Why Income Trades did fine with SPX down 62.

Most of the live Income Trades (delta neutral, positive theta, selling strategies) that students in our community and myself had on today did much better than expected, and in some cases did great. lets discuss at least 2 of the trades I had on as examples.

Trade #1 did absolutely great today, and it was a basic non-Directional trade that made 20% today with the market going drastically against us. The trade was a balanced Butterfly trade in SPX in the August 19 expiration, and the width of the Butterfly was 40.The trade was put on yesterday when SPX was around 2105.The trade was put on using all Calls.  Here is the trade using a 1 contract example. Buy 1 2065  and sell 2  2105’s and Buy 1  2145. I bought some units at $5.40, $5.30, and $5.20. A unit could be 1-2-1 or 2-4-2 or 3-6-3, whatever size you are trading at. In this trade, we want the price of SPX to be near the short strike of 2105. Today at around 9:45 am central time, SPX was around $2059 and I got out of my entire trade that I bought around $5.30 and sold it for a $6.40 Credit, a return of about 20%. How did that happen with SPX moving about 50-60 points from the short strike, which is bad for this trade? Did theta get us the high return in 1 day?  No. VIX was up  about 3 points at 8:45 am central, this is a short Vega trade, shouldn’t an increase in Implied Volatility hurt an Short Vega at-the- money Butterfly trade? It should, but this was a bit of an unusual situation. Usually when SPX closes around $2110 which it did yesterday, the VIX would be between 11-15 because if SPX is 30-35 points from its all time high, VIX would be in the lower end of the range. But yesterday the VIX was around 18 because of the UK vote, sort of an Earnings situation for the market, an Event that could trigger a big Gap move. With VIX up about 3 at 8:45 am central, we still made money from the implied Volatility because the Volatility increases in the individual strikes of our Butterfly worked in our favor. Just because the VIX went up doesn’t mean we had to lose on a short Vega trade. The key is what happened with the volatility of each of the  strikes of the Butterfly combined.

Trade #2 was a Heart stopper. It was a 1 Day Iron Butterfly in SPX that I put on Wednesday and took off today for about a scratch, but was thrilled. A scratch means I basically broke even on the trade but covered my commissions. The Trade was in in SPX and I entered it Wednesday with the Index at $2090. It was a 2 Day trade and I used the June 24 expiration which expires today. I bought the 2100 call and sold 2090 Call. In the Puts, I bought the 2080 Put and sold the 2090 Put. The Iron Butterfly was put on Wednesday for a credit of $9.40 with SPX at $2090. Today I bought the spread back for a debit  of $9.35. How could I have made any money on this trade since the SPX moved over 50 points away from my sweet spot which is the short strike? Part of the answer is that when SPX was at $2059 and I bought the spread back, we still had almost 6 hours left of Trading and the market was pricing in the fact that a big rally back was possible. The other part of the answer is the fact that although the VIX was up, this short Vega trade made money from the Volatility because each of the strikes of the Butterfly didn’t all move up the same. The takeaway is that Greeks like Vega and Theta are Theoretical numbers and in real life like today, don’t always move like they say they should. The answer is to really understand the Greeks and become a good Option Craftsmen.

Go to Sheridanmentoring.com and check out, fresh off the press,  the archives of last weeks 2 day Chicago Seminar we put on.

Options Trading Seminar June 16-17 – Live Streaming

At Sheridan Options Mentoring, we’re proud to offer informational resources for people who are interested in learning more about options trading, options strategies, and more. We’re pleased to announce our annual options seminar, hosted by our very own Dan Sheridan in Chicago. This year’s seminary will take place on June 16th and 17th and will be streamed live.

Learn Options Trading Secrets from Industry Experts

The live stream of the options seminar will feature presentations from Dan Sheridan, founder of Sheridan Options Mentoring as well as the following speakers:

  • Brian Overby, Senior Options Analyst at TradeKing and author of The Options Playbook
  • Russell Rhoads, Senior Instructor at CBOE’s Options Institute
  • Tom Sosnoff, Co-Founder of ThinkorSwim and founder of TastyTrade
  • Steve Basigo, Veteran Retail Trader
  • Karen Bruton, AKA “Karen the Super Trader”
  • Mark Fenton, Senior Mentor at Sheridan Mentoring and Veteran Retail Trader
  • Jimm Bittman, speaking about credit spreads
  • Dino Karahalios, Veteran Retail Trader

Live Stream Our Options Trading Seminar

The live stream seminar will get you full access to each session, both days, streamed live in real time.

You’ll be able to ask any questions you may have to a moderator on our live chat box, and you’ll have access to HD recordings of each session in case you miss one or want to rewatch it.

Downloadable copies of all the presenters’ materials will also be offered, and you’ll have access to all of the material for at least six months.

Seminar Time, Dates and Details

This year’s event will be at the University of Chicago’s Gleacher Center at 450 N. Cityfront Plaza in Chicago. The seminar is from 7:30 a.m. to 4:30 p.m. on Thursday, June 16, and from 8 a.m. to 4:30 p.m. Details for each speaker will be announced shortly, but space is limited for the seminar, so you’ll want to book your spot soon!

You’ll learn about different options trading strategies as well as trade options, including Iron Condor methodologies, Butterfly strategies, and much more.

Tickets for the streamed seminar are $437 per person.

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To learn more about our summertime options trading seminar, contact us today. We want you to succeed at trading!

3 Steps to successful Option Trading

Three steps words and numbers on arrows in a circle to illustrate a process, system, directions or instructions

#1 Learn the Craft

This stage takes a while and possibly much longer depending on how you learn the craft. Most folk pick a directional approach to finding trades, and that is a very difficult proposition.

We pick trades based on 3 Things: Probabilities, Time decay, and a good plan for each trade. As you learn the craft, a good understanding of the Greeks and the ins and outs of the different strategies is essential.

options trading courses

#2 Practice the Craft

This stage in my opinion means trading a plan and 30-50 live trades proving and practicing the plan under the tutelage of someone very experienced at Risk Management. That is what we do here at Sheridan Mentoring.

I don’t know another mentoring company or coaching service in the Options Trading business that teaches you the business in this manner. This is crucial. Most folks who do 30-50 live trades on their own will usually end up in a heap of trouble!

#3 Discipline in the Craft

This is where most people “bite the dust”. Our mentors have there hands full with students who come in with many bad habits, including being directional on every trade and not used to following a plan.

Our coaching on a trading plan and 30-40 live trades usually takes 6-12 months. Our aim is to develop good risk management habits in the students so when they are done, they can be capable of some independence on their own and know how to run an Option Trading Business.

Good luck Trading!

Dan Sheridan

Dan@SheridanMentoring.com