ETF Liquidity More Than Meets the Eye

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1 Vol. 2 Issue ETF Liquidity More Than Meets the Eye Special Feature: BlackRock shares educational tips on the liquidity of ETFs and guidelines to consider while trading. Pages Table of Contents Technical Analysis Analyzing Price Gaps An in-depth look to help understand why and where these gaps occur as well as how they can influence price action. Income Generation Collars for Protection with Minimal Cost Discussion of how using collars could help protect paper profits with little to zero cost. Trading Strategies Riding the Bull, Caging the Bear, or Cruising in Neutral Study past trades and their results in an effort to learn about future trade considerations. Key Indicators Potential Market Movers: What to Watch for A look into why keeping an eye on certain key indicators may be helpful. Special Feature ETF Liquidity: More than Meets the Eye BlackRock shares educational tips on the liquidity of ETFs and guidelines to consider while trading. Education and Events Options Market Center Education Series Want to learn more? Tune into a weekly webcast or join us in-person, or both! Get to Know Our Contributing Writers Check out their bios. Moving from Mutual Funds to ETFs? Trade Smart. Due to their low costs, flexibility, and transparency, the ETF market continues to grow at a rapid pace. But as you may know, ETFs don t trade like mutual funds. Ready for a hand? The TD Ameritrade Institutional Block Desk offers RIAs guidance and assistance with the execution of large block ETF orders. Our experienced traders use several order management systems, algorithms, and pre-trade tools all designed to help achieve the most efficient and seamless execution for your clients. To help minimize the market impact when executing large block orders, the Block Desk can also provide a competitive risk quote a process that leverages multiple Authorized Participants (APs) that may create or redeem shares of the ETF. Carefully consider the investment objectives, risks, charges and expenses before investing in an ETF (Exchange Traded Fund). A prospectus, obtained by calling , option 1, contains this and other important information about an investment company. Read carefully before investing. 1 The following information is not a recommendation or endorsement of any particular investment or investment strategy. Returns will vary and all investments involve risk, including loss of principal.

2 Technical Analysis Increase in Volatility in the Broad Market As we move further into 2015, we are noticing an increase in volatility in the general market. When volatility is higher, it is much more common to see gaps, also called windows, in the price action of many stocks. It can be quite helpful to understand why these gaps appear, where in a trend they occur, and how they can influence the expected price action. Clint Cowles Senior Specialist, Trade Desk/thinkpipes TD Ameritrade Institutional Three main types of gaps exist in the market. The easiest way to identify them is where they occur in the stock s prevailing trend: Breakaway gaps will start a new trend Runaway gaps will accelerate an existing trend Exhaustion gaps are the death knell of an established or mature trend We Will Start by Taking a Look at Breakaway Gaps The gaps will appear at the beginning of a new trend, usually breaking a strong support or resistance level the stock has been respecting during a consolidation. With most breakaway gaps, price continues to move in the direction of the gap for the remainder of that day. Whatever the reason may be for the gap, investors see it as a new beginning and jump in even though they are paying much more (or selling for less on a down gap) than they could have the day before. 2

3 Technical Analysis Increase in Volatility in the Broad Market Continued Below is a chart of Amazon (AMZN) over the past 18 months. As you can see there are gaps all over this chart, but the most pronounced is the large breakaway gap, which just occurred on Jan. 30 after their last earnings announcement at gap 1. It is significant due to the size of the gap, but also because it broke through two established resistance lines, one horizontal and one down-sloping. Notice the additional 3% gain in the price on the day of the gap, after a 10% gain on the gap itself. It shows us how strong the new sentiment is for AMZN, and is telling us that higher prices still are likely in the near future. For illustrative purposes only. Not a recommendation. Also notice there are several runaway gaps in this chart. These occur within an existing trend and confirm the trend. It s easy to confuse runaway gaps and exhaustion gaps initially since they both occur when a trend has been in place for a period of time. The best way to distinguish them is to watch the price action on the days following the gap. If the price reverses and closes below the opening of the gap (or above if it s bearish), then it is classified as an exhaustion gap. If the price closes above the high made on the gap day, it is classified as a runaway gap and higher prices are likely to occur. Taking trades on runaway gaps requires more diligent trade management than breakaway gaps because price has already made a substantial move before you know what type you re working with, but they are still very useful in identifying securities in strong trends. 3

