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International Securities Exchange. December 2006. Stable Market Opportunities. December 2006. - PowerPoint PPT Presentation

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  • International Securities Exchange

    December 2006

    qqqq\Roadshow\ISE Secondary Roadshow Pres -2005 as of 11_23_05 v4.ppt

  • Stable Market OpportunitiesDecember 2006

    qqqq\Roadshow\ISE Secondary Roadshow Pres -2005 as of 11_23_05 v4.ppt

  • For the sake of simplicity, the examples that follow do not take into consideration commissions and other transaction fees, tax considerations, or margin requirements, which are factors that may significantly affect the economic consequences of a given strategy. An investor should review transaction costs, margin requirements and tax considerations with a broker and tax advisor before enteringinto any options strategy.

    Options involve risk and are not suitable for everyone. Prior to buying or selling an option, a person must receive a copy of CHARACTERISTICS AND RISKS OF STANDARDIZED OPTIONS. Copies have been provided for you today and may be obtained from your broker, one of the exchanges or The Options Clearing Corporation. A prospectus, which discusses the role of The Options Clearing Corporation, is also available, without charge, upon request at 1-888-OPTIONS or www.888options.com.

    Any strategies discussed, including examples using actual securitiesprice data, are strictly for illustrative and educational purposes and are not to be construed as an endorsement, recommendation or solicitation to buy or sell securities.

    qqqq\Roadshow\ISE Secondary Roadshow Pres -2005 as of 11_23_05 v4.ppt

  • Alex Jacobson Vice Presidenteducation@iseoptions.com

    www.iseoptions.com

    qqqq\Roadshow\ISE Secondary Roadshow Pres -2005 as of 11_23_05 v4.ppt

  • Upcoming/Current PublicationsOption Traders Magazine May 2006Spread Trading Credit/Debit Spreads - How Volatility Impacts The Trade DecisionSFO Magazine Current Issue Importance Of Volatility To Option TradersMASTER TRADERS Wiley Investment Publishing Fari Hamzei Editor Volatility Chapter Preorders at www.amazon.com

    qqqq\Roadshow\ISE Secondary Roadshow Pres -2005 as of 11_23_05 v4.ppt

  • Strategies That Benefit From A Stable Price EnvironmentOption strategies which are done at a debit to their expected valuation at expiration

    Option strategies that create a credit

    qqqq\Roadshow\ISE Secondary Roadshow Pres -2005 as of 11_23_05 v4.ppt

  • Some Thoughts On RiskIve back tested 5 years of data .. That proves the strategy is good

    The strategy is approved for IRAs therefore it must be safe

    The strategy has a statistical probability of making a profit of 90%

    qqqq\Roadshow\ISE Secondary Roadshow Pres -2005 as of 11_23_05 v4.ppt

  • Income Strategies

    Covered Call WritingPut SellingCalendar SpreadsCredit SpreadsDebit SpreadsWhich has the best return over time ?Which has the biggest draw downs ?

    qqqq\Roadshow\ISE Secondary Roadshow Pres -2005 as of 11_23_05 v4.ppt

  • SPY @ 126.05 August 06 35 Day Options14.5% VolatilityCovered Call WritingBuy SPY @ 126.05Sell Aug 129 Call @ $.95C on C .753% StaticIf called 3.09%BE 125.10

    qqqq\Roadshow\ISE Secondary Roadshow Pres -2005 as of 11_23_05 v4.ppt

  • Thoughts On Covered WritingEnhance income on existing position

    Small downside cushion

    Of all income ideas requires most $$

    qqqq\Roadshow\ISE Secondary Roadshow Pres -2005 as of 11_23_05 v4.ppt

  • SPY @ 126.05Sell 129 Put OptionSell Aug 129 Put @ 3.50C on C (.55/25.20) 2.18%SPY @ 129 (3.50/25.20) 13.90%BE 125.50

    qqqq\Roadshow\ISE Secondary Roadshow Pres -2005 as of 11_23_05 v4.ppt

  • Thoughts On Put SellingSame payoff characteristics as covered writing cash secured put sale is just another form of a covered writePut seller gets more leverage - Puts sold against SMAMany brokerage houses restrict put sellingMany allow IRA put sellingRequirements vary from firm to firm

    qqqq\Roadshow\ISE Secondary Roadshow Pres -2005 as of 11_23_05 v4.ppt

  • Calendar Spread Diagonal Spread SPY @ 126.05

    Buy Dec 110 Call @ $19.80Sell Aug 129 Call @ $.95C on C 4.80% SPY @ 129 or above HAVE AN EXERCISE PLAN

    qqqq\Roadshow\ISE Secondary Roadshow Pres -2005 as of 11_23_05 v4.ppt

  • Thoughts On Calendar SpreadsA lot like covered call writing except you dont want to deliver by exercising the ITM callAll time spreads benefit from the fact that option time erosion is different for different expirationsHave an exercise plan in place Buy back your short call Roll your short callLeverage and limited risk

    qqqq\Roadshow\ISE Secondary Roadshow Pres -2005 as of 11_23_05 v4.ppt

  • Put Credit Spread SPY @ 126.05Sell Aug 126 Put @ 1.85Buy Aug 120 Put @ .65Net Credit 1.20 6.00 RequirementC on C 20%

    qqqq\Roadshow\ISE Secondary Roadshow Pres -2005 as of 11_23_05 v4.ppt

  • Thought On Credit SpreadsInvestor popularity For many of the option Gurus this is their core strategyJune expiration was difficult the previous 5 years was O.K.Trade can earn $1.20 worst case(excluding early exercise) the trade could lose $4.80

    qqqq\Roadshow\ISE Secondary Roadshow Pres -2005 as of 11_23_05 v4.ppt

  • Call Debit Spread SPY @ 126.05Buy Aug 120 Call @ 7.20Sell Aug 126 Call @ 2.40Net Debit Is 4.80Max Profit Is 1.20

    qqqq\Roadshow\ISE Secondary Roadshow Pres -2005 as of 11_23_05 v4.ppt

  • Thoughts On Debit SpreadsSame economics as credit spreadLess early exercise concernInvestors crave credits intraday debit spreads are commonly better (even if you earn interest on the credit balance)

    qqqq\Roadshow\ISE Secondary Roadshow Pres -2005 as of 11_23_05 v4.ppt

  • Thoughts On Spreads In GeneralGood way to HARVEST premium incomeMy bias is debit spreads for income must investors have to taught to go for creditsPrice the parity trade of your spread to see which is betterBe EXTRA cautious during expiration weekMany brokers offer spread commissions

    qqqq\Roadshow\ISE Secondary Roadshow Pres -2005 as of 11_23_05 v4.ppt

  • Option Myths

    90% Expire Worthless {10 - 30 -60 }Sellers Smarter Than BuyersZero Sum Game Between Buyer/Seller

    qqqq\Roadshow\ISE Secondary Roadshow Pres -2005 as of 11_23_05 v4.ppt

  • ISE HistoryFirst fully electronic options exchange in the U.S. First newly registered securities exchange since 1973Launched equity options trading on May 26, 2000Largest equity options exchange in the worldISE's stock began trading on The New York Stock Exchange on March 9, 2005

    qqqq\Roadshow\ISE Secondary Roadshow Pres -2005 as of 11_23_05 v4.ppt

  • International Securities Exchange

    DraftNovember 29, 200511:30pm

    qqqq\Roadshow\ISE Secondary Roadshow Pres -2005 as of 11_23_05 v4.ppt

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