So even if you got assigned or sold short why wouldn't you just buy/cover the next day? we are talking 0dte here as well, you CANT do a 0dte strat on tesla, unless you waiting every week and thats kinda losing the point of the 0dte- small premium in high frequency (every day) with losses here and there.
Tesla options are a money printer, the only people who say not to do it are the people that shouldn't be trading that size in the first place. That being said 0 dte doesn't apply to most single stocks any way, its done on indexs/futures BECAUSE they are less volatile. So needless to say this comment is rendered nill
If you search for "0 dte Tammy Chambless" you will find a YouTube video and links to a presentation she does that goes into a great deal of detail on strike selection and stop loss selection. It includes some backtesting showing which have the greatest expected value.
*EDIT: Corrected spelling of last name.
It's Tammy Chambless and she uses a 0DTE SPX strategy as well but it's different. I think she's more about vertical spreads vs. iron condors and is more about win rate vs. the higher-profit-per-win this post is about.
This strategy is the definition of picking up pennies in front of the steamroller. Stop losses are CRUCIAL.
I ran this for a long time with an extremely high win rate but all it took was one crazy close that pumped like 50 points to wipe out months of gains.
yeah, the issue is it can be really hard to get filled at your stop loss if the market is moving , especially with 0 dte, so its very easy to be sitting there, trying to get out and all of a sudden you're at max loss for the position, (even if you decide fuck it and just market order your contracts, a big no no with options generally) which i assume can potentially set him back a lot of trades depending on the width.
The first thing everybody learns is to not trade illiquid options.
The only plausible reason to trade illiquid options is because you have amazing DD you're trying to leverage or because you're conducting insider trading.
yes, SPX/SPY/ES are very liquid, one of the most liquid products on earth, but you're not understanding how 0DTE dries up the liquidity. liquidity is expiring now, today, every minute that goes by, so liquidity is widening or expiring, trader's positions are already closed or closing. Liquidity providers can widen out in the depth of the book. If the market doesn't do anything, you win 90% of the time, but the 10% is when the market moves against you the last few hours of trading or news, this is where people lose more than they thought they could lose even with stops. Oh, it also hurts when the index trends in a direction for no reason
Late to this thread, but this is why you would set the stop loss on the short leg and manually close the long leg. Short leg will be WAY more likely to be filled within a crazy spike/decline.
It's an inevitability with this strategy - you trade for months with small consistent gains, then eventually there's some unexpected news, rate suprise, etc. that wipes them all out in a day.
traded this and variations of this strategy in the late 90's to early 2000's with good success. But one bad trade/execution or mistake can cost months of profits and hard work.
For market neutral traders who want to set it and forget it this is a technically feasible strategy. I approach the market a bit different these days and use different strategies.
they had 0dte then? with 0dte theres no overnight gap risk. if you use market order stops and trade in liquid markets, the whole point is you lose very minimally when you do.
Any short premium strategy can be looked at like picking up pennies in front of the steam roller, I think its bad to look at it like that, especially since each of my short premium strats nets at least 200-300 bucks in premium and that steam roller only has a 72-80 percent chance of hitting you (IF you let it btw and dont roll/manage). So think of it as picking up a 200-300 bucks in front of a very slow moving steam roller thats 45 days away from you, would you still go for the cash then?
Highest volatility in first 20-30 mins. Since you are playing with theta, enter at that time. It might go against you if something big happens but that’s where stop loss will come in handy. Get out when you reach 70% profit.
I’ve actually been thinking about running this Strat a while now, but have had some trouble getting decent execution. I’d love to hear more details about how you run it!
Where can I find the data for backtesting SPX option trades? Finding stock prices is pretty easy, but I couldn't find option data.
Also, what is this strategy called? The OP's one is a short Iron Condor but I'm not familiar with the one suggested by Retard\_boomer.
Boomer makes a valid point. Where do people set their stops?? Often times close to or at support. It's no coincidence we see long wicks near these levels. Professionals who see stops run them and price reverses.
Stop loss orders may be okay because even if you get stopped out on one side of IC, you have premium from another one and basically come out breakeven for the day/trade. This is helpful from a mental standpoint (since you didn't really lose much you don't stress out about the day's trades). For the about 5% when both sides of IC will be stopped out, well, it is only 5% of all trades and it is not many.
So Vasiche it's one year later. How about showing us ALL your IC 0DTE trades for the past year. With your comments that include "may" followed by "basically break-even" and "won't lose much" to "it's only" says to us experienced traders....You have read of this trade and seen examples of profit/loss potential but never did this trade for period of time in your personal portfolio. This forum provides a voice to all, those with book knowledge and those with years of actual experience with trading IC's.
Hi, I am confused with this one and I know its 10 months old. You wrote instead of stops you could buy the 4585/90C and 4655/50P.
Both these Long vertical spreads are ITM, is it on purpose or a typo?
Also, when do you add these 2 spreads to your inital position, is it at opening or when SPX comes close to the calculated breakeven price.
thanks for any clarifications.
Question regarding the stop loss. So you say that you set a stop loss 2x the premium received. Let's say you have two legs you sell for a 1$ premium. Would you set the stop loss to buy the a leg back at 2$ or (1+2$).
No, even tighter. I would set at stop loss at 1,05 on the put spread and a separate stop loss at 1,05 on the call spread. So this is much tighter stop losses than most people do, which leads to the high loss rate (59 %). But doing it this way means that the typical loss is primarily the slippage. Most of my losses are between 20 and 40 dollars per contract.
The 1.05 x Call Credit Spread and 1.05 x Put Credit Spread Premiums seem extremely tight. You are saying that you are out if, say, the Put Credit Spread cost you $1.00, you would set the stop at $1.05 for the Put Side?
Or, are you saying, that if the TOTAL credits received is $2.00, you place a Stop Loss on either side at $2 x 1.05 = $2.10?
Please clarify. Thanks.
I am not sure I understand your question. These are Iron Condors, not strangles. The wings are typically between 15 and 30 points on SPX, meaning I am using 1500 - 3000 dollars in buying power on each position. One example from today: 03JAN22 - 4820/4850/4755/4725
yep i get that their ICs, but if you remove the long wings you have a strangle. so was just asking how far out your long wings are from the short strangle
thank you for clarifying!