4 Technical Analysis Now Let s Look at Exhaustion Gaps Exhaustion gaps are the least common type and they occur at the very end of a trend. These are capitulation moves that gap in the direction of the prevailing trend, but then lose their momentum quickly and reverse direction. These are identified when the price closes below (or above in a downtrend) the opening point of the gap and signal a trend reversal. You will often see a large part or potentially all of the gap filled on the gap day itself. Below you will see a classic example of an exhaustion gap on AT&T (Symbol: T). On the day of the gap it looks like an exhaustion gap, however it s not confirmed until two days later when it closes below the gap s opening. This is a concerning signal pointing to lower prices in the near future. For illustrative purposes only. Not a recommendation. One of the best tools to be gained through gap analysis is identifying significant levels of support and resistance. The beginning and the end of the gap create strong levels of support or resistance depending on which side of the market you are on. This includes the common occurrence of filling the gap. After breakaway and runaway gaps price will often retrace to the beginning point of the gap and touch it intraday, before finding its support or resistance and reversing back in the direction of the gap. This doesn t occur every time as you can see with the most recent breakaway gap in AMZN, but it does occur quite often, and can give a very attractive entry point for a trade if you re willing to wait for the pullback. You can see examples of this on points 2, 3, and 4 of the AMZN chart (on the previous page). If we continue to see volatility trend higher this year, these signals will become much more frequent. Understanding them can present attractive trading opportunities as well as potential warnings on positions you may already have. 4

5 Income Generation Collars for Protection with Minimal Cost Do you have clients that currently hold a low cost basis, concentrated position in one underlying asset, and would be receptive to ways of helping protect those paper profits with little to zero cost? If so, the answer may lie in the use of a collar. A typical collar can be established by holding shares of an underlying security, purchasing a protective put, and writing a covered call. The underlying asset may be a stock, ETF, or even a basket of stocks or ETFs which represent an index the collar is created by selling an out-of-the-money (OTM), call to generate income, and buying an OTM put to provide the hedge. Incorporating these two different options collars the asset, using the premium received from the call sold to finance (entirely or partially) the cost of the protective put. A collar, at its most basic level, trades some upside participation for the downside protection. Once you are aware of the possible outcomes, even a novice investor can implement a collar. Bob Groves Senior Strategist, Institutional Trading Education TD Ameritrade Institutional Long Stock + Short Call + Long Put = Collared Position Generally, the put and the call are both OTM with the same expiration month; one collar equals one long put and one short call in combination with owning 100 shares of stock. The primary concern in employing a collar is the protection of profits accrued in the asset rather than increasing returns on the upside. The profit or loss on a collar depends mainly on the direction of the stock price. The stock will profit up to the strike of the short OTM call and lose value as it drops to the strike of the long OTM put. At that point, further losses in the stock are offset one-for-one by gains in the long put. Knowing you have established a floor for the stock can be comforting, but the best outcome would be for the stock to trend up toward the short call. Think of a collar as a position with two potential exit prices - one above and one below. If you don t want to limit your upside potential on the stock, then a collar may not be for you. Keep in mind, collars may also be constructed using different expiration cycles, with the possible objectives of lessening the initial time decay of the long put, or generating a greater amount of credit over time from the short call. Both the buy and the sell sides of a collar are opening transactions and are normally the same number of contracts. While the short call caps your potential upside and the long put caps your potential downside, barring early assignment that can arise if the short call is in-the-money around a dividend date, the actual sale of any shares generally would not occur until expiration. This is when the investor either exercises the put and sells the stock, or is assigned an exercise notice on the written call and is obligated to sell the stock. Until then all rights associated with owning the underlying asset are retained. 5

