[00:00] welcome back everyone to another fantastic strategy session with Tom snov CEO of tasty live today we're going to be diving into a topic that many of you have been requesting on zero days to expiration strategies Tom first of all
[00:15] Tony yeah Tom I know you and your team have been doing a lot of research on zero days expiration so really excited to pick your brain about strategy
[00:28] parameters take profit stop losses all types of uh back tests that you've done and the research that you've done on the Zero days expiration and dive into that um so before we get started uh just to remind everyone here uh these education
[00:44] sessions that we host every single uh Thursday afternoon is really focused on helping you develop as a Trader to help you build uh confidence to sustainably grow your account in the long run um as you can see many of you have already
[00:57] chimed into the chat window saying hello so if you're joining us for the first time first of all we do this every single Thursday but feel free to chime from as you can see we have a very Vibrant Community of Traders here that
[01:12] join us every single Thursday to help uh each other learn how to uh become a better Trader with regards to options and providing kind of a very well-rounded education not just on options trading but everything around
[01:26] technical analysis fundamental analysis um even trading Psych ology So today we're going to be diving into zero days expiration and what we will be going through are some examples but what we are going to do is these examples are
[01:38] only for education and demonstration purposes this is not a solicitation or recommendation to buy or sell any of the specific Securities that we'll be using as example purposes during today's session so uh we'll start off with just
[01:52] a quick introduction from Tom and the tasty trade team um as far as uh who the current volatility environment before we kind of get deep into zero
[02:04] days expiration strategies I have a lot of questions prepared to help you guys better understand the research that the tasty live team have conducted on zero days exploration to give you a very well-rounded understanding of these
[02:17] types of strategies and what are kind of optimal settings based on the back test and research the tasty trade team has provided and then during that time Tom will walk you through the tasty trade platform and then very end we'll open
[02:30] this up for Q&A and before we uh uh wrap up for today I'll show you how you can open up a tasty trade account if you don't already have one for today so possible on zero daysa expiration today but for those of you who don't know who
[02:49] not know Tom please could you just give everyone AIT bit of background on who you are and kind of how you came about to being uh to starting tasty trade good I thought you were going to say how did I
[03:04] come about and I wasn't wasn't repared to answer that um uh we started tasty I started tasty after we um we built a company called thinker swim which probably some of you use and um after 20 years on the floor I
[03:21] built thinker swim and after 10 years of being um of thinker swim which was a public company we got bought out by TD Merit trade to two years after we got bought out I left to build a digital Network called tasty trade and we
[03:36] morphed tasty trade into tasty live and now tasty trade is back as the broker dealer um which we launched in 2017 and so now we're finishing up year seven and um Tasty's probably the largest Boutique broker in America um
[03:53] actually anywhere and um uh we specialize in derivative derivative products obviously option about 75% of our business and about 20% of our business is Futures the rest is some stocks and crypto and stuff like
[04:07] that but um we're a we're a firm that specializes in um in tech highfrequency technology in um uh in strategic Finance we're also a research Think Tank um so
[04:23] we create more financial research than anybody else in the world and um that's it and I I'm an I'm an industry junkie I guess you could say um I've been doing this for a long time and you know part of my passion is like events like this
[04:39] you know getting a a nice hu nice big audience a huge audience on a Thursday afternoon is super cool and Tony and I have probably been doing this now for a long time and um it's a great relationship it's uh um it's kind of
[04:53] special to me so here we are yeah thank you so much Tom and you watching uh Tom's webinars 18 years ago when you when you when you were on
[05:06] here and be doing sessions with you on trading derivatives and Diving really deep because this is really how I learn how to do this um but today what we're
[05:19] strategies themselves entry and exit rules for specifically zero days to expiration options um the those of you that are asking for the recording or the
[05:32] options play which you can sign up using the link uh on your screen uh in the chat window or if you point your phone to the QR code you'll be able to sign up for a free trial and get access to both the platform that we offer as well as
[05:47] the recording and the slides from today's session so um what we're going to go over today is really sort of a rapid fire session you know we're going to do a bunch of questions to Tom uh and like I said these questions have been
[05:59] research that um the tasty live team have conducted and put out with regards to uh the back test that they've brought on zero days to expiration help you really understand what seems to work what doesn't seem to work and kind of
[06:13] what type of strategies you might want to consider if you're trading these types of strategies in your portfolio will go over everything from expiration strike prices uh volatility uh you know what research has been done on taking
[06:26] tasty trade platform so first question Tom um before we dive into the uh the know when you're trading these uh these zero daysa expiration strategies there
[06:44] are a few different products that you can choose from right SPX obviously being the the G the the 800 pound gorilla in the room um but what's your thoughts in terms of trading uh this using an index option such as SPX versus
[06:59] let's say a very liquid ETF like spy which obviously from a size perspective is far more favorable for a lot of retail investors or investors who have smaller trading accounts sure and I mean I think you just you know you asked and
