0 DTE SPX Iron Condors and Credit Spreads: What We'll Cover

8/6/2020
0 DTE SPX Iron Condors
and Credit Spreads
Focus on Entry, Management
and Adjustments
Updated August 13, 2020
By Tammy Chambless
All trading decisions are yours alone, and
I take no responsibility for your results.
© Tammy Chambless 2020 1
• What is a 0 DTE trade? Slide 3
• The Basic Trade Slide 4
• Risk Slide 7
• Benefits of Trading This Strategy Slide 8
• Why Does This Strategy Work Slide 9
• Expectancy Slide 10
• Preparation for Trading Slide 11
• Entries Slide 12
• Determining # of Contracts Slide 19
What We’ll Cover •
•
Example Trade (April 17, 2020)
Premium Decay in Example Trade
Slide 23
Slide 27
• Setting the Stops Slide 29
• Management: Turning a Loser into a Winner (July 10, 2020) Slide 32
• Width of Spreads Slide 39
• Backtest Results: This Year Slide 43
• Backtest Results: 2012‐2019 Slide 46
• Trading in Different Market Conditions Slide 52
• Frequently Asked Questions Slide 57
• Resources Slide 62
1
8/6/2020
• 0 Days to Expiration means no overnight risk.
This is a great advantage to this trade!
• Uses options that expire the day of the trade.
• I trade Iron Condors and Vertical Spreads using 0
DTE options. What I present here is what I have
What is a 0 DTE found works for me. I’ve traded this since August
2019.
trade? • I trade SPX because of the tax advantages (Section
1256 in the US IRS Code). You can use SPY for
smaller accounts (but no tax advantage on SPY).
• There are a lot of strategies that use 0 DTE options.
When someone mentions 0 DTE trades, make sure
you ask what strategy they are doing.
• Enter trades on Mondays, Wednesdays and
Fridays using options that expire that day.
• Sell between Delta 5‐10 Put and/or Call Credit
Spreads on SPX (or SPY) using options that
expire that day.
The Basic Trade • I typically sell a 50‐point spread. Sell as wide a
spread as you can afford in your account.
0 DTE Credit • The long options are used purely to reduce the
Spreads buying power required, not to limit risk. You
want to minimize the cost of the long leg so
you collect more premium.
• CRITICAL TO SUCCESS: USE A STOP to exit
when the trade shows a loss of 3x the initial
credit or leave the trade on until expiration.
2
8/6/2020
Put Credit Spread
with a Stop
Profit
or Loss Sell 2785 Put
Sell 1 Delta 5+/‐ Put $100

$0
Buy 1 Put 50 Points Further 2735 2785 2845
OTM ‐$200 Stock Price
Set Stop to trigger at a net
loss of 2x the initial credit Buy 2735 Put
‐$5000
© Tammy Chambless 2020
Call Credit Spread
with a Stop
Profit
or Loss
Sell 2900 Call
Sell 1 Delta 5+/‐ Call $100