6 Income Generation Creating the Collar Selection of Expiration Dates and Strike Prices Understanding the purpose of the long put is for protection and the sale of call is for financing the long put can help you decide which options might be right for this strategy. You will need to decide how far OTM and how far out in time you want to go. Strike Prices At what level do you want the downside protection to begin? If you buy a put further OTM, it will be less expensive, but your stock position will need to lose more before the long put protection kicks in. Puts that are closer to the current stock price provide more protection, but are more expensive. If you want the collar to have a net zero cost, buying a more expensive put is going to require the sale of a more expensive call (a strike price closer to the current price); this provides less room for the stock to run up before the upside is capped. Expiration Cycle On the put side, protection for a longer period sounds good, but that protection also comes with an obligation to sell at the call strike for a longer period of time. On the call side, another factor to consider is the balance between the rate of decay and the total amount of extrinsic value. The amount of extrinsic value determines the maximum income you can receive for selling the call. But the rate of decay determines how quickly the position generates that income. So the more time to expiration, the more extrinsic value and the higher the credit received for selling the call, but the rate of decay is also slower. If a longer period of protection is desired, consider buying a longer dated put and selling a shorter dated call to take advantage of accelerated time decay. Rolling the short call over time could generate more credit. 6

7 Income Generation KMX (CarMax) Trade Example: Market opinion: Neutral to bullish, following a period of appreciation. KMX was trading around $7 at the end of 2008, followed by a run up of 900% to the current $65 price. Typically this strategy is employed after accruing unrealized profits from the underlying shares. To help protect these gains, a protective put is purchased. At the same time, being willing to sell the stock higher than the current market price, an OTM call is sold. Because the premium received from writing the call can offset the cost of the put, downside put protection is obtained at a smaller net cost versus buying the put alone. For illustrative purposes only. Not a recommendation. 7

8 Income Generation Possible Collar: Setup: KMX trading at $65, and a desire to protect gains at 10%-11% below current price with a willingness to sell at 10%-11% above current price. The January 2016 $57.50 strike puts could have been bought for $4.50, while the $72.50 strike call could have been sold for $4.50 creating a zero-cost collar (less transaction costs). While this collar is in place you now have one right and one obligation. The right is to sell shares at $57.50 (at 11% below current price) and the obligation is to sell shares at $72.50 (at 11% above current price). For illustrative purposes only. Not a recommendation. Below are three possible scenarios for the KMX collared position at January 2016 expiration. 1. If the underlying stock price is between the put and the call strike prices at expiration, the options will expire with no value. The client will retain ownership of the shares and can either hold, sell, or hedge them again with new option contracts. 2. If the stock price is below the put s strike price at expiration, the put will be in-the-money (ITM). The client can elect to either sell the put before the close of the market on the option s last trading day and receive cash, or exercise the put and sell the stock at the put s strike price. 3. If the stock price is above the call s strike price at expiration, the short call will be ITM and the client can expect assignment to sell the shares at the strike price. Or, if retaining ownership of the shares is desired, the client can close out the short call position by buying the call back before the close on expiration day. 8

9 Income Generation KMX: Here is what actually happened: By initiating this collar, you are locking in two potential exit prices for the underlying stock investment. Subsequently, the January 2016 expiration cycle that was used in the example above, shows the collar would remain active and in place for another 300 days, unless the call is assigned early or the option collar is closed by you. Since the collar was initiated 40 days ago, KMX has traded in a range between $62 and $68 and as of March 21st, sits at $ Due to time decay and lower volatility, the January 2016, $57.50 strike put, purchased for $4.50 and the $72.50 strike call sold for $4.50, traded at $3.30 as of March 21st. This suggests, from a profit and loss standpoint, as of March 21st, the collar remains at a net zero-cost and overall position profit up to this point comes from the higher stock price. Legal: The collar position involves the risks of both covered calls and protective puts. A covered call strategy can limit the upside potential of the underlying stock position, as the stock would likely be called away in the event of substantial stock price increase. Additionally, any downside protection provided to the related stock position is limited to the premium received. (Short options can be assigned at any time up to expiration regardless of the in-the-money amount.) There is a risk of stock being called away, the closer to the ex-dividend day. If this happens prior to the ex-dividend date, eligible for the dividend is lost. Income generated is at risk should the position moves against the investor, if the investor later buys the call back at a higher price. The investor can also lose the stock position if assigned. With the protective put strategy, while the long put provides some temporary protection from a decline in the price of the corresponding stock, this does involve risking the entire cost of the put position. Should the long put position expire worthless, the entire cost of the put position would be lost. 9

