Inflation depreciates idle money. I'm in a privileged position to be able to save almost 65% of our net household income, as I placed it on safer investments. The key for us was not spending beyond our means. If you invest and have other sources of income outside of dividends then you will be able to live off dividends. Got north of $520K in my portfolio as I bought a lot of dividend stocks before, I'm buying more now, and I will buy more when it drops further.
The main problem is that most folks don’t care about anything other than football, Basketball and Music etc. They find it normal to take credit card debt which will cost them 20% per year but considers it risky to invest their money and make 10% or more per month. Learning to avoid high interest debt while also learning how to put your money to work for you by investing is a very powerful combo.
Starting out with a professional that knows the ropes of the choppy but profitable market is the best way to achieve getting a well structured portfolio. That’s why I have been working with 'MARGARET ANN WARNKEN" because in financial dealings one has to be prudent. Most traders enter and exit with a quick 10% profit which is not bad in general opinion but why not make more of the opportunities presented?.
She looks the part. MARGARET really seems to know her stuff. Out of curiosity i looked her up, found her web~page, and decided to read through her resume, educational background, qualifications and it was really impressive. She is a fiduciary who will act in my best interest. So, I booked a session with her.
To hedge risk, buying a back ratio with a further expiration date would be better if a dump in the market were to occur. A calendar spread would work as well. If you're range bound, sell spreads on support & resistance levels.
Wonderful content man. I am usually skeptical about trading channels because of how they over promise and never tell you the downside. But you are the real deal. Keep it up!
What do you mean the indices don't gap up/down all that often? They do it all the time. Last Thursday I had three short butterflies sitting dead center near max profit. The gap up Friday put me at max loss, and the subsequent run up sealed the deal. The thing about the index options is that they don't pay enough premium to offset your losses over time. The IV right now for at the money options is around 12%. The math doesn't work out over time. Plus, the cost of the trade is 100 bucks or so.
Thanks for this video 🙏 Please add current price when you show the entry calculation. That will help beginners in understanding how to choose strike price. Also it will be great if you explain strategy to choose strike price for any trade. 🙏
i always like to close out this trade once my loss is 2x my credit. so if you're trading the .25 credit close it out if loss hits $50+ Live to fight another day. this whole strategy is just hitting singles. no homers
when price is formed at the beginning of a strong move. a clear uptrend makes series of higher highs and higher lows, while a donwtrend makes series of lower highs and lower lows. Note; When the market stops making these movement patterns, it is no more trending and ready for breakout. so if you are a downtrend follower, you have to determine when the market is likely to stop trending, placing your stop loss with developed strategy. when it is likely to reverse to price breakout profitable. Google and read more about IQD Momentum strategy to get your copy of ebook format written by Lukasz Wilhelm and learn how the breakout candle closed above the market key level. As we all know, old resistance becomes new support.
You could set an exit price on the short put of 50% of your max profit to catch any late-day swings that could crash the position. But when you're trading a very broad instrument (like an entire index), big changes like this don't come very often during the day. So you're probably going to be leaving a lot more money on the table than you would just letting them expire and taking the loss. And like the guys says, 10 week payback for a complete loss is pretty good. But if you jump out at 50%, that climbs to 20 week payback. So now you can only afford 2 gap-downs in an entire year. Or you could just set your initial premium spread at about half what this guy did, and position yourself further out of the money, cutting down on the frequency of gap downs that will flip your position. The profit is the same, but the quantity of losses you can sustain is doubled, and the losses are less likely.
You provided good points. Trading put credit spread is like hitting single after single and a big loss is like a grand slam that goes against you. I like to trade a bit more conservative, hence, less premium but minimizing my risk. My main bread and butter are selling covered calls and buy LEAPS and sell short against those LEAPS for consistent weekly/monthly cash flow.
One thing that I place emphasis on when teaching stock and options trading is paper trading to make consistent profits, most beginner traders want to jump in the market only to loose money then give up. In my own experiences I say , paper trade for a while maybe 6 months to a year and experiment using these type of strategies and learn from your mistakes but the good thing is, your mistakes will cost you nothing but time. Great post Seth!.
Paper trading is useless because it’s not real. There’s no point to it because once you have real money on the line you will begin to question your trade because there’s a real risk there
@@chump6901 it's a tool, we all use tools to perform task and job functions in order to get things done. Trading options is high risk like any other strategy in the stock market. if you are not sure of a certain strategic investment or options risk, you can use a tool such as paper trading to assess the risk. This is why all trading platforms have a paper trading section and its good for beginners to learn on until they become confident and successful at trading. "useless" is one thing but a waste and loss of money is another.
I have attended the options workshop he mentions twice, took what I thought were good notes, and I still have no idea how to do it, let alone how to find stocks that meet the required criteria.
He shows only "index options" which are a group of more than 1 stock, like "spx" is all stocks or others that u get cash (or pay) instead of setteling in stock because there a group of stocks
@@robertcampbell6513 IMO for 99.9% of traders, the only way to learn how to trade options in the REAL world is to blow out your account to complete zero multiple times over the span of 20 years. then you will finally LEARN what to do and what never to do again. until you suffer multiple blowouts you will find it irresistible to push boundaries. so... options trading is NOT a good idea for 99.9% of traders IMO
Hi Seth. Back tested from January to 1st November. Total trades 82. Winners 76 @+- $1250 and 6 losers @ about $23 600 that equates to loss of @ $46 600
What you explain in this video is really the crucial part of any trading strategy, you have to plan for your losses as carefully (if not more carefully) as you plan for you profits, because many traders enter the market thinking that since they chose a "safe" position they are immune to losses as a result, and this could not be farther from the truth. I have designed many profitable strategies over the years and I only managed to reach a positive outcome once I realized this, and of course, all was based on thorough back-testing using hard data from the market, no guesswork of any kind.
hmmmmm. love the channel. But this video is pure theory. Forgot the Commission for 50 contracts !!!! And the slippery !!! You can not do this 1 day before. the market maker is pushing down the price and the spread between ask and bit is so far away. And some statistics. the last 10 years SP500 have lost 1 % the next day .....::: 196 times. so not 4 times pr year but rather 20 times.
Good point towards the end about Max loss scenario. I was surprised you didn't mention that in the recent Elon Musk Twitter iron Condor video you made.
I am not sure what's the purpose of the back-testing about this strategy. Yes, the strategy has its risk. But there is no way in a back-testing to determine the probability about an appearance of a "Black Swan" event; that's why it's called a Black Swan :-)
Backtesting is key. When you check your short strike price % OTM, that will determine if your trade idea is profitable. 90% OTM, with a 20C credit. Money in the pocket.
