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Identifying and Exploiting High Volatility Stocks with Over-Priced Options Ryan Winkler

Identifying and Exploiting High Volatility Stocks with Over-Priced Options Ryan Winkler Options Meetup – 07/25/19. Goal for Today. Present a compelling argument to show: 1 . Selling puts is a viable strategy.

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Identifying and Exploiting High Volatility Stocks with Over-Priced Options Ryan Winkler

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  1. Identifying and Exploiting High Volatility Stocks with Over-Priced Options Ryan Winkler Options Meetup – 07/25/19

  2. Goal for Today • Present a compelling argument to show: 1. Selling puts is a viable strategy. 2. All options traders should consider selling puts as a small percentage of their portfolio. And 3. Provide tools to help you get started.

  3. Agenda • A Little About Me • Trading History • Trading Philosophy • Risk Management • Examples • Scanning for Options • Resources

  4. A Little About Me • Born and Raised in Indiana • Family man – wife and 2 kids • NC State for Grad School • Senior Accountant for Regional Bank • Naval Officer in Navy Reserve • Currently learning to code • Real-Time Scanner Using OPRA API

  5. Trading History Bought Options Trend and Swing Trading John Locke Trading Watched Karen the Super Trader Condors and BSH Sell Options Trade Volatility 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

  6. Trading History Continued • Wiped out Personal Account Thrice • -$6,000 (Pharma) • -$5,000 (/CL) • -$22,000 (SVXY – Feb 2018) • Didn’t make money for 10 years • Have been profitable for 3 years now • Selling Puts • Trading Volatility

  7. Trading History Continued • Doesn’t include profit from volatility trades

  8. Trading History Continued • Time Frame: 1/1/2017 – Present • Total Positions: 350+ • Symbols: 200+ • Average DTE: 40 • Average DIT: 26 • Win Rate: 99.45% • Average Winner: +$37 • Average Loser: -$359

  9. Trading Philosophy • How I got started – Sears • Like an insurance company • Insure the best, lowest risk companies with the highest premiums • You can still be wrong and make money • You have time decay on your side

  10. Trading Philosophy - Continued

  11. Trading Philosophy - Continued • Sell high vol, opposite of “Safe Investing” • Stock trading vs. Option Trading differences • Belief that Greeks are not always accurate • Irrational fear creates irrational prices

  12. Risk Management • No Pharma or Biotech • No Earnings before Expiration • Lowest Delta Strike Possible that has Premium • Short term trades ~ 45 DTE • Focus on Risk instead of Return • Pay Attention to Support and Resistance

  13. Risk Management • Different Depending on: • Portfolio Margin • TastyWorks Margin • Reg T Margin • Cash Secured & IRA

  14. Risk Management • Example: TSLA trading at 228.55 • Strike $100 @ 09/20/19 Expiry (57 DTE) for $0.45 • PM: $70 • TastyWorks: $1,000 • Reg T: $1,990 • Cash Secured: $9,955

  15. Risk Management • Adopted a lot of TastyTrade’s Rules: • “Trade Small, Trade Often” • “Managing Winners” • “How Accurate is Delta?” • “Why 45 DTE is the Magic Number”

  16. Risk Management Credit: https://www.tastytrade.com/tt/shows/options-jive/episodes/theory-behind-trade-small-trade-often-12-14-2015

  17. Risk Management Credit: https://www.tastytrade.com/tt/shows/market-measures/episodes/managing-winners-and-managing-earlier-comparison-06-12-2018

  18. Risk Management Credit: https://www.tastytrade.com/tt/shows/options-jive/episodes/how-accurate-is-delta-08-09-2017

  19. Risk Management Credit: https://www.tastytrade.com/tt/shows/the-skinny-on-options-modeling/episodes/why-45-dte-is-the-magic-number-05-26-2016--2 and https://www.tastytrade.com/tt/shows/trade-logic-unlocked/episodes/the-decay-of-moneyness-12-21-2018

  20. Risk Management • Additional Thoughts: • Don’t be greedy • Focus on Risk instead of Return • Always manage and model margin • BSH to protect big market move down

  21. Examples

  22. Examples - Continued 04/29/19 Example: • TSLA Price: $241.47 • Strike: $100 • 60% below market price • Expiration 06/21/19 (51 DTE) • Premium: 0.86 • Close 5 days later for 0.10

  23. Examples - Continued

  24. Examples - Continued 04/23/19 Example: • RIOT Price: $5.18 • Strike: $1 • 80% below market price • Expiration 06/21/19 (59 DTE) • Premium: 0.15 • Close 37 days later for 0.03

  25. Examples - Continued

  26. Examples - Continued 06/26/19 Example: • MDB Price: $150.69 • Strike: $100 • 34% below market price • Expiration 08/16/19 (51 DTE) • Premium: 0.40 • Currently Holding at 0.10

  27. Examples - Continued

  28. Examples - Continued 05/17/19 Example: • DQ Price: $65.12 • Strike: $45 • 31% below market price • Expiration 06/15/18 (29 DTE) • Premium: 0.25 • Rolled until 12/21/19 Expiration • Loss of $4950 (8 contracts)

  29. Scanning for Options • How to find good candidates to sell? • TOS Scanner • TastyWorks “Grid” • API Access to OPRA • Various Websites

  30. Scanning for Options • TOS Scanner

  31. Scanning for Options • TastyWorks “Grid”

  32. Scanning for Options • API Access to OPRA via Vendor (TOS, IB, etc.)

  33. Scanning for Options • Optionstrategist.com/calculators/free-volatility-data

  34. Scanning for Options • Marketchameleon.com/volReports/VolatilityRankings

  35. Scanning for Options • Big gains/losses intra-day • After earnings moves • After-market or pre-market movers

  36. Resources • OptionAlpha.com • TastyTrade.com • Traders in this room • Email me

  37. Recap • Trading History • Trading Philosophy • Risk Management • Examples • Scanning for Options • Resources

  38. Goal for Today • Present a compelling argument to show: 1. Selling puts is a viable strategy. 2. All options traders should consider selling puts as a small percentage of their portfolio. And 3. Provide tools to help you get started.

  39. Questions? • Contact info: • RyanWinkler24@gmail.com

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