Managing Longs for Short Term Diagonals | Zero Days to Expiration Research
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It would be soooooo helpful if you stepped through one of these trades using the platform showing all the steps throughout a couple of trades. Show what managing and re-centering means. I know it takes more time than reading 8 slides cold, but (and maybe it's just me), seeing the steps and unpacking some of the terms is necessary.
I agree!
💯. Tom is in too much rush to finish. Slow down bro.
coming here to say this. yay data, show me how to design the trade so i can try it
I mean basically you prepare the trade at market open, try to get a good fill, then calculate what 25% would be for the straddle to set a profit take.
Once its sold you reopen another 0dte straddle and again calculate profit take
also, is there a conflict of interest when the guys who run a brokerage company promote a high frequency - with adjustment - trading strategy
Could you guys do a real case scenario of this? Pick any day on a calendar and show how this would have looked in real time on that day
It's the best 0DTE strategy since the last one!
I traded this live for the first time today. While the premium drained nicely out of the 0DTE short straddle, I was really surprised to see how fast the 30 DTE long strangle lost money. Ended the trade per the 25% profit target on the short straddle with a total net profit on both trades of +$175 (the long strangle lost -$160). I decided not to reload the same day until I do more analysis on this.
Is the potential max loss greater than the debt paid? Because I just checked an analysis of a similar trade today on think or swim and the debit was $720 to open the trade but the potential max loss is greater than $720. Let me know if I got this right please. On SPX I sold the straddle on the (0) DTE then on the (28) DTE I bought the strangle at the expected moves for the (28) DTE and the total debit to open the trade was $720. But when I checked the analysis tab on this trade the potential max loss was greater than $720
I've noticed that on diagonals TT doesn't calculate max loss?
I noticed my long strangle will lose money for no reason… just because I picked a slightly different strike. E.g., opened two long strangles at 30DTE within 15 minutes of each other, at slightly different strikes (maybe 2 higher/lower), and one strangle lost MUCH more than the other. I think you have to be careful when entering them to make sure you dont get a bad price.
Your strangle strikes should be very far OTM and *need to be delta neutral*. 35 - 45 days seems ideal (the further out you go in time the less you will reduce BP on the short straddle). If you do this, the strangle should lose a negligible amount if the price does not move much and hedge a bit if price moves against you significantly. So far I'm seeing a 80% win rate taking winners at 20%, matching tasty's findings.
@@mcop1 hows that analysis going? i just tried this and (i think i did it right anyway....) it seemed to make me money as they described.
I'm not a 0DTE trader and would need some practical examples to process this. This was a lot to digest without any examples. Hopefully you can elaborate on this with an actual trade set-up, re-center etc. But this looks like exciting info. Can the data change if thousands of 0DTE traders latch on to this strategy?
thank you for all the data!
Exactly, how about couple of slides of actual trade setup or orders?
If you’re having trouble processing this, then the trade is not for you. You can easily lose thousands of dollars in 15 minutes.
@@theeman2424 I agree thanks for the ADVICE! nothing ever wrong with good solid advice. I'm thinking of a more stable set-up. Maybe u have an opinion. PLTR at $18.20. Buy 100 shares, sell 1 week 18.50 strike call and collar it with a 1 week 17.50 PUT. I don't have the #'s in front of me but it's close to a NET $0.23 Credit/week. There is a bit of risk but even a Black Swan can't blow up an acct. return w/hedge is 1.5%/week. That's with a hedge. Too good to be true so maybe sell an ITM 18 strike. NET $.18/week. Scale this up if comfortable. I like this set-up bc I believe the Covered Call is the BEST tool in the tool box and easiest to hedge (collar). Tried and true. The rule of thumb with a CC unhedged is 1.5%/month but still too much risk for me. What do you think? I will then take all profits and buy Silver with hose money, lol.
I look forward to your thoughts.
If you're not a 0DTE trader, why bother spending the time trying to understand it? 0DTE will eat your lunch if you're not familiar with it.
Essentially you’re squeezing the daily IV. Think about it..
