Weekly Options Trading Earns Him $2,500 Every Week (but he's missing something huge)
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- čas přidán 24. 09. 2019
- Weekly options can be a great way of supplementing your personal income. However, there are a few pitfalls of which you must be aware.
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The main problem is that most folks don’t care about anything other than football, Basketball and Music etc. They find it normal to take credit card debt which will cost them 20% per year but considers it risky to invest their money and make 10% or more per month. Learning to avoid high interest debt while also learning how to put your money to work for you by investing is a very powerful combo.
The one effective technique I'm confident nobody admits to using, is staying in touch with an Investment-Adviser.
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She looks the part. MARGARET really seems to know her stuff. Out of curiosity i looked her up, found her web~page, and decided to read through her resume, educational background, qualifications and it was really impressive. She is a fiduciary who will act in my best interest. So, I booked a session with her.
Identifying lucrative investments can get you ahead in no time, in years of Investing, my portfolio has experience immense growth, because i did so.
Seth, amazing content here. You did great on this one! Thank you for your time to share with us Seth!
You’re welcome
To hedge risk, buying a back ratio with a further expiration date would be better if a dump in the market were to occur. A calendar spread would work as well. If you're range bound, sell spreads on support & resistance levels.
Everyone is a genius when the Market goes up... When it stops you find what strategies actually work
Wonderful content man. I am usually skeptical about trading channels because of how they over promise and never tell you the downside. But you are the real deal. Keep it up!
we try our best to recognize the downsides and give it straight to everyone watching
Well I liked to see the backtest of this strategy in the video as to know how much far from the close (in SP points ) is build
Wow. Thank you for this lesson. I will test it before I apply it.
Nice to see back testing advice in an options video. I don't see it talked about nearly as often as i do in videos related to other markets.
it's a must!
Thanks for this video 🙏 Please add current price when you show the entry calculation. That will help beginners in understanding how to choose strike price.
Also it will be great if you explain strategy to choose strike price for any trade. 🙏
Ok next time!
I like Seth's teaching style - I am intrigued and will continue with SMB
Thank you
What do you mean the indices don't gap up/down all that often? They do it all the time. Last Thursday I had three short butterflies sitting dead center near max profit. The gap up Friday put me at max loss, and the subsequent run up sealed the deal. The thing about the index options is that they don't pay enough premium to offset your losses over time. The IV right now for at the money options is around 12%. The math doesn't work out over time. Plus, the cost of the trade is 100 bucks or so.
@11:32 - So what I'd like you to take away from today's video is...YOU have no chance of becoming a successful trader lol
Great piece, Thanks!
Hi Seth. Back tested from January to 1st November. Total trades 82. Winners 76 @+- $1250 and 6 losers @ about $23 600 that equates to loss of @ $46 600
@John Smith what software did you use for the backtest? Thanks
@@quantza8723 I did it manually using excel sheets
Taking profits often and early to is the key take away from selling options.
I'm with you man... I have been trading the premium lately and smashing it. I have never sold options only bought them, but that is just me.
@@adddad9779 are you doing Covered Calls? Selling Call or Put and receiving the immediate Credit?
Eddie Latorre Jr. none
@@eddielatorrejr.3018 I think he's just trading the options... Not a wise play tbh.
@@helloyes2288 I day trade options, what makes you say its not a wise play?
You could also switch to calls depending on your bias for the market that week.
What you explain in this video is really the crucial part of any trading strategy, you have to plan for your losses as carefully (if not more carefully) as you plan for you profits, because many traders enter the market thinking that since they chose a "safe" position they are immune to losses as a result, and this could not be farther from the truth. I have designed many profitable strategies over the years and I only managed to reach a positive outcome once I realized this, and of course, all was based on thorough back-testing using hard data from the market, no guesswork of any kind.
Awesome breakdown. Thanks.
Awesome Video ! Thanks
You bet!
Thanks for addressing the probability side of trading.
Hi Seth, I just stumbled on your content and am enjoying it. I've been trading for 4 years and always looking to learn more! Curious what you would think about this strategy if he hedged it by buying long calls in VXX or VIX. This trader is placing around 2SD's below the market. If a 2SD drawdown happens in one day, that would send VXX/VIX from their current levels around 15 up to 30+ pretty quick. If you scaled it right, you might even make more from a losing trade is SPX. What are you thoughts on that? Am I missing anything huge as well in that strategy? Thanks!