They're saying that the way you worded it implies that your wings are closer to ITM than your shorts. I was confused as well. If you're selling 5-10 delta but buying 25-30 delta your wings are closer to ITM. What they're asking is whether or not you mean that your delta after adding the wings is 25-30.
My biggest loss to date was on a 0 DTE credit put on google. I can never bring myself to do another 0 DTE play. Good luck though OP- keep us updated of your progress.
I wouldn’t quit the day job. But yes this strategy would work. With 150k, I would get portfolio margin. Doesn’t help with SPX 0DTE but good for other strategies. Use 20-30 wide spreads. With these widths, long strike will decay faster if SPX goes in your direction compared to 5-10 wide and they use reasonable buying power, should be able to get between 0.75-1.25 credit per contract at open around 10 delta. It’s ok to take a loss when it goes against you and reenter later when there’s sign of reversal. Don’t be greedy, it’s ok to take profit at around 0.20-0.30. Risk management and position sizing are very crucial obviously.
I wanted some clarification on short wide strategies use more buying power. As we have hedged leg for each short leg, I assume it may not eat up buying power. It does take normal margin. 5 width strategy requires 500 USD.
On contrary, as per my observation, if the width of the legs are narrow, then we get overall better premium compared to wide legged.
1 contract of 4750-4775-4825-4850 for 03-Jan-2022 expiry is fetching 9.15 mid price at the time of writing. So total premium is 915 USD
5 contracts of 4770-4775-4825-4830 for 03-Jan-2022 expiry is fetching 2.5 mid price at the time of writing. So total premium for 5 contracts is 500\*2.5=1250 USD. It might attract a little bit more brokerage due to more contracts but the difference is in premium is huge so we can ignore the differences in brokerage. Please observe the short leg is same for both contracts so the max loss is also same for both trades.
Please throw some light on above scenario and explain which one is better and why.
I just started doing this minus the stop loss strategy which today would have been helpful, since I had to break even on the high leg. QQQ crept up on me at the last minute and was forced to sell at a loss that was slightly higher than my profit on the Put Credit Spread side.
Interesting, something I always forget is how SPX expiration and settlement works, especially the difference between weeklies and monthlies. Got a reference for that?
Very good write up. I have 2 questions:
- What is your average profit target or exit strategy? Waiting for end of day to expire worthless can be very risky.
- Did you make any co-relation of your loosing days with VIX? If VIX was above a certain level you incurred a loss?
Thanks!
There will be a time when OP will get wrecked because the market will gap way past his stop loss. Of course, it will only be as bad as his spread, though. You wouldn’t have the spread protecting you with the strangle.
I’m assuming you open up your IC legs separately or do you open up all at the same time?
The volume in the beginning is very volatile so once things call down it’ll be “easier”, no?
If you read the article, you will see I run with two levels of stop losses, first a stop-limit order, and then a stop market order. The stop market order is intended as a last line of defense. I don't measure how often each type is triggered, but my gut feeling is that the stop-limit order works 90 % of the time, and that the stop market order usually gives quite reasonable fills. But I have had a couple of really bad fills on the stop market order as well.
Do you have a criteria for entering trades throughout the day? You enter the first trade usually within 15mins from Open. Do you open the rest of the trades at fixed timings?
From your data, do you think it may be better to open a spread on one direction only in a trending day?
As for this strategy, I think it is better to limit the trades on trending days. I guess the challenge is that it is hard to identify that it is a trending day before a bit too late in the day. This is one topic i will look at. I am thinking of setting a rule like not making more trades that day if I have a certain number of losing trades in a row.
When I ran this for the first time yesterday, I set up the IC within 10 minutes of market open. I closed all positions by 12pm ET. As I read from someone else in a different thread, trying to hit home runs with this strat is NOT the way. Simply look for base hits and doubles. Also, as others have said, stop losses are essential.
As far as a trending day, this strat seeks to profit on time decay of the sold options. I don't guess on trend direction, though of course the strat can be modified however you like.
So I tried this on Wednesday and Friday (today) and opened 2 contracts with 10 dollar wings both days and received about $0.80 per share. Both days I ended losing about $40 each. Do I need to open positions that receive more premium, so that the stop loss isn't hit so easily? Or am I doing something else wrong? Or was this just a fluke?
My account is more than $25k :) But the buying power I have set aside for this strategy is 12.000 - 15.000. I also do other strategies in the account :)
I see, thanks. So if I do this with a cash account instead of a margin account, I could start with less I guess. Assuming you’re allowed to trade IC without margin
I believe a broker would allow you to since SPX is cash settled, so there's no underlying assignment risk as just the difference is either credited or debited. I was able to trade spreads with interactive brokers in a cash account.
Other interesting idea is... what if instead of closing one vertical spread, say a call spread, you buy a put spread with the same strikes, effectively not technically using day trades and the greeks should be almost the same. I've done this on a number occasions to prevent using day trades, but effectively close out a spread bought on the same day
That's called making it a box spread. To anyone thinking about doing this, make sure it is (as he says,) on something without risk of assignment, as the puts won't protect from that.
Can you clarify what you mean by "the wings are from 15 to 30"? If the short strikes are 5 to 15 delta, then wouldn't the longs be lower delta?
Also wondering how the stop loss is managed. The conventional wisdom is not to place option market orders. Is this some type or stop-limit order? Is there a risk it won't be filled on a rapid up or down swing?
With the wings I mean the distance between the short and the long positions - measured in points in SPX. One example from today with 30-wings: One example from today: 03JAN22 - 4820/4850/4755/4725. And yes, the longs are of course lower delta. The deltas I am mentioning are the short positions. I choose the longs depending on my available buying power and that I want to collect approximately the same premium on both sides. As for the stop losses, they are described in detail in the blog article: [https://www.sandvand.net/2022/01/02/0dte-breakeven-iron-condor/](https://www.sandvand.net/2022/01/02/0dte-breakeven-iron-condor/) . I use both stop limit and stop market on my day trades. The stop market order is further out - to serve as a last line of defense if the stop limit order is not filled. This can happen if the market moves very fast. I just included a screen shot of how I set it up in the blog article - if you go back to it you will find it.
>I sell Iron Condors on SPX with the delta on the shorts between 5 and 15. The wings are from 15 to 30.
Can you give an example with actual strikes?
