Trade idea
Trade idea Oracle bear spread
The speaker opened their first options trade, an Oracle bear spread with strikes 125 and 120, and mentioned making a mistake with the expiry date.
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StrategyOracle bear spread
Assetoptions
ExpirationAugust 21st
Entry / triggeropened first option
SpeakerAnton
Trade idea
Trade idea offensive roll
If a short put trade is profitable but not near 50% yet, and the delta has decreased, rolling the put strike to take additional credit can be considered an offensive roll. This strategy is suitable if the trader is bullish on the underlying asset and believes there is more upside potential. However, the trader should consider taking profits if the trade is already profitable and the time to expiration is approaching.
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Strategyoffensive roll
Assetoptions
Time horizonNear expiration
Entry / triggerProfitable short put trade with delta decreased
Target / exitAdditional credit by rolling put strike
Invalidation / stopIf the underlying asset moves against the position
SpeakerScott
Risks- Market volatility could lead to losses
- Rolling the strike may expose the trader to additional risk if the underlying asset moves against the position
Trade idea
Trade idea buying wings
The strategy involves buying wings based on the expected move, with the time frame (same day or extended) affecting the premium decay. The key is to use mechanical numbers from the screen for consistency. The results are virtually the same regardless of the time frame, but the focus should be on comfort and execution.
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Strategybuying wings
Assetoptions
Time horizonsame day or extended time frame
Entry / triggerbased on expected move calculation
Target / exitbased on expected move
Invalidation / stopbased on time decay and premium decay
SpeakerTom
Risks- premium decay
- time decay
- market volatility
Trade idea
Trade idea put spread
For a trader who has already engaged in a 'poor man's covered call' strategy, the next logical step is to consider selling a put spread slightly below the market. This strategy offers a similar risk profile while providing a defined risk and reward structure. It is suitable for traders who believe the stock will move upward but want to limit downside risk. The put spread allows for capturing premium while maintaining a directional bias.
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Strategyput spread
Assetoptions
Time horizonshort-term
Entry / triggerif the trader believes the stock will move upward
Invalidation / stopif the stock moves significantly against the position
SpeakerScott
Risks- limited upside potential
- risk of assignment if the stock moves significantly against the position
Trade idea
Trade idea SPX put selling
The speaker describes using an SPX put selling strategy as a main trade, which involves selling put options on the S&P 500 index. The strategy is effective when the market is trending upwards, as the underlying asset is less likely to fall below the strike price. The speaker emphasizes the importance of maintaining a portion of capital as dry powder to take advantage of high implied volatility. The trade is considered a 'bread and butter' strategy, and the speaker suggests that the risk should be limited to around 25% of the total capital to preserve liquidity for potential opportunities.
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StrategySPX put selling
Assetoptions
Time horizonShort-term, typically within a few days to weeks
Entry / triggerWhen the market is trending upwards and implied volatility is high
Target / exitProfit from the premium collected, with the underlying asset remaining above the strike price
Invalidation / stopIf the underlying asset drops below the strike price, the trade may result in a loss
SpeakerThe speaker
Risks- Market downturns can lead to losses if the underlying asset falls below the strike price
- High volatility can increase the risk of large losses if the market moves against the trade
Trade idea
N/A premium selling
In high volatility environments, selling out-of-the-money puts is a viable strategy to capitalize on elevated premium prices. The speaker emphasizes that this approach is straightforward and leverages the mechanics of premium selling, which has been refined over years. The trade is managed at 50% or 21dt, and the strategy is most effective when the market is getting 'a little cheaper' (i.e., volatility is moderate but not extreme). This is a contrarian approach, suitable for markets with high volatility, where put prices are high and basis is low.
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Strategypremium selling
Assetoptions
ExpirationN/A
Time horizonshort-term
Entry / triggerhigh volatility (VIX > 20)
Target / exitmanaged at 50% or 21dt
Invalidation / stopmarket conditions shift to low volatility or significant price movement
SpeakerTom
Risks- Market conditions shift to low volatility
- Significant price movement
- Liquidity issues in options markets
Trade idea
Trade idea spread
The speaker took a call spread trade and faced some criticism, but the speaker believes the spread is a safer approach compared to naked options.
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Strategyspread
Assetoptions
Entry / triggerweeks ago the 11315 call spread
SpeakerUnknown
Trade idea
Trade idea short puts
We're going to sell puts and we're never going to flip those cards over.
