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6 WAYS TO GENERATE INCOME USING OPTIONS

MARKET TAKER MENTORING, INC.
Dan Passarelli
MarketTaker.com
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6 Ways to Generate Income Using Options
Naybe you've heaiu people say that 9u% of tiaueis lose money.
Well, I have some bau news foi you. It's tiue! Bowevei, I have
some goou news too. I have tiaineu lots of tiaueis to geneiate
consistent income using options. Anu I can tiain you too.

I'm Ban Passaielli, founuei of Naiket Takei Nentoiing, Inc. I
spent yeais tiauing on the CB0E tiauing flooi giinuing out
consistent piofits uay aftei uay, week aftei week anu month af-
tei month. In this eBook, I'm going to show you 6 ways Y00 can
geneiate income with options.

The 6 Ways to ueneiate Consistent Income 0sing 0ptions

The teim "income" means something specific in options lingo
that is uiffeient than the common context of the woiu. "In-
come" option stiategies aie option stiategies that aie high-
piobability tiaues, which benefit fiom time passing. As time
passes, options slowly lose value, all othei piice influences helu
constant. This phenomenon is calleu "time uecay". Taking au-
vantage of time uecay is at the heait of income stiategies.

The maiket is always changing, so just knowing one such in-
come tiauing technique is not going to woik if you want to be
successful in the long iun. Theie aie lots of uiffeient income
stiategies; but these 6 stiategies aie the simplest anu most
common.





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!" $%&'(') $*++

A coveieu call is a simple "stock oveilay" investment stiategy.
An investoi who owns a stockusually as pait of a long-teim
investment stiategysells (shoit) an out-of-the-money call.
This call has a stiike piice above the cuiient stock piice anu
has no intiinsic valueonly time value. That is impoitant be-
cause an option's time value is 1uu% subject to time uecay.
Again, time uecay is what makes all these income stiategies
woik anu favoi the tiauei.

Imagine you own 1uu shaies of Yahoo! (YB00)*, which is tiau-
ing aiounu $SS. You think the stock will iemain faiily stable
ovei the next seveial weeksnot iising much anu not falling
much. Question: Bow aie you supposeu to make money holuing
this stock.

A coveieu call coulu be the answei. A tiauei can establish a
coveieu call by selling a call with an out-of-the-money stiike
piice, say the Nay S6 call foi $1.

Now, imagine the tiauei holus the call until the expiiation uate
(S weeks away in this example). In this scenaiio, as long as the
stock uoesn't iise above $S6 a shaie (aiounu 9%) the call ex-
piies anu the $1 iemains the tiauei's to keep. That means the
tiauei makes $1 just foi holuing the stock. This tiauei might
make oi lose some on the stock iising oi falling, but the $1 op-
tion piemium is a piofit. As long as the stock uoesn't fall moie
than $1, the tiaue is a winnei. If it falls moie than $1, the tiaue
is a losei, but it loses $1 less than it woulu have without the
call. If the stock iises above the $S6 stiike, the call gets as-
signeu anu the stock is solu at $S6also a winning tiaue.


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," $*++ $(')-. /0('*)

The call cieuit spieau is similai to the coveieu call in some
ways. The uiffeience is that theie is no stock involveuonly
options. Anu in auuition to the shoit call, the tiauei buys a
highei-stiike call to cieate a "spieau".

Foi example, imagine Facebook (FB) is tiauing aiounu $S6. A
tiauei thinks it won't iise above $6S a shaie ovei the next
month. So, the tiauei sells a Nay 6S-7u call cieuit spieau foi
$u.9u. That means, the tiauei sells the Nay 6S calls anu buys
the Nay 7u calls. Like the coveieu call, if the tiauei is still holu-
ing the option position at expiiation anu the stock is below the
shoit-call's stiike piice the options expiie anu the tiauei keeps
the entiie option piemium. That woulu be a $u.9u piofitoi,
$9u of actual cash foi a 1-lot spieau.

If FB stock falls, even significantly, the tiaue is a winnei, as the
options will still expiie anu the tiauei has no long stock to
woiiy about. 0nly if the stock iises above the $6S stiike piice
can the tiaue stait to potentially lose. That woulu iequiie a
16% iise in a S-week peiiou. Foi this ieason, cieuit spieaus aie
high-piobability tiaues. Beie, if the stock falls, the tiaue is a
winnei; stock stays stable, tiaue's a winnei; stock iises up to
16%, it's a winnei. 0nly if the stock makes a veiy laige move to
the upsiue, can the tiauei lose.








