Ds Condor Adjust

Dan Sheridan
Income Strategy Adjustments for the Downside

Mar 31, 2011
Sheridan Options Mentoring, Inc. www.SheridanMentoring.com
Disclaimer
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, 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 recommendation to buy or sell a security or to provide investment advice. Supporting documentation for any claims, comparisons, statistics or other technical data in this presentation is available at Sheridan Options Mentoring (info@sheridanmentoring.com). Past performance is not indicative of future results. Parameters relating to past performance of strategies discussed are not capable of being duplicated. In order 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 any potential tax consequences. The views of third party speakers are their own and do not necessarily 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.
@ Copyright 2010. All rights reserved.
Page 2
Download The Presentation Slides!

You can download the slides here:
http://www.sheridanmentoring.com/x/cboe22
Page 3
Portfolio Plan
Income Strategies
Speculative Strategies
Long Term Strategies
Page 4
Portfolio Plan
Calendar Spreads Double Calendar Spreads Double Diagonals ATM Butterflies Condors
Collars LEAPS Covered Writes/Straddles Long Stock Long Term Calendars
Long Calls/Puts, Diagonal Spreads OTM Butterflies Vertical Spreads Directional Calendars Long Straddles
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How to Scale to a Larger Trades and Run a Successful Option Business

Month 16 712 1318 1924 Size $10,000 $20,000 $40,000 $80,000 LiveTrades PerMonth 34 34 34 34 Monthly Profit Breakeven atleast3% 45% 47%
How many different strategies should I trade? How many different vehicles should I trade? Should I do the same trade every month? How important is it WHEN you enter a trade? How much money will I make?
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Asset Allocation for Monthly Income Trades
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VIX 15 to 19 60% Long VEGA and 40% Short VEGA

z z z z
$10,000 Portfolio
$1000 in cash for adjustments
$5400 in Calendars and Double Diagonals $3600 in Condors, credit spreads and Butterflies 3-5 trades per month
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VIX 25 to 30 70% Short VEGA and 30% Long VEGA

z z z z
$10,000 Portfolio
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VIX 20 to 25 60% Short VEGA, 40% Long VEGA

z z z z
$10,000 Portfolio
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Credit Spread Traders SPX Price Chart

Date: 3/16/2011 SPX Price: $1256.88
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Credit Spread Before Down Move With No Adjustment

Date: 3/8/2011
Options 1280 Puts 1270 Puts
SPX Price: $1321.80

APR(38)
Price $17.10 $14.90 IV Delta Trade 10 +10 19.7% -26.0 20.3% -22.7
Warning Signs: When the spread is starting to go bad

Delta Gamma Theta Vega Credit Margin 33.1 -0.4 11.0 -85.6 2,200 7,800
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1. Delta of short 2. IV of short increases 10% 3. P/L down 30%-50% of max loss
Credit Spread Before Down Move With No Adjustment

Date: 3/8/2011 SPX Price: $1321.80
How important is todays (T+0) graph?
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SPX from 1322 to 1257 in 8 Days!

Date: 3/16/2011 SPX Price: $1256.88
8 Days Later Starting Price $1321.80
APR(30)
Options 1280 Puts 1270 Puts Price $45.50 $40.40 Orig Pr $17.10 $14.90 IV Delta Trade 10 +10 19.7% -58.9 20.7% -54.0
Delta Gamma Theta Vega Loss Margin
49.0 -0.1 -45.6 42.7 2,900 7,800
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SPX from 1322 to 1257 in 8 Days!

Date: 3/16/2011 SPX Price: $1256.88
8 Days in Trade Starting Price $1321.80
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Adjustment #1: Add a Long Put

Date: 3/8/2011
Options 1280 Puts 1270 Puts 1220 Puts
SPX Price: $1321.80

APR(38)
Price $17.10 $14.90 $7.60 IV Delta Trade 10 +10 +1 19.7% -26.0 20.3% -22.7 23.5% -11.5
Without Long Put

Delta Gamma Theta Vega Credit Margin 33.1 -0.4 11.0 -85.6 2,200 7,800
With Long Put

Delta Gamma Theta Vega Credit Margin 21.5 -0.2 -18.8 10.7 1,440 8,560
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Adjustment #1: Add a Long Put

Date: 3/8/2011 SPX Price: $1321.80
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Long Put Cuts Losses

Date: 3/16/2011 SPX Price: $1256.88
8 Days in Trade
Options 1280 Puts 1270 Puts 1220 Puts
Starting Price $1321.80
APR(30)
Price $17.10 $14.90 $7.60 IV Delta Trade 10 +10 +1 19.7% -26.0 20.3% -22.7 23.5% -11.5
Without Long Put