@@realjmaloi Sorry, but that's not quite right. All backtesting determines is if your trade idea would have been profitable IN THE PAST, during the specific time frame backtested. It says nothing about whether the trade idea will be profitable in the future.
@@iwasdeceived true. However, staying well out of the money statistically will provide a profitable trade. Past performance is no guarantee of future success. It's up to the trader to determine their own risk tolerance. 20 cents, 90% otm. Try it. Thanks for the reply bro. 💪🔥
@@realjmaloi Be careful. "Staying well out of the money statistically will provide a profitable trade" is true only if the spread expires OTM (or if you can and do close the trade early for a % of total expected profit). In the example given in the video, the SPX was at 3010 the afternoon the trade was opened. If the SPX gapped down a mere 25 pts or more and didn't recover by 4pm, then a total loss would be incurred. This despite having a statistical probability of finishing OTM of probably 95% or more just the day before. A 25 pt move on an index of 3010 is only a 0.8% move. Just this week the SPX closed down 27 pts on Mon and gapped down 26 pts on Tues because of unpredictable overnight tweets. This trader has to win 19 out of 20 trades (95%) just to break even. If he had a bad streak of 5 total losses out of 20 trades, that's $100k in losses and practically impossible to recover from using this same trading plan. Once the MM sees what this trader is doing every Tues & Thurs afternoon, then the guy is toast. So have fun & make $$$, but I suggest trading small if you do something this risky...
Rule 1 of any Market strategy. Never assume that your strategy is going to work consistently over a long, or even short. Of time. The trading gods do not like smart asses who think they figured out the market. I speak from experience.
Well??? Is there a follow-up video on the subject? It would be high anxiety if the trade failed before you had sufficient capital saved from the strategy.
Lol, he's over complicating simple concepts. If you TRULY want to learn trading options - search for Elite Options 2 - he is a good teacher, join his trading room and learn, there are many people who are making decent money using much simpler strategies
@@KillerBearsaw EXACTLY! I’m a “long,” so I didn’t lose money during the COVID dip, and I bought more. Then it went down. And I bought more. Turns out that was a great strategy. :)
Would be curious to know what his total options trading portfolio is? Maybe a $5 spread is too risky for the size of his portfolio! Smaller portfolios should probably start at a $2 spread.
Not Optimized: If he's selling overnight SPX credit spreads 2times per week on Weds & Fri...then why not do it 3 times per week on Mon, Weds & Friday? He's already taking a ton of Gamma risk, so why not increase his opportunity by 33% per week/year ? Of course, he's gonna get whacked some N-number of times during the year...especially when the market stops going straight up, which BTW, is the only reason he thinks he's on to something special right now. But, there are Soooo many ways to hedge out his credit spread Gamma risk. He could get short some number of Futs overnight to hedge out his -negative Deltas in case of Jump Vol. He could sell Broken Wing Put Butterfly's up and down his Realized Vol profile during the week/month....on & on. Guy has just the very beginning of a winning strategy....but he has to figure out is exposure AND more importantly where & how to immunize himself from certain ruin. This person's story reminds me of a favorite saying of my first boss: "Don't confuse Brains w/a Bull Market."
Interesting comment. Could you please expand a bit on "sell broken wing put butterflies up and down his realized vol profile..." I know what BWB are, but I do not understand what you mean with "realized vol profile". I agree with you completely that hedging gamma risk is crucial to this strategy, thus I would like to better understand what you are saying. Thanks.
He'd be increasing his gains by 33% but the risk from overnight surprises is twice as high. If the chance of an overnight catastrophe over a year leads to this occurring 6 times over 208 nights then you'd be doubling it to 416. If the results of a weekend disaster on friday night or saturday from a presidential tweet or any other kind of terrorist attack affect the open on monday then his gains are more than offset by the increased risk.
There is no reason to adjust a fundamentally flawed strategy to try and make it less volatile and market-dependent (i.e. more delta neutral). You simply have to take the problem at its roots and remove the huge gamma exposure, and instead, start trading strategies that work because they take advantage of IV crush or expansion, some amount of directional bias, and a good amount of time decay.
best way to trade is selling puts ,with credit spreads ...bear call spreads and bull put spreads ...it can be a little confusing but you will get it......…...you keep the premium and a safe way to trade...just sell puts but do not buy them,play it safe
Hi Seth, I just stumbled on your content and am enjoying it. I've been trading for 4 years and always looking to learn more! Curious what you would think about this strategy if he hedged it by buying long calls in VXX or VIX. This trader is placing around 2SD's below the market. If a 2SD drawdown happens in one day, that would send VXX/VIX from their current levels around 15 up to 30+ pretty quick. If you scaled it right, you might even make more from a losing trade is SPX. What are you thoughts on that? Am I missing anything huge as well in that strategy? Thanks!
You should be aware of this and take advice from others that have already succeeded. I searched round a few sites and found a lot of great advice by searching google on websites such as Trevs Exchange Tactics. I wish you luck and hope you make some cash!
For something this short term there is just about nothing you can do. Loss is locked in. If the market opens below your long put, then if you try to roll it or buy it back, you will bank the maximum loss. Only option is to hope it bounces back before the close above your long put so you can recoup some of the losses.
Caution, the distance from the underlying index ($SPX) can get pretty small (less than 50 points) during market rallies AND contracting implied volatility for these 25 cent 1 DTE Put spread trades. On Dec 23rd close, for Dec 24th close, you only reached 35 points OTM when spread premium was 30 cents.
I would be curious to see this trade replicated with some similar /ES futures options because they trade overnight and a stop could be placed to help reduce the gap risk.
I used also 0 DTE , before the market closed, but mostly on Volatile days. That's the problem in the same day , the price of the option are too cheap to make profits.
Dear Seth, how should we size up over time on an strategy like that? last thing we want is to do well in this strategy for 5 straight year while increasing size each year and on year six 1 loss wipes 5 years of profit. Thanks SMB!!
To mitigate the risk, all he needs is a stop loss that's 3x his original credit for the short. That would eliminate most crazy delta events. No needs for a hedge or calendar spreads... a stop loss would take care of 99% of all gap downs. Or he could trade SPY and take assignment of the shares and wheel them until break even.
However a stop loss is not a guarantee that you will get stopped out at your price. On a big gap down, it will not get stopped at all at your price and when it does get stopped you may still lose 25,000 in his example or even more.
He doesn't have to accept the loss 5 or 6 times a year. Couldn't He can close out of the credit spread at a much lower cost than letting the option expire ITM?
Yes, or roll down or out to a future Date. Further, he could add a call spread on the other side of the play without increasing required capital and make his spreads wider and increase his percentage of wins.
