Various Trading Ideas

January 26, 2024January 19, 2024 by mgdonithan

As I come across things in reading forums or researching, this’ll be a place to jot down ideas. Mainly trading ideas, but anything really.

The Spintwig backtest of SPY Vertical Put Spreads with various parameters is interesting. I’d always heard about it, but didn’t find it till today, 1/18/24. I don’t trade SPY (or the indices in general), but some interesting observations in it. One is that being short at 16Δ is in some ways better than 30Δ (less volatility, less drawdown). But the key takeaway I got was that managing at 75% profit is probably better than 50%, so I’m going to start doing that.

IntraAlpha

A Redditor (and a website) who publishes “cheap” and “expensive” Puts and Calls. I signed up for his daily reports, but still trying to figure out what to do with them.
1/18/24

He had MRVL as Bullish so I put a 26Jan 64/66P on it at 29Δ for 0.43.
That closed in 2 trading days for 16%.
Did it again 1/22: 12% in 2 trading days.
Put another one on it 1/24 for 0.39 net.
He had V with expensive Puts, so I sold the 26Jan 257.5/262.5P at 31Δ for 1.09. 15%/wk
I liked his IC rec and on 1/19 placed the SBUX 26Jan 91P (18Δ) / 95C (22Δ) 2-wide for 0.37. 14%/wk
On 1/23 the Call spread BTC’d for 0.05 (7% net), so I sold the 26Jan95/93C for 0.19.

1/18: Short COIN. It’s down 33% in 3 weeks, even with the new spot BTC ETFs. The sentiment is that it’ll keep going down until some catalyst turns it, and that’s not likely in the near future. Staged a 26Jan order for 1/19: 134/130C at 35Δ for 1.07. Went to 35Δ because Prob. ITM was 30.xx%, AND because COIN is falling so hard.
That didn’t fill, so after the open I changed it to the 132/128C (31Δ / 30.9% prob. ITM) for 0.95.

1/18: Saw SMCI mentioned on r/thetagang and liked the 26Jan IC 280P/350C, 2-wide. 15%, didn’t place it. 1/19: but holy cow should I have:

It did this on upgraded guidance. The PCS would’ve closed today.
So how to play it now? Put a CCS above it banking on a pullback? Or a PCS below thinking it continues to go up?
I looked at a 0DTE CCS. Volatility is 162%, with EM 11.76. From current spot, that means 420. The 420C is at 25Δ at 24% prob. ITM, so it’s below 30Δ.
Volume at 12:00 is already 5x normal, so the demand is probably done and it won’t climb much higher. But went a little more conservative to the 430/425C at 19Δ/18% prob for 0.45. 8.4% today if it expires worthless.

And whew, that was a close thing! The 425C was at 19Δ and almost 1.5 times EM, but it still got breached for a short while, reaching 428.69 before turning. So I was facing a $300 loss just to make 45. I sold it at 3:54PM for 0.22. It closed at 423.36, so I could’ve held for max profit, but I was just glad to get out with a gain.
0.45 – 0.22 = $23, minus fees of 2.64 gives 4.0%, same-day.
But I broke at least 2 major rules:
– I traded against the trend.
– The market can stay irrational longer than you can stay solvent.
STOP DOING 0DTE TRADES!

1/21: Longs for Monday
FNGS is at ATH (4 years). Up 22% in 3m. Looks like 16% for 25DTE at 33Δ. A little high, but trend is good.
XLK also at ATH (25y). Also up 22% 3m. Weeklies, easy to get 30Δ. Prices wonky with markets closed.

1/21: Shorts for Monday
BABA is testing ATL, and China economy weak. Spot 69.42, resistance at 70? Looks like ~18% at 32DTE & 30Δ. Could you fairly safely move to 71C for 2:1 and 35%?
BMY steadily down over the year, 30%. Hugging $50 the last 2 months. The 34Δ 52C is 3:1, 24%.
AES at 16.41 is probably heading back to its 4y and 3m low of about 12. But premium is only about 0.17.

1/21: ICs for Monday
XLE looks safe enough for a condor. The 16Feb 78P/83C is at about 30Δ each side, but pays a whopping 47%.
But move out to the 23Δ 77P/84C for 26%.

1/25: Thesis on Iron Condors
Find an ETF that’s not too volatile, do ICs on it.
Ex: IEF is bonds, 11m avg volume, and just 8% volatility. In past year, as high as 100, as low as 89, about a 6% range; currently 95. Went out to 22DTE to find similar deltas on Call and Put sides (25&26Δ): the 1-wide 16Feb94P/96.5C priced at 0.33. That’s one-third the width, so 2:1 risk/reward, with PoP 62%. Net of opening fees (assume it expires worthless), that’s 10% per week.
That’s a lot, so move out 50 cents (17&18Δ): 93.5P/97C for 0.21 –> 6% per week. Both legs are beyond EM.
But that’s still a lot, so move out 50c (12&13Δ): 93P/97.5C for 0.14 –> 3.5% per week.