Thanks Seth another great educational video
Thanks, Ed! Let us know what other topics you'd like us to cover.
Great video!
Thank you!
Caution, the distance from the underlying index ($SPX) can get pretty small (less than 50 points) during market rallies AND contracting implied volatility for these 25 cent 1 DTE Put spread trades. On Dec 23rd close, for Dec 24th close, you only reached 35 points OTM when spread premium was 30 cents.
This is why I'm switching to selling same-day expiration credit spreads, 3x per week. No overnight risk!
i really wanna do this to focus on my music and quit my job. PLEASE HELP ME
this is what im doing its a life changer lol
Thanks Seth! Fantastic ideas here. Did the trader you mentioned in this video take one of the SMB Options courses?
One thing that I place emphasis on when teaching stock and options trading is paper trading to make consistent profits, most beginner traders want to jump in the market only to loose money then give up. In my own experiences I say , paper trade for a while maybe 6 months to a year and experiment using these type of strategies and learn from your mistakes but the good thing is, your mistakes will cost you nothing but time. Great post Seth!.
Paper trading is useless because it’s not real. There’s no point to it because once you have real money on the line you will begin to question your trade because there’s a real risk there
@@chump6901 it's a tool, we all use tools to perform task and job functions in order to get things done. Trading options is high risk like any other strategy in the stock market. if you are not sure of a certain strategic investment or options risk, you can use a tool such as paper trading to assess the risk. This is why all trading platforms have a paper trading section and its good for beginners to learn on until they become confident and successful at trading. "useless" is one thing but a waste and loss of money is another.
What kind of delta’s are good for a vertical like this?
I wish we could get an update on this. It's been 4 years, and there were some wild markets in that time.
we'll have to contact the trader
8:45 - well, this comment aged well.
Lmao yep
Hahahahaha
But then...
@@KillerBearsaw EXACTLY! I’m a “long,” so I didn’t lose money during the COVID dip, and I bought more. Then it went down. And I bought more. Turns out that was a great strategy. :)
What was the back test software you recommended?
I wonder if he learned this lesson the hard way in the last two weeks.
Lou GC 😂
or now
@@josephabramo2324 or now
Seth, whc backtest platform you reccomend him to try?
Very informative. While I may not trade that particular strategy, it still provides insight to take a look at whatever strategy I am using and look at it from a different angle.
great vid!
Do you adjust your iron condors and verticles also
Thanks for this!!!
You bet!
Is it better to close it before the expiration date if its getting close to the strike? Or even buying back some puts if its quite bullish?
I really like this guy. Great teacher.
Hi, I have a question, I' read that even when puts and credit spreads expire worthless, what will define if you have a profit or loss in the trade is the settlement calculated the next day via SET. Is this true? So say my credit spread expire worthless, and at expiration it shows a profit, it could become a loss if settlement price is lower? selling credit spreads a few minutes before expiration lets say on thursday, and friday is the settlement. Please help with some guidance, thanks!
So....what happend at the end of the day? What was the study results and final conclusion?
Juan Pedroza they all became bankrupt and got hooked on crack 🤷🏻♂️
Would have been creamed in likely March, June, September and it’s not even the end of this year god damn. I’d stay away.
@@macphistorules you can do the same thing with calls to put a bearish direction on the trade, so in a downtrending market it can still work
@@tarubewildin6931 ya the call side would have been killed all this week
Tune in next week? lol
Just wondering if you guys could explain how you handle wash sales. I'm assuming that you're using mark-to-market accounting? ..... thanks, I find your videos to be very interesting.
This video is amazing.
I'm curious how he did a couple of weeks ago..
Very straight forward & thorough explanation! Love this guy!
Good point towards the end about Max loss scenario. I was surprised you didn't mention that in the recent Elon Musk Twitter iron Condor video you made.
To minimize the risk of an overnight gap up or gap down would be a good idea to just day trade credit spreads?
Great video, with very good and detailed examples, along with very thorough explanations!
So what was the backtesting software recommended?
