Introduction Accountant Realtor -Current

SMALL TRADES AND MANY

Practise Practise Practise

Strategies-weekly • Sell Naked Put • Sell or Buy Put/Call Vertical

Spread • Back Ratio Spread

criteria • Stock vol 500K and more • PITM – 20% and below • Implied Volatility rank – Green or Yellow • Do not trade during earning week • Spread between buy and sell – small

10 +Criteria to satisfy before selling put. What is the trend of stock. Up or down for pass 10, 5 and 1 year. Support and Resistance price. ROI 0.5% pw. Must be above $22 to cover cost (5+1.25+15) Expiry date 1 to 2 weeks. PITM ( 10 to 20%) Stock vol 500k to 1m Spread between bid and ask not to wide. As small as possible. If spread is big need to pay more to close.

Eg bid S$1 Ask S$1.70. To close a bid need to pay $70 IF earning week, we need to use different strategy. see notes on earning. VIX above 15 to get good premium- overall market. Implied Volatility (IM) 50 and above for specified stock. IVR (Implied Volatility Rank) colour Green can play option. Yellow neither good or bad . In the middle. Red

cannot play. No rank if stock is within one year of issue. Probability analysis chart ( know the probability of option) Standard deviation (we can find next to option date ( buy within the standard deviation to play safe) Open interest (OI)- the number of people queuing. The higher the better. Volume of option. (V) If OI and V are both high...is call the natural support line (NSL). (Advise is 1 step below or above NSL) Too many gap not suitable for selling option strategy (SOS). Monthly target 2% so (0.5%) each week.

Tools to help me. • Bollinger band • Linear Regression • Support and Resistance • Candle stick

Strategies - weekly • Sell Naked Put • Vertical Spread – Sell and Buy

Put at the same time. • Back Ratio Spread

Back Ratio Spread

What Why

When How

What is Back Ratio Spread • Ratio – 1:2, 1:1, 2:4 etc • Spread : difference between buy and sell Illustration : Ratio Put Spread Buy 1 put and sell 2 put.

Back Ratio Spread

WHY Back Ratio Spread • There is credit to be collected. • Reduce cost basis if assigned. • Lower breakeven point so reduce chance of being assigned.

Back Put Ratio Spread WHEN to trade Back Ratio Spread.

• Direction : Neutral to slightly bearish. • Implied Volatility : High • Implied Volatility Rank : High

Back Put Ratio Spread How does it work ?

• Buy 1 put (atm or otm) and sell 2

put (far otm) in same trade. • 45 days to expiry • with a credit

BACK RATIO PUT SPREAD Z stock

Buy 1 Put$85 (right to sell) atm/otm

Z $90

Sell 2 Put @ $80 ea far Otm (must buy)

And receive a credit of $0.30 cents

Sell put x 2 $80 buy put x 1 $85

Z Stock Price $90

With 0.30c credit

Back Put Ratio Spread

1) Price no movement. 2)Price above $90 3)Price between $85 to 90

OUTCOME : EARNED FULL PREMIUM . BOTH LEGS EXPIRE WORTHLESS.

• WHY : Buy put - means you have the right to sell. Why exercise or sell at 85 when price is higher.

• Sell put – means oblige to pick up stock . It will not be assigned because stock price is higher than $80

Sell put x 2 $80 buy put x 1 $85

Z Stock Price $90

With 0.30c credit

Back Put Ratio Spread

1) Price MOVES between to $80 to $84.99. Let say $80

• Buy leg has intrinsic value. • Make a capital gain of $5.00 • Total gain of 5.30 (5.00 plus premium of 5.30 cents. ) • This is the maximum gain of the Back Put Ratio. • Breakeven price of this trade is $74.70 (80.00 less 5.30)

Sell put x 2 $80 have to buy buy put x 1 $85 right to sell

Z Stock Price $90

With 0.30c credit

Back Put Ratio Spread

1) Price MOVES below 80 to $74.70 breakeven point

• Sell put leg will be assigned - you are obliged to pick up 2 stocks at $80 each.

• One of the stock you have the right to sell at $85 which give you a capital gain of $5.00.

• The other stock sell at $74.70 which is the breakeven point with no lost .

Sell put x 2 $80 oblige to buy buy put x 1 $85 right to sell

Z Stock Price $90

With 0.30c credit

Back Put Ratio Spread

1) Price MOVES below 80 $74.70

• Sell put leg will be assigned - you are obliged to pick up 2 stocks at $80 each.

• One of the stock you have the right to sell at $85 which give you a capital gain of $5.00.

• The other stock will be at a lost and suggest you roll forward.

https://www.tastytrade.com/tt/learn/ratio-spread?locale=en-US