Slides from the 132nd Meetup of the Vancouver Disciplined Trading Hub.

1. Educating Since Jan 2017

2. 1. Who are we?
2. What is Disciplined Trading?
3. A Practice Disciplined Trade
Meetup Agenda

3. This is a presentation prepared for Education purposes only.
Neither Vancouver Disciplined Trading Hub (VDTH) or Prosperis Passive Income
Strategies (PPIS) nor any of its personnel are registered broker-dealers or investment
advisors.
We may mention that we consider certain securities or positions to be good candidates
for the types of strategies we are discussing or illustrating. This does not mean that we
are telling you to trade these exact strategies or securities.
Keep in mind that we are not providing you with any specific recommendations or
personalized advice about your own trading activities. The information we are providing
is not tailored to any particular individual. Any mention of a particular security is not a
recommendation to buy, sell, or hold that or any other security, or a suggestion that it is
suitable for any specific person. Trading ALWAYS involves a risk of loss, even if we are
discussing strategies that are intended to limit risk.
VDTH and PPIS are not subject to trading restrictions. We could have a position in a
security or initiate a position in a security we mention at any time.
Disclaimer

4. Who are We?
SUNDAY 6:00PM CEDAR COTTAGE PUB, VANCOUVER
www.meetup.com/vdthub
www.slideshare.net/vdth
Educating Since Jan 2017
FRIDAY 6:30PM SKYPE

5. Who are We?
Karim Adatia, CPA
Tax Auditor (2008 – 2016)
Full-time Stock Options Trader (2016 - Present)
Financial Educator (2016 - Present)
www.ppis.ca
TRADING INC.
Canada Revenue Agency

6. What is Disciplined Trading?
Trade based on:
1) CONVICTION (based on what is PERCEIVED in any given moment.)
2) CATALYST (A fundamental or technical reason/opinion)
3) COMPLACENCY (Eg. Wait for a bull market to return
Convert a trade to an investing position)
What a Disciplined Retail Trader will Do …
1) PREDEFINE their risk BEFORE taking a trade
2) CUT THEIR LOSSES without hesitation (when the catalyst fails)
3) MANAGE using a SYSTEMATIC and CONSISTENT money management plan
What Most Retail Traders Do…

7. 1. Who are we?
2. What is Disciplined Trading?
3. A Practice Disciplined Trade
Meetup Agenda

8. What are Equity Options?
An option is a contract that to buy or sell
a certain amount of stock.
allows you
RIGHT or OBLIGATION
BUY
SELL
When you buy, you have a RIGHT.
When you sell, you have an OBLIGATION.
What can we do with Option Contracts?

9. Why trade Equity Options?
Leverage = 1 to 100
1 option contract controls 100 shares
Bullish Stock Trader
Apple Inc. (AAPL) costs $100.00/share
100 shares would cost = $10,000.
Apple Inc. share goes to $105.00/share
Stock Trader makes $500 or 5% profit.
Bullish Options Trader
Apple Inc. (AAPL) costs $100.00/share
1 contract costs $5.00, so trader pays $500.
Apple Inc. share goes to $105.00/share
The Option contract goes to $6.80.
Options Trader makes $180 or 36% profit.

10. A Call Option is an option contract that gives the buyer (holder) the right to buy, and gives
the seller (writer) the obligation to sell a 100 shares of a stock at the given strike price on or
before the expiration date of the contract.
A Put Option is an option contract that gives the buyer (holder) the right to sell, and gives the
seller (writer) the obligation to purchase 100 shares of a stock at the given strike price on or
before the expiration date of the contract.
Types of Option contracts
CALL
PUT
(You Choose)
(You Choose) (Market decides)
(You Choose) (You Choose) (You Choose) (Market decides)

11. SELL
BUY
(SHORT/WRITE)
(LONG)
THE RIGHT TO: THE RIGHT TO:
THE OBLIGATION TO: THE OBLIGATION TO:
Buy Stock Sell Stock
Sell Stock Buy Stock
PUT
CALL
WHEN WE DO ALL FOUR – WE ARE NON-DIRECTIONAL!

12. https://www.youtube.com/watch?v=Eg8IyTPoaQY
Trading
Range
Put
Spread
Call
Spread
The Iron Condor Options Strategy on a Stock
FULL VERSION: SHORT VERSION: https://tinyurl.com/9hd28mt5
https://www.youtube.com/watch?v=Eg8IyTPoaQY

13. Non-Directional Trade
No opinion on whether market goes up or down.

14. 3695 4030 4345
Write a Put at
this Strike
Price
Write a Call at
this Strike
Price
The Iron Condor Options Strategy on an Index

15. Iron Condor Trade Characteristics
1. Option Writing Write: To Sell an Option
2. Range-bound Confidence Interval: 95%
3. Index-linked Ticker: SPX
4. Out-The-Money No Intrinsic Value, Only Time Value
5. Average Return Goal of 8% in 3 weeks
6. 25-day Timeframe Guaranteed Time Decay

16. The Guarantee with Options – Time will Decay
$$$
Time Remaining Until Expiration Date (Days)
Option
Time
Value
($)
SELL
BUY
BACK
90 60 30 0