10 Trading Strategies Riding the Bull, Caging the Bear, or Cruising in Neutral Trade #1: BIDU Trading Direction and/or Volatility Around Earnings BIDU trading $ on February 11, 2015 For illustrative purposes only. Not a recommendation. If you were BULLISH, you could have... Bought 1 February $210 call and sold 1 February $220 call for a debit of $4.80 If you were BEARISH, you could have... Bought 1 February $ put, sold 2 February $ puts and bought 1 February $ put for a debit of $0.35 If you were NEUTRAL, you could have... sold 1 February $230/$235 call vertical and sold 1 February $197.50/$ put vertical for a total credit of $1.28 Strategy Long Call Vertical Strategy Butterfly Strategy Iron Condor Expiration 9 Days Max Loss $480 (If BIDU closes at or below $210 at expiration) Max Gain $520 (If BIDU closes at or above $220 at expiration) Break-even $ at expiration ($4.80 debit added to long call strike of $210) Explanation Long call verticals allow clients to place a risk-defined bullish trade without having to commit as much capital as a single long option. The position is often constructed by buying a call one or two strikes ITM and selling a call one or two strikes OTM. By straddling the stock s current price it sets up a reward to risk ratio usually near 1:1. This is a short-term, speculative example based on a potential bullish move from the earnings announcement. Also the stock was already near the position s break-even point at the time of trade, which means that leverage is being applied without having to purchase much extrinsic value. Expiration 9 Days Max Loss $35 (If BIDU closes at or above $ or at or below $ at expiration) Max Gain $465 (If BIDU closes at $ at expiration) Break-even $ and $ at expiration ($0.35 debit subtracted from highest strike and added to lowest strike) Explanation A butterfly spread is a low cost, low probability, high potential reward trade. When implied volatility (IV) is high, for example, right before an earnings announcement, butterflies can become cheaper. For a bearish forecast in this example, the center strike ($202.50) was chosen based on subtracting the expected move (+/- $11.80) from the stock s current price ($214.50). Butterflies expand in value when the stock moves towards the center strike and when IV drops. Expiration 9 Days Max Loss $375 (If BIDU closes above $235 or below $ at expiration) Max Gain $128 (If BIDU closes between $ and $230 at expiration) Break-even $ and $ at expiration ($1.28 credit added to short call strike and subtracted from short put strike) Explanation A short iron condor is the sale of an OTM call vertical and an OTM put vertical. It is sometimes used to take advantage of high IV around earnings announcements. In this example the February expiration IV was around 50% on February 11, which fell to 28% the next day after the news was announced. This should cause the options to lose value quickly assuming the stock stays in the desired range. The strike prices were selected based on the goal of staying outside the stock s expected move of +/- $11.80, making this a high probability setup. BIDU: Here is what actually happened: Earnings trades are typically set up to be short-term in nature. In fact, many earnings trades are closed once the stock opens after the news is released, because the inflated IV crashes immediately. For example, BIDU s February expiration IV dropped from 50% at the close on February 11 to 28% at the close on February 12, while the stock dropped from $ to $ over the same time period (and traded as low as $ on February 12). Let s see how each trade performed: BULLISH: With the stock s drop on February 12 the value of the long call vertical fell to $1.18, resulting in a loss of $362 (plus commissions and fees). If the trade was held until expiration the following week, it would have resulted in the maximum loss (BIDU closed at $209.63, and all options expired worthless). BEARISH: The $207.50/$202.50/$ put butterfly spread increased to $1.17 on February 12, a gain of $82 (minus commissions and fees). If held until expiration the trade would have experienced the maximum loss because BIDU closed above the upper strike price and all options expired worthless. NEUTRAL: The iron condor could have been closed on February 12 for a debit of $0.54, a gain of $74 (minus commissions and fees). If held until expiration the trade would have made the maximum gain because BIDU closed between the short call and short put strikes. Spreads, Straddles, and other multiple-leg option strategies can entail substantial transaction costs, including multiple commissions, which may impact any potential return. These are advanced option strategies and often involve greater risk, and more complex risk, than basic options trades. 10

