Trading SPX like a Buccaneer
This is not meant to be a step-by-step guide on how to trade, ultimately the decision to place a trade is your own and you must own it. One advantage of Slope is the level of expertise and the breadth of knowledge from fellow Slopers and their willingness to share. Arguably, it's Slope's greatest strength. In that light, I'd like to begin compiling notes and wisdom with respect to Buccaneer's strategy of selling 1 DTE puts in SPX.
Here's the nitty gritty...
- What - Sell far OTM put spreads with one trading day left till expiration
- In general, this means selling the Weeklies on Tuesday, Thursday, and Friday
- You can also sell the Monthly on the third Wednesday
- NOTE the monthly settlement is Friday morning, so do not hold past Thursday close
- When - On weakness, but how you determine the weakness depends on you
- Bucc reads the options chain to get a feel for the market, both for overall trend as well as real time action. More on how he reads the options chain later
- I use a combination of the Bollinger Bands (20) and Hull Moving Average (20)
- Briefly, I look for price to close above the HMA while is is below the BB midline. The closer to the lower band the better the entry.
- There's no need to catch the falling knife. Averaging in is a good idea
- Where - Down around the 10 delta range
- Buccaneer has more than once claimed he is picking up pennies on the train track.
- You are looking for a 20 point spread to collect around $0.50
- Widen up to 30 pts if very bullish and premium is hard to come by
- Why - why not?
- Seriously though...more to come
- How - Management is fairly straight forward
- Set GTC orders for $0.10 and wait for the !DING!
- If the expected move touches your short strike, get out for a manageable loss
- There's more to this but it's getting late
I'll expand on much of this at a later time and add snippets from the comments feed from our local hero himself. Please provide any feedback, suggestions for improvement or clarity, or general thoughts and I'll update the this header accordingly.
Thank you @Buccaneer for taking the time to share!
Ty Zprime ! You've done better than I would have !
Will work on add-ons asap !
Great start Zprime29 thank you. Not sure if I am correct but I would add
- When Along with weakness when SPX is at -1% down for the day you'll have a better entry.
- Management When EM is touches your short strike close and sell monthlies looking for price range minimum of $2. If you started with 10% you would use 30%. Set a $1 GTC and trade would profit when GTC's hit.
The main trigger that you will bank big is when your 10% BP 1 DTE gets threatened and EM touches your Short Put. I know it sounds bold ! How can you win big when you have to manage a looser ?
Just reload on next 45 DTE monthly at 30% BP collecting 2 to 3$ for a 20pts Put Spread and set GTC @ 1.00$. With such a high vol, you will be able to buyback within minutes !!! You will be able to do multiple round trips until the vol settles down.
In fact the method is 1 DTE 10% BP all the time, but you crave for 45 DTE 30% BP ! That's why although you bank when the tape goes up, you're a bear like the grizzly catching salmons !
...yesterday and today move in the market is a good example of how powerful is the 30% BP 45 DTE reload !
I was just thinking last night about capturing the chart/options chain for yesterday, it provided a textbook example of just about everything to do. If I have time this weekend, I'll use ToS's on-demand feature and take a few snippets to use with the chart.