How to short the S&P using options? Day & swing puts

taowave said:
you need the rare quality

Dont underestimate that gift

I definetly do not have it
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I personally don't think great/rare traders have a special gene, or gift, or touch from God.
But rather it's a conditioning and experience and perspective they have absorbed.

I wouldn't expect a group of firefighter traders....college professor traders...professional athlete traders...high school student traders....adult actress traders....corporate ceo traders....and monk traders to all perform the same.
Each person/group...has been shaped and molded by their past conditioning...that may help, or hinder, their future success in trading the market.

Great/excellent/rare traders are made, not born.
If you put a snake in a lion's den or zoo...it will starve to death. If you put that same snake in a mouse exhibit it will survive and thrive.
You have to put the right killer in the right environment.
 
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One key skill that takes years of practice to get better at and is very helpful, is to be able to recognize outlier high volatility pattern setups where you at a very clear advantage.

I like that analogy about environment, much like you can be a great trader but if you're trading a choppy chart during the middle of the day when it's a choppy market it doesn't end well despite your trading skills. No soup for you.
 
KCalhoun said:
One key skill that takes years of practice to get better at and is very helpful, is to be able to recognize outlier high volatility pattern setups where you at a very clear advantage
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The word One has On in it. -- To be the One, you have to be On.
The word Skill has Kill in it. -- To have Skill, you need to Kill.
The word Years has Ears in it. -- To have Years of practice and expertise, you need Ears.
The word Practice has Ice in it. -- To Practice, you need Ice, patience.
The word Better has Bet in it. -- To Better, you need to Bet, and do.
The word Recognize has Cog in it. -- To Recognize, you need to understand each component, the Cog.
The word Pattern has Pat in it. -- To see a Pattern, you need to Pat, be gentle and calm.
The word Setups has Set in it. -- To have a Setup, you need to Set rules and variables, assumptions.
The word Advantage has Age in it. -- To have an Advantage, Age, experience, wisdom is generally required.
 
KCalhoun said:
One key skill that takes years of practice to get better at and is very helpful, is to be able to recognize outlier high volatility pattern setups where you at a very clear advantage.

I like that analogy about environment, much like you can be a great trader but if you're trading a choppy chart during the middle of the day when it's a choppy market it doesn't end well despite your trading skills. No soup for you.
More...

Ken a piece of advise for you is stay away from options . You’ve been searching for a top with 3 x inverse bear etf’s for a long time with very poor results .Selling these options can go against you 100’s of % very fast .The reason 98% of traders fail is they are inherently bearish ( a stocks up 800% in 9 months surely it will fall 30%). So all try to short top after top after top providing rocket fuel . The time to short heavy is the hardest time to short . When the mkts free falling . That’s when few dare to short as all bottom fish . It’s a rare shit up but yrs of income can be made over a 3-4 week period .
 
SammyJ said:
Ken a piece of advise for you is stay away from options . You’ve been searching for a top with 3 x inverse bear etf’s for a long time with very poor results .Selling these options can go against you 100’s of % very fast .The reason 98% of traders fail is they are inherently bearish ( a stocks up 800% in 9 months surely it will fall 30%). So all try to short top after top after top providing rocket fuel . The time to short heavy is the hardest time to short . When the mkts free falling . That’s when few dare to short as all bottom fish . It’s a rare shit up but yrs of income can be made over a 3-4 week period .
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Nobody here has told him to sell options.
 
NoahA said:
Ken, since you mentioned you want even more leverage than the 2x/3x inverse ETF's, lets do some math (and someone feel free to correct me if I get something wrong).

Assume that to short the S&P, you're gonna use SPXU. Here we see the chart for Friday. Lets say you are lucky enough to catch the absolute bottom and buy on the low tick, and hold till the end of the day for the high tick. This means you gained 64 cents. Now I'm not sure what kind of size you're trading, lets say something like 1000 shares for this. That low tick is at about $15.35, so you need 15k in buying power. Obviously if you held for the full 64 cents profit, you made $640.

But we also need to consider what you're risking. Maybe you don't want to risk more than $200 on a trade, since I know you put on lots of trades, so with 1000 shares, you can only let these drop 20 cents before you'd be stopped out.


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So if we know you're gonna risk $200 on this trade, lets see what throwing $200 at options would get you. Lets say you will go all in on the 449 put (all in vs. buying a couple of different strikes). The low tick looks to be 14 cents, but lets say, just to be generous and make this example less ideal, you get them for 20 cents each. This would cost $20 per option, so if risking $200, you could technically buy 10 options. (not including commissions here).


View attachment 267771


Now we see the value of this option go as high as 3.60. As in the SPXU example, lets assume you time this almost perfectly and get out for 3.50. This means you receive $350 per option, minus the $20 it cost you, so a profit of $330. But since you had 10, this means a total of $3,300. This is more than 5 times the profit of $640 for buying the ETF, without having to use 15k in buying power. Plus, the most you would ever lose with the option route is the cost of the option, so $200, and there is no guarantee that if SPXU dropped, that you could in fact get out for a loss of 20 cents per share. Maybe there would be slippage, or maybe even your psychology would tell you to hold longer, and lose more if you don't exit as intended. The option has a fixed loss if you assume that you will just let it expire worthless and hence always just buy cheap options.

Now clearly this is the most ideal example, and something as simple as just buying the option with more than 1 day till expiry will affect things greatly, but this is an easy place to start.
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Since these are 0-DTE options, in general, what is the latest he could sell his puts to prevent getting stuck in the trade and being forced to settle into a short SPY position at 449 x 1000 shares at the end of the day?

I don't trade options, just trying to get my head wrapped around this, but who would want to buy his 0-DTE puts that expire in an hour or so?

I've only traded MES futures, so I hope I asked that right.
 
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