Dan Sheridan

Option Trading for Income

March 17, 2009

Sheridan Options Mentoring, Inc.
g
www.SheridanMentoring.com
 Disclaimer
The views of third party speakers and their materials are their own and do not necessarily represent the
views of Chicago Board Options Exchange, Incorporated (CBOE). Third party speakers are not affiliated
with CBOE. This presentation should not be construed as an endorsement or an indication by CBOE of
the value of any non-CBOE product or service described in this presentation.

Options
O ti involve
i l risk
i k and
d are nott suitable
it bl ffor allll iinvestors.
t P
Prior
i tto b
buying
i or selling
lli an option,
ti a person
must receive a copy of Characteristics and Risks of Standardized Options (ODD). Copies of the ODD
are available from your broker, by calling 1-888-OPTIONS, or from The Options Clearing Corporation,
One North Wacker Drive, Suite 500, Chicago, Illinois 60606. The information in this presentation is
provided solely
p y for g
general education and information p purposes.
p Any
y strategies
g discussed,, including
g
examples using actual securities and price data, are strictly for illustrative and educational purposes. In
order to simplify the computations, commissions and other transaction costs have not been included in
the examples used in this presentation. Such costs will impact the outcome of the stock and options
transactions and should be considered. Investors should consult their tax advisor about any potential
tax consequences
consequences. No statement within the presentation should be construed as a recommendation to
buy or sell a security or to provide investment advice.

Multiple leg strategies involve multiple commissions charges. Brokerage firms may require customers to
post higher margins than the minimum margins specified in this presentation.

Acknowledgement
Screen shots of OptionVue 5 or 6 Software courtesy of OptionVue Systems International. www.optionvue.com

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 Laying
y g the Foundation for
Income Trading

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 Insurance Company

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 Normal Distribution Bell Curve

Standard
Probability
Deviations
1 68.2%
1.5 86.6%
1 96
1.96 95 0%
95.0%
2.33 98.0%
2.58 99.0%
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 Standard Deviations (Sigma)
One Day 
Standard Deviations
Standard Deviations Range
Price $ 100.00
Volatility 19.1%
1 σ $      1.00 $    
$ $ 99.00 to $ $  101.00
2 σ $      2.00 $     98.00 to $  102.00
3 σ $      3.00 $     97.00 to $  103.00

FREE STANDARD DEVIATION CALCULATOR AT:

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http://www.sheridanmentoring.com/sigma
 Portfolio Plan

Speculative
Income
Strategies
Strategies

Long Term
Strategies

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 Portfolio Plan

Long Calls/Puts,
Calls/Puts
Calendar Spreads Diagonal Spreads
Double Calendar Spreads OTM Butterflies
Double Diagonals Vertical Spreads
ATM Butterflies Directional Calendars
Condors Long Straddles

Collars
LEAPS
Covered Writes/Straddles
Long Stock
Long Term Calendars

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 Income Strategies
Calendars and Butterflies focus on Time decay

I
Iron condors
d focus
f on probabilities
b biliti

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 New Era since Sep 30, 2008-
2008- VIX 35
35--40
60% longg Vega
g and 40% short Vegag
 $10,000 Portfolio $1000 in cash for adjustments
 $5400 in Calendars and Double Diagonals
 $3600 in Condors, credit spreads and Butterflies
 Maximum 6-7 positions, gets a bit crazy to manage
more than 6-7 positions
 Minimum positions 3-4.
 Until economy stabilizes would always have some
downside insurance

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 New Era since Sep 30, VIX 55-
55-60
g and 40% long
60% short Vega g Vega
g
 $10,000 Portfolio $1000 in cash for adjustments
 $3600 in Calendars and Double Diagonals
 $5400 in Condors, credit spreads and Butterflies
 Maximum 6-7 positions, gets a bit crazy to manage
more than 6-7 positions
 Minimum positions 3-4.
 Until economy stabilizes would always have some
downside insurance

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 New Era since Sep 30, VIX 42-
42-53, 55%
short Vega,
g , 45% long
g Vega
g
 $10,000 Portfolio $1000 in cash for adjustments
 $4050 in Calendars and Double Diagonals
 $4950 in Condors, credit spreads and Butterflies
 Maximum 6-7 positions, gets a bit crazy to manage
more than 6-7 positions
 Minimum positions 3-4.
 Until economy stabilizes would always have some
downside insurance

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 Big Picture Portfolio-
Portfolio- Sample Portfolio
$500,000
, ( 50%,, 40%,, 10% Mix))
 $250,000 Long Term Strategies ( 180 days or
longer)- Collars, Covered Writes, Long Stock, Long
Term Calendars
 $200,000 Monthly Income Strategies ( 25-60 days)-
Condors , Credit Spreads, Calendars and Multiple
Calendars, Butterflies, Double Diagonals
 $50,000 S
$ Speculative SStrategies ((1-90 days)-
)
Straddles, Earnings Plays, Long calls and puts,
Debit spreads,
p , Reverse Calendars,, Back spreads
p
 How would I make my percentages?

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 SPY Price Chart

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 Condor-- Monthly Income
Condor

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 IBM

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 IBM Calendar-
Calendar- Monthly Income

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 SPY Butterfly-
Butterfly- Monthly Income

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 Long Term-
Term- AAPL today 99.66

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 Speculative-- Slightly Bearish Today
Speculative

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 Spec-- Slightly Bullish
Spec

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 Free Standard Deviation Calculator
http://www.sheridanmentoring.com/sigma

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 Dan Sheridan
+1 678-262-8898

info@SheridanMentoring.com
info@SheridanMentoring.com

S
Sheridan
e da Opt
Options
o s Mentoring,
e to g, Inc.
c
http://www.SheridanMentoring.com/

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