You have to be right 80-90% and if you start increasing size, one bad day wipes out all your gains. So it is even more critical to have an adjustment plan. Especially when the VIX is north of 20-25.
@@gi295 Actually when volatility is high is exactly the time to sell premium. But as Nick says below, one max loss wipes out 5-8 trades and I have not ever heard of a SPECIFIC strategy to adjust when the market starts going hard against. Because as it starts movng against you what are the rules and what is the adjustment if any? Just use today as an example. I haven't looked at it closely, but I am going to bet that if you did a put credit spread today, you would have had max loss. maybe not depends on the time you entered
I saw a trader who sold ODTE credit spreads around 10-11am EST and after noon the theta decay was so intense that he could hold the spread for 2 hrs and then cash in his gains. the last 3 to 4 hrs of the day (noon to 4pm EST) Theta Decay is at max peak, almost minute by minute options are decaying at a rapid pace.
Thank you for this inspiration, realy appreciated Today I've setup my first Iron Condor on SPX - Until now it works perfect. Of course with small account for testing. Based on the ADR from the past days I took a wider spread ;-)
2x the Daily Avg True Range (ATR) is also a good bet. Be aware of the days when the fed spews garbage however (can occur on Expiration Wednesdays on occassion)...
hi Seth, thank you for a very informative video. What are your thoughts on 0DTE selling premium (with protective stop loss at 3x)? Any views on that? (intention to expire the position or alternatively lock in profit throughout the session)
What exactly do you do if the market moves very hard in the direction of your Iron Condor leg to adjust or do you just automatically assume your will take full loss which is a huge loss? If it falls or rises say 100 points?
Tim, you have to back test it and develop a stop on the trade. Some people use 3 times the original credit as the stop on the trade. It depends on how you want to handle it.
Could someone explain to me in layman's terms why the buying of calls & puts is part of the iron condor strategy? He does mention protection, but I'm not really grasping that part.
Both sides work the same, but mirrored. Consider if you just sell a 100 call, what is your max loss? Infinite. By buying a 110 call, then any price above 110 and you have capped the losses on the short 100 by being long the 110 - so max loss would be 10 x 100 = $1000 instead of infinite.
I’ve never gotten filled on any iron condor I have tried to place. I’ve tried going closer in the money and trying to go in between the bid/ask but it never fills. This is on IB and trading SPX which I would have thought would have enough liquidity, etc.
Use just one leg, i.e. a put spread or credit spread instead of an Iron Condor, they are easier to maintain and roll out of if it goes bad. With an iron condor, you are taking on risk on both sides, and it only takes one side to "get you"!
Agreed with several statements here. There is zero mention of risk management here, and the numbers are arbitrary. SMB seems very legit and I like a lot of their videos, but this video doesn’t explain the half of it. I trade almost exclusively 0 dte spreads, namely iron condors as noted here, and without proper risk management in place (setting stop losses at certain multiples of premium received, for example), it’s an unsustainable approach. You will hit stretches where the probability of said 90% win rate seems completely meaningless as you lose back to back days. He doesn’t describe the big swing movements that occur in your p/l on extreme moves like we’ve had lately and the panic that ensues if you don’t know what you’re doing. Lot of key components of this strategy are missing in this overly simplistic and idealistic video.
Tcho, this was a simplified video and did not get into adjustment tactics and stops. I can do a video like that in the future, but it takes alot of time and work to prepare a video like that.
