Meetup Slides for July 18, 2021
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This document provides an agenda and overview for a presentation on disciplined trading. It discusses: 1. Who is providing the presentation - individuals from Vancouver Disciplined Trading Hub and Prosperis Passive Income Strategies. 2. What disciplined trading involves - having a conviction, catalyst, and plan for each trade as well as predefined risk management and cutting losses. 3. A practice disciplined trade using an iron condor options strategy on the S&P 500 as an example to illustrate concepts like being non-directional and managing risk. The document concludes by providing takeaways on being disciplined, making money without directional bets, the benefits of leverage with options, and opportunities
Meetup Slides for July 18, 2021
- 1. Educating Since Jan 2017
- 2. 1. Who are we? 2. What is Disciplined Trading? 3. A Practice Disciplined Trade Meetup Agenda
- 3. This is a presentation prepared for Education purposes only. Neither Vancouver Disciplined Trading Hub (VDTH) or Prosperis Passive Income Strategies (PPIS) nor any of its personnel are registered broker-dealers or investment advisors. We may mention that we consider certain securities or positions to be good candidates for the types of strategies we are discussing or illustrating. This does not mean that we are telling you to trade these exact strategies or securities. Keep in mind that we are not providing you with any specific recommendations or personalized advice about your own trading activities. The information we are providing is not tailored to any particular individual. Any mention of a particular security is not a recommendation to buy, sell, or hold that or any other security, or a suggestion that it is suitable for any specific person. Trading ALWAYS involves a risk of loss, even if we are discussing strategies that are intended to limit risk. VDTH and PPIS are not subject to trading restrictions. We could have a position in a security or initiate a position in a security we mention at any time. Disclaimer
- 4. Who are We? SUNDAY 6:00PM CEDAR COTTAGE PUB, VANCOUVER www.meetup.com/vdthub www.slideshare.net/vdth Educating Since Jan 2017 SKYPE
- 5. Who are We? Karim Adatia, CPA Tax Auditor (2008 – 2016) Full-time Stock Options Trader (2016 - Present) Financial Educator (2016 - Present) www.ppis.ca TRADING INC. Canada Revenue Agency
- 6. What is Disciplined Trading? Trade based on: 1) CONVICTION (based on what is PERCEIVED in any given moment.) 2) CATALYST (A fundamental or technical reason/opinion) 3) COMPLACENCY (Eg. Wait for a bull market to return Convert a trade to an investing position) What a Disciplined Retail Trader will Do … 1) PREDEFINE their risk BEFORE taking a trade 2) CUT THEIR LOSSES without hesitation (when the catalyst fails) 3) MANAGE using a SYSTEMATIC and CONSISTENT money management plan What Most Retail Traders Do…
- 7. 1. Who are we? 2. What is Disciplined Trading? 3. A Practice Disciplined Trade Meetup Agenda
- 8. What are Equity Options? An option is a contract that to buy or sell a certain amount of stock. allows you RIGHT or OBLIGATION BUY SELL When you buy, you have a RIGHT. When you sell, you have an OBLIGATION. What can we do with Option Contracts?
- 9. Why trade Equity Options? Leverage = 1 to 100 1 option contract controls 100 shares Bullish Stock Trader Apple Inc. (AAPL) costs $100.00/share 100 shares would cost = $10,000. Apple Inc. share goes to $105.00/share Stock Trader makes $500 or 5% profit. Bullish Options Trader Apple Inc. (AAPL) costs $100.00/share 1 contract costs $5.00, so trader pays $500. Apple Inc. share goes to $105.00/share The Option contract goes to $6.80. Options Trader makes $180 or 36% profit.
- 10. A Call Option is an option contract that gives the buyer (holder) the right to buy, and gives the seller (writer) the obligation to sell a 100 shares of a stock at the given strike price on or before the expiration date of the contract. A Put Option is an option contract that gives the buyer (holder) the right to sell, and gives the seller (writer) the obligation to purchase 100 shares of a stock at the given strike price on or before the expiration date of the contract. Types of Option contracts CALL PUT (You Choose) (You Choose) (Market decides) (You Choose) (You Choose) (You Choose) (Market decides)
- 11. SELL BUY (SHORT/WRITE) (LONG) THE RIGHT TO: THE RIGHT TO: THE OBLIGATION TO: THE OBLIGATION TO: Buy Stock Sell Stock Sell Stock Buy Stock PUT CALL WHEN WE DO ALL FOUR – WE ARE NON-DIRECTIONAL!
- 12. https://www.youtube.com/watch?v=Eg8IyTPoaQY Trading Range Put Spread Call Spread The Iron Condor Options Strategy on a Stock FULL VERSION: SHORT VERSION: https://tinyurl.com/9hd28mt5 https://www.youtube.com/watch?v=Eg8IyTPoaQY
- 13. Non-Directional Trade No opinion on whether market goes up or down.
