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re: Options Trading Thread
Posted on 3/27/23 at 8:38 am to bayoubengals88
Posted on 3/27/23 at 8:38 am to bayoubengals88
I believe it will work out.
1
Posted on 3/27/23 at 8:01 pm to jerryc436
I can’t offer any opinion on that one. The probability tables/deltas don’t mean very much in a situation like that and that’s typically what guides me. But best of luck. 
Fairly quiet day in IC land today. Sold a 5 lot of low delta SPX ICs later in the session, kept the risk low and made enough to justify a “safe” trade. On these 0DTE trades, I’m still sticking to a 1% minimum profit vs. risk target. For daily trades, I’m pleased enough with that, and I’m liking that my trading capital gets recycled very quickly.
Fairly quiet day in IC land today. Sold a 5 lot of low delta SPX ICs later in the session, kept the risk low and made enough to justify a “safe” trade. On these 0DTE trades, I’m still sticking to a 1% minimum profit vs. risk target. For daily trades, I’m pleased enough with that, and I’m liking that my trading capital gets recycled very quickly.
Posted on 3/27/23 at 8:42 pm to Jag_Warrior
Jag, can you explain to me why 4/21 calls on SCHW were down heavily on a very solid day for the stock (up 3%)?
Is it just lower IV and theta doing its thing??
The 65s are just brutal!
Is it just lower IV and theta doing its thing??
The 65s are just brutal!
Posted on 3/28/23 at 12:11 am to bayoubengals88
Good question, but I’m not sure. Theta decay shouldn’t be hitting the 4/21 calls hard yet. Not in one day anyway. The stock slipped back a bit from its 55.29 high to close at 54.86 - so nothing dramatic there. IV is still elevated at 68.43% and 44% IV percentile. The delta is about 13 with a probability of being “in the money” at 10.34%.
Do you remember what the IV and delta were when you bought them?
ETA: I sold some SCHW 4/6/23 47 strike puts about 10ET this morning and they’d dropped by about 36% by the close of trading. I don’t remember where IV was when I sold them though. Hopefully they’ll pop for you this week.
Do you remember what the IV and delta were when you bought them?
ETA: I sold some SCHW 4/6/23 47 strike puts about 10ET this morning and they’d dropped by about 36% by the close of trading. I don’t remember where IV was when I sold them though. Hopefully they’ll pop for you this week.
This post was edited on 3/28/23 at 12:17 am
Posted on 3/28/23 at 7:40 am to Jag_Warrior
quote:
I’m still sticking to a 1% minimum profit vs. risk target. For
Just making sure I understand....you're targeting only $10 profit on a $10 wide ($1000 risk) spread? I try to target more like 10%, but I'm sure my win rate is lower.
This post was edited on 3/28/23 at 7:41 am
Posted on 3/28/23 at 12:43 pm to dragginass
Yes. Because the deltas aren’t as beneficial on these short duration trades, I’m more focused on win rate and being able to recycle the capital daily. When the VIX is low, this is especially the case. With a higher VIX, I would be more aggressive.
This post was edited on 3/28/23 at 12:45 pm
Posted on 3/28/23 at 1:09 pm to Jag_Warrior
Are you getting decent fills out there? As my account grows I know I will get more conservative, but the sheer number of contracts required for meaningful profit would scare me, ha.
Posted on 3/28/23 at 1:44 pm to dragginass
I know what you mean. I typically sell 10-20 contracts per trade. Of course the % gain is still the same, but the $ are more meaningful. Yes, the good thing about SPX (and I’m guessing SPY) is it’s not hard to get fills because it’s SO liquid.
A relatively low IV environment is kind of nerve racking. Combine that with these short duration trades and it’s doubly so. I still trade my typical bread & butter 45DTE 10-15 delta ICs/strangles and earnings trades. I’m more at ease with those, because there’s usually time and opportunity to adjust or roll. I can be more mechanical. Not so with these more binary 0-1DTE hand grenades.
A relatively low IV environment is kind of nerve racking. Combine that with these short duration trades and it’s doubly so. I still trade my typical bread & butter 45DTE 10-15 delta ICs/strangles and earnings trades. I’m more at ease with those, because there’s usually time and opportunity to adjust or roll. I can be more mechanical. Not so with these more binary 0-1DTE hand grenades.
Posted on 3/28/23 at 5:13 pm to dragginass
If you get the opportunity, TastyTrade/Sosnoff & Battista have a series of videos comparing the risk vs. reward on these 0-1DTE SPX options trades (both long and short). He speaks to the gamma effect and how fast the deltas and losses can get out of hand (or profit, if long), compared to a standard 45DTE trade. The study shows that the loss profile can quite easily top 1000% in rather short order.
So these things are definitely quite risky (especially if going short), while the profit potential doesn’t compare favorably. So because losses can be so painful on the short side, that’s another reason I’ve targeted what seems to be rather meager daily gains/very high win rates. As memory serves, I’ve had probably 20+ winning SPX trades over the past couple of weeks with this strategy - only 1 loser YTD. Volatility was higher the week after I got smacked in the face, so I was able to put on several trades that were in the 20% profit range and recouped those losses within 3 trading sessions. So that’s where the 1-2% gain per day vs. capital at risk begins looking attractive. But one fast loser could easily wipe those gains out, so admittedly it is a game of picking up pennies and trying to stay away from the steamroller for usually 3 hours or so later in the session. And yes, Sosnoff would probably throw eggs and scoff at me.
