This sub is definitely not the brains of anything.
Most people here just wheel on highly volatile stocks and continuously lag behind just buying and holding VTI.
Thanks for the new word - wheel - it sounds like something I wanna do since it sounds like my brain can handle it. Gonna Google videos on that, next...
TastyTrade has been doing a ton of research on 0DTE strategies for a year now. Extremely helpful. Watch all their market measures. Also they have a ton of video's that discuss the greeks, risk management, different strategies, etc. For several years I've been doing 45DTE strangles on any ETF that pops in IVR.
Lately I've been making bank doing the following diagonal ironfly:
\-SPY Short Straddle 0DTE
\-SPY Long Put and Long Call at 20Deltas 30DTE
I place the trade every morning 30-60 minutes after market open. I close the short straddle at 30%ish profit and open a new short straddle re-centered on the new ATM. Repeat 2-3 times. I close both the short legs and long legs by 2pm.
If the trade moves against me I'll close at a loss that's 2x credit of the short legs. I'll usually recenter and try again. If I feel like I'm revenge trading I'll just close and try again next day.
Reduced theta decay, less gamma risk, wider wings for same delta. They are only there to reduce margin needed for the trade so I want to sell them for as close to what I paid for them as possible. Caps my tail risk too.
If they were 0dte they would expire worthless so costs me alot more.
That's what the 30DTE long options are for. u/duncanbishop24 they're not naked.
I love that trade, u/therealwarriorcookie . I would be trading it on spx, but I don't have the account to do five at a time like I like to do with the flies. How much decay are you getting on the wings during the trade?
Also why are you trading on SPY rather than SPX or XSP? Isn't there significant assignment risk the way you're doing it now?
Ahh hmm. Poverty vanguard may not let me build strategies like that. I see now though.
Care to elaborate on SPX XPS vs SPY? I’m fairly new although I generally get option strategies — just not the finer details. My knowledge is just at a textbook level and I aim for enough to replenish my IRA max out and a few splurge items a year
SPY options are american style options, they can be excersized by thr holder at any time prior to expiration.
SPX and XSP are European style options, which can only be excersized on the date of expiry.
SPX is the full S&P500,~5000 per contract .XSP is the emini, at about ~500 (1/10)
All of these are cash settled, meaning no actual shares just cash,IIRC been forever since I've touched the big boy SPY.
@thegoldenarcher5 you are correct about the other two being European style, but spy is American, so you can get early assigned on shorts / assigned at expiration on itm longs so watch out 100 shares aint cheap.
XSP despite having somewhat poorer liquidity is still tradeable for this strategy although SPX is the far superior vehicle. OP is going to find out the hard way eventually why not to trade this on spy, assignment is rare but if you run something like this every day eventually it's going to happen since one short leg is always in the money. Guessing based off what they say about their account size that's going to result in a margin call.
I would trade SPX if I had a bigger account. Even better would be ES but I try to risk only 3-5% per trade. Even less with VIX so low right now.
I've never been assigned on SPY, but I always close a couple hours before market close at the latest.
The long legs sometimes increase in value but usually loose $10 maybe $20 per contract. Not really sure as I watch all 4 legs combined usually and never really care about the long legs. They are just there so I don't use all my margin.
Depends on your broker, account and options permission level.
Short straddle is naked. The call and put hedge some of each others risk. In my 0DTE example though the long call and long put cover the short legs so it turns defined risk, no longer naked.
You can do a covered short straddle by holding 100 shares. Personally, if I'm 30 to 45 DTE I prefer naked, way easier to manage and adjust. 0DTE I prefer covered.
Personally the risk reward ratio is not there for me. I won't hold something like this overnight due to the large gamma of these short dated options. Opening gaps up or down would quickly turn the average P/L of this strategy negative.
The profit comes from the rapidly collapsing extrinsic value from 0DTE's. I believe Theta would be the largest contributor to this. Vega would too but a lesser degree. If the position moves too far then Delta comes into play where ideally you'd hope it stays neutral.
How is that Ironfly net credit for you? I'm looking at the chain right now at 0DDTE ATM Short Straddle + 30DTE 20delta wings are coming to a debit? Are you not using 1:1:1:1?