- 14. 4100 4325 4550 Write a Put at this Strike Price Write a Call at this Strike Price The Iron Condor Options Strategy on an Index
- 15. Iron Condor Trade Characteristics 1. Option Writing Write: To Sell an Option 2. Range-bound Confidence Interval: 95% 3. Index-linked Ticker: SPX 4. Out-The-Money No Intrinsic Value, Only Time Value 5. Average Return Goal of 8% in 3 weeks 6. 25-day Timeframe Guaranteed Time Decay
- 16. The Guarantee with Options – Time will Decay $$$ Time Remaining Until Expiration Date (Days) Option Time Value ($) SELL BUY BACK 90 60 30 0
- 17. SPX (S&P 500) SHORT CALL: = 4550 4325 4550 4100 95% CONFIDENCE INTERVAL : Under NORMAL Volatility Conditions TRADING RANGE: 4100 – 4550 SHORT PUT: = 4100 LONG PUT as protection 5 points away LONG CALL as protection 5 points away 4555 4095
- 18. THE VOLATILITY INDEX – TICKER: VIX 18 25
- 19. Practice Trade Get spreadsheet from www.ppis.ca/Meetup
- 20. Our Track Record (Feb 2021 - Current) www.meetup.com/VDTHub Message Boards SPX Iron Condor Track Record
- 21. Our Previous Track Record (Apr 2018 – Feb 2021) www.meetup.com/VDTHub Message Boards SPX Iron Condor Track Record
- 22. Determining Expectancy Steps for calculation expectancy: 1. Calculate your win and loss ratio 2. Calculate your reward to risk ratio 3. Combine those two ratios into an expectancy ratio SPX Trade Expectancy 1. Win and loss ratio: Win ratio = Wins/Total Trades Loss ratio = Losses/Total Trades 2. Reward to risk ratio: Avg. Winner / Avg. Loser 3. Expectancy ratio: (Reward to Risk ratio x Win ratio) – Loss ratio SPX PRACTICE TRADE 72/85 = 84.70% 10/84 = 15.30% $564.58/$357.69 = 157.84% (157.84% x 84.70%) – 15.30% = +118.41% Win Ratio: Loss Ratio: R2R Ratio: Exp Ratio:
- 23. How Many Contracts to Trade should I trade? www.optionalpha.com/blog/how-many-options-contracts-you-can-trade How Large of a Portfolio do I need? Depends on broker. Depends on commissions. Depends on risk tolerance. Recommended at least US$750/trade on SPY at a time. Recommend at least 3 SPY contracts at a time.
- 24. Apply with caution Disciplined Traders … 1) Predefine their risk before taking a trade 2) Cut their losses without hesitation 3) Use a systematic money management plan to make consistent profits. This Strategy… 1) Predefines your risk 2) Has an adjustment plan 3) Can be systematic / automatic with trade alerts Has positive expectancy (is therefore consistent)
- 25. Takeaways!! 1) Be Disciplined! Whether you are trading stocks, options, currency or futures. 2) You Can Make Money by being Non-Directional! 3) Equity Options give you leverage that stocks can’t! 4) If you are interested in this particular strategy, (1) Come to VDTH Meetups each week or (2) Follow the Practice Trades on Discussion Board. and only then…
- 26. Full Workshop SFU HARBOUR CENTRE (DOWNTOWN) 515, W. Georgia Street, Vancouver, BC V6B 5K3 Register at : WWW.PPIS.CA/SERVICES Workshop (3 hours) + Workbook + 1-1 Coaching (1 hour) + Weekly support via VDTHub Meetup & Contact me if interested in SKYPE Course. Methodology in Detail Adjustment / Stops Entry Criteria & Risk management Taking Advantage of Volatility
- 27. US ON FACEBOOK www.facebook.com/ppistrategies If you Liked the Presentation, Write us a review! www.ppis.ca
- 28. karim@ppis.ca
- 29. Backup Slides
- 32. OUTCOMES WHEN TRADING OPTIONS If you believe a stock will go UP: BUY A CALL • You are betting the price of the stock will go UP • The person you sell the call to is betting the price will go DOWN or STAY THE SAME When you buy a call, you can win 1 out of 3 ways When you sell a call, you can win 2 out of 3 ways YOU WIN 1 NEUTRAL 2 YOU LOSE 3 YOU LOSE
- 33. OUTCOMES WHEN TRADING OPTIONS If you believe a stock will go UP: SELL A PUT • You are betting the price of the stock will go UP or STAY THE SAME • The person you sell the put to is betting the price will go DOWN When you sell a put, you can win 2 out of 3 ways When you buy a put, you can win 1 out of 3 ways YOU WIN 1 NEUTRAL 2 YOU WIN 3 YOU LOSE … Maybe
- 34. OUTCOMES WHEN TRADING OPTIONS If you believe a stock will go DOWN: BUY A PUT • You are betting the price of the stock will go DOWN • The person you sell the put to is betting the price will go UP or STAY THE SAME When you buy a put, you can win 1 out of 3 ways When you sell a put, you can win 2 out of 3 ways YOU WIN 1 3 YOU LOSE NEUTRAL 2 YOU LOSE
- 35. OUTCOMES WHEN TRADING OPTIONS If you believe a stock will go DOWN: SELL A CALL • You are betting the price of the stock will go DOWN or STAY THE SAME • The person you sell the put to is betting the price will go UP When you sell a call, you can win 2 out of 3 ways When you buy a call, you can win 1 out of 3 ways NEUTRAL 2 YOU WIN YOU WIN 1 3 YOU LOSE … Maybe