11 Trading Strategies Trade #2: Dough in Deere (DE) DE trading $89 on February 11, 2015 For illustrative purposes only. Not a recommendation. If you were long 100 shares of stock and BULLISH, you could have... Bought 1 March $90 strike call for $1.90 and sold 2 March $92.50 strike calls for $1 for a net $0.10 credit Without a stock position, if you were BEARISH, you could have... Bought 1 March $90 strike put and sold 1 March $87.50 strike put for a net $1 debit If you were NEUTRAL and believed the stock would trend sideways over the next month. Wanted zero upside risk if wrong, and were willing to potentially buy shares 4.5% lower, you could have Sold 1 March $87.50 put for $1.90 and Sold 1 $92.50 / $95 call spread for $0.60 for a net credit of $2.50. Strategy Call Ratio Spread Strategy Debit Put Spread Strategy A Jade Lizard Expiration 35 Days Max Loss $8,890 (below $88.90, long position risk down to market price of $0) Max Gain $610 (if DE closes at or above $92.50 at March expiration) Break-even $88.90 (stock price $89 minus net credit of $0.10) Explanation Holding long stock and overlaying a call ratio spread results in a combination covered call and a long vertical call spread position. Because you are able to trade this 1 X 2 call spread for a net credit, your overall break-even is lowered slightly, while increasing your overall upside profit potential (versus stock alone) up to $95 (first 6.75%). Bottom line: you could potentially outperform the stock alone over the next month for the first $6 up move without adding any additional downside risk. Expiration 35 Days Max Loss $100 (if stock closes at or above $90 at March expiration) Max Gain $150 (if DE closes at or below $87.50 at March expiration) Break-even $89 (current price) Explanation A debit spread can be a low cost way to utilize the leverage that options provide while paying little to no extrinsic premium. In this example you bought the $90 strike put which was one strike in-the-money and then sold the first out-of-the-money strike $87.50 put to finance and reduce the cost basis of the long put. Since the $90 strike put was worth $1 at the time you didn t pay any extrinsic/time premium when initiating this position. The spread is risking $100 to potentially make $150, and a potential return on capital of 150%. Expiration 35 Days Max Loss $8,500 (below $85, long position risk down to market price of $0) Max Gain $250 If DE closes between the short put strike and the short call strike Break-even $85 on the downside (equal to the $87.50 short put strike minus the net credit of $2.50). There is zero risk on the upside Explanation A jade lizard is a defined risk strategy established by combining a short call spread with the sale of a naked put. The trade makes max profit if the stock expires between the short put strike and the short call strike of the call spread. As long as you collect a net credit greater than the width of the call spread, a large upside move should not result in a loss. In this example, you collected a total credit of $2.50 ($1.90 from naked put sale and $0.60 from call spread sale). Because the call spread can only be worth a maximum of $2.50 there would be zero risk on the upside. On the downside, if the stock trades below the short put strike of $87.50 and you get assigned, the $2.50 net credit would result in an effective purchase price of the stock at $85 per share (4.5% below $89 stock price when trade initiated). Note that the naked put position entails a high risk of purchasing the stock at the strike price when market price of the stock will likely be lower. DE: Here is what actually happened: DE closed at $89.18 on March expiration, up $0.18 from the initial trade value on February 11th. During the life of these trades, the stock traded up to $92.50, leading into the February earnings report and then sub sequentially drifted lower to $88 over the next month, before recovering slightly to close just above $89 on March expiration. During this time volatility has moved lower, which can be typical following an earnings event. The premium-selling neutral strategy did especially well in this environment. Each of the trades yielded the following results: Bullish: Long stock with 1 X 2 call ratio spread resulted in a small gain of $28 (plus commissions and fees). Because volatility collapsed following the earnings report, this trade likely could have been managed for a bigger profit earlier in the cycle. Bearish: Long put spread purchased for a debit of $1 expired worth $0.82, for a net loss of $18. Note, because no extrinsic premium was paid initially for spread, loss was equal to adverse stock price movement alone. Neutral: Jade lizard (short naked put and short call vertical spread) expired with maximum profit of $250. This was due to all options expiring out-of-the-money and worthless. 11 A covered call strategy can limit the upside potential of the underlying stock position, as the stock would likely be called away in the event of substantial stock price increase. Additionally, any downside protection provided to the related stock position is limited to the premium received. (Short options can be assigned at any time up to expiration regardless of the in-the-money amount.)

