Weekly Options Trading Earns Him $2,500 Every Week (but he's missing something huge)
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- เผยแพร่เมื่อ 27 ก.ย. 2024
- Weekly options can be a great way of supplementing your personal income. However, there are a few pitfalls of which you must be aware.
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Wonderful content man. I am usually skeptical about trading channels because of how they over promise and never tell you the downside. But you are the real deal. Keep it up!
we try our best to recognize the downsides and give it straight to everyone watching
Hi Seth. Back tested from January to 1st November. Total trades 82. Winners 76 @+- $1250 and 6 losers @ about $23 600 that equates to loss of @ $46 600
@John Smith what software did you use for the backtest? Thanks
@@quantza8723 I did it manually using excel sheets
Everyone is a genius when the Market goes up... When it stops you find what strategies actually work
Thanks for this video 🙏 Please add current price when you show the entry calculation. That will help beginners in understanding how to choose strike price.
Also it will be great if you explain strategy to choose strike price for any trade. 🙏
Ok next time!
What do you mean the indices don't gap up/down all that often? They do it all the time. Last Thursday I had three short butterflies sitting dead center near max profit. The gap up Friday put me at max loss, and the subsequent run up sealed the deal. The thing about the index options is that they don't pay enough premium to offset your losses over time. The IV right now for at the money options is around 12%. The math doesn't work out over time. Plus, the cost of the trade is 100 bucks or so.
@11:32 - So what I'd like you to take away from today's video is...YOU have no chance of becoming a successful trader lol
Well I liked to see the backtest of this strategy in the video as to know how much far from the close (in SP points ) is build
Nice to see back testing advice in an options video. I don't see it talked about nearly as often as i do in videos related to other markets.
it's a must!
@@smbcapital It would have been nice, if you also mentioned the backtesting software you recommended to him.
Seth, amazing content here. You did great on this one! Thank you for your time to share with us Seth!
You’re welcome
What you explain in this video is really the crucial part of any trading strategy, you have to plan for your losses as carefully (if not more carefully) as you plan for you profits, because many traders enter the market thinking that since they chose a "safe" position they are immune to losses as a result, and this could not be farther from the truth. I have designed many profitable strategies over the years and I only managed to reach a positive outcome once I realized this, and of course, all was based on thorough back-testing using hard data from the market, no guesswork of any kind.
One thing that I place emphasis on when teaching stock and options trading is paper trading to make consistent profits, most beginner traders want to jump in the market only to loose money then give up. In my own experiences I say , paper trade for a while maybe 6 months to a year and experiment using these type of strategies and learn from your mistakes but the good thing is, your mistakes will cost you nothing but time. Great post Seth!.
Paper trading is useless because it’s not real. There’s no point to it because once you have real money on the line you will begin to question your trade because there’s a real risk there
@@chump6901 it's a tool, we all use tools to perform task and job functions in order to get things done. Trading options is high risk like any other strategy in the stock market. if you are not sure of a certain strategic investment or options risk, you can use a tool such as paper trading to assess the risk. This is why all trading platforms have a paper trading section and its good for beginners to learn on until they become confident and successful at trading. "useless" is one thing but a waste and loss of money is another.
Best way to paper trade options in Australia considering how shit the opportunity is down here
So....what happend at the end of the day? What was the study results and final conclusion?
Juan Pedroza they all became bankrupt and got hooked on crack 🤷🏻♂️
Would have been creamed in likely March, June, September and it’s not even the end of this year god damn. I’d stay away.
@@macphistorules you can do the same thing with calls to put a bearish direction on the trade, so in a downtrending market it can still work
@@tarubewildin6931 ya the call side would have been killed all this week
Tune in next week? lol
You have a mistake in the slides at time 8:08. It should have been 2992.10 instead of 2922.10.
I wish we could get an update on this. It's been 4 years, and there were some wild markets in that time.
we'll have to contact the trader
Good point towards the end about Max loss scenario. I was surprised you didn't mention that in the recent Elon Musk Twitter iron Condor video you made.
Would be curious to know what his total options trading portfolio is? Maybe a $5 spread is too risky for the size of his portfolio! Smaller portfolios should probably start at a $2 spread.
