Trade idea
Trade idea Take profit at 50% of expected move
Taking profits at 50% of the expected move, calculated from implied volatility, is a strategy that aims to capture a high probability (up to 80%) of reaching the target. This method is particularly applicable to premium sellers and positions with defined expiration cycles. The expected move is determined using implied volatility and can be found on most trading platforms. This approach is based on the idea that reaching half of the expected move is a realistic and achievable target, given the high probability of success.
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StrategyTake profit at 50% of expected move
Time horizonOver the course of the expiration cycle.
Entry / triggerWhen a position is initiated, the expected move based on implied volatility is calculated.
Target / exit50% of the expected move calculated from implied volatility.
Invalidation / stopIf the position does not reach the 50% target, it may indicate a failure to meet the expected move, which could be due to market conditions or volatility changes.
SpeakerTom and Scott
Risks- Market conditions may change, affecting the expected move.
- Implied volatility may not align with actual market movements.
- Failure to reach the 50% target may indicate a need to reassess the position or adjust the strategy.
Trade idea
Trade idea Defined risk spreads
The speaker suggests that defined risk trades can be used to achieve a 20% return on a $250,000 account without constant monitoring. This approach involves selling premium (e.g., shorting options) and avoiding directional trades with profit caps. The speaker also notes that the VIX being elevated above 20 while IVR is not elevated below 30 may indicate a no-trade condition, as the market is volatile but the individual ticker's implied volatility is not elevated.
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StrategyDefined risk spreads
Time horizonLong-term
Entry / triggerWhen the VIX is elevated above 20 but IVR is not elevated below 30
Target / exit20% return on a $250,000 account over time
Invalidation / stopSignificant market moves that invalidate the trade premise
SpeakerScott
Risks- Market volatility
- Potential for significant losses if the trade premise is invalidated
Trade idea
Trade idea High IVR trades
When the VIX is elevated, it is rare to find low IVR across the board. High IVR is typically associated with elevated VIX, and low IVR is more common in post-earnings stocks. This suggests a strong correlation between market volatility (VIX) and implied volatility (IVR). Therefore, when the VIX is elevated, it is advisable to stick with high IVR trades. The rationale is that high IVR indicates higher expected volatility, which aligns with the elevated VIX. The invalidation would be if IVR is low despite a high VIX, which is rare. The time horizon is short-term, as the correlation may not hold in all market regimes or during extreme volatility events.
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StrategyHigh IVR trades
Time horizonShort-term
Entry / triggerElevated VIX
Invalidation / stopLow IVR
SpeakerSpeaker
Risks- Market volatility may change rapidly
- IVR may not remain high despite elevated VIX
Trade idea
ZB sell bond puts
The speaker suggests that the bond market is signaling a potential policy shift, such as a Trump put, and that the yield curve is wide, indicating a potential for further movement in the market. The speaker proposes selling bond puts as a trade, with a target of 114 and a stop at the low 114s. The trade is based on the idea that the bond market is acting as a 'bond vigilante' pushing yields down in anticipation of policy changes.
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Strategysell bond puts
Assetbond
Time horizonshort-term
Entry / triggerif the bond market is signaling a potential policy shift, such as a Trump put, and the yield curve is wide
Target / exit114
Invalidation / stopif the bond market does not signal a policy shift or if the yield curve narrows
SpeakerRyan
Risks- The trade is speculative and based on market sentiment rather than concrete data.
- The bond market may not signal a policy shift, leading to a loss on the trade.
- The yield curve may narrow, reducing the potential for a trade outcome.
Trade idea
Trade idea tail hedge
A tail hedge using out-of-the-money puts can protect against extreme downside risk in the SPX or SPDRs. The strategy involves buying options that are less than five deltas, which are associated with fat tails in the distribution of price movements. This is a long-term strategy that aims to cover the account if the index drops to a level that is considered a fat tail event. The entry condition is when the index is at a level that is less than five deltas, and the target is to cover the account if the index drops to that level. The stop or invalidation is if the index does not reach the level, the trade is considered invalid. The time horizon is long-term, as the strategy is designed to protect against extreme market events.