Yo Tasty... We are calling this Strategy THE CROCODILE ... If you ever WATCH a Crocodile eat he is always re-centering his food in his mouth... In His teeth... So we have the Jade Lizard, The Butterfly, The Zebra... and now The Crocodile... Whose short name for this is... The Croc.
Examples please
I ran this strategy myself in a backtest to see if i could reproduce results and I am not seeing it being successful. I have the same criteria, except I have to use ~20 delta for the 30 DTE legs since that seems to most closely reflect the IV move (as of the my current time of writing). Short 0dte straddle at 50 delta, long 30 dte strangle at 20 delta. Close long strangle at market close (30 min before close to ensure I don't have overnight risk). Close short straddle at 25% profit and open a new leg that is "centered" around the current price up to 3 times in a day.
I ran this YTD (Jan 1st 2024 to april 22 2024 and it was down ~10k (i have the trade set up to only trade 1 contract max, so this is the minimum size you can do). When I ran it against the last year (Starting April 23rd 2023 to now), I am down $26k.
Not quite sure how they're getting their results. I'm utilizing 1 minute SPX options data. Simply holding SPX has outperformed this strategy every time. There's a few days that have healthy winners.
I've found it to only work well on low VOL days. On high volatility days, it's a losing strategy.
I would like to back test this myself but I'm new to back testing options. Did you code this yourself or is there a service for this? If you coded it, how did you get 1 min SPX options data? Thanks.
@@zombiesniper3350 I have my own I wrote in Python along with a paid service (option omega). I bought the 1 min data from cboe directly but it's expensive
So if im winning 25% of my straddle i close that straddle and open a new in the same day?
Lol 😂. Only if you are recentering the trade.
@@quantum7401 yes because based on their research recentering is the most profitable
Yes pretty much!
To the Tasty team - I am struggling to understand how the data in this presentation reconciles to the last 0 DTE video you presented on this topic (“How we trade 0DTE Diagonal Spreads). Slide 5 of this presentation shows that when you do new strangles everyday and recenter at 25% profit the net P&L per day is $30.15. The previous presentation on slide 4 presented that rolling winners for the 0/30 diagonals had a net P&L of $312.70 per day. This is a 10x difference on what I thought was the same data point?
I think here this video is about SPY and in the other video it's about SPX, although in both videos SPX is shown on the slides.
They are recentering the trade with another 0dte option here (not a roll just buying back at 25% profit and recentering on price with another 0dte option), there, they are recentering on price and rolling it to the next day's expiration. I believe. Would make sense that this makes more money, as you're capturing premium decay as it's decaying the fastest.
We are talking about a factor of 10 here. Do you think this will clarify the issue?
My biggest question is wether the long strangle is bought mainly to reduce buying power requirements or to protect against big moves? Buying them at 1 deviation 30 days out simply doesn't provide the delta and gamma to give decent protection. At this point, isn't it better to just go with a naked 0DTE straddle if you can manage the BP requirement?
Is the potential max loss greater than the debt paid? Because I just checked an analysis of a similar trade today on think or swim and the debit was $720 to open the trade but the potential max loss is greater than $720. Let me know if I got this right please. On SPX I sold the straddle on the (0) DTE then on the (28) DTE I bought the strangle at the expected moves for the (28) DTE and the total debit to open the trade was $720. But when I checked the analysis tab on this trade the potential max loss was greater than $720
Have you considered buying the 30day as a straddle instead of a strangle? I accidentally did this the first time attempting the trade and the 30 day straddle made a nice profit 😂
@@theeman2424exactly! I’ve had good luck with buying straddles. I was suggested to buy a straddle and then sell a nearby shorter term strangle 2 points on either side of the straddle (for SPY). The opposite of what these guys suggest.
I'm not clear on how they calc the $30/day average profit. If on average they do 3 trades a day and take 25% of the profit and the 0DTE straddle yields at most ~$20 (at the open) then that gives me 3 x 0.25 x 20 = $15. And this doesn't include loosers or the fact that the straddle yields less credit as the session progresses. What am I missing?