$0
Buy 1 Call 50 Points Further 2845 2900 2950
OTM ‐$200 Stock Price
Set Stop to trigger at a net
loss of 2x the initial credit
‐$5000
Buy 2950 Call
3
8/6/2020
• Never risk more than 2%+/‐ of your account in
any one trade.
• Max loss using a stop is no more than 2x the
initial credit. (Set stop for 3x the initial credit.)
• For this strategy, I consider the risk to be the
Risk amount I would lose if I hit my stop order, not
the buying power required by the spread.
• Example: $50,000 Account. 2% of that is
$1,000. I set up the trade so the loss at 2x the
initial credit should not exceed that amount.
Benefits of this Strategy
• Strategies that sell Low Delta are generally high probability/low reward trades
that rely on good loss management to make them profitable.
• 75‐85% of trades are profitable
• No overnight risk
• Can be scaled up for larger accounts or down for smaller accounts
• Enter one or two sets of trades per trading day (MWF)
• Uses a stop order as protection to limit risk to 2% of account
• Typical max loss of around 2x the initial credit
• Can make up a loss in 2 trades often on the same day
4
8/6/2020
• Probabilities of the Options
• A Delta 5 option has a 95% chance of
expiring worthless.
• This probability is reduced about 10% by
using stops, so it has an 85% chance of
Why Does expiring worthless.
This Trade • Theta is working in your favor.
Work? • No overnight risk
• Positive expectancy
• Low Delta trades are high probability
and low return trades.
• Key to low delta strategies is risk control.
• Expectancy is a way to determine if the
probabilities are in your favor for a trading
strategy.
• To determine expectancy, you need to know the
win rate of a trade, and you need to know the
size of the win compared to the size of the loss.
Expectancy With an 80% win rate, out of 100 trades 80 will be
winners at $1,000 each = $80,000
And 20 will be losers at x $2000 each= $40,000.
After 100 trades, you’ll have a profit of $40,000.
• This trade has a 40% expectancy.
(For reference, tastytrade says their strategies have a 25‐28% expectancy.)
10
5
8/6/2020
Check for announcements that are expected during the day.
Check ForexFactory.com has a calendar of announcements.
Check the futures to see what direction the market may be
Check headed. Use /ES, CNBC, Bloomberg, etc.
Preparation
for Trading Check
Check chart of SPX for yesterday’s high/low range and to
determine entry points. Use 1 minute chart or 3 minute
chart.
Check Use a chart of /ES for volume, since SPX has no volume.
Use any Technical Analysis, Indicators, Market Internals,
Check Market Profile, etc. that you might find helpful.
11
• Enter soon after the market opens to collect the
higher premium from the volatility at the open. This
is the recommended strategy when the market is
fairly calm and there aren’t big moves at the open.
• Another approach is to wait to enter until the
market direction for the day is a little clearer, and to
Entries time the entries entering the puts when the market
has dipped and entering the calls when the market
has risen. This is the recommended strategy when
the markets are more volatile.
• You can enter as an iron condor or enter each side
with separate vertical credit spreads.
12
6
8/6/2020
Option 1: Enter Both Sides at the Market Open
Short Strike on the Call Spread
Enter the Call Spread
Enter the Put Spread
Short Strike on the Put Spread
13
Option 2: Time the Entries as Best You Can
Short Strike on the Call Spread
Enter the Call Spread
on an up Move
Enter the Put Spread
on a Down Move
Short Strike on the Put Spread
14
7
8/6/2020
Study Comparing Early and Later Entries at
Various VIX Levels
• This study was completed for the period from Jan 2 to Jun 5, 2020
• Selling Delta 5 options, 2x stop, using naked options only.
• This looks at entering within 10 minutes after the market open (Early Entry) and
looks at entering at 90 minutes after the market opens (Late Entry).
• Looked at performance at various levels of VIX.
• Goals:
• To see if a later entry avoids early day volatility and improves performance.
• To see if we should avoid trading at higher levels of VIX.
15
Premiums for Delta 5 Puts and Calls at
Various Times and VIX Levels
Times are listed in Central Standard Time
16
8
8/6/2020
Study Comparing Early and Later Entries at
Various VIX Levels
Jan 2 ‐ Jun 5, 2020 Credit Received Losses Wins
Early Entry Losing Losing Total Average
(9:40 am Total Calls‐Ave Puts‐Ave Trades on Trades on Losing Loss Move For Total Win
Eastern) Trades Credit Credit Calls Puts Trades Rate Stop Out Wins Rate
All Trading Days 136 $ 0.86 $ 1.13 9 12 21 15% 1.18% 115 85%
VIX < 20 44 $ 0.33 $ 0.54 2 4 6 14% 0.46% 38 86%
VIX 20‐30 24 $ 0.58 $ 0.81 0 4 4 17% 1.33% 20 83%
VIX 30‐40 26 $ 0.77 $ 0.99 4 2 6 23% 1.39% 20 77%
VIX 40‐50 22 $ 1.24 $ 1.62 2 1 3 14% 1.35% 19 86%
VIX > 50 20 $ 2.08 $ 2.43 1 1 2 10% 2.18% 18 90%
Jan 2 ‐ Jun 5, 2020 Credits Losses Wins Penalty for Late Entry