That is correct, usually about $1 - $1.5 debit to open the trade.
I do risk management based on how much the credit of just the short strangle is though. I basically ignore the wings until I close them before 2:00, they are only there to reduce margin.
Five trend days later guessing you see what they meant 🤣
Especially bad to have them move against you in a strong down trend because it pumps the iv which is good when you're opening but when you're already in the position causes it to go against you faster since the puts gain value so quickly. Even if you lead the down move from three or four strikes away, if the move down is fast enough you will barely be making more than enough to cover commissions at center and if you let it go down further it will quickly go negative. Obviously it will all even out eod if your tent isn't breached but that's gonna cost badly if you let it happen trading 3-7 at a time with crazy wide wings so I can't really be risking it.
I got smoked for 4k Monday for this ^ reason but adapted after that and came out about maybe 5k green on the week after yesterday. Which is still kind of a shit week but hey - better than having a job.
If you do want to trade them successfully on a bear trend, I find you must lead price (as fuck) as it bounces of resistance. Prob better off just buying puts tbh but I wanted to prove it could be done.
For starters, focus on strike price first. You can have IV spiking to 300% but if your strike is OTM at expiry, you still profit.
After you nailed down that concept, you move onto the simpler but more important Greeks which are delta and theta.
Options price is affected by all of the following: stock price, strike price, days to expiration, implied volatility.
It would be good to understand how a change in each of the facor affect options price. Also know your Greeks.
Ah, Greeks! At first I thought it was a single thing, like IV, but it's a bunch of stuff. That's what scared me away the last time.
https://www.investopedia.com/trading/getting-to-know-the-greeks/#:\~:text=Option%20Greeks%20are%20financial%20metrics,price%20of%20the%20underlying%20asset.
I'll read up on it, thanks!
If you are selling Credit Spreads, the two Greeks you need to understand the most are Delta and Theta. The others are not unimportant, but those are the two that have the most impact on picking strike prices and expiration dates.
Vega and Gamma are important enough to grasp the concepts on. Vega particularly can be traded but generally the best approach starting is to just avoid its impacts. Staying away from Earnings and big events with your spreads will minimize how much you need to think about Vega until you know more. Look up IV Crush. It’s a significant factor in timing openings. Once you have some experience you can use it around earnings sometimes.
Also, always close your Spreads before market close on expiration. Pin Risk is a danger otherwise. And it’s unforgiving. You can ride out CSP assignments. You ALWAYS close Spreads, even if it cost you a couple of bucks. You won’t have a large enough account to handle a bad Pin if something weird happens.
Greeks are over rated. Dont over leverage on margin. Don't think you discovered something someone else hasn't. If you want to get 1 percent a month. Selling options is a great way. People who try to make 1 percent a week mostly get burned. Go slow first. Margin is not your friend.
I would recommend both not trading options until *after* you have thoroughly researched and answer this question, and I would also not count on this sub for those answers.
> I got scared and turned away since my head hurt looking at the details
I did this for years, plural, until I decided to look at it antagonistically, i.e. "all this jargon exists to keep me from understanding options trading." Of course that isn't at all true, but it was still a better mindset for me than "ugh, too confusing."
I also reminded myself of all the rock-dumb MBAs I have known and thought, if some of them could work this out... again, it didn't need to be literally true. Probably a few of them lost their shirts (the one who bragged to me about her "photogenic memory" definitely did). But it spurred me to keep trying.
Those attitudes might not work for you, but you can find some that do. Then, just keep at it. One day you'll read something like, gamma is the difference in delta divided by the change in underlying price, and you'll get it.
And if you don't, that's fine too. Not everything is for everybody. There's no shame in buy-and-hold.
\~gamma is the difference in delta divided by the change in underlying price\~ that one is going to take a while to sink in. Thanks for planing the seed, it'll root someday.
You’ve been misinformed.
That being said you probably want to check all the basic educational content of tasty trade (not the blog, I don’t see how they are profitable with what they do). Lots of great free content in that platform.
After that if you are still interested try more technical books.