Very informative. While I may not trade that particular strategy, it still provides insight to take a look at whatever strategy I am using and look at it from a different angle.
Your advice was good and interesting on that scenario. My intuitive thought was primarily, unless this guy is WEALTHY and until he gets sufficient experience, he should trade SMALLER (and by implication, safer). I might well need to look into some good backtesting software, depending on the price, as usually with my simple strategies, I just look at things like history, implied volatility, experience, hedging opportunities (and costs), etc.
Just wondering if you guys could explain how you handle wash sales. I'm assuming that you're using mark-to-market accounting? ..... thanks, I find your videos to be very interesting.
In credit spreads is impossible to lose your max loss. Why? Because if your short side is breached, you can create a iron butterfly. Doing this, the max loss is reduced dramatically and the trade has the same risk.
It's curious that at the time of your example trade (approx 9/13/19) getting .28 credit, the short strike was 20 pts OTM which is approx a 30 delta, hence, 70% chance of expiring OTM for full profit. As of today 11/30/19, for .25 credit, the short strike is 70 pts OTM which is approx 11 delta, hence, 89% chance for full profit - much better probabilities. I wonder what would happen if you set a condition to exit if the price drops and hits the short strike; that is, you could cut your losses to well less than 50% max loss that way. Of course, there's always a chance that if price did breach the short strike, it could come back up before expiry for full profit. Would be an interesting backtest but whatever that backtest shows, it's no guarantee of future price action.
I'm confused on the math. I thought his maximum loss was the difference between the strikes minus the credit received, that amount is deducted from his collateral and the rest is returned? For example a premium was paid of $10. The stock closes below the strike prices of $18/ $19. The difference is $1 so it's $100 - $10 = $90 subtracted from collateral and the rest of the collateral returned. Can someone verify this for me?
@@dpckcmo Thanks for your answer! I trade with interactive brokers. Are there softwares for purely backtesting? Or, another question, can I open an account with these two and not trade with those brokers?
At 7:02 in the video you mention 'depending on market conditions'. What conditions are you referring to? Its seems this information would be necessary to be successful at this trade to determine how for OTM or ITM you need to make your trade.
Either I’m missing something or you got your expiration prices wrong. on time 7:45 you said that the spx closed at 2992 that’s why his option expired worthless but it couldn’t be worthless since his short put had a strike price of 2990, it was above his strike price but on time 8:12 you say that the index closed at 1922 which is why both long and short options expired worthless because they were below his strike prices of 2990 and 2985 respectively, which makes sense but not when you mention that the closing index price was 2992.
Why not sell them on Wed/Fri at the open to avoid the overnight? Why sell it as a condor rather than a PCS? you can probably get the same or larger credit with further OTM strikes
Absolutely correct, buy same day, and just use a neutral IC. Heck, I buy verticals sometimes 30 minutes to expiration. Sure it's risky, and you're obviously close to the money, but if you're trending higher or lower and can stand the directional assumption, then go for it. Before you know it, ding-ding expired OTM😂
@@TrentFallinGmail he could be doing better with less risk doing as an IC. Lot of commissions on those 50 contracts, too. Broken wing butterflies would also provide greater upside with less downside risk.
@@docmtaylor Yes, ICs are more forgiving in spread (if you pick the right strikes), plus potentially more premiums. If you're going to do that, same day ICs can dry up sometimes, but one day before is generally okay so long as your strike price is => than the weekly mean (movement) of the underlying. I know SPX quite well to realize it's capable of moving 10-35 points per intraday session. So... I place my strikes 35 points x n days from expiration away OTM. Successful stike placement wins over anything else. If it's Tuesday am and I'm placing an IC for Wed expiration, then my body width is 70-80, right? Tues can burn 35 points and so can Wed. So strike position, in the end, will save or kill your trade. Happy trading bro😏👍
@@TrentFallinGmail Would you mind recommending some resources that best helped you learn the options game? There's so much noise to cut through... books, services, etc..
I've been running this trade for two months now, since I've first seen this video and it has been successful both times every week. The P&L curve is very steep on this trade meaning it can go from a winner to a loser very quickly. One of the ways I plan on mitigating risk if/when the trade starts to turn against me is to open a call credit spread to turn the trade into an Iron Condor. Taking in the additional credit will give me a little more breathing room to try and stay above the break even line while also lessening my max loss on the trade.
Brent W interesting. I’ve been doing this exact same strategy except as an IC. What time do you open your trades? Initially I backtested the strategy going back 5 years then forward tested for 8 weeks using a 25% SL. On backtest AND in TDA Paper Trade, it worked very well, 80% win, and nearly 100% returns each month. In my live account the 25% SL simply doesn’t work. LOL, I’m sure nobody is surprised.
@@mattportnoyTLV I have been getting in on average between the last hour and last fifteen minutes of the day depending on how the s&p has been moving throughout the day.
@@1fastk Thanks for the info. When I backtest this over the last year, I show 4 greater-than-1% events that would have cause pretty much total loss on this system. March 22 2019, Aug 14 2019, Aug 23 2019, Oct 2, 2019. The remaining 96 trades were winners. Projected annual return on a single SPX contract would be $820.
@Brent W going back 5 years (2015 through 2019) I find a total of 16 losses, 14 of which would have wiped out all the trade margin assuming there was no stop loss in place. As I said in my first post, I can back test with a stop loss and show dramatically improved results, and I've been able to mirror that in TDA Paper Trade. But no luck doing that with a live account unfortunately because of the pricing spreads. I suspect this system could be improved upon if we were to research conditions on each of those loss days. Where was RSI? How did VXX or $TICK or $ADD behave? That sort of thing. Maybe it's possible to build a condition-based stop loss to weed out the catastrophic events?
@Brent W so I did some more digging through the last 5 years of data. In nearly every case the catastrophic loss events occur when there’s a large gap down at the open of >10 points. Two of the gaps down were around 50 points, which means you’d have a catastrophic loss at the open and never recover. What I’ve noticed is that, in every single case, if you wait until after the close of the first 15 min candle and then take the trade, you reduce catastrophic losses by 56%. If you avoid the large gaps down the catastrophic losses get reduced by 94%.
the question, can you buy leaps calls in the money and then sell calls in indexes such as spx and ndx ? For example spx price is 4k, I will buy calls 2 years out strike price 3k and then sell calls weekly or 3 times weekly in spx? i know I can do that in spy but not sure in SPX or NDX. Thanks
I may be missing something out here but if he sold puts at 2990 strike while the market was at 3010 when he did the trade, he hoped that if the market drops next day it would be less than 1% which is a drop that is pretty likely to happen in todays market. why not betting on lower puts? and in general why not pick much lower puts with a larger spread between the longs and the shorts?