Very good reflexions. What determinates if the position will be 20 points from the market or more? 100 points as an example. Is it ATR, his directional bias or something else? Thanks again!
with what software would you backtest a strategy of countertrend oversold bounces which i use to get better entries bottom fishing or for daytrade flips. shifts when the strategy is effective are usually from first 5 min Os at 30 after a big move up in a daily or weekly uptrend to 15 min to hourly , 4 h and daily oversold in a weekly uptrend depending on where in the trend or momentum you are trading this condition\
You have a mistake in the slides at time 8:08. It should have been 2992.10 instead of 2922.10.
Thank you for the video. Please give all the information needed to understand the example like days to expiry and current index level. Explain how the strikes are chosen and the strike width. Thanks
I would like to know which stock he traded?
What time of day would he place the trade on Tuesday or Thursday? I would add Placing the spread just below a large PUT open interest strike. The Large put volume at that strike will act as a buffer.
Could you tell us what software you recommended for the backtracking of his strategy?
So what if you sold 0DTE instead? No risk of gaps
Be aware - $2,500/wk income is based on 2 groups of such "spread trades" per week. The mishap/risk was based on 1 occurrence only.
Which doesnt mean it wont happen 2 or even 5 in a row.
Close it out, 3x premium received
Sold at 0.10, close out 0.30
Math game
Seth, what back testing software do you recommend? Thank you.
What backtesting software do you think we should use?
Google search it and compare it on your own...
I have attended the options workshop he mentions twice, took what I thought were good notes, and I still have no idea how to do it, let alone how to find stocks that meet the required criteria.
He shows only "index options" which are a group of more than 1 stock, like "spx" is all stocks or others that u get cash (or pay) instead of setteling in stock because there a group of stocks
Stick to Real Estate its easier and payoff are better
Sigifredo Coria It took me nearly 20 years to sell my first house, and it was at a loss, so real estate sucks for me too.
This some crazy stuff to learn
@@robertcampbell6513 IMO for 99.9% of traders, the only way to learn how to trade options in the REAL world is to blow out your account to complete zero multiple times over the span of 20 years. then you will finally LEARN what to do and what never to do again. until you suffer multiple blowouts you will find it irresistible to push boundaries. so... options trading is NOT a good idea for 99.9% of traders IMO
I like this strategy and have been doing something similar for the last 10 weeks - The only caveat is you need to be near your computer 30 minutes before the close in case your short put is being tested and you want to roll to the next expiration.
Can you set a stop loss at the short put strike price when you enter the trade to at least cut your risk in half?
Is there a followup video with back testing?
Hi Seth Thanks for the video. Could you please advise what platform can backtest options trading Have been trying to find a goodone no luck yet.
Excellent advise, especially @11:33 mark
Would be curious to know what his total options trading portfolio is? Maybe a $5 spread is too risky for the size of his portfolio! Smaller portfolios should probably start at a $2 spread.
Thank you.
Can you share back testing software and analytical indicators recommended?
got a question, webull got those weekly options, lets take UCO as an example, it got weekly options set on march 4, which basically giving us 2+ months, but it is going against the rule of weekly option expiration after one week, can you please explain me why it is like that and if those options will expire in one week or 2+ months?
i have to practice this but I am so lost at the moment.
Great vedio. Can he hedge by shorting the index that he was selling the credit spread ?
I think I'd buy a monthly call on the VIX every month as a hedge if I was going to do this.
So what was the conclusion? What did you suggest to do the back testing?
Thanks for sharing video risk involved ,he can probably use monthly low strike price and executing near week expiry.
i always like to close out this trade once my loss is 2x my credit. so if you're trading the .25 credit close it out if loss hits $50+ Live to fight another day. this whole strategy is just hitting singles. no homers
when price is formed at the beginning of a strong move. a clear uptrend makes series of higher highs and higher lows, while a donwtrend makes series of lower highs and lower lows. Note; When the market stops making these movement patterns, it is no more trending and ready for breakout. so if you are a downtrend follower, you have to determine when the market is likely to stop trending, placing your stop loss with developed strategy. when it is likely to reverse to price breakout profitable. Google and read more about IQD Momentum strategy to get your copy of ebook format written by Lukasz Wilhelm and learn how the breakout candle closed above the market key level.
As we all know, old resistance becomes new support.
