© 2002 Optionetics

1

High Profit - Low Risk Trading

© 2002 Optionetics

2

Who We Are

1. Leading stock market education

company in the United States &
Canada

2. Courses taught by experienced,

successful traders

3. Since 1993, we have helped over

30,000 students trade the markets
successfully.

© 2002 Optionetics

3

Option Elements

Strike

Prices

Expiration
Months

Call Prices:

Price of XYZ - 105

STR July

Aug

Oct

100

6.3

7.5

8.2

105

2.0

3.9

4.7

110

0.4

1.6

2.7

Stock

Price

Option Premiums

© 2002 Optionetics

4

1. Uses discretionary method

2. Greed and Fear

3. Buy Low – Sell High

4. The Religious Approach

5. System Trading with Limited

Risk

Average Trader

© 2002 Optionetics

5

Dogs of the DOW System

1. Uses the DOW 30 Stocks
2. System only BUYS certain stocks
3. One Year Trading System
4. No Risk Management

© 2002 Optionetics

6

Stock Symbol Price 12/31 Yield Price Today Difference

Yield

Totals

EK

29.43

6%

34.06

4.63

0.450279 5.080279

JPM

36.35

4%

34.96

-1.39

0.3398725 -1.05013

SBC

39.17

3%

39.25

0.08

0.25558425 0.335584

IP

40.35

2%

45.98

5.63

0.25017

5.88017

XOM

39.9

2%

44.02

4.12

0.233415 4.353415

Totals

185.2

14.59932

ROI

8%

Annualized

32%

Dogs of the Dow for 2002 January - March

16%

© 2002 Optionetics

7

System Recap

Long Term Stock Buying System

Unlimited Returns (Best 40% in One Year)

Substantial Risk (Actual worst was 6.8% for One
Year)

Outperforms nearly every fund in the last 30
years (Average Annual Returns – 22% in the last
30 years)

© 2002 Optionetics

8

Analyzing Positions

1. What if I am right?

2. What if I am wrong?

3. Great traders look at risk.

FIRST !

© 2002 Optionetics

9

Bullish

Buy a Call instead of buying stock

• Lower Cost and Risk

• The Power of Leverage

• The Power or Protection

© 2002 Optionetics

10

Dogs of the DOW System

Using Call Options

1. Uses the DOW 30 Stocks
2. Buy 1 year ATM Call Options
3. Rebalance each year in December

© 2002 Optionetics

11

Stock Symbol Premium Yield Price Today Difference

Yield

Totals

EK

3

0%

3.5

0.5

0

0.5

JPM

3.5

0%

3.2

-0.3

0

-0.3

SBC

4

0%

4

0

0

0

IP

4

0%

6.5

2.5

0

2.5

XOM

4

0%

6

2

0

2

Totals

18.5

Interest

2.3125

Profit

7.0125

ROI

38%

Annualized

152%

Options on the Dogs of the Dow for 2002

76%

© 2002 Optionetics

12

Bearish

Buy a Put instead of selling stock

• Lower Cost and Risk

• The Power of Leverage

• The Power or Protection

© 2002 Optionetics

13

DOW Sell System

Buy 60-90 Day Put Options on the

DOW when the VIX drops below a
level of 20.

Exit the trade within 30 days to

expiration.

© 2002 Optionetics

14

Index System

VIX Sell Signals for the last 3 Years

© 2002 Optionetics

15

Index System

5/20/2002 19.99

DOW DROPS 1000 points JUL02 Puts up 220%

The Option Returns reflect buying 60-90 Day options and holding them no
longer than 30 days to expiration.

NOTE

– We will show you a system using this indicator that works 96% of

the time with Delta Neutral Trades

© 2002 Optionetics

16

Spreading

With “Creative Financing” we can trim

the cost of our trades, therefore:

1. Further reducing both the cost and risk

2. Reducing the Breakeven on the Trades

3. Increasing the Return in Investment

4. Smoothing out the equity curve and stress

© 2002 Optionetics

17

Stock Symbol Premium Yield Price Today Difference

Yield

Totals

EK

1.5

0%

3

1.5

0

1.5

JPM

2.5

0%

2.8

0.3

0

0.3

SBC

2.5

0%

3.5

1

0

1

IP

2.5

0%

5.5

3

0

3

XOM

2.5

0%

5

2.5

0

2.5

Totals

11.5

Interest

2.3125

Profit

10.6125

ROI

92%

Annualized

369%

Spreads on the Dogs of the Dow for 2002

184%

© 2002 Optionetics

18

Comparing Trades

• Dogs of the Dow original system would

cost $18,500 for 100 shares of each
stock.

• Dogs of the Dow call option system

would cost $1850

• Dogs of the Dow Spreading would cost

just $1050

• Using Options lowers the risk

dramatically on this safe system

© 2002 Optionetics

19

Optionetics

• Visualize your Risk

to determine the

BEST strategy to use.

• Combining Options into “Spreads” -

Slash your risk over 90%!!!

• Great Trading Systems

to use the other

11 months of the year.

• TRADING SESSION

Using the right tools

and indicators for High Octane/ High
Probability trades.

1500/500/5