@@timb4695 I have just recently (last 3 weeks, which also coincided with Evergrande Monday which I took max profit on) adjusted my approach to be a lot more conservative after talking to some buddies about tweaking our approach, and current higher vol days helps us do this. We are now at 3-5 delta, personally more at 3-4. I only aim for a total of $.50 per full IC, on 25-wide spreads for each leg. One can scale up via contract size as they see fit. It results in only 2% return on BP used, which is 6%/week for 3 0 dte days/week. Much lower result than the 10 delta presented in this video, which a lot of people I know are closer to the 6-10 delta range admittedly…but I’m also not going to complain about 6%/week (not including loss days and commissions, etc obviously). My stops are set on each leg so that the overall net loss would be just 2% of BP as well when accounting for one leg being stopped out and the other hitting max profit (which way more often than not would be the actual outcome). Since EG Monday, the only loss I’ve had was Quarterly’s despite the volatility these past three weeks, and said loss was only 1.4% of BP once I re-entered with another 3 delta put spread after the initial stopped out. Very manageable, turns out to be a 1:1 risk/reward ratio doing it this, and even better ratio when finding a re-entry on the stopped side. No more wiping out several weeks+ worth of profit on one day. Instead, you can make up your entire loss and then some on the very next day of trading your normal size.
@@sethfreudberg4750 thanks for the response Seth. As mentioned, I am a fan of your all’s content in general. And I figured you were just simplifying it for time’s sake. I just know from my experience trading 0 dte exclusively and my friends’ experiences that there’s really a fuller picture that needs to be portrayed to help people understand that it’s just not as simple as “easy 10-20%/day” return. I used to think that when I first started and after several big loss days, I’ve learned that proper risk management policies and learning to stay calm with the p/l swings are very crucial to fully understanding this specific approach and actually making it profitable in the long term. Would be curious to see your take on these topics in a video if you do find the time to make one though.
There are important matters that were not mentioned in this video, and they may be overlooked by the viewer before he is in danger There is an implied volatility factor, which is very dangerous for this strategy. If it rises during the day, you will often hit your stop loss. Which will probably be close (x2 - x3 of premium received) Pay attention and test it before
I find it a bit disingenuous and maybe even a little evil of SMB to suggest a low volatility option strategy to their viewers at a time when volatility is going crazy.
Now is the time to sell options. High volatility translates to higher premiums. You have to manage your entries and stops just like any trade, but some of what he discusses is a really good way to make money and be out of the market at end of day. One of my mentors always said, it's very simple, but it's not easy. Manage your emotions, manage your money.
Hamster, this is not a low volatility strategy. The deltas automatically adjust to wider short calls and puts in higher volatility which can in some ways make it easier to win.
@@sethfreudberg4750 Thanks for your reply! My point is, while volatility is on the rise, there is no way of knowing beforehand whether volatility will not double intra day just after entering the trade, which will make premium received insufficient for the new market condition. By low volatility strategy I mean one that works better when volatility is progressively falling, not rising.
@@HamsterHearthstone but who is to say that volatility won't fall from a high level down to a slightly less high level, affording you the same benefit? So I respectuflly differ with your viewpoint.
thanks but I'll pass. negative expectancy. risking $3400 to make $600. I'd rather just go out to the same delta as the short options and buy a call or put a day or two before expiration to have a high degree of gamma on my side, potentially leveraging convexity.
Nick, you need a stop on the trade just like any other strategy. This is not a set it and forget it strategy. I just gave an example where an adjustment was not necessary which happens in many cases incidentally.
Statistically there’s a 90% chance that the calls expire worthless which means 9 out of 10. At 17.4% returns that means it would take 6 trades to clear a profit and in 10 trades (that would be just over 3 weeks) you would show a return of $2,600 or a statistical return of about of almost $40,000 a year while only needing about $4,000 in your account. Not bad at all even considering that things don’t usually go my way it’s pretty basic math and the percentages usually work out in the long run.
@@sethfreudberg4750 This was helpful. As a beginner, it would help to know how long you hold an option trade like this for in various scenarios. Do you set up a 2:1 win-loss ratio and let it play out? Does that usually take less than a day or more than a day? A video where we watch a trade executed like this in real-time would be awesome as well. Thanks!
One loss would wipe out almost 6 days gains, and only if it’s a max loss, which is lower probability than any loss. Any loss probability is about 19%, but max loss probability would be about 10%.
Aren't you at a $0 net result? Assuming 90% win rate like he says, then 10% is losing rate. So, on an average 10 trades, 9 wins x $600 = $5400. 1 loss x $5400 = -$5400. $0 net. Of course, all this assumes that you never all yourself to get stopped out and just blindly ride out the trade, which I'm sure they are not promoting.