To hedge risk, buying a back ratio with a further expiration date would be better if a dump in the market were to occur. A calendar spread would work as well. If you're range bound, sell spreads on support & resistance levels.
hmmmmm. love the channel. But this video is pure theory. Forgot the Commission for 50 contracts !!!! And the slippery !!! You can not do this 1 day before. the market maker is pushing down the price and the spread between ask and bit is so far away. And some statistics. the last 10 years SP500 have lost 1 % the next day .....::: 196 times. so not 4 times pr year but rather 20 times.
This is why I'm switching to selling same-day expiration credit spreads, 3x per week. No overnight risk!
i really wanna do this to focus on my music and quit my job. PLEASE HELP ME
this is what im doing its a life changer lol
Caution, the distance from the underlying index ($SPX) can get pretty small (less than 50 points) during market rallies AND contracting implied volatility for these 25 cent 1 DTE Put spread trades. On Dec 23rd close, for Dec 24th close, you only reached 35 points OTM when spread premium was 30 cents.
To minimize the risk of an overnight gap up or gap down would be a good idea to just day trade credit spreads?
I have attended the options workshop he mentions twice, took what I thought were good notes, and I still have no idea how to do it, let alone how to find stocks that meet the required criteria.
He shows only "index options" which are a group of more than 1 stock, like "spx" is all stocks or others that u get cash (or pay) instead of setteling in stock because there a group of stocks
Stick to Real Estate its easier and payoff are better
Sigifredo Coria It took me nearly 20 years to sell my first house, and it was at a loss, so real estate sucks for me too.
This some crazy stuff to learn
@@robertcampbell6513 IMO for 99.9% of traders, the only way to learn how to trade options in the REAL world is to blow out your account to complete zero multiple times over the span of 20 years. then you will finally LEARN what to do and what never to do again. until you suffer multiple blowouts you will find it irresistible to push boundaries. so... options trading is NOT a good idea for 99.9% of traders IMO
I would like to see some videos on how to repair or trade credit spreads that went against you.thx
You should be aware of this and take advice from others that have already succeeded. I searched round a few sites and found a lot of great advice by searching google on websites such as Trevs Exchange Tactics. I wish you luck and hope you make some cash!
For something this short term there is just about nothing you can do. Loss is locked in. If the market opens below your long put, then if you try to roll it or buy it back, you will bank the maximum loss. Only option is to hope it bounces back before the close above your long put so you can recoup some of the losses.
Your advice was good and interesting on that scenario.
My intuitive thought was primarily, unless this guy is WEALTHY and until he gets sufficient experience, he should trade SMALLER (and by implication, safer).
I might well need to look into some good backtesting software, depending on the price, as usually with my simple strategies, I just look at things like history, implied volatility, experience, hedging opportunities (and costs), etc.
8:45 - well, this comment aged well.
Lmao yep
Hahahahaha
But then...
@@KillerBearsaw EXACTLY! I’m a “long,” so I didn’t lose money during the COVID dip, and I bought more. Then it went down. And I bought more. Turns out that was a great strategy. :)
Dear Seth, how should we size up over time on an strategy like that? last thing we want is to do well in this strategy for 5 straight year while increasing size each year and on year six 1 loss wipes 5 years of profit. Thanks SMB!!
Wow. Thank you for this lesson. I will test it before I apply it.
Can you share back testing software and analytical indicators recommended?
Well??? Is there a follow-up video on the subject? It would be high anxiety if the trade failed before you had sufficient capital saved from the strategy.
Lol, he's over complicating simple concepts. If you TRULY want to learn trading options - search for Elite Options 2 - he is a good teacher, join his trading room and learn, there are many people who are making decent money using much simpler strategies
If you are willing to lower your profit margin on this strategy , you can lower your loss
sawman man I’m new to trading but couldn’t the risk be reduced with stop losses?
@@authorkalliopimegali you’re messing with us. Why even comment if you’re gonna troll LOL
@@pmich8913 lmfao
Hey, I’ve been trading for a while, I’m just finding out about portfolio advisory and I can’t believe how much sense this makes. I’ve heard a lot of people recommended investing programs, Why haven’t I looked for a way to take advantage of that? I just made the most rewarding trades these past months and now I’m all about credit spreads.
