Start Small and Retire Early With Weekly Options

Start Small and Retire Early With Weekly Options
Welcome to the Start Small and Retire Early With Weekly Options Webinar/Video Series

My 27% Weekly Option Strategy

As With Most Weekly Strategies that Provide the Best Probabilities of Success, this Strategy is Based on the Warped Rate of Time Decay That Exists in Weekly Options

This is a Super Powerful Strategy as Long as the Opportunities Exist

If You Have Not Watched my Video Entitled “Power of PPD”
You Need to Stop This Video and Watch That Video First.

The Basis for Any Efficient Option Strategy is to Buy Cheap PPD Options and Sell Expensive PPD Options

Chart of PPD of 7-Day Option Verses a 14-Day Option Over the Next 7-Days

My 27% Weekly Option Strategy is a Type of What is Known as a Diagonal Spread

A Diagonal Spread is an Option Spread Where The Strike and the Expiration are Different in the Buy and Sell Leg of the Spread

Long Jan 23rd 210 Put From 4.65 Short Jan 16th 207 Put From 2.25
For a Debit of 2.40 Placed on January 8th With SPY at This is an ITM Debit Diagonal Spread

For a Debit of 2.40 (SPY Trading at ) Both the Buy Leg and the Sell Leg are “In the Money”

For a Debit of 2.40 Let’s Take a Quick Look at the PPD Values

For a Debit of 2.40 (SPY Trading at ) The 207 Put is 1.10 In the Money. Therefore, we Subtract 1.10 From the Option Price to Come up With 1.15.

For a Debit of 2.40(SPY Trading at ) There are 8-Days Left on the Jan 16th Option. Divide the Time Value (1.15) by the Days Left and You Come Up with 0.14 PPD

For a Debit of 2.40(SPY Trading at ) The Put is In the Money by Therefore, Subtract this from 4.65 and What Remains is 0.55 of Time Value in the Long Option.

For a Debit of 2.40 (SPY Trading at ) There are 15-Days Left on the Jan 23rd Option. Divide the Time Value (0.55) by the Days Left and You Come Up with 0.04 PPD

We are Buying a 0.04 PPD Option and Selling a 0.14 PPD Option
Long Jan 23rd 210 Put From 4.65 Short Jan 16th 207 Put From 2.25 For a Debit of 2.40 (SPY Trading at ) We are Buying a 0.04 PPD Option and Selling a 0.14 PPD Option

For a Debit of 2.40 What Else Might Stand Out About This Spread?

For a Debit of 2.40 The Strike Difference is 3.00 Points While the Debit on the Trade is Only at 2.40

For a Debit of 2.40 This Means That if SPY Closes at or Lower on January 16th, The Spread MUST be at a Minimum of 3.00.

For a Debit of 2.40 If We Buy the Spread at 2.40 and on the Short Expiration the Spread HAS to be at 3.00 or Higher if SPY Closes at or Lower, Then...

For a Debit of 2.40 We are Guaranteed to Make at Least 0.60 on the Trade at or Lower. That Means the Market can Tank and We Will Make 0.60.

For a Debit of 2.40 Why is That? Because on the Short Expiration, There Will be NO Time Value on the Short Option.

For a Debit of 2.40 If SPY is Trading at and There is No Time Value on the Short Option, it is at 0.00. Meanwhile, the Put MUST be at Least 3.00 (And will Often be More)

SPY Stays the Same and We Make 0.60+
Long Jan 23rd 210 Put From 4.65 Short Jan 16th 207 Put From 2.25 For a Debit of 2.40 (SPY Trading at ) SPY Tanks and We Make 0.60+ SPY Stays the Same and We Make 0.60+ SPY Moves Higher to and We Make 0.60+

SPY Closed at 201.75 on January 16th
Long Jan 23rd 210 Put From 4.65 Short Jan 16th 207 Put From 2.25 For a Debit of 2.40 SPY Closed at on January 16th The 207 Closed at 5.25 for a 3.00 Loss on That Leg of the Trade.

For a Debit of 2.40 The Buy Leg is 8.25 In the Money, Meaning it Has to be Worth at Least 8.25 for a 3.60 Gain on That Leg. Accordingly, the Net Gain on This Trade Was 0.60.

For a Debit of 2.40 In This Example, We Lost All of the Time Value on Both Legs of the Trade. However, Because the Long Leg Had Less Time Value, We Profited the Difference

Short Leg Time Value = 1.15 Long Leg Time Value = 0.55
Long Jan 23rd 210 Put From 4.65 Short Jan 16th 207 Put From 2.25 For a Debit of 2.40 Short Leg Time Value = 1.15 Long Leg Time Value = 0.55 Difference is 0.60 The Profit is In the Warped Time Value

For a Debit of 2.40 At a Close of or Below, This is the Minimum Profit We Will Make. But We Can Often Make More Than the Minimum Profit

For a Debit of 2.40 For Example, if SPY Closed at on January 16th, There Would Still be 1-Week of Time Value in the Long Option. The Current 1-Week Put Option That is 3.00 Points in the Money is Trading at 3.40

For a Debit of 2.40 This Means That Our Short Option Would Expire Worthless for a Gain of 2.25 and the Long Option Would Exit at 3.40 for a Loss of 1.25, for a Total Gain of 1.00, Not 0.60.

