Presents

Ultimate Options Day Trader Course

With

Bill Corcoran

I am not a registered broker-dealer or investment adviser. I will mention that I consider certain securitiesor positions to be good candidates for the types of strategies we are discussing or illustrating. Because Iconsider the securities or positions appropriate to the discussion or for illustration purposes does notmean that I am telling you to trade the strategies or securities. Keep in mind that we are not providingyou with recommendations or personalized advice about your trading activities. The information we areproviding is not tailored to any particular individual. Any mention of a particular security is not arecommendation to buy, sell, or hold that or any other security or a suggestion that it is suitable for anyspecific person. Keep in mind that all trading involves a risk of loss, and this will always be the situation,regardless of whether we are discussing strategies that are intended to limit risk.

I am not subject to trading restrictions. Myself and other instructors could have a position in a security orinitiate a position in a security at any time.

WELCOME

• I am SUPER excited to do this class.

• This is a day trading class.

• Over the next several weeks our lessons will be based on real trading opportunities that have traded in my trading group, “The Morning Lab” and/or that I review in “The Day Traders Almanac”.

• This is an open forum, your questions will direct the topics we learn.

THIS WEEK• History of the strategy

• Goals and objectives

• Basic Considerations

• Brokers

• Costs

• PDT

• Why the Spy

• Spreads

• Expirations

• Charts

• Strategy Overview

WHAT IS IT??• This course is the result of over 13 years of experience

trading and teaching people to trade the options market.

• It evolved from a need to find an options strategy that could be traded in any market condition.

• It avoids overnight “headline risk” and can be scaled to fit virtually any trading account size.

• This strategy has the potential to generate significant income with minimal time expenditure once it is mastered.

WHAT IT ISN’T

• This is not a get rich quick scheme.

• It is not “quick and easy” to learn, some effort and time is required.

• A “set it and forget it” strategy, you must be present to win.

• This strategy will not work unless you do, it will take lots of practice to “get it”, but will be so worth it!

IN A NUTSHELL

• You are about to learn my most popular options trading strategy!

• This options day trading strategy exploits numerous anomalies in the SPY options that give you the trader a significant advantage over the market.

• We ONLY enter a trade when one of seven technical “setups” appear on the five minuteintraday chart. We also observe the chart for the appearance of a special opening setup that occurs nearly every day at or very near the open of the market.

THE BASICS

PREREQUISITES

• This is an equity option day trading strategy,you should understand the basics of options trading as a BUYER.

• I will review a few of those basics here but if you need to improve wour foundation I suggest you go to www.mywealtheducation.com and sign up for the “Trade School 101” course, it is very complete and costs $9.97/mo.

• You need a brokerage account.

WHAT IS DAY TRADING??

• A trade that is entered and exited on the same day is a day trade.

• Typically this means we will see smaller move in the price of the stock.

• That means we expect a smaller move on the option price.

• We will compensate for that move by taking larger positions.

BROKERAGE

• You must have an options capable brokerage account.

• I suggest you use a broker that has very high quality, real time data and charting.

• TradeStation, Interactive Brokers and eSignalall have excellent charting platforms and excellent data.

TRADE COSTS

• Day trading can involve large positions and high volume.

• Trade costs are a significant consideration due to the volume of trades and position sizes.

• I suggest you research your broker’s trading commissions and ask about volume pricing.

• The best option commission pricing in the industry by far can be found at “Tasty Works” www.tastyworks.com

SPY

• This is an equity option day trading strategy used primarily on the SPY.

• The SPY is an Exchange Traded Fund (ETF) that essentially acts like a stock, unlike the “market”, shares of the SPY can be bought and sold.

• The SPY has a very active options market.

• The SPY mimics the moves of the market in general (S&P Index) nearly perfectly but at 1/10 the price.

PDT

• This is an equity option day trading strategy.

• Day trading involves opening and closing a trade in the same day and may expose you to “Pattern Day Trader” Status

• Federal regulations dictate that any trader who completes more than 3 intraday trades (open and close in the same day) in a margin account must maintain at least $25,000 of equity in that account.

• The regulation also allows a broker to extend 4:1 intraday margin to a pattern day trader!

PDT

• The federal regulation does NOT apply to a cash account.

• A cash account cannot be given any margin.

• Once the Opening days’ cash value has been exhausted, you are done trading.

• Nothing limits the number of margin accounts you can own, only how frequently each can execute day trades.