Taking a $5 risk (5 wide strike) for 0.28 credit doesn't even make sense to me. I like a 1:3 risk reward, Ideally $1.65 credit minimum for a $5 wide strike on a credit spread.
Seth Freudberg I realize that, I sell naked puts all the time, but the risk you take has to be worth the reward. Is there not a minimum premium you expect for a $5 risk/wide strike.
@@mattdelongofficial Yes, Matt and that's a very sound point. Every strategy should have a minimum income expectation per trade size, otherwise the trade should be skipped that period.
I think that trader also needs to determine the probability of a loss with that strategy. The risk-reward ratio in dollar amount is not perfect, but as long as it can achieve his goal with the risk he can tolerate it's a good strategy to him, imho.
Hi, I have a question, I' read that even when puts and credit spreads expire worthless, what will define if you have a profit or loss in the trade is the settlement calculated the next day via SET. Is this true? So say my credit spread expire worthless, and at expiration it shows a profit, it could become a loss if settlement price is lower? selling credit spreads a few minutes before expiration lets say on thursday, and friday is the settlement. Please help with some guidance, thanks!
Me being a small account guy of 10K, I would buy myself another put say 5 ticks lower then my first put, at a verily cheap price, so on a big gap down I make money on that one also, or should say lose way less then the 25K. Yes in buy buying more insurance I will not make 2500 week but only say 2000 a week but way less risk. And I can live with 2k a week even with the inflation of today
As soon as you said he opened the trade the day before, I thought immediately he's crazy, especially with the bevy of reports that come out every morning. He'd be better off opening the trade the morning of expiry instead. He also could cut his risk in half by opening iron condors, since you can only lose in one direction.
I don't undestand something, I open an iron condor the same day of exp, and when market close 4:30 I was in red 100 dollars, later next morning I was 470 negative. Do i need to closed the trade before 4:30 or let it expired until next day morning?
How does one get out of those spreads? Do you go leg by leg...isn’t the market moving as you’re trying to get out which could blow ones strategy...FAST? There is no link showing to sign up? :(
What time of day would he place the trade on Tuesday or Thursday? I would add Placing the spread just below a large PUT open interest strike. The Large put volume at that strike will act as a buffer.
I use thinkorswim for backtesting although there are some issues with using it for options backtesting. The one gripe I had with it was that I couldn't see option greeks for anything that was in the backtest. The rest of the software is phenomenal in the other aspects, and the support teams are great!
![I.N "HALLUCINATION" | [Stray Kids : SKZ-PLAYER]](http://i.ytimg.com/vi/n5B5q1Hwt_U/mqdefault.jpg)
Inflation depreciates idle money. I'm in a privileged position to be able to save almost 65% of our net household income, as I placed it on safer investments. The key for us was not spending beyond our means. If you invest and have other sources of income outside of dividends then you will be able to live off dividends. Got north of $520K in my portfolio as I bought a lot of dividend stocks before, I'm buying more now, and I will buy more when it drops further.
The main problem is that most folks don’t care about anything other than football, Basketball and Music etc. They find it normal to take credit card debt which will cost them 20% per year but considers it risky to invest their money and make 10% or more per month. Learning to avoid high interest debt while also learning how to put your money to work for you by investing is a very powerful combo.
The one effective technique I'm confident nobody admits to using, is staying in touch with an Investment-Adviser.
Starting out with a professional that knows the ropes of the choppy but profitable market is the best way to achieve getting a well structured portfolio. That’s why I have been working with 'MARGARET ANN WARNKEN" because in financial dealings one has to be prudent. Most traders enter and exit with a quick 10% profit which is not bad in general opinion but why not make more of the opportunities presented?.
She looks the part. MARGARET really seems to know her stuff. Out of curiosity i looked her up, found her web~page, and decided to read through her resume, educational background, qualifications and it was really impressive. She is a fiduciary who will act in my best interest. So, I booked a session with her.
Identifying lucrative investments can get you ahead in no time, in years of Investing, my portfolio has experience immense growth, because i did so.
To hedge risk, buying a back ratio with a further expiration date would be better if a dump in the market were to occur. A calendar spread would work as well. If you're range bound, sell spreads on support & resistance levels.
Wonderful content man. I am usually skeptical about trading channels because of how they over promise and never tell you the downside. But you are the real deal. Keep it up!
we try our best to recognize the downsides and give it straight to everyone watching
What do you mean the indices don't gap up/down all that often? They do it all the time. Last Thursday I had three short butterflies sitting dead center near max profit. The gap up Friday put me at max loss, and the subsequent run up sealed the deal. The thing about the index options is that they don't pay enough premium to offset your losses over time. The IV right now for at the money options is around 12%. The math doesn't work out over time. Plus, the cost of the trade is 100 bucks or so.
@11:32 - So what I'd like you to take away from today's video is...YOU have no chance of becoming a successful trader lol
So....what happend at the end of the day? What was the study results and final conclusion?
Juan Pedroza they all became bankrupt and got hooked on crack 🤷🏻♂️
Would have been creamed in likely March, June, September and it’s not even the end of this year god damn. I’d stay away.
@@macphistorules you can do the same thing with calls to put a bearish direction on the trade, so in a downtrending market it can still work
@@tarubewildin6931 ya the call side would have been killed all this week
Tune in next week? lol
Thanks for this video 🙏 Please add current price when you show the entry calculation. That will help beginners in understanding how to choose strike price.
Also it will be great if you explain strategy to choose strike price for any trade. 🙏
Ok next time!
Taking profits often and early to is the key take away from selling options.
I'm with you man... I have been trading the premium lately and smashing it. I have never sold options only bought them, but that is just me.
@@adddad9779 are you doing Covered Calls? Selling Call or Put and receiving the immediate Credit?
Eddie Latorre Jr. none
@@eddielatorrejr.3018 I think he's just trading the options... Not a wise play tbh.
@@helloyes2288 I day trade options, what makes you say its not a wise play?
Well I liked to see the backtest of this strategy in the video as to know how much far from the close (in SP points ) is build
You could also switch to calls depending on your bias for the market that week.
I'm curious how he did a couple of weeks ago..
You have a mistake in the slides at time 8:08. It should have been 2992.10 instead of 2922.10.
i always like to close out this trade once my loss is 2x my credit. so if you're trading the .25 credit close it out if loss hits $50+ Live to fight another day. this whole strategy is just hitting singles. no homers
when price is formed at the beginning of a strong move. a clear uptrend makes series of higher highs and higher lows, while a donwtrend makes series of lower highs and lower lows. Note; When the market stops making these movement patterns, it is no more trending and ready for breakout. so if you are a downtrend follower, you have to determine when the market is likely to stop trending, placing your stop loss with developed strategy. when it is likely to reverse to price breakout profitable. Google and read more about IQD Momentum strategy to get your copy of ebook format written by Lukasz Wilhelm and learn how the breakout candle closed above the market key level.