For a Debit of 2.40 What are the Risks?

For a Debit of 2.40 Technically, the Maximum Risk is the Debit, or ($240 on a 1-Lot). However, I Say Technical Because SPY Would Have to Move Dramatically Higher in a Very Short Period of Time for That Risk to be Realized.

For a Debit of 2.40 The Worst That Can Happen is Both Option Are Worthless When You Exit the Position. For the Long Option to be Worthless With 1-Week Left, SPY Would Have to Be Trading About Points Above the Long Option, or in this Case, Around !

That Would be a Move Higher of About 8% in Just 1-Week!
Long Jan 23rd 210 Put From 4.65 Short Jan 16th 207 Put From 2.25 For a Debit of 2.40 That Would be a Move Higher of About 8% in Just 1-Week!

What are the Realistic Risks?
Long Jan 23rd 210 Put From 4.65 Short Jan 16th 207 Put From 2.25 For a Debit of 2.40 What are the Realistic Risks?

For a Debit of 2.40 In My “Power of PPD” Video, I Show You How the Most Time Value is Going to Exist in the “At the Money” Options. So as SPY is Moving Higher Toward 210, it is Actually Gaining in Time Value

For a Debit of 2.40 Spy is Trading at When the Trade is Placed. If SPY Moves to on the Short Option Expiration, The Put Would be Worth Approximately 1.50 (Range is Normally 1.25 – 1.75)

For a Debit of 2.40 In This Scenario, We Would Exit the Long Option at 1.50 and That Would be Our Debit. We Bought at a Spread Debit of 2.40 and Exit at a Spread Debit of 1.50 for a Net Loss of 0.90 on the Trade

This Would Occur at a 2% Move Higher From Friday to Friday.
Long Jan 23rd 210 Put From 4.65 Short Jan 16th 207 Put From 2.25 For a Debit of 2.40 In Other Words, the Increasing Time Value in the Long Option is Acting as a Buffer to Our Loss. This Would Occur at a 2% Move Higher From Friday to Friday.

For a Debit of 2.40 My 27% Weekly Option Strategy is What I Consider to be a Semi Non-Directional Strategy.

For a Debit of 2.40 The Market Can Move Down and I’m Guaranteed a Profit. The Market can Stay the Same and I’m Guaranteed a Profit. The Market can Move Higher to a Limited Degree, and I am Guaranteed to Make a Profit.

For a Debit of 2.40 Only if the Market Moves up by a Certain Amount Within a Short Period of Time is There Risk With This Strategy.

(Every Trade is Different)
Long Jan 23rd 210 Put From 4.65 Short Jan 16th 207 Put From 2.25 For a Debit of 2.40 The Question is, How Much Higher Does the Market Have to Move to Reach my Breakeven Point? (Every Trade is Different)

For a Debit of 2.40 I am Mathematically Guaranteed a Profit at the Long Strike Minus the Debit. In This Case it is: 210 – 2.40 =

For a Debit of 2.40 SPY Closed at at the Time of the Trade. I Cannot Lose Money as Long as SPY Closes at or Below on the Short Option Expiration

For a Debit of 2.40 But the Actual Breakeven is Higher Than This. In Order for This to be the Actual Breakeven, There has to be NO Time Value Left on the Long Option.

So the Breakeven Level Must Be Greater Than 207.60.
Long Jan 23rd 210 Put From 4.65 Short Jan 16th 207 Put From 2.25 For a Debit of 2.40 So the Breakeven Level Must Be Greater Than

For a Debit of 2.40 For Example, a 1-Week Put Option That is 2.00 Points in the Money is Currently Trading at This Means I would Lose 2.05 on the Long Leg and Gain the Entire 2.25 on the Short Leg, for a Net Profit of 0.20 if SPY Closed at (In This Example).

For a Debit of 2.40 In Other Words, the Actual Price of the Long Put Option Must Drop Below 2.40 to Lose Money. That is Usually Going to Occur Around 1.50 Below the Long Put Strike, or ish

For a Debit of 2.40 In This Example, My Actual Breakeven is Calculated at Around That Would be a Move of About 1.3% in the Next Week to Reach Breakeven.

For a Debit of 2.40 At , the Long Put Would be Worth Approximately 1.90, Which Would be My Debit on the Spread for a Loss of 0.50.

For a Debit of 2.40 The Market Has to Move Higher by 2.50 Points Before I Lose the Same Amount That I am Guaranteed to Make if the Market Stays the Same, Moves Down, or Even Moves Higher by About 2.00 Points.

For a Debit of 2.40 To Help Increase the Odds of Overall Success, There Are Several Guidelines You Can Follow. The Trade Above Was Placed Because SPY Just Made a 3.50 Point Move Higher in One Day.

For a Debit of 2.40 When SPY is Making a Move to the Upside, I am a Little More Aggressive and Place Trades That are Closer to the Money.

