GoTradeSignals - Option Selling PPT Pres

TheOPTION PREMIUM SELLING MODELPRESENTATION : 

TheOPTION PREMIUM SELLING MODELPRESENTATION

Did you know it is possible to generate profits in a rising, declining or sideways stock market? : 

Did you know it is possible to generate profits in a rising, declining or sideways stock market? By using specific trading techniques, profits can be generated regardless of market direction.

Most owners of stock will tend to be profitable when the general market is rising. : 

Most owners of stock will tend to be profitable when the general market is rising. But have you ever wondered who is making money in a down trending or sideways market? Answer: The Smart Money

How is this specifically accomplished by the Option Premium Selling Model? : 

How is this specifically accomplished by the Option Premium Selling Model? Before we answer that, let’s take a step back and look at the age old business model of an Insurance Company.

Here is a Simplified Example: : 

Here is a Simplified Example: Let’s say an individual owns an automobile worth $10,000 and is paying $1000 a year for insurance on that vehicle.

If the $10,000 vehicle needs replacement, the insurance company will pay the vehicle owner the replacement cost of that automobile, up to $10,000. : 

If the $10,000 vehicle needs replacement, the insurance company will pay the vehicle owner the replacement cost of that automobile, up to $10,000. But, if the insurance company is paid $1000 for insurance, and yet, pays out $10,000, how does the insurance company stay profitable?

Answer: : 

Answer: By selling insurance to many individuals. They also MODEL the probability of a claim, the required premium payment, and the potential payout to the insured, among other things.

To continue the example, let’s say there are now 10 parties paying $1000 a year to insure their $10,000 vehicle. : 

To continue the example, let’s say there are now 10 parties paying $1000 a year to insure their $10,000 vehicle. Total revenue to the insurance company then sums to $10,000. 10 x $1000 = $10,000

If there is still a 10% probability of a $10,000 payout, and the payout occurred, : 

If there is still a 10% probability of a $10,000 payout, and the payout occurred, the insurance company would not be profitable. There would be revenue of $10,000 and a payout of $10,000.

We, of course, can safely assume insurance companies do not model their fee structure to break even, or lose money. : 

We, of course, can safely assume insurance companies do not model their fee structure to break even, or lose money. So… Let’s see what happens in the example if we change the vehicle insurance premium to $1500 a year.

In this example the insurance company would generate revenue of $15,000 a year. : 

In this example the insurance company would generate revenue of $15,000 a year. 10 x $1500 = $15,000 With the same 10% probability of a $10,000 payout for 10 parties, the insurance company earns a $5,000 profit margin: 10 x $1500 =$15,000 $15,000 - $10,000 = $5,000

In the end, an insurance company must charge enough to be compensated for the risk of insuring a vehicle. : 

In the end, an insurance company must charge enough to be compensated for the risk of insuring a vehicle. It could be said: insurance companies OVER CHARGE to create a margin for them to stay in business.

Let’s now go back to the original question: how does the smart money make money in a DOWN and SIDEWAYS stock market? : 

Let’s now go back to the original question: how does the smart money make money in a DOWN and SIDEWAYS stock market? Just like buying insurance on a vehicle, investors can ALSO buy insurance on the stock market.

This is accomplished by using options, and it is often known as hedging. : 

This is accomplished by using options, and it is often known as hedging. An option is simply the right to buy or sell stock. Call options can increase in value in an upward market move; Put options can increase in value in a declining market move.

Selling options on the stock market is similar to selling insurance. : 

Selling options on the stock market is similar to selling insurance. Just as an insurance company makes its profit by selling premium at higher prices,

Slide 16: 

a profit can be made by selling overpriced options premium at what are viewed as higher prices.

Selling premium is the basis for the Option Premium Selling Model. : 

Selling premium is the basis for the Option Premium Selling Model. Position management controls are employed, and hedging techniques are also utilized.

Who buys the options? : 

Who buys the options? Great question. Answer: Institutional stockholders are typically the buyers of options. The options are used to hedge a declining move in the market.

Slide 19: 

In this way, institutional stock holders literally buy insurance on their stock portfolios. Individual investors also buy these options as well. The demand resulting from option buyers can inflate options prices.

