Art of Making 10% PM

8/8/2019 Art of Making 10% PM

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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/


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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/


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Vision

OptionPundit is your trustworthy

partner who passionately helpsyou achieve consistent income

through option trading


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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


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Key Discussion Points

Professional Option Trading

Building a Condor

Real Examples Risk Adjustments

Way Forward


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Power of Compounding

What % per month is required

to double capital in a Year?

~ 6%


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Professional Trading

Know your business

Respect for Risk

Winning Secret = No. of Wins x $$$ >No. of Losses x $

Power of Compounding

Trading Journal


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OPNewsletter

Performance Size Matters


10/27


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?


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OP OptionsMatrixTM

Type Call Put

Buyer

(Right)

Buy Stocks Sell Stocks

Seller

(Obligation)

Sell Stocks Buy Stocks


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Call Vs. Put

Long Call Long Put


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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


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Genesis of Iron Condor

Bull Put Credit Spread Bear Call Credit Spread

+

Iron Condor

=


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Key Consideration

Underlying

Distance between shorts

When to adjust How to adjust

Exit Strategy


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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%


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A Pix is worth 1000 words


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Everything Seems OK..

An Excellent 300 Point Condor


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Until the Unexpected

Real Life> 100 up, 70 down, 60 up, 300 Down, 230 up, 100 down again!!!!

Lower Breakeven

Upper Breakeven


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Risk Management

May 15 2010 close for +238%

~ 4:1(Risk: Reward) ~1:18

(Risk: Reward)~4:1

(Risk: Reward)


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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


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A Beautiful Mind


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A Pix is Worth 1000 words


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A Pix is Worth 1000 words


25/27


Discussion Points for Next Time

Trading psychology

Adjustment, what point

Strategies at that point


26/27


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The Great Paradox

Trading is Complex because it isSimple

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Art of Making 10% PM

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