As we all know, old resistance becomes new support.
You could set an exit price on the short put of 50% of your max profit to catch any late-day swings that could crash the position. But when you're trading a very broad instrument (like an entire index), big changes like this don't come very often during the day. So you're probably going to be leaving a lot more money on the table than you would just letting them expire and taking the loss.
And like the guys says, 10 week payback for a complete loss is pretty good. But if you jump out at 50%, that climbs to 20 week payback. So now you can only afford 2 gap-downs in an entire year. Or you could just set your initial premium spread at about half what this guy did, and position yourself further out of the money, cutting down on the frequency of gap downs that will flip your position. The profit is the same, but the quantity of losses you can sustain is doubled, and the losses are less likely.
You provided good points. Trading put credit spread is like hitting single after single and a big loss is like a grand slam that goes against you. I like to trade a bit more conservative, hence, less premium but minimizing my risk. My main bread and butter are selling covered calls and buy LEAPS and sell short against those LEAPS for consistent weekly/monthly cash flow.
I wish we could get an update on this. It's been 4 years, and there were some wild markets in that time.
we'll have to contact the trader
I wonder if he learned this lesson the hard way in the last two weeks.
Lou GC 😂
or now
@@josephabramo2324 or now
Be aware - $2,500/wk income is based on 2 groups of such "spread trades" per week. The mishap/risk was based on 1 occurrence only.
Which doesnt mean it wont happen 2 or even 5 in a row.
Close it out, 3x premium received
Sold at 0.10, close out 0.30
Math game
One thing that I place emphasis on when teaching stock and options trading is paper trading to make consistent profits, most beginner traders want to jump in the market only to loose money then give up. In my own experiences I say , paper trade for a while maybe 6 months to a year and experiment using these type of strategies and learn from your mistakes but the good thing is, your mistakes will cost you nothing but time. Great post Seth!.
Paper trading is useless because it’s not real. There’s no point to it because once you have real money on the line you will begin to question your trade because there’s a real risk there
@@chump6901 it's a tool, we all use tools to perform task and job functions in order to get things done. Trading options is high risk like any other strategy in the stock market. if you are not sure of a certain strategic investment or options risk, you can use a tool such as paper trading to assess the risk. This is why all trading platforms have a paper trading section and its good for beginners to learn on until they become confident and successful at trading. "useless" is one thing but a waste and loss of money is another.
Best way to paper trade options in Australia considering how shit the opportunity is down here
Everyone is a genius when the Market goes up... When it stops you find what strategies actually work
I have attended the options workshop he mentions twice, took what I thought were good notes, and I still have no idea how to do it, let alone how to find stocks that meet the required criteria.
He shows only "index options" which are a group of more than 1 stock, like "spx" is all stocks or others that u get cash (or pay) instead of setteling in stock because there a group of stocks
Stick to Real Estate its easier and payoff are better
Sigifredo Coria It took me nearly 20 years to sell my first house, and it was at a loss, so real estate sucks for me too.
This some crazy stuff to learn
@@robertcampbell6513 IMO for 99.9% of traders, the only way to learn how to trade options in the REAL world is to blow out your account to complete zero multiple times over the span of 20 years. then you will finally LEARN what to do and what never to do again. until you suffer multiple blowouts you will find it irresistible to push boundaries. so... options trading is NOT a good idea for 99.9% of traders IMO
Seth, amazing content here. You did great on this one! Thank you for your time to share with us Seth!
You’re welcome
To minimize the risk of an overnight gap up or gap down would be a good idea to just day trade credit spreads?
So what was the backtesting software recommended?
Hi Seth. Back tested from January to 1st November. Total trades 82. Winners 76 @+- $1250 and 6 losers @ about $23 600 that equates to loss of @ $46 600
Which software did you use to backtest?
@@karan261 Tested it manually
I see people say they back test these playbooks but I am not sure its 100% legit. If true that's a sad state of affairs
I like Seth's teaching style - I am intrigued and will continue with SMB
Thank you
Nice to see back testing advice in an options video. I don't see it talked about nearly as often as i do in videos related to other markets.
it's a must!
@@smbcapital It would have been nice, if you also mentioned the backtesting software you recommended to him.
Could you tell us what software you recommended for the backtracking of his strategy?
So what if you sold 0DTE instead? No risk of gaps
Can you share back testing software and analytical indicators recommended?
What you explain in this video is really the crucial part of any trading strategy, you have to plan for your losses as carefully (if not more carefully) as you plan for you profits, because many traders enter the market thinking that since they chose a "safe" position they are immune to losses as a result, and this could not be farther from the truth. I have designed many profitable strategies over the years and I only managed to reach a positive outcome once I realized this, and of course, all was based on thorough back-testing using hard data from the market, no guesswork of any kind.
hmmmmm. love the channel. But this video is pure theory. Forgot the Commission for 50 contracts !!!! And the slippery !!! You can not do this 1 day before. the market maker is pushing down the price and the spread between ask and bit is so far away. And some statistics. the last 10 years SP500 have lost 1 % the next day .....::: 196 times. so not 4 times pr year but rather 20 times.
Good point towards the end about Max loss scenario. I was surprised you didn't mention that in the recent Elon Musk Twitter iron Condor video you made.
Is there a followup video with back testing?
This is why I'm switching to selling same-day expiration credit spreads, 3x per week. No overnight risk!
i really wanna do this to focus on my music and quit my job. PLEASE HELP ME
this is what im doing its a life changer lol
I am not sure what's the purpose of the back-testing about this strategy. Yes, the strategy has its risk. But there is no way in a back-testing to determine the probability about an appearance of a "Black Swan" event; that's why it's called a Black Swan :-)
Backtesting is key. When you check your short strike price % OTM, that will determine if your trade idea is profitable. 90% OTM, with a 20C credit. Money in the pocket.
@@realjmaloi Sorry, but that's not quite right. All backtesting determines is if your trade idea would have been profitable IN THE PAST, during the specific time frame backtested. It says nothing about whether the trade idea will be profitable in the future.
@@iwasdeceived true. However, staying well out of the money statistically will provide a profitable trade. Past performance is no guarantee of future success. It's up to the trader to determine their own risk tolerance. 20 cents, 90% otm. Try it. Thanks for the reply bro. 💪🔥
@@realjmaloi Be careful. "Staying well out of the money statistically will provide a profitable trade" is true only if the spread expires OTM (or if you can and do close the trade early for a % of total expected profit).