You could set an exit price on the short put of 50% of your max profit to catch any late-day swings that could crash the position. But when you're trading a very broad instrument (like an entire index), big changes like this don't come very often during the day. So you're probably going to be leaving a lot more money on the table than you would just letting them expire and taking the loss.
And like the guys says, 10 week payback for a complete loss is pretty good. But if you jump out at 50%, that climbs to 20 week payback. So now you can only afford 2 gap-downs in an entire year. Or you could just set your initial premium spread at about half what this guy did, and position yourself further out of the money, cutting down on the frequency of gap downs that will flip your position. The profit is the same, but the quantity of losses you can sustain is doubled, and the losses are less likely.
You provided good points. Trading put credit spread is like hitting single after single and a big loss is like a grand slam that goes against you. I like to trade a bit more conservative, hence, less premium but minimizing my risk. My main bread and butter are selling covered calls and buy LEAPS and sell short against those LEAPS for consistent weekly/monthly cash flow.
what software do you use to backtest??
It's curious that at the time of your example trade (approx 9/13/19) getting .28 credit, the short strike was 20 pts OTM which is approx a 30 delta, hence, 70% chance of expiring OTM for full profit. As of today 11/30/19, for .25 credit, the short strike is 70 pts OTM which is approx 11 delta, hence, 89% chance for full profit - much better probabilities. I wonder what would happen if you set a condition to exit if the price drops and hits the short strike; that is, you could cut your losses to well less than 50% max loss that way. Of course, there's always a chance that if price did breach the short strike, it could come back up before expiry for full profit. Would be an interesting backtest but whatever that backtest shows, it's no guarantee of future price action.
I would like to see some videos on how to repair or trade credit spreads that went against you.thx
You should be aware of this and take advice from others that have already succeeded. I searched round a few sites and found a lot of great advice by searching google on websites such as Trevs Exchange Tactics. I wish you luck and hope you make some cash!
For something this short term there is just about nothing you can do. Loss is locked in. If the market opens below your long put, then if you try to roll it or buy it back, you will bank the maximum loss. Only option is to hope it bounces back before the close above your long put so you can recoup some of the losses.
Rule 1 of any Market strategy. Never assume that your strategy is going to work consistently over a long, or even short. Of time. The trading gods do not like smart asses who think they figured out the market. I speak from experience.
There are no trading gods. The market is indifferent to you, your attitude, and your $80 Robinhood Account.
He gave sound advice and you insult him. Completely unnecessary.
@@anybodykilla92 You mean YOUR $80 RH account fool
best way to trade is selling puts ,with credit spreads ...bear call spreads and bull put spreads ...it can be a little confusing but you will get it......…...you keep the premium and a safe way to trade...just sell puts but do not buy them,play it safe
How you select strike price?
Do you check IV?
How you observe market trend?
the question, can you buy leaps calls in the money and then sell calls in indexes such as spx and ndx ? For example spx price is 4k, I will buy calls 2 years out strike price 3k and then sell calls weekly or 3 times weekly in spx? i know I can do that in spy but not sure in SPX or NDX. Thanks
Dear Seth, how should we size up over time on an strategy like that? last thing we want is to do well in this strategy for 5 straight year while increasing size each year and on year six 1 loss wipes 5 years of profit. Thanks SMB!!
At 7:02 in the video you mention 'depending on market conditions'. What conditions are you referring to? Its seems this information would be necessary to be successful at this trade to determine how for OTM or ITM you need to make your trade.
Nice video. 2 questions though. Would it not be more profitable in the long term to set a stop loss of 50% on the losing trades that he receives. This would obviously have to be subject to backtesting and may not be so good due to intraday fluctuations that could stop you out but ultimately rally back up end of day, however it is interesting to backseat. My next question is, why don't u just buy the 50 contract credit spreads on the same day as expiration (Wednesdays and Fridays) So that you can adjust for the gap downs. ?
Stop loss will do nothing to avoid a gap down, especially at 0 dte.
I am only a newbie still, but I think what glossed over really quickly in this video is the pattern of Friday being a shitty trading day for the bulls. With the pattern of more red on Fridays, some people are learning to make money from it.
Hi
I normally buy weekly calls, once in a blue moon going out to a month.
