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Best Long Strategy with Hedge - ZEEHBS Options Trading Strategy
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- เผยแพร่เมื่อ 15 ส.ค. 2024
- The Zero Extrinsic Hedged Back Spread (ZEEHBS) was created by Tony from Mexico (@TFMtrades on Twitter). The trade essentially is a zero extrinsic long straddle with the risk shifted to the downside. Trade wins with any up move or a crash to the downside.
The ZEEHBS consists of bull back spread and hedged at 50%. The example is shown with the S&P 500 but can be used for any index (NASDAQ, Russell, DOW) or stock you are bullish on.
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0:00 ZEEHBS Intro
0:10 Risk Profile
0:40 ZEBRA
1:21 Why the ZEEHBS?
1:35 Underlyings to Use
2:10 The ZEEHBS Trade Setup
7:08 Valley of Death
8:03 Adjustments
14:09 ZEEHBS vs Straddle
The timing of this video!!! I actually came across this ZEEHBS from your 2021 video, and this week was the first time I put it on (on Tuesday, Monday being a holiday). Unfortunately, this showed a negative PnL by Wednesday and I was afraid it would go into the valley of death, so I took off one long call. Terrible for me, SPY rallied on Thursday and Friday to ATH, and I am watching this trade show negative (because I messed with it). Fortunately, the loss is a small amount relative to the gain from my other theta positions.
Can u do thus on earnings
Indeed modifying your trade can mean you ride the loss in both directions
I am fascinated with this strategy and trying so many different things using its principles. I have hit a brick wall with something I am trying to do. I understand you can create this with no theta decay. So to me if I create a bullish trade, as long as markets stay where they are or go up...I should not lose any money. Also if I create a Bearish trade, as long as the markets stay where they are or go down...I should not lose any money.
So that said....if I create a Bullish as well as Bearish trades.....I have limited loss on both sides with 0 theta decay but unlimited potential on the opposite side. So in theory I see this as if the markets makes a small move....I should not lose any money since both sides will cancel each other. If the market makes a big move....I should have a limited loss on 1 side but good profit on the other side. But when I do back test....I noticed that unless markets makes a huge move....I am losing on both sides! Why is this the case? What is the loss coming from?
I am available to discuss this on a call if you are available?
If you look at the individual trade, the slope of the losing side is steeper than the profit side, so if you do both a bullish and bearish version, the resulting risk graph would be a W shape
Hi, great video!! have you ever tried this for an eanings play? seems interesting
fantastic video, many thanks. what would be the best volatility conditions for this trade? i guess rising volatility would help
Low vol would be ideal when you put on the trade. Debit would be less and valley of death would be narrower. Once trade is on then rising vol helps.
HELLO
THE EXTRINSIC VALUE OF 2 LONG OPTIONS IF Is NOT EQUAL TO THE EXTRINSIC VALUE OF THE SELL OPTION SHOULD IT BE GREATER OR LESS and why?
THANK YOU
I usually like the extrinsic value to be positive, so that if the market doesn't move at all then you still make money, but more importantly you want it as close to 0 as possible.
@@IncomeOptionsTrading hello
Thank you for your answer ,so if the extrinsic value of the 2 long options isn’t equal to the extrinsic value of sell option it’s better to be less and not greater?even with the zebra I profit when the market moves?
I like spx because options expire on close, not half an hour later
I remember this trade from back in 2021! How has it done since then? Have you used it much and/or consistently? I wonder how it would perform in a backtester like Option Omega? It doesn't look very good in Lookback.
Thanks for the trade idea! What’s your thoughts on placing an iron butterfly trade to hedge against the max loss?
Changes the trade completely, but you can if you want. Look at the risk profile to help with your decision
Can you explaining how this is different from just buying a normal straddle? Seems like basically the same effect to me, but with added complexity
Compare the risk profile of each. This trade shifts the risk profile to the left so that even a no move or a tiny move up will make money. A straddle loses on a small move up.