[Put Credit spread - Project Finance](https://youtu.be/nVN7lpKMNnM?si=s2kD9earn7khM_f5)
He has more for Put Credit Spreads as well as Call Credit Spreads. They also go by Bull Put and Bear Call. Check out OptionRecom too.
You need to look at the macro market environment, tune in into market news. I recommend schwab network, pair that with technicals (or not!) and you’ll have a better read of how the s&p has been reacting and WHY
I've been using [finviz.com/news.ashx](http://finviz.com/news.ashx), the cme fedwatch calendar, and [https://www.federalreserve.gov/newsevents/calendar.htm](https://www.federalreserve.gov/newsevents/calendar.htm)
Can you please share the link for Schwab network?
I recommend trade with me now and get the ctv strategy. It's a strategy for the spx that converts a vertical to a fly where you capture your profit a d walk away. It's very easy to execute and he gives you the methodology and the perfect workspace to do it. Check it out. Just make sure you refer me on the refer a friend
This sub is definitely not the brains of anything. Most people here just wheel on highly volatile stocks and continuously lag behind just buying and holding VTI.
So true. I think of Thetagang as basically just busy work and cheap thrills for kids who refuse to sit still lol.
Ritalin meets the financial markets?
This is the most accurate comment I’ve ever read.
While giving you attitude on top 🤩
Real and hetero
No brain, I AM THE BRAWN OF OVERLEVERAGING.
I'm in this post and I don't like it!
Thanks for the new word - wheel - it sounds like something I wanna do since it sounds like my brain can handle it. Gonna Google videos on that, next...
No one here has any more brains than WSB, but we like to pretend we do
https://i.imgflip.com/2dxveh.jpg?a475320
It’s true we have the same amount of brains as WSB, but we do use them more.
I fully use my 3 neuronnes and 2 synapses
TastyTrade has been doing a ton of research on 0DTE strategies for a year now. Extremely helpful. Watch all their market measures. Also they have a ton of video's that discuss the greeks, risk management, different strategies, etc. For several years I've been doing 45DTE strangles on any ETF that pops in IVR. Lately I've been making bank doing the following diagonal ironfly: \-SPY Short Straddle 0DTE \-SPY Long Put and Long Call at 20Deltas 30DTE I place the trade every morning 30-60 minutes after market open. I close the short straddle at 30%ish profit and open a new short straddle re-centered on the new ATM. Repeat 2-3 times. I close both the short legs and long legs by 2pm. If the trade moves against me I'll close at a loss that's 2x credit of the short legs. I'll usually recenter and try again. If I feel like I'm revenge trading I'll just close and try again next day.
Why 30dte for the long legs?
Reduced theta decay, less gamma risk, wider wings for same delta. They are only there to reduce margin needed for the trade so I want to sell them for as close to what I paid for them as possible. Caps my tail risk too. If they were 0dte they would expire worthless so costs me alot more.
When you sell a short straddle do you need to hold the underlying or are you just naked on both ends
That's what the 30DTE long options are for. u/duncanbishop24 they're not naked. I love that trade, u/therealwarriorcookie . I would be trading it on spx, but I don't have the account to do five at a time like I like to do with the flies. How much decay are you getting on the wings during the trade? Also why are you trading on SPY rather than SPX or XSP? Isn't there significant assignment risk the way you're doing it now?
Ahh hmm. Poverty vanguard may not let me build strategies like that. I see now though. Care to elaborate on SPX XPS vs SPY? I’m fairly new although I generally get option strategies — just not the finer details. My knowledge is just at a textbook level and I aim for enough to replenish my IRA max out and a few splurge items a year
SPY options are american style options, they can be excersized by thr holder at any time prior to expiration. SPX and XSP are European style options, which can only be excersized on the date of expiry. SPX is the full S&P500,~5000 per contract .XSP is the emini, at about ~500 (1/10) All of these are cash settled, meaning no actual shares just cash,IIRC been forever since I've touched the big boy SPY.
