Best directional SPY options trading strategy

Needless Promo · Oct 27, 2016

I love deep OOM. S&P on average isn't predictable enough for me to trade consistently. Maybe once or twice a week I'll see a sign that I could capitalise on. Risk/Reward ratio is low, gives a huge edge. I shoot to be correct 2/3 times. It's a huge edge.

stepandfetchit · Oct 27, 2016

OOM ?

Trading Education Buyer · Oct 27, 2016

stepandfetchit said:
OOM ?
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He is another call options professor

Trading Education Buyer · Oct 29, 2016

Investing in stock market indices via option spreads beats buffet?

Trading Education Buyer · Oct 29, 2016

turco_directo said:

I only trade the SPY, which I have monitored for so long that my gut often predicts how it will move. No joke. When you’re hyperfocused, investing with your gut can be effective.

I use weekly options to add leverage and reduce the capital required. I always trade at the money call or put that’s going to expire at the end of the week. This option normally has a delta around .50, which means that if the SPY moves a $1.00 the option will increase (or decrease) in value by $0.50—a 50% return if the option you are buying costs $1.00.

I buy only calls and puts—no fancy spreads.

I try to be in a trade for 40 minutes max. Sure, sometimes a trade lasts a few hours, but I always close the trade at the end of the day no matter what.

I like to enter my trades around 1:00 pm EST when more often than not trading is flat; the news from the morning has already been traded on, and many traders are taking a lunch break. By 1:30 or 2:00 the SPY is moving and shaking again.

I enter a trade knowing whether the SPY is bullish or bearish on that day, and I never buck the trend: if the SPY is pushing up I trade calls; if the SPY is going down I trade puts.

If the market seems flat—the RSI and MACD indicators are not hitting extremes throughout the day—I just stay out.

I make only one trade per day. If I am trading more than that most likely I am either cocky and think I can make more money or I am trying to fix a loss trade—both are bad ideas.

I never risk more than 30% of my trading account’s capital in any one trade. Yes, this percentage is high, but I am only risking money I’m willing to lose. That said, the SPY is stable so in reality the risk is more like 15%.

If the conditions are right I scale into a trade up to 4 times the dollar-cost average. I only scale down, never up—meaning I buy more as the price drops, and when I close the trade I sell everything (I do not scale out).

I time my entry by waiting for the RSI to cross 70 or 30 and then wait for the MACD lines to cross and proceed in the other direction. I also make sure the MACD histogram bars clearly resemble rolling hills, an indicator that the SPY is not flat. At this point I enter, and if the SPY continues to drop I buy more on the way down.

After entering a trade I always set a closing trade price, typically 20% higher than the option purchase price. Doing so protects me in the case of an upward spike in the market and frees me from being glued to the computer screen.

I do not set stop losses. The SPY is not crazy volatile and almost always I have some money left if a trade goes against me. Plus, I never risk more than I can handle losing. Stop losses are bad because sometimes the market really has to fall before it can pick back up. I have been down 50% only to be up 20% 10 minutes later.

I rely on my gut to time my exit (one of the reasons I have not automated this trading style). I always set out aiming for a 20% return, but if the market is not accelerating I will lower my goal until it corresponds to the reality of what the market is yielding. If a trade goes against me I simply wait for an uptick and use that opportunity to close the losing trade. Almost every day some buyer comes in and pushes the SPY up or down faster than normal in one big trade, but if not I sell at 3:59 and go all cash.

more from

https://stockpeer.com/blog/29/how-i-day-trade-the-spy
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So you are buying s and p after oversold and selling after overbought ?

Sounds a profitable strategy , since s and p is has the wall street circuit breakers , fed put and helipcopter money from central banks , with inherent desire for growth with money printing.

Trading Education Buyer · Oct 29, 2016

Highly risky

https://www.thestreet.com/story/127...s-trading-strategy-that-beats-the-sp-500.html

Trading Education Buyer · Oct 29, 2016

http://www.investopedia.com/articles/optioninvestor/02/071702.asp

tradelosses · Oct 31, 2016

I use weekly options to add leverage and reduce the capital required. I always trade at the money call or put that’s going to expire at the end of the week. This option normally has a delta around .50, which means that if the SPY moves a $1.00 the option will increase (or decrease) in value by $0.50—a 50% return if the option you are buying costs $1.00.

the decay will kill this strategy

Trading Education Buyer · Oct 31, 2016

tradelosses said:
I use weekly options to add leverage and reduce the capital required. I always trade at the money call or put that’s going to expire at the end of the week. This option normally has a delta around .50, which means that if the SPY moves a $1.00 the option will increase (or decrease) in value by $0.50—a 50% return if the option you are buying costs $1.00.

the decay will kill this strategy
More...

This free strategy had made money historically .

Trading Education Buyer · Oct 31, 2016

so very true - you post anything constructive on et and the stupid fucks come out in force. it's really amazing like a mosquito they will hunt down intelligence and attack. this was not always the case on this forum. i really think it's that dawning of college polluted and brainwashed minds.