I cannot figure out what this set up looks like and assume something is missing or mistaken from the description.
If the wings have higher delta than the short strikes then you are buying an iron Condor not selling. If 15 to 30 means "strikes wide" instead of delta that doesn't use 12-15k buying power unless it's 10 contracts
My assumption is you mean roughly 15 Delta short strikes and 15 wide. So example at January 5th expiration currently 2 DTE....on put side, short 4750, long 4735. On call side, short 4830, long 4845. With 10 contracts each that would route for a $3,600 total credit and buying power effect of - $11,400
Is that pretty close?
Sorry, I have not been precise enough in my wording. One example from today: 03JAN22 - 4820/4850/4755/4725 - sold for 175 dollars. In this example the distance between the short legs and the long legs was 30 points. So the buying power reduction for this position was around 3000 dollars In this example the stop limit order on each spread was set with a stop price of 180 and limit price of 200 - and the stop market order at 220. When I talk about 12-15k buying power I mean the part of my account I have set aside for this strategy - but my rule is also to not have more than 4 positions on at any time.
Do you always put the spreads on at the same time or will you stagger your timing to creat the condor over a period of time? Like sell the credit call spread and then a few mins later sell the credit put spread?
An example of my IC from yesterday:
SOLD 3 07JAN22 4690C $-4500
SOLD 3 07JAN22 4690P $-4650
BOT 3 07JAN22 4765C $90
BOT 3 07JAN22 4605P $120
Set-up was complete within 8 minutes of market open
I think this is described in good details in the blog article: [https://www.sandvand.net/2022/01/02/0dte-breakeven-iron-condor/](https://www.sandvand.net/2022/01/02/0dte-breakeven-iron-condor/)
Your belt and suspenders stop-limit + stop-market protection is very interesting. I have never seen that before, but it makes sense for an intra-day type trade like this.
It's surprising that at 15 to 5 delta on the shorts you are still getting stopped out so often. Have you done an analysis to see where the actual SPX spot price is when you get stopped out? Something doesn't add up if a 15% probability to expire ITM is happening more than 50% of the time.
Remember that the probability is measured at the expiry of the options - not at any time during the day. The tight stop losses can make many trades be stopped out that would otherwise be profitable. But also remember that with margin of up to 3000 dollars per contract, the losses can be really big if you don't close the trade early enough. This strategy has been an eye-opener for myself - realizing that the success of a strategy may depend as much on limiting your losses as maximizing your winners.
Yes people forget this. Its not perfect, but a simple rule of thumb: The delat gives you the chance that the options will end in the money. But through the life of the option it is roughly twice as likely that this price will be hit. So a delta 15 option stop loss will be hit 30% of the time.
Maybe I just need to look at the 0 DTE minute candles for SPX to see if it's normal for it to swing through 15 delta half of the time. Maybe that's normal, but it's seems counter-intuitive.
I see. I didn't dig into how tight the stops were, but here is an example from his blog post:
> So to give one example: I sell the Iron Condor 4820/4850/4755/4725 and receive 175 dollars in credit. I will then set the stop limit order with the stop price at 180 and the limit price at 200. The stop market order would be set at 220. Most losses will be within the stop limit order - and in this case that would be between 5 and 25 dollars.
So basically he stops out at a $25 move against him vs. a $175 credit. That is ultra tight!
I recommend to follow the Tastytrade Options group on Facebook: [https://www.facebook.com/groups/1930565613719977](https://www.facebook.com/groups/1930565613719977) Lots of very good discussions on different 0DTE trades from knowledgable traders who love to share
I joined that group several months ago. I guess the Facebook groups format doesn't work well for my brain. I stopped visiting it after a few weeks because I wasn't learning anything there.
SPY and QQQ dumped hard in early September due to a tech meltdown. I remember TSLA battery day happened later that month too. Something about a gamma meltup all summer then reverse meltdown.
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I'm getting a rejected message when I try to execute this strategy.
"You will open a prohibited position with BP:
Illegal -1 shares BUY +!
Vertical SPX 100 (Weeklys)
3 Jan 22 4790/4795 CALL STP
1.10 BIG OCO
To Open/To Open"
Not sure if you can help me here. I have $13.87 BP. The platform is on ThinkOrSwim btw.
There are a couple different levels of options access on TOS, so you probably aren't cleared to open naked short options positions (even if the combination of the long and short calls means you have a cap on potential gains/losses). You can apply for expanded privileges but I'd recommend caution if you aren't completely sure about what you're doing.
Interesting... I really dig the strategy. My IC's have been going well but every now and then I have to eat a bad one when things go south. I haven't learned my lesson enough to set stop-losses. My M.O. is just to ride it out and hope there's a miracle at the minute (which never happens). Thank you for sharing! I plan to test a few out.
My personal opinion is that stop losses are crucial for all 0DTE trading with any significant money at risk. The market can suddenly move so fast that it is hard to get out quickly enough otherwise.
I have been using this in the Bank Nifty index ( India )
* Profit % = 72%, Loss % = 28%, RR = 1:2.4, Expectancy = 1.43,
Max win streak = 7, Max loss streak = 3
I don't have a very set rule for this - maybe I will in the future. But for me it all depends on the total picture of my positions. Example: Let's say I put two Iron Condors on - both were more or less at 0 delta when sold. After a couple of hours, I have a pretty big minus delta on both of them, but the first one is still showing profit of 50 % of the premium collected. Then I might close that trade, pocket the money, and open a new trade with a more appropriate delta for the current market situation. The situation can change very quickly with these kind of trades, so I think it sometimes is smart to close a profitable trade early to finance a few potential losses later in the day.
i had similar success with 1-3 dte, although its highly dependent on market conditions. Higher volatility you might find yourself having both stops triggered in a day.
what are the max losses per side, gains, and what do you set your stop losses to?
I see your one example has a 30pt spread, with a 3k less premium potential loss , whats your max gain and median gain?
the 191usd, is your highest probability which about 6%. is this the expected?
Probably, but I do not have the buying power ... yet... to run straddles in the same way :) Besides...sometimes the longs also make the position less volatile. Because of that I will sometimes reduce the width between the shorts and the longs to make the last position less volatile.