Late Entry Losing Losing Total Average % Credit Credit
(11:00 am Total Calls‐Ave Puts‐Ave Trades on Trades on Losing Loss Move For Total Win Reduction In Reduction in
Eastern) Trades Credit Credit Calls Puts Trades Rate Stop Out Wins Rate Calls Puts
All Trading Days 136 $ 0.75 $ 0.92 13 19 32 24% 1.22% 104 76% 14% 18%
VIX < 20 44 $ 0.29 $ 0.44 2 3 5 11% 0.37% 39 89% 13% 18%
VIX 20‐30 24 $ 0.51 $ 0.65 0 6 6 25% 0.79% 18 75% 12% 20%
VIX 30‐40 26 $ 0.63 $ 0.79 7 3 10 38% 1.13% 16 62% 18% 20%
VIX 40‐50 22 $ 1.02 $ 1.22 2 2 4 18% 1.16% 18 82% 53% 1%
VIX > 50 20 $ 1.79 $ 2.05 2 5 7 35% 2.34% 13 65% 14% 16%
17
Is There an Advantage to Entering Earlier or Later
or Using VIX as a Signal?
• This study shows a distinct advantage to entering early.
• The premium is about 14‐18% less if you use a later entry.
• The loss rate increases and the win rate decreases for a later entry compared to
the earlier entry. And a smaller move would stop you out with the later entry.
• So all signs point to the early entry being a better performer!
• Regarding various VIX levels, the win rate is better in the higher VIX levels for the
early entry, and poorer for the later entry. The increased credit again helps the
performance in higher VIX levels. So there's no need to avoid this trade on high
volatility days!
18
9
8/6/2020
• The buying power used for this trade should
not exceed 50% of your total buying power.
• What is the BP for naked options?
Determining • What is the BP for spreads?
Number of
Contracts: • The maximum risk (2x the initial credit)
which will determine how many contracts
you can trade. Never risk more than 2‐3% of
your account in any one trade.
19
To determine how many contracts you should trade, you need to look at 2 things:
1. Your available Buying Power based on your account size.
2. The Maximum Risk you should take based on your account size.
This shows the maximum buying power you should use for your
trades. Example, if you have a $100,000 account, you should use
no more than 50% of that, or $50,000 for buying power.
Recommend Risking No More than 2% of Your Account in any 1 Trade
Account Size
$10,000 $25,000 $50,000 $100,000 $200,000 $500,000
2% of Account Size‐Max Risk
At Risk $200 $500 $1,000 $2,000 $4,000 $10,000
Max Size of Initial Credit
Max Size of Credit $100 $250 $500 $1,000 $2,000 $5,000
This shows what the max size of your credit should be to keep your risk
within 2% of your account. Example, if you have a $100,000 account, your
initial credit should be no more than $1,000.
Max risk is 2x the initial credit, so the max size of the initial credit we are looking for is ½ the risk.
20
10
8/6/2020
• First I see what kind of credit I can get.
• Then I check how many contracts my buying
power will allow.
Determining • Then I double check if 2x the credit for that
number of contracts is within 2% of my account.
Number of If not, I reduce the number of contracts.
Contracts • FOCUS ON HOW MUCH YOU COULD LOSE and
make sure you’re okay with that before you
enter the trade.
• Then I enter my order.
21
• For the Trade on April 17, 2020, and $100,000
account :
• Max Buying Power of 50% = $50,000
• Max Risk of 2% = $2,000
• For a 50 point spread = $5,000 BPR would allow
trading 10 contracts. ($50,000/$5,000)
Example: • With a $135 credit, 10 contracts would be a
total credit of $1,350. (Credit will vary
depending on the trade.)
• Risk would be 2x the initial credit = $2,700.
• REDUCE THE NUMBER OF CONTRACTS.
• 7 Contracts x $135 credit = $945 credit
• $945 x 2 = $1,890 Risk, therefore OKAY.
22
11
8/6/2020
• Determine Market Direction
• Determine the Options to Enter
Example
Trade $VIX opened at 41, and had been going
down since 3/18 high of 85.
8:30 8:45 9:00 9:15 Times are listed in Central Standard Time
Market at the Open – April 17, 2020
23
Real Trade – April 17, 2020
Selecting the Options to Trade
Buy 2960 Call
Sell 2910 Call
SPX @ 2843
Sell 2775 Put
Buy 2725 Put
24
12
8/6/2020
How Did It Work Out?
Buy 2960 Call
Sell 2910 Call
Sell 2775 Put
Buy 2725 Put
25
Closer Look
Sell 2910 Call
Moves against you later in
the day don’t hurt much
because much of the
premium has decayed.
Moves against you early in the trade
show negative profit. Doesn’t take
much early to go negative. Don’t
worry, just wait.
Sell 2775 Put
26
13
8/6/2020
Compare Premium Decay in Various Spreads
Stock Moving in Favor of the Trade Stock Moving Against the Trade
( )
Times are listed in Central Standard Time © Tammy Chambless 2020 27
27
Closer Look
Sell 2910 Call
Sell 2775 Put
28
14
8/6/2020
• Market Stop Order – You set the price at which the
stop triggers, and the broker closes at whatever
price they can get. Set Trigger for 3x the initial
credit.
• Stop Limit Order – You set the price at which the
stop triggers and you set the maximum price you
Setting the are willing to pay to close. Set Trigger for 3x the
initial credit and Limit for $.20‐.30 more.
Stops
• Stop on a Condition – Example: Exit the short leg
when the stock hits a certain price.
• Manual Stop – You set a price mentally at which you
will get out.
29
Set a stop using only the short leg. It’s easier to get
Set Stop out.
Stops
Ideally you want to take the trade to expiration. But in
MORE Let Expire higher volatility with big swings at the EOD, it’s best to