CASH ACCOUNT

Value at Open =$10,000

Trade #1= $2300Remaining Cash $7,700

Trade #2 $3500Remaining Cash $4,200

Trade 3# $3,200 Remaining Cash $1000

MARGIN ACCOUNT

Value at Open =$50,000Intraday buying power $200,000

Trade #1= $13,000Remaining ID Buying Power Cash $187,000

Trade #2 $17,000Remaining ID Buying Power Cash $170,000

Trade 3# $13,200 Remaining ID Buying Power Cash $156,800

WHY THE SPY

Why Day Trade The SPY?

• The SPY and it’s options trade until 4:15 PM EST, 15 minutes past the rest of the market.

• SPY weekly options expire three times a week, on Monday Wednesday and one on Friday.

• The proximity to expiration means a higher delta at a lower price.

• The bid x ask spreads on the SPY options are typically $.01 and rarely more than $.05.

• The daily volume on SPY options is HUUUUGE.

THE BEST OPTIONS FOR DAY TRADES

• We trade the SPY specifically because it’soptions structure provides you with significant advantages over the market maker.

• These include extremely high extrinsic values, narrow separation between strikes, extreme liquidity, among the lowest spreads in the options trading world and the potential for massive leverage at relatively low cost.

THE COST OF DOING BUSINESS

• Day traders are seeking small moves in stock price.

• A wide BID X ASK spread destroys small day trade profits.

• The sooner we overcome the spread, the faster we reach profit.

• Tight spreads are critical to Day Trading.

BID X ASK

“Bid”

3.20 x

“SELL”

“Ask”

3.30

“BUY”

BID X ASK

buy

3.30

sell

3.20

Down $100 at the start of the trade on 10 contracts!

BID X ASK

buy

3.30

sell

3.28

Down $20 at the start of the trade!

THE COST OF DOING BUSINESS

• Option strike prices with very high open interest tend to have tight spreads.

• Option Strikes with high daily volume tend to have tight spreads.

• ITM options tend to have wider spreads.

THE POWER OF EXPIRATION

• Option expiration gives us major pricing advantages.

• As we approach expiration the mix of “time value” to “intrinsic value” is reduced .

• This allows us to buy a lot of “intrinsic value” for less money.

• The closer to expiration, the more powerful the options. (higher delta, lower price)

DAY TRADE CHARTS

TECHNICAL ANALYSIS

• If you suck at chart reading you will suck at trading.

• The chart tells us all we need to know.

• Patterns tend to repeat.

• Charting is scalable and transferable.

• Most trades should be in the direction of the daily chart. (there are exceptions)

THE CHART

• A picture is worth a thousand…Dollars!

• A picture of the market psychology.

• Tells us what the market is “thinking”.

• Pure supply and demand in picture form.

THE CHART

• Chart patterns occur in multiple time frames.

• Chart patterns occur in all asset classes.

• Anytime there is a buyer and a seller there is likely a chart pattern being created.

STRATEGY OVERVIEW

THE SPY DAY TRADE

• We focus on trading primarily SPY ETF weekly options for very short periods of time.

• Entries are based on 8 clearly defined chart “Setups”.

• Exits are based on a .10 profit on the price of the option.

• 1:1 reward:risk ratios are strictly executed when win:losspercentage is at 70% minimum.

• 1:2 reward to risk MAY BE considered when win:losspercentage is at least 80%

POSITION SIZE

• Position size should be considered in relation to total account value.

• Exploiting relatively small moves using high probability technical setups can potentially create higher win/loss ratios.

• His means we can afford to set up near 1:1 reward to risk ratio trades.

• The profit target on these SPY day trades is .10/share, therefore the net realized loss can approach .10/share, including the spread.

• Even with the potential for higher win/loss ratios, potential net realized loss on a single trade should not exceed 7.5%-10% of total account value.

NEXT WEEK

• Charts, Technical Indicators, Multi Time Frame

• Asset Allocation

• Risk management

• Win:Loss Ratios

• Reward:Risk Ratios

• Performance Measuring

I am not a registered broker-dealer or investment adviser. I will mention that I consider certain securitiesor positions to be good candidates for the types of strategies we are discussing or illustrating. Because Iconsider the securities or positions appropriate to the discussion or for illustration purposes does notmean that I am telling you to trade the strategies or securities. Keep in mind that we are not providingyou with recommendations or personalized advice about your trading activities. The information we areproviding is not tailored to any particular individual. Any mention of a particular security is not arecommendation to buy, sell, or hold that or any other security or a suggestion that it is suitable for anyspecific person. Keep in mind that all trading involves a risk of loss, and this will always be the situation,regardless of whether we are discussing strategies that are intended to limit risk.

I am not subject to trading restrictions. Myself and other instructors could have a position in a security orinitiate a position in a security at any time.