If we are to believe their numbers, the difference would have to be explained by some average appreciation of the 30 DTE strangles and their contribution to that “P/L per day.” It might explain why they use the 30 day long strangles, despite the fact that one wouldn’t expect the price to move that much in one day.
@@sethhanson4485it seems so. I’m guessing that’s why you dont recenter the strangle during the session.
So if we're closing at 25% profit... are we closing both the straddle AND strangle at that point and re-centering the whole thing? Or are we closing just the straddle and keeping the long strangle on at least for the remainder of the trading session?
My take: closing the 0DTE short straddle when its premium decays by 25%, then selling a new 0DTE straddle ATM. The 30DTE Long Strangle stays as is until the end of the day, then sell to close.
@@sethhanson4485how much buying power it’s takes? Also I could not tell what does the max loss is from the analysis tab and was wondering what is the max loss?
@@sethhanson4485What if the market hasn't moved, the premium has decayed 25%, then why would i recenter? The ATM strike would be same......
@CharlesCharles-bb6qxit’s to lower BP req not protect from losses
Some advice on how to manage losing trades would be helpful. I tried this trade today. 4 hours after entry SPX was trading above the IVx expected move for the day, so I closed out the trade. At a small profit, thanks to the fast theta decay, I suppose. Maybe next time I'll try rolling the short side to the 1DTE for a credit.
It'll be a while probably before they have real examples, if ever. So I'd suggest paper trading SPX or trade a 1-lot XSP and see how it goes.
Reading the comments is interesting and brings up some good questions. 1) What is the purpose of this trade? Having a single long strangle, 30 DTE does not cover an outside move of a 0 DTE short straddle in delta terms (it offers little protection). In my back testing you have to use a ratio from 1/5 to 1/10 short straddles/long strangles to mitigate delta. The problem with this is that you then have significant Vega exposure and in my back testing, it was common for the 30 DTE to crush as much (if not more) than the 0 DTE in pure dollar terms (which makes for a bad trading day). Is the purpose to reduce the margin requirements by having the double calendars on as opposed to a naked short straddle (this is my bet)? If that's not the case, you'd be better off selling the 30 DTE strangle and not worrying about the 0 DTE. Having a more thorough trade setup example would be very useful here.
It's effectively a straddle with BPR (and some black-swan protection).
Why wouldn’t you buy a straddle and sell a strangle? That way you have a good chance at staying inside the strikes, and any movement is a profit to the straddle.
Does the profit numbers include the commission and fee cost?
No 😂
I think this would be called a Diagonal Iron Butterfly... It is an Iron Butterfly in physical structure because we are selling the ATM Guts straddle and buying EQUAL distance strike wings... and Diagonal because in TIME the Straddle Guts are expiring today 0DTE unlike the equal Wings which are expiring in 30 days - 30 DTE - in time -- so it Diagonal in time structure.
I think your analogy is good. Thanks.
Some also would call it a Double Calendar
If I consider the commisions and fees, they will be a big bite on that $30, no? It seems to much buying power and work for an average of $30. Unless this is already considering commision + fees.
Not sure I understand the point of the 30 Day strangle. Is it meant to control/define the risk? How can it do that if it is set way out at the 30 day move for a same-day trade?
If you had the permission, why not just sell the 0DTE straddle? Taking profit/ rolling at some target like 25%? Obviously the position would have to be watched like a hawk, maybe closing manually if it exceeded the same-day move.
The strangle lowers BP req from $100k to $12k
Can anyone give a strike prices for O DTE & 30 DTE? My buying power going to $21k but it should be $9k to $10k.
the key is VIX on the move, what does this mean?
This video raises more questions than answers...
Why 30DTE and not 1DTE or 7DTE?
Why use a long strangle and not a long straddle at the remote end?
And how does underlying move effects the outcome?
And I'm very grateful to Tom & his research that I now have more questions than answers ... since before, I didn't even have any of those questions using conventional 0-DTE credit spreads ... now instead, I have a great starting point to do my own due diligence ...