Delta Gamma Theta Vega Loss Margin 49.0 -0.1 -45.6 42.7 2,900 7,800
With Long Put

Delta Gamma Theta Vega Loss Margin 16.0 0.3 -104.0 177.2 1,310 8,560
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Long Put Cuts Losses

Date: 3/16/2011 SPX Price: $1256.88
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Adjustment #2: Directional Butterfly

Date: 3/11/2011 SPX Price: $1304.30
3 Days in Trade
Price $22.80 $20.30 $17.60
Starting Price $1321.80
APR(35)
Options 1290 Puts 1280 Puts 1270 Puts Orig Pr $17.10 $14.90 IV Delta Trade Adj 10 +10 +10 10 New +10 20 +10 18.0% -37.7 19.1% -33.1 19.8% -29.0
Before Adjusting
Delta Gamma Theta Vega Loss Margin 41.5 -0.4 4.5 -68.2 500 7,800
After Adjusting
Delta Gamma Theta Vega Loss Margin -4.6 0.0 15.2 -17.1 -500 300
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Adjustment #2: Directional Butterfly

Date: 3/11/2011 SPX Price: $1304.30
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Stock Down More: Why Still Profitable?

Date: 3/15/2011 SPX Price: $1281.90
APR(31)
Options 1290 Puts 1280 Puts 1270 Puts Price $35.00 $31.00 $27.50 Orig Pr $22.80 $18.70 $14.90 IV Delta Trade +10 20 +10 19.6% -49.5 20.5% -44.2 21.4% -39.3
Delta Gamma Theta Vega Profit Margin Original Margin

-4.1 0.0 8.9 -24.9 200 300 7,800
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Stock Down More: Why Still Profitable?

Date: 3/15/2011 SPX Price: $1281.90
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Stock Continues Lower: Still Profitable?

Date: 3/16/2011 SPX Price: $1256.88
APR(30)
Options 1290 Puts 1280 Puts 1270 Puts Price $50.70 $45.50 $40.40 Orig Pr $22.80 $18.70 $14.90 IV Delta Trade +10 20 +10 18.4% -64.2 19.8% -59.2 20.8% -54.3
Delta Gamma Theta Vega Profit Margin Original Margin

-0.9 -0.1 21.3 -22.4 200 300 7,800
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Stock Continues Lower: Still Profitable?

Date: 3/16/2011 SPX Price: $1256.88
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Adjustment #3: Turn Into an Iron Condor

Date: 3/10/2011 SPX Price: $1294.90
APR(36)
Options 1335 1325 1280 1270 Calls Calls Puts Puts Price $11.90 $15.70 $26.80 $23.50 Orig Pr IV 17.2% 17.7% 20.3% 20.9% Delta Trade Adj 31.5 37.1 -39.1 -34.7 +10 10 10 +10 New +10 10 10 +10
$17.10 $14.90
Delta Gamma Theta Vega Loss Margin Original Margin

-14.6 -0.4 34.1 -155.5 1,100 4,000 7,800
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Adjustment #3: Turn Into an Iron Condor

Date: 3/10/2011 SPX Price: $1294.90
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Iron Condor Adjustment

Date: 3/16/2011 SPX Price: $1256.88
APR(30)
Options 1335 Calls 1325 Calls 1280 Puts 1270 Puts Price $4.90 $7.10 $46.40 $41.60 Orig Pr $11.90 $15.70 $17.10 $14.90 IV 19.1% 19.9% 23.3% 24.1% Delta Trade 16.9 21.6 -55.2 -50.4 +10 10 10 +10
Delta Gamma Theta Vega Loss Margin Original Margin

2.2 -0.6 27.7 -119.2 1,000 4,000 7,800
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Iron Condor Adjustment

Date: 3/16/2011 SPX Price: $1256.88
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Synthetic Covered Write with all Options
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Covered Write with All Options

Date: 3/8/2011
APR(39)
Options 132 Calls 122 Calls Price $2.95 IV Delta Trade 10 $12.20 22.4% 81.3
When to adjust short option?
SPY Price: $132.58

JUN(102)
Price IV Delta Trade +10
17.2% 55.6
How to pick long strike?
Delta Gamma Theta Vega Debit
256.0 -37.6 14.0 47.8 9,250
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Covered Write with All Options

Date: 3/8/2011 SPY Price: $132.58
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Adjustment #1: Turn into a Calendar

Date: 3/10/2011 SPY Price: $129.94
APR(37)
Options 132 Calls 122 Calls Price Delta Trade Adj $1.85 41.0 10 New 10 $3.85 $10.35
JUN(100)
Price Delta Trade Adj 51.8 75.9 +10 +10 10 New +10
Before Adjusting
Delta Gamma Theta Vega Loss Margin 349.0 -36.5 10.4 81.1 750 9,250
After Adjusting
Page 33
Adjustment #1: Turn into a Calendar

