The advantage of 45 days over O DTE is you have time to allow the price to move in your favor and you can also build a position over time rather than being stuck with whatever the market is doing on that particular day.
I can agree with this based on personal experience. Especially with the 0DTEs. My trades almost always get killed in the third two hours of the day. I believe in rolling losers out to the next day instead of closing, and I find a majority of the trades that reach that third two hour window, or new trades that I place in that window, end up having to get rolled. Nice piece 👌
@@Pengkui I don't like buying options. You have to get a directional move to make money with those because the options experience negative theta. Paying premiums, beating breakevens, getting directional, they're just not my things. I enjoy the positive theta that comes from selling options premium. I'd rather take the risk and roll the positions as needed.
I’m new and have done well with 7DTE or less so far. I haven’t tried more than 30DTE since the shorter DTE are so easy and don’t hold down my BP. What am I missing? 🤔
Very helpful.....Please can you suggest how to backtest on E mini S&P options (for non-us citizens) where buy and sell signals are generated from a third party software. Any guidance would be appreciable
Are the percentages based on Annual return. i.e. the first 4 weeks for 45 day trades makes 35% per year, and 0DTE 18% per year for the second 2 hours trade?
Unfortunately, this misses the profit gain with ATM butterflies (not a strangle) and my ability to watch minute by minute and use the best management techniques of closing the shorts or closing a spread or tight loss limits and reacting to momentum as well as many other indicators I use. I realize this is the limit of modeling and simulation but it is a BIG difference.
@@Petesx7vo I like 0 dte butterflies because I can enter early and scrape 10-20% profit quickly. ICs can take too long to develop profit. I also like finishing b4 11 am cst so I can avoid gamma and have a life.
Tasty has had 45dte as gospel for a long time. I think they should revisit that. You can often sell ICs at 20 delta for 10-14 days shorter than that for just a minor discount. Isn't a primary goal to get the trade to accelerated theta decay? 45 days is a long time to wait for that....like watching paint dry.
My understanding is that that they are showing the data, they have also shown data when to exit trades to get best ROI in long run and it was either at a percentage or days to go for expiry. The data also indicated that holding trades till 45 days has it’s risk and affects the profits. It’s individual call what they want to see in the story.
@@Jp421JP You can do micro futures for small accounts if buying power is an issue. E.g., /MES is 50% size (notional exposure) of SPY, and offers CME SPAN margining. You can now short 45DTE 1SD /MES for $150 extrinsic value with only $300 BP or less on a RegT margin account. For SPY, the same strikes would be $310 extrinsic with $8,000 BP for RegT.
Once and only once mind you I heard them say that it’s not about 21 days but about managing at the mid point. So if you put on a 14 day trade manage at 7. If it’s a 0dte trade manage at mid day
@@sumitino yes, you will make many small sums of money for a while, till the day when the stock moves too much to one side, then you will lose (by definition) everything you made almost at once, it is very well known. Now if you try to put stop loss, then it will become really noisy and you will not have enough time to enjoy the premium and you lose the Mean Reversion advantage. Bottom line, this all priced in, you bet that the stock will not move that much , which is mostly true, but when it moves, you literally lose in one day everything you made in a month. You can prove this simply by looking at the normal distribution of the stock, each month there will be 2-3 big moves even for spy, these moves usually equals the sum of the 40dte premiums++. Now if the stop loss try to avoid that, you will have to correct too much and you then can't enjoy the Mean Reversion. Bottom line, when the market start a real trend up/down, you lose everything.
The advantage of 45 days over O DTE is you have time to allow the price to move in your favor and you can also build a position over time rather than being stuck with whatever the market is doing on that particular day.
I’ve been trying to figure this out. What do you mean by building a position? Are you talking about legging in? Scaling in with different lot sizes?
@@sumitino open the chart to see when the option was created and look at the price volatility
I can agree with this based on personal experience. Especially with the 0DTEs. My trades almost always get killed in the third two hours of the day.
I believe in rolling losers out to the next day instead of closing, and I find a majority of the trades that reach that third two hour window, or new trades that I place in that window, end up having to get rolled.
