Day trading SPX index options. 100% daily ROI possible?

Romeg said:
While it is possible to make very good money trading SPX, NO ONE is making 100% ROI consistently, over time, although it might be possible to make 100% of your initial investment over a short period of time IF you start with a relatively small balance (Most brokers will require you to have at least $2000 in your margin account of which only half is available for trading options) AND you're willing to risk all that is available with each trade, AND you WIN EVERY TIME. But if you do risk it all and discover that you need to make an adjustment to your trade, you will not be able to because you will not have sufficient liquidity available to make the adjustment. So, don't believe this person because you are not being told the whole story.

If you want to Day Trade SPX, before you even fund a brokerage account, open a paper trading account and become intimately familiar with SPX. Don't waste time looking at anything else because, while SPX isn't totally unique, it does come pretty damned close. Set you trading balance in your PAPER ACCOUNT to equal your risk capital to make it more realistic. Become familiar with credit spreads (Put and Call), Iron Condors and Broken-Wing Butterflies. Some of those are directional but Condors are not.

Become familiar with a good chart. I, personally, like Trading View (Google it) and how to read the signals it contains. Successfully Day Trading SPX requires you to have a solid understanding of what the markets (SPX is the index for the S&P 500 which includes all of the Dow plus just under 500 other publicly traded large cap stocks) so it is a good indicator of what is happening in the world of equities. Understand that it can and HAS moved $300 in a 24 hour period. If you are day trading you will only be trading on Expiration days, usually Mondays, Wednesday and Fridays.

Learn to gain COMPLETE control of your emotions. if you are not able to do that, then do NOT EVEN CONSIDER day trading SPX or anything else. You will quickly become suicidal. Get to know SPX better than you know your spouse or your children but don't neglect them for the sake of getting to know SPX. Don't waste time with other derivatives, especially stock options. SPX is unlike ANY stock based derivative.

Success Day Trading SPX is a function of Discipline, Emotional Control, Knowledge of the markets and knowing that the financial rewards (ROI) are a function of all those things plus the risk you are able and willing to take.
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So are you profitable day trading SPX?

You made a bunch of God and Motherhood statements that are very difficult to implement in practice. The only trader I know that has done well day trading SPX is @jeffalvinson, an excellent individual. But it took him years of experimenting and system development to achieve his results. I tried, even with some helps from him, but just couldn't make it work.

If you are interested, search and read all his posts. He was very generous in sharing the basic concepts, very informative and profound. I wasn't able to day trade options using his approach but benefited by applying his concepts to swing trade options.
 
ironchef said:
So are you profitable day trading SPX?

You made a bunch of God and Motherhood statements that are very difficult to implement in practice. The only trader I know that has done well day trading SPX is @jeffalvinson, an excellent individual. But it took him years of experimenting and system development to achieve his results. I tried, even with some helps from him, but just couldn't make it work.

If you are interested, search and read all his posts. He was very generous in sharing the basic concepts, very informative and profound. I wasn't able to day trade options using his approach but benefited by applying his concepts to swing trade options.
More...
 
This will take a minute because I want to answer your question completely and truthfully. Bear with me, please.

Beginning almost four years ago and before I made my first trade in SPX I had spent, quite literally, thousands of dollars on memberships, subscriptions and other information on trading. I began by following the conventional 'wisdom' of selling Iron Condors 30-45 days out in a paper trading account on TDA. None of them were ever winning trades. I switched to trading two to ten days out in that same paper account and started having success. I did that for three months and made $30 grand and figured I could probably make money using real dollars.

That went extremely well for one month. I started with $10,000 and by the end of that month, had accumulated $6000 in profits. Then came the first of the next month. I had several trades open spread over the next 10 days. Volatility spiked and SPX tanked. I lost all of that $6000 plus another $3000 and got suspended for violating the PDT rule.

I repeated that pattern for the next three months, a period during which I had put an additional $30,000 into my trading account so as to avoid that nasty PDT rule. By the end of February of this year I had lost ALL of that $30,000 plus another $3,000 of my original stake so I just quit trading altogether and began to re-think everything. One of the things I had come to realize along that path was that the thing that just killed me every single time was overnight exposure. By the time of The Big Freeze, the CORONA Virus shutdown I realized that it was those big, overnight and over the weekend swings that just completely destroyed everything I had set up. That is when I decided to try day trading.