He also has some studies that show the percentage of time that the S&P has 1, 2 and 3 standard deviation moves within a session (less than 1% of the time for a 3 standard deviation move or range). I glance at the deltas, but I’m more prone to look at the technicals (specifically RSI and momentum) and then try to stay just outside 3 standard deviations - but only on these short duration trades. Most all of my other trades are delta based.
So these things are definitely quite risky (especially if going short), while the profit potential doesn’t compare favorably. So because losses can be so painful on the short side, that’s another reason I’ve targeted what seems to be rather meager daily gains/very high win rates. As memory serves, I’ve had probably 20+ winning SPX trades over the past couple of weeks with this strategy - only 1 loser YTD. Volatility was higher the week after I got smacked in the face, so I was able to put on several trades that were in the 20% profit range and recouped those losses within 3 trading sessions. So that’s where the 1-2% gain per day vs. capital at risk begins looking attractive. But one fast loser could easily wipe those gains out, so admittedly it is a game of picking up pennies and trying to stay away from the steamroller for usually 3 hours or so later in the session. And yes, Sosnoff would probably throw eggs and scoff at me.
He also has some studies that show the percentage of time that the S&P has 1, 2 and 3 standard deviation moves within a session (less than 1% of the time for a 3 standard deviation move or range). I glance at the deltas, but I’m more prone to look at the technicals (specifically RSI and momentum) and then try to stay just outside 3 standard deviations - but only on these short duration trades. Most all of my other trades are delta based.
Posted on 3/29/23 at 6:16 am to Jag_Warrior
quote:
I still trade my typical bread & butter 45DTE 10-15 delta ICs/strangles and earnings trades.
What’s your earnings strategy? Still the IC/strange approach?
I’ve been dabbling in diagonals/ calendars with some success. Front month benefitting from IV increase as earnings date.approaches.
Posted on 3/29/23 at 10:03 am to LSUtoOmaha
I'm continuing to put on long calls/diagonals and short put spreads based on technical setups from Trade Machine.
I have placed 13 trades this month. 5 were profitable, 2 were losses, 6 are pending.
Only short put spread I have right now is MLM (40 delta on the short leg).
I have placed 13 trades this month. 5 were profitable, 2 were losses, 6 are pending.
Only short put spread I have right now is MLM (40 delta on the short leg).
Posted on 3/29/23 at 4:55 pm to Rouxdee
quote:
What’s your earnings strategy? Still the IC/strange approach?
I’ve been dabbling in diagonals/ calendars with some success. Front month benefitting from IV increase as earnings date.approaches.
A friend of mine does straddle/strangle swaps around earnings events. He’s a fan of the strategy. I haven’t really looked into it, but I believe it’s a double diagonal structure. Do you have a target for how/when you manage the diagonals or calendars?
During earnings season, uually I go with either “week of expiration” strangles or ratio jade lizards (2-3 naked puts per 1 call spread) - always covering/exceeding the net call spread width with premium. 15-20 delta has been my sweet spot for the short options on most of what I do, other than these crazy 0-1DTE SPX trades (only sold short put verticals today - didn’t dare try to call the top).
Posted on 3/29/23 at 4:56 pm to LSUtoOmaha
That Trade Machine seems to be working pretty well for you, yes?
Posted on 3/29/23 at 7:27 pm to Jag_Warrior
It does indeed. But I want 100 actual trades taken before I fully endorse it
Posted on 3/29/23 at 9:12 pm to Jag_Warrior
If you listened to Tom on today’s Last Call episode, his “risk off” explanation was very enlightening regarding a huge decrease in options premiums.
This is probably what’s happening with SCHW calls.
This is probably what’s happening with SCHW calls.
Posted on 3/29/23 at 9:41 pm to LSUtoOmaha
Lots of occurrences are the best way to test a system.
Posted on 3/29/23 at 9:51 pm to bayoubengals88
quote:
If you listened to Tom on today’s Last Call episode, his “risk off” explanation was very enlightening regarding a huge decrease in options premiums.
This is probably what’s happening with SCHW calls.
I haven’t had a chance to see the episode yet. He’s going “risk off” with his short option strategies? Yeah, the VIX was down over 4% today to just over 19. As a premium seller, that makes us have to get too close to the flame to get any decent premiums. It worked out, but putting on those SPX short put verticals today gave me an uneasy feeling. Only because the upside momentum had been strong all day did I put them on.. and it was later in the day.
Is Tom leaning toward some light debit spreads or net debit trades now, with the option premiums being relatively low?
Posted on 3/30/23 at 6:53 am to Jag_Warrior
quote:
Is Tom leaning toward some light debit spreads or net debit trades now, with the option premiums being relatively low?
I've never seen him stray from strangles as his primary strategy. Maybe more futures pairs. He just goes smaller, keeping more capital available to pounce at the next IV pop.
The tasty overall doctrine is go smaller, but use more debit verticals, calendars and diagonals.
Posted on 3/30/23 at 7:37 am to Jag_Warrior
quote:He's been really emphasizing this IWM/QQQ ratio trade for a couple of weeks. I don't quite understand it. Perhaps you know what he's talking about...
Is Tom leaning toward some light debit spreads or net debit trades now, with the option premiums being relatively low?
Posted on 3/30/23 at 7:20 pm to Rouxdee
quote:
The tasty overall doctrine is go smaller, but use more debit verticals, calendars and diagonals
Yep. Tried & true.
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