Lunch & Learn w/Options February 15, 2013


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Learn how to write covered calls and sell put options to generate income, augment returns and reduce risk in a stock portfolio.

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Lunch & Learn w/Options February 15, 2013

  1. 1. TMLunch & Learn w/Options February 15, 2013 Laurie Itkin The Options Lady TM
  2. 2. TERMS OF USE, DISCLAIMER, ASSUMPTION OF RISK, & WAIVER OF LIABILITYThe Options Lady will not be held responsible for any trading losses you incur using the products or servicesassociated with The Options Lady, including its website, this seminar, and all mentoring services. Trade at your ownrisk and only trade with capital you can afford to lose. You can lose money trading options and equities. Optionstrading has large potential rewards but also large potential risk. You must be aware of the risks and be willing toaccept them in order to invest in the options markets. This seminar is neither a solicitation nor an offer to buy or sellequities or options. No representation is being made that any account will or is likely to achieve profits or lossessimilar to those discussed in this webinar. The past performance of any trading system or methodology is notnecessarily indicative of future results.DisclaimerAny opinion expressed by Laurie Itkin in today’s seminar or products or services offered on The Options Ladywebsite are not an inducement to make a particular investment or follow a particular strategy, but only as anexpression of Laurie Itkin’s opinion. Past performance is not indicative of future results. The Options Lady does notguarantee any specific outcome or profit.Assumption of RiskCovered call investing carries an inherent risk that some or all of an investment can be lost. There is no guaranteethat using methods outlined by Laurie Itkin or The Options Lady will generate any profit whatsoever.LIMITATION OF LIABILITYThis seminar is intended only to assist you in your financial organization and decision-making. Your personalfinancial situation is unique. Accordingly, before making any final decisions or implementing any financial strategy,you should consider obtaining additional information and advice from your accountant, tax advisor or other financialadvisors who are fully aware of your individual circumstances.
  3. 3. My Path to Options Trading• Undergraduate finance degree from Wharton School of University of Pennsylvania• Summer internship on the Chicago Board Options Exchange• Bought first stock at age 24• 20-Year career in public policy and lobbying• Matured from “buy and hold” stock investor to options trader• The Options Lady (coaching)• Series 65 investment advisor license• Coastwise Capital Group (money management)
  5. 5. Can’t Live Off Interest Anymore Average Rate Average YieldCD/Money Market/Savings 10-Year BondsLess than or close to 1% Corporate Bonds: 2 - 6% Municipal Bonds: 2.5 – 5% (tax-exempt) What will happen to price of bonds when interest rates begin to rise?
  6. 6. Stock Market Performance Past Ten Years The Lost Decade? S&P 500 fell 38% in 2008 Where was your What happenedfinancial advisor? to your nest egg?
  7. 7. Stock Market is Volatile But Holds Growth PotentialCRASH 2012 13.41%
  8. 8. Mutual Funds vs. Exchange Traded Funds Mutual Funds Exchange Traded Funds (ETFs)
  9. 9. Consider Covered Calls WHAT WHY• 100 shares of stock or ETF • More conservative than just combined with the sale of one “buying & holding stock” call option • Ability to generate monthly income to spend or compound• Can enter from a cash position • Creates a monthly “dividend” or by selling calls on stock you • Make money when underlying already own stock is going up, stays flats, or even declines a bit • Limits risk in case stock price falls • Can be used in cash, margin or IRA accounts • The downside? A cap on stock appreciation
  10. 10. Monthly Income from Real EstateReal Estate Investment1) Buy a house and make money if it goes up in value2) Rent out a house for income and make money if it goes up, stays flat, or decreases slightly Assume the Home is Worth $1M What if someone offers to pay you $100K for the right to buy your home any time over the next 12 months for $1.2M?
  11. 11. Monthly Income from StockEquity Investment1) Buy a “growth”/non-dividend paying stock and make money if it goes up in value; or2) Buy a dividend-paying stock for income and make money if it goes up, stays flat, or decreases slightly Assume the Stock is Worth $10K What if you could receive $1K in exchange for the obligation to sell your stock anytime over the next 12 months for $12K?
  12. 12. Return Scenarios Real Estate Investment Equity InvestmentYou are offered $100K for obligation to You are offered $1K for obligation to sellsell your $1M home anytime over the your $10K worth of stock anytime overnext 12 months for $1.2M. the next 12 months for $12K.1.Value of house stays flat. You keep 1.Value of stock stays flat. You keep $1K $100K premium and still own home premium and still own stock worth worth $1M for 10% annual gain. $10K for 10% annual gain.2.Value of house falls to $900K or less. 2.Value of stock falls to $9K or less. You You keep $100K premium and still own keep $1K premium and still own stock. your home. You either break even or You either break even or lose less lose less money than had you not made money than had you not entered into agreement. covered call.3.Value of house increases beyond $1.2M 3.Value of stock increases beyond $12K and renter purchases home for $1.2M. and call option buyer exercises his right You make 30% annual gain (20% on to purchase stock for $12K. You made house + 10% on income premium). 30% annual gain (20% on stock + 10% on income premium).
  13. 13. Made Money in Three Weeks Even Though Stock Stayed FlatBought 300 MDCO @ 29.86 Sold 300 MDCO @ 29.98Sold 3 MDCO Feb 29.0 Call @1.74 Bought 3 MDCO Feb 16 29.0 Call @1.18Profit after fees/commissions = $188 or 2% return in three weeks or 36% annualized return
  14. 14. Automate Your Call Selection With Born to Sell’s Trading ToolSign up for Free Trial at
  15. 15. Sell Put Options for Income Strategy Benefits• Sell puts on a high • If stock stays above quality stock you would strike price, you pocket like to own at a discount the income which you• You are selling can do month after “insurance” to the month holder of stock that • If stock gets “put” to you bought puts for downside (which you then bought protection at a discount), you can sell calls to generate income each month
  16. 16. Salesforce (CRM) Three Month Chart Monthly Income for Jan Put Option Dec 20 closing price - $168.91 $435 $276 $174 Monthly Return Annualized Returnif CRM > strike price 435/16,500 = 2.6% 31.6% 276/16,000 =1.7% 21% 174/15,500 = 14%
  17. 17. Selling a Put on CRMUsing TD Ameritrade
  18. 18. Investing with The Options LadyDo-It-Yourself Full-ServiceOpen and fund TD Transfer funds to Ameritrade Coastwise Capital Trading Account Free Guru Group Hours Every Mon 12:30-2:30 Investment Three-Month advisors tradeCoaching Package covered calls for you