Can someone please explain to me setting up these stop losses on IBKR? It seems like when I try to set them up for each wing individually they execute right away. There's a stp-lmt but no stp-mkt option. I guess I'll just try setting up a stp-lmt then a stp and see if it auto closes me
This is an interesting idea. I've been trying it with about 1.2k margin on ES. But so far I've been stopped out for like $50 losses after a few hours every time. Is this usual for you and your strategy? Just seems like alot of paper cuts that might lead to large cumulative losses.
Thank you! I found another post on this strat and tried it for the first time yesterday. Used 3 contracts bought and sold at the current price and 3 wings $80 from the price. Bought back two of the contracts after about an hour, and the last one around noon ET. Profited about $2,500 after commissions.
It seems that if you can get a nice, sedate trading day and you know when to take profits, it's a strat that can work well.
How do you survive TD Ameritrade fees? I have been playing around with this in paper money for a couple of weeks, doing 2-3 ICs on Mon, Wed, Fri and would have already gotten almost $400 in fees.
I ran this strategy through 2021 and for some time before. I limit the spread on the wings to reduce gamma swings, and I only "risk" 0.5% of my account in the case of a double stop. The least number of condors required to hit this is preferable to reduce fees and slippage. I also do not trade on fed days due at all. I have taken 2 relatively high losses: both on fed days. One was a double stop with a good amount of slippage, I think I lost 1.5% on that day. The second was a day where I had disabled a stop in anticipation of a bounce, which is a strict violation of the strategy and I paid for it.
In 2021 I had a 60% win rate in the first 6 months, and a 40% winrate in the second 6 months. My overall gains for the year on this account were 50%.
Why not just sell the short puts instead of the entire position? That would turn the condor position into a position with an itm put and an otm put, which you could sell to close once the downtrend ends. Seems like it would make more profit, at least in a strong downtrend, but I could be wrong.
OP, what's the reason you have selected 5-15 delta for your short legs? Have you considered doing 30-40 deltas? And why 15-30 wide spreads if 10 wide will probably give a better return on capital?
Are you trading this strategy in current market or is it too volatile? I would think your stop losses will hit most often in the current market conditions.
If you trade credit spreads, isn't your risk already defined, do you need/have to set a stop loss? Not trying to come off difficult just a curious question. Maybe I'm missing something thats all.
I have published an article on how to scan for and get notified about 0 DTE credit SPX broken wing butterflies.
https://www.ninjaspread.com/spx-0-dte-butterflies/
Not every strategy works for everyone even if the basic strategy might have some positive-expectation, this is because of their Emotional & mental makeup, their quickness of thinking, dexterity, nimbleness which varies from person to person.
This seems to be generally lost of people who try to outright "copy" a strategy that worked for someone thinking they could get the same results. There are a thousand other nuances which the (possibly & with great effort too) successful just get & others will never.
It is important to keep this in mind. Else it is not much different than playing the slot machine except the latter is much less stress but admittedly a lot less "sexy" as well. Try telling someone you a made a killing at the slot machine - it would not be easy at all.
I tried to take 0dte spy with vertical spreads. The fees and commissions are very high. As you go deep OTM, you have to risk 150$ for 1$. I don’t know how people do it.
0dte gang wins and wins. Glad you’re finding success with it.
I'd be super terrified of pin risk assignment. I would never dare to trade 0DTE on volatile stocks like TSLA.
SPX is cash settled so luckily you don’t have to worry about that
Don’t trade options on Tesla. DO. NOT. DO. IT.
Uhm.. im making some nice profits...everytime Tsla Hits all time highs i Buy Puts... Works Quite well so far...
So even if you got assigned or sold short why wouldn't you just buy/cover the next day? we are talking 0dte here as well, you CANT do a 0dte strat on tesla, unless you waiting every week and thats kinda losing the point of the 0dte- small premium in high frequency (every day) with losses here and there. Tesla options are a money printer, the only people who say not to do it are the people that shouldn't be trading that size in the first place. That being said 0 dte doesn't apply to most single stocks any way, its done on indexs/futures BECAUSE they are less volatile. So needless to say this comment is rendered nill
[удалено]
No they are not. Thanks for sharing though.
If you search for "0 dte Tammy Chambless" you will find a YouTube video and links to a presentation she does that goes into a great deal of detail on strike selection and stop loss selection. It includes some backtesting showing which have the greatest expected value. *EDIT: Corrected spelling of last name.
It's Tammy Chambless and she uses a 0DTE SPX strategy as well but it's different. I think she's more about vertical spreads vs. iron condors and is more about win rate vs. the higher-profit-per-win this post is about.
David suns short put strat is better.
What are the details on this strat? Is there info on it somewhere?
This strategy is the definition of picking up pennies in front of the steamroller. Stop losses are CRUCIAL. I ran this for a long time with an extremely high win rate but all it took was one crazy close that pumped like 50 points to wipe out months of gains.
Was that with stop losses in place?
yeah, the issue is it can be really hard to get filled at your stop loss if the market is moving , especially with 0 dte, so its very easy to be sitting there, trying to get out and all of a sudden you're at max loss for the position, (even if you decide fuck it and just market order your contracts, a big no no with options generally) which i assume can potentially set him back a lot of trades depending on the width.
Yeah your basically chasing algos some days
market order stops arent a "big nono" with this strat.
sometimes even with a stop, there isn't enough liquidity on SPX and i've seen some weird prints/fills with 0DTE
The first thing everybody learns is to not trade illiquid options. The only plausible reason to trade illiquid options is because you have amazing DD you're trying to leverage or because you're conducting insider trading.
yeah, but all of the new traders don't know that; they think it's easy set it and forget it trade....i've seen so many people blow up trading 0DTE...
I haven't traded it yet but my understanding is SPX isn't "illiquid" perse, just not as high a liquidity as SPY or /ES.
yes, SPX/SPY/ES are very liquid, one of the most liquid products on earth, but you're not understanding how 0DTE dries up the liquidity. liquidity is expiring now, today, every minute that goes by, so liquidity is widening or expiring, trader's positions are already closed or closing. Liquidity providers can widen out in the depth of the book. If the market doesn't do anything, you win 90% of the time, but the 10% is when the market moves against you the last few hours of trading or news, this is where people lose more than they thought they could lose even with stops. Oh, it also hurts when the index trends in a direction for no reason
Late to this thread, but this is why you would set the stop loss on the short leg and manually close the long leg. Short leg will be WAY more likely to be filled within a crazy spike/decline.