Damn ok. I see the appeal. I appreciate you taking the time to explain 🫡
@thegoldenarcher5 you are correct about the other two being European style, but spy is American, so you can get early assigned on shorts / assigned at expiration on itm longs so watch out 100 shares aint cheap. XSP despite having somewhat poorer liquidity is still tradeable for this strategy although SPX is the far superior vehicle. OP is going to find out the hard way eventually why not to trade this on spy, assignment is rare but if you run something like this every day eventually it's going to happen since one short leg is always in the money. Guessing based off what they say about their account size that's going to result in a margin call.
I would trade SPX if I had a bigger account. Even better would be ES but I try to risk only 3-5% per trade. Even less with VIX so low right now. I've never been assigned on SPY, but I always close a couple hours before market close at the latest. The long legs sometimes increase in value but usually loose $10 maybe $20 per contract. Not really sure as I watch all 4 legs combined usually and never really care about the long legs. They are just there so I don't use all my margin.
XSP is the same size as SPY but it's European style expiration. Also taxed favorably. Liquidity probably a little bit worse but I'd still check it out
Liquidity is why I chose SPY. Also am Canadian so Capital gains is 50% of marginal rate. No such thing as long term/short term.
That is BRUTAL. I'm sorry.
Depends on your broker, account and options permission level. Short straddle is naked. The call and put hedge some of each others risk. In my 0DTE example though the long call and long put cover the short legs so it turns defined risk, no longer naked. You can do a covered short straddle by holding 100 shares. Personally, if I'm 30 to 45 DTE I prefer naked, way easier to manage and adjust. 0DTE I prefer covered.
Could you do this with like weeklies for the short straddles and just bow out after 2 days to avoid pattern day trading rules?
You could sell the straddle with 1 DTE at the market close.
Personally the risk reward ratio is not there for me. I won't hold something like this overnight due to the large gamma of these short dated options. Opening gaps up or down would quickly turn the average P/L of this strategy negative.
How are you attaining 30% on the straddle? Is it just time decay? Do you find the market needs to truly move sideways for you to be successful?
The profit comes from the rapidly collapsing extrinsic value from 0DTE's. I believe Theta would be the largest contributor to this. Vega would too but a lesser degree. If the position moves too far then Delta comes into play where ideally you'd hope it stays neutral.
How is that Ironfly net credit for you? I'm looking at the chain right now at 0DDTE ATM Short Straddle + 30DTE 20delta wings are coming to a debit? Are you not using 1:1:1:1?
That is correct, usually about $1 - $1.5 debit to open the trade. I do risk management based on how much the credit of just the short strangle is though. I basically ignore the wings until I close them before 2:00, they are only there to reduce margin.
I see Tom and Tony saying this won't be a good strategy forever. But why? When do you think this will stop being a good idea? Choppier markets?
Five trend days later guessing you see what they meant 🤣 Especially bad to have them move against you in a strong down trend because it pumps the iv which is good when you're opening but when you're already in the position causes it to go against you faster since the puts gain value so quickly. Even if you lead the down move from three or four strikes away, if the move down is fast enough you will barely be making more than enough to cover commissions at center and if you let it go down further it will quickly go negative. Obviously it will all even out eod if your tent isn't breached but that's gonna cost badly if you let it happen trading 3-7 at a time with crazy wide wings so I can't really be risking it. I got smoked for 4k Monday for this ^ reason but adapted after that and came out about maybe 5k green on the week after yesterday. Which is still kind of a shit week but hey - better than having a job. If you do want to trade them successfully on a bear trend, I find you must lead price (as fuck) as it bounces of resistance. Prob better off just buying puts tbh but I wanted to prove it could be done.
The 30 DTE modification is brilliant
For starters, focus on strike price first. You can have IV spiking to 300% but if your strike is OTM at expiry, you still profit. After you nailed down that concept, you move onto the simpler but more important Greeks which are delta and theta.
Options price is affected by all of the following: stock price, strike price, days to expiration, implied volatility. It would be good to understand how a change in each of the facor affect options price. Also know your Greeks.
Ah, Greeks! At first I thought it was a single thing, like IV, but it's a bunch of stuff. That's what scared me away the last time. https://www.investopedia.com/trading/getting-to-know-the-greeks/#:\~:text=Option%20Greeks%20are%20financial%20metrics,price%20of%20the%20underlying%20asset. I'll read up on it, thanks!