Sounds intriguing Luke, how can get this with your help? Please how is the performance rate?
Trust me, I hate tall claims when it comes to investing stocks but mine has shown good results . My account has increased 34% so far this month on a secondary level for nearly 80%. Starting with $2,000 with Charles Alen and trading with one account, I now have $38,000.That is an 78% increase in 3 months trades.
Wow that's a nice result on your account in what directives do you follow?
Luke this is an amazing trading performance
He can help do the same for you, I’ll suggest you write him yourself on
Allentradeoptions{a}gmai!•com
I am not sure what's the purpose of the back-testing about this strategy. Yes, the strategy has its risk. But there is no way in a back-testing to determine the probability about an appearance of a "Black Swan" event; that's why it's called a Black Swan :-)
Backtesting is key. When you check your short strike price % OTM, that will determine if your trade idea is profitable. 90% OTM, with a 20C credit. Money in the pocket.
@@realjmaloi Sorry, but that's not quite right. All backtesting determines is if your trade idea would have been profitable IN THE PAST, during the specific time frame backtested. It says nothing about whether the trade idea will be profitable in the future.
@@iwasdeceived true. However, staying well out of the money statistically will provide a profitable trade. Past performance is no guarantee of future success. It's up to the trader to determine their own risk tolerance. 20 cents, 90% otm. Try it. Thanks for the reply bro. 💪🔥
@@realjmaloi Be careful. "Staying well out of the money statistically will provide a profitable trade" is true only if the spread expires OTM (or if you can and do close the trade early for a % of total expected profit).
In the example given in the video, the SPX was at 3010 the afternoon the trade was opened. If the SPX gapped down a mere 25 pts or more and didn't recover by 4pm, then a total loss would be incurred. This despite having a statistical probability of finishing OTM of probably 95% or more just the day before.
A 25 pt move on an index of 3010 is only a 0.8% move. Just this week the SPX closed down 27 pts on Mon and gapped down 26 pts on Tues because of unpredictable overnight tweets. This trader has to win 19 out of 20 trades (95%) just to break even. If he had a bad streak of 5 total losses out of 20 trades, that's $100k in losses and practically impossible to recover from using this same trading plan.
Once the MM sees what this trader is doing every Tues & Thurs afternoon, then the guy is toast. So have fun & make $$$, but I suggest trading small if you do something this risky...
@@realjmaloi 90% success at 20C credit with 10% loss at 480C is losing money. Do the math.
I would be curious to see this trade replicated with some similar /ES futures options because they trade overnight and a stop could be placed to help reduce the gap risk.
very possible
Can you do credit spreads with futures like you can with options though?
@@bfourney yea and the margin is stan margin it's less then the difference between the strikes. Idk why es option are not as liquid as Spx
Hmmm...just from a quick look see...I counted 17 -20 point down days (close to close, T-W, Th-F) in 2018, 8 in 2019, and 29 in 2020
i have to practice this but I am so lost at the moment.
Is there a followup video with back testing?
Thanks Seth! Fantastic ideas here. Did the trader you mentioned in this video take one of the SMB Options courses?
You can also insulate against a massive drop by applying your credit from the spread towards buying a call below your spread which will increase in value as your spread loses value.
Why would you buy a call if the fear is the market will drop like a stone when you expect it to stay where it is but not drop much.
@@erwinerwin1245 I think he means buy a put as "insurance". I'm a noob, but have been studying. If he used, the word "put", it would make sense, yes?
@@jasonhempel53 Yes they buy a put as insurance so on a huge drop they make money on that or lose only say 500.00. I just prefer to play it safe and buy a straight call or put. I will only lose the cost of my option while having the opportunity to make a good pay off on a big stock move.
Rule 1 of any Market strategy. Never assume that your strategy is going to work consistently over a long, or even short. Of time. The trading gods do not like smart asses who think they figured out the market. I speak from experience.
There are no trading gods. The market is indifferent to you, your attitude, and your $80 Robinhood Account.
He gave sound advice and you insult him. Completely unnecessary.