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Strategyshort puts
Assetoptions
Entry / triggerwhen the sell-off doesn't stop
SpeakerSpeaker 1
Trade idea
Trade idea put calendar
This is a calendar spread, which I thought was super cheap.
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Strategyput calendar
Assetoptions
ExpirationSE with 30 days
Entry / triggerright around the same price, right around a $160,$165
Target / exitright around a $160,$165
Speakerspeaker
Structure / legs- buying the O 95 puts
- selling the SE 95 puts
Trade idea
Trade idea puts
The speaker is selling puts at 3500 and 3600, indicating a bullish or neutral stance on the underlying asset.
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Strategyputs
Assetoptions
Entry / triggerselling the 3500 puts, the 3600 puts
SpeakerUnknown
Risks- The underlying asset could move significantly against the position.
Trade idea
Trade idea selling
NQ puts are more capital efficient than QQQ puts
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Strategyselling
Assetoptions
Time horizonshort-term
Entry / triggerselling a 12 delta put on NQ
Target / exit10 times the size
Invalidation / stoptrade size
Speakerspeaker
Trade idea
Trade idea naked call
Selling naked calls on stocks with call skew can be advantageous due to higher pricing in the market.
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Strategynaked call
Assetoptions
Entry / triggerstock with call skew
SpeakerUnknown
Risks- Market movement against the position
Trade idea
Trade idea put
Market may not move significantly, allowing the put position to expire worthless
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Strategyput
Assetoptions
Expiration2023-08-18
Time horizon2 days
Entry / triggerSold 90 puts in August expiring on Friday
SpeakerTom Sosnoff
Risks- Market moves against the position
- Volatility spikes
Trade idea
Trade idea call diagonal with call skew
relatively cheap
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Strategycall diagonal with call skew
Assetoptions
ExpirationSeptember
Time horizonmonth of August and September
Entry / triggerif you're a little bit bullish
Target / exitplay a little bit
Invalidation / stopif you're a little bit bearish
SpeakerTony Battista
Risks- if you're a little bit bearish, you can do a put diagonal, but you'll pay a lot more
Trade idea
Trade idea iron condor
iron condor is delta neutral and has no directional risk
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Strategyiron condor
Assetoptions
Entry / triggerwhen IVR is super high
Speakerunknown
Risks- market movement
- volatility changes
Trade idea
Trade idea put spread or call spread
The speaker suggests using a put spread or call spread to short a position with a high probability of a move, aiming for a 65-75% chance of success. The strategy involves giving the position time to work, with a time horizon of 50 to 70 days. The idea is to reduce the risk of a large downside move while maintaining some upside potential.
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Strategyput spread or call spread
Assetoptions
Time horizon50 to 70 days
Entry / triggerwhen the probability of a move is between 65-75%
Invalidation / stopif the market moves against the position
SpeakerDavid
Structure / legs- far out of the money put spread
- out of the money call spread
Risks- market moves against the position
- time decay
- implied volatility changes
Trade idea
Trade idea strangle
The speaker advocates for short strangles as a go-to strategy, particularly in volatile markets. This approach is based on the idea that market movements provide opportunities, and liquidity is a key factor in executing trades. The strategy is not tied to specific symbols but rather to the overall market conditions, emphasizing flexibility and responsiveness to market dynamics.
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Strategystrangle
Assetoptions
Time horizonshort-term
Entry / triggervolatility and liquidity
Invalidation / stopmarket movement and liquidity
SpeakerSpeaker
Risks- Market movement against the position
- Liquidity issues
- Volatility decay
Trade idea
70 to 75 puts short put
The speaker is short the 70 to 75 puts ahead of earnings, expecting the stock to decline. The rationale is based on the stock's recent performance and the potential for a decline due to earnings. The speaker is not covering the positions, indicating a commitment to the trade. The risk is that the stock could rise, leading to a loss on the short put position.
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Strategyshort put
Assetoptions
Time horizonshort-term
Entry / triggershort the 70 to 75 puts ahead of earnings
Target / exitprofit from the stock's potential decline
Invalidation / stopif the stock rises above the strike price
Speakerspeaker
Risks- The stock could rise, leading to a loss on the short put position.
- Earnings could be better than expected, leading to a decline in the put's value.
Trade idea
Trade idea vertical_spread
The speaker suggests buying a vertical spread and taking profit at a specific percentage. They also mention the possibility of placing a butterfly spread for a credit, indicating a strategy that involves multiple options legs. The trade idea is based on the expectation of market movement, with a focus on defined risk and limited exposure.
