www.appod.com
• David Hsiao蕭正則
• Master in Math/Computer Science from
Minnesota State University
• Mainframe System Programming
• Micro computer, Client-Server, Web
Application
• Microsoft Certified Solution Developer(MCSD)
Show Me The Money
Time, People, Money
What is takes to make 1 Million
• You need one million, not really!
• Rule of 72
Top 1%
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2007 - $424,413(income)
2008 - $380,354(19% of top 1% is from wage)
2009 - $343,927(19% drop from 2007)
Paid 27.6% Federal tax
Own half of country’s stocks, bonds, mutual
funds
Investment Like(If I don’t see or Don’t
know then it does not happen)
It happens to People(Bank, Mutual
Fund, annuity,fee,Paper lost,Tax
liability no control, etc)
Most Stock Trading Strategy(Masses)
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Buy Low sell High
Buy and Hold
Buy more when lower
Chapter 11 !!(Don’t buy)
Trading Strategy($100 challenge)
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Risk Management – 10-70%
Profitability – 1-4%+ Per week
Simplicity – Easy to understand and execute
Consistency – Time, frequency
The winning strategy
• Stock Movement(up, neutral, down)
• Time(Option)-Own right(Long), Owe
Right(Short)
• Leverage(Option)-10-50% at risk
• KISS(Keep It Simple and Stupid)
• Insurance(use option)- Net cost is always
lower than current price
. Make it->Master it-> Matter it
Dividend
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X-Dividend Date(Buy before X-D to get Div)
Sell Put or Call can benefit from it
Relates to Option
Hold Call position and exercised right before
X-divididend date, you have to pay the
dividend!!
Major Exchange
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NYSE - 3112
AMEX - 1614
NASDAQ – 2553
7279(some ETFs, stock only about 6700)
ETF(optionable), Mutual Fund(end of day trade)
Option – 1876 symbols(include about 100 ETFs,
etc), 2012-2016(Year)
• 400,000+ records(Put and Call)
• Watch out for non-standard option(ns)
Stock, Option Count
Exchange callorput
Count
AMEX
C
1,510
NasDaq
C
50,541
NYSE
C
83,482
AMEX
P
NasDaq
NYSE
OptionCount Symbol WIthOptionCount
135,533
SymbolInExhange
1782
3241
54.98%
2,034
91
486
18.72%
P
54,359
1429
2716
52.61%
P
82,490
3302
6443
138,883
274,416
407 (Symbol Not in Exhange)
How to Profit
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Data(Data Mining)
Information
Opportunities(Aanlysis)
Proper Execution
$$$
Day Trade
• What is a day trade/round trip?
• A day trade occurs when you buy and sell (or sell and buy) the same stock
or option position during the same trading day. A trading day includes all
pre-market, normal trading hours, and extended session hours. Selling a
position held overnight and reacquiring the position the following day is
not considered a day trade.
• FINRA provides that a pattern day trader is any account that executes four
or more round-trip day trades within any rolling five-business-day period,
provided the number of day trades represents at least 6% of the total
trading activity during the same five-business-day period.
• If you are flagged as a pattern day trader, you'll be subject to restrictions,
including a minimum equity of $25,000 at the start of any day in which day
trading occurs. Pattern day-trader accounts that fall below the $25,000
minimum equity requirement and day trading will be restricted to
closing transactions only for 90 days, or until the equity is brought up to
$25,000.
Why Option(Spread)
• Protection – small investment, large position
• Leverage – own more than you can afford.
• Profit – it means more profit or more
protection
• Retirement Account- settlement date, limited
margin account, can not use incoming money!
. Not enough cash to buy 100 shares of stock
Sell Put or Call(From Seller’s point)
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Put – Good when stock is Up
Call – Good when stock is Down
Risk?
Leverage?
More Profit: Close positions right before
Expiration Date(if your options will be
exercised). Keep enough cash so that you can
buy back the sell position!
Option
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Strike Price – Buy or Sell at price
Bid(Premium) – Price buyer is willing to pay(low)
Ask – Price Seller is willing to pay(high)
(From buyer’s point of view)
Call – benefit only when stock is up
Put – benefit only when stock is down
Expiration Date- When contract is not valid
100 shares- 1 contract
Non-Standard ***
Pay more when the trend is the same intention as the
buyer(pay more or less for the premium)
Cover Call Option
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Simplest one
Good for people with company’s stock option
Good for stock with dividend
Good to get stream of income
Need to buy at least 100 shares
Vertical Spread On Call(Diagonal
Spread)
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Good leverage
Preserve Cash
Risk management
Bullish on market
Average return 2%+ a month
Buy LEAP(Long) Call and Sell short Call
Sell price is higher than Buy price
Advantage of Using LEAPs
• Less costly than purchasing stock; remaining
cash can be used to generate additional cash
• A declining stock will have time to recover
• Low time value of deep I-T-M LEAPS make
option ownership similar to stock ownership
where intrinsic value changes dollar-for-dollar
• DisAdv: No divident, hard to sell(Close) LEAP
call
Why VS On Cal And Put
• Conflict of Interest
• Stock does not change much
• Generate Income instead of idling the
money(keep in cash position)
Basic(Why VS on Put)
• Weekly premium*4 usually is higher than
monthly
• Easier to find good news or bad news?
• Stock react strongly to bad news than good news
• More profit to bet on down than up
• Stock can go down to 0 but has a limit to go up
• Good News can go down, bad news always down
(WD- good revenue, profit but future in doubt)
Vertical Spread on Put
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Good leverage
Preserve Cash
Risk management
Bear market or stock
Average return 1-2% a week
Buy LEAP(Long) Put and Sell short Put
Sell price is higher than Buy price
Why Vertical Spread
• Protection – On Put, LEAP is protection, the
lower the better
• Leverage – The LEAP can cover the short. No
need to keep cash in case ..
• You can get more shares(2-10x) than your cash
can afford. So little profit is feasible trade
Vertical Spread Call Example
Vertical Spread Put Example 1
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Close before expired:$30.2-$25.7-5+$2.12=$1.62($1.62/$25.7=6.3%)
$60381.3+$4222.56-$51417.34-$10017.34=$3169.18
$3169.18/$51417.34=6.1%
Exercised:$80-$55-$25.7+$2.12= $1.42($1.42/$25.7=5.525%)
VS Put Example 2