SMB Training OPTIONS TRAINING PROGRAM A Somewhat Average
Month
Slide 2
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trader education and training. SMB TRAINING offers a number of
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through Smbtraining.com) and in person. Through Smbtraining.com,
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which independent traders (subscribers), as well as T3 Trading
Group, LLC traders, observe a virtual trading floor environment (as
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web-based, interactive training courses on demand. 2. The seminars
given by SMB TRAINING are for educational purposes only. This
information neither is, nor should be construed, as an offer, or a
solicitation of an offer, to buy or sell securities. You shall be
fully responsible for any investment decisions you make, and such
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circumstances, investment objectives, risk tolerance, and liquidity
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recommendation by SMB TRAINING or its affiliates to buy, sell or
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therein or to engage in any specific investment strategy. The
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Any information contained in this presentation is for educational
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(SIPC).Characteristics and Risks of Standardized Options.Forex Risk
Disclosure
Slide 3
RUT Butterfly position size - 10 contracts scaling to 30. All
profit, loss, Delta and Theta numbers within these guidelines are
based off of the above position size. If you are trading a
different position size, you will need to adjust these numbers
accordingly. Delta/Theta ratios are the same regardless of position
size.
Slide 4
Planned Capital - $50,000 Minimum Capital Required in Account -
$100,000 Profit Target - $15,000 Reduced Profit Target 21 DTE -
$5,000 Max Loss - $15,000 All decisions are made at 3:30 PM EDT.
The daily range is ignored. UNLESS the trade is over profit target
or under 9 DTE and we choose to stay in the position.
Slide 5
Exit 1 ($15,000) profit target hit Exit 2 ($5,000) 33% profit
target is hit 21 DTE of closer Exit 3 Friday before expiration Exit
4 Maximum loss number ($15,000) is exceeded at 3:30 PM EDT. Exit 5
Any time the preponderance of evidence shows that the position is
more likely to lose money than to make money if we stay in the
trade AND it cannot be corrected. If we choose to stay in the
position after exit points are hit, the position will be monitored
and adjusted as needed.
Slide 6
Date: March 24, 2008 RUT Price: 699.80 Entry Strikes: 680
Purchase 10 630/680/730 Put Butterflies Control Point: 680 Add
Points: 720/740 Roll Points: 750/760/770/780/800 First Downside
Adjustment: 640
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It has been a relatively easy month. According to the core
guidelines, the trade needs to be exited today. More experienced
traders who are willing to risk losing a significant amount of
money can stay in the trade and even bring it into expiration in
order to do so. However we have decided to take the trade into
expiration.
Slide 24
Must be willing to lose money in order to make more. Must
ALWAYS know your exit point. Must be able to monitor the market and
adjust as needed. Must be able to incrementally adjust your
position.
Slide 25
The closer you are to expiration the more vulnerable the trade
is to a large price movement, even if you are up a significant
amount of money. Gain and lose significant amounts of money with
relatively small price movements. Because of the additional risk,
we need to take precautions and trade differently. Must constantly
and objectively weigh the risk of staying in the position. Takes
more skill than simply following guidelines.
Slide 26
Once you hit your profit target or are at the Friday before
expiration, in order to stay in the trade, you must be willing to
risk at least 20% of your planned capital, in this case about
$10,000, if not, it is time to GET OUT! ANYTIME you are no longer
willing to risk losing a reasonable amount of money. It is time to
GET OUT!
Slide 27
Ive seen too many times where people have exceeded their profit
targets and then proceeded to take much more than a maximum loss on
a trade. To avoid this, you MUST KNOW at all times the price points
you will exit and the dollar amount of profit or loss you will exit
at. You MUST HAVE THE DISCIPLINE to stick to those numbers!
Slide 28
I typically check trades once per day as I have no desire to
sit there and watch the stock market all day. However, when I
CHOOSE to trade closer than10 DTE I know I need to monitor the
market to control my risk.
Slide 29
You must be able to make small enough adjustments to control
risk without over adjusting the position and opening up yourself to
getting chopped out of the trade. If you find yourself getting
chopped up, EXIT THE TRADE and move on to the next month.
Slide 30
It is imperative that you stick to your risk management rules,
your results, but it is equally important that you do NOT get
caught up in the mechanics of the trade. Your job in the trade is
to make as much as you can WHILE STAYING WITHIN YOUR RISK
MANAGEMENT RULES. Do whatever is necessary to keep the probability
of winning in your favor and when you cannot, EXIT THE TRADE
Slide 31
These guidelines are for the bearish butterfly trade on RUT,
starting with 10 contracts, scaling to 30. The numbers must be
modified if trading a different position size. These guidelines are
only to be used when trading near expiration or when the profit
target is exceeded AND you choose to stay in the position. These
guidelines can be loosely followed if the profit target has not
been achieved or if it has been achieved and the trade is over 7
DTE but should be strictly followed if the trade has hit profit
target AND it is 7 DTE or closer. Of course the closer you are to
your target and expiration, the more closely you should follow
these guidelines.
Slide 32
Intraday 10 AM EST 3:30 PM EST maximum position Delta is +/-
500. When Delta is exceeded, remove, add or reposition butterflies
to correct delta to between 300 and 450. The Delta must remain the
same sign. IE. 550 Delta would be corrected to 350 Delta NOT + 350
Delta. Maximum size is 30 contracts.
Slide 33
AT 3:30 PM EST maximum position Delta is +/- 250. Delta prior
to 10:00 AM and after the 3:30 PM adjustment is made, will be
ignored. If Delta is greater than +/- ~250, Adjust Delta to between
200 and ~250. The Delta must remain the same sign. IE. 550 Delta
would be corrected to -250 Delta NOT + 250 Delta.
Slide 34
Whenever you hit your predetermined numbers OR you are not
willing to lose additional money. Whenever you are satisfied with
your profit. Whenever a 15 point overnight more will put you past
your maximum loss number and you cannot reasonably correct the
position. Whenever Gamma is so high that you cannot withstand
regular price movements without constantly adjusting the position.
IE. Whenever the position becomes unmanageable. Whenever you feel
the odds of making more money are no longer in your favor.
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Up $6340, which is past the reduced profit target per
guidelines. How much am I willing to risk at to stay in? 10K Can I
adjust the trade to meet my new Delta guidelines and take an
overnight move of at least15 points and not exceed my loss numbers?
What is my exit point? When trade is down $3700
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