My toughest nut to crack on covered calls is, when you buy the stock , example bought 200 shares of INTC at 60.50 wrote the covered call got the premium. now the stock dropped to 58 dollars, cannot get a good premium to do a cover call at 60.50 or higher so if called i do not lose out on the trade. right now my stratagy has been to wait it out and collect dividends until the stock moves back up
What do you do in this situation if when you buy a stock and the price drops away from what you paid for it so the covered calls premiums also tank. Do you sell the stock? do you wait it out untill the stock moves back up? what choices do you make?
Hmmm...just from a quick look see...I counted 17 -20 point down days (close to close, T-W, Th-F) in 2018, 8 in 2019, and 29 in 2020
I would be curious to see this trade replicated with some similar /ES futures options because they trade overnight and a stop could be placed to help reduce the gap risk.
very possible
Can you do credit spreads with futures like you can with options though?
@@bfourney yea and the margin is stan margin it's less then the difference between the strikes. Idk why es option are not as liquid as Spx
How does one get out of those spreads? Do you go leg by leg...isn’t the market moving as you’re trying to get out which could blow ones strategy...FAST?
There is no link showing to sign up? :(
why does the bid ask fluctuate so much in tsla, but the open interest and volume barely move?
What is a good backtesting software?
Well??? Is there a follow-up video on the subject? It would be high anxiety if the trade failed before you had sufficient capital saved from the strategy.
Lol, he's over complicating simple concepts. If you TRULY want to learn trading options - search for Elite Options 2 - he is a good teacher, join his trading room and learn, there are many people who are making decent money using much simpler strategies
If you are willing to lower your profit margin on this strategy , you can lower your loss
sawman man I’m new to trading but couldn’t the risk be reduced with stop losses?
@@authorkalliopimegali you’re messing with us. Why even comment if you’re gonna troll LOL
@@pmich8913 lmfao
What is the best backtest software to use?
How do you close out a credit spread? Just buy/sell back?
You simultaneously buy back the short leg and sell the long leg for a net debit.
Hello, long time listener, first time caller. I was hoping you could go into this method of trading more? I think it'd be really good to have some info on how you guys read the market, ie what this gentleman would be looking for in order to decide if he should avoid buying this spread
To mitigate the risk, all he needs is a stop loss that's 3x his original credit for the short. That would eliminate most crazy delta events. No needs for a hedge or calendar spreads... a stop loss would take care of 99% of all gap downs. Or he could trade SPY and take assignment of the shares and wheel them until break even.
However a stop loss is not a guarantee that you will get stopped out at your price. On a big gap down, it will not get stopped at all at your price and when it does get stopped you may still lose 25,000 in his example or even more.
A gap down day past the stop loss is useless.
Whats the best options backtesting software?
I'm a total newbie when it comes to options trading. I've been swing trading penny stocks with minimal success. I'd like to learn more about options trading, but it seems like it has a whole new lingo I will have to learn.
Swing trading penny stocks ? 99% of them go bankrupt, they are only used for pump and dumps.
Nice video. Is there any risk that you could suffer a catastrophic loss on the puts sold or is your risk 100% capped and defined?
Your max loss on this trade would be 25k less the credit of $1250 received. This may be Catastrophic for most. But you would see the loss building and could close at, say, 3x credit received. It's not an all or nothing trade.
@@loubob21 Thanks so this is not a credit spread?
@@paulkaz1752 It is a credit spreads. Credit and debit spreads are defined risk. The only undefined risk trade with options is selling puts or calls naked.
I would like to know what back testing software you recommend?
Also wondering about this myself, seems like this would be helpful but we couldn't mention it in the video?
@@tinyutopia825 if you still care, the platform of showing the trade is optionnet explorer or would be optionvue
This is mistaken at 8:15 you have written 2922.10 which would mean that the closing price moved through the spread by -$63.
When you risk 25,000 twice a week to make 1400 you have more to worry about than what overnight exposure. Even in this video the example used where he profited after they expired worthless he was still down a max loss at the point during the day when the PX was at its low of 2884. Doing this strategy with an index that has a 10% IV will lose just enough times per year on average to put the trader at or near a loss. The greeks are all calculated in such a way that no matter what strategy you use you are still going to struggle to break even.
Agreed. You have to have additional information to tip the odds in your favor. Perhaps some kind of trend indicator would do that. Hard to say.