re: 0DTE option strategies

Wow would've guessed your short call would've hit a stop loss when the S&P ripped above 3,950 there for a bit.

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For Options, Tastyworks is FAR SUPERIOR. That's their bread and butter. I also have accounts with fidelity, and options trading is not user friendly at all.

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Stands to reason. Sosnoff created Think or Swim, before selling it to TD Ameritrade (and I’m told ToS is the main reason Schwab bought TDA). I’m still on Think or Swim and that’s where I get my deltas, etc. But I’m a loyal follower of the TastyTrade/Works team. It was a real pleasure to spend some time with them at the Las Vegas investors conference earlier this year.

I believe that my trading style is similar to yours, in that I’m primarily a premium seller and I rely mostly on IV, IV rank and the deltas.

Just picked this post at random to say what a good job you’ve done in laying out your strategy and trade structures. Excellent.

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I set a Stop Trigger at 5x premium, and I set the Limit order price $0.40 HIGHER than the trigger.

The stop limit is set for both short legs. If one short leg gets stopped, I manually shut down the untested leg. Typically the untested leg will be at 90-95% MP. This eliminates the risk of both legs getting stopped out (which can happen with big market swings).

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Seems like a short straddle would be a simpler trade?

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Running a straddle or strangle on SPX would be prohibitively expensive for most traders. I just ran the numbers for expiration tomorrow, based on the approximate 3945 close today. Just one ATM/3945 straddle would result in a $105,000 hit to my buying power… and I have portfolio margin. I’m not sure how that would hit a regular margin account. The max profit would be roughly $2500. Max loss… theoretically infinite (although one would attempt to execute a stop loss at some point).

You have to stay on your toes to do what he’s doing - especially with the two standard deviation moves we’ve experienced this year. But his basic trade structure has a very high POP (probability of profit). And being nimble with sensible stops, he seems to be making this work quite well.

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What purpose do the long wings serve if you have a stop loss on your short legs?

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I should let him answer the question (the man’s got game!), but I’m already here so… that’s how he’s avoiding the insane margin requirement that I spoke about above. Long/protective wings on a short condor or butterfly greatly lessen the margin requirement.

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So sounds like the only point of the long wings is to reduce the margin to a manageable level.

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Exactly. Using the same pricing example from above, even one SPX strangle at 5 delta on each side (delta neutral) would have a $96,200 affect on buying power/margin. When you pop the wings on, making the trade risk defined, the margin requirement is then based on the spread between the long and short options on just one side (assuming the sides are symmetrical - some of mine aren’t… so those are based on the widest spread). By having those very wide wings, he’s essentially creating a synthetic strangle.

TastyTrade has spoken of this strategy, as has SMB Capital (a prop trading shop based in New York). Both have some excellent videos on YouTube.