Nice piece 👌
How about flipping to buying options in the 3rd two hours?
@@Pengkui I don't like buying options. You have to get a directional move to make money with those because the options experience negative theta. Paying premiums, beating breakevens, getting directional, they're just not my things.
I enjoy the positive theta that comes from selling options premium. I'd rather take the risk and roll the positions as needed.
I’m new and have done well with 7DTE or less so far. I haven’t tried more than 30DTE since the shorter DTE are so easy and don’t hold down my BP. What am I missing? 🤔
dude it's just risk tolerance. You can go to sleep easier trading the longer dated options.
Very interesting! Could you do the same for Weeklies please?
Very helpful.....Please can you suggest how to backtest on E mini S&P options (for non-us citizens) where buy and sell signals are generated from a third party software. Any guidance would be appreciable
what are the advantages and disadvantages of rolling a long otm put option 2 weeks before expiry vs 1 day before expiry?
Are the percentages based on Annual return. i.e. the first 4 weeks for 45 day trades makes 35% per year, and 0DTE 18% per year for the second 2 hours trade?
What exactly are the rules for managing at 21dte?
Is it to just get out of the whole trade?
Make a profit. That’s the goal. It’s not rocket science.
If this is correct we really should manage at 30 DTE
I think you mean 15 DTE? It was pretty confusing honestly as the total number of weeks added up to 7, not 6 lol.
That's true. I guess it's 2 2 weeks so 30 days
Unfortunately, this misses the profit gain with ATM butterflies (not a strangle) and my ability to watch minute by minute and use the best management techniques of closing the shorts or closing a spread or tight loss limits and reacting to momentum as well as many other indicators I use. I realize this is the limit of modeling and simulation but it is a BIG difference.
Hey what is the advantage of butterflies over iron condos?
@@Petesx7vo I like 0 dte butterflies because I can enter early and scrape 10-20% profit quickly. ICs can take too long to develop profit. I also like finishing b4 11 am cst so I can avoid gamma and have a life.
@@tlmarcottis the butterfly you are choosing an direction?
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Tasty has had 45dte as gospel for a long time. I think they should revisit that. You can often sell ICs at 20 delta for 10-14 days shorter than that for just a minor discount. Isn't a primary goal to get the trade to accelerated theta decay? 45 days is a long time to wait for that....like watching paint dry.
My understanding is that that they are showing the data, they have also shown data when to exit trades to get best ROI in long run and it was either at a percentage or days to go for expiry. The data also indicated that holding trades till 45 days has it’s risk and affects the profits. It’s individual call what they want to see in the story.
If you ladder your trades, 45 days is not too long to wait: everyday you will have a few positions entering 21 day and prompting you to manage.
@@Pengkuithat takes a lot of buying power to do.
@@Jp421JP You can do micro futures for small accounts if buying power is an issue. E.g., /MES is 50% size (notional exposure) of SPY, and offers CME SPAN margining. You can now short 45DTE 1SD /MES for $150 extrinsic value with only $300 BP or less on a RegT margin account. For SPY, the same strikes would be $310 extrinsic with $8,000 BP for RegT.
Once and only once mind you I heard them say that it’s not about 21 days but about managing at the mid point. So if you put on a 14 day trade manage at 7. If it’s a 0dte trade manage at mid day
Calm down sparky 😅
enough, release this thing, it is not working, the mean=0 , you can easily prove this mathematically
Can you explain more what you mean?
@@sumitino yes, you will make many small sums of money for a while, till the day when the stock moves too much to one side, then you will lose (by definition) everything you made almost at once, it is very well known. Now if you try to put stop loss, then it will become really noisy and you will not have enough time to enjoy the premium and you lose the Mean Reversion advantage. Bottom line, this all priced in, you bet that the stock will not move that much , which is mostly true, but when it moves, you literally lose in one day everything you made in a month.
You can prove this simply by looking at the normal distribution of the stock, each month there will be 2-3 big moves even for spy, these moves usually equals the sum of the 40dte premiums++. Now if the stop loss try to avoid that, you will have to correct too much and you then can't enjoy the Mean Reversion. Bottom line, when the market start a real trend up/down, you lose everything.