Intermediate Options Strategy By Sir Pipsalot Focus on Long Term and Position Trading with Options

Before we start… If you have not yet watched the Basic Options Strategy Webinar, I suggest you watch that first or at least skim through the materials before we move forward.

Goals of this Webinar Learn to choose the right kind of option contract for a given trade opportunity Learn how to forecast future option prices given different sets of parameters Learn how efficiently to roll over options positions from one expiration to another *Note* We will not discuss advanced topics such as Butterflys, Condors, Credit/Debit spreads, etc.

Options for your Options 3 factors for deciding which options contract is right for a given opportunity: –Underlying Instrument –Expiration –Strike Price Start thinking, what, how far, and how long

Underlying Instrument You have to find a proper underlying instrument in order to trade options pegged to that underlying instrument’s price. –Index options $DJX.X (DJIA), $NDX.X (Nasdaq) –ETF’s SPY (S&P 500), GLD (gold), SLV (silver) –Currency Options through PHLX $XDA (AU), $XDB (GU), $XDE (EU), etc.

Which Expiration? Try to figure out a rough idea of how long you want to hold the trade Always put plenty of extra time padding in based on how long you plan to hold: –Days? – Use the contract 1-2 months out –Weeks? – Use a contract 2-3 months out –1-2 months – Use a contract 4-6 months out –3-6+ months – Use a contract 6-9 months out and plan to roll it over about 2-4 months before expiration if still open.

Why Pick Longer Expirations? Simply put, time decay losses on your contract accelerate as you get closer and closer to expiration –Because of this, you never want to hold front month contracts

Strike Price If this trade works out, where is it headed? At what point will I want to take profits? –Shorter Term trades with uncertain targets Use strikes at or near the money –Longer Term trades that are high probability and confirmed with clear targets (Aggressive): Use out of the money options 8-12 strikes above target level. –Longer Term trades that are less certain or may take awhile to get moving (Conservative): Pick something at the money or only about 5-10 strikes out of the money and consider changing them over to a more aggressive contract if/when the trade becomes more certain.

How do you figure this out? You dig around and analyze the different options available in different ways, I’ll show you how… I’ll show two examples: –Using a Direct Access broker with good tools (Tradestation) –Using a shoddy internet broker (Scottrade)

*side notes* In today’s market, puts will make you a lot more money than calls due to higher vega’s. –Calls will lose some of their value as stocks rise since volatility will fall –Puts will gain extra value as stocks sell off due to more volatility value built in Also, there are other potentially more profitable strategies in some situations than buying naked calls and puts… so feel free to research them on your own if you’re interested in learning more.

That’s all for now Those of you attending live, please formulate your questions and submit them into the room for the question and answer session Thanks for coming!