2017 10 29 Meetup Slides
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This document provides an agenda for a meetup on disciplined trading. It includes an introduction to who will be presenting, an overview of disciplined trading strategies and concepts, a sample practice trade, and discussion of future weekly content. Disclaimers are provided noting that the presenters are not registered advisors and that any securities mentioned are not recommendations. The meetup information is provided for educational purposes only.
2017 10 29 Meetup Slides
- 1. Meetup Agenda • Who are we? • What is Disciplined Trading? • Non-Directional Practice Trade • Content for the week
- 2. This is a presentation prepared for Education purposes only. Neither Vancouver Disciplined Trading Hub (VDTH), Round Table Educators (RTE) 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, RTE 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
- 3. Who are We? 6:00 PM EVERY FRIDAY – SFU SURREY 6:00 PM EVERY SUNDAY – CEDAR COTTAGE PUB, VANCOUVER www.meetup.com/VDTHub www.slideshare.net/vdth
- 4. Who are We? Karim Adatia, CPA • Tax Auditor (2008 – 2016) • Full-time Stock Options Trader (2016 - ) • Financial Educator www.ppis.ca
- 5. What is Disciplined Trading? Place a trade based on: 1) CONVICTION (based on what is PERCEIVED as happening in any given moment.) 2) A CATALYST (A fundamental or technical reason/opinion) 3) COMPLACENCY (Eg. Wait for a bull market to return, convert to an investing position) But a Disciplined Trader will … 1) Predefine their risk before taking a trade 2) Cut their losses without hesitation (when catalyst fails) 3) Use a systematic money management plan to make consistent profits. What Most Traders Do…
- 6. What are Equity Options? An option is a contract that to buy or sell a certain amount of stock. allows you BUYING AN OPTION GIVES THE OWNER A RIGHT SELLING AN OPTION GIVES THE SELLER AN OBLIGATION RIGHT or OBLIGATION
- 7. Why trade Equity Options? Leverage. An option contract controls 100 shares of the underlying stock but costs a lot less! 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.
- 8. SELLBUY (SHORT)(LONG) CALL PUT THE RIGHT TO: THE RIGHT TO: THE OBLIGATION TO: THE OBLIGATION TO: Buy Stock Sell Stock Sell Stock Buy Stock CALL WHEN WE DO ALL FOUR – WE ARE NON-DIRECTIONAL!
- 9. Non-Directional Trade No opinion on whether market goes up or down.
- 10. Non-Directional Trade Characteristics 1. Option Writing (Write: To Sell an Option) 2. Range-bound (Confidence Interval: 95%) 3. Out-The-Money (No Intrinsic Value, Only TV) 4. Index-linked (Ticker: SPX) 5. Average Return (8% in 3 weeks) 6. 25-day Timeframe (Guaranteed Time Decay)
- 11. The Guarantee with Options – Time will Decay $$$ Time Remaining Until Expiration Date (Days) Option Time Value ($) SELL BUY BACK 90 60 30 0
- 12. The Iron Condor Options Strategy 2480 2580 2680
- 13. SPX (S&P 500) SHORT CALL: = 2680 2580 26802480 95% CONFIDENCE INTERVAL : Under Normal Volatility Conditions TRADING RANGE: 2480 – 2680 SHORT PUT: = 2480 LONG PUT as protection 5 points away LONG CALL as protection 5 points away 26852475
- 14. THE VOLATILITY INDEX – TICKER: VIX
- 15. Practice Trade WEEK OF: JAN 2 - 6 2017 STEP 1: INFORMATION -105.00 -100.00 (SPX VALUE) +100.00 +105.00 Long Put Short Put Short Call Long Call STEP 2: TRADE Watch Video: STEP 3: MANAGEMENT Watch Video: CALL ALERT: SPX Value + 65= PUT ALERT: SPX Value - 65= YOUR PRACTICE TRADE
- 17. 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: 43 trades. 43 wins. Win ratio = 100%, Loss ratio = 0% 2. Reward to risk ratio: Winner size (Avg) = $358. Loser size (Avg) = N/A. Risk-Reward Ratio = ∞ 3. Expectancy ratio: (Reward to Risk ratio x Win ratio) – Loss ratio = (∞ x 100% ) - 0% = + ∞
- 18. How much does the SPX Change on a Daily Basis? www.investing.com/indices/us-spx-500-historical-data+45
- 19. How much does the SPX Change on a Daily Basis? www.investing.com/indices/us-spx-500-historical-data-30
- 20. How much does the SPX Change on a Daily Basis? www.investing.com/indices/us-spx-500-historical-data+55
- 21. How much does the SPX Change on a Daily Basis? www.investing.com/indices/us-spx-500-historical-data+50
- 22. How much does the SPX Change on a Daily Basis? www.investing.com/indices/us-spx-500-historical-data+28
- 23. WORST DAY FOR THE S&P 500 IN 2017 2400 24652335 2.6% away (Put Alert) Index Value (Call Alert) 2.6% away
- 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 Wednesday Nov 15 – 6 PM SFU Harbour Centre (Downtown) Register at : www.ppis.yapsody.com Workshop (2.5 hours) + Workbook + 1-1 Coaching (1 hour) Methodology Adjustment Rules Risk management …
- 27. US ON FACEBOOK www.facebook.com/ppistrategies If you Liked the Presentation, Write us a review!
- 28. Content Disclaimer Content Availability to VDTH Meetup Members 1) Reference To Source 2) By Donation In the Content Portion of this Meetup we may play copyrighted material; the use of which has not been specifically authorized by the copyright owner. We are making such material available for the purposes of criticism, comment and review which constitutes the "fair use" of any such copyrighted material as provided for in Section 107 of the US Copyright Law. Not withstanding the provisions of sections 106 and 106A, the fair use of a copyrighted work for purposes such as criticism, comment or review is not infringement of copyright.
- 29. This Week’s Content Videos available by contact: karim@ppis.ca
- 30. karim@ppis.ca
- 31. Backup Slides
- 33. NON- DIRECTIONAL TRADES Stocks and Equity Options 3-month Program US$799 DIRECTIONAL TRADES FOR VIDEO ABOUT MMT PROGRAM: www.youtube.com/watch?v=hzhJBdGNwyo $200 off for VDTH Meetup Members (Contact us for details) FB PAGE: www.facebook.com/MasterMindTraders.official/ www.mastermindtraders.com/freevideos
- 34. 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
- 35. 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
- 36. 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
- 37. 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 WINYOU WIN 1 3 YOU LOSE … Maybe
- 38. VIX During the 2008 Financial Crisis