12 Trading Strategies Important information: Options are not suitable for all investors as the special risks inherent to options trading may expose investors to potentially rapid and substantial losses. Options trading subject to TD Ameritrade review and approval. Please read Characteristics and Risks of Standardized Options before investing in options. * Theta is a measure of an option s sensitivity to time decay. ** Delta is a measure of an option s sensitivity to changes in the price of the underlying asset. Spreads, straddles, and other multiple-leg option strategies can entail substantial transaction costs, including multiple commissions, which may impact any potential return. These are advanced option strategies and often involve greater risk, and more complex risk, than basic options trades. Investors should also consider contacting a tax advisor regarding the tax treatment applicable to multiple-leg transactions. The short put strategy risks purchasing the corresponding stock at the strike price when the market price of the stock will likely be lower. Naked option strategies involve the highest amount of risk and are only appropriate for traders with the highest risk tolerance. The preceding information is not a recommendation or endorsement of any particular investment or investment strategy. Returns will vary and all investments involve risk, including loss of principal. Transaction costs (commissions, contract, exercise/assignment fees and other fees) are important factors and should be considered when evaluating any options trade. Examples presented are provided for illustrative and educational use only and are not a recommendation or solicitation to purchase or sell any specific security or to use a specific strategy. Supporting documentation for any claims, comparison, statistics, or other technical data in options communication will be supplied upon request. 12 *Please note that by clicking the hyperlink provided you will enter an unaffiliated third-party website to access its products and services. The third-party site is governed by its posted privacy policy and terms of use, and the third party is solely responsible for the content and offerings on its website.

13 Key Indicators A Choppy First Quarter for Markets Over the past several years, investors have become quite accustomed to low volatility in the markets. In fact, during 2013 and 2014 you could count on one hand the number of times the CBOE Volatility Index (VIX) spiked above 20 (a common threshold for high volatility). Most investors don t mind low volatility because it s usually accompanied by rising stock prices and an expanding economy. However, 2015 has started out much different due to concerns about whether the U.S. can continue to be immune from economic weakness that seems to be spreading across the rest of the developed world. A key indicator to keep an eye on is the performance of U.S. small-cap companies. These stocks, measured by the Russell 2000 Index (RUT), underperformed large-cap stocks in This was unusual typically small-cap stocks will be leaders during an economic expansion. Then, when the data starts to turn for the worse these become the first stocks investors sell because of their higher risk. Small-cap stocks tend to be more sensitive to key economic reports like gross domestic product (GDP) and employment figures because these companies do the bulk of their business domestically. For example, on January 30 the first estimate of 2014 fourth quarter GDP growth disappointed at 2.6 percent versus expectations of 3.2 percent; the RUT underperformed the large-cap S&P 500 Index (SPX) that day (RUT dropped 2.1 percent versus a decline of 1.3 percent for SPX). The report was also coming off a 5 percent expansion in the third quarter of Michael Turvey Senior Strategist, Institutional Trading Education TD Ameritrade Institutional Remember, quarterly GDP figures are revised twice, so keep an eye out for those reports which are issued near the end of the month. We ll get our first look at 2015 first quarter GDP near the end of April. Looking at a chart of the RUT, it s easy to see the sideways channel since early An ongoing sideways pattern or a break below the October 2014 lows would likely indicate expectations of a stalling or slowdown in GDP growth. But if the RUT can convincingly break above the $1,210-1,220 range, that could imply that investors are willing to bet on the continued strength of the U.S. economy and the low volatility that typically goes along with it. GDP Report Date Actual 2014 Q4 (1st Estimate) 1/30/15 2.6% 2014 Q4 (2nd Estimate) 2/27/15 2.2% 2014 Q4 (3rd Estimate) 3/27/15 2.2% 2015 Q1 (1st Estimate) 4/29/15? To review some key items that the Strategy Desk will be following (and may be of interest to you), click here to view the monthly economic calendar*. For illustrative purposes only. Not a recommendation. 13 *Please note that by clicking the hyperlink provided you will enter an unaffiliated third-party website to access its products and services. The third-party site is governed by its posted privacy policy and terms of use, and the third party is solely responsible for the content and offerings on its website.