exit early.
IMPORTANT
THAN If Stopped If you get stopped out on the short leg, you can decide
whether you want to close the long leg or just let it
Out…
ENTRIES! expire.
If you get stopped out, you may be able to re‐enter
Re‐enter? using further OTM options to recoup some of the loss.
30
15
8/6/2020
• You can stay out of the side that stopped out,
and just collect the profit on the other side.
• You still have the long option. If the market
continues to go in that direction, your long
What Can You option will gain in value and you can sell it at a
profit to recoup some of your loss.
Do if You are • You can sell a new short option if it looks like
Stopped Out: the market hit a low or high and is turning
around.
• If the spread is too wide to reuse your existing
long option, you can sell it (if it has any value)
and enter a new spread at your preferred width.
31
• Date of Trade: Friday, July 10, 2020
• VIX was around 29.
Management: • No announcements were scheduled.
Turning a • SPX was near recent highs but had been
Loser into a trading in a range the last 4‐5 days.
Winner • Futures indicated a flat opening.
32
16
8/6/2020
Friday, July 10, 2020
Entry
Times are listed in Eastern Standard Time
Daily Chart as of July 10, 2020
33
Monday, July 10, 2020, Time: 9:45 EST
Entry
Sell
3195 Call
9:40 EST Sell 3095 Puts for .85 (Stop Set at 2.55)
9:40 EST Buy 3045 Puts for .10
Net Credit on Puts: .75
9:45 EST Sell 3195 Calls for .60 (Stop Set at 1.80)
9:45 EST Buy 3245 Calls for .05
Net Credit on Calls: .55
Net Credit on Trade: 1.30
Sell 3095 Put Times are listed in Eastern Standard Time
34
17
8/6/2020
Monday, July 10, 2020 Time: 10:00 EST
Stop Triggers
Sell
3195 Call
9:40 EST Sell 3095 Puts for .85
10:00 EST Stopped out at 2.55. (2.55‐.85 = Net loss of 1.70)
Net Loss on Puts: ‐1.80
Net Credit on Calls: +.55
Net Loss on Trade: ‐1.25
Stopped out at 10:00
35
Reenter on Put Side
Sell 3195 Call
10:10 EST Sold 3095 Puts at 10:10 for $1.20 (Stop Set for $3.60)
Net Loss on Puts: ‐.60
Net Credit on Calls: .55
Net Loss on Trade: ‐.05
Sell 3095 Put
36
18
8/6/2020
Roll Put Side
Sell 3195 Call
10:10 EST Sold 3095 Puts at 10:10 for 1.20
11:55 EST Buy back 3095 Puts at $.10
11:55 EST Sold 3130 Puts for .75
Net Gain on Puts: +.05
Net Gain on Trade: +.60
Sell 3130 Put
Sell 3095 Put
37
End of Day Results
Sell 3195 Call
Net Loss on Puts: +.05
Net Gain on Trade: +.60
All options expired worthless at the EOD.
Sell 3125 Put
Sell 3095 Put
38
19
8/6/2020
• I recommend using a spread width of 50
points wide to mimic trading naked options.
• If you have a smaller account, you can
Width of reduce the width of the spread to reduce
the buying power required for the trade.
Spreads
• Avoid trading spreads 10 points wide or
smaller. (Review Slide 27 – Premium Decay)
39
• Greeks are working in your favor.
• Decay theta and volatility are the primary
Greeks that benefit this trade.
• No cost of purchasing long options.
Ideal Trade is • Minimize commissions because you’re trading
few contracts.
Selling Naked • Requires more buying power than spreads.
Puts and Calls • Naked options require 20% of the notional
value of the naked puts or calls as buying
power.
• For a 2800 strike put, this would require
$56,000 of buying power per contract.
40
20
8/6/2020
• Can trade more contracts with spreads compared to
naked puts and calls due to reduced buying power.
This will increase the premium you are able to collect.
• Trading a wider spreads will mimic the Greeks of
Trading Wide naked options.
• Go as wide as you can based on the buying power
Credit Spreads available in your account.
100 point spread uses approx. $10,000 of buying
power per contract.
25, 50 or 100‐Point Spread 50 point spread uses approx. $5,000 of buying power
per contract.
25 point spread uses approx. $2,500 of buying power
per contract.
41
• The Greeks on the long side come into play on the
trade and those Greeks are working against you.
• A tighter spread decays at a much slower rate, so
you’re actually taking on more risk because you may
be in the trade longer.
Trading Tight • You’re paying more for the long options on tighter
spreads compared to the credit on the short options.
Spreads • Because the premium is lower, it is more likely that
you will get stopped out more on a tighter spread
since the stop is based on 2x the initial credit.
$5‐10 Spreads • You could use the width of the spread less the initial
credit as max risk, but your loss will be higher.
• One $5 Spread‐ $.32 Credit= $4.68 of risk x 100 = $468
per contract. (This exceeds 2% of a $10,000 account.)
Compare to 2x the initial credit = $.64 x 100 = $64 per