Starting the second week of April I took my balance of just shy of $7,000 to, at the close yesterday, eleven sessions later, $15,095.20, a gain of nearly $8,500.00 in just under three weeks.

So, to answer your question, YES. Day Trading has restored my faith in my ability to setup and execute profitable trades and put both me and my trading account back on the road to a full recovery. What had happened is that I had begun to apply those God, Country and Apple things to my trading.

I could lose a big chunk of that in the next session but I don't think that will happen, not because I'm particularly smart or immune to bad things happening but because I live by those 'rules' enumerated in my initial post. Like a pilot before taking off or a sailor before weighing anchor I try to have as much information available to me as I can and I wait until well after the opening bell to enter my first trade, usually not before 10:30.
 
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^ Most sensible post of the day for me. Here, have a 'like'. Hope to read more of your contributions.

I also day trade the SPX, but am not consistent enough yet to talk about it too much.

I could totally relate to your 'trade only on expiry days' and 'do not hold overnight' points - I've discovered these two little gems myself after having successfully turned winning trades into losing ones by holding overnight.
 
The conventional 'wisdom' suggests that buy relatively far in advance of expiration and hold until a few days before expiration will allow you to capture between around 30% and 70% of the profit in the trade. Well, if the SPX moved consistently in one direction or the other over that span of time, Maybe. But if the last 90 days has taught us nothing else, it is that SPX is as volatile as anything in existence and can move $300 in either direction over two or three sessions.

When setting up trades, how are you selecting your strikes and what strategy are you using?
 
Romeg said:
This will take a minute because I want to answer your question completely and truthfully. Bear with me, please.

Beginning almost four years ago and before I made my first trade in SPX I had spent, quite literally, thousands of dollars on memberships, subscriptions and other information on trading. I began by following the conventional 'wisdom' of selling Iron Condors 30-45 days out in a paper trading account on TDA. None of them were ever winning trades. I switched to trading two to ten days out in that same paper account and started having success. I did that for three months and made $30 grand and figured I could probably make money using real dollars.

That went extremely well for one month. I started with $10,000 and by the end of that month, had accumulated $6000 in profits. Then came the first of the next month. I had several trades open spread over the next 10 days. Volatility spiked and SPX tanked. I lost all of that $6000 plus another $3000 and got suspended for violating the PDT rule.

I repeated that pattern for the next three months, a period during which I had put an additional $30,000 into my trading account so as to avoid that nasty PDT rule. By the end of February of this year I had lost ALL of that $30,000 plus another $3,000 of my original stake so I just quit trading altogether and began to re-think everything. One of the things I had come to realize along that path was that the thing that just killed me every single time was overnight exposure. By the time of The Big Freeze, the CORONA Virus shutdown I realized that it was those big, overnight and over the weekend swings that just completely destroyed everything I had set up. That is when I decided to try day trading.

Starting the second week of April I took my balance of just shy of $7,000 to, at the close yesterday, eleven sessions later, $15,095.20, a gain of nearly $8,500.00 in just under three weeks.

So, to answer your question, YES. Day Trading has restored my faith in my ability to setup and execute profitable trades and put both me and my trading account back on the road to a full recovery. What had happened is that I had begun to apply those God, Country and Apple things to my trading.

I could lose a big chunk of that in the next session but I don't think that will happen, not because I'm particularly smart or immune to bad things happening but because I live by those 'rules' enumerated in my initial post. Like a pilot before taking off or a sailor before weighing anchor I try to have as much information available to me as I can and I wait until well after the opening bell to enter my first trade, usually not before 10:30.
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Romeg, would you mind sharing your game plan, what you look for ect. I have traded 0DTE with some success but I was following someone. Thanks James
 
I begin by watching the futures activity to get a feel for market sentiment for SPX here. I check that about every 15 minutes, right up to the open. That give me a sense of whether there's going to be upward or downward pressure on the S&P 500. I then watch the open so see whether it confirms that pre-market futures sentiment. I'm also watching for news events that could impact market behavior. Seems that these days, there's a lot of it. Not looking for anything in particular, just the newsworthiness of events and it's impact on the Dow, NASDAQ and S&P.

I then wait for the activity in SPX to settle down while watching my chart of SPX Here. This just happens to be the one I like but there are several available. I just upgraded from the free version to the lowest priced subscription so I can set multiple alerts. I'm trying to determine what the potential range of prices will be as best I can without a crystal ball, by looking at support and resistance over the last several sessions. That will help me determine where to do a directional trade or a non-directional one.

