My Option Trader: July 2011

Dan is teaching a FREE class on Tuesday, August 2nd at 1:00 PM Central (Chicago) Time on

Managing by the Greeks. This class is a hands on class with Dan putting on trades and managing them with a weekly update class in addition to the main class taught each week.

These are the details for joining the live class:

------------------------------------------------

Event: Free Manage by the Greeks Class

Event address: https://sheridanmentoring.webex.com/sheridanmentoring/onstage/g.php?t=a&d=925207333

Event address (shortened): http://www.sheridanmentoring.com/x/925207333

Date and time: Tuesday, August 2, 2011 1:00 pm Central Daylight Time (Chicago, GMT-05:00)

Event number: 925 207 333

To manually join this class:
1. Visit http://sheridanmentoring.webex.com/
2. Find the meeting "Free Manage by the Greeks Class"
3. Click the "Join" button
4. Fill in your name, email address
------------------------------------------------

We hope you can attend this free class!.

Regards,

Sheridan Options Mentoring
www.sheridanmentoring.com
800-288-9341

Mailing address: Sheridan Options Mentoring, 1539 Della Drive, Hoffman Estates, IL 60169 USA

To unsubscribe please visit:
http://www.sheridanmentoring.com/index/method/c.unsubscribe/emailaddr/markrschultze.tset@blogger.com.html

Real Access. Real Markets. Real Trading

2011

Real Trading with Dan Sheridan - Denver, CO -

SPECIAL rate for the Denver Trading Group!

Dan Sheridan, Sheridan Options Mentoring

Thursday, August 11, 2011- 7:30am to 4:30pm

Have you read every options book and are still lost in the specifics? Do you want a guideline for trading your portfolio? If the answer is YES, then attend Real Trading with Dan Sheridan. Dan teaches how to trade with real life examples using back-trading software. He will demonstrate how to use the greeks and adjust your positions. Dan also includes a 3-hour follow-up webex one month after the seminar to answer any questions you may have and gauge your trading proficiency. We are offering this seminar at a special rate of $350.00 for the Denver Trading Group. Call Barb Kalicki (312-786-7819) and mention the special code - DTG to receive your discounted rate!

Still deciding on whether or not to attend? Below are actual testimonials from people who have taken Da

Tuesday, July 12, 2011

Sheridan Options Mentoring Blog

Options Safari: WFM Bull Call Spread and GOOG Bear Put Spread

Posted: 11 Jul 2011 09:59 AM PDT

Dan is recording two shows today for CBOE TV Options Safari:

WFM Bull Call Spread

GOOG Bear Put Spread

Download the Presentation Slides here

Options Safari: WFM Bull Call Spread

Join our free public forums at http://forums.sheridanmentoring.com.

Monday, July 11, 2011

Dan Sheridan's CBOE Calendar Webcast Follow Up Tuesday at 3:30 PM Central

We invite you to attend a free CBOE Webcast follow up on Calendar Spreads. The webinar will be at 3:30 PM Central (Chicago) Time.

These are the details for joining the event:

------------------------------------------------

Event: CBOE Calendar Webcast Follow Up

Event address: https://sheridanmentoring.webex.com/sheridanmentoring/onstage/g.php?t=a&d=921610979

Date and time: Tuesday, July 12, 2011 3:30 pm Central Daylight Time (Chicago, GMT-05:00)

Event number: 921 610 979

To manually join this class:
1. Visit http://sheridanmentoring.webex.com/
2. Find the meeting "CBOE Calendar Webcast Follow Up"
3. Click the "Join" button
4. Fill in your name, email address
------------------------------------------------

This event will be recorded and available on our blog at http://blog.sheridanmentoring.com.

We hope you can attend this event.

Regards,

Sheridan Options Mentoring
www.sheridanmentoring.com
800-288-9341

Mailing address: Sheridan Options Mentoring, 1539 Della Drive, Hoffman Estates, IL 60169 USA

To unsubscribe please visit:
http://www.sheridanmentoring.com/index/method/c.unsubscribe/emailaddr/markrschultze.tset@blogger.com.html

Sunday, July 10, 2011

Sheridan Options Mentoring Blog

The Lure of Weeklies: One 1 Strategy and Four Tips

Posted: 09 Jul 2011 01:23 PM PDT

Fishing Lure What's the fascination of Weeklies?
Why is this the hottest thing in the options market? Buyers of weeklies use it as a hedge against their portfolios or individual strategies. They also like the fact that they can hit a home run if the price moves quickly in their favor.Sellers of options like the fast time decay and great yields you can get in 2-5 days.

Let's face the facts: Trading weeklies is an adrenaline rush
If you trade 30-day trades and now you can get potentially similar yields in 3-4 days, that's a huge temptation. The reality is that weeklies have existed for almost 30 years. The name was expiration week!
Sure, expiration week only came once a month, but it was there for the taking.

Bottom line: life as well as options comes with pluses and minuses that accompany every decision we make. In weeklies, you have pluses of quick potential yields, fast time decay for sellers, quick potential home runs for option buyers. Minuses are price moves can smoke premium sellers ( strategies with positive time decay), and non-moving vehicles could wreak havoc on buyers. The risks and rewards are high!

Strategy #1 Iron Butterfly
(( For Premium Sellers, strategies with positive time decay)
This involves selling a straddle at-the money and buying the strangle ( wings) for protection. An example in a $50 stock would be to sell 1 Aug 50 call and 1 Aug 50 put and buy 1 Aug 55 call and 1 Aug 45 put . This strategy will usually give you a great risk reward in that you will bring in a credit greater than your risk. A good risk/ reward is essential with weeklies. Many times you can make good profit in 2-3 days and get out because time decay is so great. If the market or your stock is more volatile, you can buy an extra call or put for insurance at the beginning of the trade , or as an adjustment.

