Post on 10-Apr-2018
8/8/2019 Art of Making 10% PM
1/27
OptionPundit 2006-2010
The Art of Making 10% a
Month
May 15, 2010
With
Manoj Agrawal
Founder OptionPundit
www.OptionPundit.Com
http://www.optionpundit.com/http://www.optionpundit.com/http://www.optionpundit.com/http://www.optionpundit.com/http://www.optionpundit.com/http://www.optionpundit.com/8/8/2019 Art of Making 10% PM
2/27
OptionPundit 2006-2010
Disclosure
Options involve risks and are not suitable for all investors. Prior to
buying or selling an option, a person must receive a copy of
Characteristics and Risks of Standardized Options. Copies are available
from your broker, by calling 1-888-OPTIONS (USA), or at
www.theocc.com.
OptionPundit is not a RIA and is not liable for any profit/loss occurred
due to investment decision made on the basis of this presentation. The
information in this presentation is provided solely for general education
and information purposes. No statement should be construed as a
recommendation to buy or sell a security or to provide investment
advice.
For detailed legal notices and disclaimer, please visit
(http://www.OptionPundit.net/legal-and-disclaimer). Past performance
is not indicative of future results.
http://www.theocc.com/http://www.optionpundit.net/legal-and-disclaimerhttp://www.optionpundit.net/legal-and-disclaimerhttp://www.theocc.com/8/8/2019 Art of Making 10% PM
3/27
OptionPundit 2006-2010
Vision
OptionPundit is your trustworthy
partner who passionately helpsyou achieve consistent income
through option trading
8/8/2019 Art of Making 10% PM
4/27
OptionPundit 2006-2010
Bookmark OptionPundit.com today..
OP Mentoring(coming soon)
PaidOPNewsletter
Free Articles
Free and PaidForum
Free Toolbox
OptionPundit
http://www.optionpundit.net/op-newsletterhttp://www.optionpundit.net/op-newsletterhttp://www.optionpundit.net/articleshttp://www.optionpundit.net/forumhttp://www.optionpundit.net/forumhttp://www.optionpundit.net/toolboxhttp://www.optionpundit.net/http://www.optionpundit.net/http://www.optionpundit.net/toolboxhttp://www.optionpundit.net/forumhttp://www.optionpundit.net/forumhttp://www.optionpundit.net/forumhttp://www.optionpundit.net/articleshttp://www.optionpundit.net/op-newsletterhttp://www.optionpundit.net/op-newsletterhttp://www.optionpundit.net/op-newsletter8/8/2019 Art of Making 10% PM
5/27
OptionPundit 2006-2010
Key Issues/Experiences with Condor
1. Transaction fee (too many contracts)
2. Gain little, risk so much
3. Short strike always seems to threaten
4. Iron Condor vs. other strategies5. Strike price selection
6. Underlying selection
7. Manage/adjusting the trade during holding
period8. Always applicable?
9. Implied Volatility
8/8/2019 Art of Making 10% PM
6/27
OptionPundit 2006-2010
Key Discussion Points
Professional Option Trading
Building a Condor
Real Examples Risk Adjustments
Way Forward
8/8/2019 Art of Making 10% PM
7/27
OptionPundit 2006-2010
Power of Compounding
What % per month is required
to double capital in a Year?
~ 6%
8/8/2019 Art of Making 10% PM
8/27
OptionPundit 2006-2010
Professional Trading
Know your business
Respect for Risk
Winning Secret = No. of Wins x $$$ >No. of Losses x $
Power of Compounding
Trading Journal
8/8/2019 Art of Making 10% PM
9/27
OptionPundit 2006-2010
OPNewsletter
Performance Size Matters
8/8/2019 Art of Making 10% PM
10/27
OptionPundit 2006-2010
Life Offers Options
Call and Put ; 2 options = Hundreds of Money Making Opportunities
Call Option
A call option is a financial contract between two parties, the buyer and the seller of this type ofoption. It is the option to buy shares of stock at a specified time in the future. Often it is simplylabeled a "call". The buyer of the option has the right, but not the obligation to buy an agreedquantity of a particular commodity or financial instrument (the underlying instrument) from the
seller of the option at a certain time (the expiration date) for a certain price (the strike price). Theseller (or "writer") is obligated to sell the commodity or financial instrument should the buyer sodecide. The buyer pays a fee (called a premium) for this right.
Put Option
A put option (usually just called a "put") is a financial contract between two parties, the writer(seller) and the buyer of the option. The buyer acquires a short position by purchasing the right tosell the underlying instrument to the seller of the option for specified price (the strike price)during a specified period of time. If the option buyer exercises their right, the seller is obligated to
buy the underlying instrument from them at the agreed upon strike price, regardless of thecurrent market price. In exchange for having this option, the buyer pays the seller or option writera fee (the option premium).