@@primerodinero2909bingo. This is a great start point for creating your own strategy that works for your account, risk appetite, and profit expectations
Hopefully we will get this study eventually. My gut feeling is that if you buy the strangle too close then the increased theta decay eats all your profits on the short straddles.
surprised I had to read down so far to see someone ask this. a 1 or 7 dte long strangle might actually protect from severe price movement (loss) instead of just lowering BP requirement. And you wouldn't need to be rich just to put one trade on. It will decay faster sure but if you're rapid fire recentering and making profit like that ^ you should be able to cover it pretty easily.
What I will say as far as selling the straddles goes, if you've ever traded ODTE options you need to have serious underlying movement in your direction to make profit.... and that's just dealing with one option's worth of time decay. With these straddles, you have two atm options (highest ext value possible) decaying, and one of them is losing value if one is going against you. Even the one that's going against you, is still losing ext value rapidly. You'd need a massive move in one direction to overcome that, and it's almost never going to happen.
I might try my luck with 7 dte wings tomorrow, come back and let you know.
@@GrumbleMachine maybe you just answered your own question… those latge moves “almost never happen” so why pay for the shorted dated long strangle by way of higher theta decay? Yeah it’ll protect you better from the outlier move, but is that protection worth the higher decay in the long run?
you guys are phenomenals, I have to rewind dozens of times to catch it all.
Almost all effective option strategies seem to capitalize on the premium value given to time. If you are selling time you are probably making money.
I don't understand .... in the same trade you do a 30DTE strangle and a 0DTE Straddle? Some example at the end of the video would be very helpful
I only mess with 0DTEs, for fun. They are extreme, and reverting to the mean any of that doesn’t work. For the most part you have to catch the open high or low breakout. Especially with spy, theirs always a high percentage for the spy to hit its high or low of day in the first 30 mins, that’s when I play them. And I wouldn’t hold any contract less then 30- 45 days
over night, your asking for a BIG 🍩😂😂😂
Thank you very much for this, will try this on spy, it is a poor man cover call/put that you close daily.
0 DTE iron flies were zero for five in last five days, maybe one could squeak out a win on FRIDAY, but the loss was too great as 100% of position was breached. If you waited until late in day you could have have gotten the 25%. One week undid a whole month of profits. Proving the market is random.
These are diagonals not iron flys
@@jacoby4838 same result
Perhaps the most-important metric is missing: drawdown.
You'd help everyone, if you'd just do a real live sample trade.
i've been trading these for a ~6 months now but I use 45 DTE for the back month. IDK if I am even doing it right, but I focus on collecting more premium on the front month than I lose in theta on the back month and so far it seems to be generating a decent return. It can be really hard to manage when there is a sudden pump in the markets though in my experience. I like to leg in and get a slight profit on each of the legs.
But isn’t the buying buyer like $45k or more?
What is your win rate on this strategy in your case? Have you backtested it?
Is the potential max loss greater than the debt paid? Because I just checked an analysis of a similar trade today on think or swim and the debit was $720 to open the trade but the potential max loss is greater than $720. Let me know if I got this right please. On SPX I sold the straddle on the (0) DTE then on the (28) DTE I bought the strangle at the expected moves for the (28) DTE and the total debit to open the trade was $720. But when I checked the analysis tab on this trade the potential max loss was greater than $720
@@myrealtv7830 your max loss should never be greater than the debit paid. IN order for your max loss to exceed the debit paid, your short options would have to exceed the value of your long options, which is impossible since your long options, being further out in terms of DTE will have significantly more extrinsic value.
Do you leg in on the strangle or straddle?
I’m shocked this works. What are the mechanics for the roll? Do you do both sides of the strangles or leg out of them?
just one leg
I think they said the recentering means closing the strangle for profit on both sides. then doing another 0DTE ATM set at 25% profit. My issue how are going to be there when it closes at 25% profit to enter another trade.
What do you call it? A calendarized butterfly?
Hey, would anybody be able to explain what the mechanics are for recentering a winning Straddle?