14 14 Special Feature

15 15 Special Feature

16 Education and Events About the Options Market Center TD Ameritrade Institutional s Options Market Center is a comprehensive options offering, which includes: Strategy Desk Leverage options-related expertise and guidance to help you to make more informed decisions. Education Join us online or in person at one or more of our ongoing educational events. Technology Monitor the markets and place your orders on thinkpipes, a next-generation, innovative software. For more information, please contact your Relationship Manager. Options Market Center Webcasts Clients are more sophisticated than ever and may have a heightened sensitivity to portfolio risk. Join us to learn how to adapt to the evolving needs of your clients. Hear how utilizing options and incorporating technical analysis strategies may: Help manage risk Potentially generate income Work to reduce portfolio volatility Register Now Introducing the thinkpipes Learning Center Have you considered using thinkpipes TD Ameritrade Institutional s powerful, next-generation trading platform but wanted additional help before getting started? Or do you currently use the platform, but would like to learn how to expand your use of it? The new thinkpipes Learning Center enables you to get more out of your trading experience by leveraging the many educational opportunities. You can: View the collection of thinkpipes video tutorials Get ideas about how to better manage and grow your business by reading current and historical TD Ameritrade Institutional magazines and newsletters Review the thinkpipes Release Notes showing the latest platform enhancements Visit the thinkpipes Learning Center Today To access the Learning Center, login to thinkpipes and click on the link for the thinkpipes Learning Center. Get Support For questions about thinkpipes or to gain access, please contact thinkpipes Support at or Market volatility, volume and system availability may delay account access and trade executions. Access to real-time market data is conditioned on acceptance of the exchange agreements. 16

17 Contributing Writers Contributing Writers Michael Turvey Senior Strategist, Institutional Trading Education TD Ameritrade Institutional Michael is a former options floor broker and market maker. For the past 11 plus years he has been designing and delivering courses and presentations on stocks, ETFs, options, and portfolio management. Additionally, he has written articles published on Forbes.com and in TD Ameritrade s thinkmoney and Ticker Tape magazines. Clint Cowles Senior Specialist, Trade Desk/thinkpipes TD Ameritrade Institutional Clint is proficient in the field of technical analysis, a method of evaluating securities by analyzing statistics generated and trends by market activity. He has taught multiple college workshops focusing on technical analysis and he is a also thinkpipes chart specialist. Bob Groves Senior Strategist, Institutional Trading Education TD Ameritrade Institutional Bob is a former market maker and options risk manager. Additionally, he works on the TD Ameritrade Institutional Strategy Desk to help advisors implement options strategies. Options are not suitable for all investors as the special risks inherent to options trading may expose investors to potentially rapid and substantial losses. Options trading subject to TD Ameritrade review and approval. Please read Characteristics and Risks of Standardized Options before investing in options. Investors should consider contacting a tax advisor regarding the tax treatment applicable to options transactions. A covered call strategy can limit the upside potential of the underlying stock position, as the stock would likely be called away in the event of substantial stock price increase. Additionally, any downside protection provided to the related stock position is limited to the premium received. (Short options can be assigned at any time up to expiration regardless of the in-the-money amount.) The naked put strategy includes a high risk of purchasing the corresponding stock at the strike price when the market price of the stock will likely be lower. Naked option strategies involve the highest amount of risk and are only appropriate for traders with the highest risk tolerance. Examples presented in workshop sessions are for educational and illustrative purposes only and are not a recommendation or solicitation to purchase or sell any specific security or product. While certain webcasts discuss technical analysis, other approaches, including fundamental analysis, may assert very different views. Transaction costs (commissions and other fees) are important factors and should be considered when evaluating any options trade. Supporting documentation for any claims, comparison, statistics, or other technical data in options communication will be supplied upon request. TD Ameritrade Institutional, Division of TD Ameritrade, Inc., member FINRA/SIPC. TD Ameritrade is a trademark jointly owned by TD Ameritrade IP Company, Inc. and The Toronto-Dominion Bank TD Ameritrade IP Company, Inc. All rights reserved. Used with permission. 17

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