing Trading$300 equates to 3 contracts
Conditional Orders for BABA Spread: Top of Keltner with Over Bought TSI sell Call Credit Spread Bottom of Keltner with Over Sold TSI Sell Put Credit Spreads 1. Capture 50% - 70% of premium collected Trigger between 195-197 with a stop below 193.75, sell 5 contracts of 8Jun 197.50/195P for a credit of 1.25 2. Buy back at 0.60 for a profit of $325 3. Stop loss below 193 or by back at 1.90 (Max Loss $325)
Weekly Cashflow Targets and required Contracts for BABA $500 : 5 Contract Spread at 0.65 per = $325 (at Risk = -$325) + 3 contract directional at profit of $ 213 (at Risk = $300): Total = $538 (at Risk = $625) $1000 : Double or do 2-3 Stocks What does trade look like? - Spread Risk by trading all three stocks - Conditional Orders at specific price points
- Mix of TSLA, BABA, NVDA? - 2, 3, 3 - What would this look like for a 50-70 delta long Call? Directional with 50% Stop Loss no more that $1000 Draw down - TSLA = 6.4 x 2 = $1280 (+/- 13.92) - BABA= 1.85 x 3 = $555 (+/- 6.7) - NVDA = 4.50 x 3 = $1350 (+/- 8.73) - Total Invested = $3185; Target Gain $1585 @ 50% move; Gain $792.5 @ 25% move - Spread 3, 3, 3 - TSLA = 3 x 200 = $600 close at $300 - BABA = 3 x 200 = $600 close at $300 - NVDA = 3 x 200 = $600 close at $300 - Total Capital Required = $2700; Target Gain $900
Premise: The advent of Covered calls ushered in a new way of looking at buying and holding a long stock position Great Idea--Sounds great but!! What are the challenges? 1. The stock doesn t sit still Goes up Fear of your collateral being taken away Goes down Fear of loosing your collateral 2. Not all stocks are good CC candidates No OI Too Much of a Trend Too Little of a Trend If done well, CC s can provide a great source of Income, but is there another way?
1. The Concept: Hold a Collateral Long Position and then sell weekly premium against the position What makes the best collateral position? 1. Long Stocks or ETF s? 2. Zero Collateral Position? 3. LEAPS? (Long-Term Equity Anticipation Securities)
Pro s & Con s Zero Collateral: Sell weekly naked weekly positions Naked Puts With no stops Risk is very high! For short Calls Risk is unlimited Can t short calls in an IRA Ties up Margin/Capital Long Stocks or ETF s: Capital Intensive No Expiration Capital Intensive Delta = 1 Hedging?
How to Trade Weekly Options for Wealth & Income But Is this Strategy Worth Your Effort? Yes because of Weekly Options Weekly vs Monthly Options OTM Call Option - SPY Monthly SPY Nov 205C = $2.24 (1.1% of SPY) How Many Week s until Nov 20 th? Six - SPY Weekly SPY Oct 205C = $0.55 (0.273% of SPY) - If an OTM Call every week is 0.55 then over the next 6 weeks this equates to $3.3 - This is a difference of $1.06 in potential premium, 47% more premium - This got my attention
How to Trade Weekly Options for Wealth & Income Plusses 1. Weekly trades that generates cash in a challenging market 2. Develops Patience & Persistence 3. Develops Technical Skills 4. Target Return is 100% over the life of the long option (the LEAPS) Cover Collateral Position plus 100% 5. Less Capital required than buying the Stock/ETF and writing covered calls Greater Leverage Challenges 1. The underlying option (LEAPS) may expire worthless! Index ETF s Better? Change in Mind Set Required This is not your Daddy s Covered Calls 2. Trade goes against you during the week 3. Short option assigned (Over 4 years I ve had three options exercised) 4. Timing (Target Shoot)
Cashflow Trades with Strategy 2 Strategy II: Options The objective of this strategy is to use Active Trend Trading Triggers for short to intermediate swing trades using directional option strategies. Expected hold time is a few days to a few weeks. (10% of Capital: 4 positions) Focusing on Cashflow would mean either buying directional Option Positions and closing at set stop loss or set profit targets Or Selling option positions to collect Weekly Premium What type of stocks or ETFs will lend themselves towards these cashflow trades?
Cashflow Trades with Strategy 2 Strategy II: Options The objective of this strategy is to use Active Trend Trading Triggers for short to intermediate swing trades using directional option strategies. Expected hold time is a few days to a few weeks. (10% of Capital: 4 positions) What type of stocks or ETFs will lend themselves towards these cashflow trades? 1. Stocks/ETFs with High OI Weekly Options Chains 2. Average Weekly Ranges of $5.00 I like TSLA, NVDA, NFLX due to repeating technical patterns
Cashflow Trades TSLA: Weekly Range $15.00; Liquid Weekly Options NVDA: Weekly Range $7.00; Liquid Weekly Options NFLX: Weekly Range $7.00; Liquid Weekly Options Directional Weekly Calls or Puts (if in strong uptrend no Puts) - Go out up to 2 weeks - Delta = 0.60 or better - How many? What is our desired weekly cashflow? $500, $1000, $1500 - How much of the weekly move will we need to catch? Start estimate with 60-70% - Stop Loss at 50% Directional Credit Spreads Similar rules Triggers: Support/Resistance TSI Tick Up/Tick Down on Intraday, Daily or Weekly Charts How would this work for NFLX
Cashflow Strategy 2 Option Trades Take a closer look at NFLX What is the three chart timeframes saying? Is there identifiable technical patterns? Support/Resistance worth waiting for? Wait for the Daily or Weekly Signals? Set Alert or Conditional Order?