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USING OPTIONS ON ETF’S TO FIND AN EDGE IN TODAY’S MARKETS

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RiskDisclosure•WeAreNotFinancialAdvisorsoraBroker/Dealer:NeitherTheoTrade®noranyofitsofficers,employees,representaFves,agents,orindependentcontractorsare,insuchcapaciFes,licensedfinancialadvisors,registeredinvestmentadvisers,orregisteredbroker-dealers.TheoTrade®doesnotprovideinvestmentorfinancialadviceormakeinvestmentrecommendaFons,norisitinthebusinessoftransacFngtrades,nordoesitdirectclientcommodityaccountsorgivecommoditytradingadvicetailoredtoanyparFcularclient’ssituaFon.NothingcontainedinthiscommunicaFonconsFtutesasolicitaFon,recommendaFon,promoFon,endorsement,orofferbyTheoTrade®ofanyparFcularsecurity,transacFon,orinvestment.•SecuriFesUsedasExamples:ThesecurityusedinthisexampleisusedforillustraFvepurposesonly.TheoTrade®isnotrecommendingthatyoubuyorsellthissecurity.PastperformanceshowninexamplesmaynotbeindicaFveoffutureperformance.•ReturnonInvestment“ROI”Examples:ThesecurityusedinthisexampleisforillustraFvepurposesonly.ThecalculaFonusedtodeterminethereturnoninvestment“ROI”doesnotincludethenumberoftrades,commissions,oranyotherfactorsusedtodetermineROI.TheROIcalculaFonmeasurestheprofitabilityofinvestmentand,assuch,therearealternatemethodstocalculate/expressit.AllinformaFonprovidedareforeducaFonalpurposesonlyanddoesnotimply,express,orguaranteefuturereturns.PastperformanceshowninexamplesmaynotbeindicaFveoffutureperformance.•InvesFngRisk:TradingsecuriFescaninvolvehighriskandthelossofanyfundsinvested.InvestmentinformaFonprovidedmaynotbeappropriateforallinvestorsandisprovidedwithoutrespecttoindividualinvestorfinancialsophisFcaFon,financialsituaFon,invesFngFmehorizon,orrisktolerance.•OpFonsTradingRisk:OpFonstradingisgenerallymorecomplexthanstocktradingandmaynotbesuitableforsomeinvestors.GranFngopFonsandsomeotheropFonsstrategiescanresultinthelossofmorethantheoriginalamountinvested.BeforetradingopFons,apersonshouldreviewthedocumentCharacterisFcsandRisksofStandardizedOpFons,availablefromyourbrokeroranyexchangeonwhichopFonsaretraded.•NopartofthispresentaFonmaybecopied,recorded,orrebroadcastinanyformwithoutthepriorwri\enconsentofTheoTrade®.•NoSoliciFng.NoRecording.NoPhotography.

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Copyright Disclaimer All 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 media, is expressly prohibited without the prior written consent of TheoTrade, LLC. For further information, please contact:

TheoTrade, LLC 16427 N. Scottsdale Rd. # 410 Telephone: 1-800-256-8876 Email: support@theotrade.com

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Don Kaufman Ø  Co-Founder TheoTrade

Ø  Industry-leading options strategist

Ø  Derivatives Risk Manager

Ø  19 year trading career

Ø  17 years of thinkorswim® platform experience

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Trading is not about being right or wrong… However, when you go up against Mr. Wonderful… well, I am right and he is most definitely wrong!

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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Who is TheoTrade •  Doc Severson – Stocks, Options and Technicals

•  Jeff Bierman – Stock trader & Former CMT for TD Ameritrade

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

•  Tony Rago - Nasdaq Futures and Intraday Strategist

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What You Will Learn In This Presentation • Learn one strategy you can implement within ETF’s that can produce results even in the most horrific of market conditions.

• How to find statistical advantages in markets and develop your own trading regimen to exploit the edge.

• Use ETF options markets and liquidity to your advantage. • Discover how you CAN sell premium in the LOWEST volatility without taking extraordinary risks.

• Find out how far markets can move within a given period of time and learn to profit from the unexpected and unanticipated risks.

• Discover what opportunities even the most docile markets can offer.

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Let’s start with: How Far and When?

•  If I could help you learn how far a marketplace or stock was likely to move within a given period of time would that be helpful?

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What to Expect with Expected Moves •  First, for the direction we are headed today it is imperative I recap a bit about

expected moves.