For a Debit of 2.40 However, if SPY is Making a Move Down, I am a Little More Conservative and Place a Limit Order a Little Higher Than I Would Otherwise.

For a Debit of 2.40 A Good Rule of Thumb is to Assume a Breakeven Level 1.50 Points Above the Short Strike, and Make That at Least 2% Away From Where the Market is Trading One Week Prior to the Short Expiration

For a Debit of 2.40 If SPY is Trading at One Week Prior to Expiration, Then Would be a 2% Move. I Would Then Structure My Order so That I Sell at Put and Buy a Put

For a Debit of 2.40 The Market Will Usually Have to Move Higher for This to Get Hit, But it Puts a Majority of Your Trades Will Make Money Since the Market Does Not Move Higher by More Than 2% Weekly Often

For a Debit of 2.40 If the Market has Moved Down, Then You Might Want to Wait for a Bounce of Perhaps 0.5% - 1% and Then do the Calculation and Place the Order.

For a Debit of 2.40 The Third Thing is You Want to Make Sure You Get Your Price is About as High of a Debit as I am Willing to Go. Otherwise the Profit/Risk Ratio Starts to Become a Little More Skewed. Sometimes This is Not Available, Which Means You Won’t Have a Trade That Week.

Long 1/2/14 Exp 210 Put From 3.80 Short 12/26/14 Exp 207 Put From 1.40
For a Exit Debit of 2.40 SPY Was Trading at It Doesn’t Always Work Out Here, SPY Had Been Moving Higher, so I Was Slightly More Aggressive and Placed this Trade with the Short Option Only Being 0.50 In the Money. I Was Able to Get My Debit of 2.40, But Here is What Happened:

For a Exit Debit of 2.40 SPY Was Trading at On 12/26/14 SPY Closed at The 207 Put Expired Worthless for a 1.40 Gain While the 210 Put Exited at 1.90 for a Loss of 1.90, for a Net Loss on the Trade of 0.50.

For a Exit Debit of 2.40 SPY Was Trading at Had I Waited and Put the / on, I Would Have Made About 0.50 on the Trade

Long 1/9/15 Exp 211. 50 Put From 3. 30 Short 1/2/15 Exp 208
Long 1/9/15 Exp Put From 3.30 Short 1/2/15 Exp Put From 1.05 For a Exit Debit of 2.25 SPY Was Trading at The Following Week I Was Even More Aggressive Placing the Short Option Leg “At the Money”. You’ll Notice I Was Able to Get a Cheaper Debit on the Trade Because of That

Long 1/9/15 Exp Put From 3.30 Short 1/2/15 Exp Put From 1.05 For a Exit Debit of 2.25 SPY Was Trading at On 1/2/15 SPY Closed at The Put Exited at 3.07 for a Loss of Meanwhile the Put Was at for a Gain of 3.20 for a Total Gain of 1.25.

Long 10/31/14 Exp Put From 4.10 Short 10/24/14 Exp Put From 2.10 For a Exit Debit of 2.00 SPY Was Trading at on 10/17 Here is the Worst Trade of the Year Last Year. SPY Had Moved Down About 8% the Previous 7 – 10 Trading Days. It Then Bounced From a Low of to in Just 2-Days. I Decided to be Aggressive Because I Could Get a 2.00 Debit on an “At the Money” Short Option Spread.

Long 10/31/14 Exp Put From 4.10 Short 10/24/14 Exp Put From 2.10 For a Exit Debit of 2.00 SPY Was Trading at on 10/17 On 10/24 SPY Closed at , Moving Higher by About 8.00 Points, or 4.2%. My Max Loss Was Only 2.00, but it Had Moved So High That I Could Only Get 0.27 Out of My Long Put Giving Me a Total Net Loss of 1.73

+$4,022 in 64-Trades Here Are Some Interesting Facts to Keep in Mind:
Weekly Movement in SPY From July 2013 – November 2014: 12 Times Down > 1% for Minimum Avg Profit of $70. +$ Times Within 1% Higher or Lower for Avg Profit of $95 +$3, Times Between 1% - 2% Higher for Avg Profit of $ Times Up > 2% for an Avg Loss of $100 ($600) +$4,022 in 64-Trades

$63 Per Trade Risking an Average of $230.
Here Are Some Interesting Facts to Keep in Mind: +$4,022 in 64-Trades $63 Per Trade Risking an Average of $230. That Comes to a Gain of 27% Weekly Gain During Weeks Trade is Available

This is Based on the Assumption That You Follow the Guidelines:
Make Breakeven at 2% Move Higher in 1-Week Place the Order for a Minimum 2.40 Debit Don’t Take Trades After Significant Down move

“Start Small and Retire Early With Weekly Options”
There Are Ways to Dramatically Diminish the Risks Associated With This Strategy, and There are Also Other Strategies That Can be Implemented in Conjunction With This Strategy to Also Dramatically Diminish The Risks. I Would Strongly Encourage You to Purchase the Entire Weekly Option Package Entitled: “Start Small and Retire Early With Weekly Options”

Start Small and Retire Early With Weekly Options

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