contract.
42
21
8/6/2020
• How did this strategy do this year?
• Is it better to enter as soon as the market opens
or enter later to avoid early volatility?
Backtest • Is it better to trade Delta 5 or Delta 10?
• Should we avoid trading in high Volatility?
Results: • What are average credits in low volatility
This Year compared to high volatility?
• Do you get stopped out more on the put side or
the call side?
43
Trading 1 Contract selling Naked
Puts and Calls at Delta 5.
44
22
8/6/2020
Trading 1 Contract selling Naked
Puts and Calls at Delta 10.
45
• How did this strategy do in prior years?
• How does trading naked puts and calls compare
to trading spreads?
Backtest • How does trading different deltas affect the
Results: trade?
• How does using different stops such as a 1x stop,
2012‐2019 2x stop or 3x stop affect the results?
46
23
8/6/2020
47
47
48
48
24
8/6/2020
Backtesting Results for 0 DTE Short Puts and Credit Spreads in SPX
May 21, 2020
Who did this study?
What we present are summary results from a rough backtest of the 0 DTE strategy selling either naked puts or put spreads. David Sun and Alex Nguyen assembled
the data and did the programming in a database and in Google Sheets. Others who contributed to the efforts were Tammy Chambless, Brad Fach, Joy Veradt Gentle,
Brian Reisman, and Lee Sanders. There have been many others who have traded 0 DTE strategies in many different ways and we continue to learn from each other
and share ideas. We have built upon the experience of others who have generously shared their knowledge in the Facebook Groups. However, each of us has put
our own knowledge and trading experience into developing our individual strategies for trading, included using studies like this. (You can find more info on our
individual strategies by searching for our names in the Facebook Groups titled TastyTrade Options and Tastytrade and Beyond Discussion Group. We offer this
summary information from our backtest simply because it may be helpful to you in making decisions about strategies, selecting deltas, and determining the size of
the losses you may encounter related to trading in 0 DTE options in SPX. Any trading decisions that you make based on information that you observe in the studies
are yours alone, and we take no responsibility for your results. Results may vary in actual trading depending on the trading plan being used and how closely that
trading plan is followed.
How was this study done?
After trading this strategy for a few months in the fall of 2019, we decided to do a backtest on the strategy to see if it would hold up in various market environments.
In researching various backtesting software, we found that none had the intraday data that we needed to fully test this strategy as most backtesting software only
uses end of day data. We decided to purchase intraday data from CBOE.com and relied on those in the group with some programming and spreadsheet wizardry to
extract the data we needed. At the time of the study, we were only trading the put side of the strategy, and we therefore only purchased the data on the puts for our
testing. (We believe adding the call side to the trade will improve results over this study by approximately 50‐75%.) We studied the trade selling puts on the day of
expiration using various stop levels and various deltas for the period from Jan 2012 to Dec 2019. During this time there were several periods of bearish trends in
the market including 2015 and 2018. We entered each trade 5 minutes after the market opened, and took whatever credit was available at the time.
Certain functions were simulated because we did not have the data to perform the backtest in a more complete and accurate way. For example, in the years 2012
through 2015, SPX only offered weekly options. In the summary titled “Backtest using 1 Contract for Each Strategy”, I have only used actual trades during this time.
Therefore, the results in this summary are somewhat skewed because of the limited trading opportunities during those years. In early 2016, SPX options expiring on
Mondays, Wednesdays and Fridays became available. This strategy benefits greatly from the increased number of trades per week. The results in the summary titled
“Backtest using 50% of Buying Power” normalizes the early years by replicating trades to normalize those years on the assumption that the probabilities would play
out similarly. This may or may not be the case. Be aware that the returns indicated for both summaries are not accurate due to the limited data available from 2012
