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

[ffs1001]

Or, maybe I'll just sit on my freaking hands or go for a walk.

Oddly enough, if I had done that many times in the past, I would be much better off financially. Sometimes, walking away and having a coffee is the best trading decision to be made.

once again proved that my initial research and analysis were exactly correct.

May I ask what is the type of research and analysis you undertake? Is it not a case of selecting the deltas for the shorts and looking at probability of touch, or POP, and hence the max risk/rewards and pulling the trigger? Or is it more complex than that?

 

[Romeg]

I ignore the Greeks. I do not use them at all. I use Probability ITM which displays on my trading screen instead. Before that, though, I try to gauge market sentiment and depth base on the pre-market in futures activity, which is almost entirely seat-of-the-pants. Using that I assume a trading range of between $40 to $60 either side of the open. Using my Trading View chart, I look at past sessions for support and resistance levels and set alerts for those to give me a visual. These, BTW, more often than not are about one strike wider than the standard deviation indicated on my trading screen's option chain, and then I wait for the open.

After the bell, I watch the chart for the action for, usually, between 30 minutes to an hour. If it is choppy I wait even longer for things to settle. If/when it smooths out and resistance and support begin to become apparent I start looking at the option chain for an opening trade. While I'd love to get $1.00 or more for $400 or less of buying power with an 85% POP, that just doesn't ever happen. But I'm willing to accept $.65 while using around $400 so long as the POP% is around 72% or better. It takes me 15 or 20 minutes to execute a trade because I am trying to avoid the kind of mistake I made today. BTW, my initial trade setups have been correct 100% of the time. All of the adjustments I've made, especially the one today, have been redundant and expensive. I am NOT a genius. I'm just really careful, MOST of the time.

 

[Marcelino]

Romeg, I set up a tastytrade acct to check this. Not funded though. Is this what you were talking about?
Condor is set this morning. Checking the ITM probability it is indeed 2% or less for the shorts and 71% probability of making a profit. ROI above 20% Range is pretty tight. Good luck now if you placed such a trade this morning.

 

[Romeg]

That is the framework. HOWEVER, today is EXTREMELY TURBULENT. And that particular trade is a losing trade B/C SPX is trading around the 2810/2815 level. I did enter one, one strike wider on both sides, and I am going to take a very nasty hit unless things turn around before 4:00. I need for it to move back above 2830, which seems unlikely at this moment. So, two losing session in a row. C'est la vie, C'est la guerre.

 

[Romeg]

UPDATE: Since I had hit the PDT threshold and did not want to risk getting suspended I allowed all my trades to expire ITM where they were Assigned/Exercised. In so doing, I actually MADE over $1300.00. So, not a bad day after all. That is about what I had expected to make when I set the trades up.

When I entered the trade, the Fed Chairman had not yet made his comments or they had not been digested by the market. So, when that did take effect, the S&P tanked even further. Try to imagine my euphoric surprise at the results this AM. I may take the day off. WAIT. Today's Thursday, a non-expiry day. I ALREADY have the day off. Woo Hoo!

 

[ffs1001]

In so doing, I actually MADE over $1300.00. So, not a bad day after all.

Congrats on the gain. Sometimes doing nothing with a trade at risk is the best policy.

Did the SPX actually close above 2830 last night? I thought your short strike was around that level?

 

[Romeg]

No. It closed at 2820, two strikes ITM for my short puts, one strike ITM for my long puts. I took my own advice about walking away, knowing that anything I did was going to be harmful to me. I considered a BWB below my existing position but the premium was too low and the cost too great so I just logged off and went out and did some work on a construction project until after the close. That was at around 1:30 or so.

 

[ffs1001]

It closed at 2820, two strikes ITM for my short puts, one strike ITM for my long puts.

So, were your Put strikes 2930-2925? (Shorts being 2930, and longs 2925). If so, then did the overall trade not make a loss as the premium you would have received on the whole IC would have been less than the 5 that you would have had to pay at the close?

 

[Romeg]

UPDATE II: Well, my euphoria has evaporated. I don't know why it takes them as long as it does to update their stuff. I actually did take a very substantial hit, as I had predicted I would. I'm not UP $1300. I'm DOWN about $6000.

 

[ffs1001]

Yes, the SPX is a treacherous beast - I've been fighting with it for a couple of years, and just when I think I have a workable strategy, the market conditions change in a way that makes my strategy in-effective.

I've done a couple of "long term" (ie. DTE of around 10, rather than 0) IC's, and this forces me to hold overnight for several days, (something I am unhappy to do), but the profit zone is much wider, so a 100 point SPX move does not hurt so much.