The Art of Making 10% a

Month
May 15, 2010

With
Manoj Agrawal

Founder – OptionPundit
www.OptionPundit.Com

© OptionPundit 2006-2010
Disclosure
Options involve risks and are not suitable for all investors. Prior to
buying or selling an option, a person must receive a copy of
Characteristics and Risks of Standardized Options. Copies are available
from your broker, by calling 1-888-OPTIONS (USA), or at
www.theocc.com.

OptionPundit is not a RIA and is not liable for any profit/loss occurred
due to investment decision made on the basis of this presentation. The
information in this presentation is provided solely for general education
and information purposes. No statement should be construed as a
recommendation to buy or sell a security or to provide investment
advice.

For detailed legal notices and disclaimer, please visit

(http://www.OptionPundit.net/legal-and-disclaimer). Past performance
is not indicative of future results.

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Vision

OptionPundit is your trustworthy

partner who passionately helps
you achieve consistent income
through option trading

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Key Issues/Experiences with Condor

1. Transaction fee (too many contracts)

2. Gain little, risk so much
3. Short strike always seems to threaten
4. Iron Condor vs. other strategies
5. Strike price selection
6. Underlying selection
7. Manage/adjusting the trade during “holding
period”
8. Always applicable?
9. Implied Volatility

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Key Discussion Points

 Professional Option Trading

 Building a Condor
 Real Examples
 Risk Adjustments
 Way Forward

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Power of Compounding

What % per month is required

to double capital in a Year?

~ 6%

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Professional Trading

 Know your business

 Respect for Risk
 Winning Secret = No. of Wins x $$$ >
No. of Losses x $
 Power of Compounding
 Trading Journal

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OPNewsletter

Performance Size Matters

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Life Offers Options
 Call and Put ; 2 options = Hundreds of Money Making Opportunities

Call Option
 A call option is a financial contract between two parties, the buyer and the seller of this type of
option. It is the option to buy shares of stock at a specified time in the future. Often it is simply
labeled a "call". The buyer of the option has the right, but not the obligation to buy an agreed
quantity of a particular commodity or financial instrument (the underlying instrument) from the
seller of the option at a certain time (the expiration date) for a certain price (the strike price). The
seller (or "writer") is obligated to sell the commodity or financial instrument should the buyer so
decide. The buyer pays a fee (called a premium) for this right.

Put Option
 A put option (usually just called a "put") is a financial contract between two parties, the writer
(seller) and the buyer of the option. The buyer acquires a short position by purchasing the right to
sell the underlying instrument to the seller of the option for specified price (the strike price)
during a specified period of time. If the option buyer exercises their right, the seller is obligated to
buy the underlying instrument from them at the agreed upon strike price, regardless of the
current market price. In exchange for having this option, the buyer pays the seller or option writer
a fee (the option premium).

What the heck?

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OP OptionsMatrixTM

Type Call Put

Buyer Buy Stocks Sell Stocks

(Right)

Seller Sell Stocks Buy Stocks

(Obligation)

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Call Vs. Put

Long Call Long Put

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Iron Condor, In Simple terms
 Bear and Bull in Harmony
(Market Neutral); Bear Call
+ Bull Put Credit Spreads
 Risk = Difference in Strikes-
Credit
 Lower Breakeven= Short
Put - Credit
 Upper Breakeven= Short
Call + Credit
 Returns = Credit/Margin

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Genesis of Iron Condor

Bull Put Credit Spread Bear Call Credit Spread

Iron Condor
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Key Consideration

 Underlying
 Distance between shorts
 When to adjust
 How to adjust
 Exit Strategy

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Real Trade Example
March 30, 2010 NDX @ 1,967
 Sell to open May 2100/2125 Bear Call Credit Spread (Sell May 2100 Call,
Buy May 2125 Call) and ( @$2.55 credit)
 Sell to open May 1825/1800 Bull Put Credit spread (Sell May 1825 Put
and Buy May 1800 Put) (@2.70 credit)
 This whole Iron Condor will generate roughly $525 credit by risking $1,975;
~26%

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A Pix is worth 1000 words…

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Everything Seems OK..

An Excellent 300 Point Condor

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…Until the Unexpected

Upper Breakeven
Real Life> 100 up, 70 down, 60 up, 300 Down, 230 up, 100 down again!!!!

Lower Breakeven

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Risk Management

~ 4:1
(Risk: Reward) ~1:18
~4:1 (Risk: Reward)
(Risk: Reward)

May 15 2010 close for +238%

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GOOG IC- DIY
GOOG Iron Condor Example, May 11, 2010
- June IC 2010, Price - $509
- Sell to open 570/580 BCS – Credit @ $72
- Sell to open 450/440 BPS – Credit @ $85
- Risk= $1,000 - $157= $843
- Returns = $157/$843 = 18.6%
- Breakeven = $448.43 and $571.57
- Time required = 5 weeks
- 10 times/year = $1000  $5,500

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A Beautiful Mind…

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A Pix is Worth 1000 words…

© OptionPundit 2006-2010
A Pix is Worth 1000 words…

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Discussion Points for Next Time

 Trading psychology
 Adjustment, what point
 Strategies at that point

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The Great Paradox

Trading is Complex because it is

Simple
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