Date: 3/10/2011 SPY Price: $129.94
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Adjustment #2: Roll Short Out & Down

Date: 3/10/2011 SPY Price: $129.94
APR(37)
Options 132 Calls 131 Calls 122 Calls Price Trade Adj New $1.85 10 +10
MAY(72)
Price $3.60 Adj 10 New 10
JUN(100)
Price Trade
$10.35
+10
Before Adjusting
After Adjusting
Page 35
Adjustment #2: Roll Short Out & Down

Date: 3/10/2011 SPY Price: $129.94
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Adjustment #3: Take Off of Position

Date: 3/10/2011 SPY Price: $129.94
APR(37)
Options 132 Calls 122 Calls Price $1.85 Trade Adj 10 +5 New 5 $10.35
JUN(100)
Price Trade Ajd +10 5 New +5
Before Adjusting
After Adjusting
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Adjustment #3: Take Off of Position

Date: 3/10/2011 SPY Price: $129.94
Page 38
CBOE Real Trading with Dan Sheridan

Uniondale, NY Tuesday, May 17th Boston, MA Thursday, May 19th
Page 39
Website Walk Throughs See Whats on the Other Side

Let us show you a behind the scenes look at what our mentoring program and what our trading community is like. Dan pioneered option mentoring and has the most robust program with the best support to help you learn and continue to grow as a trader. Take a few minutes to see for yourself how we can help take your option trading to the next level.
Sign up for your website walk through at http://www.sheridanmentoring.com/x/WT
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Dan Sheridan
+1-800-288-9341 info@SheridanMentoring.com
Sheridan Options Mentoring, Inc.

http://www.SheridanMentoring.com/
Page 41

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Dan Sheridan

Income Strategy Adjustments for the Downside

@ Copyright 2010. All rights reserved.

Download The Presentation Slides!

@ Copyright 2010. All rights reserved.

Long Term Strategies

@ Copyright 2010. All rights reserved.

@ Copyright 2010. All rights reserved.

How to Scale to a Larger Trades and Run a Successful Option Business

Asset Allocation for Monthly Income Trades

@ Copyright 2010. All rights reserved.

VIX 15 to 19 60% Long VEGA and 40% Short VEGA

$1000 in cash for adjustments

@ Copyright 2010. All rights reserved.

VIX 25 to 30 70% Short VEGA and 30% Long VEGA

$1000 in cash for adjustments

@ Copyright 2010. All rights reserved.

VIX 20 to 25 60% Short VEGA, 40% Long VEGA

$1000 in cash for adjustments

@ Copyright 2010. All rights reserved.

Credit Spread Traders SPX Price Chart

@ Copyright 2010. All rights reserved.

Credit Spread Before Down Move With No Adjustment

SPX Price: $1321.80

Warning Signs: When the spread is starting to go bad

@ Copyright 2010. All rights reserved.

Credit Spread Before Down Move With No Adjustment

How important is todays (T+0) graph?

@ Copyright 2010. All rights reserved.

SPX from 1322 to 1257 in 8 Days!

Delta Gamma Theta Vega Loss Margin

49.0 -0.1 -45.6 42.7 2,900 7,800

@ Copyright 2010. All rights reserved.

SPX from 1322 to 1257 in 8 Days!

@ Copyright 2010. All rights reserved.

Adjustment #1: Add a Long Put

SPX Price: $1321.80

Without Long Put

With Long Put

@ Copyright 2010. All rights reserved.

Adjustment #1: Add a Long Put

@ Copyright 2010. All rights reserved.

Long Put Cuts Losses

Starting Price $1321.80

Without Long Put

With Long Put

@ Copyright 2010. All rights reserved.

Long Put Cuts Losses

@ Copyright 2010. All rights reserved.

Adjustment #2: Directional Butterfly

Starting Price $1321.80

@ Copyright 2010. All rights reserved.

Adjustment #2: Directional Butterfly

@ Copyright 2010. All rights reserved.

Stock Down More: Why Still Profitable?

Delta Gamma Theta Vega Profit Margin Original Margin

-4.1 0.0 8.9 -24.9 200 300 7,800

Stock Down More: Why Still Profitable?

@ Copyright 2010. All rights reserved.

Stock Continues Lower: Still Profitable?

Delta Gamma Theta Vega Profit Margin Original Margin

-0.9 -0.1 21.3 -22.4 200 300 7,800

Stock Continues Lower: Still Profitable?