With SPX at $2588, I put on an SPX Double Calendar. Here is the 4 Step Risk Management Plan Step 1: Set Up: B 1 Dec 8 2600 C, B 1 Dec 8 2560 P, S 1 Nov 24 2600 C, S 1 Nov 24 2560 P, $15.20 Debit. Short Strikes 17 Days from Expiration and Long Strikes 31 Days from Expiration. Started my Call Calendar up about 12 points from the current price. Put Calendar was 30 points below the current price. Profit Target Step 2: Profit target and Max Loss: Profit Target 8%, would sell out Double Calendar for $16.40 Credit. If the Debit of the spread goes under $13.80, would sell out Double Calendar for about a 10% loss at $13.80 or $13.70 Credit. Step 3: When to Adjust? Upside, around the short strike of the calls. Downside? Would look for a possible adjustment the first 2 days of this trade, about 10 points from the short put strike. Step 4: How to Adjust? Upside? Take off the Put Calendar Downside? Take off the Call calendar
About Dan Sheridan
Dan Sheridan traded in the pits of the CBOE for over twenty years and is still a weekly educator at the Options Institute in Chicago. He opened Sheridan Options Mentoring in 2007, and has since educated thousands of retail traders by relying on the methodologies and strategies that were crafted by current market makers.
Entries by Dan Sheridan
In yesterday’s Live Trade for Ally Invest, I did a 2 Day Butterfly for $3.65 Debit . Normally I like to get out of a 2 day trade the day I put it on. Today, SPX is around 2595, and I don’t like to carry these trades past the morning of the 2nd day, risk goes up quite a bit. I sold out the spread around 9:10 am central today for $3.60 Credit , very small loss of $5. Kenny Rogers used to say, “Know when to hold them and know when to fold them”. Can check original trade details by scrolling up to yesterday’s November 6 Blog. SPX If SPX is trading at 2598 by the end of the day today, only 3 points higher, the spread could be trading for $3.00, down 20%. The least risky time to navigate through this trade with a good risk/reward scenario is the first day. Strict Risk Management Remember, the way we trade is to do similar trades every week with strict risk management. I am looking to do this trade over 50 weeks in a year, and I need to keep my losers very small and less than my winners. If […]
With SPX at 2591 at 11:48 am central today, took off Double Calendar Trade from Friday for $17 credit, about 4% yield. Why did I take off the trade early? Got a little impatient with this quiet market that I don’t think will last, and a 4% profit in 1 trading day. Got into the Double Calendar Trade Friday for $16.35 Debit. How did it make 4% in 1 Trading Day? Daily theta on this trade was almost $60 for 1 contract, benefit of doing a 17 Day Trade. For more details on original trade, scroll to Nov 3 Blog. Dan email@example.com
( From Ally Invest Webinar Today) Buy 1 Nov 8 2580 C, Sell 2 Nov 8 2590 C, Buy 1 Nov 8 2600 C, $3.65 Debit 2 Step Risk Management Process ( No Adjustments) #1 Sell 2 ATM Calls and Buy 1 OTM call 10 points up and down from short strike. Enter on Monday morning, expiration will be Wednesday, 2 days further out. #2 Profit Target is about 10% of debit and risk of $365 for each 1 Butterfly. Will sell out Butterfly if Debit hits $4 or higher. Ideally, want to get out today, latest, Tuesday by Lunch. Max loss, would get out if Debit decreased below $3.15. When I exit trade for either a profit or loss, it would be for a credit. Dan Sheridan firstname.lastname@example.org
Today , around 12:15 or 12:30 central, I did this trade in SPX: Buy 6 Dec 8 2600 C, Buy 6 Dec 8 2555 P, S 6 Nov 20 2600 C, S 6 Nov 20 2555 P, for $16.35 Debit. The long is 35 days from expiration and the short is 17 days from expiration. SPX was around $2586 when I did this. Beginning position Deltas are near zero, the Theta is 38 and the Vega is 1277 ( 6 Contracts). For 1 contract, the capital required is the debit of $1635. 6 Contracts in this example would be about $10,000. Dan’s 4 Step Risk Management Plan 1 Set up : Long Expiration 35 Days out and Short expiration is 17 days from expiration. Start position deltas near zero. Call Calendar is about 15 points up from current price and Put Calendar is about 30 points down from the current price. 2 Profit target and Max Loss: Looking to make about 7-10 % profit and not lose more than say 10%. I bought the spread at 16.35 debit, so I would sell out for around $115 profit for each 1 Double Calendar, or a credit of about […]