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Strategyvertical_spread
Assetoptions
Time horizonShort-term
Entry / triggerBuy a vertical spread when the market is expected to move in a specific direction
Target / exitTake profit at X percent
Invalidation / stopIf the market moves against the spread, the trade may be adjusted or closed
SpeakerS0001
Risks- Market movement against the spread
- Liquidity issues in the options market
- Regulatory changes affecting the market
Trade idea
Trade idea long diagonal spreads
short-term, long diagonal spreads can be used on unleveraged products
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Strategylong diagonal spreads
Assetoptions
Time horizonshort-term
Entry / triggeron unleveraged products
Target / exitshort-term profit
SpeakerTonyy
Trade idea
Trade idea covered call
entry level trades are accessible for beginners
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Strategycovered call
Assetoptions
Time horizonentry level
Entry / triggerselling puts in the notes because this is a trade I made on Friday
Target / exitmax profit of $600
Invalidation / stopwaiting for a little bit of softness, maybe 34, 35
Speakerunknown
Risks- waiting for softness
- market movement
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
Trade idea covered call
the market has come back and forth, making it a great selling opportunity
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Strategycovered call
Assetoptions
Time horizonshort-term
Entry / triggerwhen the market is in a two-sided market
Target / exitsell some stuff when the market is a great selling opportunity
Invalidation / stopif the market rallies back up again, sell them again
Speakerunknown
Risks- market rally
- volatility changes
Trade idea
Trade idea diagonal spreads
short-dated plays are good in ETFs
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Strategydiagonal spreads
Assetoptions
Expirationclosest to 45 days
Time horizonshort-term
Entry / triggerlow volatility environment
Target / exitdirectional
Speakerspeaker
Trade idea
Trade idea unbalanced iron condor
collecting premium with limited risk
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Strategyunbalanced iron condor
Assetoptions
ExpirationSEP
Time horizon39 days
Entry / triggercollecting $4.70
Target / exitcollecting $4.80
Invalidation / stopimplied volatility rank
SpeakerTom
Structure / legs- SEP 260 250 put spread
- SEP 90 95 call spread
Risks- volatility changes
- market direction
Trade idea
NEX wide put spread
the biggest risk in natural gas is always upside moves
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Strategywide put spread
Assetoptions
Time horizonimmediate
Entry / triggervolatility is acting at 0.046
Target / exitvolatility to come to 0.47
Invalidation / stopmarkets are bid at 42, but it's 47 right now
SpeakerTom
Risks- volatility acting against the trade
- markets moving in the opposite direction
Trade idea
Trade idea call spread or broken wing butterfly
The speaker suggests avoiding buying premium (calls or puts) when implied volatility is expensive, especially before earnings. Instead, they recommend using strategies like a call spread or a broken wing butterfly to limit risk while still participating in potential upside. This is particularly relevant for assets like Meta, where the speaker acknowledges the potential for earnings beats but is cautious about high volatility.
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Strategycall spread or broken wing butterfly
Assetoptions
Time horizonshort-term
Entry / triggerwhen implied volatility is expensive and earnings are approaching
Target / exitlimited upside with defined risk
Invalidation / stopif volatility remains high or earnings disappoint
Speakerspeaker
Risks- High volatility could lead to losses if the market moves against the position
- Earnings could disappoint, leading to a drop in the underlying asset
Trade idea
Trade idea scalp
sell options for scalp
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Strategyscalp
Assetoptions
Entry / triggerwhen it's plus on the day
Speakerspeaker
Trade idea
Trade idea iron butterfly
The iron butterfly strategy is recommended for earnings periods when the expected price movement is minimal. By selling an at-the-money straddle and buying out-of-the-money wings, traders can capitalize on low volatility. The strategy is considered low-risk with high potential returns if the stock remains within the expected range. However, the speaker notes that this strategy is not personally favored due to the potential for lower returns compared to selling strangles.
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Strategyiron butterfly
Assetoptions
Time horizonShort-term (weekly)
Entry / triggerEarnings period with low expected price movement
Target / exitProfit if stock remains within expected range
Invalidation / stopLoss if stock moves outside expected range
SpeakerEmmett
Risks- Potential for loss if stock moves outside expected range
- Limited risk but potential for lower returns compared to other strategies
Trade idea
XSP Buy call options
The speaker executed a trade by buying call options on XSP during a market correction, leveraging high IVR to capitalize on potential price movements. They sold the 7400 10 wides for tomorrow to reduce cost basis and manage risk. The trade was based on the expectation of a price increase following the correction, with the goal of profiting from the upward movement.