Slide 20: 

Whether buying or selling an option, it will eventually reach a point when it no longer trades. When an option stops trading with no intrinsic value, it expires worthless, benefiting the option seller.

Slide 21: 

Historically, an option buyer, since they have to be correct in both time frame, AND direction, is not successful.

Slide 22: 

Therefore, the concept is to take the other side of the trade of the option buyer, by selling the option, and managing the position. There is typically a higher probability of a winning trade for the options seller.

Option Seller Benefits… : 

Option Seller Benefits… Enjoys a historically higher probability of winning. Harnesses the potential to earn in an up, down and sideways market. Historically represents the smart money. And finally, Emulates the insurance industry.

This Concludes the Option Premium Selling Model Presentation. : 

This Concludes the Option Premium Selling Model Presentation. Thank you.

For more information on utilizing the Option Premium Selling ModelContact:www.GoTradeSignals.comRISK STATEMENT: The trading of stocks, futures, commodities, index futures or any other securities has potential rewards, and it also has potential risks involved. Trading may not be suitable for all users of this Website. Anyone wishing to invest should seek his or her own independent financial or professional advice. The Information, Forms and other resources available on or through this Website and received from or through this Website such as e-mails and/or newsletters are provided for education and informational purposes only, without any express or implied warranty of any kind, including warranties of accuracy, completeness, or fitness for any particular purpose. The Information contained in or provided from or through this Website is not intended to be and does not constitute financial advice, investment advice, trading advice or any other advice. The Information on this Website and provided from or through this Website in the form of e-mails and/or newsletters is general in nature and is not specific to the User or anyone else. USER SHOULD NOT MAKE ANY DECISION, FINANCIAL, INVESTMENTS, TRADING OR OTHERWISE, BASED ON ANY OF THE INFORMATION PRESENTED ON, OR DELIVERED BY ANY OF THE PRODUCTS, SERVICES, INTERNET WEB SITES WITHOUT UNDERTAKING INDEPENDENT DUE DILIGENCE AND CONSULTATION WITH A COMPETENT FINANCIAL ADVISOR OR PROFESSIONAL BROKER. User agrees that any and all use of the Information and Website which User chooses to utilize, is completely at User's own risk and without any recourse whatsoever to GoTradeSignals, its associates, subsidiaries, partners or content Providers. User understands that User is using any and all Information, Forms and other resources available on or through this Website and received from or through this Website such as e-mails and/or newsletters AT USER'S OWN RISK. : 

For more information on utilizing the Option Premium Selling ModelContact:www.GoTradeSignals.comRISK STATEMENT: The trading of stocks, futures, commodities, index futures or any other securities has potential rewards, and it also has potential risks involved. Trading may not be suitable for all users of this Website. Anyone wishing to invest should seek his or her own independent financial or professional advice. The Information, Forms and other resources available on or through this Website and received from or through this Website such as e-mails and/or newsletters are provided for education and informational purposes only, without any express or implied warranty of any kind, including warranties of accuracy, completeness, or fitness for any particular purpose. The Information contained in or provided from or through this Website is not intended to be and does not constitute financial advice, investment advice, trading advice or any other advice. The Information on this Website and provided from or through this Website in the form of e-mails and/or newsletters is general in nature and is not specific to the User or anyone else. USER SHOULD NOT MAKE ANY DECISION, FINANCIAL, INVESTMENTS, TRADING OR OTHERWISE, BASED ON ANY OF THE INFORMATION PRESENTED ON, OR DELIVERED BY ANY OF THE PRODUCTS, SERVICES, INTERNET WEB SITES WITHOUT UNDERTAKING INDEPENDENT DUE DILIGENCE AND CONSULTATION WITH A COMPETENT FINANCIAL ADVISOR OR PROFESSIONAL BROKER. User agrees that any and all use of the Information and Website which User chooses to utilize, is completely at User's own risk and without any recourse whatsoever to GoTradeSignals, its associates, subsidiaries, partners or content Providers. User understands that User is using any and all Information, Forms and other resources available on or through this Website and received from or through this Website such as e-mails and/or newsletters AT USER'S OWN RISK.