I already know that SPX can swing $150 in a single day up or down but that the median swing each way is around $60, either way. That's 12 strikes either side of the opening price line. Once I have a pretty good feel about direction and range I then try to decide whether to enter a directional trade (either a put or call spread or a broken-wing butterfly) or a non-directional one (iron condor). I try to stay far enough away from the money that I won't wind up ITM but, at the same time, earn a decent premium relative to the risk. Lastly, just before I send the order, I look at POP and Probability of ITM. I want Probability of ITM to be in the 0% to 2% range, knowing it will move throughout the day. I want POP to be between 76% and 90%. I want my ROI for the trade to be at least 16% for the day. The later in the day you enter a trade, the more difficult it is to meet all of those parameters but the earlier you enter a trade, the more likely is the chance that you will have to adjust it (which is expensive and can trigger a PDT notice if you do more than two).

The last thing I look at is the dollar amount of the premium that the trade will generate. My goal is to collect between $250 and $350 (at my current level. When my balances were lower my expectations in that regard were commensurately lower). Once i'm pretty sure about all those things, I pull the trigger. I usually get filled at the mid-price. I avoid chasing prices. I then repeat that order in my other two accounts. Then I settle in and watch what happens.

This is my job. Since starting this I'm being paid pretty well for my time; in excess of $150 per hour. This is NOT a passive income strategy and trading SPX is extremely risky, especially now so I don't recommend it to anyone. But, since you asked, this is what I do and since I started following this plan I've been consistently successful. We'll see what tomorrow brings.
 
Romeg, Wow awesome, thanks so much for sharing that. Another question if you don’t mind. The accounts you trade are all under $25,000?

Thanks James
 
Romeg said:
I begin by watching the futures activity to get a feel for market sentiment for SPX here. I check that about every 15 minutes, right up to the open. That give me a sense of whether there's going to be upward or downward pressure on the S&P 500. I then watch the open so see whether it confirms that pre-market futures sentiment. I'm also watching for news events that could impact market behavior. Seems that these days, there's a lot of it. Not looking for anything in particular, just the newsworthiness of events and it's impact on the Dow, NASDAQ and S&P.

I then wait for the activity in SPX to settle down while watching my chart of SPX Here. This just happens to be the one I like but there are several available. I just upgraded from the free version to the lowest priced subscription so I can set multiple alerts. I'm trying to determine what the potential range of prices will be as best I can without a crystal ball, by looking at support and resistance over the last several sessions. That will help me determine where to do a directional trade or a non-directional one.

I already know that SPX can swing $150 in a single day up or down but that the median swing each way is around $60, either way. That's 12 strikes either side of the opening price line. Once I have a pretty good feel about direction and range I then try to decide whether to enter a directional trade (either a put or call spread or a broken-wing butterfly) or a non-directional one (iron condor). I try to stay far enough away from the money that I won't wind up ITM but, at the same time, earn a decent premium relative to the risk. Lastly, just before I send the order, I look at POP and Probability of ITM. I want Probability of ITM to be in the 0% to 2% range, knowing it will move throughout the day. I want POP to be between 76% and 90%. I want my ROI for the trade to be at least 16% for the day. The later in the day you enter a trade, the more difficult it is to meet all of those parameters but the earlier you enter a trade, the more likely is the chance that you will have to adjust it (which is expensive and can trigger a PDT notice if you do more than two).

The last thing I look at is the dollar amount of the premium that the trade will generate. My goal is to collect between $250 and $350 (at my current level. When my balances were lower my expectations in that regard were commensurately lower). Once i'm pretty sure about all those things, I pull the trigger. I usually get filled at the mid-price. I avoid chasing prices. I then repeat that order in my other two accounts. Then I settle in and watch what happens.

This is my job. Since starting this I'm being paid pretty well for my time; in excess of $150 per hour. This is NOT a passive income strategy and trading SPX is extremely risky, especially now so I don't recommend it to anyone. But, since you asked, this is what I do and since I started following this plan I've been consistently successful. We'll see what tomorrow brings.
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It is possible to make 100% or more on SPX.
The other side of it is when I buy options the premium is my stop.
So my $300 position can go up 100% or more but my stop is also $300.
Much different than a stock purchase where someone lays out $40,000 and makes 100% or
more,and their stop is $1200.
 
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