Slides for the 70th Meetup for 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
4. Videos for the week
Meetup Agenda

3. This is a presentation prepared for Education purposes only.
Neither Vancouver Disciplined Trading Hub (VDTH), Round Table Educators (RTE) 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, RTE 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?
MONDAY 6:00PM CEDAR COTTAGE PUB, VANCOUVER
www.meetup.com/vdthub
www.slideshare.net/vdth
Educating Since Jan 2017

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. Who are We?
Maki Yanagi, LLQP
Financial Services and Adviser
Professional Referral service
Career & Academic Consultant

7. 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…

8. 1. Who are we?
2. What is Disciplined Trading?
3. A Practice Disciplined Trade
4. Videos for the week
Meetup Agenda

9. What are Equity Options?
An option is a contract that to buy or sell
a certain amount of stock.
allows you
BUYING an option gives the owner a RIGHT
SELLING an option gives the seller an OBLIGATION
RIGHT or OBLIGATION

10. What are Equity Options?
Coupons for stocks
Book
costs $6
Expires:
Dec 31,
2018
TERMINOLOGY
PREMIUM $6
STRIKE PRICE $10
RIGHT OR OBLIG. RIGHT
EXPIRATION Dec 31, 2018
MULTIPLIER 1

11. 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.

12. SELLBUY
(SHORT/WRITE)(LONG)
THE RIGHT TO: THE RIGHT TO:
THE OBLIGATION TO: THE OBLIGATION TO:
Buy Stock Sell Stock
Sell Stock Buy Stock
PUTCALL
WHEN WE DO ALL FOUR – WE ARE NON-DIRECTIONAL!

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

14. The Iron Condor Options Strategy
2625 2725 2825
Write a Put at
this Strike
Price
Write a Call at
this Strike
Price

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:
= 2825
2725 28252625
95% CONFIDENCE INTERVAL : Under NORMAL Volatility Conditions
TRADING RANGE: 2625 – 2825
SHORT PUT:
= 2625
LONG PUT as
protection 5
points away
LONG CALL as
protection 5
points away
28302620

18. THE VOLATILITY INDEX – TICKER: VIX
18

19. Practice Trade
WEEK OF: JAN 2 - 6 2017
STEP 1: INFORMATION
-105.00 -100.00 (SPX VALUE) +100.00 +105.00
Long Put Short Put Short Call Long Call
STEP 2: TRADE Watch Video:
STEP 3: MANAGEMENT Watch Video:
CALL ALERT: SPX Value + 65=
PUT ALERT: SPX Value - 65=
YOUR PRACTICE TRADE
Get spreadsheet from www.ppis.ca/Meetup

20. WORST DAY FOR THE S&P 500 IN 2017
2400 24652335
2.6% away
(Put Alert) Index Value (Call Alert)
2.6% away

21. WORST DAY FOR THE S&P 500 IN 2018
2740 28052675
2.4% away
(Put Alert) Index Value (Call Alert)
2.4% away

22. Our Track Record (2017- Mar 2018)
www.meetup.com/VDTHub
*Average Invested
= $5,000/week

23. Our Track Record (> Apr 2018)
www.meetup.com/VDTHub
*Average Invested
= $5,000/week

24. 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
Before Apr 2018 After Apr 2018
55/60 = 92% 21/27 = 78%
5/60 = 8% 6/27 = 22%
$242.86/$1,520 = 16% $578.57/$233.33 = 248%
(16% x 92%) – 8%=
+6.72%
(589% x 78%) – 8%
+170.63%
Win Ratio:
Loss Ratio:
R2R Ratio:
Exp Ratio:

25. How much does the SPX Move on a Daily Basis?
www.investing.com/indices/us-spx-500-historical-data+ 61

26. How much does the SPX Move on a Daily Basis?
www.investing.com/indices/us-spx-500-historical-data+ 17

27. How much does the SPX Move on a Daily Basis?
www.investing.com/indices/us-spx-500-historical-data- 266

28. The Volatility Factor

29. VIX Value Comment 95% c.i. Trading Range
<10.00 Not Volatile Enough
Too narrow, 100 strikes
doesn’t pay enough $
10-15 Average Volatility
Average, 100 strikes away
is ideal.
15-18 Perfect Volatility
Excellent, >100 strikes
away pays enough $.
>18 Too Volatile
Opportunity to get
150~200 strikes away
The Volatility Factor in SPX Iron Condors

30. The Volatility Factor
Trading Range = 2270-2030
= 240
Distance on either side
= 120/2150 = 5.58%
Return = 8% After Commissions
2030 2150 2270
1990 2150 2300
Trading Range = 2300-1990
= 310
Distance on either side
= 155/2150 = 7.21%
Return = 8% After Commissions
1
2
The
Volatility is
Higher

31. 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)

32. 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…

33. Full Workshop
Every 3rd Wednesday of the Month
SFU Harbour Centre (Downtown)
Register at :
www.ppis.ca
Workshop (2.5 hours)
+ Workbook
+ 1-1 Coaching (1 hour)
+ Weekly support via VDTHub Meetup
Next Workshop: Nov 21, 2018
Methodology in Detail
Adjustment / Stops
Entry Criteria & Risk management
Taking Advantage of Volatility

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

35. 1. Who are we?
2. What is Disciplined Trading?
3. A Practice Disciplined Trade
4. Videos for the week
Meetup Agenda

36. Videos

37. karim@ppis.ca

38. Backup Slides

39. Our Inspiration
Mark
Douglas
Norman
Hallet

40. NON-
DIRECTIONAL
TRADES
Stocks and Equity Options
3-month Program
US$799
DIRECTIONAL
TRADES
FOR VIDEO ABOUT MMT PROGRAM: www.youtube.com/watch?v=hzhJBdGNwyo
$200 off for VDTH Meetup Members (Contact us for details)
FB PAGE: www.facebook.com/MasterMindTraders.official/
www.mastermindtraders.com/freevideos

41. 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

42. 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

43. 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

44. 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 WINYOU WIN
1 3
YOU LOSE
… Maybe

45. VIX During the 2008 Financial Crisis
Takeaway: When VIX is > 18, Don’t Trade This Strategy!