Trading ading In A High gher er Vol olati atility ity Ma Market! t!
Disclai claimer mers Investin esting g Risks ks: The risk of loss from investing in securities (stocks, ETFs, mutual funds, etc.), bonds, options, futures, and forex or related products, can be substantial. Investors must consider all relevant risk factors, including their own personal financial situation, before investing. Investments in bonds and fixed income products are subject to various risks (including liquidity, interest rate, financial, and inflation risks) and special tax liabilities. Option ions s Risks ks: Options involve risk and are not suitable for everyone. Options Trading privileges are granted at the account level by your custodial broker and are subject to review and approval. Not all accountholders will qualify. Before trading options, a person must receive a copy of Characteristics and Risks of Standardized Options. Individuals should not enter into options transactions until they have read and understood the risk disclosure document, Characteristics and Risks of Standardized Options, which can be found on our website www.mscm.net. Copies may be obtained by contacting your broker or the Options Clearing Corporation. Spreads, Straddles, Strangles, and other multi-leg option strategies can entail substantial transaction costs, including multiple commissions, which may impact any potential return. These are advance option strategies and often involve greater risk, and more complex risk than basic options trades.
Disclai claimer mers Genera eral Discl closur osures: es: Any strategies discussed in this presentation, including examples using actual securities and price data, are strictly for illustrative and educational purposes only and are not to be construed as an endorsement, recommendation, or solicitation to buy or sell specific securities or strategies. Investors should carefully consider the investment objectives, risks, charges, and expenses before investing in any investment product. To obtain a prospectus containing this type of information as well as other important information, contact your custodial broker. Please read the prospectus carefully before investing. You should discuss any/all implications of investing in such products with your custodial broker, financial adviser/advisor, and/or tax advisor. Pa Past perfor orma mance nce is not ot indicat cativ ive of future e results ts. Third d Pa Party Infor ormati mation: on: This presentation may utilize or refer to third party data. In such a case, let it be known that MSCM, LLC. does not control, nor has it developed the content being referred to, and does not make any warranty, express or implied, as to the accuracy, usefulness, timeliness or even the continued availability or existence of said information/content created or maintained by others. Opinions expressed by others are not necessarily those of MSCM, LLC., nor does MSCM, LLC. endorse, warrant, or guarantee products, services or information described or offered by such firms.
A Litt ttle le Abo bout ut Me Me • 33+ Year Veteran of the trading and Financial Services Industry • Founder, Co-Founder and or Partner of: • 3 Investment Firms • 2 Onshore/Offshore Hedge Funds • 2 “40 Act” Mutual Funds • Been featured in numerous articles in the financial press including: • CNBC.com • InvestmentNews.com • Dow Jones Newswire • Euromoney Institutional Investor • Markets Media • And has been a regular featured guest on The Educated Investor On CBS radio affiliate KRLD in Dallas. • Former President and Executive Board Member of the Dallas Security Traders Association • Former Chairperson and Co-Chair of the Dallas Chapter of the Market Technicians Association
Trader/Investment Manager jbeamer@mscm.net
Wh Where ere Are re We e Tod oday
Wh Where ere Are re We e Tod oday
Wh Where ere Are re We e Tod oday
Wh Where ere Are re We e Tod oday
Fresh Idea’s - Lis ist t Bui uilding lding In n A High High Vol olat atility ility Ma Market
Fresh Idea’s - Lis ist t Bui uilding lding In n A High High Vol olat atility ility Ma Market
List t Bu Buildin lding g – Thin ink Outsid side e of the e Box http tp:/ ://ww /www.s .sect ctor orspdr dr.c .com om/sect /sector orspd spdr/ r/