“Buy to Close” the straddle at your target profit (video says 25%).” “Sell to Open” a new ATM straddle. If the ATM strike is the same, you wouldn’t close, just mentally reset the profit target
@@sethhanson4485 thanks. Appreciated
*edit* does the strangle change at all?
Strangle stays as is until you sell to close at the end of the day
@@sethhanson4485 got it. Thanks again.
How bout an example, dude?
What platform do you use?
When closing for 25% profit.. this is implying either side of the stradle? How does this make sense .. in theory if the call stradle is winning than the put stradle is losing right? How you get 25% profit
He’s talking about 25% of credit received on selling the straddle, which works out to a much lower return on risked capital (on the order of 2.5%, but that’s the gotcha of the 81% POP).
because the 0DTE options are decaying at a much faster rate than the 30 day DTE options, hence the profit
Initially that would be true but theta decay saves the day assuming the stock price stays under the tent!
@@ricomajestic so you are saying if the call we sold on the straddle moves 30% gain.. the put we sold doesn't lose 30%.? Rather it might only loss 15% hour into it.. is that the general idea?
@@harrywang4055 Yes but there is a limit to this. Obviously if the stock moves by a lot and very quickly, this position will also start to lose and extrinsic value decay won't be enough to save you.
I'd love to see this trade executed during the day through all scenarios.
keep in mind they are talking about trading diagonals. A double diagonal is a combination of a straddle and a strangle. But, you have to enter and manage the trade as two diagonals. If you want to "re-center" the trade, that means rolling both diagonals together, to a price where the short straddle is "centered".
A lot of the large profit they report on the adjusted trades comes from having one of the adjusted diagonals return close to its maximum profit.
Trading this double diagonal is going to work best in a market with constrained moves. In a volatile market, you'll be trying to roll too much. I have a paper trade on but no way I'd touch it with real $ on NFP day.
Today's double diagonal is Dec08/Jan05 4585/4720 calls for $0.90 debit; Dec08/Jan05 4590/4440 puts for $5.35 credit. Net credit for a 1 lot is $4.45. Margin required is $14,465.
They are trading a single diagonal!
@@ricomajestic double diagonals, put side and call side, with the shorts at the money
I dont think you need to touch the strangle. Rolling means buying back the straddle and then selling it again ATM
got it, excellent explanation, this makes sense!
Can you do the exact same study, expect buying the 30 day straddles and selling the 0DTE strangles? Also, the 30 day strangles in this study are purchased at 0DTE expected move, correct?
no, 30 day strangles are bought at the 30 day expected move. I think the 0 day move at 30 DTE would be prohibitively expensive.
You’re not going to get a high enough theta decay on the 0DTE if you’re selling strangles instead of straddles
Not so much, as you would get most of the that premium back when you sell it again at the end of the day@@sethhanson4485
you guys never show any graphs with the options - I don't understand how you have zero date straddles and long dated straddles and what this looks like graphically - please add some graphics to your set ups like this please. it would be a big help for me.
So for the long wings does he mean the actual Vix 30 day expected move which is 2-3 points or spx 30 day expected move which is about 150 points?
so you are buying a back-dated long strangle at the epected move, and then selling a short 0dte straddle ATM?
Any one know of a reason why this trade couldn’t be done with SPY? Doing it with SPX (or RUT) is very expensive. Would SPY not being cash settled mean you wouldn’t want to do this trade with SPY for fear of assignment?
Do you have a video that explains exactly what you are doing by stepping through a couple of trades?
If I close the straddle toward the end of the day but let my 0DTE expire (as was suggested), as soon as I close the straddle, the BPR is gonna spike.
For losers just close once price passes breakeven a bit or as vid said close at end of day (I guess in this case just hoping price will move back to winning)?
Need a follow up video, with more detailed explanation and actual example. Also, it wasn't clear if short straddle was covered by long straddle or strangle. If strangle, how were the strikes determined?
At what point to close for a loss? Otherwise seems like a promising 0 DTE play.
