sheridan top 5 mistakes when creating monthly income feb10
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8/13/2019 Sheridan Top 5 Mistakes When Creating Monthly Income Feb10
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Dan SheridanDan Sheridan
TopTop 5 mistakes when creating monthly5 mistakes when creating monthly
incomeincome
FebFeb 18,18, 20102010
Sheridan Options Mentoring, Inc.www.SheridanMentorin .com
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Disclaimer Disclaimer
The views of third party speakers and their materials are their own and do not necessarily represent the
views of Chicago Board Options Exchange, Incorporated (CBOE). Third party speakers are not affiliated
with CBOE. This presentation should not be construed as an endorsement or an indication by CBOE of
the value of any non-CBOE product or service described in this presentation.
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 fromyour broker, by calling 1-888-OPTIONS, or at www.theocc.com. The information in this presentation is
provided solely for general education and information purposes. No statement should be construed as a
recommen a on o uy or se a secur y or o prov e nves men a v ce. uppor ng ocumen a on or
any claims, comparisons, statistics or other technical data in this presentation is available at Sheridan
Options Mentoring ([email protected]). Past performance is not indicative of future results.
Parameters relating to past performance of strategies discussed are not capable of being duplicated. Inorder to simplify the computations, commissions, fees, margin interest and taxes have not been included
in the examples used in this presentation. These costs will impact the outcome of all stock and options
transactions and must be considered prior to entering into any transactions. Multiple leg strategies
involve multiple commission charges. Brokerage firms may require customers to post higher margins
than the minimum margins specified in this presentation. Investors should consult their tax advisor about
.
reflect the views of Chicago Board Options Exchange, Incorporated (CBOE). CBOE is not affiliated with
Sheridan Options Mentoring. This presentation should not be construed as an endorsement or an
indication by CBOE of the value of any non-CBOE product or service described in this presentation.
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Point #1: NoPoint #1: No Plan or RoadPlan or Road MapMap
Financial edge to start a monthly
Probabili ties or Decay?
What strategies to trade? Which vehicles?
Risk Management Plan for each strategy? What todo when trade goes bad?
Key: Do you have a passion? Do you think it’s easyor hard to be good trader?
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One Day
Standard Deviations (Sigma)Standard Deviations (Sigma)
Price 100.00$
Volatility 19.1%
1 σ 1.00$ 99.00$ to 101.00$
2 σ 2.00$ 98.00$ to 102.00$
3 σ 3.00$ 97.00$ to 103.00$
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FREE STANDARD DEVIATION CALCULATOR AT:
http://www.sheridanmentoring.com/sigma
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Portfolio PlanPortfolio Plan
,
Diagonal SpreadsOTM ButterfliesVertical Spreads
Calendar SpreadsDouble Calendar SpreadsDouble Diagonals
Directional CalendarsLong Straddles
ATM ButterfliesCondors
LEAPSCovered Writes/StraddlesLong Stock
Long Term Calendars
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Income StrategiesIncome Strategies
Calendars and Butterflies focus on Time decay
Iron condors focus on probabilities
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Big Picture PortfolioBig Picture Portfolio-- Sample PortfolioSample Portfolio
$500,000 50%, 40%, 10% Mix$500,000 50%, 40%, 10% Mix $250,000 Long Term Strategies ( 180 days or
longer)- Collars, Covered Writes, Long Stock, LongTerm Calendars
$200,000 Monthly Income Strategies ( 25-60 days)-Condors , Credit Spreads, Calendars and MultipleCalendars, Butterflies, Double Diagonals
$50,000 Speculative Strategies (1-90 days)-Straddles, Earnings Plays, Long calls and puts,Debit s reads Reverse Calendars Back s reads
How would I make my percentages?
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How to Scale toHow to Scale to LargerLarger TradesTrades
Month SizeLive
Trades
Per MonthMonthly
Profit
1‐6 $10,000 4‐6 Break even
7‐12 $20,000 4‐7 at least 3%
‐ ‐ ‐,
19‐24 $80,000 4‐8 4‐7%
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Sample PlanSample Plan-- $10,000 Portfolio$10,000 Portfolio
Monthl Income NonMonthl Income Non--DirectionalDirectional $1000 Cash
$3000 Condors
$3000 Butterflies
$3000 Calendars and Double Diagonals
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Points #2Points #2 andand #3#3 combined:combined:
Plan and Risk Mana ementPlan and Risk Mana ement Profit target 15%?
