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4. Locke in Your Success, LLC.
The ROCK Trading System Part 3 High IV Entry and September 2011 Expiration Trade
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Created and taught by John Locke
Locke in Your Success, LLC.
“Know what you want, make it happen!”

5. John Locke President of Locke In Your Success, LLC Options Trader
Success Coach
Options Trading Mentor

6. September 2011 Expiration Risk Management and Profit Targets
Planned Capital - $50,000
Profit Target - $10,000
Max Loss - $10,000
Profit Target may be adjusted up or down as trade progresses
Max Loss may be adjusted down but will not be increased

7. Model put butterflies and check Delta We want to know what our Delta is 20 points over our short strikes (at 670). Currently, we are showing -90 at RUT 663. Therefore we need to check the analyze graph to see if Delta is greater than -200 at RUT 670

8. Excessively flat Delta indicates the market is too volatile for a normal entry and we should use a high IV entry modification

9. High IV Entry Guidelines Once we have determined we will do a High IV entry….
Model entry adding10 OTM calls with sufficient Delta to cut your position significantly Delta under -50
Check to see if the calls are under 10 Delta
IF the calls are under 10 Delta, then proceed with Modified ROCK entry
IF the calls need to be more than 10 Delta, then an M3 entry needs to be considered using M3R guidelines for timing the trade conversion back into ROCK configuration.
IF you could go either way, check the chart to see if the market is experiencing excessive chop or it is trending.
If market is excessively choppy use Modified ROCK entry.
If market is trending, use the M3 entry

10. Buy 10 OTM calls that cut Delta to under -50

11. Sept 2011 Expiration Entry

12. Modified ROCK Configuration Upside Guidelines
In this configuration you should regularly be checking both your un- hedged Delta and your hedged Delta.
We want to reconfigure to normal ROCK or M3 ASAP.
If un-hedged Delta climbs to over -200 and underlying is LESS than 20 over short strikes, sell the hedges and reposition to normal ROCK configuration.
If hedged Delta climbs to over -200 and underlying is MORE than 20 points over short strikes, roll up the put butterflies to between 10 and 20 points under price and then test to see if numbers work for a normal ROCK entry. If so, reconfigure to normal ROCK, IF not, we will either reposition our modified ROCK or reconfigure to M3

13. Modified ROCK Configuration Upside Guidelines
If underlying exceeds 40 points past short strikes OR trade goes negative Theta, roll up the put butterflies to between 10 and 20 points under price and then test to see if numbers work for a normal ROCK entry. If so reconfigure to normal ROCK, IF not either hold modified entry or reconfigure to M3

14. Modified ROCK Configuration Downside Guidelines
When Delta exceeds +100, sell position
Test to see if Normal ROCK, M3 or Modified ROCK entry is appropriate for re-entry
Re-enter position as appropriate

15. August 24 (6 days) – RUT at 691, up about 30 points, and trade has gone negative Theta

16. Graph Prior to Adjustment

17. Test to see if we can shift to normal positioning RUT at butterflies and Delta is -92, still well under -200

18. At RUT 700 Delta is -112, still too low for normal positioning

19. Roll butterflies up 30 points and reposition calls

20. New Position

21. August 30 (6 days) – RUT is at 728, up another 30 points, and trade has gone Theta negative

22. Existing Position

23. Test to see if we can go into normal positioning

24. Roll butterflies up 30 points and reposition calls

25. Graph after adjustment

26. September 2 (3 days) – RUT dropped to 683, down 45 points, and maximum positive Delta is exceeded

27. Existing Position

28. Test to see if we can go into normal positioning

29. Nope, not yet Delta is still only -167

30. We could think about a transition to an M3 but, considering we are getting 75 point swings in the market, it is probably safer to stay in Modified ROCK position

31. Roll butterflies back 40 points and reposition calls

32. New Position

33. September 7 (5 days) – 9 DTE RUT back to 707, up 25 points and theta has gone negative

34. Current Position

35. Test to see if we can go into normal positioning… YES! Finally at 9DTE

36. Reposition put butterflies and sell calls

37. Add in 730 call butterflies as needed to bring Delta into range

38. New Position Now if only the market will settle down for a few days!

39. September 9 (2 days) - 7DTE Maximum Positive Delta is Exceeded

40. Existing Position

41. Roll the put butterflies back 20 points

42. New Position Maybe the market will settle now?

43. September 14 (5 days) – 2 DTE

44. We are 2DTE and we should really just close the trade

45. We are getting chopped back and forth and having large movements near expiration. Let’s just widen out the position and see if we can make a little more.

46. MEOW

47. This is it. Expiration Thursday

48. Now the market can gap all it wants

49. Summary In this section we covered: September 2012 Expiration Trade
Modified ROCK Entry
Transition from Modified ROCK to Normal Rock
Adjustment into ½ ROCK with 1 roll back
Adjustment into CAT from ½ ROCK with 1 roll back
Removing risk for expiration

50. In Part 4……
M3 Entry
Go though February 2012 Expiration Sample Trade

51. Locke In Your Success, LLC
John Locke
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