I wonder how different it is if you do the synthetic, but then buy otm puts/calls. You still get the V on the outcome visual.
That's a long strangle with short stock. Would have a lot of extrinsic value and theta decay.
Thanks!
Thank you!
I wonder how would perform if you did it on this on at least 1 year DTE. The underlying most likely would move up or down in 1 year to have a almost guaranteed profits. Also if done on several stocks at the same time would also provide diversification just incase 1/some do not move. Would love to hear your thoughts on this.
yeah i think it'd be good! just more expensive the longer you go out.
bid ask spread will be massive. so coming in the trade and getting out will suck away lot of gains
Would this trade survive this monday vix explosion? Tks
@familiasouza889 wouldve been perfect for it if you had it on
Thank you. Question, how can I use this (how to create the setup initially or adjust) if I woud like it more as a hedge to the downside than a strategy to gain wins from the upside.... I mean, what can I do to make the valley of death smaller ? Thank you.
Being on fixed income now, have some capital I want to get the best possible return. I've scalped and done spreads, mainly IC's. If you were to move the 2:1 spread closer, say 427/425 or 427/424, do you have and estimate of how many more SPY shares would need to be used to keep the math the same or improve it? Thanks for any help anyone might provide.
Hard to say without seeing specifics. Keep an eye on the risk profile, the extrinsic value, and the delta
@@IncomeOptionsTrading Well, I tied it today in simulated account. I'm using a brokerage I used 15 years ago, but with all the new improvements gonna give at least a week getting used to using it. I used QQQ, sold 1 slightly OTM 422 call for $324 credit and bought 2 ITM 420 calls for a total of $874. Shorted the QQQ at $422.37 as it was running up fast when I opened the position around 3:30. I was up about $44 in less than a minute, then chopped around between plus $20-$40. Just did worst case scenario, would be down $238 if QQQ were to close at 419.99. So I guess I should either go $1 lower buying ITM calls, or increase the number of shares shorted.
I really like this strategy and gonna play around with it in simulated account to fine tune. Thanks for sharing, seems like a potential strategy to minimize losses but make excellent gains. Gonna play around with it with different underlyings and spread sizes, number of options and ideal spread width. Thanks for reviving this since I missed it when it was first posted. Good luck and happy trading!
Genius, but why such short DTE, wouldn't the POP be much greater for longer periods?
Shorter DTEs allow you to center and adjust more often. You might not be able to catch spikes as well with longer DTEs
@@IncomeOptionsTrading ok, thanks. but I'm still thinking if the chance out of valley of death is greater with longer DTE, why the need to adjust often?
Lock in profits, like you would for gamma scalping
Is this simply a re-post of a 2021 video? Not sure why it's being re-posted if it is already here on YT...
I edited the video to improve it and deleted the other one. This one is 7 minutes shorter
@@IncomeOptionsTrading It's helpful to me. I hadn't seen it before and happy I found it.
"remastered"
Will this have 0 theta decay if you took a long position with 1 year DTE?
if you open it with 0 extrinsic, then it will have no theta decay initially but it will vary as the market moves.
I already got short positions, how could I hedge it?
You could buy call(s)
I am trying to figure out the rate of success for this trade. From your video and doing a simple calculation SPY would need to move up ~1% or down more than 3.8% to be in the profit zone. I am taking ~410 and 430 at the threshold points just looking at the video. This means that it is suited for bull markets or strong bear markets. I am true? Do you have any insight on success percent of the trades you placed?
This is incorrect. If the market moves up at all then you profit due to it being 0 extrinsic value
IMO it would have been a better presentation to just explain the entire concept in the first 3 to 5 mins or so. Skip the stock purchase etc.
Love you - keep on teaching us!
Can you make this to play best on the short side aswell?
Of course. You just have to flip flop everything
I see, flipp flopp😄 Is early assignment a common occurrence with this strategy?
No, just keep an eye out for ex dividend dates and make sure you don't have a short call with extrinsic value less than the dividend
How do I do this with /MES
You can do the same setup, just with different strikes in /MES.