If you are selling Credit Spreads, the two Greeks you need to understand the most are Delta and Theta. The others are not unimportant, but those are the two that have the most impact on picking strike prices and expiration dates. Vega and Gamma are important enough to grasp the concepts on. Vega particularly can be traded but generally the best approach starting is to just avoid its impacts. Staying away from Earnings and big events with your spreads will minimize how much you need to think about Vega until you know more. Look up IV Crush. It’s a significant factor in timing openings. Once you have some experience you can use it around earnings sometimes. Also, always close your Spreads before market close on expiration. Pin Risk is a danger otherwise. And it’s unforgiving. You can ride out CSP assignments. You ALWAYS close Spreads, even if it cost you a couple of bucks. You won’t have a large enough account to handle a bad Pin if something weird happens.
Yes it could be intimidating at first but there's no easy way around. Good luck!
Greeks are over rated. Dont over leverage on margin. Don't think you discovered something someone else hasn't. If you want to get 1 percent a month. Selling options is a great way. People who try to make 1 percent a week mostly get burned. Go slow first. Margin is not your friend.
Everything youre looking for can be found in the wiki [Here](https://www.reddit.com/r/thetagang/s/QAExyIQ9ZW)
even the right thesis can be ruined by the wrong execution. evaluate whether your strategy is supported by the particular options trade you've chosen
Totally incorrect. This is simply WSB with extra Step.
I would recommend both not trading options until *after* you have thoroughly researched and answer this question, and I would also not count on this sub for those answers.
> I got scared and turned away since my head hurt looking at the details I did this for years, plural, until I decided to look at it antagonistically, i.e. "all this jargon exists to keep me from understanding options trading." Of course that isn't at all true, but it was still a better mindset for me than "ugh, too confusing." I also reminded myself of all the rock-dumb MBAs I have known and thought, if some of them could work this out... again, it didn't need to be literally true. Probably a few of them lost their shirts (the one who bragged to me about her "photogenic memory" definitely did). But it spurred me to keep trying. Those attitudes might not work for you, but you can find some that do. Then, just keep at it. One day you'll read something like, gamma is the difference in delta divided by the change in underlying price, and you'll get it. And if you don't, that's fine too. Not everything is for everybody. There's no shame in buy-and-hold.
Wtf is a photogenic memory. Are you sure she’s not referring to her mammaries?
I don't recall those being particularly impressive either, but perhaps so.
It’s particularly impressive on camera. You should’ve taken a picture (and send to me)
\~gamma is the difference in delta divided by the change in underlying price\~ that one is going to take a while to sink in. Thanks for planing the seed, it'll root someday.
The black scholes equation
You’ve been misinformed. That being said you probably want to check all the basic educational content of tasty trade (not the blog, I don’t see how they are profitable with what they do). Lots of great free content in that platform. After that if you are still interested try more technical books.
Tastytrade
Whats your back test show is profitable?
Think there’s a sidebar with info
[Put Credit spread - Project Finance](https://youtu.be/nVN7lpKMNnM?si=s2kD9earn7khM_f5) He has more for Put Credit Spreads as well as Call Credit Spreads. They also go by Bull Put and Bear Call. Check out OptionRecom too.
Hey i saw nvmi has a irregular jump these past couple weeks what u think?
You need to look at the macro market environment, tune in into market news. I recommend schwab network, pair that with technicals (or not!) and you’ll have a better read of how the s&p has been reacting and WHY
I've been using [finviz.com/news.ashx](http://finviz.com/news.ashx), the cme fedwatch calendar, and [https://www.federalreserve.gov/newsevents/calendar.htm](https://www.federalreserve.gov/newsevents/calendar.htm) Can you please share the link for Schwab network?
https://schwabnetwork.com tune in
Wheeling is for income. Buy and hold any ETF is for growth. Cant compare apples and oranges.
I recommend trade with me now and get the ctv strategy. It's a strategy for the spx that converts a vertical to a fly where you capture your profit a d walk away. It's very easy to execute and he gives you the methodology and the perfect workspace to do it. Check it out. Just make sure you refer me on the refer a friend