0 DTE SPX

gneyman

New member
Anyone do these, selling condors or one sided verticals risking 9 to make 1 or the inverse - with directionality edge risking 1 to make 9 sometimes while benefitting from probability of touch to make 2-5x frequently? Sound off!
 

status1

Active member
I do the first part not so much the second part unless there is a directional edge because risking 1 to make 9 has a much lower probability unless you know the direction
With the iron condor you will make money anywhere inside the tent
If you are outside the tent you will not make money unless the underlying goes into the tent but the tent has to be in the direction of where the market will be when it expires which is much harder to predict under normal market conditions
 

gneyman

New member
I do the first part not so much the second part unless there is a directional edge because risking 1 to make 9 has a much lower probability unless you know the direction
With the iron condor you will make money anywhere inside the tent
If you are outside the tent you will not make money unless the underlying goes into the tent but the tent has to be in the direction of where the market will be when it expires which is much harder to predict under normal market conditions
So you combine the best of both worlds - directional OTM tent w/ +theta booster once inside tent
 

status1

Active member
There are many ways to combine them although I have not tried it with 0 DTE

You can do an iron condor and than add a debit spread to where you think the market will go so that will give it a boost but that will reduce the profit in the original iron condor if the market does not move in that direction You can even loose money if the market does not move in that direction It's all a tradeoff
Just keep an eye on your theta if it's negative and see if it's worth it to stay in the trade if the market is not moving in the predicted direction
 

M-ONE

New member
There was a presentation on SMB of this type of trade recently. I am curious though, I have never used a conditional order to get me out of an option trade, and I have heard some of the traders at Aeromir and SMB use them. So I wanted to try it out to at least know how its done. (I know that with the way option prices fluctuate that its not always a good idea to do this)

They made it seem that all you need to do is enter a resting 'limit order to close' for the short option to protect you from a large move.

Say you have a short put credit of 0.50, and you want to buy it back if it reaches 1.50 (loss of 1.00), you would place a resting limit order when you initially sell the put 'limit order to close - @ 1.50'

I tried doing this as a test and I get this message from the TOS platform: "REJECTED: Limit price too aggressive"

Am I suppose to use a Stop order at 1.50 and have it buy back with a market order (that seems dangerous because of slippage/spread)

Just curious on the best way to do this

Thanks
 

Mark17

Member
Anyone do these, selling condors or one sided verticals risking 9 to make 1 or the inverse - with directionality edge risking 1 to make 9 sometimes while benefitting from probability of touch to make 2-5x frequently? Sound off!

I've been looking closely at this strategy over the last couple weeks. So far, I've backtested from the end of last year through last week. The results have not been encouraging.
 

status1

Active member
Am I suppose to use a Stop order at 1.50 and have it buy back with a market order (that seems dangerous because of slippage/spread)
I think a better way would be to put in a stop/limit order but I am not sure if it can be done on a spread
I have not tried it so I am not sure if that is even something that most broker other than TOS have a capability of doing it Maybe you could do it on the short leg and let the long leg expire
 

NoMoWork

New member
Gold Member
I have been doing the 0 DTE on SPX for the past couple of months. They have worked great with the flat market, only had a couple of losses. I put them on as early in the day as possible once the market stabilizes. I use the price of the SPX to set my stop orders, but they need to be adjusted while the trade is active as the premium dissolves. I tend to watch the trades closely while they are on and adjust accordingly. It's been a very profitable trade for me so far. Here's a webinar that explains it fairly well:
 

status1

Active member
Thanks for the link
Looks like a pretty good presentation
I will have to look into it to see if it works out for me
 

Mark17

Member
I have been doing the 0 DTE on SPX for the past couple of months. They have worked great with the flat market, only had a couple of losses. I put them on as early in the day as possible once the market stabilizes. I use the price of the SPX to set my stop orders, but they need to be adjusted while the trade is active as the premium dissolves. I tend to watch the trades closely while they are on and adjust accordingly. It's been a very profitable trade for me so far. Here's a webinar that explains it fairly well:

I'm surprised to hear you've had good results with it. I backtested it from start of this year through first week of May and it was about breakeven. I used stop-loss of 3x initial credit.
 

status1

Active member
I backtested it from start of this year through first week of May
Just curious on how you did the backtesting
In other words how did you set up the trade ? This strategy seem to be very sensitive on when and how far from the market the trade is placed

I just tried it but I only did 2 put spreads and they worked out the first one was a 0DTE and the second one was a 1DTE The second one was a near disaster but fortunately it recovered by the close of the second day
If I have used the 3X initial credit I am sure I would have locked in a loss I think it's critical the timing of when you place the trade
You have to try to determine which way the market want's to go early in the morning You want to place the put spread at the beginning of the day preferably after a gap down and maybe not even place a call since it has a tendency to fill the morning gap so if you place the call at the same time and the market recovers the call side is going to take some heat The opposite should be done if it starts out with a gap up

So I am not sure how subjective can the backtester be or how it can be customized to only place a trade in only certain circumstances for the best outcome Otherwise if the backtester is just used to place a trade blindly regardless of the circumstances than I imagine the outcome will not be as good
Just a thought
 

Mark17

Member
You have to try to determine which way the market want's to go early in the morning You want to place the put spread at the beginning of the day preferably after a gap down and maybe not even place a call since it has a tendency to fill the morning gap so if you place the call at the same time and the market recovers the call side is going to take some heat The opposite should be done if it starts out with a gap up

So I am not sure how subjective can the backtester be or how it can be customized to only place a trade in only certain circumstances for the best outcome Otherwise if the backtester is just used to place a trade blindly regardless of the circumstances than I imagine the outcome will not be as good
Just a thought

I backtested mechanically with well-defined rules. One can certainly tweak the rules, but do it mechanically throughout. I'd be interested to see if anyone comes up with something that looks impressive.

There seems to be a lot about "you have to try to determine what way the market wants to go early in the morning" surrounding discussion of this trade. In my view, that's precisely the problem. I don't think you can. If you can then you have a functional directional trading system and you should be able to make tons of money. That is, in other words, a veiled Holy Grail.

In case I'm misunderstanding and you only mean to say some objective criteria must be in place, then yes--I just question whether it's going to have any edge when tested over a large sample size of trades.

Tammy Chambless (from the YT presentation attached above) has a "trade signals" type of service for this. She claims the service increases winners from 80-85% to 90-95%. In my backtesting, I didn't see anything close to that. If you want to trade just one side rather than the whole IC, then it's a slightly different story. Since the market generally has an upward bias these days, puts would probably have the natural edge. I'd be curious to see the overall results if the backtest were run long enough to get some bear market activity mixed in (or maybe that's not even necessary... in my backtest, the number of losers was about equal on either side).
 
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