to 2015. Using the Compound Annual Growth Rate (CAGR) for various strategies may be a more accurate estimate of returns on an annual basis.
Another function that we simulated was trading this strategy using a spread. As a simplified way of looking at this as a spread, we added a cost of $0.05 for each long
leg which at the time (fall of 2019) would typically result in a spread of between 35‐50 points. Therefore, be aware that the results for the spreads in the study are
not true spreads, but simulated spreads. Therefore, the results on the spreads may or may not be accurate if true spreads were being selected. The cost of the
spread affects the Return listed, the CAGR and the Premium Capture. However, you will notice that the Win Rate, Average Credit, and Stop Out Rate are identical for
both the naked trades and the spreads, because we were using the same data for both.
49
How to Read the Studies
Both studies list first the trades that use naked puts using various stops and each stop at various deltas, and then list the results for trading spreads with the same strategies
of stops and deltas. We listed the stops with the tightest stop first and lessening stops thereafter, including using a stop that would result in a net loss of 1x the initial credit,
a stop that would result in a net loss of 2x the initial credit, and a stop that would result in a net loss of 3x the initial credit, as well as using not stop at all and taking the
trade to expiration. We showed results using Delta 5 and 10 on all stop strategies, and we included data for selling Delta 20 and 30 on the study that utilizes a net loss of 2x
the initial credit. We recommend using all info in the Backtest summaries as comparative, rather than predictive results, due to the limitations of the program and the data.
Results for “Backtest using 1 Contract for Each Strategy”
The information in this spreadsheet is offered as data based on a per contract basis, since only 1 contract was traded for each strategy, no leverage was used and no
normalization was used for the period of time between 2012‐2015 when options weren’t available for Mondays and Wednesdays. We started with a net liquidity of
$100,000. Important points to compare are the Compound Annual Growth Rate (CAGR), the Win Rate, the Max Drawdown, and Max Loss. Items highlighted in red on the
chart are areas of concern that would cause us to stay away from this strategy.
Results for “Backtest using 50% of Buying Power for Each Strategy”
The information in this spreadsheet is offered as data based on utilizing approximately 50% of the buying power available in a $100,000 account. This would mean that
many times only 1‐2 naked options could be traded, but we sized the number of contracts for spreads based on a 50‐point spread requiring $5,000 buying power per
contract. We also normalized results on this summary for the period between 2012‐2015 when options were not available for Mondays and Wednesdays by replicating
trades for these days based on actual trades in that same week. Important points to compare are the Compound Annual Growth Rate (CAGR), the Win Rate, the Max
Drawdown, and Max Loss. Items highlighted in red on the chart are areas of concern that would cause us to stay away from this strategy.
Results of this backtest may or may not be able to be duplicated in future trading due to the many factors involved.
Any trading decisions that you make based on information that you observe in the studies are yours alone, and we take no responsibility for results. If you copy this
information for posting or publication in other locations, we request that you ask for permission to copy, let us know the purpose of the intended use, and give credit to the
people listed in the first paragraph. If you wish to learn more about how these strategies are traded, look for posts by David Sun, Tammy Chambless, and others in the
Facebook Group: TastyTrade Options and Tastytrade and Beyond Discussion Group. Also look for uploads in the Files Section on these Strategies.
50
25
8/6/2020
Backtesting – Summary
Using Comparable Buying Power and Risk
$100,000 Account Size.
Using net stop of 2x the initial credit.
Results are from Jan 2012 thru Dec 2019.
With Higher Deltas the Win Rate Declines and Drawdown Increases
51
• The market is always changing, and this
strategy can be adjusted to trade in different
Trading in markets.
Different • Adjustments include determining
• What Delta to sell
Market • When to enter
Conditions • Whether to just trade one side
• Whether to take to expiration or close early
52
26
8/6/2020
Adjustments for LOW VOLATILITY MARKET HIGH VOLATILITY MARKETS