What the heck?
8/8/2019 Art of Making 10% PM
11/27
OptionPundit 2006-2010
OP OptionsMatrixTM
Type Call Put
Buyer
(Right)
Buy Stocks Sell Stocks
Seller
(Obligation)
Sell Stocks Buy Stocks
8/8/2019 Art of Making 10% PM
12/27
OptionPundit 2006-2010
Call Vs. Put
Long Call Long Put
8/8/2019 Art of Making 10% PM
13/27
OptionPundit 2006-2010
Iron Condor, In Simple terms
Bear and Bull in Harmony
(Market Neutral); Bear Call
+ Bull Put Credit Spreads
Risk = Difference in Strikes-
Credit
Lower Breakeven= Short
Put - Credit
Upper Breakeven= Short
Call + Credit
Returns = Credit/Margin
8/8/2019 Art of Making 10% PM
14/27
OptionPundit 2006-2010
Genesis of Iron Condor
Bull Put Credit Spread Bear Call Credit Spread
+
Iron Condor
=
8/8/2019 Art of Making 10% PM
15/27
OptionPundit 2006-2010
Key Consideration
Underlying
Distance between shorts
When to adjust How to adjust
Exit Strategy
8/8/2019 Art of Making 10% PM
16/27
OptionPundit 2006-2010
Real Trade Example
March 30, 2010 NDX @ 1,967 Sell to open May 2100/2125 Bear Call Credit Spread (Sell May 2100 Call,
Buy May 2125 Call) and ( @$2.55 credit)
Sell to open May 1825/1800 Bull Put Credit spread (Sell May 1825 Putand Buy May 1800 Put) (@2.70 credit)
This whole Iron Condor will generate roughly $525 credit by risking $1,975;
~26%
8/8/2019 Art of Making 10% PM
17/27
OptionPundit 2006-2010
A Pix is worth 1000 words
8/8/2019 Art of Making 10% PM
18/27
OptionPundit 2006-2010
Everything Seems OK..
An Excellent 300 Point Condor
8/8/2019 Art of Making 10% PM
19/27
OptionPundit 2006-2010
Until the Unexpected
Real Life> 100 up, 70 down, 60 up, 300 Down, 230 up, 100 down again!!!!
Lower Breakeven
Upper Breakeven
8/8/2019 Art of Making 10% PM
20/27
OptionPundit 2006-2010
Risk Management
May 15 2010 close for +238%
~ 4:1(Risk: Reward) ~1:18
(Risk: Reward)~4:1
(Risk: Reward)
8/8/2019 Art of Making 10% PM
21/27
OptionPundit 2006-2010
GOOG IC- DIY
GOOG Iron Condor Example, May 11, 2010
- June IC 2010, Price - $509
- Sell to open 570/580 BCS Credit @ $72
- Sell to open 450/440 BPS Credit @ $85- Risk= $1,000 - $157= $843
- Returns = $157/$843 = 18.6%
- Breakeven = $448.43 and $571.57
- Time required = 5 weeks
- 10 times/year = $1000 $5,500
8/8/2019 Art of Making 10% PM
22/27
OptionPundit 2006-2010
A Beautiful Mind
8/8/2019 Art of Making 10% PM
23/27
OptionPundit 2006-2010
A Pix is Worth 1000 words
8/8/2019 Art of Making 10% PM
24/27
OptionPundit 2006-2010
A Pix is Worth 1000 words
8/8/2019 Art of Making 10% PM
25/27
OptionPundit 2006-2010
Discussion Points for Next Time
Trading psychology
Adjustment, what point
Strategies at that point
8/8/2019 Art of Making 10% PM
26/27
OptionPundit 2006-2010
Bookmark OptionPundit.com today..
OP Mentoring(coming soon)
PaidOPNewsletter
Free Articles
Free and PaidForum
Free Toolbox
OptionPundit
http://www.optionpundit.net/op-newsletterhttp://www.optionpundit.net/op-newsletterhttp://www.optionpundit.net/articleshttp://www.optionpundit.net/forumhttp://www.optionpundit.net/forumhttp://www.optionpundit.net/toolboxhttp://www.optionpundit.net/http://www.optionpundit.net/http://www.optionpundit.net/toolboxhttp://www.optionpundit.net/forumhttp://www.optionpundit.net/forumhttp://www.optionpundit.net/forumhttp://www.optionpundit.net/articleshttp://www.optionpundit.net/op-newsletterhttp://www.optionpundit.net/op-newsletterhttp://www.optionpundit.net/op-newsletter8/8/2019 Art of Making 10% PM
27/27
OptionPundit 2006-2010
The Great Paradox
Trading is Complex because it isSimple
OptionPundit.Com
http://www.optionpundit.net/http://www.optionpundit.net/