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Dan SheridanCalendarsJune 2008Sheridan Options Mentoring, Inc.www.SheridanMentoring.com
Disclaimer and DisclosureThe views of third party speakers and their materials are their own and do not necessarily represent theviews of Chicago Board Options Exchange, Incorporated (CBOE). Third party speakers are not affiliatedwith CBOE. This presentation should not be construed as an endorsement or an indication by CBOE ofthe value of any product or service described in this presentation.Options involve risk and are not suitable for all investors. Prior to buying or selling an option, a personmust receive a copy of Characteristics and Risks of Standardized Options (ODD). Copies of the ODDare available from your broker, by calling 1-888-OPTIONS, or from The Options Clearing Corporation,One North Wacker Drive, Suite 500, Chicago, Illinois 60606. The information in this presentation isprovided solely for general education and information purposes and therefore should not be consideredcomplete, precise, or current. Many of the matters discussed are subject to detailed rules, regulations,and statutory provisions which should be referred to for additional detail and are subject to changes thatmay not be reflected in the presentation. Any strategies discussed, including examples using actualsecurities and price data, are strictly for illustrative and educational purposes. In order to simplify thecomputations, commissions and other transaction costs have not been included in the examples used inthis presentation. Such costs will impact the outcome of the stock and options transactions and shouldbe considered. No statement within the presentation should be construed as a recommendation to buyor sell a security or to provide investment advice.Multiple leg strategies involve multiple commissions charges.
EEM Calendar ComparisionDate: 2/20/2008Price: 141Let’s compare three different calendar trades1. Single Calendar2. Double Calendar3. Triple Calendar
EEM Calendar Comparison #1Date: 2/20/2008Price: 141MAR(30)Options145 Calls140 Calls135 CallsPriceIVAPR(59)Trade 4.30 36.5% 7.00 39.5% 10.25 42.1%DeltaGammaThetaVega-1PriceIV 7.00 37.8% 9.65 39.7% 12.80 41.8%-3.1-0.53.16.4Trade 1
EEM Calendar Comparison #1Date: 2/20/2008Price: 141
EEM Calendar Comparison #2Date: 2/20/2008Price: 141MAR(30)OptionsPriceIV145 Calls140 Calls135 Calls 4.30 36.5% 7.00 39.5% 10.25 42.1%145 Puts140 Puts135 Puts 5.70 4.00 -1-1PriceIV 7.00 37.8% 9.65 39.7% 12.80 41.8% 10.50 37.6% 8.25 39.8% 6.30 41.4%-5.1-0.95.413.2Trade 1 1
EEM Calendar Comparison #2Date: 2/20/2008Price: 141
EEM Calendar Comparison #3Date: 2/20/2008Price: llsCallsCallsCalls 2.33 4.30 7.00 10.2533.9%36.5%39.5%42.1%-1 4.80 7.00 9.65 12.8036.1%37.8%39.7%41.8% 1135 Puts130 Puts125 Puts 4.00 2.75 1.9042.3%45.1%48.3% 6.30 4.85 -1-1-5.4-1.26.620.8 1 1
EEM Calendar Comparison #3Date: 2/20/2008Price: 141
EEM Calendar ComparisonExpiration YieldsWhich one would you trade and why?
EEM Calendar ComparisonYield Curves for 15 days in the futureWhich one would you trade and why?
Considerations for picking a CalendarWhat trade offs are there between them?Break evens vs. best yieldsBest Yields vs. best protection for large movesExecution issuesCommissions
EEM Price ChartTraded from 6/14/2007 to 1/16/2008.Most of that period was a veryvolatile market.
EEM Double Calendar Guidelines1.2.3.4.5.6.7.35-40 days35Place short calls 55-10 points OTMPlace long options out 11-3 months from shortsPlace long strikes 55-10 points from shortsPLANMax loss 20% ( adjust by -8-10%)PLANTake Profits 15%Adjustment points½ way between short strikeand breakeven move 1/2 of spreads
EEM Double CalendarDate: 7/12/2007Price: 141.50AUG(37)OptionsPriceIVSEP(72)Delta Trade150 Calls145 Calls140 Calls 1.25 22.1% 23.8 3.00 24.3% 41.9 5.65 26.3% 59.8140 Puts135 Puts130 Puts 3.90 26.6% -40.5 2.70 30.9% -25.9 1.60 32.7% lta Trade-5 2.95 23.8% 31.3 5.00 25.1% 44.5 7.70 26.5% 57.5 5-5 5.95 27.8% -42.7 4.30 29.7% -31.2 3.10 31.8% -22.3 5Cash Flow15% Profit Target20% Max Loss (1,830) 275 (366)
