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The Biz Plan (1st Iteration)


Trading Business Plan
Objective:                   Achieve positive market returns greater than or equal to 15% annually in up, down, and sideways markets.
Plan:                            The objective will be achieved by trading options to leverage profitable trades while at the same time limiting risk and capital outlay. Technical analysis will be the primary tool used to time in and out of positions as well as aid in the measurement of risk vs. reward. Once stops and targets are identified using technical analysis those inputs will be fed into the option pricing model for profit/loss estimates. Options strategies will be chosen based on the current trend of the stock (up, down, sideways).
Assets Traded:            The portfolio will be comprised of 100% options. They can however be options on either equities or indexes. If at any time the portfolio is assigned stock due to certain option positions taken in the market place, the assigned stock is to be disposed of in a timely manner. Trades are not to turn into investments.
Note: One exception is if the assigned stock remains in an uptrend and is in a pull back the trader can use his discretion to initiate a covered call strategy to exit the trade. This exception is only valid in the event that the total stop loss has not been hit.
Holding Period:           1 day and up to 90 days.
Position Limits:           First the limits will be based off the assumption of a margin portfolio and will be in the context of the required margin to initiate the position. No single position can exceed 10% of the portfolio value at the time of initiation. Also max stop losses shall be set at no greater than 3% of the total portfolio value at the initiation of the position.
Initiating positions:     Before any new position is added to the portfolio a detailed post and analysis must be completed and should include the following: Chart analysis, stop loss amount and corresponding stock price, target profit and corresponding stock price, option pricing model analysis, estimated holding period, current stock price at entry, position to be taken, and any key fundamental catalyst coming up. Optional: Company summary and sector.
                                    Note: The one exception is if the intent is to day trade the option. Also all positions must meet the minimum risk/reward of 1:2. No Exceptions!
Performance:              Trading performance will be measured against the stated goal of greater than or equal to 15% as well as compared to the key index ETF’s (S&P, DJIA, NSDQ). Results are to be tracked in the tracking file along with key metrics identified by the trader. These results are to be posted once per month on the blog for full transparency.
Resources/Ideas:        IWO.com, IBD, Onn.tv, SMB blog, T3Live.com, CNBC.com, Stocktwits suggested, Google and Yahoo Finance, Schaffers.com, TOS platform, IB.

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