A Weekly Options Strategy With Remarkable Potential
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- čas přidán 6. 09. 2024
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Traders would love to have a strategy that can be employed each week but does not require much maintenance and can be a source of additional income for day and swing traders in many cases. The weekly double broken wing butterfly trade that we discuss in this example is an interesting example of the kinds of weekly trades available once you have a grasp of how options income trading works.
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Very nice and clear example. However, if you wake up tomorrow morning and a trade deal is announced (SPX up 30+) or a bank fails (SPX down 30+), the index may zoom past the profit zone into a sickening loss with little warning or ability to adjust. Newbies make sure you are strong swimmers before diving off the deep end to get the nickels at the bottom!
A
He doesn't want to tell the viewers that, it's bad for business.
So, according to you there is always a risk that some exogenous event will occur overnight that would cause losses in this trade. That risk exists with any investment (except T-Bills, I suppose). Of course there could be losses. Each trade has a max loss indicated when you put the trade on. If you can't afford the max loss, reduce the number of contracts or don't trade at all.
Would you please cover the max loss potential and how to adjust/roll/close? Most videos are about opening a trade and taking a win. I think we need some on risk reduction strategies when the trade goes against you. Great video. Thanks!
In other videos, he shows how to adjust the positions if it looks like the market is going against you, and how the adjustment reduces the potential profit.
“ When the trade goes against you” …its pretty much game over in most cases before you can even respond to it
I would appreciate it if you would mention the possible loss in these presentations, even if it is low probability. Then provide a link to adjustment strategies. Seems appropriate because you are targeting inexperienced option traders to some degree
Totally agree. No strategy should be considered complete unless you have a clear understanding as to what exit strategy and adjustment strategy you should have in case the market goes against you. What's presented here therefore is only half the story.
U wouldn't buy his course if he gave all the info here
@@poppapips7493 He wouldn't sell any course if it some kind of surely profitable. He would just make money
Good presentation. One small correction that I’m sure ppl paying close attention may have noticed. Seth said that the SPX closed at 2994.10. It actually closed at 2984.10
This strategy is excellent if you know that the price will go up to a little below 2990 or will drop to a little above 2880 . However I did the math on this strategy, if the price rallied above 3010 or dropped below 2860 , you loss will be 5000 . So you are risking 5000 to earn about 695 minus commission
Any better strategies? Credit put spreads should be a better weekly strategy with a better risk/reward ratio
Although what you mentioned is true, you almost always don’t want to wait till the price rallies above 3010 while still holding this position, closing the spread out asap if the stock got into the fly body early. You might close for a minor loss but better risk management rule should applied to stop your loss, and same applies to the put side.
@@jeremiedumas8555 this is the way, or diagonal calendar spread if you don’t care about margin requirement use in ur account.
@@eddiehillergrand8882 But the problem is that the exit door might be very crowded when you are ready to get out.
I also have questions about adjustments. For instance, what does the P&L look like if the market spikes up or breaks down 8 or 9 points before expiration? Is there a way to close out of the positions entirely before exp and still make a profit?
Yes, each trader needs to set up a target profit and stop on each trading concept and certainly with weekly trades, where profits can flow into the trade quickly, it's quite possible you can close the trade at a nice profit well in advance of expiration,.
@@sethfreudberg4750 In this kind of a trade if it was going against you would you ever attempt to adjust or roll ..
Or is it simply too short a trade?
Why did you prefer this to an iron Condor?
loved this video
Do you do any adjustments if the market moves against you or do you just set it and forget it?
I'd have to back test to see whether this is better setting and forgetting it, or whether it's better to employ a defensive adjustment strategy. Many weekly strategies do best as set it and forget it trades though, subject of course always to a stop.
I’m pretty sure that at a moment a strategy is created, a trader puts an asset in limits the strategy makes sense. For instance if we sell a range, this strategy exists only when the asset is in this range. If a breakout happens the strategy must be bought back with fixing looses. Trading of options also consists of series of profits and losses as any other kind of trading.
Adjusting of option strategy is like to wait for a market bouncing to be in a positive zone. This hoping every trader must avoid.
The only adjustment accepted is to manage Vega when theta is sold imho
@@sethfreudberg4750 I would be really intrested to see what would happen in reality if you set a stop loss of 2x the 695 .... and otherwise let it run.
Awesome!
Can you tell me how I can become one of your in house employee trader? Or remotely? 🙏🏽🙏🏽🙏🏽 90 days this summer?
I'm a math guy and I'm a tiny bit puzzled by this one. If I started with $300, do I roll that first win over and risk $500 next week - say with two options? If there were 41 trades in the year and 15 lost $300 - that's $4500. 26 winners X $200 add up to $5200 for a profit of $700 for the year. In other words $300 grew to $700. That doesn't sound like a %500 gain. I'm missing something. Most of these videos are fantastic learning opportunities for a simple trader like me but I'm missing something on this one
Are strategies you use on the SPX transferable to trading the SPY? It would be more digestible for smaller accounts.
sure Michael. Our options traders generally use the SPX vs SPY because it requires less contracts to trade for the same amount of capital. Trading the SPY would result in higher commissions because you will need more contracts for the same amount of capital
@@smbcapital Also, you could get assigned on SPY as well, correct? Unlike SPX where that can't happen.