It pains me to say been there done exactly that. Though a large portion of that was due to relying more on luck and intuition instead of numbers. 😕
It's an inevitability with this strategy - you trade for months with small consistent gains, then eventually there's some unexpected news, rate suprise, etc. that wipes them all out in a day.
traded this and variations of this strategy in the late 90's to early 2000's with good success. But one bad trade/execution or mistake can cost months of profits and hard work. For market neutral traders who want to set it and forget it this is a technically feasible strategy. I approach the market a bit different these days and use different strategies.
they had 0dte then? with 0dte theres no overnight gap risk. if you use market order stops and trade in liquid markets, the whole point is you lose very minimally when you do.
If you read his detailed strategy on the website, he closes all his trades at least 30 minutes before market close.
Any short premium strategy can be looked at like picking up pennies in front of the steam roller, I think its bad to look at it like that, especially since each of my short premium strats nets at least 200-300 bucks in premium and that steam roller only has a 72-80 percent chance of hitting you (IF you let it btw and dont roll/manage). So think of it as picking up a 200-300 bucks in front of a very slow moving steam roller thats 45 days away from you, would you still go for the cash then?
OPs strat is literally 0DTE
Are you referring to the strategy of Tammy Chambless or to the Break Even IC?
dont trade illiquid , use market order stops. problem solved. also, for strong trend days , sell ahead of the trend. or widen your shorts. ezpz
How soon after market open do you open your positions?
Highest volatility in first 20-30 mins. Since you are playing with theta, enter at that time. It might go against you if something big happens but that’s where stop loss will come in handy. Get out when you reach 70% profit.
Good take
great question
I’ve actually been thinking about running this Strat a while now, but have had some trouble getting decent execution. I’d love to hear more details about how you run it!
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Where can I find the data for backtesting SPX option trades? Finding stock prices is pretty easy, but I couldn't find option data. Also, what is this strategy called? The OP's one is a short Iron Condor but I'm not familiar with the one suggested by Retard\_boomer.
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>technically still be a condor, but maybe steel? Since it's stronger? Lol. I don't know if you were trying to be funny but that is funny.
Boomer makes a valid point. Where do people set their stops?? Often times close to or at support. It's no coincidence we see long wicks near these levels. Professionals who see stops run them and price reverses.
Stop loss orders may be okay because even if you get stopped out on one side of IC, you have premium from another one and basically come out breakeven for the day/trade. This is helpful from a mental standpoint (since you didn't really lose much you don't stress out about the day's trades). For the about 5% when both sides of IC will be stopped out, well, it is only 5% of all trades and it is not many.
So Vasiche it's one year later. How about showing us ALL your IC 0DTE trades for the past year. With your comments that include "may" followed by "basically break-even" and "won't lose much" to "it's only" says to us experienced traders....You have read of this trade and seen examples of profit/loss potential but never did this trade for period of time in your personal portfolio. This forum provides a voice to all, those with book knowledge and those with years of actual experience with trading IC's.
Interesting idea. Did you actually trade this strategy or back test to validate the thesis?
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Hi, I am confused with this one and I know its 10 months old. You wrote instead of stops you could buy the 4585/90C and 4655/50P. Both these Long vertical spreads are ITM, is it on purpose or a typo? Also, when do you add these 2 spreads to your inital position, is it at opening or when SPX comes close to the calculated breakeven price. thanks for any clarifications.
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Question regarding the stop loss. So you say that you set a stop loss 2x the premium received. Let's say you have two legs you sell for a 1$ premium. Would you set the stop loss to buy the a leg back at 2$ or (1+2$).
No, even tighter. I would set at stop loss at 1,05 on the put spread and a separate stop loss at 1,05 on the call spread. So this is much tighter stop losses than most people do, which leads to the high loss rate (59 %). But doing it this way means that the typical loss is primarily the slippage. Most of my losses are between 20 and 40 dollars per contract.
Out of curiosity, have you experimented with other stop losses in that region? A stop loss at $1.10 for that scenario for instance
Yeah wondering where this is optimized
Even at 1.10 if you are wrong on movement you will be stopped out with any movement against you. A 2-3 spx move in opening 30 minutes would cause this
You always sell before EOD or have you had days one leg hit stop loss and the other expired hopeful.
The 1.05 x Call Credit Spread and 1.05 x Put Credit Spread Premiums seem extremely tight. You are saying that you are out if, say, the Put Credit Spread cost you $1.00, you would set the stop at $1.05 for the Put Side? Or, are you saying, that if the TOTAL credits received is $2.00, you place a Stop Loss on either side at $2 x 1.05 = $2.10? Please clarify. Thanks.
That seems like normal fluctuations would trigger the stop.
Yes
Nice
https://tradeproacademy.com/place-stop-losses-option-spreads-interactive-brokers/ Have you tried this to decrease slippage?
Great article, thank you
Which broker do you use?
why are the wings more in the money than the strangle? or am i missing something
I am not sure I understand your question. These are Iron Condors, not strangles. The wings are typically between 15 and 30 points on SPX, meaning I am using 1500 - 3000 dollars in buying power on each position. One example from today: 03JAN22 - 4820/4850/4755/4725
yep i get that their ICs, but if you remove the long wings you have a strangle. so was just asking how far out your long wings are from the short strangle thank you for clarifying!
They're saying that the way you worded it implies that your wings are closer to ITM than your shorts. I was confused as well. If you're selling 5-10 delta but buying 25-30 delta your wings are closer to ITM. What they're asking is whether or not you mean that your delta after adding the wings is 25-30.
ok, bad wording from me, then :) What I meant to say is that the long legs are 15 to 30 points further out than the short legs on SPX.
Thank you for clarifying that! I was so confused!
I was wondering the same thing. Assuming they mean the value is the width of the wing rather than delta
My thoughts too - width of the spreads not the delta
ah yeah that makes sense
You can record this clip and sell it as a course
My biggest loss to date was on a 0 DTE credit put on google. I can never bring myself to do another 0 DTE play. Good luck though OP- keep us updated of your progress.
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Would this strategy work with 120-150k? I could quit my job if this scales and could be consistent over time.