Below, is a trade that I put on earlier today in a live webinar for Ally Invest. Sell 1 Nov 24 2605 SPX Call , Buy 1 Nov 24 2610 C, $1 Credit. SPX at $2571. 4 Step Risk Management Plan Step #1 With SPX about 12 Points off of the all time highs, thought it appropriate to do a Call Credit Spread in SPX. Sold a Call at a 20 Delta and bought a call 5 points further out-of-the-money. The risk is $400 for every 1 spread (risk of $500 minus the $100 credit). I filled this trade live at 11:35 am with SPX trading at 2571. Step #2 Profit Target and Max Loss. Profit Target is about 10%. We will buy back the trade for .50, half the credit in this example. Max Loss is 15%. If the $1 Credit goes to 2 .00, we will take off the trade for a $2.00 Debit or a loss of $1.00 on the credit spread, down 20%. Step #3 When to Adjust ? and Step #4 How to Adjust? Not applicable here because we are simply going to take off for a profit or loss and won’t be […]
Dan just closed his Monday SPX Double Calendar trade for a 12.40 Credit on Thursday morning at 8:35am Central Time. He closed his trade for a 12% profit.
Dan put the below trade on about an hour ago, live, in a webinar for Ally Invest. Trade: With SPX around 2554 at about 11:40 central, bought 1 Nov 10 2570 Call and bought 1 Nov 10 2530 Put, and sold 1 Oct 27 2570 Call and sold 1 Oct 27 2530 Put. Total debit for this live trade, 11.05 . Selling Expiration that expires in 11 Days and buying the expiration that expires in 25 days. Dan’s 4 Step Risk Management Plan for this trade: Step 1– Set up: Details are up above next to Trade. Step 2– Risk Management: 8% Profit and 10% Max Loss on risk capital of $1105. Will have in order to take off for $11.90 Credit , a profit of about 8%. If spread I paid $11.05 for goes under $9.50 , I would get out of the trade . Note: Beginner Traders would only deal with Step 1 and 2. Once you have done 5-6 Double Calendars and understand them, then I would deal with Step 3 and 4. Step 3- When to Adjust? Upside: Short Call strike of 2570 . Downside: Short Put Strike plus 5 points or 2535. Step 4- How […]
Took off Mondays Live Butterfly today for a profit of around 5% in 3 Days! (You can reference the trade from Monday’s blog using the link below.) https://www.sheridanmentoring.com/butterfly-live-trade-today-risk-management-plan/ Took off the Butterfly for less than my goal of 8-10 % because I am concerned with the narrow range in SPX last 5 trading days and am quick to get out of my short Vega trades a bit early when VIX is so low, today it is at 9.76! We bought the Butterfly Monday for 12.15 Debit and sold it out today for 12.70 Credit . The Trade was in the Oct 27 expiration. The trade was B 1 2520 C , S 2 2550 C , B 1 2575 C , $12.15 Debit. Dan Sheridan email@example.com
Earlier today I did a Live Butterfly Trade in a webinar for Ally Invest. Below is my 4 Step Risk Management Plan. Step 1: The Set up: I did the Butterfly in SPX at about 11:25 am central today, Oct 9, with SPX around $2548. I bought 1 2520 Call, Sold 2 2550 Calls, and bought 1 2575 Call. I paid $12.15 Debit or $1215 for the entire trade. My beginning position Greeks are: Deltas -2 Theta 13 and Vega -107. Total Capital and Risk for 1 contract is $1220. The expiration is Oct 27 which is 18 days from expiration. Why did I do this? For monthly Income. How does this trade make money? The short options I sold , they decay quicker than the options I bought. ATM options decay faster than ITM or OTM options. Step 2: Profit Target and Max Loss: 8-10% Profit. If I make around 8% on this trade this week, that’s about $100. So if I paid $12.15 debit, my goal is to sell this out for around $13.15 Debit. My Max Loss is 10-12% of the cost of the trade. So if I want to exit the trade at 10% […]
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