In the example given in the video, the SPX was at 3010 the afternoon the trade was opened. If the SPX gapped down a mere 25 pts or more and didn't recover by 4pm, then a total loss would be incurred. This despite having a statistical probability of finishing OTM of probably 95% or more just the day before.
A 25 pt move on an index of 3010 is only a 0.8% move. Just this week the SPX closed down 27 pts on Mon and gapped down 26 pts on Tues because of unpredictable overnight tweets. This trader has to win 19 out of 20 trades (95%) just to break even. If he had a bad streak of 5 total losses out of 20 trades, that's $100k in losses and practically impossible to recover from using this same trading plan.
Once the MM sees what this trader is doing every Tues & Thurs afternoon, then the guy is toast. So have fun & make $$$, but I suggest trading small if you do something this risky...
@@realjmaloi 90% success at 20C credit with 10% loss at 480C is losing money. Do the math.
Rule 1 of any Market strategy. Never assume that your strategy is going to work consistently over a long, or even short. Of time. The trading gods do not like smart asses who think they figured out the market. I speak from experience.
There are no trading gods. The market is indifferent to you, your attitude, and your $80 Robinhood Account.
He gave sound advice and you insult him. Completely unnecessary.
@@anybodykilla92 You mean YOUR $80 RH account fool
Well??? Is there a follow-up video on the subject? It would be high anxiety if the trade failed before you had sufficient capital saved from the strategy.
Lol, he's over complicating simple concepts. If you TRULY want to learn trading options - search for Elite Options 2 - he is a good teacher, join his trading room and learn, there are many people who are making decent money using much simpler strategies
If you are willing to lower your profit margin on this strategy , you can lower your loss
sawman man I’m new to trading but couldn’t the risk be reduced with stop losses?
@@authorkalliopimegali you’re messing with us. Why even comment if you’re gonna troll LOL
@@pmich8913 lmfao
8:45 - well, this comment aged well.
Lmao yep
Hahahahaha
But then...
@@KillerBearsaw EXACTLY! I’m a “long,” so I didn’t lose money during the COVID dip, and I bought more. Then it went down. And I bought more. Turns out that was a great strategy. :)
I don't quite understand it... Isn't max loss limited with spreads?
It is...limited to the distance of the spreads sold vs bought x # of contracts.
What backtesting software do you think we should use?
Google search it and compare it on your own...
Would be curious to know what his total options trading portfolio is? Maybe a $5 spread is too risky for the size of his portfolio! Smaller portfolios should probably start at a $2 spread.
wait!! There are companies that pay people to trade options for them?
Not Optimized: If he's selling overnight SPX credit spreads 2times per week on Weds & Fri...then why not do it 3 times per week on Mon, Weds & Friday? He's already taking a ton of Gamma risk, so why not increase his opportunity by 33% per week/year ?
Of course, he's gonna get whacked some N-number of times during the year...especially when the market stops going straight up, which BTW, is the only reason he thinks he's on to something special right now.
But, there are Soooo many ways to hedge out his credit spread Gamma risk. He could get short some number of Futs overnight to hedge out his -negative Deltas in case of Jump Vol. He could sell Broken Wing Put Butterfly's up and down his Realized Vol profile during the week/month....on & on.
Guy has just the very beginning of a winning strategy....but he has to figure out is exposure AND more importantly where & how to immunize himself from certain ruin.
This person's story reminds me of a favorite saying of my first boss: "Don't confuse Brains w/a Bull Market."
Interesting comment. Could you please expand a bit on "sell broken wing put butterflies up and down his realized vol profile..." I know what BWB are, but I do not understand what you mean with "realized vol profile". I agree with you completely that hedging gamma risk is crucial to this strategy, thus I would like to better understand what you are saying. Thanks.
He probably died these past few days
He'd be increasing his gains by 33% but the risk from overnight surprises is twice as high. If the chance of an overnight catastrophe over a year leads to this occurring 6 times over 208 nights then you'd be doubling it to 416. If the results of a weekend disaster on friday night or saturday from a presidential tweet or any other kind of terrorist attack affect the open on monday then his gains are more than offset by the increased risk.
There is no reason to adjust a fundamentally flawed strategy to try and make it less volatile and market-dependent (i.e. more delta neutral). You simply have to take the problem at its roots and remove the huge gamma exposure, and instead, start trading strategies that work because they take advantage of IV crush or expansion, some amount of directional bias, and a good amount of time decay.
best way to trade is selling puts ,with credit spreads ...bear call spreads and bull put spreads ...it can be a little confusing but you will get it......…...you keep the premium and a safe way to trade...just sell puts but do not buy them,play it safe
How you select strike price?
Do you check IV?
How you observe market trend?
Hi Seth, I just stumbled on your content and am enjoying it. I've been trading for 4 years and always looking to learn more! Curious what you would think about this strategy if he hedged it by buying long calls in VXX or VIX. This trader is placing around 2SD's below the market. If a 2SD drawdown happens in one day, that would send VXX/VIX from their current levels around 15 up to 30+ pretty quick. If you scaled it right, you might even make more from a losing trade is SPX. What are you thoughts on that? Am I missing anything huge as well in that strategy? Thanks!
I would like to see some videos on how to repair or trade credit spreads that went against you.thx
You should be aware of this and take advice from others that have already succeeded. I searched round a few sites and found a lot of great advice by searching google on websites such as Trevs Exchange Tactics. I wish you luck and hope you make some cash!
For something this short term there is just about nothing you can do. Loss is locked in. If the market opens below your long put, then if you try to roll it or buy it back, you will bank the maximum loss. Only option is to hope it bounces back before the close above your long put so you can recoup some of the losses.
Caution, the distance from the underlying index ($SPX) can get pretty small (less than 50 points) during market rallies AND contracting implied volatility for these 25 cent 1 DTE Put spread trades. On Dec 23rd close, for Dec 24th close, you only reached 35 points OTM when spread premium was 30 cents.
I would like to know which stock he traded?
I would be curious to see this trade replicated with some similar /ES futures options because they trade overnight and a stop could be placed to help reduce the gap risk.
very possible
Can you do credit spreads with futures like you can with options though?
@@bfourney yea and the margin is stan margin it's less then the difference between the strikes. Idk why es option are not as liquid as Spx
Why not do this strategy ON the expiration day (Wed and Fri) .. no overnight surprises ?
Premium is sucked out overnight and by the minute
I used also 0 DTE , before the market closed, but mostly on Volatile days. That's the problem
in the same day , the price of the option are too cheap to make profits.