Wow, I have back tested this and it looks amazing. Can't wait to monitor it real time.
Aren't 0 DTE options *only* available in the most liquid ETFs?
SPX is the best vehicle to trade it because it's cash-settled. you can trade spy and qqq as well but you have risk assignment with those
@@VirmanaMarketing start with XSP
@@fuzzyboomboom9742 XSP is not liquid enough!
@@fuzzyboomboom9742may have too much slippage with XSP. I dont know the bid ask spread but i assume it’s more than SPX
Great video guys, as always , but would be great to see some examples and not just numbers
i dont understand. selling a call or a put? what strike? this is confusing.
Are you referring to selling a straddle & strangle or buying them?
Thanks guys. I think I get it now. Hopefully the market gods will be kind to me during the first few trades so I can lock it down and add this to my short list of favorite strategies.
I'm going to test some of this on options omega. One minute data.
What was the results?
@@tvlobo202 he's not telling!
You'll probably get even better results on Options Omega!
what's the delta for 30DTE strangle?
Looks like at the implied move. This is available on the platform and more or less 1 sigma.
@@mpuchatek16delta-ish
It’s right at the expected move easily shown on the platform
Usually 16,8
It's the expected move of the 30? Not zero correct?
this video addresses a question I had on last video THANkS !
so a double diagonal? going to touch on how that relates to IV?
It sounds like a good strategy. I will back test it and I wish there will be a follow up video of how Tasty folks trade it.
What Deltas were you buying your longs at?
What's your opinion on buying strangles 7DTE instead of 30DTE?
probably a bad idea! Too much theta decay!
Will someone make a video example of this please
Haven't watched yet..looking forward to it.
This seems a really interesting idea. Need to find a way to backtest this one myself.
What average slippage do you estimate on SPX 0dte?
around 10 cents probably! It is SPX!
are they re-centering the back 30 day strangle throughout the day in the last test?
Probably not
Love the effort guys but is this supposed to be educational? Lot's of smart people in the comments are totally lost. Even issues in the video between you two understanding what's happening with this structure. Why not offer a simple illustration to clarify? I've just spent a couple of hours watching and re-watching then reading all the comments to try to piece together what in the world Tom knows that most of us are trying to piece together. Please show the trades and the adjustments to clarify the jargon. Again, much love but more clarity is needed.
Question: Are you buying the 0DTE straddles and 30 DTE strangles the night before or the morning of?
Morning of. Never night before.
Just to clarify, you should be selling the 0 DTE straddle and buying the 30 DTE strangles.
What’s their stoploss tho?
so when you say "recenter" you exit the previous straddle and re-enter another ATM straddle right? but what if the SPX price is the same as it was when you entered the first one, meaning you buy to close your straddle but then you have to sell to open the same exact straddle?? does that mean just keep it longer?
Interesting question. Thinking about it, I would. This happens when the first short straddle makes the 25% profit target. Exiting it and entering a new ATM short straddle would mean its exit would hopefully also yield another 25% profit at that price (which is theoretically 25% of now the 75% of the original total profit). I would just keep the original straddle longer with that new calculated profit target. But with a stop loss of keeping the original 25%.
@@billwong5157 yea that makes sense to me in my head also. cause exiting and re-entering the same trade is dumb and just costs more commissions. so far i've tried this strat out 3 times and have been profitable each time. havent tried the re-enter or keep the same thing longer technique but so far so good!
Great episode, excellent research, and God bless Tony for being there to get Tom through those slides (it was a little painful to watch him struggle 😂)
Thank you. Have a nice weekend.
I was doing this on robinhood, but got kicked off the platform by finra because apparently the margin maintenance was an order of magnitude larger than my account value when I was recentering constantly. Can you speak a bit about what the finra regulations have to say about capital maintenance for positions like this when trading the same position several times per day?
Open an account with a real brokerage 😂
@@theeman2424 I mean I did. Still wondering about what they were on about though.
