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Q3 P/L Challenge: How do you trade the volatile markets?
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SpyderCall joined discussion · Oct 10, 2022 13:45

Risky Short-Dated Out-Of-The-Money SPY Options

I never recommend trading short dated far out of the money options. It is very risky and is almost always a losing bet when you are trading just about any ticker. Most of the time there is just not enough liquidity, or buyers and sellers, to make an option contract's price move. Even if you chose the correct direction of price action sometimes there are no buyers or sellers to push the price up.
With a major ETF like $SPDR S&P 500 ETF (SPY.US)$ and $Invesco QQQ Trust (QQQ.US)$ there is tons of options liquidity. Probably more than any other ticker symbols on the market. This provides more opportunities to make some options gains which would not be available on other tickers. Even risky options plays can have some very nice gains.
Risky Short-Dated Out-Of-The-Money SPY Options
Typically if you are betting on the correct direction in price action then you would want to purchase options contracts that are already in the money and there is plenty of time before expiration so your options can gain more value. This is the less risky way to play options. But it can be expensive to enter into a trade with this method.
If you want to prove to somebody that you can make nice gains off of a small amount of capital then it will take a risky options play. You don't want to hold the risky ones long as there is a very small chance of the option breaking even.
First you must pick the correct direction in price action. Today looked like it wanted to go bearish so I grabbed some very risky put options on SPY after SPY's price had a few good green one minute candles. I waited for a few green candles so that my put contracts would have less premium and be cheaper to purchase. You never want to buy a put for a day trade at the current low of the day. It can be profitable sometimes but you would be essentially paying the highest amount for the day to enter into the trade. That is not how you day trade.
Risky Short-Dated Out-Of-The-Money SPY Options
The options were so far out of the money and their expirations were this Friday. They don't get riskier than these. So my position was very small and I took some profit off of the table immediately when my positions went green. Initially I was profiting but with a risky play like this almost any green candles will kill the put options value because the chance of breaking even is so small. But with a ticker that has very high options liquidity every day on many many strike prices then there is always an opportunity to make some money. So my position eventually turned green again and I sold the remainder of my puts near the previous 52-week low after a big green one minute candle appeared.
Risky Short-Dated Out-Of-The-Money SPY Options
Personally I would stick to less risky options plays. You will be more profitable that way. And if you like to take risks then never do any risky plays unless there is a ton of options liquidity.
Transaction Stats

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The next day was even more profitable with the same strategy. I got even more lucky with this momentous downturn. I only held this only for 15 minutes and received an amazing gain. I could have made more money with more contracts or with a smarter less risky play. But I didn't want to thow down a lot of capital. I just wanted to get a little lunch money. I could have made a little more if I held a little longer but I say that every time anyway so im happy with what I got.
Risky Short-Dated Out-Of-The-Money SPY Options
I was not too worried about this risky bet because when the initial dip down started to take place the relative volume increased greatly. You can see that in the volume candles in the picture above. Sometime the volume does not change much with the changing trend. But increasing volume is the best confirmation of a trend.
Risky Short-Dated Out-Of-The-Money SPY Options
$SPDR Dow Jones Industrial Average Trust (DIA.US)$ $Invesco QQQ Trust (QQQ.US)$ $SPDR S&P 500 ETF (SPY.US)$ $iShares Russell 2000 ETF (IWM.US)$ $VIX Index Futures(DEC4) (VXmain.US)$ $Gold Futures(DEC4) (GCmain.US)$ $Powershares Exchange Traded Fd Tst Db Us Dollar Index Bullish Fund Etf (UUP.US)$ $SPDR Gold ETF (GLD.US)$ $iShares Silver Trust (SLV.US)$ $Ishares Iboxx $ High Yield Corporate Bond Etf (HYG.US)$ $Ishares Iboxx $ Investment Grade Corporate Bond Etf (LQD.US)$ $iShares 20+ Year Treasury Bond ETF (TLT.US)$ $Crude Oil Futures(JAN5) (CLmain.US)$
$TENCENT (00700.HK)$ $SSE Composite Index (000001.SH)$ $CSI 300 Index (000300.SH)$ $CSI 300 Index (000300.SH)$ $FTSE Singapore Straits Time Index (.STI.SG)$ $NIO-SW (09866.HK)$ $NIO Inc. USD OV (NIO.SG)$ $NIO Inc (NIO.US)$ $BILIBILI-W (09626.HK)$ $Bilibili (BILI.US)$ $Baidu (BIDU.US)$ $BIDU-SW (09888.HK)$ $XPeng (XPEV.US)$ $Li Auto (LI.US)$ $BYD COMPANY (01211.HK)$ $BYD Company Limited (002594.SZ)$ $S&P/ASX 200 (.XJO.AU)$ $FTSE Singapore Straits Time Index (.STI.SG)$
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SpyderCall
Trade the trends via technical, fundamental, and macro analysis. Day Trades, swing trades, and long-term investments.
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