Can weekly strategies be profitable?

[tommcginnis]

Not So. It has to beat a return adjusted coin flip. If you make 3:1, then you can lose 60% of trades and do fine. (not my game, just saying).

You're conflating a non-discretionary trading trigger rule for a risk-recognizing trading practice. This is often missed on ET, so your point is granted (with a ).

 

[misterkel]

You're conflating a non-discretionary trading trigger rule for a risk-recognizing trading practice. This is often missed on ET, so your point is granted (with a ).

Oh, master of subtlety. Not sure what you mean by those 2 things, but have a great weekend.

 

[B Lucci]

Enjoyed your post. Your approach to trading is similar to mine. However I use mostly calendar spreads and diagonals, and hedge for extreme moves either up or down. Do you make much use of those ?

No, I stick to vertical spreads. I have looked into trading the others but I like simplicity. Straight verticals work best for me,

Best

 

[B Lucci]

Up to how many positions? In other words, are following the usual advice of premium sellers - always play it small?

Yes, trade often trade small. The Sosnoff/tastyworks mantra. Although that was my style before tastyworks/tastytrade came into vouge. As to positions I normally carry current week and 5 puts and calls next week. I generally don't trade beyond the current and next week. My Monday weeklys expire tomorrow. I've already closed out (tonight) the PUT vertical for a profit. The /ES is up 16.00 at the moment so I took the profit on the PUT side, the CALLs are still OTM but a little less than 1 SD from ATM. I'll watch them and see what happens when Tokyo, Shanghai and Hong Kong do when they open in a few minutes. Then sit tight, roll, close, etc. I am not inclined to take a position at the end of this week (Friday) because it is triple witching Friday. The /ES futures, /ES options and SPX all expire on the same day. Crazy things seem to happen on triple witching day. So I'll probably take some positions for Week 4.

The Asia Dow index just opened up and the Nikkei 225 just opened down. I'm sitting tight on my CALL spread.

Best

 

[qlai]

No, I stick to vertical spreads.

Yes, trade often trade small.

K, my understanding is that tasty trades guys prefer unlimited risk trades, which makes sense if you trade small. Why do you prefer spreads?

 

[B Lucci]

I prefer credit spreads because thy offer Limited (i.e. defined) risk. Yes, Tom Sosnoff and Tom Preston and the rest of the tastytrade gang seem to like undefined risk trades. That is short strangles and straddles. But they do spend a fair amount during their daily show going over their recent studies about spreads and condors. I have hundreds of their segments with slides that I've saved on my hard drive and at least a third of them are studies they've done on defined risk trades.

Best

 

[qlai]

But they do spend a fair amount during their daily show going over their recent studies about spreads and condors.

I think that is because lots of their followers have small accounts.

 

[B Lucci]

I think that is because lots of their followers have small accounts.

Not sure what "lots" means (25%, 50% o5 75$) nor how you are defining a "small account" (e.g. 2,000, 10,000, more) My account is pretty decent (high enough to not have to worry about FINRA's Pattern Day Trading rules) and am a proponent of defined risk trades.

 

[qlai]

I am thinking of accounts which do not have enough capital/margin to either take assignments or even open undefined risk trades. So someone who wants to collect premium on TSLA but doesn’t have account large enough to survive the worst case scenario.

TT talk a lot about how much more flexible one can be trading undefined risk. I am not arguing against your approach, just thinking out loud.

 

[spectastic]

Yes. I trade the /ES Weeklys (and EOM) profitably (with the occasional (but contained) loss of course.) Sometimes I sell the Monday Weeklys, sometimes the Wednesday Weeklys, sometimes the Weeklys that expire on Friday. Sometimes I trade a Weekly product that expires in 2 or 3 days sometimes a Weekly product that expires in a week or two.

Some stock and ETF Weeklys (e.g. AAPL, AMZN, SPY, etc. have Weeklys listed out to the end of January. The SPX index options have dozens of Weeklys listed out to the end of May 2021. Futures Weeklys (e.g. the /ES) have Weeklys (WK2, WK3, WK4) also listed out to the end of May 2021. Some Futures Options have no Weeklys (e.g. /CL and /GC.)