Thank you.To you last point about making additional money as long as it doesn't go too far past the highest call or put. Can you provide a bit more detail around that to better understand where that would become a negative for us? Again, thx.
Thank you Seth, this is valuable content. Are there any forums that you could recommend that cover options trading?
Thomas if you go to Optionsclass.com and watch this webinar, if you end up joining, we meet each week for an hour to go over all sorts of options topics.
Seth does this need to be done in two separate trades? I can't enter all six legs of the trade. The most I'm able to enter is the call side legs and one leg of the put side. Would you just enter a call side broken wing butterfly and then enter a separate put side broken wing butterfly?
I tried i am not getting the actual price on weekly bases
Seth, all your videos are great. My 401k is all into index. My personal trading revolves around individual stocks... Just saying. I think I'm probably the average joe schmoe... Do I need to switch everything into index trading? I don't know if that's your true message...
most of the options income strategies are run on indexes bc you have reduced overnight risk vs individual stocks. why we mostly trade indexes and not stocks for more complex options strategies
@@smbcapital Thanks for the response and ALL you do. I'm truly grateful and impressed by your professionalism and attention to detail. LOVE LOVE LOVE you people, FAVORITE CZcams channel!👍
Thanks Seth! Great information. I’ve been trading Equities for a year now , so indexes are new to me.
I’ve had my A*s handed to me about 12 times this year with assignments on the short sides of some Put Credit Spreads. Having watched plenty of videos on this situation and probably assignment s.
Is it any different trading Indexes ?
Thanks again
Indexes are cash settled.
So the only thing that gets put to you (or taken) is $
Yep. Plus SPX has expiries on Mon, Wed & Fri. Equities only have expiries on Fri. This works great for ppl that trade O DTE options.
THANKS A LOT! I do have one stupid question: What happens if I close the trade before expiration date [e.g. when S&P reaches 2983] ?
whatever the options are worth at the time you close is your difference. you buy back your short legs and offset that with the remaining value in your long legs and your credit received. all your options still have theta inside, so their value could be a little bit inflated, but this is offset by all the other options. expect to give back some but not all of your initial credit gained
Just to check, on the day of expiry, do you need to buy all your positions back or just let them expire to keep the credit?
Which options platform is recommended
Thanks Seth, great video and strategy.
This is a cool trade..but so many positions! Do you fill them as a single trade or individually?
not so cool at all
if the spx stops at the protective price
This is basically an overcomplicated iron condor.
How much margin required to execute the strategy?
Thanks Seth!
The strategy seems like an iron condor with extra steps
Seems like an expensive version of an iron condor
If u can’t do it with an index. Could you do this with an index tracker like spy ?
yes
Great video thank you
See you know those profit potential zones, man whilst
super money makers I would be sweating if the market rallied or tanked to where my loss zones are.
Sir how 45 points are decided?
It looks like he's using 24 delta strike on call side and 19 delta strike on put side. But, I'm not sure if that's how he picks his strikes.
@Josh Kilburn yes. he probably starts with the short strike first at the 16 delta
The potential loss should be mentioned since as described it looks like a cash machine. Maybe course discusses management of trade With short time frame will be hard to deal with tweet driven moves.
The short strike is typically one standard deviation out of the money on both sides, Ashok.
@@lauriejones7834 I agree, need to mention the downside and how to manage.
What is your solution for canadian that are with interactive brokers. Margin for this kind of trade are ridiculously high + IB add their own house margin which Return on margin not worh it
Is the margin for canadians more than the max-loss in the trade? In this example I think the credit was about 10% of that max loss for this 1 week trade. That says nothing about the real risk of loosing though... especially in a nervous market and president with a twitter account.
@@backspin1448 yes it is.. margin is much higher than max loss for canadian ..so stupid.
@@naoufeltaief Blame your Canadian laws to `protect ` the people
Canadian solution: stick to buy side calls/puts in tsfa account until u can move to the usa. Canadians have the highest broker fees and margin fees in the world...and USD conversion fees/interest on accounts. To open multiple leg options are not financially viable never mind adjustments.
Robinhood won't let me set up more than like a 4 option stradegy....time to graduate.
Hey
I love those videos. Some of the best trading education out there.
However... the courses you guys sell... are overpriced... by a lot...
I love you guys! I respect you guys immensely.
But i dont think these prices are justified.
i agree bro..
How much are the courses?
Nice idea, however you unfortunately complete ignore the impact of commissions in your analyses. Trading 40 Contracts for such a system generates substantial costs which eat up a big chunk of your gains, in particular when you need to close the contracts again.... I would really like to see a more realistic picture.
Given that options are getting cheaper and cheaper, a trade like this is now more affordable ...
You need to "win" about 85% of the time just to break even with this strategy.
If you had done this over the past 2 months your account would have been wiped out. As of 12/25/2019
From 3080-3223 as we speak.
What this video does not tell is the downside which can disproportionately drill a hole in your wallet. There is no free money.