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1" 23. $(')-. /0('*)

The put cieuit spieau is the close cousin to the call cieuit
spieau. Beie, a tiauei sells an out-of-the-money put (with a
stiike piice lowei than the cuiient stock piice) anu buys a low-
ei-stiike put in the same expiiation month.

Beie, imagine uN is tiauing aiounu $S4. But in this case, the
tiauei thinks the stock won't !"## much. So the tiauei sells the
Nay Su-S2 put cieuit spieau foi $u.Su. So, heie the tiauei sells
the Nay S2 puts anu buys the Su puts. Similai to the last two
examples, as long as the options iemain out-of-the-money until
expiiation, the option piemium enus up as all piofit. But, heie
that iequiies the stock to not fall below $S2. It can iise. It can
stay steauy. It can fall as much as $2. Again, a high-piobability
tiaue, as many outcomes leau to piofit. The only outcome that
leaus to loss is the stock making an exaggeiateu move to the
uownsiue.














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4" 5(%6 $%6)%(

The iion conuoi may sounu intimiuating to the novice tiauei.
But in fact, it is iathei simple. It's simple, that is, if you unuei-
stanu call cieuit spieaus anu put cieuit spieaus. An iion conuoi
is simply a combination of those two afoiementioneu -67%8'
9.(*.':-'9. Because it combines the two spieauscall cieuit
spieau anu put cieuit spieauit combines the essence of both.
Fiist, it is noteu that because the tiauei sells two spieaus, the
tiauei gets uouble option piemium. That means gieatei piofit
potential. But that also means if the maiket iises too much $%
falls too much the tiaue can iun into tiouble.

This time we'll look at 0.S. Steel (X). Let's say the tiauei has a
neutial bias. With the stock aiounu $27 a shaie, the tiauei
thinks it won't iise above $29 oi fall below $24. That's a $S
iange on a $27 stock (oi 18.S%) in which it must iemain in this
S-week peiioupietty iealistic expectations.

So, the tiauei can sell the Nay 29-S1 call spieau at u.41 &'(
sell the Nay 22- 24 put spieau at u.26. That is a combineu op-
tion piemium of u.67 foi this Nay 22-24-29-S1 iion conuoi.

It woiks like this: As long as 0.S. Steel, in this example, iemains
between $24 anu $29 thiough Nay expiiation, the $u.67 pie-
mium (oi $67 of cash foi one spieau) iepiesents all piofit. This,
again, is a high-piobability tiaue in anu of itself. 0nly if the
stock bieaks out of a iathei laige iange uoes the tiaue fail anu
lose money.





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;" 5(%6 <3..'(=+>

No. Not the 7us iock banu. It's a classic income spieau that is
neaily as simple to use as the iion conuoi. This tiaue again is a
combination of a call cieuit spieau anu a put cieuit spieau. But
the only uiffeience between this anu the iion conuoi is that the
shoit put anu shoit call shaie the same stiike.

It's common foi iion butteiflies to be shoitei-teim tiaues be-
cause of the little amount of piemium left in the "wings" oi the
long, out-of-the-money options. So, foi this example, we'll use a
1u-uay tiaue in ueneial Electiic (uE).

With uE at $2S.9u, the tiauei will tiaue the seiial weekly op-
tions that expiie in 12 uays. The tiauei sells the 2S-26-27 iion
butteifly by selling the weekly 2S-26 put spieau &'( the 26-27
call spieau, collecting a total of $u.44.

This tiaue neeus just a bit moie analysis than the iion conuoi.
In this case, the tiauei wants to focus on the "bieak evens" of
the spieau. Beie, the $u.44 option piemium pioviues a buffei.
As long as uE, in this example, stays within $u.44 of the miuule
(shoit) stiike, the tiaue is a winnei. So, it can't fall below
$2S.S6 oi iise above $26.44. This $u.88 iange is much tightei
than the pievious example, but theie is much less time until
expiiation anu uE is a much moie stable stock.








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?" @-8' /0('*)

The time spieau is moie complex than the pievious S stiate-
gies. But it is the most poweiful in that clevei tiaueis can use
volatility analysis to get "euge" on this tiaue to ieally stack the
ouus in theii favoi.

In its most basic foim, the time spieau is when a tiauei buys a
call anu sells anothei call with the same stiike piice but with
less time until expiiation. Insteau of both calls, the tiauei can
also execute this stiategy using both puts to the same effect.

Time spieaus aie also often ciafteu to be neutial-maiket
stiategies, like the iion conuoi oi iion butteifly. Time spieaus
can be constiucteu with longei-teim months, oi even weeklys.