Dear Seth, how should we size up over time on an strategy like that? last thing we want is to do well in this strategy for 5 straight year while increasing size each year and on year six 1 loss wipes 5 years of profit. Thanks SMB!!
What was the result of the back-testing please??
How do you close out a credit spread? Just buy/sell back?
You simultaneously buy back the short leg and sell the long leg for a net debit.
Wow. Thank you for this lesson. I will test it before I apply it.
Seth, what back testing software do you recommend? Thank you.
your slide at 8:13 is incorrect >>> should read 2992.10 not 2922.10, to make the two puts end worthless.
Hmmm...just from a quick look see...I counted 17 -20 point down days (close to close, T-W, Th-F) in 2018, 8 in 2019, and 29 in 2020
I would like to know what back testing software you recommend?
Also wondering about this myself, seems like this would be helpful but we couldn't mention it in the video?
@@tinyutopia825 if you still care, the platform of showing the trade is optionnet explorer or would be optionvue
To mitigate the risk, all he needs is a stop loss that's 3x his original credit for the short. That would eliminate most crazy delta events. No needs for a hedge or calendar spreads... a stop loss would take care of 99% of all gap downs. Or he could trade SPY and take assignment of the shares and wheel them until break even.
However a stop loss is not a guarantee that you will get stopped out at your price. On a big gap down, it will not get stopped at all at your price and when it does get stopped you may still lose 25,000 in his example or even more.
A gap down day past the stop loss is useless.
He doesn't have to accept the loss 5 or 6 times a year. Couldn't He can close out of the credit spread at a much lower cost than letting the option expire ITM?
Yes, or roll down or out to a future Date. Further, he could add a call spread on the other side of the play without increasing required capital and make his spreads wider and increase his percentage of wins.
What software or websites do you recommend in general to use for back testing options?
Your paper write up at time stamp 8:10 had a bad typo Your showing 2922.10 not 2992.10 Confusing if studying the explanation. Good video otherwise
Excellent. I couldnt understand why he said both expires worthless. Thanks
Yeah because based on the numbers in the video, both puts would be deep in the money. Which is far from expiring worthless.
Very informative. While I may not trade that particular strategy, it still provides insight to take a look at whatever strategy I am using and look at it from a different angle.
i have to practice this but I am so lost at the moment.
what software do you use to backtest??
Seth why wouldn’t he just exit 2995 via a stop or other method?
Your advice was good and interesting on that scenario.
My intuitive thought was primarily, unless this guy is WEALTHY and until he gets sufficient experience, he should trade SMALLER (and by implication, safer).
I might well need to look into some good backtesting software, depending on the price, as usually with my simple strategies, I just look at things like history, implied volatility, experience, hedging opportunities (and costs), etc.
What was the back test software you recommended?
Just wondering if you guys could explain how you handle wash sales. I'm assuming that you're using mark-to-market accounting? ..... thanks, I find your videos to be very interesting.
In credit spreads is impossible to lose your max loss.
Why? Because if your short side is breached, you can create a iron butterfly. Doing this, the max loss is reduced dramatically and the trade has the same risk.
It's curious that at the time of your example trade (approx 9/13/19) getting .28 credit, the short strike was 20 pts OTM which is approx a 30 delta, hence, 70% chance of expiring OTM for full profit. As of today 11/30/19, for .25 credit, the short strike is 70 pts OTM which is approx 11 delta, hence, 89% chance for full profit - much better probabilities. I wonder what would happen if you set a condition to exit if the price drops and hits the short strike; that is, you could cut your losses to well less than 50% max loss that way. Of course, there's always a chance that if price did breach the short strike, it could come back up before expiry for full profit. Would be an interesting backtest but whatever that backtest shows, it's no guarantee of future price action.
I'm confused on the math. I thought his maximum loss was the difference between the strikes minus the credit received, that amount is deducted from his collateral and the rest is returned? For example a premium was paid of $10. The stock closes below the strike prices of $18/ $19. The difference is $1 so it's $100 - $10 = $90 subtracted from collateral and the rest of the collateral returned.
Can someone verify this for me?
That price typo @ 8:07 had me all sorts of confused for a second.
Hahaha there is no typo. You clearly didn't understand
What were the back testing software's that he suggested?
TradeStation and Think or Swim both can be backtested.
@@dpckcmo Thanks for your answer! I trade with interactive brokers. Are there softwares for purely backtesting? Or, another question, can I open an account with these two and not trade with those brokers?
Makes no sense. Would rather trade stock options and only loose a few hundred if that but make 1k ever 2 weeks.
Do you just buy calls and puts? Thanks.
What were the results of his backtrading?
Seems to be using 25 deltas, maybe try 10-15 ?
So what was the conclusion? What did you suggest to do the back testing?
What happens if you just never go closer to the market? That would be my question.
At 7:02 in the video you mention 'depending on market conditions'. What conditions are you referring to? Its seems this information would be necessary to be successful at this trade to determine how for OTM or ITM you need to make your trade.
What kind of delta’s are good for a vertical like this?
This is mistaken at 8:15 you have written 2922.10 which would mean that the closing price moved through the spread by -$63.
Either I’m missing something or you got your expiration prices wrong. on time 7:45 you said that the spx closed at 2992 that’s why his option expired worthless but it couldn’t be worthless since his short put had a strike price of 2990, it was above his strike price but on time 8:12 you say that the index closed at 1922 which is why both long and short options expired worthless because they were below his strike prices of 2990 and 2985 respectively, which makes sense but not when you mention that the closing index price was 2992.
Why not sell them on Wed/Fri at the open to avoid the overnight? Why sell it as a condor rather than a PCS? you can probably get the same or larger credit with further OTM strikes
Absolutely correct, buy same day, and just use a neutral IC. Heck, I buy verticals sometimes 30 minutes to expiration. Sure it's risky, and you're obviously close to the money, but if you're trending higher or lower and can stand the directional assumption, then go for it. Before you know it, ding-ding expired OTM😂
@@TrentFallinGmail he could be doing better with less risk doing as an IC. Lot of commissions on those 50 contracts, too. Broken wing butterflies would also provide greater upside with less downside risk.
@@docmtaylor Yes, ICs are more forgiving in spread (if you pick the right strikes), plus potentially more premiums. If you're going to do that, same day ICs can dry up sometimes, but one day before is generally okay so long as your strike price is => than the weekly mean (movement) of the underlying. I know SPX quite well to realize it's capable of moving 10-35 points per intraday session. So... I place my strikes 35 points x n days from expiration away OTM. Successful stike placement wins over anything else. If it's Tuesday am and I'm placing an IC for Wed expiration, then my body width is 70-80, right? Tues can burn 35 points and so can Wed. So strike position, in the end, will save or kill your trade. Happy trading bro😏👍
@@TrentFallinGmail Thanks for the tip!