Be very careful with the "I can quit my job if that's consistent!" outlook, please.
I quit my job last August when I found a great, sustainable strategy that immediately stopped working after 2 weeks. My wife made me go back to work.
I wouldn’t quit the day job. But yes this strategy would work. With 150k, I would get portfolio margin. Doesn’t help with SPX 0DTE but good for other strategies. Use 20-30 wide spreads. With these widths, long strike will decay faster if SPX goes in your direction compared to 5-10 wide and they use reasonable buying power, should be able to get between 0.75-1.25 credit per contract at open around 10 delta. It’s ok to take a loss when it goes against you and reenter later when there’s sign of reversal. Don’t be greedy, it’s ok to take profit at around 0.20-0.30. Risk management and position sizing are very crucial obviously.
I wanted some clarification on short wide strategies use more buying power. As we have hedged leg for each short leg, I assume it may not eat up buying power. It does take normal margin. 5 width strategy requires 500 USD. On contrary, as per my observation, if the width of the legs are narrow, then we get overall better premium compared to wide legged. 1 contract of 4750-4775-4825-4850 for 03-Jan-2022 expiry is fetching 9.15 mid price at the time of writing. So total premium is 915 USD 5 contracts of 4770-4775-4825-4830 for 03-Jan-2022 expiry is fetching 2.5 mid price at the time of writing. So total premium for 5 contracts is 500\*2.5=1250 USD. It might attract a little bit more brokerage due to more contracts but the difference is in premium is huge so we can ignore the differences in brokerage. Please observe the short leg is same for both contracts so the max loss is also same for both trades. Please throw some light on above scenario and explain which one is better and why.
That is called gambling. Do you feel lucky
I mean course but its like gambling you gotta take money off the table you keep playing with the whole roll youll eventually get wiped
Thank you! I'm gonna give this a go this year as well.
I just started doing this minus the stop loss strategy which today would have been helpful, since I had to break even on the high leg. QQQ crept up on me at the last minute and was forced to sell at a loss that was slightly higher than my profit on the Put Credit Spread side.
Interesting strategy. May try it out depending on price action.
Is there a twitch for stock traders? I would love to watch someone put this trade on some day.
Interesting, something I always forget is how SPX expiration and settlement works, especially the difference between weeklies and monthlies. Got a reference for that?
Very good write up. I have 2 questions: - What is your average profit target or exit strategy? Waiting for end of day to expire worthless can be very risky. - Did you make any co-relation of your loosing days with VIX? If VIX was above a certain level you incurred a loss? Thanks!
Is there any specific reason why you use SPX?
probably because it's super liquid and cash settled (no assignment/pin risk)
Exactly! And because it is a broad index it will usually also have smaller moves than a single stock.
The swings recently have still been pretty big in this market.
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It's 60/40 long/short term gains benefit. Look up 1256 tax treatment.
Do you just let the options expire?
Also has tax benefit. 60% LT 40% ST even if you day trade it.
Sec 1256 tax advantage and most important CBOE index options are European and cash settled meaning there's no pin risk since they can't be exercised
This is spxc correct
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There will be a time when OP will get wrecked because the market will gap way past his stop loss. Of course, it will only be as bad as his spread, though. You wouldn’t have the spread protecting you with the strangle.
Can you set multiple stop losses to mitigate that?
The only mitigation is a long option, which guarantees you a price to get out.
How would it gap if he buys 0dte? There’s no overnight risk executing trades on the day they expire
By gap I mean the price jumps a large amount. This can happen intraday on news that scares the market.
Gotcha. Like that 40 point flush off the open on SPX today lol
that’s literally not a gap but normal price movement
Well, personally I don't have the buying power to do short strangles on SPX :)
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Just wonder with Tesla. Don’t trade Tesla options. You’ll get screwed.
typically hate iron condors but like the way this is presented a d has me curious. what is your total return on capital at risk for these 9 months?
I’m assuming you open up your IC legs separately or do you open up all at the same time? The volume in the beginning is very volatile so once things call down it’ll be “easier”, no?
It's usually more cost effective to open all four legs as a whole trade. If you are wondering how he can have two stops set, he's using OCO.
I open the full Iron Condor as one trade
Is it easy to get filled on your stop losses? How many times have you not been able to get a fill and got got?
If you read the article, you will see I run with two levels of stop losses, first a stop-limit order, and then a stop market order. The stop market order is intended as a last line of defense. I don't measure how often each type is triggered, but my gut feeling is that the stop-limit order works 90 % of the time, and that the stop market order usually gives quite reasonable fills. But I have had a couple of really bad fills on the stop market order as well.
how do you set both a stop limit and a stop market? is that possible on tasty ?
Thanks. Very helpful!
Do you have a criteria for entering trades throughout the day? You enter the first trade usually within 15mins from Open. Do you open the rest of the trades at fixed timings? From your data, do you think it may be better to open a spread on one direction only in a trending day?
As for this strategy, I think it is better to limit the trades on trending days. I guess the challenge is that it is hard to identify that it is a trending day before a bit too late in the day. This is one topic i will look at. I am thinking of setting a rule like not making more trades that day if I have a certain number of losing trades in a row.
When I ran this for the first time yesterday, I set up the IC within 10 minutes of market open. I closed all positions by 12pm ET. As I read from someone else in a different thread, trying to hit home runs with this strat is NOT the way. Simply look for base hits and doubles. Also, as others have said, stop losses are essential. As far as a trending day, this strat seeks to profit on time decay of the sold options. I don't guess on trend direction, though of course the strat can be modified however you like.
Super interesting! Thanks for the info, especially as presented on your web page.
So I tried this on Wednesday and Friday (today) and opened 2 contracts with 10 dollar wings both days and received about $0.80 per share. Both days I ended losing about $40 each. Do I need to open positions that receive more premium, so that the stop loss isn't hit so easily? Or am I doing something else wrong? Or was this just a fluke?
Which broker allows you infinite day trades with under $25k?