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Strategytail hedge
Assetoptions
Time horizonlong-term
Entry / triggerwhen the index is at a level that is less than five deltas
Target / exitcover the account if the index drops to that level
Invalidation / stopif the index does not reach the level, the trade is considered invalid
SpeakerTom
Risks- The cost of the options may be high if the index moves significantly
- The strategy may not be effective if the index does not reach the level
- The strategy may not be effective if the market is not volatile enough
Trade idea
SPX tail risk protection
The speaker discusses the cost of tail risk protection for the SPX, noting that it costs $500 to protect $275,000 worth of notional value. The idea is to buy one week of protection against a crash, but the speaker personally does not recommend this strategy, suggesting that it is not a recommended move for most investors.
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Strategytail risk protection
Assetindex
ExpirationMarch 20
Time horizonone week
Entry / triggermarket drops to 6000
Target / exitprotection against a crash
Invalidation / stopno specific stop mentioned
Speakerunknown
Risks- high cost relative to notional value
- only effective in the event of a crash
- not recommended for regular use
Trade idea
Trade idea premium selling
The speaker advocates for a premium selling approach, which involves selling options with a capped upside and theoretically unlimited downside. This strategy is suitable for those who are comfortable with the risk and can help stay engaged in the market. However, the speaker acknowledges that this approach may not work for everyone and that the effectiveness of such strategies can vary based on market conditions and individual risk tolerance.
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Strategypremium selling
Time horizonshort to medium term
Entry / triggerpremium selling approach
Invalidation / stopcapped upside and potential for downside
SpeakerGary
Risks- capped upside
- potential for unlimited downside
- market volatility
Trade idea
SPX volatility-based
The speaker believes that the VIX is approaching 30, which could lead to significant market volatility. The inverse relationship between crude oil and the S&P index is highlighted as a key factor to monitor. The speaker suggests that the market may experience wild swings if the VIX reaches 30, and that traders should be cautious and prepared for increased volatility. The speaker also mentions that triple witching next week could provide trading opportunities, but the market is expected to be volatile.
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Strategyvolatility-based
Assetindex
Time horizonshort-term
Entry / triggerVIX approaching 30
Target / exitVIX reaching 30
Invalidation / stopVIX dropping below 25
SpeakerUnknown
Risks- Market volatility could lead to significant losses
- The inverse relationship may not hold consistently
- The speaker's personal position is not disclosed
Insight
Take Profit at 50% of Expected Move
Taking profits at 50% of the expected move is a strategy based on implied volatility rather than forecasted moves from charts. This approach aims to capture a high probability (up to 80%) of reaching the target, which is referred to as a 'touch.' The expected move is calculated using implied volatility and can be found on most trading platforms. This method is particularly applicable to premium sellers and positions with defined expiration cycles.
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Applicable when- premium sellers
- positions with defined expiration cycles
Limitations- Does not apply to straight-out positions like stocks or calls
- Requires understanding of implied volatility and expected move calculations
Insight
Realistic Expectations for Defined Risk Trades
The speaker emphasizes that expecting to double one's money with defined risk trades is unrealistic. Instead, a more achievable goal is a 20% return on a $250,000 account, which can be achieved through defined risk strategies without constant monitoring. This approach requires setting realistic expectations and understanding that significant returns come with substantial risk.
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Applicable when- Defined risk trades
- Long-term investment goals
Limitations- Requires substantial capital
- High risk for doubling money
Insight
Relationship Between VIX and IVR
The speaker explains that when the VIX is elevated, it is rare to find low IVR across the board. High IVR is typically associated with elevated VIX, and low IVR is more common in post-earnings stocks. This suggests a strong correlation between market volatility (VIX) and implied volatility (IVR).
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Limitations- The correlation may not hold in all market regimes or during extreme volatility events.
Insight
Bond Market and Geopolitical Events
The bond market is influenced by geopolitical events and can signal shifts in market sentiment. The speaker suggests that the bond market is 'hunting for a Trump put' similar to the tariffs situation, indicating that market participants are anticipating a policy shift that could impact bond yields. The correlation between ZB (U.S. 30-year Treasury bond) and CL (Crude Oil) is noted as a strong negative correlation, with the bond market potentially acting as a 'bond vigilante' pushing yields down in anticipation of policy changes. The speaker also highlights the significance of the yield curve, noting that the 30-year bond is trading at a wide spread over the 10-year bond, indicating a potential for further movement in the market.