@@anybodykilla92 You mean YOUR $80 RH account fool
I am only a newbie still, but I think what glossed over really quickly in this video is the pattern of Friday being a shitty trading day for the bulls. With the pattern of more red on Fridays, some people are learning to make money from it.
Thanks for addressing the probability side of trading.
Thank you for the video. Please give all the information needed to understand the example like days to expiry and current index level. Explain how the strikes are chosen and the strike width. Thanks
Yes there was a lot of risk. Also fcash/margin used. Surprised he lasted that long with blowing up his account.
I like this strategy and have been doing something similar for the last 10 weeks - The only caveat is you need to be near your computer 30 minutes before the close in case your short put is being tested and you want to roll to the next expiration.
Can you set a stop loss at the short put strike price when you enter the trade to at least cut your risk in half?
Your paper write up at time stamp 8:10 had a bad typo Your showing 2922.10 not 2992.10 Confusing if studying the explanation. Good video otherwise
Excellent. I couldnt understand why he said both expires worthless. Thanks
Yeah because based on the numbers in the video, both puts would be deep in the money. Which is far from expiring worthless.
wait!! There are companies that pay people to trade options for them?
I was hoping you would share what this trader could to to further protect himself from these errant down days while still being able to place these trades???
We are trying to get the trader to do a follow up video on what he could do to mitigate the downside risk
@@smbcapital any luck with getting the follow up put together?
@@smbcapital you could always roll the entire trade down and out for credit….
Hello, long time listener, first time caller. I was hoping you could go into this method of trading more? I think it'd be really good to have some info on how you guys read the market, ie what this gentleman would be looking for in order to decide if he should avoid buying this spread
Helpful but the way you explained certain things is so confusing its no wonder some are confused in the comments. Should really remove the whole part with the 50k loss because that 2980 price is irrelevant and the price may very well be lower then 2980 in which case your example no longer works, super confusing to someone that's new to this. What should be said is the max loss that one can incur is the diff between options * option quantity * 100.
Why not do this strategy ON the expiration day (Wed and Fri) .. no overnight surprises ?
Premium is sucked out overnight and by the minute
I used also 0 DTE , before the market closed, but mostly on Volatile days. That's the problem
in the same day , the price of the option are too cheap to make profits.
hey Seth how about do a video on a regular condor?
What time of day would he place the trade on Tuesday or Thursday? I would add Placing the spread just below a large PUT open interest strike. The Large put volume at that strike will act as a buffer.
He can try 0dte and close before eod then there will be no overnight risk
Why not sell them on Wed/Fri at the open to avoid the overnight? Why sell it as a condor rather than a PCS? you can probably get the same or larger credit with further OTM strikes
Absolutely correct, buy same day, and just use a neutral IC. Heck, I buy verticals sometimes 30 minutes to expiration. Sure it's risky, and you're obviously close to the money, but if you're trending higher or lower and can stand the directional assumption, then go for it. Before you know it, ding-ding expired OTM😂
@@TrentFallinGmail he could be doing better with less risk doing as an IC. Lot of commissions on those 50 contracts, too. Broken wing butterflies would also provide greater upside with less downside risk.
@@docmtaylor Yes, ICs are more forgiving in spread (if you pick the right strikes), plus potentially more premiums. If you're going to do that, same day ICs can dry up sometimes, but one day before is generally okay so long as your strike price is => than the weekly mean (movement) of the underlying. I know SPX quite well to realize it's capable of moving 10-35 points per intraday session. So... I place my strikes 35 points x n days from expiration away OTM. Successful stike placement wins over anything else. If it's Tuesday am and I'm placing an IC for Wed expiration, then my body width is 70-80, right? Tues can burn 35 points and so can Wed. So strike position, in the end, will save or kill your trade. Happy trading bro😏👍
@@TrentFallinGmail Thanks for the tip!
@@TrentFallinGmail Would you mind recommending some resources that best helped you learn the options game? There's so much noise to cut through... books, services, etc..
I'm a total newbie when it comes to options trading. I've been swing trading penny stocks with minimal success. I'd like to learn more about options trading, but it seems like it has a whole new lingo I will have to learn.
Swing trading penny stocks ? 99% of them go bankrupt, they are only used for pump and dumps.