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SMB Options Workshop bit.ly/3uuo8yQ
90% chance of not hitting either put or call short, but combined it is only 80% of not hitting either
Your guidance has given me the confidence to keep working on my trading skills
You have to be right 80-90% and if you start increasing size, one bad day wipes out all your gains. So it is even more critical to have an adjustment plan. Especially when the VIX is north of 20-25.
Yup, now is not the time to be fucking around and selling 0DTE options. We are primed for a crash, major volatility incoming
@@gi295 Actually when volatility is high is exactly the time to sell premium. But as Nick says below, one max loss wipes out 5-8 trades and I have not ever heard of a SPECIFIC strategy to adjust when the market starts going hard against. Because as it starts movng against you what are the rules and what is the adjustment if any? Just use today as an example. I haven't looked at it closely, but I am going to bet that if you did a put credit spread today, you would have had max loss. maybe not depends on the time you entered
@@timb4695 exiting the positions few points before the market reaches one of our strike prices would be wise.
That's not true Tim if you have an adjustment strategy and a hard stop at some multiple of your original credit.
@@sethfreudberg4750 I will give you that Seth for sure :)
I saw a trader who sold ODTE credit spreads around 10-11am EST and after noon the theta decay was so intense that he could hold the spread for 2 hrs and then cash in his gains. the last 3 to 4 hrs of the day (noon to 4pm EST) Theta Decay is at max peak, almost minute by minute options are decaying at a rapid pace.
I tried this and it works really well. Thank you!
Be sure to setup those stop losses a certain multiple of the credit received just in case.
Finally found a pro.
Thank you for this inspiration, realy appreciated
Today I've setup my first Iron Condor on SPX - Until now it works perfect.
Of course with small account for testing.
Based on the ADR from the past days I took a wider spread ;-)
hope it works out! good to test with small size at first to get a fell for the trade
Excellent content. Well done, Seth!
thanks!
My best strategy by far with 90% success is cash secured puts
2x the Daily Avg True Range (ATR) is also a good bet. Be aware of the days when the fed spews garbage however (can occur on Expiration Wednesdays on occassion)...
Hello Seth, You're welcome, We are here happy to serve you.
thx for watching Yasir!
Seth, thanks for the video. But I think that risk control is the most important thing. Do you have any video about that topic?
Thankyou Seth for all your videos!! I
you are welcome Shlok
My pleasure :)
I love Seth
Well thank you, happy you are enjoying the videos.
What’s used to determine how many contracts to sell/buy?
Your personal risk tolerance and account size.
hi Seth, thank you for a very informative video. What are your thoughts on 0DTE selling premium (with protective stop loss at 3x)? Any views on that? (intention to expire the position or alternatively lock in profit throughout the session)
SPX 1DTE IRON CONDOR:
-DON'T DO THIS ON DAYS WHEN IV RANK IS LOW, OR THERE'S A FED ANNOUNCEMENT!
I see many videos where you discuss 0dte options on SPX index, do you have any geared towards SPY or QQQ ETFs?
I just signed up for your workshop
Test this method. It's awesome
What's your common stop u guys set? 2x premium? 3x or +-5 of short strike?
What exactly do you do if the market moves very hard in the direction of your Iron Condor leg to adjust or do you just automatically assume your will take full loss which is a huge loss? If it falls or rises say 100 points?
Tim, you have to back test it and develop a stop on the trade. Some people use 3 times the original credit as the stop on the trade. It depends on how you want to handle it.
@@sethfreudberg4750 I'll give you this one as well. Thanks Seth !
Could someone explain to me in layman's terms why the buying of calls & puts is part of the iron condor strategy? He does mention protection, but I'm not really grasping that part.
Both sides work the same, but mirrored.
Consider if you just sell a 100 call, what is your max loss? Infinite. By buying a 110 call, then any price above 110 and you have capped the losses on the short 100 by being long the 110 - so max loss would be 10 x 100 = $1000 instead of infinite.