Trading In
High vs Low • Sell between Delta 5‐10. • Sell between Delta 3‐5.
Volatility • Sell within 15 minutes • Wait for 45‐60 minutes after
the open to let the initial
after the open to capture volatility settle and to better
the higher premium at determine market direction.
market open.
• Determine side to trade and
• Enter spreads on the put time the entries for better
side only, and only pricing based on market
occasionally both sides. moves.
• Take the trade to • Close trades when you can for
expiration, unless you get $0.10 or by 2:00+/‐ pm CST to
avoid market volatility at the
stopped out. EOD.
• Calls can take more heat. • Calls act more like Puts.
53
• Bigger price swings during the day.
• Prior to March 2020, you could be 30 points
away from the price of the stock and feel fairly
safe.
Differences in • In March 2020, I tried to be at least 80‐100
points away from the price of the stock.
Trading In • In April 2020, I tried to be at least 50‐60 points
away from the price of the stock.
High or Low • As of August 2020 I try to be around 30 points
away from the price of the stock.
Volatility
• The premium of calls options prior to March 2020
was about 50% of what you could get for the puts.
In March 2020, the premium for calls was about the
same for puts. In August 2020, the premium for
calls is now about 60% of the premium for puts.
54
27
8/6/2020
How I’ve adjusted my trading system with the markets:
• I originally just sold put spreads because of the bull
market we were in.
• Originally started selling between Delta 5 and 10.
• In December, with more 2‐sided action coming in the
Be Flexible market, I decided to trade both the put side and the
call side.
Adjust the rules depending
• With more volatility, I adjusted to selling Delta 3‐5.
on what you see in the Even with the lower delta, I could collect the same or
market higher credits.
• Lately I’ve been starting to use Delta 6‐7 again. I let
the credit guide me. I typically get around $0.70 to
$1.00 credit on the put spreads right now. Call credit is
typically lower than put credits.
55
• Trade using higher deltas, but leave it on for a
shorter period of time and take off the trade at a
profit target.
Other Ideas • Exit at 50% of profit and sell additional short
for Trading options.
• Trade for a consistent credit.
this Strategy • Example, you could always sell the options that are going
for $0.65. (Not a specific recommendation.)
• In higher volatility markets this will keep you further OTM,
in lower vol markets this will get you closer to the money.
56
28
8/6/2020
• Can I trade a spread that is only 5 or 10
points wide rather than trading a 50 point
Frequently wide spread?
Asked • Tighter spreads act very differently than wider
spreads and don’t decay as fast. Use the widest
Questions spread you can.
57
• Can I trade this strategy on Tuesdays and
Thursdays and just use the options that
expire the next day?
• These options don’t decay on Tuesdays and
Thursdays like they do on the day of Expiration.
Frequently I have not had good results trading these as 1
DTE options.
Asked
Questions • HOWEVER, there are options that expire on the
last day of each month, so if that falls on a
Tuesday or Thursday, you can use this strategy
on those days because they are 0 DTE options.
(These are not monthly options.)
58
29
8/6/2020
• Can I trade the monthlies on Thursday of
expiration week since they expire at the end
of the day?
Frequently • I don’t recommend it because the decay is
Asked different since these don’t settle until the AM.
Absolutely CLOSE the TRADE at the end of the
Questions day! You don’t want overnight risk that you
can’t do anything about.
59
• Can I take profits at 50% rather than taking the
trade to expiration?
• No. The ratio of your wins to losses changes. Using full
profit, you can make up a 2x loss in 2 trades, but with only
50% profit it will take 4 wins to make up your losses. You
could lower your stop so that your losses aren’t so much
Frequently larger than your gains, but then you’ll be stopped out too
often. Look at the expectancy of the trade, using $1000
initial credit as an example.
Asked In 100 trades, 80 will be winners x $1000 x 50% (taking
Questions profits at 50%) = $40,000.
And 20 will be losers at a loss of 2x the initial credit of
$1000 = 20 x 2 x $1000 = $40,000.
So out of 100 trades, you’ll simply be even based on the
probabilities of the trade.
By closing early, you cut your profits and reduce the
expectancy of the trade to $0.
• It is okay to close early if you intend to open a new short option
in order to make more premium.
60
30
8/6/2020
• Can I take profits at 50% rather than taking the
trade to expiration?
Frequently
Asked
Questions
61
• “TastyTrade Options” Group on Facebook
• I’m a moderator of this group. It is not limited to
discussions about TastyTrade methods. Any discussion of
options and strategies are welcome.
• Lots of great traders and we keep it very civil.
• A good place to see what strategies are work for traders.
Resources • There are quite a few people who trade 0DTE options, and
a number of them use my system. We post frequently
about what’s working and what’s not working.
• Facebook Messenger or Email: tamchambless@gmail.com
• You can message or email me with any questions.
• I love questions.
62
31
8/6/2020
• Software – OptionNet Explorer.com
• Cost – Approx. $60/month. (in British Pounds)
1‐month trial is free.
• It is not a true backtesting software, but it acts
similarly to TOS OnDemand.
• It has intraday data, where most backtesting
Resources programs don’t.
• Also it has the Greeks for intraday data.
• It has excellent risk graphs and trade analysis
tools.
• New Beta Version has detachable windows,
watchlists, etc.
63
The End!
All trading decisions are yours alone.
I take no responsibility for your results.
64
32

