Live @ 7:00 pm Central Time - Theo Trade€¦ · High Probability Credit Spread 100 Sell 110 call for 1.50 credit Buy 115 call for .50 debit Selling 110 call Buying 115 call Net Credit

Live @ 7:00 pm Central Time

HOW TO SELL CREDIT

SPREADS FOR INCOMEWITH DON KAUFMAN

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Risk Disclosure• We Are Not Financial Advisors or a Broker/Dealer: Neither TheoTrade® nor any of its officers, employees, representatives, agents, or independent contractors are, in such capacities, licensed financial advisors, registered investment advisers, or registered broker-dealers. TheoTrade ® does not provide investment or financial advice or make investment recommendations, nor is it in the business of transacting trades, nor does it direct client commodity accounts or give commodity trading advice tailored to any particular client’s situation. Nothing contained in this communication constitutes a solicitation, recommendation, promotion, endorsement, or offer by TheoTrade ® of any particular security, transaction, or investment.• Securities Used as Examples: The security used in this example is used for illustrative purposes only. TheoTrade ® is not recommending that you buy or sell this security. Past performance shown in examples may not be indicative of future performance.• Return on Investment “ROI” Examples: The security used in this example is for illustrative purposes only. The calculation used to determine the return on investment “ROI” does not include the number of trades, commissions, or any other factors used to determine ROI. The ROI calculation measures the profitability of investment and, as such, there are alternate methods to calculate/express it. All information provided are for educational purposes only and does not imply, express, or guarantee future returns. Past performance shown in examples may not be indicative of future performance.• Investing Risk: Trading securities can involve high risk and the loss of any funds invested. Investment information provided may not be appropriate for all investors and is provided without respect to individual investor financial sophistication, financial situation, investing time horizon, or risk tolerance.• Options Trading Risk: Options trading is generally more complex than stock trading and may not be suitable for some investors. Granting options and some other options strategies can result in the loss of more than the original amount invested. Before trading options, a person should review the document Characteristics and Risks of Standardized Options, available from your broker or any exchange on which options are traded.• No part of this presentation may be copied, recorded, or rebroadcast in any form without the prior written consent of TheoTrade ®.• No Soliciting. No Recording. No Photography.

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Copyright DisclaimerAll rights reserved. This Material may not be reproduced or distributed, in

whole or in part, without prior written permission of TheoTrade, LLC. Any

other reproduction or distribution, in whatever form and by whatever

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TheoTrade, LLC. For further information, please contact:

TheoTrade, LLC

16427 N. Scottsdale Rd. # 410

Telephone: 1-800-256-8876

Email: [email protected]

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http://www.finra.org/investors/day-trading-margin-requirements-know-rules

mailto:[email protected]

Don Kaufman

➢ Co-Founder TheoTrade

➢ Industry-leading options strategist

➢ Derivatives Risk Manager

➢ 20 year trading career

➢ 17 years of thinkorswim® platform experience

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About TheoTrade• TheoTrade Specializes in education for options, futures, and

stocks.

• Founded by professional traders and trading educators each

with a minimum of 15 years experience, several with many

decades

• TheoTrade is here to help you mitigate the risks in the market,

while learning a skill set that can last a lifetime.

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Your TheoTrade Instructors• Doc Severson – Stocks, Options and Technicals

• Jeff Bierman – Analyst, Trader, & Former CMT for TD Ameritrade

• Corey Rosenbloom – Senior Strategist & Swing Trader

• Steve “Slim” Miller - 43 year veteran stock, options, futures trader

• Tony Rago - Nasdaq Futures and Intraday Strategist

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What You Will Learn In This Presentation

• Learn why we will see a shift to more volatile markets and why 2018 will

be optimal for selling options premium.

• Central Bankers are raising interest rates, learn why higher rates will

translate into opportunities for you to sell defined risk spreads!

• Discover how probabilities are law in the markets and how YOU can create

high probability trade setups in ANY market!

• Powerful strategies on how to use credit spreads so you can create a

consistent return.

• What are the major benefits or trading credit spreads and why do so many

professional traders trade this way

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Have no FEAR… the FED is here!

• Markets have seen an unrelenting complacency and lack of volatility in recent

years.

• Although the last month has seen a degree of fear return, we are still flying under

the radar for volatility.

• Furthermore, considering myriad of risks on the horizon complacency is

unequivocally remarkable.

• Multiple rounds of Quantitative Easing and the influence of the Federal Reserve is

decisively behind both the rally and degree of complacency in capital markets.

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Monkeys Throwing Darts

• The last 9 years monkeys throwing darts made

money…

• However, moving forward you will need a

definitive skill set.

• What we intend to do tonight is introduce you to

the skills and more importantly the criteria

needed to thrive in markets.

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All Good FED things MUST come to an END

• Starting in 2018 the Federal Reserve is effectively departing the

marketplace and will commence contracting the 4.5 trillion dollar balance

sheet.

• As FED capital declines, interest rates will increase… investors and traders

will be forced to unwind positions in countless marketplaces.

• In effect, as the Fed pulls away the “punch bowl“ capital markets will

become increasingly volatile.