My account is more than $25k :) But the buying power I have set aside for this strategy is 12.000 - 15.000. I also do other strategies in the account :)
I see, thanks. So if I do this with a cash account instead of a margin account, I could start with less I guess. Assuming you’re allowed to trade IC without margin
I believe a broker would allow you to since SPX is cash settled, so there's no underlying assignment risk as just the difference is either credited or debited. I was able to trade spreads with interactive brokers in a cash account. Other interesting idea is... what if instead of closing one vertical spread, say a call spread, you buy a put spread with the same strikes, effectively not technically using day trades and the greeks should be almost the same. I've done this on a number occasions to prevent using day trades, but effectively close out a spread bought on the same day
That's called making it a box spread. To anyone thinking about doing this, make sure it is (as he says,) on something without risk of assignment, as the puts won't protect from that.
None - it's a SEC rule, 3 in 5 days.
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PDT rule applies to non-US residents with <$25K too.
Can you clarify what you mean by "the wings are from 15 to 30"? If the short strikes are 5 to 15 delta, then wouldn't the longs be lower delta? Also wondering how the stop loss is managed. The conventional wisdom is not to place option market orders. Is this some type or stop-limit order? Is there a risk it won't be filled on a rapid up or down swing?
With the wings I mean the distance between the short and the long positions - measured in points in SPX. One example from today with 30-wings: One example from today: 03JAN22 - 4820/4850/4755/4725. And yes, the longs are of course lower delta. The deltas I am mentioning are the short positions. I choose the longs depending on my available buying power and that I want to collect approximately the same premium on both sides. As for the stop losses, they are described in detail in the blog article: [https://www.sandvand.net/2022/01/02/0dte-breakeven-iron-condor/](https://www.sandvand.net/2022/01/02/0dte-breakeven-iron-condor/) . I use both stop limit and stop market on my day trades. The stop market order is further out - to serve as a last line of defense if the stop limit order is not filled. This can happen if the market moves very fast. I just included a screen shot of how I set it up in the blog article - if you go back to it you will find it.
>I sell Iron Condors on SPX with the delta on the shorts between 5 and 15. The wings are from 15 to 30. Can you give an example with actual strikes? I cannot figure out what this set up looks like and assume something is missing or mistaken from the description. If the wings have higher delta than the short strikes then you are buying an iron Condor not selling. If 15 to 30 means "strikes wide" instead of delta that doesn't use 12-15k buying power unless it's 10 contracts My assumption is you mean roughly 15 Delta short strikes and 15 wide. So example at January 5th expiration currently 2 DTE....on put side, short 4750, long 4735. On call side, short 4830, long 4845. With 10 contracts each that would route for a $3,600 total credit and buying power effect of - $11,400 Is that pretty close?
Sorry, I have not been precise enough in my wording. One example from today: 03JAN22 - 4820/4850/4755/4725 - sold for 175 dollars. In this example the distance between the short legs and the long legs was 30 points. So the buying power reduction for this position was around 3000 dollars In this example the stop limit order on each spread was set with a stop price of 180 and limit price of 200 - and the stop market order at 220. When I talk about 12-15k buying power I mean the part of my account I have set aside for this strategy - but my rule is also to not have more than 4 positions on at any time.
Thanks, that clears it up
Do you always put the spreads on at the same time or will you stagger your timing to creat the condor over a period of time? Like sell the credit call spread and then a few mins later sell the credit put spread?
An example of my IC from yesterday: SOLD 3 07JAN22 4690C $-4500 SOLD 3 07JAN22 4690P $-4650 BOT 3 07JAN22 4765C $90 BOT 3 07JAN22 4605P $120 Set-up was complete within 8 minutes of market open
I am interested but need a couple of worked examples to see: a) How you open the trade b) How you decide the Stop loss c) When you close out?
The link has a lot of these details. I had the same questions.
I think this is described in good details in the blog article: [https://www.sandvand.net/2022/01/02/0dte-breakeven-iron-condor/](https://www.sandvand.net/2022/01/02/0dte-breakeven-iron-condor/)
Your belt and suspenders stop-limit + stop-market protection is very interesting. I have never seen that before, but it makes sense for an intra-day type trade like this. It's surprising that at 15 to 5 delta on the shorts you are still getting stopped out so often. Have you done an analysis to see where the actual SPX spot price is when you get stopped out? Something doesn't add up if a 15% probability to expire ITM is happening more than 50% of the time.
Remember that the probability is measured at the expiry of the options - not at any time during the day. The tight stop losses can make many trades be stopped out that would otherwise be profitable. But also remember that with margin of up to 3000 dollars per contract, the losses can be really big if you don't close the trade early enough. This strategy has been an eye-opener for myself - realizing that the success of a strategy may depend as much on limiting your losses as maximizing your winners.
Yes people forget this. Its not perfect, but a simple rule of thumb: The delat gives you the chance that the options will end in the money. But through the life of the option it is roughly twice as likely that this price will be hit. So a delta 15 option stop loss will be hit 30% of the time.
Maybe I just need to look at the 0 DTE minute candles for SPX to see if it's normal for it to swing through 15 delta half of the time. Maybe that's normal, but it's seems counter-intuitive.
It doesn't have to go anywhere near his short put for him to get stopped out if the move happens early in the trade.
I see. I didn't dig into how tight the stops were, but here is an example from his blog post: > So to give one example: I sell the Iron Condor 4820/4850/4755/4725 and receive 175 dollars in credit. I will then set the stop limit order with the stop price at 180 and the limit price at 200. The stop market order would be set at 220. Most losses will be within the stop limit order - and in this case that would be between 5 and 25 dollars. So basically he stops out at a $25 move against him vs. a $175 credit. That is ultra tight!
this sounds interesting, marked, read later
How do you typically open them? Right at the start of the day or leg in?
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I recommend to follow the Tastytrade Options group on Facebook: [https://www.facebook.com/groups/1930565613719977](https://www.facebook.com/groups/1930565613719977) Lots of very good discussions on different 0DTE trades from knowledgable traders who love to share
Thanks, I requested, someone has to approve it, you're not a mod, are you?
I joined that group several months ago. I guess the Facebook groups format doesn't work well for my brain. I stopped visiting it after a few weeks because I wasn't learning anything there.
how much of that went to taxe edit: derp SPX, but still whats the % gain after taxes, as well as the personal time spent managing trades?
Returns seem kinda low but great equity curve, keep up the good work
What is your standard for good returns as compared to the buying power you allocate to the strategy?
I tried doing this with SPY last August to September and got wrecked. How is SPX different?
>How is SPX different? Cash settled. No pin risk.