0 DTE SPX Iron Condors and Credit Spreads: What We'll Cover

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

0 DTE SPX Iron Condors and Credit Spreads: What We'll Cover

Uploaded by

Copyright:

Available Formats

8/6/2020

© Tammy Chambless 2020 3

© Tammy Chambless 2020 4

Sell 1 Delta 5+/‐ Put $100

© Tammy Chambless 2020

Sell 1 Delta 5+/‐ Call $100

© Tammy Chambless 2020 7

© Tammy Chambless 2020 8

© Tammy Chambless 2020 9

© Tammy Chambless 2020 10

© Tammy Chambless 2020

© Tammy Chambless 2020 12

© Tammy Chambless 2020

© Tammy Chambless 2020

Jan 2 ‐ Jun 5, 2020 Credits Losses Wins Penalty for Late Entry

© Tammy Chambless 2020

© Tammy Chambless 2020

© Tammy Chambless 2020 19

© Tammy Chambless 2020 20

© Tammy Chambless 2020

© Tammy Chambless 2020

© Tammy Chambless 2020 23

© Tammy Chambless 2020

© Tammy Chambless 2020

Times are listed in Central Standard Time © Tammy Chambless 2020 27

© Tammy Chambless 2020 29

MORE Let Expire higher volatility with big swings at the EOD, it’s best to

© Tammy Chambless 2020

© Tammy Chambless 2020

© Tammy Chambless 2020 32

© Tammy Chambless 2020

© Tammy Chambless 2020

© Tammy Chambless 2020

© Tammy Chambless 2020

© Tammy Chambless 2020

© Tammy Chambless 2020 39

© Tammy Chambless 2020

© Tammy Chambless 2020

© Tammy Chambless 2020

© Tammy Chambless 2020 43

© Tammy Chambless 2020 44

© Tammy Chambless 2020 45

© Tammy Chambless 2020 46

© Tammy Chambless 2020 49

© Tammy Chambless 2020 50

© Tammy Chambless 2020 52

Adjustments for LOW VOLATILITY MARKET HIGH VOLATILITY MARKETS

© Tammy Chambless 2020 53

© Tammy Chambless 2020

© Tammy Chambless 2020

© Tammy Chambless 2020

© Tammy Chambless 2020 57

© Tammy Chambless 2020 58

© Tammy Chambless 2020 59

© Tammy Chambless 2020 61

© Tammy Chambless 2020 62

© Tammy Chambless 2020 63

You might also like