17. SPX (S&P 500)
SHORT CALL:
= 4345
4030 4345
3695
95% CONFIDENCE INTERVAL : Under NORMAL Volatility Conditions
TRADING RANGE: 3695 – 4345
SHORT PUT:
= 3695
LONG PUT as
protection 5
points away
LONG CALL as
protection 5
points away
4350
3690

18. THE VOLATILITY INDEX – TICKER: VIX
18

19. Practice Trade
Get spreadsheet from www.ppis.ca/Meetup

20. Our Track Record (Feb 2021 - Current)
www.meetup.com/VDTHub Message Boards
SPX Iron Condor
Track Record

21. Determining Expectancy
Steps for calculation expectancy:
1. Calculate your win and loss ratio
2. Calculate your reward to risk ratio
3. Combine those two ratios into an expectancy ratio
SPX Trade Expectancy
1. Win and loss ratio:
Win ratio = Wins/Total Trades
Loss ratio = Losses/Total Trades
2. Reward to risk ratio:
Avg. Winner / Avg. Loser
3. Expectancy ratio:
(Reward to Risk ratio x Win ratio) – Loss ratio
SPX PRACTICE TRADE
49/50 = 98.00%
1/50 = 2.00%
$485.71/$250 = 194.28%
(194.28% x 98.00%) – 2.00%
= +188.40%
Win Ratio:
Loss Ratio:
R2R Ratio:
Exp Ratio:

22. How Many Contracts to Trade should I trade?
www.optionalpha.com/blog/how-many-options-contracts-you-can-trade
How Large of a Portfolio do I need?
Depends on broker.
Depends on commissions.
Depends on risk tolerance.
Recommended at least US$750/trade on SPY at a time.
Recommend at least 3 SPY contracts at a time.

23. Apply with caution
Disciplined Traders …
1) Predefine their risk before taking a trade
2) Cut their losses without hesitation
3) Use a systematic money management plan
to make consistent profits.
This Strategy…
1) Predefines your risk
2) Has an adjustment plan
3) Can be systematic / automatic with trade alerts
Has positive expectancy (is therefore consistent)

24. Takeaways!!
1) Be Disciplined!
Whether you are trading stocks, options, currency
or futures.
2) You Can Make Money by being Non-Directional!
3) Equity Options give you leverage that stocks can’t!
4) If you are interested in this particular strategy,
(1) Come to VDTH Meetups each week or
(2) Follow the Practice Trades on Discussion Board.
and only then…

25. Full Workshop
SFU HARBOUR CENTRE (DOWNTOWN)
515, W. Georgia Street, Vancouver, BC V6B 5K3
Register at : WWW.PPIS.CA/SERVICES
Workshop (3 hours)
+ Workbook
+ 1-1 Coaching (1 hour)
+ Weekly support via VDTHub Meetup &
Contact me if interested in SKYPE Course.
Methodology in Detail
Adjustment / Stops
Entry Criteria & Risk management
Taking Advantage of Volatility

26. US ON FACEBOOK
www.facebook.com/ppistrategies
If you Liked the Presentation,
Write us a review!
www.ppis.ca

27. karim@ppis.ca

28. Backup Slides

29. Cycle of Doom
https://www.youtube.com/watch?v=TuerJcBpYp8

30. Our Inspiration
Mark
Douglas
Norman
Hallet

31. OUTCOMES WHEN TRADING OPTIONS
If you believe a stock will go UP:
BUY A CALL
• You are betting the price of the stock will go UP
• The person you sell the call to is betting the price will go DOWN or
STAY THE SAME
When you buy a call, you can win 1 out of 3 ways
When you sell a call, you can win 2 out of 3 ways
YOU WIN
1
NEUTRAL
2
YOU LOSE
3
YOU LOSE

32. OUTCOMES WHEN TRADING OPTIONS
If you believe a stock will go UP:
SELL A PUT
• You are betting the price of the stock will go UP or STAY THE SAME
• The person you sell the put to is betting the price will go DOWN
When you sell a put, you can win 2 out of 3 ways
When you buy a put, you can win 1 out of 3 ways
YOU WIN
1
NEUTRAL
2
YOU WIN
3
YOU LOSE
… Maybe

33. OUTCOMES WHEN TRADING OPTIONS
If you believe a stock will go DOWN:
BUY A PUT
• You are betting the price of the stock will go DOWN
• The person you sell the put to is betting the price will go UP or
STAY THE SAME
When you buy a put, you can win 1 out of 3 ways
When you sell a put, you can win 2 out of 3 ways
YOU WIN
1 3
YOU LOSE
NEUTRAL
2
YOU LOSE

34. OUTCOMES WHEN TRADING OPTIONS
If you believe a stock will go DOWN:
SELL A CALL
• You are betting the price of the stock will go DOWN or STAY THE SAME
• The person you sell the put to is betting the price will go UP
When you sell a call, you can win 2 out of 3 ways
When you buy a call, you can win 1 out of 3 ways
NEUTRAL
2
YOU WIN
YOU WIN
1 3
YOU LOSE
… Maybe