@@WendingWayfarerthe margin maintenance should be about $12k for this trade
@@theeman2424 that's more than an order of magnitude less than what was asked of me... I haven't tried with tasty yet, but I think I will give this another go as it was a nice (albeit small) regular income.
What is delta on long straddles?
Probably around 16 delta!
HI Is this a defined risk trade?
yes
The first rule of backtesting. If you see a result that is too good to be true... you have a bug in your backtest. I ran the same backtest -- your result is in fact wrong.
First rule of backtesting is don't use backtesting. It is completely worthless! Always trade in real time. Always forward test and keep a log!
how is it wrong. tell us! If you come into the tastytrade dojo with silly comments you better back your claims old man. This is a trading dojo not a knitting class!
$3496 max loss is kinda steep for most accounts I would guess and it only takes one loss to wipe out lots of winning ones?
I believe that "Max Loss" is determined the same way as any other spread: (distance between short and long strikes) x (100) x (# of contracts) - (credit received). Per the video, there's a 20% risk of loss if planning to manage winners at 25% profit (on the 0DTE Straddle), but any loss should never be "Max Loss." The long strikes are set at the 30 Day expected move, and one wouldn't expect to see a move that large in one day.
I had thought that the longs were set at the 0dte expected move. Not the 30?
@@growontap moving the long strikes in would make for a much more expensive trade cost.
That's what I thought do. If it were the 30 day expected move, your max loss would be huge@@growontap
@@growontap No!
this strategy is pure management in real time (bc 0 DTE pirce options swings every minute) and you have to paid a fee for real time in options market...
Fee is peanuts compared to what you can make!
Too good to be true!
Not really!
0DTE is nuttier than even crypto?
10min data is pretty worthless for 0DTE. Get at least 1min data.
Not in this study! Since they don't manage the losers. 25% profits might happen sooner though.
@@ricomajestic Nope, i tried this strategy yesterday on paper account, the swings on the options prices for the 0dte were too wild, in 5 minutes i had a loss then a win...Also when i was winning near 25% (never reach that amount lol), i want to roll but never got filled because the prices showd in the platform were lagged because of the price movement of the SPX, so you NEVER got the real instant prices every minute and there is when you lose money
So you're putting on a short straddle long straddle daily? short straddle 0dte and long straddle 30dte ?
30dte long strangle, legs set at the 30 day expected move (1 standard deviation)
@@sethhanson4485 So the long is a strangle instead of straddle. Thanks.
A question:
At 25% profit target, if the short straddle is at the center would you still close the trade and open another trade? Or just keep holding the current trade?
If current price is at strike price of the straddle then you obviously keep it. But take notice of what the premium is atm. To keep things simple: you short a straddle while SPX is at 4000 points for 40 dollars, after straddle goes for 30 dollars (you profit 10 dollars or 25% straddle) and SPX price still at 4000 then you keep it, but now you consider you are short at it again at 30 dollars. So you only recenter it when you profit another 7,5 dollars or your straddle goes for 22,5.
@@caiobortoli Unless you have a large account that allows you to naked short straddles, you're going to have to manage the trade as a pair of diagonals.
There's no reason to exit at 25% profit if the underlying price is static. They just had to pick a profit target to uniformly model the trade across 9 months of data. You can hold the trade longer to get a larger profit from the "straddle" if that'll work.
If the underlying price is moving the trade into loss, you can "re-center" the "straddle" by rolling both diagonals.
@@fuzzyboomboom9742 they aren't naked, you are buying strangles on the back month, the guys said it in the video. 🤔
@@fuzzyboomboom9742 yeah there's no need to manage it if the price is static.
You are the guy from the comments section in the previous video, right? Have you tried the things we were talking about? I still couldn't get time to test if we get a positive theta directional trade that makes it worthwhile the huge BP needed
1. They need to put a trade example in here from setup to close out with clear explanations at each step. (Mike get your White Board and explain this,
2. Is this a Diagonal, Straddle or Strangle? (Title of slide 3 is "Short Term Diagonal". Then it looks like they look at results for a "0/30 Diagonal". Then the present the winning percentages for
a "Straddle"... WTF! I must have missed something!
