How to trade like a retarded genius - an actual strategy that works

[ondafringe]

1. The CBOE site is a good place to start.

2. I picked up what I know through experience of trading it and researching it at the time on how it works. In 2016 and 2017 I sold Iron Condors on every SPX expiration available at the close prior to expiration date. I thought I had a "Cash Cow" that would last forever. However in 2018 the market makers could just not get enough premium into the options and I was getting too many max losses so I quit. Price just blew right through my IC protection.

I don't know of any websites that specialize in the SPX but I am sure there of some out there.
I will give you a couple of caveats though.

1. Stay away from the Monthly AM settlement. That is crazy and I don't know why they even have it. Trade only the Weekly's. Strange name in that there 5 expirations in a week now.

2. There is no underlying ETF behind SPX like there is in SPY so you can let it settle without getting out of your option at the close. It is a cash settlement into your account. It is much easier that trying to exit a position near the close. The bid gets below intrinsic value so you can really get hosed if you are not careful in a late close out. I let all my Iron Condors expire on the cash settlement process and it is smooth and seamless. Statements sure look strange as they show full value of your settlement contracts.

3. The great thing about SPX is that profits are taxed like a futures contract. A lot of wheeling and dealing with congress to get that done. So, 60% of an SPX option trade profit is taxed as a long term gain and 40% is taxed at ordinary rates.

4. Trading SPX options is a lot like trading TSLA options. There is so much premium early in expiration day that you have to have movement or the option just melts away. The last hour prior to expiration has been fun on TSLA the last two weeks.

5. I went back on TOS and took some screen shots of Friday's action of the SPX option chain close to the turning points during the day that shows how you can use it for good profits "if you have an edge on determining direction". I could post those if you or anyone else is interested.

Yes, post it.

 

[Illini Trader]

SPX Option Chains taken from TOS "Ondemand" feature at
Central Time Zone
8:33
9:15
10:30
12:15
2:15
2:57

 

[easymon1]

 

[ondafringe]

5. I went back on TOS and took some screen shots of Friday's action of the SPX option chain close to the turning points during the day that shows how you can use it for good profits "if you have an edge on determining direction". I could post those if you or anyone else is interested.

Even if you have an edge on determining direction, you would still be better off trading the S&P futures.

Just looking at your first two screen grabs: Had you bought the 4110 Call right after the open and paid the 19.20 ask, then sold it 45 minutes later and took the 39.50 bid, you would have made 20.3 points, so $2,030.

During that same time period, ES moved 40 points at $50/per point, so $2000.

Both gains almost the same, but the entry cost for the option contract was $1,920, whereas the day trading margin required for the future's contract (at my broker) would have only been $400. So you could have traded almost five future's contracts for the same cost as one option contract. Plus, I think it would be much easier and faster to get in and out of your trade with futures.

However, you aren't going to get those futures day trading margins at TDAmeritrade because they aren't focused on futures. You would have to seek out a discount futures broker.

Just something to keep in mind during your decision-making process.

 

[Illini Trader]

Even if you have an edge on determining direction, you would still be better off trading the S&P futures.

Just looking at your first two screen grabs: Had you bought the 4110 Call right after the open and paid the 19.20 ask, then sold it 45 minutes later and took the 39.50 bid, you would have made 20.3 points, so $2,030.

During that same time period, ES moved 40 points at $50/per point, so $2000.

Both gains almost the same, but the entry cost for the option contract was $1,920, whereas the day trading margin required for the future's contract (at my broker) would have only been $400. So you could have traded almost five future's contracts for the same cost as one option contract. Plus, I think it would be much easier and faster to get in and out of your trade with futures.

However, you aren't going to get those futures day trading margins at TDAmeritrade because they aren't focused on futures. You would have to seek out a discount futures broker.

Just something to keep in mind during your decision-making process.

Yes, I get that. I have a futures account with AMP for many years now and use Sierra Charts as my platform. I have never had success with futures as I always get too cute with the short term noise. I am not currently trading SPX but I follow it. I just got involved in the discussion here as Easymon asked a few questions about it. I day-trade options on stocks as it forces me to play the longer swings during the day and trade above the noise.

I am finding even looking at SPX during the day distracts from my trading as it influences me too much. I want to just look at my stock list and trade them for what I see.

PS: You do have limited risk with Options on SPX -- one advantage over futures.

 

[easymon1]

Yes, I get that. I have a futures account with AMP for many years now and use Sierra Charts as my platform. I have never had success with futures as I always get too cute with the short term noise. I am not currently trading SPX but I follow it. I just got involved in the discussion here as Easymon asked a few questions about it. I day-trade options on stocks as it forces me to play the longer swings during the day and trade above the noise.

I am finding even looking at SPX during the day distracts from my trading as it influences me too much. I want to just look at my stock list and trade them for what I see.

Are you using ES for monitoring the SPX price action?

 

[ondafringe]

Are you using ES for monitoring the SPX price action?

If you want to explore index options trading, instead of starting with SPX, you might want to check out the mini-SPX to get your feet wet: XSP

 

[Illini Trader]

Are you using ES for monitoring the SPX price action?

No, the two are basically the same except for the opening bell gap.

 

[easymon1]

No, the two are basically the same except for the opening bell gap.

Do you monitor spx on sierra using IB data?

 

[Illini Trader]

If you want to explore index options trading, instead of starting with SPX, you might want to check out the mini-SPX to get your feet wet: XSP

Wow, I had never heard of this and it looks like it has been around for a long time. I really like the tax 60-40 tax treatment on this but there is very little option volume and the spreads are way too wide to trade. I can usually get the mid-point of the spread but these are too wide to even get a good sense of valuation.