Beie's an example in Taiget Coip. (TuT). The stock is at $6u.Su.
In the weeklys, the tiauei buys the Nay 2
nu
61 calls foi $u.8S
anu sells the Apiil 2S
th
61 calls foi $u.64, paying a net uebit of
$u.19. 0ne gieat auvantage of time spieaus is that the tiauei
only iisks the initial piemium paiu, in this case $u.19, oi $19,
but the tiauei can potentially have a leveiageu piofit.










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A*9.'(-6: 567%8' @(*)'9

Bigh-piobability income tiaues aie veiy poweiful, anu poten-
tially veiy piofitable stiategies. They aie one of the coie focus-
es of my tiaining piogiam. Let me help you to mastei income
tiaues with my 6-pait seiies, The Income Tiauing Nastei Ses-
sions.

In this viueo seiies, you'll leain how to finu high-piobability
canuiuates foi income tiaues. You'll leain how to set up income
tiaues anu manage them. Anu, you'll leain when to take piofits.
Plus, I'll show you how to get euge on these tiaues using pio-
fessional volatility analysis techniques. Anu what's moie is I'll
show you exactly how to aujust income tiaues when the maiket
moves against you.
Enioll in this viueo seiies now anu get staiteu in youi Income
Tiauing Nasteiy.


uoou luck in youi tiauing,




Ban Passaielli
Piesiuent, Naiket Takei Nentoiing
B*6 2*99*('++- is an authoi, tiauei anu foimei membei of the
Chicago Boaiu 0ptions Exchange (CB0E) anu CNE uioup. Ban
has wiitten two books on options tiauing "Tiauing 0ption
301 Whi t e St r e e t , Uni t B, Fr a nkf or t , I L 6 0 4 2 3 t e l e phone : 8 1 5 . 5 3 4 . 5 2 0 4 ht t p: //ma r ke t t a ke r. c om
xxxxxxxxxxxxxxxxxxxxx
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uieeks" anu "The Naiket Takei's Euge." Be is also the founuei
anu CE0 of Naiket Takei Nentoiing, Inc., a leauing options eu-
ucation fiim that pioviues online options euucation, options
newsletteis anu peisonalizeu, one-on-one coaching foi option
tiaueis.

Ban began his tiauing caieei on the flooi of the CB0E as an eq-
uity options maiket makei. Be also tiaueu agiicultuial options
anu futuies on the flooi of the Chicago Boaiu of Tiaue (now
pait of CNE uioup).

In 2uuS Ban joineu CB0E's 0ptions Institute anu began teach-
ing both basic anu auvanceu tiauing concepts to ietail tiaueis,
biokeis, institutional tiaueis, financial planneis anu auvisois,
money manageis, anu maiket makeis. In auuition to his woik
with the CB0E, he has taught options stiategies at the 0ptions
Inuustiy Council (0IC), the Inteinational Secuiities Exchange
(ISE), CNE uioup, the Philauelphia Stock Exchange anu many
leauing options-baseu biokeiage fiims. Ban also contiibutes to
financial meuia such as TheStieet.com, F0X Business News,
Bloombeig Television, BNN, Public Rauio (NPR), anu the CB0E
blog. Anu he has a weekly featuieu viueo on CB0ETv.

uelu Piess nameu Ban's 2uu8 book, "Tiauing 0ption uieeks," "Best
Book foi 0nueistanuing 0ption uieeks." Ban's latest book is "The
Naiket Takei's Euge: Insiuei Stiategies fiom the 0ptions Tiauing
Flooi," publisheu by Ncuiaw-Bill in 2u11.




* All examples useu in this eBook aie hypothetical anu foi euu-
cational puiposes only. Piices aie not cuiient.

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0ptions involve iisk anu aie not suitable foi all investois. Be-
foie tiauing options, please ieau Chaiacteiistics anu Risks of
Stanuaiuizeu 0ption (0BB), which can be obtaineu fiom youi
biokei; by calling (888) 0PTI0NS; oi fiom The 0ptions Cleai-
ing Coipoiation, 0ne Noith Wackei Biive, Suite Suu, Chicago,
IL 6u6u6.

The content in this eBook is intenueu to be euucational anuoi
infoimative in natuie. No statement is intenueu to be a iecom-
menuation oi solicitation to buy oi sell any secuiity oi to pio-
viue tiauing oi investment auvice. Tiaueis anu investois con-
siueiing options shoulu consult a piofessional tax auvisoi as to
how taxes may affect the outcome of contemplateu options
tiansactions.

Copyiight 2u14 Naiket Takei Nentoiing, Inc." All iights ie-
seiveu.










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