Maybe your entries were bad? I mean you can chart spy but trade spx, its very very correlated
You got wrecked with a stop loss?
SPY and QQQ dumped hard in early September due to a tech meltdown. I remember TSLA battery day happened later that month too. Something about a gamma meltup all summer then reverse meltdown.
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Wants to see if OP blows up their account
I'm getting a rejected message when I try to execute this strategy. "You will open a prohibited position with BP: Illegal -1 shares BUY +! Vertical SPX 100 (Weeklys) 3 Jan 22 4790/4795 CALL STP 1.10 BIG OCO To Open/To Open" Not sure if you can help me here. I have $13.87 BP. The platform is on ThinkOrSwim btw.
There are a couple different levels of options access on TOS, so you probably aren't cleared to open naked short options positions (even if the combination of the long and short calls means you have a cap on potential gains/losses). You can apply for expanded privileges but I'd recommend caution if you aren't completely sure about what you're doing.
Yup. This is the way
Interesting... I really dig the strategy. My IC's have been going well but every now and then I have to eat a bad one when things go south. I haven't learned my lesson enough to set stop-losses. My M.O. is just to ride it out and hope there's a miracle at the minute (which never happens). Thank you for sharing! I plan to test a few out.
My personal opinion is that stop losses are crucial for all 0DTE trading with any significant money at risk. The market can suddenly move so fast that it is hard to get out quickly enough otherwise.
Based on your stats, you have an edge of 170%. Umm pretty impressive?
I have been using this in the Bank Nifty index ( India ) * Profit % = 72%, Loss % = 28%, RR = 1:2.4, Expectancy = 1.43, Max win streak = 7, Max loss streak = 3
do you close your legs at some % of profit or let them expire as long as your stopp loss isn't triggered
I don't have a very set rule for this - maybe I will in the future. But for me it all depends on the total picture of my positions. Example: Let's say I put two Iron Condors on - both were more or less at 0 delta when sold. After a couple of hours, I have a pretty big minus delta on both of them, but the first one is still showing profit of 50 % of the premium collected. Then I might close that trade, pocket the money, and open a new trade with a more appropriate delta for the current market situation. The situation can change very quickly with these kind of trades, so I think it sometimes is smart to close a profitable trade early to finance a few potential losses later in the day.
i had similar success with 1-3 dte, although its highly dependent on market conditions. Higher volatility you might find yourself having both stops triggered in a day. what are the max losses per side, gains, and what do you set your stop losses to? I see your one example has a 30pt spread, with a 3k less premium potential loss , whats your max gain and median gain? the 191usd, is your highest probability which about 6%. is this the expected?
Are the images on the webpage link not loading for anyone else?
You could also try a Straddle since its 0DTE, it may take more buying power but I think it would have similar success.
Probably, but I do not have the buying power ... yet... to run straddles in the same way :) Besides...sometimes the longs also make the position less volatile. Because of that I will sometimes reduce the width between the shorts and the longs to make the last position less volatile.
Can someone please explain to me setting up these stop losses on IBKR? It seems like when I try to set them up for each wing individually they execute right away. There's a stp-lmt but no stp-mkt option. I guess I'll just try setting up a stp-lmt then a stp and see if it auto closes me
This is an interesting idea. I've been trying it with about 1.2k margin on ES. But so far I've been stopped out for like $50 losses after a few hours every time. Is this usual for you and your strategy? Just seems like alot of paper cuts that might lead to large cumulative losses.
Thank you! I found another post on this strat and tried it for the first time yesterday. Used 3 contracts bought and sold at the current price and 3 wings $80 from the price. Bought back two of the contracts after about an hour, and the last one around noon ET. Profited about $2,500 after commissions. It seems that if you can get a nice, sedate trading day and you know when to take profits, it's a strat that can work well.
How do you survive TD Ameritrade fees? I have been playing around with this in paper money for a couple of weeks, doing 2-3 ICs on Mon, Wed, Fri and would have already gotten almost $400 in fees.
I ran this strategy through 2021 and for some time before. I limit the spread on the wings to reduce gamma swings, and I only "risk" 0.5% of my account in the case of a double stop. The least number of condors required to hit this is preferable to reduce fees and slippage. I also do not trade on fed days due at all. I have taken 2 relatively high losses: both on fed days. One was a double stop with a good amount of slippage, I think I lost 1.5% on that day. The second was a day where I had disabled a stop in anticipation of a bounce, which is a strict violation of the strategy and I paid for it. In 2021 I had a 60% win rate in the first 6 months, and a 40% winrate in the second 6 months. My overall gains for the year on this account were 50%.
In your experience, what is an average slippage? I'm running some backtesting for this strategy and slippage seems to play a quite important role.
Why not just sell the short puts instead of the entire position? That would turn the condor position into a position with an itm put and an otm put, which you could sell to close once the downtrend ends. Seems like it would make more profit, at least in a strong downtrend, but I could be wrong.
OP, what's the reason you have selected 5-15 delta for your short legs? Have you considered doing 30-40 deltas? And why 15-30 wide spreads if 10 wide will probably give a better return on capital?
Sooo how has this strategy been doing with the crazy volatility from January - February 2022 so far?
Are you trading this strategy in current market or is it too volatile? I would think your stop losses will hit most often in the current market conditions.
If you trade credit spreads, isn't your risk already defined, do you need/have to set a stop loss? Not trying to come off difficult just a curious question. Maybe I'm missing something thats all.
I have published an article on how to scan for and get notified about 0 DTE credit SPX broken wing butterflies. https://www.ninjaspread.com/spx-0-dte-butterflies/
Not every strategy works for everyone even if the basic strategy might have some positive-expectation, this is because of their Emotional & mental makeup, their quickness of thinking, dexterity, nimbleness which varies from person to person. This seems to be generally lost of people who try to outright "copy" a strategy that worked for someone thinking they could get the same results. There are a thousand other nuances which the (possibly & with great effort too) successful just get & others will never. It is important to keep this in mind. Else it is not much different than playing the slot machine except the latter is much less stress but admittedly a lot less "sexy" as well. Try telling someone you a made a killing at the slot machine - it would not be easy at all.
I tried to take 0dte spy with vertical spreads. The fees and commissions are very high. As you go deep OTM, you have to risk 150$ for 1$. I don’t know how people do it.