Max Loss -20%?
This is a business. We can’t make $1000 in a good.
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RUT Butterfly example to demonstrateRUT Butterfly example to demonstrate
Plan and Risk ManagementPlan and Risk ManagementDate: 1/19/2010Date: 1/19/2010 RUT Price: $649.07RUT Price: $649.07 +11.11+11.11
Options Price IV Delta TradeFEB(31)
a s . . . +
650 Calls $14.00 19.3% 51.5 ‐4
610 Calls $42.80 22.9% 85.6 +2
Margin 3,290$Delta -11.2
Gam ma -2.4
eta .Vega -123.9
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RUT ButterflyRUT Butterfly
Date: 1/19/2010Date: 1/19/2010 RUT Price: $649.07RUT Price: $649.07 +11.11+11.11
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RUT ButterflyRUT Butterfly
Date:Date: 1/21/20101/21/2010 RUTRUT Price: $Price: $628.40628.40 --11.2111.21
Options Price IV Delta Trade
690 Calls $0.65 19.4% 3.5 +2
650 Calls $6.00 20.0% 27.8 ‐4
610 Calls $26.60 23.0% 71.8 +2
Margin 3,290$
Loss (240)$
Delta 39.5
Gam ma -2.0
Theta 21.7
Vega -81.7
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RUT ButterflyRUT Butterfly
Date: 1/21/2010Date: 1/21/2010 RUT Price: $628.40RUT Price: $628.40 --11.2111.21
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RUTRUT Butterfly AdjustmentButterfly Adjustment
Date: 1/21/2010Date: 1/21/2010 RUT Price: $628.40RUT Price: $628.40 --11.2111.21Options Price IV Delta Trade New
FEB(29)
. . .
650 Calls $6.00 20.0% 27.8 ‐4610 Calls $26.60 23.0% 71.8 +2
-. . .620 Puts $13.30 24.4% -37.9 ‐4
580 Puts $4.40 29.2% -10.5 +2
Delta 39.5
Gamma -2.0
e ore us ng
Delta 6.7
Gamma -4.0
er us ng
Margin Before Adjusting 3,290$
e a .Vega -81.7
e a .Vega -181.0
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Margin After Adjusting 6,170$
Loss (240)$
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RUT Butterfly AdjustmentRUT Butterfly Adjustment
Date: 1/21/2010Date: 1/21/2010 RUT Price: $628.40RUT Price: $628.40 --11.2111.21
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RUTRUT ButterflyButterfly
Date:Date: 1/22/20101/22/2010 RUTRUT Price: $Price: $617.01617.01 --11.3511.35
Options Price IV Delta Trade
FEB(28)
690 Calls $0.65 23.0% 2.0 +2
650 Calls $4.80 23.2% 18.0 ‐4
610 Calls $21.70 26.7% 60.5 +2
660 Puts $47.00 24.8% -88.8 +2
620 Puts $19.90 26.8% -50.5 ‐4
580 Puts $7.70 32.1% -15.8 +2
Margin 6,170$
Loss (660)$Delta 45.5
Gam ma -3.2
e a .Vega -140.1
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RUT ButterflyRUT Butterfly
Date: 1/22/2010Date: 1/22/2010 RUT Price: $617.01RUT Price: $617.01 --11.3511.35
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RUTRUT Butterfly AdjustmentButterfly Adjustment
Date: 1/22/2010Date: 1/22/2010 RUT Price: $617.01RUT Price: $617.01 --11.3511.35Options Price IV Delta Trade New
‐
FEB(28)
. . .
650 Calls $4.80 23.2% 18.0 ‐
4 +2610 Calls $21.70 26.7% 60.5 +2 ‐1
660 Puts $47.00 24.8% -88.8 +2
650 Puts $38.70 24.8% -81.9 +1
620 Puts $19.90 26.8% -50.5 ‐4
610 Puts $15.70 27.9% -39.5 ‐2580 Puts $7.70 32.1% -15.8 +2
570 Puts $6.30 34.0% -11.7 +1
Mar in Before Ad ust in 6 170Before Ad ustin After Ad ustin
Margin After Adjusting 6,270$Loss (660)$
Delta 45.5
Gamma -3.2
Delta 4.6
Gamma -3.8
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.