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The Shift to Volatile Markets in 2018

• The FED balance sheet decline has already begun.

• Moving forward you need to be fully aware the FED no longer has your

back!

• It is time to get back to SELLING Options Premium as increases in volatility

are forthcoming.

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Learning to SELL Options• Many have heard through the grapevine “selling options” is the way to

make money…

• Well if you have experimented with selling options you know full well there

is definitely RISK involved.

• Today’s session will separate the myths from the real risks and the fact

from the fiction in selling options premium.

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Don’t Panic, You Can Do This

• You may know NOTHING about options and that is ok for

today’s session!

• For starters, look to grasp the big concepts regarding

probability and risk. So let’s dive right in…

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Probability and Profitability

• Your trading is based on probability.

• You and I can create trades all day long with a 90%

probability of success and still lose money.

• Probability alone does NOT make you profitable.

Remember that!

Markets Are a Trade Off

• Markets are a series of trade offs.

• Higher probability equals Higher RISK!

• You can be right 90% of the time and still lose money!

• So where can I find an edge?

• That's what you here for right? Great, then get ready because

I’m about to show you something very important:

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Discovering Probability: The Curve

100

If the stock expires

below the short

strike, you keep the

credit.

Selling Out of the Money Options100

Sell 110 call for 1.50 credit

High Probability Credit Spreads• Having walked through a few of the basics we will now discuss high

probability credit spreads.

• Credit Spreads are by definition option spreads whereby we receive a

“credit balance” in the initial transaction.

• Credit Spreads are also defined risk trades, meaning you will know

precisely the risk and reward prior to ever placing ANY trade.

• Credit Spreads allow traders to “dial in” probabilities in trading. That

means if you want a 80% probability of success, you will know exactly

which options to use!

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The Many Facets of Credit Spreads• Credit Spreads can be referred to in a number of different ways:

• Selling Premium

• Credit Spreads

• Short Spreads

• Bear Call Spreads

• Bull Put Spreads

• Credit Spreads can be used to create both BULLISH or BEARISH

positions!

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If the stock expires

below the short

strike, you keep the

credit.

High Probability Credit Spread100

Sell 110 call for 1.50 credit

Buy 115 call for .50 debit

Selling 110 call

Buying 115 call

Net Credit $1.00

Maximum Risk $4.00

Stock @ 200

Buy 225 Call

Sell 220 Call +1.00 20% lose / 80% win

Probability of Success?

Risk = 4.00 --- 4.00 / 5.00 = 80%

1.00 credit

Break-Even Point up is 221

Short Call Spread

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Probability of Success

• Calculating YOUR Spread’s Probability of Success - Take

the real risk in the Spread divided by the Total Width of the

Spread.

• Probability calculation details are as follows...

TOTAL RISK= $5.00 (width of spread)

REAL RISK= $4.00 (total you can lose)

real risk is the width of the spread minus the credit received.

PROBABILITY= real risk/width of spread

Calculation= $4.00/$5.00 = 80%

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Short Spread Probability Calculation

Recent TSLA Example…

• Opening Trade

• Closing Trade

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Let’s Do Another Trade in AMZN!

• AMZN trading in and around all-time highs!

• Let’s Sell an Out of the Money Spread.

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AMZN @ $1534

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Probability Solved!

• AMZN is @ 1534.00

• We are selling the 1580 calls and buying the 1585 calls.

• Net Credit +1.50

• Maximum Risk = - 3.50

• Width of Spread= $5.00

• Probability is 3.50/5.00 = 70%

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70% probability and the 30% hammer• 70% sounds great but 30% of the time the market “rips your face off”.

• When you trade high probability strategies and you’re wrong, you get

hammered.

• And the market is just evil enough to allow you to make money 3 or 4

times, you increase contract size…then…

• Train wreck! Your losses exceed the gains on the previous 3 trades.

• I know…I know it’s like I can see your account. Well for the previous 15

years, I could ☺

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I Can Fix It, I Know I Can Fix It...• Fix is a really dirty word in trading.

• 15 years in the brokerage business has made me a bit cynical

regarding good trades gone bad.

• Any time you are fixing a trade you are adding more risk to an already

losing trade and racking up transaction costs.

• Yes some “fixes” may work but the very notion of fixing a trade throws

good capital after bad.

Yesterday’s Trash

• Take a car drive it off a cliff and bring it to a body shop.

The body shop will tell you the same thing about the car

that I am going to say about your losing trade. It’s a piece

of junk, let it go.

• Do it right…learn how to correct good trades gone bad!

Would You Like to Learn How to Sell

Spreads and how to Control Your Risks the

Right Way?

Let’s Discuss Criteria!

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THEOTRADE RECIPES IN TRADING

Criteria…it's what we at TheoTrade do!

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Trading is about Answering the What Ifs

• What might be a good stock or ETF candidate for me to sell a spread ?

• What is the correct options expiration cycle to sell my spread?

• How much capital do I commit to generating short spread premium?

• What Strike Price Options do I sell?

• What Strike Price Options do I buy?