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Applicable when- geopolitical events
- bond market dynamics
- yield curve analysis
Limitations- The analysis is speculative and based on market sentiment rather than concrete data.
- The interpretation of the bond market's actions as a 'bond vigilante' is a metaphor and not a quantifiable market mechanism.
Insight
Bond Market Dynamics and Central Bank Influence
The bond market is described as massive and influential, with the Fed's actions having limited impact. The market's size and complexity mean that no single entity, including the administration, can dictate its direction. The bond market's behavior is seen as a reflection of broader economic sentiment and market expectations. This insight highlights the importance of understanding the market's scale and the limitations of central bank influence.
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Applicable when- central bank policy
- bond market behavior
Limitations- The market's behavior can be influenced by external factors not discussed here
- The analysis is based on a specific time frame and context
Insight
Volatility Trading Requires Adequate Account Size
Volatility trading, particularly with strategies like wall plays, requires a minimum account size to mitigate the risk of significant losses from a single trade. The speaker suggests an absolute minimum of $25,000 and recommends a range of $50,000 to $100,000 for a more robust position. This is due to the high risk associated with volatility, where a single adverse event could severely impact the account.
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Applicable when- volatility trading
- account size requirements
Limitations- The recommendation assumes a certain level of experience and understanding of volatility strategies, which may not apply to all traders.
Insight
Tail Risk Options as Crash Protection
Tail risk options, such as far out-of-the-money puts on indices like the SPX, serve as crash protection. These options are purchased to hedge against extreme market declines, though they are generally not recommended for regular use due to their high cost relative to the notional value they protect. The cost of such protection is often low compared to the potential risk, but it is not a typical recommendation for most investors.
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Applicable when- market volatility
- extreme market decline scenarios
Limitations- high cost relative to notional value
- not recommended for regular use
- only effective in the event of a crash
Insight
Integrity and Credibility in Society
The speaker emphasizes the importance of integrity and credibility in society, particularly in the context of sports and politics. They argue that the current state of affairs is marked by an integrity and credibility crisis, which undermines trust in institutions and individuals. The speaker suggests that eliminating conflicts of interest is essential to restoring this trust. This insight is applicable in contexts where institutional integrity is at stake, such as governance, sports, and corporate environments. However, the limitations include the difficulty of implementing such changes in practice and the potential for resistance from powerful entities.
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Applicable when- integrity crises
- institutional trust
- conflict of interest
Limitations- difficulty in implementation
- potential resistance from powerful entities
Insight
Trade Small and Often Strategy
Trading small and often is a strategy that leverages the law of large numbers to manage risk and opportunity. It allows traders to diversify across multiple underlying assets or strategies, which can enhance the distribution of risk and opportunity. This approach is not limited to a single underlying asset and can be applied across various instruments, as the focus is on the cumulative effect of multiple trades rather than the performance of any single trade.
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Applicable when- trading strategy
- risk management
- portfolio diversification
Limitations- Requires consistent execution and discipline
- May not be suitable for all market conditions or trader styles
Insight
Market Regime and Historical Performance
The speaker discusses the historical performance of stocks and assets like Nvidia during the bull market from 2009 to 2020, noting that significant wealth creation occurred during this period. However, the speaker emphasizes that such performance may not be replicable in the future, highlighting the importance of understanding market regimes and the potential for changing conditions. The speaker also mentions that strategies like premium selling can be effective but are not suitable for everyone.
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Applicable when- bull market
- historical performance
- market regime
Limitations- uncertainty about future market conditions
- strategy suitability varies by individual
Insight
Complex trades are more difficult to manage
The speaker suggests that complex trades like iron condors are more difficult to manage compared to simpler strategies like credit spreads. The reasoning is that managing complex trades requires more effort and attention, and the speaker prefers simpler strategies for ease of management.