Vega -140.1
.
Vega -169.9
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RUT Butterfly AdjustmentRUT Butterfly Adjustment
Date: 1/22/2010Date: 1/22/2010 RUT Price: $617.01RUT Price: $617.01 --11.3511.35
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RUTRUT ButterflyButterfly
Date:Date: 1/27/20101/27/2010 RUT Price: $RUT Price: $618.42618.42 +6.26+6.26Options Price IV Delta Trade
FEB(23)
690 Calls $0.15 20.2% 1.0 +1
650 Calls $2.30 19.0% 17.0 ‐2610 Calls $18.40 22.7% 62.7 +1
u s . . - . +
650 Puts $34.60 20.3% -83.0 +1
620 Puts $14.70 22.2% -48.8 ‐4
- ‐. . .580 Puts $4.00 27.6% -14.0 +2
570 Puts $2.90 29.1% -10.2 +1
Margin 6,270$Loss 350$
Delta -2.1Gam ma -4.4
Theta 69.6
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Vega -174.1
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RUT ButterflyRUT Butterfly
Date: 1/29/2010Date: 1/29/2010 RUT Price: $602.00RUT Price: $602.00 --5.935.93Options Price IV Delta Trade
FEB(23)
690 Calls $0.10 0.1 +1
650 Calls $0.80 20.7% 5.4 ‐2610 Calls $9.20 22.2% 42.2 +1
. - .650 Puts $50.20 -94.5 +1
620 Puts $24.70 23.5% -70.6 ‐4
- ‐. . .580 Puts $7.10 27.6% -23.5 +2
570 Puts $5.10 29.0% -16.4 +1
Margin 6,270$Loss 215$
Delta 76.4Gam ma -3.7
Theta 58.7
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Vega -117.4
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RUT Butterfly AdjustmentRUT Butterfly Adjustment
Date: 1/29/2010Date: 1/29/2010 RUT Price: $617.01RUT Price: $617.01 --5.935.93
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RUTRUT ButterflyButterfly
Date:Date: 2/4/20102/4/2010 RUTRUT Price:Price: $589.77$589.77 --20.8920.89Options Price IV Delta Trade
FEB(15)
660 Puts $70.20 -99.6 +2
650 Puts $60.20 -98.8 +1630 Puts $41.10 -93.3 +1
. . - . ‐
610 Puts $24.20 22.9% -76.6 ‐2
590 Puts $12.20 25.2% -48.0 ‐2
-. . .570 Puts $5.70 28.3% -23.1 +1
560 Puts $2.65 31.9% -10.3 +1
Margin 6,670$Loss 740$
Delta 103.7Gam ma -3.9
Theta 54.2
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Vega -97.9
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RUT ButterflyRUT Butterfly
Date: 2/4/2010Date: 2/4/2010 RUT Price: $589.77RUT Price: $589.77 --20.8920.89
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Point #4Point #4 -- Stay with SAME vehicle, SAMEStay with SAME vehicle, SAME
strate , SAME methodolo !!strate , SAME methodolo !! Switch vehicles monthly? NO
How are craftsmen or experts developed?
Can you follow a plan and stay disciplined?
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Point #5 Do you really , really love thisPoint #5 Do you really , really love this
stuff? PASSIONstuff? PASSION First 1-1 1/2 years you might imitate The Three
Stooges more than a trader!
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L t T d d J i O C it !L t T d d J i O C it !
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Learn to Trade and Join Our Community!Learn to Trade and Join Our Community!
Trading takes a long t ime to learn.Trading takes a long t ime to learn.Our mentoring program has lifetimeaccess so you never stop learning.
The fastest way to learn a new skil l is with an experienced mentor.The fastest way to learn a new skil l is with an experienced mentor.It’s no different with learning to trade options. Our Mentors are all
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Our special community of over 750 active option traders helpseach other daily in our forums and trading groups. It’s like havinga partner to go to the gym with. You’re more likely to be successfulif you surround yourself with others doing the same activity.
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