Kingdom Trading, LLC

Short Option Program

The Short Option Trading Program consists primarily of selling options on futures while employing stringent risk management techniques. The purchase and sale of futures in a variety of markets to enhance the option component is common. The Kingdom Trading Program may be utilized to trade any futures market, including grains, meats, metals, softs, energies, currencies, financials, and indices. Fundamental to the program is an analysis to determine if a market is moving upward, downward, or sideways. Once the direction of the market is determined, call or put option strike prices are evaluated with respect to premium, liquidity, and technical support or resistance areas. Typically, the program seeks a conservative strike option price that will yield a rate of return of 10% (based on margin requirements) for a 30 day period. Choosing strike prices above or below key support or resistance levels is critically important to the success of the system. Patience in identifying and seeking profit opportunity is of the utmost importance. Identifying exits is a vital component of the trading strategy. After a trade is initiated, the program’s risk management strategies are implemented. The advisor believes that risk management is the most important component of a successful trading strategy. The program utilizes a variety of exit strategies if a market trades or closes at a specified predetermined price. The exit strategies usually involve closing of positions or covering the option positions with futures contracts. If the latter strategy is implemented, it becomes extremely important to manage the risk on the open futures positions. Risk management of open futures positions involves the selling of options in the direction the market is moving and/or placing stop loss orders on the futures positions. There are, however, limitations in the use of stop loss orders. In an effort to further control risk, the advisor customarily places open orders to cover short option positions with futures contracts at or near the strike price.