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StrategyBuy call options
Assetoptions
ExpirationAugust 21st
Time horizonShort-term (daily trading)
Entry / triggerMarket correction with high IVR
Target / exitProfit from price increase
Invalidation / stopLoss if price does not move upward
SpeakerJeff
Structure / legs- Buy 750 August 21st options
- Sell 7400 10 wides for tomorrow
Risks- Price may not move upward as expected
- Volatility may decrease, reducing the effectiveness of the trade
- Market conditions may change rapidly, requiring quick adjustments
Trade idea
NASDAQ short puts
The speaker is short puts on NASDAQ, covering them when the market is up. This suggests a strategy of profiting from a potential decline in the underlying asset, with the expectation that the market will not rise significantly. The speaker also mentions covering 10% of their position, indicating a partial hedge or risk management approach.
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Strategyshort puts
Assetoptions
Time horizonshort-term
Entry / triggerwhen the market is up
Invalidation / stopmarket moves against the short position
Speakerspeaker
Risks- Market moves against the short position
- Liquidity issues in options markets
- Time decay may reduce the value of the short position
Insight
Option Pricing and Strategy
Options are priced correctly based on the information available at the time of pricing. The key is to focus on strategy rather than trying to determine if an option is cheap or expensive. The IVR (Implied Volatility Ratio) on platforms like Tasty Trade can help assess whether options are priced relative to the stock's volatility. The market makers and aggregators spend significant resources to ensure accurate pricing, and the unknown variable (V) is the main factor that can lead to profitable trades.
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Applicable when- trading with options
- assessing option pricing
Limitations- Requires understanding of IVR and market dynamics
- Does not guarantee profitability despite accurate pricing
Q&A
What's actually happening in a stocks option markets in the 24 hours before earnings? Who's doing what and why does implied volatility behave the way it does?
In the 24 hours before earnings, there is uncertainty leading to people buying cheaper options to protect their positions, which holds volatility up. It's rare for volatility to implode before earnings. Market makers and risk teams manage their positions, and there's a tug-of-war between those selling premium and those buying premium. The outcome depends on market forces and no one knows if volatility will expand or contract.
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Actionable takeawayVolatility tends to stay elevated before earnings due to uncertainty and positioning by market participants, with no clear prediction on whether it will expand or contract.
Q&A
What did you actually do on the floor when you were trading and how did you balance it out?
The speaker explained that trading involved managing delta, which is the sensitivity of an option's price to changes in the underlying asset's price. They balanced trades by hedging the delta of options using futures or other options, focusing on delta management rather than complex strategies. This approach was described as straightforward and not requiring advanced knowledge.
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Actionable takeawayDelta hedging is a key technique in options trading, where traders adjust their positions to neutralize risk associated with price movements in the underlying asset.
Q&A
What is the expected move for the July 34 puts on IBIT?
The expected move for the July 34 puts on IBIT is $3.70.
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Actionable takeawayTraders should consider the expected move of $3.70 when evaluating the trade's potential.
Q&A
Is learning futures options the natural next step after trading regular options, or should one get comfortable with straight futures first?
The speaker recommends learning futures options as the natural next step after trading regular options. They suggest that futures options are a progression from equity options and that trading futures is a different animal. They advise getting comfortable with futures options before jumping into futures directly.
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Actionable takeawayFutures options are a natural progression from equity options, and traders should get comfortable with futures options before moving to straight futures.
Q&A
Why is liquidity important for scalping options?
Liquidity is crucial for scalping options because illiquid options result in excessive edge given up during trades. The speaker emphasizes that tight markets with high liquidity, such as SPY and SPX, are ideal for scalping.
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Actionable takeawayScalping options requires tight markets with high liquidity to minimize the edge given up during trades.
Q&A
What is the preferred method for scalping in the futures market?
The speaker prefers scalping the active month for futures and monthly options for options trading, maintaining consistency within the same expiration cycle.
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Actionable takeawayConsistency in expiration cycles is key for effective scalping strategies.
Q&A
How do you know if an option is cheap?
