Dan Sheridan – High Probability Condors Adjusment:
High Probability Condors Adjusment live trade Class
This video contains paid mentoring sessions from Sherdan’s students real trades that took place on 2007 July.
Dan show his novice part-time student trader how to adjust high probability condor by keeping eyes on delta and theta.
Dan Sheridan – Managing By The Greeks:
Managing By The Greeks Class Outline
Why manage Option Trades by the Greeks? Using Volatility and VIX to make trading decisions. How to incorporate technical analysis in your trading decisions.
What does it mean to manage option trades by the Greeks? How does this compare to other methods of risk management? Is this method for beginner or experienced option traders? How to use implied volatility, VIX, and standard deviations to make trading decisions? How we use technical analysis with the managing by the Greeks methodology?
Delta: How to know when this number is too big and can hurt you?
Gamma: When to increase or decrease this important Greek is essential for consistent income!
Theta: When is it OK to decrease or increase your theta? Is a negative theta ever OK?
Vega: How to know whether I should be positive or negative vega in a trade? How do you use VIX to help determine your vega position? Best ways to hedge your vega risk? Margin: How this non-Greek is involved in the decision making of managing by the Greeks
Dan Sheridan – Trading and Adjusting Butterfly Trades:
Learn options trading from a real master – Dan Sheridan, a 22 year veteran option floor trader.
Dan shows all the intricacies of trading income generating Butterfly trades:
Income Butterfly Trade Specifics:
1) Recommended “wing” separations (long options): RUT, 50 points, MID, 30 – 40 points, SPY and IWM, 5 points, SML, 25 points MNX, 7 ½ points, MDY, 10 points
2) Try to initiate the trade near delta-neutral. Usually, this is accomplished by buying one or two extra OTM calls
3) Underlying should have a relatively steady IV, preferably either in the low range or moving lower
4) Avoid placing the trade in earnings release months
5) Choose long option strikes which will generate an initial Probability of Profit of 50% or greater.
1) Must exit the trade by 7 days prior to expiration
2) Begin adjusting if the underlying moves to an expiration breakeven point
3) Exit the trade if the underlying moves to a breakeven within 10 days after trade initiation
4) Monitor the position delta daily. As the position delta increases, so does your risk of loss. When you are uncomfortable with the risk it is time to adjust or exit the trade.
5) Adjust by removing part of the “bad” side of the spread (“shaving deltas”) or by repositioning the spread if the position delta increases uncomfortably. A small vertical spread can also be added.
6) If your profit reaches 15 % yield, “tighten the noose” with contingent orders at a price corresponding to a minimum12 % yield or simply take your profit and exit the trade.
7) Increasing IV of the underlying may damage the trade. Monitor IV diligently.
8)When exiting the position, close out the ITM long options and the short options first. Your remaining position is now a credit spread, so you must have adequate margin in your account to “carry” the spread until you close it. The OTM long option may not have a bid price, and should simply be allowed to expire.
Dan Sheridan – Trading Ideas in Volatile Markets:
Dan discuss the cons and pros of Speculative trading using time-bomb butterfly and calendar spreads in great details:
Put the trade on 10 -20 days prior to expiration but can “plant them” farther out in time
Best in a high IV environment with the expectation of IV going down (after earnings)
It is used as a direction trade instead of buying long options
They are placed OTM not ATM
It’s a one month trade in and out with no adjustments made
Use either Puts or Calls (which ever has highest premium/profit)
Sell the short options at the strike you predict the movement to go to and place the wings 2-4 strikes apart
If using it as a play on earnings, evaluate the effect of the prior earnings announcements:
• Look at the last 3-4 earnings effect on the underlying price
• Look at the last 3-4 earnings effect on IV (see how they drop)
• Compute where the expected move will be and place the short option there
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