Review of "If I wanted to make $1,000 a week trading options, this is exactly what I’d do"

 



Summary

The narrator of this video proposes a simple iron butterfly 0 DTE strategy on SPX:
  • Sell 6 puts at the money
  • Sell 6 calls at the money
  • Buy 6 puts 80 points out of the money
  • Buy 6 calls 80 points out of the money
Open the position at the start of the day and close it after 90 minutes unless some other stop conditions (not discussed) happen.

How this trade works

Iron butterflies assume that prices will not change.  This strategy therefore assumes that there is no movement in the first 90 minutes of the day.

Additionally, there is a differential in the thetas between the short and long options.  Therefore, there should be more theta decay for the shorts, creating more value with time. 

Backtesting

The narrator indicates that with backtesting, this strategy won in 9 of the 12 months of 2023 and made about $1,000 per week with a $36K capital requirement.

Other

The narrator also mentions some other steps that income seekers should follow:

  1. Backtest
  2. Trade paper money
  3. Start small
  4. Gradually scale up

Summary

To implement this, one must be a day trader, which many people are not.

Also, it's odd to me that the market will typically be quiet the first 90 minutes of the day.

Comments

Post a Comment

Popular posts from this blog

Review of "The Top 3 DEADLIEST Credit Spread Mistakes To Avoid!"

Image
  Summary This video contains three random tips for designing and managing credit spreads. Do not hold spreads to expiration It is tempting to hold a spread to expiration, thereby maximizing return, when all legs expire worthless.  However, two risks come into play: Risk of early assignment - There is a chance of assignment if a position is ITM and close to expiration.  It is also a risk if there are dividends coming up. Empirically, holding to expiration decreases performance (see the Tasty Trade table) as the risk of max loss increases. Prefer wider spreads over many smaller spreads (assuming a given short strike) Having more contracts (i.e., many smaller spreads) increases commission costs. Having a farther out long position decreases its price. On the other hand, there could be more premium with multiple contracts since the incremental premium probably descreases with increasing width. Do not create naked positions I can't have naked positions.  But this is obvio...
Read more

Review of "The Winning Mindset of Successful Traders"

Image
  1.  Prepare for / embrace risk - Accept losses.  Have plans before getting into positions.  Don't let emotions get in the way. 2.  Max losses will happen - Due to probability. 3.  Losing streaks will happen - Size trades appropriately. 4.  Ask, Can I accept max loss? 5.  Have the mindset of a "clerk" - stick with a plan. Very nice video that lists not just attitudes successful traders should have, but also includes a checklist of questions that must be answered before entering a trade. There is also a bit of cheerleading here.  Davis tries to let people know that losses will happen, even to him, so one should not be discouraged when they occur.
Read more

Review of "Generate Monthly Income With The IRON CONDOR"

Image
  Summary This video lays out in detail how to design iron condors for monthly income. DTE:  45 days - shown to be profitable Strikes:  15 to 25 delta and $5 or $10 wings Should get 25% - 30% premium for the width of wing (e.g., $1.50 for $5 wings) Should spend no more than 5% of capital per trade Trade management Close when hit 50% profit Or, at 21 days Because the gamma risk increases after 21 days Can close Or, if close to 50%, close Or, if not close, but inside breakeven price, wait. Optionally Can roll around Narrator does not generally adjust The rest of the video shows how Thinkorswim can generate PnL curves. Upshot This is a very nice video and shows a very clear, well motivated way to implement iron condors.  It is also presented as a framework in the sense that it can be adjusted per investors' tastes.
Read more