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Applicable when- trading complexity
- strategy selection
Limitations- The speaker's preference may not apply to all traders or market conditions
Insight
Market Underperformance of US Stocks in 2026
The speaker believes the US stock market will underperform the rest of the world in 2026 due to a combination of cyclical factors and 'plain stupidity' in recent market actions. This underperformance is attributed to a lack of transparency, integrity, and honesty in the US market, which the speaker argues needs to be rebuilt. The speaker also notes that Europe has outperformed for many years and that it's time for a more normal distribution of performance across markets.
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Applicable when- 2026 market performance
- US stock market underperformance
Limitations- The speaker's analysis is speculative and based on subjective judgment rather than empirical data.
- The market's future performance is influenced by numerous factors beyond the scope of this analysis.
Insight
Market Commentary on Oil and Volatility
The speaker discusses the recent market movements, noting that oil prices have fluctuated significantly, with oil rising to nearly $96 before dropping to $77. The VIX, a measure of market volatility, has also increased, with the VIX cash at 2647 and the VIX future at 2410. The speaker highlights that the VIX staying above 25 indicates high market volatility and uncertainty. The market is described as heavy, with various indices like the Nasdaq and gold showing declines.
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Applicable when- market volatility
- oil price fluctuations
- volatility index (VIX)
Limitations- The speaker does not provide specific market regime details or future predictions beyond current observations.
Insight
Inverse Relationship Between Crude Oil and S&P
The speaker notes a strong inverse relationship between crude oil and the S&P index, where every tick of S&P's decline corresponds to a rise in crude oil, and vice versa. This relationship is described as unprecedented in the speaker's experience and is highlighted as a key factor to monitor. The mechanism is based on the inverse correlation between energy prices and equity markets, which can be influenced by macroeconomic factors such as inflation, interest rates, and economic growth.
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Applicable when- Crude oil prices
- S&P index movements
- Macroeconomic factors
Limitations- The relationship may not hold consistently in all market conditions
- Historical data may not predict future behavior accurately
Q&A
What do you mean by take profit at 50%?
Taking profits at 50% refers to capturing half of the expected move based on implied volatility, not the forecasted move from charts. This is a strategy used by premium sellers and positions with defined expiration cycles, aiming for a high probability of success.
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Actionable takeawayUse implied volatility to calculate the expected move and take profits at 50% of that move for premium sellers and positions with defined expiration cycles.
Q&A
Is it possible to make $5,000 a week with defined risk trades without constant monitoring?
The speaker acknowledges that it is possible to achieve a 20% return on a $250,000 account with defined risk trades, but doubling one's money is not realistic. The speaker suggests that the goal should be adjusted to a more achievable return, and that the strategy should involve selling premium (e.g., shorting options) rather than directional trades with profit caps.
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Actionable takeawayAdjust expectations to a 20% return on a $250,000 account using defined risk strategies.
Q&A
Can you explain the situation where a trader gets charged interest after selling puts and being assigned?
The trader in the question sold puts and was assigned, which required covering the position. The trader used a cash substitute (like SGOV or T-bills) to cover the margin, but interest was charged the next day. The speaker explains that this is due to the T+1 settlement rule, where the sale doesn't occur until the next day, and interest starts accruing the following day. The trader could have closed the position to avoid the interest charge.
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Actionable takeawayAvoid using cash substitutes to cover margin requirements if you're selling options, as it can lead to interest charges due to settlement delays.
Q&A
What is the correlation between ZB and CL?
The speaker states that there is a strong negative correlation between ZB (U.S. 30-year Treasury bond) and CL (Crude Oil). This correlation is noted as a significant factor in the bond market's movement, with the speaker suggesting that the bond market is acting as a 'bond vigilante' pushing yields down in anticipation of policy changes.
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Actionable takeawayThe strong negative correlation between ZB and CL indicates that movements in crude oil prices can influence bond yields, suggesting that investors should monitor both assets for potential market signals.
Q&A
Can you use the option market to capitalize on risk arbitrage spreads?
The speaker advises against trading such plays, stating that they are high-risk and not suitable for retail traders. The market indicates risk, and the options are not tradeable.
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Actionable takeawayAvoid risk arbitrage plays due to high risk and market uncertainty.