EEM Double CalendarDate: 7/12/2007Price: 141.50
EEM Double CalendarDate: 7/25/2007Price: 140AUG(24)OptionsPrice Entry Pr150 Calls145 Calls140 Calls 0.60 1.85 4.25140 Puts135 Puts130 Puts 4.30 2.50 1.35DeltaGammaThetaVega6.0-12.125.486.2IV 3.0023.8%25.8%28.9% 2.7030.6%33.1%35.1%SEP(59)Trade Price Entry Pr-5 2.28 4.20 6.80-5 6.55 4.60 3.50IVTrade 5.0025.1%27.1%29.2% 5 4.3030.4%31.7%35.1% 5Cash FlowProfit15% Profit Target20% Max Loss (1,830) 395 275 (366)
EEM Double CalendarDate: 8/16/2007Price: 118.50SEP(37)OptionsPriceIVDelta Trade130 Calls125 Calls120 Calls 1.75 36.0% 22.3 3.20 37.6% 34.2 5.50 40.3% 47.1115 Puts110 Puts110 Puts 4.95 45.0% -40.4 3.70 50.0% -29.7 2.55 52.8% -21.2DeltaGammaThetaVegaDEC(128)PriceIVDelta Trade-5 5.40 33.6% 30.4 7.30 34.4% 38 9.75 35.9% 45.8 5-5 9.05 40.1% -46.6 7.10 41.3% -39.3 5.50 42.6% -32.6 5-28.9 Cash Flow-6.8 15% Profit Target40.5 20% Max Loss130.1 (3,780) 567 (756)
EEM Double CalendarDate: 8/16/2007Price: 118.50
EEM Double CalendarDate: 8/24/2007Price: 130.75Why Adjust?SEP(29)OptionsPriceIV130 Calls125 Calls120 Calls 5.30 32.7% 8.85 37.3% 12.70115 Puts110 Puts105 Puts 1.15 0.80 9%51.9%DEC(120)TradePriceIVTrade-5 10.80 33.6% 14.10 35.8% 17.20 36.5% 5-5 4.70 3.50 2.60 5Cash FlowProfit15% Profit Target20% Max Loss39.4%40.4%41.7% (3,780) 165 567 (756)
EEM Double CalendarDate: 8/24/2007Price: 130.75
EEM Double CalendarDate: 8/24/2007Price: 130.75SEP(29)OptionsPriceIV135 Calls130 Calls125 Calls 2.80 30.2% 5.30 32.8% 8.85 37.3%115 puts110 Puts105 Puts 1.15 44.0% 0.80 48.9% 0.50 51.9%BeforeDeltaGammaThetaVegaTrade VTrade New 10.80 33.6% 14.10 35.8% 17.20 36.5%-5After-145.9-2.530.2147.0DEC(120) 3 4.70 3.50 2.6039.4%40.4%41.7%Original Cash FlowRequiredProfit15% Profit Target20% Max Loss 3 5 5-3 (3,780) 4,620 165 567 (756)
EEM Double CalendarDate: 8/24/2007Price: 130.75
EEM Double CalendarDate: 9/4/2007Price: 136SEP(18)OptionsPriceIV140 Calls135 Calls130 Calls125 Calls 2.15 30.6% 4.75 34.3% 8.25 38.0% 12.50115 Puts110 Puts105 Puts 0.55 0.30 3%61.4%DEC(109)Trade-3-5-2PriceIV 8.25 11.00 13.90 17.2532.4%34.0%34.9%36.2% 3.45 2.70 2.0040.8%42.6%44.2%Original Cash FlowRequiredProfit15% Profit Target20% Max LossTrade 3 5 2 (3,780) 4,389 132 567 (756)
EEM Double CalendarDate: 9/4/2007Price: 15 puts110 Puts105 PutsPrice 2.15 30.6% 4.75 34.3% 8.25 38.0% 12.45 0.55 0.30 e VegaDEC(109)-119.3-12.457.4177.9 2PriceIV 8.25 11.00 13.90 17.2532.3%34.0%34.9%36.2% 3.45 2.70 2.0040.8%42.6%44.2%Original Cash FlowRequiredProfit15% Profit Target20% Max LossTrade New 2 3 5 2-2 (3,780) 5,141 132 567 (756)
EEM Double CalendarDate: 9/4/2007Price: 136
EEM Double CalendarDate: 9/10/2007Price: 40 Calls135 Calls130 Calls125 Calls 0.75 2.40 5.20 8.9532.4%36.4%40.5%-2-3 7.00 9.45 12.15 15.2533.6%35.8%36.5%33.0% 2 3DeltaGammaThetaVega-60.0-19.577.9193.2-5Original Cash FlowRequiredProfit15% Profit Target20% Max Loss 5 (3,780) 4,929 1,145 567 (756)
EEM Price ChartDate: 9/10/2007Price: 133EEM Moved from 118 ½ to almost 135 and westill did great!
Calendar Back Test ResultsJa nua ry-07Februa ry-07Ma rch-07Apri l -07Ma y-07June-07Jul y-07Augus t-07September-07October-07November-07December-07Ja nua ry-08TotalsMonthly AverageCapitalProfit/Loss 1,292 334 704 (128) 916 600 1,704 273 5,228 629 3,504 636 2,166 342 6,669 1,097 7,712 289 3,226 488 2,814 678 5,070 846 4,052 (846) 45,057 5,238 3,466 403Annual 12%140%Without MarchMarch-07, Monthly yield 11%, Annual Yield 126%
Dan g.comSheridan Options Mentoring, Inc.http://www.SheridanMentoring.com/
Dan SheridanDan Sheridan Calendars Sheridan Options Mentoring, Inc. www.SheridanMentoring.com June 2008. Disclaimer and DisclosureDisclaimer and Disclosure The views of third party speakers and their materials are their own and do not necessarily represent the