An option's price is determined by the information available at the time of pricing. It's not about whether an option is cheap or expensive, but rather about the strategy and the implied volatility (IVR). The IVR on platforms like Tasty Trade can help assess if options are priced relative to the stock's volatility. The key is to focus on strategy rather than trying to determine if an option is cheap or expensive.
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Actionable takeawayFocus on strategy and implied volatility rather than trying to determine if an option is cheap or expensive.
Q&A
Is there any advantage of trading options futures futures options versus stocks ETF options?
It depends on the product. For example, Natty Gas is traded via futures options, while SPX and SPY are options for stocks. Tax advantages exist for SPX, but the speaker recommends trying both and staying with what feels comfortable.
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Actionable takeawayChoose between options, futures, or ETFs based on the product and personal comfort.
Q&A
What's the problem?
The problem was that customers had long positions in Google (GOOGL) with a straddle that expired worthless, resulting in a significant loss for the firm.
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Actionable takeawayLong straddles can expire worthless if the underlying stock doesn't move significantly, highlighting the importance of proper risk management and position sizing.
Q&A
What delta mees strangle would you sell and how far out would you go?
The speaker suggests selling a strangle with deltas between 16 to 22, and mentions that the expiration could be September or October, with a recommendation to roll to October in a week.
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Actionable takeawayThe speaker recommends selling a strangle with deltas between 16 to 22, with expiration in September or October, and suggests rolling to October.
Q&A
Does the 5 DTE include the weekend or is it just trading days?
The 5 DTE includes the weekend and is based on calendar days, not trading days.
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Actionable takeawayWhen calculating days to expiration for options, use calendar days rather than trading days.
Q&A
What is the strangle in Hood?
A strangle in Hood with 80 strike put and 115 strike call for about 240.
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Actionable takeawayThe speaker discusses a strangle in Hood with specific strike prices and a cost of 240.
Q&A
Have you ever been short an option and a three standard deviation move happens overnight?
The speaker acknowledges that this is a common scenario and that it can lead to significant losses.
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Actionable takeawayShorting options can lead to significant losses if a three standard deviation move occurs overnight.
Q&A
Is buying options a fair bet?
Buying options is not a fair bet as implied volatility can crush returns before the stock even moves. It does not pay, and the outlier move where it pays is rare and hard to achieve.
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Actionable takeawayAvoid buying options due to the risk of implied volatility crushing returns before any stock movement.
Q&A
What types of metrics do you guys look at to make the decision of should I put something on with 30 days or should I put something on at 60 days?
The decision is subjective and depends on volatility. In high volatility, shorter-term options (30 days) are preferred. In low volatility, longer-term options (60 days) are preferred to synthetically increase volatility exposure.
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Actionable takeawayIn low volatility environments, extend duration to longer-term options to synthetically increase volatility exposure.
Q&A
Is the best way to say that the NQ put and the QQQ put are similar?
They are similar in terms of buying power and leverage, but NQ is more capital efficient.
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Actionable takeawayNQ puts are more capital efficient than QQQ puts.
Q&A
Do you mostly use futures and stocks for scalping? And if so, why not options?
Futures and stocks are preferred for scalping due to higher liquidity and lower transaction costs. Options are avoided because they require more edge and can reduce profitability due to the cost of entering and exiting positions.
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Actionable takeawayFutures and stocks are more liquid and have lower transaction costs, making them more suitable for scalping strategies.
Q&A
How do you like the option markets in Moo?
Not great.
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Actionable takeawayThe speaker is not optimistic about the option markets in Moo.
Q&A
How did you find the trade in Meta with high volatility?
The trade was found on the high IVR list, not the high option volume list. The user might have been looking at the wrong index (e.g., Nasdaq or S&P 100) or sorted the list incorrectly.
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Actionable takeawayUse the high IVR list and ensure the correct index is selected when searching for high volatility trades.
Q&A
Are hourly expiration options coming anytime soon?
The speaker states that they have not heard of hourly expiration options coming anytime soon, but if they do, they would not be surprised. They suggest that if they are introduced, they should be cash-settled and not settle to stock.
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Actionable takeawayHourly expiration options may be introduced in the future, but they should be cash-settled rather than settling to stock.
Q&A
Do some type of underlyings always have put or call skew?
The speaker explains that while put skew is common, call skew can also occur, especially in indices and ETFs. However, the skew can change at any time and is influenced by money flow, not just institutional or retail traders. The speaker notes that 90% of the time, there is call skew, but this can vary.