I do not use Supply/Demand Zones, Bollinger Bands, Wilder's RSI, Appel's MACD, Simple/Hull/ Exponential moving averages, Pitchforks, Gann lines, Fibonacci's or (my favorite) Dragonfly Dojis or Swinging Hammers (analysis the Japanese rice traders used in the 16th century.

I do use some fundamental analysis (e.g. jobless claims, mortgage applications, etc.) which the market has usually already factored in and options Greeks, principally delta, theta and gamma. Along with Standard Deviation and expected moves at 1SD, 2SD, etc.

I do not, unlike some others (pundits/sages/thinkers/mavins, know-it-all scholars and television personalities like Jim Cramer) have any idea what the markets are going to do a minute from now, an hour from now, tomorrow, or next week/month/year. Nor have I found technical analysis program that can project a future price based on what just happened in the last seconds/hours/days/etc. Based on my research I have found that all technical analysis tells me is what has happened, not what will happen.

There's a book on Amazon.com entitled "Technical Analysis: Is Mostly Bullshit - Why Flipping a Coin is a Better Strategy than Using Technical Analysis in the Financial, Stock, and Forex Markets." Plus there have been many books and professional/academic research papers that show why technical analysis doesn't work. Which is why someone out there is always working on yet another concept because they have discovered, as author tommcginnis has pointed out, "...new shit is invented to explain the variance away." Available to you for just $$$$, credit cards gladly accepted.

So, as I said, I trade the /ES options, credit spreads, using both short Puts and Calls protecting the position by using an offsetting long option (i.e. a vertical credit spread). If I sell both a Put and Call vertical with the same expiration it ends up being an iron condor although my iron condors look lopsided because they are more dynamic than static (same deltas vice equidistant from the ATM Options.) Skew I think that's called.

Your experience may vary of course. I have a trading plan that includes, for what it's worth;

-No Technical Analysis. A simple chart to tell me where the market has been.
-Learn what products offer options (e.g. stocks, ETFs, Indices, Futures, etc.)
-Learn which exchanges) they're traded on
-Trading specifications (tick size, trading hours, European or American exercise)
-Futuers and Futures Options, what expires when and Triple Witching Hour
-Expiration characteristics (Mon, Wed, Fri, EOM, Quarterly, etc.)
-AM or PM settled (the SPX, RUT, VIX (and others) can bite you if you don't know that
-What drives a particular market (e.g. wars, embargoes, earnings, interest rates government interference)
-Explore the dozens of trading strategies available (e.g. Buy or Sell, Spreads, Diagonals, Butterflies, Iron Condors, Ratios, etc.
-Consider Bid size, ask size, volume and open interest
-Put Call ratio (i.e. where's the money)
-What to do when a position is challenged (e.g. nothing, rolling, closing, etc.)
-Position limits (e.g. how much $$$ to trade per position)
-When to take a profit (e.g. 50-75% of the credit) or % loss.

And, finally, you DON'T need to spend much, if any, money on this stuff. Use the free training and knowledge offered by the exchanges and various websites to help build your knowledge base.

Best

a few questions about your strategy.

-why pick /es over spx, where there's more liquidity?
-how do you determine the % take profit or % loss in your trading plan? i personally trade more on the discretionary side. the chart usually tells you whether buyers or sellers are in control. yours seems more systematic. But as market conditions change, how do you modify your strategy and rules? If you have put credit spreads that are at 50% profit, but market is looking strong, would you close it anyway and follow your list of rules, or make a call to let them expire worthless?
- when you say risk a certain % of your account, do you mean max loss, or just the stop loss, and maybe some slippage?
- how important is put/call ratio compared to ATM skew? I feel like the skew at least lets you have some sense of the direction bias, while put/call ratio, you don't really know whether they're being bought or sold.