Please are there options strategies or contracts I can implement within minutes as a scalper??
This is a common strategy, what is missing is how to manage the trade when it goes south, because when it does the trader will lose a ton of money.
you roll it
Rolling is losing and adding more risk
@@90fulltime1 of course you can lose. If you want no risk then put your money in a CD.
you need to talk about the RISK TO REWARD on this trade. really bad to skip that part.
I’ve never gotten filled on any iron condor I have tried to place. I’ve tried going closer in the money and trying to go in between the bid/ask but it never fills. This is on IB and trading SPX which I would have thought would have enough liquidity, etc.
Use just one leg, i.e. a put spread or credit spread instead of an Iron Condor, they are easier to maintain and roll out of if it goes bad. With an iron condor, you are taking on risk on both sides, and it only takes one side to "get you"!
Agreed with several statements here. There is zero mention of risk management here, and the numbers are arbitrary. SMB seems very legit and I like a lot of their videos, but this video doesn’t explain the half of it. I trade almost exclusively 0 dte spreads, namely iron condors as noted here, and without proper risk management in place (setting stop losses at certain multiples of premium received, for example), it’s an unsustainable approach. You will hit stretches where the probability of said 90% win rate seems completely meaningless as you lose back to back days. He doesn’t describe the big swing movements that occur in your p/l on extreme moves like we’ve had lately and the panic that ensues if you don’t know what you’re doing. Lot of key components of this strategy are missing in this overly simplistic and idealistic video.
How wide? What is your short delta? What do you do when starts moving fast and hard against?
Tcho, this was a simplified video and did not get into adjustment tactics and stops. I can do a video like that in the future, but it takes alot of time and work to prepare a video like that.
@@timb4695 I have just recently (last 3 weeks, which also coincided with Evergrande Monday which I took max profit on) adjusted my approach to be a lot more conservative after talking to some buddies about tweaking our approach, and current higher vol days helps us do this. We are now at 3-5 delta, personally more at 3-4. I only aim for a total of $.50 per full IC, on 25-wide spreads for each leg. One can scale up via contract size as they see fit. It results in only 2% return on BP used, which is 6%/week for 3 0 dte days/week. Much lower result than the 10 delta presented in this video, which a lot of people I know are closer to the 6-10 delta range admittedly…but I’m also not going to complain about 6%/week (not including loss days and commissions, etc obviously). My stops are set on each leg so that the overall net loss would be just 2% of BP as well when accounting for one leg being stopped out and the other hitting max profit (which way more often than not would be the actual outcome). Since EG Monday, the only loss I’ve had was Quarterly’s despite the volatility these past three weeks, and said loss was only 1.4% of BP once I re-entered with another 3 delta put spread after the initial stopped out. Very manageable, turns out to be a 1:1 risk/reward ratio doing it this, and even better ratio when finding a re-entry on the stopped side. No more wiping out several weeks+ worth of profit on one day. Instead, you can make up your entire loss and then some on the very next day of trading your normal size.
@@sethfreudberg4750 thanks for the response Seth. As mentioned, I am a fan of your all’s content in general. And I figured you were just simplifying it for time’s sake. I just know from my experience trading 0 dte exclusively and my friends’ experiences that there’s really a fuller picture that needs to be portrayed to help people understand that it’s just not as simple as “easy 10-20%/day” return. I used to think that when I first started and after several big loss days, I’ve learned that proper risk management policies and learning to stay calm with the p/l swings are very crucial to fully understanding this specific approach and actually making it profitable in the long term. Would be curious to see your take on these topics in a video if you do find the time to make one though.
@@tcho86 Where can I get more info about your strategy ?
There are important matters that were not mentioned in this video, and they may be overlooked by the viewer before he is in danger
There is an implied volatility factor, which is very dangerous for this strategy. If it rises during the day, you will often hit your stop loss. Which will probably be close (x2 - x3 of premium received) Pay attention and test it before
why buy and sell 4 each?