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Actionable takeawayMarket skew is not fixed and can change based on market conditions and money flow. Put skew is more common, but call skew can also occur, especially in certain assets like indices and ETFs.
Q&A
Is the expected move on the weekly options for XYZ stock based on calculating all open interest in that stock's options?
No, the expected move is based on the options implied volatility, not open interest.
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Actionable takeawayThe expected move for options is calculated using implied volatility, not open interest.
Q&A
today's option models whether they're black shows or whatever you guys are calculating what happens if the liquidity like an 87 becomes so or the volatility and the liquidity becomes so skewed that everybody kind of walks away and the bids
The speaker suggests that even if liquidity or volatility becomes skewed, markets won't get too wide during the day. High-frequency firms have handled such situations, and models are based on normal liquidity. If spreads do widen, a contrarian approach could be taken, but it's unlikely. The speaker advises not to trade with the idea of 'monsters under the bed' and to focus on liquid products where you can trade both sides.
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Actionable takeawayModels are based on normal liquidity, and while spreads can widen, it's unlikely during the day. A contrarian approach could be considered if spreads get too wide, but it's not recommended to trade with the idea of extreme market events.
Q&A
Is there anything wrong with an options and futures only portfolio?
There is nothing wrong with an options and futures only portfolio. It is a valid strategy that can be used to create synthetic long positions and benefit from option decay. The speaker mentions that this approach has been their entire portfolio and that it is a viable strategy for a small group of traders.
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Actionable takeawayAn options and futures only portfolio is a valid strategy that can be used to create synthetic long positions and benefit from option decay.
Q&A
Is it possible to use ES or MES instead of SPX for zero DTE trades with an account size less than $25,000?
Yes, it is possible to use ES or MES futures options as a substitute for SPX options. There are no PDT restrictions on futures or futures options, making them a viable alternative. MES is particularly suitable for smaller accounts due to its smaller contract size.
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Actionable takeawayTraders with accounts under $25,000 can consider using MES futures options for zero DTE trades as an alternative to SPX options.
Q&A
Are you still holding the SpaceX 105 August 105 put position?
The speaker is long August 105 puts in SpaceX, but not in the account for lost dog. They are short 100s, 95s, 90s, and 80s puts.
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Actionable takeawayThe speaker is long August 105 puts in SpaceX, but not in the account for lost dog. They are short 100s, 95s, 90s, and 80s puts.
Q&A
Is writing calls against a large position risky?
The speaker suggests that writing calls against a large position is not risky to the market, but it could be risky for the counterparty. They emphasize that the market is not typically involved in such large trades.
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Actionable takeawayWriting calls against a large position may not be risky to the market, but it could be risky for the counterparty.
Q&A
What do you think about intel here?
The speaker likes Intel at 85 and suggests a long diagonal spread in Intel.
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Actionable takeawayThe speaker suggests a long diagonal spread in Intel at 85.
Q&A
What is the potential impact of zero day options on the market?
Zero day options, which are short-term options, have become a significant part of the market, accounting for 60% of S&P index buying. The speaker suggests that the market calm observed might be due to the short expiration dates of these options, which prevent significant market movements. The speaker also notes that the options clearing corporation initially had concerns about market risk and margin requirements but later moved away from these concerns.
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Actionable takeawayZero day options are a significant part of the market, and their short-term nature may contribute to market calm. Retail traders prefer short-term trading, and the market seems to accommodate this demand.
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
Is XSP a better option than SPY for trading?
XSP is cash-settled and does not have the risk of stock price movements after the close, unlike SPY. However, XSP may involve additional fees and has different tax implications compared to SPY.
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Actionable takeawayXSP is suitable for traders who prefer cash-settled options and are willing to accept potential additional fees and tax implications.
Q&A
Is it possible to get assigned while a short strangle or straddle position is on?
No, you cannot get assigned intraday. Assignments typically occur after market close.
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Actionable takeawayAssignments for short strangles or straddles occur after market close, not intraday.
Q&A
What is the trade idea for Apple?
Tony suggests a put diagonal strategy for Apple, buying the August 21st 320 put and selling the August 3rd 310 put, with a bearish outlook.
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Actionable takeawayA put diagonal strategy is suggested for Apple with a bearish outlook.
Q&A
Is it normal for option traders to do well while stock traders struggle in a range-bound market?
Yes, it is normal. When option traders are successful, stock traders often struggle, and vice versa. This is due to the nature of their strategies and market conditions.