@@TrentFallinGmail Would you mind recommending some resources that best helped you learn the options game? There's so much noise to cut through... books, services, etc..
Hi Seth Thanks for the video. Could you please advise what platform can backtest options trading Have been trying to find a goodone no luck yet.
Thanks Seth! Fantastic ideas here. Did the trader you mentioned in this video take one of the SMB Options courses?
I've been running this trade for two months now, since I've first seen this video and it has been successful both times every week. The P&L curve is very steep on this trade meaning it can go from a winner to a loser very quickly. One of the ways I plan on mitigating risk if/when the trade starts to turn against me is to open a call credit spread to turn the trade into an Iron Condor. Taking in the additional credit will give me a little more breathing room to try and stay above the break even line while also lessening my max loss on the trade.
Brent W interesting. I’ve been doing this exact same strategy except as an IC. What time do you open your trades?
Initially I backtested the strategy going back 5 years then forward tested for 8 weeks using a 25% SL.
On backtest AND in TDA Paper Trade, it worked very well, 80% win, and nearly 100% returns each month.
In my live account the 25% SL simply doesn’t work. LOL, I’m sure nobody is surprised.
@@mattportnoyTLV I have been getting in on average between the last hour and last fifteen minutes of the day depending on how the s&p has been moving throughout the day.
@@1fastk Thanks for the info. When I backtest this over the last year, I show 4 greater-than-1% events that would have cause pretty much total loss on this system. March 22 2019, Aug 14 2019, Aug 23 2019, Oct 2, 2019. The remaining 96 trades were winners. Projected annual return on a single SPX contract would be $820.
@Brent W going back 5 years (2015 through 2019) I find a total of 16 losses, 14 of which would have wiped out all the trade margin assuming there was no stop loss in place.
As I said in my first post, I can back test with a stop loss and show dramatically improved results, and I've been able to mirror that in TDA Paper Trade. But no luck doing that with a live account unfortunately because of the pricing spreads.
I suspect this system could be improved upon if we were to research conditions on each of those loss days. Where was RSI? How did VXX or $TICK or $ADD behave? That sort of thing. Maybe it's possible to build a condition-based stop loss to weed out the catastrophic events?
@Brent W so I did some more digging through the last 5 years of data. In nearly every case the catastrophic loss events occur when there’s a large gap down at the open of >10 points.
Two of the gaps down were around 50 points, which means you’d have a catastrophic loss at the open and never recover.
What I’ve noticed is that, in every single case, if you wait until after the close of the first 15 min candle and then take the trade, you reduce catastrophic losses by 56%. If you avoid the large gaps down the catastrophic losses get reduced by 94%.
the question, can you buy leaps calls in the money and then sell calls in indexes such as spx and ndx ? For example spx price is 4k, I will buy calls 2 years out strike price 3k and then sell calls weekly or 3 times weekly in spx? i know I can do that in spy but not sure in SPX or NDX. Thanks
Great vedio. Can he hedge by shorting the index that he was selling the credit spread ?
I think I'd buy a monthly call on the VIX every month as a hedge if I was going to do this.
Thanks for sharing video risk involved ,he can probably use monthly low strike price and executing near week expiry.
I may be missing something out here but if he sold puts at 2990 strike while the market was at 3010 when he did the trade, he hoped that if the market drops next day it would be less than 1% which is a drop that is pretty likely to happen in todays market. why not betting on lower puts? and in general why not pick much lower puts with a larger spread between the longs and the shorts?
hey Seth how about do a video on a regular condor?
Taking a $5 risk (5 wide strike) for 0.28 credit doesn't even make sense to me. I like a 1:3 risk reward, Ideally $1.65 credit minimum for a $5 wide strike on a credit spread.
Matt it's all a function of the win rate and the size of each win. You can't look at only the risk reward per trade.
Seth Freudberg I realize that, I sell naked puts all the time, but the risk you take has to be worth the reward. Is there not a minimum premium you expect for a $5 risk/wide strike.
@@mattdelongofficial Yes, Matt and that's a very sound point. Every strategy should have a minimum income expectation per trade size, otherwise the trade should be skipped that period.
I agree Matt!!
I think that trader also needs to determine the probability of a loss with that strategy. The risk-reward ratio in dollar amount is not perfect, but as long as it can achieve his goal with the risk he can tolerate it's a good strategy to him, imho.
How is 2990 below 2922? How is 2985 below 2922? That is what you said,isn't it? I've looked several times and that's exactly what you said.
Hi, I have a question, I' read that even when puts and credit spreads expire worthless, what will define if you have a profit or loss in the trade is the settlement calculated the next day via SET. Is this true? So say my credit spread expire worthless, and at expiration it shows a profit, it could become a loss if settlement price is lower? selling credit spreads a few minutes before expiration lets say on thursday, and friday is the settlement. Please help with some guidance, thanks!
Me being a small account guy of 10K, I would buy myself another put say 5 ticks lower then my first put, at a verily cheap price, so on a big gap down I make money on that one also, or should say lose way less then the 25K. Yes in buy buying more insurance I will not make 2500 week but only say 2000 a week but way less risk. And I can live with 2k a week even with the inflation of today
Thanks for addressing the probability side of trading.
As soon as you said he opened the trade the day before, I thought immediately he's crazy, especially with the bevy of reports that come out every morning. He'd be better off opening the trade the morning of expiry instead. He also could cut his risk in half by opening iron condors, since you can only lose in one direction.
I don't undestand something, I open an iron condor the same day of exp, and when market close 4:30 I was in red 100 dollars, later next morning I was 470 negative. Do i need to closed the trade before 4:30 or let it expired until next day morning?
Nope, now you have upside risk as well. You can take big losses on either side of the trade with iron condors
How does one get out of those spreads? Do you go leg by leg...isn’t the market moving as you’re trying to get out which could blow ones strategy...FAST?
There is no link showing to sign up? :(
What time of day would he place the trade on Tuesday or Thursday? I would add Placing the spread just below a large PUT open interest strike. The Large put volume at that strike will act as a buffer.
Is it better to close it before the expiration date if its getting close to the strike? Or even buying back some puts if its quite bullish?
What software is suggested for backtesting?
I use thinkorswim for backtesting although there are some issues with using it for options backtesting. The one gripe I had with it was that I couldn't see option greeks for anything that was in the backtest.
The rest of the software is phenomenal in the other aspects, and the support teams are great!
Optionvue
Ok cool. Thanks!!! yaseen and square
I use Optionvue, Prospect.
@@sethfreudberg4750 Thanks!!!!