0 DTE? Thus mega giga high gamma. Good luck with such trades, u will need it.
Not an issue when you sell a put or credit spread, depending on the direction of the market! Try a few contracts, you will make money!
I find it a bit disingenuous and maybe even a little evil of SMB to suggest a low volatility option strategy to their viewers at a time when volatility is going crazy.
Now is the time to sell options. High volatility translates to higher premiums. You have to manage your entries and stops just like any trade, but some of what he discusses is a really good way to make money and be out of the market at end of day.
One of my mentors always said, it's very simple, but it's not easy. Manage your emotions, manage your money.
Absolutely...Maybe we need to condor stikes 300 points away, lol!
Hamster, this is not a low volatility strategy. The deltas automatically adjust to wider short calls and puts in higher volatility which can in some ways make it easier to win.
@@sethfreudberg4750 Thanks for your reply! My point is, while volatility is on the rise, there is no way of knowing beforehand whether volatility will not double intra day just after entering the trade, which will make premium received insufficient for the new market condition. By low volatility strategy I mean one that works better when volatility is progressively falling, not rising.
@@HamsterHearthstone but who is to say that volatility won't fall from a high level down to a slightly less high level, affording you the same benefit? So I respectuflly differ with your viewpoint.
Why do Iron Condors when you can just place 2 OTM broken wing butterflies which have a much better risk profile?! IC’s are lame and costly
thanks but I'll pass. negative expectancy. risking $3400 to make $600. I'd rather just go out to the same delta as the short options and buy a call or put a day or two before expiration to have a high degree of gamma on my side, potentially leveraging convexity.
One loss wipes out many gains - and it will happen. Nearly impossible to make any meaningful money selling IRON Condors as your sole strategy.
Nick, you need a stop on the trade just like any other strategy. This is not a set it and forget it strategy. I just gave an example where an adjustment was not necessary which happens in many cases incidentally.
Statistically there’s a 90% chance that the calls expire worthless which means 9 out of 10. At 17.4% returns that means it would take 6 trades to clear a profit and in 10 trades (that would be just over 3 weeks) you would show a return of $2,600 or a statistical return of about of almost $40,000 a year while only needing about $4,000 in your account. Not bad at all even considering that things don’t usually go my way it’s pretty basic math and the percentages usually work out in the long run.
@@sethfreudberg4750 This was helpful. As a beginner, it would help to know how long you hold an option trade like this for in various scenarios. Do you set up a 2:1 win-loss ratio and let it play out? Does that usually take less than a day or more than a day? A video where we watch a trade executed like this in real-time would be awesome as well.
Thanks!
Almost nothing is set it and forget it Nick. Tons of adjustments that can be made if a wing gets tested..
One loss would wipe out almost 6 days gains, and only if it’s a max loss, which is lower probability than any loss. Any loss probability is about 19%, but max loss probability would be about 10%.
But if it does hit below, you're wayyy out of the money and lose a lot. He didn't mention that part...
Daniel, please see my comments above to Tim and Nick.
@@sethfreudberg4750 Seth, do you have videos on setting and determining stop losses for trades like iron condors?
@@TheDRam3 that's a good idea. Daniel perhaps I will do that in the future.
So 9/10 your EV is $600.00 or $5400 positive vs. $3400 negative = $2000 positive every 10 trades standard deviation not withstanding.
So is there a way to calculate the standard deviation on this trade longterm? Would help with how much of the account you’d risk.
terrible strategy
market swings 20 to 40 points occasionally
No strategy wins every time.
risk $3400 . max win $600 . 5.7-1 risk reward . 3 bad trades and 10k gone
Aren't you at a $0 net result? Assuming 90% win rate like he says, then 10% is losing rate.
So, on an average 10 trades, 9 wins x $600 = $5400. 1 loss x $5400 = -$5400. $0 net.
Of course, all this assumes that you never all yourself to get stopped out and just blindly ride out the trade, which I'm sure they are not promoting.