Corrected Naked Strikes in 0DTE
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When folks are honest about a miscalculation or error of some kind, and then admit and correct it, these are folks you can trust and respect. Thanks, Guys, you are great!
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Need to show some live trades here
Comparing these naked 0 DTE results to the 0 DTE diagonal results from 3 weeks ago, Naked is just way better with higher profit/day, higher win% and lower CVaR. So The 30 DTE long strangle for the diagonal offers no protection at all? Would be interesting to see if you lower the 30 DTE long strangle to different DTE and different % of VIX derived expected move and check CVaR. It's just hard to understand the long strangle offer no protection whatsoever.
what time do you put the trade in? sometimes the profits are quick and sometimes nothing happens and then you lose money
I watched this live today. You guys should do a piece on WHEN the ODTE strategy works the best for SPX. Like, which days. Perhaps best to avoid big news days, for instance. You could do a study on the best and worst days to use 0 DTE based on history.
To make money consistently in 0 DTE SPX, you need to be directionally correct. There is no shortcut.
@@rutstrangle That's not true! There are tons of evidence to the contrary showing that neutral trading strategies can be consistently profitable with a positive expectancy!
@ricomajestic neutral trading strategies work for longer DTEs. 0DTE has too much gamma risk. Tasty does not seem to have any consistently profitable 0 DTE strategies. At least I did not find any from them. Let me know if you find any. It has to have very low draw-downs though.
@@rutstrangle Check out Tammy Chambliss on youtube. She has a whole presentation on it. She does this all the time and she is profitable same with John Einvard. A lot of people are profitable with 0 dte using this strategy. There are groups do this trade constantly with far OTM wings to control Buying Power and they are pretty consistent.
This study does not include buying the 0 DTE wings at the 0 DTE expected move. I have found for the SPX in Jan 2024 this EM is typically +/- 10 pts so those wings on either side would give you a iron fly with a total width of 20 SPX points; which is the position that I am placing for each day in 2024
I find my 9 am placed trades takes 3 to 4 hours to reach the 20% profit target, meaning I sell each contract for around $7.25 and close at $5.80 for a 20% and $145 per contract for a full win. typically the max loss could be average out to around $2.50 per contract or $250 loss
this is what i see so far.....any input from Tasty would be welcomed
When do u stop out?
@johnsullivan4183 I take the simple approach from tasty research. Let the probabilities play out and the only way is for losers to expire. If you close out losers early and often you will definitely have way more lovers than you should. I have witnessed ugly losses that turned around near the end for a miracle profit. Sometimes the daily oscillations constantly move from one end to the other and the hope is that after 3 plus hours of time decay those final oscillations during the last hour makes all the difference
What part of held to the close isn't clear?
How do you do a 10% OTM straddle at different strikes (e.g. 3995 and 4005)? Do they mean a strangle?
Yes, they just label 0% expected move strangle as straddle
The only thing missing is risk management. I know Tom hates stop losses but we mortals need them.
Maybe a good stop loss to reduce risk could be 3 time profit: 75% premium. So we Will reduce profit but low cavr?
I have my own ideas but it would be great to have the research team suggest a number. It's easy to let these go ITM and get killed. @@filippofederighi9809
Yes. They could elaborate more on that. For example: taking profits @25% with stop loss of 50% or 75%
would someone help me understand this trade? I do not understand how you can have a 74% win rate with an at the money 0DTE straddle held from open to the close when the daily expected move in the SPX could be high, such as an EM of + or - 10 points or greater? Why are you not blown out of your position if it moves against you in either direction? I must be missing something. They mention rolling winners, but what about rolling losing trades?
Am I missing something? a naked short strike strangle on SPX will required loads of buying power without the wings
This appears to be a classic example of it works 95% of the time until you blow up your account.
is this some kind of Credit Spread Straddle or did they buy the call and buy the put ATM? what is the Entry trade?
Well done tastetrade . This research is prima Dona.
For this study, were each of the 3 kinds of trades sold at market open, or only the one held through close?
93% win rate selling ATM straddles does not look realistic.. are you sure the data is really fixed?
That makes sense actually 25% is nothing! If you sold it for 100 you would buy it back at 75 and make 25 bucks! I mean held to close was around 75%! Of course, that 25% that you lose, you lose big wiping out most of your gains.
Meaning it hits 25% profit at some point during the day
It is a straddle on SPX. The credit will be order of 20 at opening and from my recent experience the decay is slow in the first few hours. 93% means 19 time you win 1 you lose.. I am not convinced this is realistic.
@@CRM82 test it. Paper trade it. I wish Tasty had sim trading. But I’m going to try it at some point. I’ve run the initial numbers but I don’t know for sure how it’ll play out yet.
@@CRM82 Probabilities mean nothing! Small wins and low probabilities large losers don't usually workout over many years . These guys only have 10 months of data only which is laughable from a statistical point of view. Straddles decay very fast actually and that is why a lot of people do the Jim Olson butterfly with very wide wings and they usually target $150. It is a very popular trade. Most people are out of JOIF in 1-2hrs but they use stops and their probabilities are lower!
To close@25% - could you please explain what do you mean? Closing only winner side? Or close each side independently?
Close @ 25% of max profit. These guys hate stop losses
When ever I see your videos can you guys be more specific in what you are trading? Like for this video. You are saying straddle, are you buying a straddle? Sell? How you take 25% profit if it’s bought at the money . Wouldn’t the trade be just washing itself out
They said they sold naked strikes so they are selling straddles! If it were a long straddle then 25% profit would be 25% of the debit that you paid so if you paid $100 for the straddle then 25% of 100 would be $25 and you would close the position at $125. So you make $25 in profit.
@@ricomajestic so they are trying to capture the time decay of the sold option on both side. But that is incrediblly dangerous to have naked sold call and puts
@@harrywang4055 1000s of people do it every day. Most of them use stops and some roll/recenter intraday! You have to watch the computer screen all day though to watch that position.
Thank you
What's the equation to calculate VIX-derived expected move? I have seen Tom mentioning it numerous times.
I’ve been asking this as well. Everyone just says it’s on the platform but I’d like to know the math
I don't get this calculation of expected move either. Can anybody elaborate?
Implied volatility could be calculated for each option strike independently. (And it is usually slightly different for each strike.) With the volatility you can find mathematical variance (ask chatgpt how) and sigma - which is by definition the expected move. VIX is calculated by implied volatility of current at the money options. Expected move is calculated by the volatility of the closest (to expect move range) out of the money options.
So, basically, there is no formula that links VIX with the expected move, but you can get it approximately. Ask chatgpt how.
the 19 comes from the square root of 365 (VIX is annualized), you use it to make EM calculations in time. some people use 16 (square root of 252 trading days). IT's all ballpark numbers and it does not matter what you use, as long as you use the outcomes of a study correctly. you can also use the straddle method to calc the EM, i prefer to do that in my coding so i don't have to access another ticker, when i already have loaded the SPX option chain.
so the example with VIX at 19 and SPX at 4000 is: VIX/100 (it's in percent) divided by 19 (or 16) times SPX, times the 10% = (19/100)/19*4000*0.1 = 4