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Actionable takeawayOption traders and stock traders often have conflicting outcomes in range-bound markets due to their strategies.
Q&A
Does weekly daily or monthly expirations quarterly whatever it is now that we have daily expirations matter any longer?
It doesn't matter anymore because they roll all of their longer dated put on a 45 days to the next month when there's around 21 days to expiration.
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Actionable takeawayDaily expirations don't matter as they roll longer dated options.
Q&A
Does IVR really matter?
IVR (Implied Volatility Ratio) doesn't matter for a covered call strategy on existing stock holdings because the focus is on the direction of the stock. However, higher IVR can lead to higher premiums, which is a benefit.
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Actionable takeawayFor covered calls on existing stock holdings, focus on the stock's direction rather than IVR. Higher IVR can result in higher premiums.
Q&A
When SpaceX was trading at like in the 170 range, I I sold some puts. Okay. you know, at 155
The speaker sold puts at 155 when SpaceX was trading at 170, but the stock dropped significantly, leading to losses. The speaker had to roll the puts out and eventually recovered some of the losses.
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Actionable takeawayWhen selling puts, it's important to consider the expected move and not get too close to the money.
Q&A
If you're trading zero DTS every day to buy the wings a month out and save on the spread, do you close the entire iron condor let's say at a 25% profit or you keeping the wings open for the next day?
The speaker suggests keeping the trade open and rolling the shorts, but acknowledges that the trade can be closed at 25% profit. They also mention that the trade costs more money due to the back month wings.
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Actionable takeawayKeep the trade open and roll the shorts if holding positions, but be aware of the higher costs associated with the back month wings.
Q&A
What do I trade? How do I do it?
The speaker discusses trading futures, options, and crypto, emphasizing the importance of understanding market outlook and using micro futures for retail traders due to their lower capital requirements and higher leverage.
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Actionable takeawayMicro futures are recommended for retail traders due to their lower capital requirements and higher leverage compared to mini or full futures.
Q&A
Why do you recommend options with the unfavorable tax treatment of the wash sale rules which significantly eat into profits?
The speaker clarifies that options profits are generally treated as ordinary income, and there are no unfavorable tax treatments with the wash sale rules when it comes to option profits. They suggest that traders should focus on their trading strategy rather than tax implications.
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Actionable takeawayOptions profits are generally treated as ordinary income, and there are no unfavorable tax treatments with the wash sale rules when it comes to option profits.
Q&A
That is the most I want to sell on Nvidia this year for tax purposes.
Roll calls forward to avoid assignment risk and large tax bill.
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Actionable takeawayRoll calls forward to avoid assignment risk and large tax bill.
Q&A
Where are the 100 puts?
The 100 puts are trading around $4.
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Actionable takeawayThe speaker is discussing the price of specific put options.
Q&A
What strikes are you short in SpaceX?
The speaker is short the 90 strike on SpaceX.
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Actionable takeawayThe speaker is short the 90 strike on SpaceX due to high volatility.
Q&A
You would look to do a trade like this then? Um, I'd rather sell puts in there
Sell puts at 10, 105 volatility, 110 volatility
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Actionable takeawaySell puts in high volatility stocks
Q&A
What option strategies are suitable for playing earnings?
The speaker suggests selling puts or put spreads as suitable strategies for playing earnings, leaning bullish or omnishirectional. This approach is suitable when volatility is cheap, and the stock feels like it's trading cheap, even if it's not technically cheap.
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Actionable takeawaySelling puts or put spreads can be a viable strategy for earnings, especially when volatility is cheap and the stock feels undervalued.
Q&A
Why did you have August 7th for SpaceX?
They don't have Fridays.
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Actionable takeawayOptions for SpaceX are available on the 7th, but not on Fridays.
Q&A
Are there options on options?
The speaker explains that while there are options on futures (which are derivatives), there are no options on options themselves. This is due to the complexity of the settlement process and the lack of interest from exchanges to develop such products.
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Actionable takeawayOptions on options are not currently available due to practical and regulatory challenges.
Q&A
What is the recommended approach for trading the US 2-year versus 10-year Treasury note pairs trade spread?
Options on the 10-year Treasury notes (ZN) are recommended as a starting point due to their accessibility and lower risk compared to options on the 2-year Treasury, which are reserved for professionals. The 10-year notes offer a great entry point for learning futures options trading with minimal risk.
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Actionable takeawayTrade options on the 10-year Treasury notes (ZN) for a low-risk introduction to futures options trading.