Smb options tribe_4_2_2013

DISCLAIMER: This material is being provided to you for educational purposes only. No information presented constitutes a recommendation by LessThanRandom.com, Falde Capital Management, or its affiliates to buy, sell or hold any security, financial product or instrument discussed therein or to engage in any specific investment strategy. The content neither is, nor should be construed as, an offer, or a solicitation of an offer, to buy, sell, or hold any securities. You are fully responsible for any investment decisions you make. Such decisions should be based solely on your evaluation of your financial circumstances, investment objectives, risk tolerance and liquidity needs.

Andrew Falde | LessThanRandom.com | SMB Options

Andrew Falde | April 2013

1. SMB TRAINING is NOT a Broker Dealer. SMB Training engages in trader education and training. SMB TRAINING offers a number of products and services, both electronical (over the internet through smbtraining.com) and in person. SMB TRAINING also offers web-based, interactive training courses on demand.

2. The seminars given by SMB TRAINING are for educational purposes only. This information neither is, nor should be construed, as an offer, or a solicitation of an offer, to buy or sell securities. You shall be fully responsible for any investment decision you make, and such decisions will be based solely on your evaluation of your financial circumstances, investment objectives, risk tolerance, and liquidity needs.

3. This material is being provided to you for educational purposes only. No information presented constitutes a recommendation by SMB TRAINING or its affiliates to buy, sell or hold any security, financial product or instrument discussed therein or to engage in any specific investment strategy. The content neither is, nor should be construed as, an offer, or a solicitation of an offer, to buy, sell, or hold any securities. You are fully responsible for any investment decisions you make. Such decisions should be based solely on your evaluation of your financial circumstances. Such decisions should be based solely on your evaluation of your financial circumstances, investment objectives, risk tolerance and liquidity needs.

4. SMB Training and SMB Capital Management, LLC are separate but affiliated companies.

5. No relevant positions

6. Please note: Hypothetical computer simulated performance results are believed to be accurately presented. However, they are not guaranteed as to accuracy or completeness and are subject to change without any notice. Hypothetical or simulated performance results have certain inherent limitations. Unlike an actual performance record, simulated results do not represent actual trading. Since, also, the trades have not actually been executed; the results may have been under or over compensated for the impact, if any, of certain market factors such as liquidity, slippage and commissions. Simulated trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any portfolio will, or is likely to achieve profits or losses similar to those shown. All investments and trades carry risks.”

The LRC Channel is a statistical tool with 4 decades of results that have been consistently effective during many different market conditions.

LRC Channel trading is a mathematical way to buy relatively low and sell/short relatively high while respecting the overall trend.


Hundreds of thousands of algorithm back tests on the four major indexes (SPX, NDX, RUT, DJI) have revealed remarkably consistent results using the buying and selling points of 1.5 ATR below and above the LRC with both calculations looking back 20 bars.


40 Years from 1973 - 2013

702 Signals

Average time in all signals: 21 Days

Average time in winning signals: 16 Days

Average time in losing signals: 28 Days

Losing signals are caused by extended cycles

63% winning, 37% losing signals

Average signal P&L: 0.5% ((2.7% x 63%) – (-3.2 x 37%))

All trades are hypothetical; simulated using past data. Andrew Falde | April 2013

(50,000.00)

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M-73 M-79 M-85 M-91 M-97 M-03 M-09


The underlying signals have 63% historical probability of reaching a profitable exit at the other side of the channel.

Using positive theta credit spreads further increases the probabilities of trade profitability anywhere from 69% to 80% depending on the Delta selected (ATM to .25 Delta).

The majority of trades win, BUT many trades have a draw down before exit

A trader must fully understand the expectations of the trade cycles to maintain positions, especially during difficult intra-trade draw downs.


Trades require almost no management between signals

You do not have to watch the market intraday

Very low commissions and spread costs

No stop outs or overreactions to noisy markets

100% rules based criteria for entry, exit, managing winners, and managing losers.


136 cycles from January 2005 through January 2013

Includes ◦ Financial boom

◦ Financial crisis

◦ The Great Recession

◦ 2009-2010 recovery

◦ Flash crash

◦ QE1, 2, 3

◦ Etc.


Jan 2005 Jan 2013

- ATM - .25 Delta - SPX


2 Big losing signals that lose a lot (fat tails)

2 Difficult trades that win (patience and theta)

1 Medium size win (a little heat)

1 Big win (with no heat)


Underlying signal: -6.61%

Entry/Exit: 12/17/2007 to 1/25/2008

Time in trade: 39 Days Options Trade P&L: -$13,130

Andrew Falde | April 2013 All trades are hypothetical; simulated using past data.


Entry/Exit: 9/01/2010 to 9/23/2010

Time in trade: 22 Days

Options Trade P&L: -$6,340

Andrew Falde | April 2013 All trades are hypothetical; simulated using past data.

9/4/08 - Long

6/6/2012 - Short



Entry/Exit: 9/04/2008 to 9/19/2008


Signal draw down before exit: -9.1%

Options Trade P&L: +$970


Underlying signal: 0.09% (Break even)

Entry/Exit: 6/6/2012 to 6/25/2012



Options Trade P&L: +$1820


7/13/2006 – Long, Medium win, A little heat

5/31/2011 – Short, Big win, No heat


Underlying signal: 1.26%

Entry/Exit: 7/13/2006 to 7/25/2006



Options Trade P&L: +$4,020


Underlying signal: 3.9%

Entry/Exit: 5/31/2011 – 6/6/2011


Signal draw down before exit: -0.01% !

Options Trade P&L: +$8,545


LRC Credit Spreads Course ◦ Entirely systematic

◦ Learn trade entry and exit rules

◦ No discretionary decisions required

◦ Define sustainable risk/reward

◦ Know when and how to manage winners and losers

◦ Review options profiles on 1+ year of signals

◦ Develop an understanding of market statistics that will help overcome psychological pit falls


DISCLAIMER: This material is being provided to you for educational purposes only. No information presented constitutes a recommendation by LessThanRandom.com, Falde Capital Management, or its affiliates to buy, sell or hold any security, financial product or instrument discussed therein or to engage in any specific investment strategy. The content neither is, nor should be construed as, an offer, or a solicitation of an offer, to buy, sell, or hold any securities. You are fully responsible for any investment decisions you make. Such decisions should be based solely on your evaluation of your financial circumstances, investment objectives, risk tolerance and liquidity needs.

Andrew Falde | LessThanRandom.com | SMB Options


Smb options tribe_4_2_2013

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