3. Does the Trade use the expected move of the VIX, Straddle, or Strangle?
4. I'm not even calling this a strategy because this was poorly written, poorly explained, a combination of both or it's completely possible I'm dumb, which is totally possible and I'm ready to
accept that in which case I'll return all of the tuition Stanford paid for my Graduate Fellowship in engineering!
Return the tuition because this isn’t that difficult of a concept to understand if you’ve taken the time to learn the basics of options, how they’re priced (IV), and the basic greeks
LOL!!!!@@theeman2424 Thanks. I'll get the check ready. Sometimes we make things harder than they have to be.
I think it would be called a Diagonal Iron Butterfly... It is an Iron Butterfly structure because we are selling the ATM Guts straddle and buying EQUAL distance strike wings... and Diagonal because in TIME the straddle Guts are expiring today 0DTE and the equal Wings are expiring in 30 days in time so it Diagonal in time structure.
Is the potential max loss greater than the debit paid? Because I just checked an analysis of a similar trade today on think or swim and the debit was $720 to open the trade but the potential max loss is greater than $720. Let me know if I got this right please. On SPX I sold the straddle on the (0) DTE then on the (28) DTE I bought the strangle at the expected moves for the (28) DTE and the total debit to open the trade was $720. But when I checked the analysis tab on this trade the potential max loss was greater than $720
Basically poor man's covered calls with 0 DTE.
WRONG!
We do not understand this 0DTE. Can you provide an example, step by step, of any trade? For example, what does recentered 25% mean and how does one determine that price point? And the same for the use of VIX for long straddle. All I am asking for is one trade with what you use to make the trade entry and exit.
Nice job 👍🏻
Can tell Tom never traded this strategy just by the way he is explaining this..
He actually does and I saw it on the follow page
@@osman3404where
So you make $30 / day per winning side?
It's times a hundred, so 3 grand. And there is no winning side, it's all done as one trade.
no, but I do think you grifters just found the newest best way to lose money !
there is absolutely no advantage in doing this instead of a standard calendar. buy a 30DTE put, sell a 0dte one. the result is exactly the same and way less complicated. its only better for tasty because you're paying twice the commission :)
There is a huge difference in the cost of the trades. The Dec08/Jan05 SPX 4590 call calendar costs $50.80. The Dec 08/Jan05 4590/4710 call diagonal costs $4.15.
@@fuzzyboomboom9742 yes I meant diagonal sorry, my point remains though, also considering that the total cost for the strategy described in the video seems to approach the cost of the calendar in your example for SPX.
Is the potential max loss greater than the debt paid? Because I just checked an analysis of a similar trade today on think or swim and the debit was $720 to open the trade but the potential max loss is greater than $720. Let me know if I got this right please. On SPX I sold the straddle on the (0) DTE then on the (28) DTE I bought the strangle at the expected moves for the (28) DTE and the total debit to open the trade was $720. But when I checked the analysis tab on this trade the potential max loss was greater than $720
@@myrealtv7830 yes that's correct, if you want a max loss closer or equal to the debit you can experiment moving the strikes of the far dated further in the money
Their worst video ever. 😕 So much confusing... Looks like Tom even doesnt know what he reads...
Looks like an amazing strategy to generate commissions for your broker.
You're whining about4 bucks when you can make as much $400 on one straddle. And double that if you trade 2 more straddles
I usually ignore the frequent criticism about Tasty's conflict of interest when they post videos like this, but this one is too explicit to ignore. The video is devoid of any actionable trading strategy, as other commenters point out, except for one very specific detail: make sure you close those longer DTE strangles every day and open them fresh the next day... Tasty has to generate commissions somehow. There is not enough information in this video to consistently profit from this "strategy", but there is plenty of detail to make sure Tasty profits. @@ricomajestic
@@jimmyblimmygo back to trading on robinhood and spend more time learning options. If you think opening a straddle that costs $3 in fees every day is the make or break for this strategy, you’re not ready to trade options anywhere besides robinhood 😂