•  Let’s start with…

• What are EXPECTED MOVES?

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Expected Moves

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What to Expect with Expected Moves • Options markets can be thought of as putting a price tag on risk. •  Pricing in markets is determined via market participants. • Ultimately, options pricing comes down to supply and demand. •  Competition breeds efficiency in pricing. •  Expected Move has NO directional bias. •  EM’s are based purely on an implied volatility which is supply and demand! • However, recognize the implied volatility is based on live markets whereby, there

are often 100s of millions of dollars setting the volatility in options and expected move.

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Implied Volatility - volatility that justifies an option’s current market price

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100 120 80

Vol = 20% St. Dev. = 20

68%

What Can Implied Volatility Do for YOU?

Expected Moves and Probability •  Expected move defines a one standard deviation move (68.3%) in a given

underlying.

•  Therefore, there is a 68.3% probability of and underlying closing inside of the expected move by the designated expiration.

•  Expected Move is a probability of expiring inside a given range by a specified date.

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At the Money Straddle

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At the Money Straddle can suffice for expected move.

How to Use Expected Move •  Expected move can be a phenomenal resource.

•  Selling Options outside of the expected move can help instantly create viable trade candidates.

•  Allow me to provide an example…

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Range Bound Index Products • Major index products such as SPX and SPY have displayed the propensity to stay

within excepted moves •  Premium Sellers attach themselves to this notion and SELL options outside the

expected moves.

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The Life Cycle of Selling Premium • Many of you have likely experienced the following…

•  Sell premium 3 or 4 months in a row successfully…maybe you are using Iron Condors, some of you are selling puts.

•  You get comfortable, add a little contract size, then SMACK!

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One Loss Exceeds ALL of Your Profits! • One loss can exceed everything you made… everything you worked for! • Total loss, giving back not only the profits you made but extending yourself into the red considerably.

• Yep, I have seen this movie before. If you sell premium in today’s efficient market price you will pay the ultimate price.

• Selling premium can see viable returns within markets however, large unforeseen moves will likely reverse profitability from premium selling tactics.

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The Premium Selling Solution • Via using quantitative market data we at TheoTrade have measured the respective expected moves on an array of different products.

• What we discovered was that certain index products stay inside expected moves and some products do NOT adhere to what was expected.

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The Data Set • The SPX closed inside or within its WEEKLY Expected Move in 11 out of 14 most recent trading weeks.

• When we did close OUTSIDE the Expected Move it was by marginal amounts. (less than 0.2%)

• Let’s look at and SHARE our research data with YOU!

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Wild vs Tame Markets • The logic of the trade is rather straightforward however, the application and execution of the strategy MUST observe the greatest attention to detail and criteria.

• We’ll show you how to SELL options premium in products that have a HIGH likelihood of staying inside the “expected move”.

• We’ll also show you how to BUY premium in products that have a HIGH likelihood of exceeding the “expected move”.

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Finance YOUR Trade Conclusion: Sell Premium to Finance the Purchase of Premium • What you are going to do is SELL premium in the SPY to finance the costs of BUYING premium in the Nasdaq. • Recall the sale of premium can be dangerous as unforeseen events can crush a trader at a moment’s notice. • Then again, you are BUYING premium in an alternative product HOPING the big move comes! • Here are a few examples of this in action!

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The TheoTrade TetraPod Spread 29

The TetraPod Spread

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Characteristics of TetraPod Spreads •  The attributes of TetraPod Spreads are undeniable! •  You DO NOT need to pick market direction! •  This is the PERFECT spread to reduce risk of a stock portfolio. •  You never have to buy the ETF or any stock. • Define your risk. • Risk is limited to precisely your comfort level. •  You need not use stop orders. •  This is an excellent tool for those seeking returns to build a smaller account.

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Building the TetraPod Spread 32

• Do not let options intimidate you! • One spread below is being done for a .37 debit. •  The other spread for a 1.43 credit. • However, this spread is akin to a massive chainsaw. •  Used correctly, can be extremely effective in creating returns! •  Used incorrectly, you may cut off a few fingers.

Fear NOT the TetraPod Spread • You may not know options OR have limited experience in placing options trades.

• We can show you HOW and WHEN to place a TetraPod Spread in a matter of a few hours.

• TheoTrade creates detailed recipes for every strategy, including the TetraPod Spread.

