Write Your Own Pay Checks r

ma
WYOPC y ri
gh
t : Sa
m
Ku

p
Co

Author: Sam Kumar

spxroundtriptrades@yahoo.com
Write Your Own Pay Checks r
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WYOPC y ri
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t : Sa
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Ku

p
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 WYOPC –
SPX options : cash settled
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t : Sa
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p y ri
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 WYOPC –
SPX Options: cashsettled
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Ku
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t : Sa
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OTA – One Triggers another
OCO – One cancels the Other
Write Your Own Pay Checks
WYOPC
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One week’s performance!
SPX algos and reversals
One roundtrip – 4 trades…
 At top reversal…

Trade 1: BTO SPXW 7aror 8 DTE 4405 P, wait

m
Ku
m
t : Sa
Trade 2: STOoSPXWgh
7 or 8 DTE 4400 P for same
y ri
p
C
premium, wait

Trade 3: BTO SPXW 7 or 8 DTE 4400 C, wait

Trade 4: STO SPXW 7 or 8 DTE 4405 C for same

premium
At bottom reversal…

Trade 1: BTO SPXW 7

ar or 8 DTE 4400C, wait
m
Ku
m
t : Sa
gh
Trade 2: STOopSPXW 7 or 8 DTE 4405C for same
y ri
C
premium, wait

Trade 3: BTO SPXW 7 or 8 DTE 4405P, wait

Trade 4: STO SPXW 7 or 8 DTE 4400P for same

premium
 At expiry…

Your account
ar will be credited $500
m
Ku
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t : Sa
gh NO MATTER
p y ri
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where SPX closes

Here is how:
SPX closes > 4405,
say 4408

Trade 1: 4400C
ar is worth $ 8 credit
m
Ku
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t : Sa
gh
Trade 2: 4405C is worth $ 3 debit
p y ri
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Trade 3: 4405P is worthless

Trade 4: 4400P is worthless

Net credit: $ 500

 At expiry,
4400<SPX<4405,
say 4402.80
Trade 1: 4400C
ar is worth $ 2.80 credit
m
Ku
m
t : Sa
gh Trade 2: 4405C is worthless
p y ri
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Trade 3: 4405P is $ 2.20 credit

Trade 4: 4400P is worthless

Net credit : $ 500

SPX closes < 4400,
say 4392

Tradear 1: 4400C is worthless

m
Ku
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t : Sa
gh Trade 2: 4405C is worthless
p y ri
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Trade 3: 4405P is worth $13 credit

Trade 4: 4400P is worth $ 8 debit

Net credit: $ 500

4 trades at even money

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At times, the net may be a

small credit or a small debit
 Return on Investment
ROI
if net credit or break even – infinite!
or as shown below for net debit Ku
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t : Sa
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 Risk management
A complete Example – all four trades in this screenshot
Risk management
 Risk management

Adjust the STO price of Trade 4 as below, instead

of waiting for a small debit.

Trade 4 Break even = (-Trade 1- Trade 2- Trade 3

- Spread)

The net gain will be less than the spread however

will save you from being in a loss situation!
 Main objectives:
• Create a regular cash flow
• Reduce/remove the risk asap r
ma
• Keep time in the market as
y ri
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t : Sa
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Ku

short as possible
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• Minimal monitoring for swing

trades
 The Good
A disciplined approach of concentrating in one set
of 4 trades will help the portfolio
K uma
r grow steadily!
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t : Sa
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The best you can gain
Co
p
is the credit to the full
amount of the spread

If you are bullish/bearish to expiry or deep ITM,

you need not do the put/call spread.
 The Bad
Until Trade 2 is completed, all of the Trade 1 amount is
at risk
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The worst that one can lose, after Trade 2, is the
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t :
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debit of the spread. Co

The risk increases after Trade 3.

 The Ugly
• IT related glitches
• Trading platform issues ma
r
u
• Market conditions gh t: S (circuit
am
K
breakers,
ri
trading halts..)
Co py

• Trader’s errors
• Lack of discipline/record keeping
• Emotions/multi-tasking
• Comparing this strategy to any other
 Deciding the expiry
date
To keep it simple, I am suggesting 7 or 8 DTE expiry
trades.
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 Deciding the exercise
price
This should not be very difficult.
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For trades 1 and 3, it should be
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ATM options. Co
p

For trades 2 and 4, it is higher

(for calls)/lower (for puts) in
steps of $5.
 Deciding the spread
This can be tricky and requires
monitoring! Ku
ma
r

Depends on current trend and

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momentum to expiry.
The daily/weekly algos and the
algo reversal zones might provide
some guidance.
Deciding the spread –
algos and reversals
Experience in WYOPC will show
you that the “range” can be used r
ma
effectively in deciding the spread.
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Ku

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Deciding the spread –
algos and reversals
The reversal can happen
anywhere, referenced to the open r
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as Sigma Up or sigma down, as t : Sa
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Ku

gh
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shown below. Co
p

• The larger the sigma move , the wider the spread!

 STO vs STC
You need momentum in the
direction of Trade 1 to follow thru r
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to Trade 2. t : Sa
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If the momentum keeps SPX

within $5 from Trade1, it is best
to STC Trade 1 and wait for the
next opportunity.
 STO vs STC

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If your BTO is a call, use the CCI zero line for guidance:
 If it resists, STC or.,
 If it doesn’t, wait for further gains and STO when
appropriate

If your BTO is a put, use the CCI zero line for guidance:
 If it resists, STC or.,
 If it doesn’t, wait for further price declines and STO
when appropriate
 Use of Stop Loss
If you are concerned about Trade 1 going
against you, you could put in a hard/trailing
stop loss soon after receiving m ar confirmation of
Ku
fill of Trade 1. ht :
Sam
rig
py
Co

Some brokers may permit the entry to Trade

1 and Stop loss as a “One triggers another”
type of order.

You could use the same type of order for

Trade 3 and its stop loss.
 Damage control!
Trade 1 BTO goes wrong $ cost average STC 2nd when
with a second profitable
BTO
Waiting for STO STC Trade 1
r
Trade 2 but trend ma
Ku
reversed m
t : Sa
gh
p y ri
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Waiting for STO STO any way BTC at lower
but trend price
reversed
Trades 1&2 Trend not No need to do Worst case, lose
expected to trades 3 and 4 debit
change before
nearing expiry
Trades 1,2 & 3 Not able to do Your loss is the STO if Trade 4 is
Trade 4. net debit. > net debit to
lock in a small
gain
 Fattening the
paycheck!
Let us see if we can put in extra hours and claim an overtime
pay!
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Once all 4 trades are complete, we can use Trades 2 and 4 as
below:

For calls, you can BTC at bottom reversals and STO again, at a
higher price, at top reversals keeping in mind the time left to
expiry!

For puts, you can BTC at top reversals and STO again, at a higher
price, at bottom reversals keeping in mind the time left to expiry!
 Thank You!
I am available to answer any questions you may have or
any clarifications you may need via video chat. I live in
r
Eastern Time Zone. K uma
m
t : Sa
gh
y ri
I can be reached via FBComessenger
p or an email to
spxroundtriptrades@yahoo.com

The Roundtrip Trade$ Facebook group

https://facebook.com/groups/1184445615243673 is
another place to engage in!