Q&A
What size account would you recommend for volatility trading?
The speaker recommends a minimum account size of $25,000 and suggests a range of $50,000 to $100,000 for a more robust position. This is due to the high risk associated with volatility, where a single adverse event could severely impact the account.
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Actionable takeawayVolatility trading requires a minimum account size to mitigate the risk of significant losses from a single trade.
Q&A
What types of oversight are there to prevent fraud in online sports betting?
The speaker discusses the challenges of preventing fraud in online sports betting, noting that leagues are connected to gambling sites and that there are concerns about players or their families benefiting from plays and stats. They suggest that leagues need to police their own players and eliminate conflicts of interest, such as allowing athletes to own betting books or casinos.
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Actionable takeawayLeagues need to implement strict oversight and eliminate conflicts of interest to prevent fraud in online sports betting.
Q&A
What is the main issue with the integrity of sports and politics?
The main issue is the presence of corruption, conflicts of interest, and a lack of trust. The speaker highlights that scandals involving athletes and officials, such as the shaving scandal at Arizona State, indicate a broader credibility crisis. They argue that these issues undermine the integrity of institutions and the trust of the public.
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Actionable takeawayThe speaker suggests that eliminating conflicts of interest and ensuring transparency are essential to restoring trust in sports and politics.
Q&A
Can you diversify in ways besides underlying the strategies?
Yes, diversifying through entering spreads on the same underlying at different strikes and times is a valid way to create more trades and diversify. This approach allows for more occurrences of trades and can be a smart way to approach the 'trade small and often' strategy.
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Actionable takeawayDiversification can be achieved through spreads on the same underlying, allowing for more trades and opportunities.
Q&A
Do you tend to favor simpler options strategies with few legs compared to the more intricate ones?
The speaker acknowledges that transaction costs have decreased significantly over time, making them less of a concern. However, the speaker prefers simpler strategies due to their lower complexity and risk profile. The speaker emphasizes that the choice of strategy should be based on individual comfort and risk tolerance, suggesting that simpler strategies may be more suitable for those who are not comfortable with complex spreads.
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Actionable takeawaySimpler options strategies may be more suitable for individuals who are not comfortable with complex spreads, as they offer lower transaction costs and reduced complexity.
Q&A
Will the 1% wipe out the rest in the stock market since COVID has revealed how easy it is to do so?
The speaker argues that the stock market is too large to be manipulated by the 1%, and that the 1%ers are not effectively managing their own money. The speaker also points out that even large firms like BlackRock or Vanguard managing over 30 trillion dollars would not collectively sell off their holdings because it would be self-defeating.
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Actionable takeawayThe speaker suggests that the stock market cannot be easily manipulated by the 1% or large institutions due to its size and the self-defeating nature of such actions.
Q&A
What are your thoughts on monthly dividend ETFs for retired individuals?
The speaker has no issue with monthly dividend ETFs for retired individuals, provided the underlying assets are suitable for the investor's risk tolerance. They suggest selecting a sector the investor is comfortable with and emphasize that the dividend stream should be suitable for the principal risk the investor is taking.
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Actionable takeawayMonthly dividend ETFs can be a viable option for retired individuals, provided the underlying assets align with their risk profile and the dividend yield is appropriate for their investment goals.
Q&A
Do you think that is still a good way of picking up stocks that maybe are oversold?
The speaker suggests that buying stocks that have pulled back (i.e., oversold) is preferable to buying at new highs, as it statistically makes more sense. However, they acknowledge that there is no proof that this strategy is guaranteed to work, and there is equal chance of the stock going lower or higher.
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Actionable takeawayBuying stocks that have pulled back may be a better strategy than buying at new highs, but it is not a guaranteed method for success.
Q&A
Why is the VIX approaching 30 significant?
The VIX approaching 30 is significant because it indicates increased market volatility. The speaker notes that this level is rare, occurring only 5-6% of the time, and that it could lead to wild swings in the market. The speaker also mentions that the VIX is currently at a 50% level over the mean, which is considered rare and could signal a potential shift in market sentiment.
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Actionable takeawayTraders should be cautious and prepared for increased volatility if the VIX reaches 30.