• You would not bake a cake without a recipe, so why trade without one?

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Why Doesn’t Everyone Do This? • Here is what you NEED to KNOW!

ü  What ETFs do I trade this on? ü  How do I determine the trade and Expected Move setup? ü  What expiration do I select? ü  What strikes do I use? ü  Position sizing? ü  What is the correct probability for the trade? ü  How do I execute the trade? ü  When do I exit? ü  What to do in a losing position?

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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 a TetraPod Spread ?

• What is the correct options expiration cycle to buy a TetraPod Spread?

•  How much capital do you commit to these TetraPod Spreads? •  What Strike Price Options do you sell and how many?

•  What Strike Price Options do you buy?

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TheoTrade is the Answer to Your Questions – Ask Yourself:

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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 TetraPod Spread? •  What if the markets sell off big? •  What is the correct return for the strategy? •  What if the markets rallies massively? •  Can I fix a losing trade? •  Can I do this is an IRA or retirement account?

TheoTrade Has Your Answers •  TheoTrade has the answers 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?

•  This is just the beginning of the many variables you will face while buying an TetraPod Spread!

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

and can do this; well think again…

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

• We spent MONTHS 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 TetraPod Spread?

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Secret Weapon to Trading Options on ETF's Class •  Trade Instructor: Don Kaufman •  June 17th 9am -12pm Central Timeime

•  Live Trading and Q&A June 19th 8:20am – 3pm Central Time •  Class recordings are available with unlimited access •  Class slide deck that includes entry and exit criteria checklist available 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 and Expected Move Essentials •  BONUS #4: Options 401: Expected Move Essentials •  BONUS #5: Iron Up: High Probability Iron Condors for Everyone Class

$197 www.TheoTrade.com/pod

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TheoTrade.com/pod TetraPod/ETF Course Curriculum •  How you can use my favorite ETF market instruments to profit from changes in market volatility so you're

not only a directional trader •  Why market efficiency has led us to seek out new ways to produce returns so you're on the cutting edge of

what's working right now •  What are Tetrapod Spreads and how anyone from newbie to experienced can execute these trades •  Build your own Tetrapod with detailed step by step directions and models so you know the exact trade to

put on week after week. •  The little known market insights into reading market risk and expected move so that you can see

opportunity coming from a mile away •  How to minimize your risk and maximize your returns like never before with specific insights beyond ANY

classes available ANYWHERE! •  How you can generate weekly and monthly returns with a small account or retirement account with

minimal options experience •  Why predicting market direction is for suckers who will eventually lose everything that is why direction is

NOT essential for Tetrapod Spreads

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TheoTrade.com/pod TetraPod/ETF Course Curriculum Continued… • 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 your trades so you all of the keys for success • What market correlations to watch intraday so you can manage your swing or long term investments • How the trades can be done with a small account of $2,000 looking for large, safe, upside potential • Which ETF's make the best candidates for TetraPod spreads so you know the exact ETF's to trade • What strikes and what expiration period to select to give you the highest probability of success in your ETF Trading • Recorded one day of the live trading room so you can see the ETF strategies and setups in a real market environment • Includes: Unlimited Access to the On-Demand Recording!

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Or…How Would You Like Access to EVERY Class We Have Ever Done? And Access to EVERY Class We Will Do for the next YEAR?

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TheoTrade.com/pod

•  All of the bonuses with the class AND •  Guide to Selling High Probability Spreads •  Consistent Intraday Strategies and Setups •  The Next Big Short: Risk Twist Spread Class •  Surviving the Extreme Volatility •  Sell Premium and Manage Risk •  Covered Calls: Income Generation for Your Stocks •  Essential Skills for Consistency in Trading Class •  Weekly Options Class •  Butterfly's Guide to Weekly Returns Class •  Pairs Trading: The Final Frontier •  Technical Analysis 101: A Comprehensive Guide to Becoming a Better Trader Class •  Fractal Energy Trading Class •  RSI Unleashed Class: Building a Comprehensive Trading Framework •  Plan or Get Slaughtered Class •  Increasing Vertical Spread Probabilities with Technical Analysis •  Small Account Options Trading Workshop •  The Top Ten Skills for Growing a Small Account •  The Whale Trade Workshop •  Plus a MINIMUM of 1 class per month!

$997 ONE YEAR of EVERYTHING WE DO!

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TheoTrade.com/pod

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