Four Tips
1. Use a small percentage of your capital for weeklies. If I'm doing $10,000 in Calendars, I may trade 10% ( $1,000) of the calendars using weeklies. It adds a little Louisiana hot sauce, but not too much!
2. When doing credit spreads, stay away from adjustments and just get out! Unless your're pretty experienced and nimble, adjustments can turn into a nightmare. When price movement goes against you with weeklies, it's like a locomotive coming straight on.
3. Also with credit spreads, keep your maximum loss on your trades at or under your normal winning months and you might actually have a credit spread business one day!
4. Stick with similar vehicles each month for familiarity
Have a great summer and keep working on the craft!

Dan Sheridan
dan@sheridanmentoring.com

Lessons in Greek: Theta

Posted: 09 Jul 2011 11:42 AM PDT

Ancient Greek Women My previous article introduced the concept of "the Greeks" and their applicability to characterizing the response of an option position to changes in both price of the underlying and implied volatility- delta and vega. There remains one additional major Greek used to help understand the impact of the passage of time on an option position; this Greek is theta.

I need to remind readers of the structure of an option price. We discussed this anatomy in detail in last week's posting in the discussion of vega. Similar to vega, theta is a factor which only impacts the extrinsic (time) portion of option premium.

Theta is reflective of a unique characteristic of options. Time, at least in our present universe, only moves in one direction. Tomorrow there will exist one less day until expiration as compared to today. Since the time to expiration represents one of the major inputs to the option pricing model, each day less that exists in an option contract is reflected in a lower time premium. Harnessing the power of this "theta decay" of option prices represents a major point of advantage for option traders.

Theta measures the reaction of an individual option or multi-legged option position to the passage of time. The concept of theta is particularly helpful in more complex option positions consisting of combinations of several individual positions. In such positions, the response to passage of time is often not intuitively obvious. This "position theta" is calculated by simply adding the theta values of each individual option position.

For a given long option position, theta is always a negative number regardless of whether the option is a put or call. The trader who wants to construct positive theta positions, structures that benefit from the passage of time, must include short options for at least a portion of his total position.

In order to help understand the impact of theta on a position, let us consider the AMZN July 200 call. AMZN is currently trading around $200; the 200 strike would be the current at-the-money series. This option is currently priced at $5.30 and has a theta of -14.2.

If price and implied volatility both remained constant until tomorrow, this option would decrease in value 14.2¢ as simply the result of passage of time. As you begin to become familiar with these concepts, I find it easy to think in terms of options being an insurance contract. In the case of owning a call, you have bought insurance to protect you against the risk of AMZN stock moving upwards beyond $200. The daily premium cost for this insurance policy is the 14.2¢ that the value of the call erodes if all other factors remain static.

The sensitivity of an option's price to theta is greatest in the at-the-money strike within an individual expiration cycle because this strike always contains the maximum dollar amount of time premium. In addition, shorter dated options have greater rates of theta decay than shorter dated options.

Theta decay is not linear, especially when considered in the framework of at-the-money options. The classic pattern is to see relentlessly accelerating theta decay as options expiration is approached. During the last month of an at-the-money option, time decay goes from a gentle green ski slope to a double black diamond slope in the last week of the option's life.

The relentless and inescapable impact of "theta decay" of option positions represents a major "tailwind" for a variety of options positions and a secret advantage for the educated trader. Learning to capitalize on the relentless decay of option premium gives the knowledgeable trader a huge competitive advantage.

My Option Trader

Pages

Friday, July 29, 2011

Free Manage By the Greeks Class Login Instructions

Thursday, July 28, 2011

FREE Manage By the Greeks Class Next Week...

Thursday, July 21, 2011

Calendar Spreads Webinar TODAY at 1:00 pm Central

Wednesday, July 20, 2011

Sheridan Options Mentoring Blog

Sheridan Options Mentoring Blog

Tuesday, July 19, 2011

Top 10 Trading Plan Tips - Today at 1:00 PM Central

Monday, July 18, 2011

Dan Sheridan Continues his In-Depth Look at Calendar Spreads on Thursday

Thursday, July 14, 2011

SPECIAL rate for CBOE Real Trading with Dan Sheridan in Denver

Real Trading with Dan Sheridan - Denver, CO -

SPECIAL rate for the Denver Trading Group!

Dan Sheridan, Sheridan Options Mentoring

Thursday, August 11, 2011- 7:30am to 4:30pm

Tuesday, July 12, 2011

Sheridan Options Mentoring Blog

Sheridan Options Mentoring Blog

Monday, July 11, 2011

Dan Sheridan's CBOE Calendar Webcast Follow Up Tuesday at 3:30 PM Central

Sunday, July 10, 2011

Sheridan Options Mentoring Blog

Sheridan Options Mentoring Blog

Pages

Friday, July 29, 2011

Thursday, July 28, 2011

Thursday, July 21, 2011

Wednesday, July 20, 2011

Tuesday, July 19, 2011

Monday, July 18, 2011

Thursday, July 14, 2011

Real Trading with Dan Sheridan - Denver, CO -

SPECIAL rate for the Denver Trading Group!

Dan Sheridan, Sheridan Options MentoringThursday, August 11, 2011- 7:30am to 4:30pm

Tuesday, July 12, 2011

Monday, July 11, 2011

Sunday, July 10, 2011

Dan Sheridan, Sheridan Options Mentoring

Thursday, August 11, 2011- 7:30am to 4:30pm