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TheoTrade is the Answer to Your Questions

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• What is the right probability for my trade?

• How many options contracts do I trade in for my account size?

• When do I close my Short Spreads?

• What if the stock sells off big? Do I bail-out of the Short Spread?

• What is the stock rallies massively?

• Can I fix a losing trade?

TheoTrade Has Your Answers

• TheoTrade has the answer to your trade related questions!

• We Build Recipes with definitive criteria and checklists for

each strategy and each unique variable you will encounter.

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How, When, Why, at What Price?

• Earnings are approaching what steps do I take?

• Can I sell options without ever owning the stock?

• This is just the beginning of the many variables you will face

while Selling a Spread!

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The Secret is in the Sauce• Now you may be thinking… hey I can read about selling spreads

anywhere and can do this; well think again…

• The following strategy and corresponding criteria requires the utmost attention to detail.

• We spent YEARS fine tuning this trades setup and criteria, when we approach the section on criteria FOLLOW the STEPS to build a trade!

• Would you like the criteria to build a short spread?

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Guide to Selling High Probability Spreads• Trade Instructor: Don Kaufman

• 4 hour course is available immediately with unlimited access

• Class slide deck that includes entry and exit criteria checklist available immediately for download.

• As an added bonus

• BONUS #1: Options 101: The Basics & Beyond Class

• BONUS #2: Options 201: Vertical & Calendar Essentials

• BONUS #3: Options 301: Volatility Essentials

• BONUS #4: TheoTrade Probability Calculator Spreadsheet

• 1 Month ACCESS PASS to TheoTrade!

$199 www.TheoTrade.com/Trade

*Course qualifies you for a reduced commissions rate*

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http://www.theotrade.com/Trade

TheoTrade.com/Trade• Guide to Selling High Probability Spreads Curriculum

• How to sell the correct spreads to maximize the benefits of time decay while you minimize your risk

• Why entry and exit criteria is the key to consistent returns so you're never left guessing what options to trade

• How to identify favorable short spread candidates so you know precisely what stocks to trade

• How to Identity your risk and rewards like never before so you will know exactly how your spread will perform in all market conditions.

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TheoTrade.com/Trade• Guide to Selling High Probability Spreads Curriculum

• The powerful strategies used by the insiders to generate consistent returns in their portfolio over the duration

• How so many experienced traders sell spreads to reap the benefits of option decay

• Which stocks and indexes make the best candidates for selling spreads

• What strikes and what expiration period to select to give you the highest probability of success

• When to open and when is the best time to close the spread

• Probability of Touching and how this calculation can be the defining factor in ALL of your trading strategies.

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Probability Calculator

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TheoTrade 1 Month Access Pass• Your Guide to Selling Spreads Course INCLUDES a 1 MONTH ACCESS PASS to

• EVERYTHING we will do online for the next MONTH, including:

• Daily Coaching Sessions with Timely Topics on Stocks, Options and Futures

• Live Trading Chat Room: Traders Provide Real Trade Ideas and Real-Time Market Insights and

Analysis

• Instructor & Coaching Archives - Missed something from the daily continued education watch

the recording at your convenience

• Start Here Section - Whether you're a new or experienced trader these 22 videos will get you

started the RIGHT way.

• emailed trade ideas

• TheoTrade proprietary indicators!

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High Probability Credit Spreads – FAQ – theotrade.com/trade

• Q: Is this a trial subscription? Will there be additional billing at some point in the

future?

• A: No, this is not a trial, you will have unlimited access to the on-demand recording

of the class and bonuses. This is a ONE-time $199 fee!

© Copyright 2018 TheoTrade, LLC. All Rights Reserved 47

• Q: I don’t have experience with Options; will I be able to follow along in the class?

• A: By offering the bonus sessions Options 101, 201, and 301 we are preparing you

for the High Probability Credit Spreads course.



• Q: I can't get approved for options because I'm a newbie will your class help me

get approved?

• A: Yes, TheoTrade course offerings are accepted at several major brokerage firms

as experience.



• Q: Can I trade these strategies in my IRA?

• A: Yes, you can trade credit spreads in your retirement accounts!



• Q: I work full time and can’t trade during the day. Can I use this program?

• A: Yes, these trades can be “setup” and walked away from… you need not monitor

spreads during the trading session as the risk in the spread defined. Furthermore,

you can create Good Till Canceled Order (aka GTC) to exit the credit spread at your

intended profit point.



• Q: I have a larger account; will your system help me?

• A: Yes, ANY SIZE account will benefit from the concepts that we discuss in this

program. Size is only a limitation of the mindset.



• Q: I swing trade stocks how is this class going to help me?

• A: Imagine swing trading WITHOUT having to take the enormous risk of owing the

stock (or worse being short the stock)! Spreads will define your risk, keep you out

of harms way, and allow you to use swing trade techniques with minimal risk.



TheoTrade.com/Trade

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Documents

Live @ 7:00 pm Central Time - Theo Trade€¦ · High Probability Credit Spread 100 Sell 110 call for 1.50 credit Buy 115 call for .50 debit Selling 110 call Buying 115 call Net Credit