“Long” Opportunities • XLU - Utilities ilities • XLRE RE - Real l Estat tate • NRG – NRG Energy • AVB – Avalonbay • NEE – Nextera Energy • SPG – Simon Property • SO – Southern Company Grp • XLV – Health alth Care • Honor orable ble Menti tions ons • ESRX – Express Scripts • UGI – UGI Corp • PFE – Pfizer • WBA – Walgreens • MDT - Medtronic • USM – US Cellular
“Long” Opportunities • XLU U - Uti tilities lities • NRG – NRG Energy • NEE – Nextera Energy • SO – Southern Company
“Long” Opportunities • XLV V – Health alth Car are • ESRX – Express Scripts • PFE – Pfizer • MDT - Medtronic
“Long” Opportunities • XLRE E - Rea eal l Es Esta tate • AVB – Avalonbay • SPG – Simon Property Grp
“Long” Opportunities Hono norable rable Men entions tions • UGI – UGI Corp • WBA – Walgreens • USM – US Cellular
“Long” Opportunities • XLU - Utilities ilities • XLRE RE - Real l Estat tate • NRG – NRG Energy • AVB – Avalonbay • NEE – Nextera Energy • SPG – Simon Property • SO – Southern Company Grp • XLV – Health alth Care • Honor orable ble Menti tions ons • ESRX – Express Scripts • UGI – UGI Corp • PFE – Pfizer • WBA – Walgreens • MDT - Medtronic • USM – US Cellular
Shorti ting g Opp pportuni tuniti ties es • CLR – Continental Resources • AIMT – Aimmune Therapeutics • DVN - Devon Energy • IRC – Irhythm Tech • NOV – National Oilwell Varco • LOXO – Loxo Oncology • PDCE – PDC Energy Inc • NP Neenah Paper • SLB – Schlumberger Lt. • BPMC – Blueprint Medical
A Ba Basic sic St Strat rategy gy to o Increase ncrease Buy uying ing Power er
The Poor Man’s Covered Call • A “Poor Man’s Covered Call” is a Long Call Diagonal Spread that is used as a substitute for a Long Stock/Short Call (“Covered Call”) Position. • Your Directional Assumption is Bullish • Done in Low Implied Volatility Environments.
PM PMCC C Di Diag agonal onal Spreads: eads: Thin ings s To o Kn Know w • For a Passive Position - Consider Keeping Your Debit Between 50%- 75% The Width Of The Spread • For a Dynamic Position - Calculate the Opportunity of Eliminating the Long Options Extrinsic Value while profiting from Directional Moves
PM PMCC C Di Diag agona onal l Spreads eads: Man anag agem ement ent • Market Moves In Your Direction? Adjust or Close • Market Moves Against You? Adjust or Close It’s All About Time To Expiration
A C A Com ommo mon n Sen ense A se Approach oach • A PMCC/CP P is is a g a grea eat alter ernati tive e to tradi ding a g a tradi dition ional l cover ered ed call l usin ing g stock ck. • In sm smalle ler r accounts, ounts, this is po posit itio ion can be us e used ed to sim imul ulat ate e a a covere ered d cal all l po posit ition ion wit ith les ess cap apit ital al and m d much ch les ess ris isk than an ac actual ual cover ered ed call. l.
Also so Known wn As s A Poor Man’s Covered Call Poor Man’s Covered Put
Beg egin b n by y us using ng any li y list st th that t con onta tains ins st stoc ocks ks th that t me meets ets you our r prog ognosi nosis • Movin ing g Aver erage ge Crosso sover er • Lea eadi ding ng S Sec ector ors • An Impo mported ed Lis ist • Any other er di direc ecti tiona onal l lis ist
Some e Ex Exam amples ples
Let’s Do A Little Comparison Adob obe e (ADBE) DBE) Ja Januar nuary y 2, 2018 18 Stock vs PMCC
Adobe obe Systems ems (A (ADBE BE) Jan anua uary y 2, 2018
Compar mparison ison Ado dobe e (A (ADBE) E) January y 2, 2018 Buy Stock – 100 Shrs ADBE @ 177.70 = $17,700 Passive version PMCC - $3265 (x 5 = $16325) Active version PMCC - $3,206 (x 5 = $16,030)
Let’s Discuss the Passive Version First
ADBE E Buy Side e
Sell ll Side e
At Ex t Expi piration ration
Closing losing Pas Passiv ive Position ition Summ mmar ary April il 18, 18, 2018 • Entry Debit - $2,643 Profit - $1017 • • ROR – 39% (10.17% return per $10K) • • Stock Position Return – 30%
Pa Passiv ssive e PMCC CC Sum umma mary y • Stock moved quickly through short strike. • Potentially stuck in the position without additional profit potential. • A nice profit was achieved but could we have done better?
Act ctiv ively ly Ma Manag aged ed PM PMCC CC
What at Abo bout ut IV
Day Pr Prior or To o Ex Exit t
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