One of the draw backs to this and other trade ideas is the greed factor in the trader. The idea is sound but human nature will be to increase the size of the trade as profit builds. Thus the account is always 100% at risk and when the critical blow comes it will take months and months of trading profits and could ruin the account. Another flaw is the trader might start to depend on the gain every week. This dependence can be an actual need, i.e. a car payment or other expense or the dependence can be psychological, i.e their ego has become intertwined with the trade strategy and this keeps them from taking protection action when they should (gap risk aside). The goal with protection action is to preserve as much of the account as possible in a bad situation. If the market has broken some key resistance or support and moving against you, protection action should be taken but greed and ego will compel most to hang on to that trade thus risking a max loss situation
Very true. You are wise man. Where do you from?
Very good reflexions. What determinates if the position will be 20 points from the market or more? 100 points as an example. Is it ATR, his directional bias or something else? Thanks again!
This is the same strategy I do. I dont have as much capital, so I only do 6 contracts with a spread of 20-30.
Instead of exposing your account to such significant single-trade risk, how about utilizing a market stop loss order immediately after selling the puts and give it some room to breath during the day with a stop 3X the credit, so you have a max loss potential of 2X? This would allow you to "trade another day" and you could recoup your 2X loss with 2 winning trades. There's obviously risk of getting stopped out, but also great advantage of not incurring huge losses.
I've had luck selling covered calls and selling cash secured puts... you get paid right away and as long as you don't mind selling 100 shares you own at a price you set or buying 100 shares at a price you set... got half portfolio in stocks and the other in cash... I'm not going to get rich but so far i haven't blown up my account... so as long as i just sell and not buy i do alright... thats its good enough for me...
I really like this guy. Great teacher.
Very straight forward & thorough explanation! Love this guy!
Either I’m missing something or you got your expiration prices wrong. on time 7:45 you said that the spx closed at 2992 that’s why his option expired worthless but it couldn’t be worthless since his short put had a strike price of 2990, it was above his strike price but on time 8:12 you say that the index closed at 1922 which is why both long and short options expired worthless because they were below his strike prices of 2990 and 2985 respectively, which makes sense but not when you mention that the closing index price was 2992.
What was the back test software you recommended?
This is a simple vertical spread trading strategy... Jeez. It's 50-50 chance of winning minus your commissions which makes it a losing trade. So what was your advice to this trader to make him a better trader with this strategy?
He doesn't have to accept the loss 5 or 6 times a year. Couldn't He can close out of the credit spread at a much lower cost than letting the option expire ITM?
Yes, or roll down or out to a future Date. Further, he could add a call spread on the other side of the play without increasing required capital and make his spreads wider and increase his percentage of wins.
The answer to "should you walk away from the trade?" is just to modify your strike selection.
If you know the SPXW resistance levels and weekly mean over the last 12 months, and if the maximum divergence move is a 6 to 7 standard deviation move, then just select your STRIKE PRICE ACCORDINGLY, duh! Simple and logical.
😆😂👍
?
Hi Trent. I appreciate you sharing some of your insight, and I follow you for the most part. But when you say "weekly mean", do you mean the average weekly closing prices? Or do you mean the weekly true ranges? Also, how do you determine the standard deviations? Thanks.
I'd also like share an observation on an underlying that I've been trading derivatives from to see if we are on the same page. But not here. Like you, I'm very territorial when it comes to things that I have learned through blood, sweat and tears, especially when people rejoiced during my tough times.
i usually buy another protective put far OTM
I am also an options trader. And trade credit spreads. And very good at it.
Hey Seth, I heard you said you do “funding” for trading.
How can I get a loan for trading? I can show you in zoom that I know exactly what I’m doing and how to protect the spreads to never lose the collateral. Anytime.
how much are you looking for?
@@nuttyjobstillsucks $100,000 or above
@@cashflowdriven7036 im interested in hearing what you have to say
i heard somewhere: trade small trade often (50 contracts is A LOT!) reduce the size but do it on Monday Wednesday and Friday
He is avoiding Monday due to the weekend risk. I agree with just Tuesday and Thursday.
@@loubob21 you can open trades on expiry Mon, Wed, Fri to avoid holding overnight and the risk of a huge move.
@@yousajiveturkey1 True, but most risk events happen during the day, not overnight. You feel you can get far enough OTM placing spread first thing in am?
@@loubob21 no but you can sell it after lunch as well. profit margins will be a lot smaller, but the risk is also a lot less.
@@yousajiveturkey1 do you mean close the spread after lunch?
Seth, what back testing software do you recommend? Thank you.
What was the result of the back-testing please??
What known events should you avoid when holding an SPX spread overnight?
Also he could use a 2X or 3X stop loss
Seth why wouldn’t he just exit 2995 via a stop or other method?
50 shares is way over leveraged. And what’s his account size to take the downside of the trade?
Any who...🙄
Makes no sense. Would rather trade stock options and only loose a few hundred if that but make 1k ever 2 weeks.
Do you just buy calls and puts? Thanks.
many of these videos talk about margin required to put on trades, not this one....
Classic credit options scenario, small gains and huge risk, high probability of gain but every once in while you wiped out... Seems like a painful way to trade.
That price typo @ 8:07 had me all sorts of confused for a second.
Hahaha there is no typo. You clearly didn't understand
What happens if you just never go closer to the market? That would be my question.
Awesome Video ! Thanks
You bet!
Great piece, Thanks!
Great video!
Thank you!
Thanks Seth another great educational video
Thanks, Ed! Let us know what other topics you'd like us to cover.
If he shorted a put at a lower comparative strike (2980) instead of higher (2990), it would've been a vertical spread and it would've capped his losses at his initial investment but also capped his gains. His strategy here seems like a worse version of ATM puts. ATM puts would have limited loss, but he has unlimited loss. Correct me if I'm wrong.
Careful with shorting options everybody
At 7:02 in the video you mention 'depending on market conditions'. What conditions are you referring to? Its seems this information would be necessary to be successful at this trade to determine how for OTM or ITM you need to make your trade.
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I agree on your opinion generally I always look out for it to dump so I can purchase some more truly it has come to stay and also to change peoples life💯
Mmm selling vol for income offset by the occasional big loss has never appealed to me
How is 2990 below 2922? How is 2985 below 2922? That is what you said,isn't it? I've looked several times and that's exactly what you said.
I would like to know what back testing software you recommend?
Also wondering about this myself, seems like this would be helpful but we couldn't mention it in the video?
@@tinyutopia825 if you still care, the platform of showing the trade is optionnet explorer or would be optionvue
This video is amazing.
I’m curious as to the reasoning why he only does Wednesday and Friday expirations? Also curious how this strategy is currently working in this volatile market
Obviously getting smoked.
wow, if you got 23k in losses on the first two trades OMG..... not for the faint-hearted. Are there any options strategies that carry lower exposure?
As a beginner, a trader should not have more that 2 or 2.5% of his or her account at risk on any one trade. Unless the guy in question has $1M in his account, he is trading too big.
I wonder what deltas he was using. I don't believe the ones in the video were his actual trades, otherwise, they look to be in the 30s which seems too high to rarely be exercised as stated in the video
Nice video. 2 questions though. Would it not be more profitable in the long term to set a stop loss of 50% on the losing trades that he receives. This would obviously have to be subject to backtesting and may not be so good due to intraday fluctuations that could stop you out but ultimately rally back up end of day, however it is interesting to backseat. My next question is, why don't u just buy the 50 contract credit spreads on the same day as expiration (Wednesdays and Fridays) So that you can adjust for the gap downs. ?
Stop loss will do nothing to avoid a gap down, especially at 0 dte.
Then it’s best to not make it a spread by simply sell the put deeply out of the money where the strike price would yield 75 cents instead. That would get more money and is safer
You would need 10,000 to make $10 in this scenario
Making $2500 a week. $130K year. Missing sth huge. Lol.
If you're looking at personal income it's great but if you are comparing that income to professional trader it's average at best.
Great video, with very good and detailed examples, along with very thorough explanations!
Hi Seth Thanks for the video. Could you please advise what platform can backtest options trading Have been trying to find a goodone no luck yet.
What you can do is go further down the option chain and not make it a spread