[07:13] you answered um uh if you need to get smaller spy would be the choice um and and I think that most people trade SPX simply because it is the most liquid
[07:28] product in the world and it's also cash settled so you don't have to deal with um the any kind of exercise or assignment at the end of the day if you happen to hold it to the end of the day um so I think when it comes to the the
[07:44] two most important factors for a lot of people um assuming that capital is not the issue um is the exercise and assignment risk at the close and um and
[07:56] liquidity both of those have the liquidity but the SPX you know is Cash settled um when you look at XSP that's also cash settled but it doesn't have the same liquidity as XPS even though it's the uh the SPX has the same market
[08:11] makers as XSP but nobody really follows XSP that much and then the last one ndx again a cash settled index but not the liquidity so I think that the the real difference here is is focused on liquidity and then exercise and
[08:25] assignment risk I think that's that's really good inside because a lot of Tom I don't mean sorry I don't mean to cut in here but um the the chat is having a hard time hearing uh Tom if you just speak up a
[08:39] little bit louder please Tom or turn your mic up yeah let me just turn my mic up testing one two3 is that better testing one two3 ask them if that's
[08:55] better testing one two three can you go a little bit more please okay um I'm on max testing one two three testing one two
[09:09] three I here Tom pretty pretty good um let me see I'll move I'll move a few people say better testing one two three testing one two
[09:24] three I think that's looking a little better now okay I moved the mic closer to my closer to my mouth so let's try that that's weird I've never had that issue before but thank you um but what I was saying before is
[09:38] that you know the spy from a liquidity perspective um because you know the argument between uh SPX and spy comes down to size right you know if you have
[09:51] a small account you really don't you might not have the the luxury to trade SPX um and that really kind of brings a lot of customers to taking a look at XSP because that's also cash settle as well and much more favorable in terms of size
[10:05] but as you said liquidity is kind of the the the big issue or is is is a concern here for XSP so which is why kind of you know from my perspective if you're thinking about spy versus X XSP and spy has the exercise and assignment risk it
[10:21] really comes down to whether or not uh the type of strategies you're trading you're going to hold into expiration and we're actually going to dive into that a to these trades there's been a lot of research that tacy trade team has done
[10:36] on that so I'm really looking forward to uh diving into that so thanks for kind of clarifying from the product side of things so let's dive into the strategy itself right Tom um you can obviously trade zero days
[10:48] expiration for a lot of different strategies now predominantly we'll cover kind of the the the option selling strategies right um because that's of strategies so across strategies like credit spreads straddles and strangles
[11:03] butterflies Condors you know based on your research what do you guys prefer trading or what do you see in terms of favorable strategies for uh zero days expiration selling index options so now remember um or let me
[11:19] butterflies Condors they're they're all any any defined risk spread on a zero day is just it's a it's a vers they're all versions of one another the
[11:33] strangles and straddles are a little bit different because those are undefined risk so when you think about zero days um you really have to think about it in terms of defined risk and undefined risk most people trade variations of defined
[11:48] risk trades in zero days and the reason for that is if you're using the SPX you're probably going to use defined risk because otherwise the undefined risk is like $100,000 per one so that people tend to use some version
[12:03] of a defined risk trade just to keep the capital cost lower um I I think for for smaller accounts that are using let's say spy any form of credit spread so
[12:15] whether you use a vertical either a put vertical call vertical or both like an iron Condor or use a butterfly which is all on the same side of the market or use a condor um you know again they're all versions of the same thing and I
[12:29] straddles and strangles most people trade those in spy rather than SPX simply because of the capital requirements of
[12:41] SPX that's that's really fantastic um insights so um so with regards to that we spoke about last time um you prefer trading straddles and strangles
[12:58] in this type of uh in this type of product it it really depends on the amount of capital you have so I mean you know if like I trade in a portfolio margin account and portfolio margin accounts you know they're much more um
[13:13] they're more leveraged so they're Capital friendly but if I'm not I will spread it off and I will use you know I will sell a front month strangle and buy a back month or a front month um strangle but much further out of the the
[13:29] money so in other words I'll essentially iron Condor it off or I'll somehow vertical it off into a defined risk trade we've done a lot of research on defined risk um give UPS in the SPX and it's about1
[13:46] to15 of total like give up to theoretical that's what it cost to do something as as Define risk as opposed to undefined risk so it's not that bad it's about1 to $2 so if you want to have an idea of how much does it cost
[14:05] actually what is my drag if I go from a undefined risk to a defined risk trade it's about10 to $15 in the SPX over the course of a day and it's about1 to2
[14:17] dollars in the Spy so just just to make sure I everyone about everything is kind of a variation right because if you think about an iron
[14:29] Condor and iron Condor is effectively being short a straddle and then being you can think about as two credit spreads but I think from the from the perspective of you know what you're saying is that the difference between
[14:43] selling a straddle I'm sorry a strangle versus selling an iron Condor is the is about1 to1 for SPX or1 to2 Dollar in terms of spy that you're giving up in terms of of p&l throughout the day correct exactly exactly exactly because
[15:00] people say hey put a number on it so I'm giving you a number right and in exchange for that that1 to $15 in SPX And1 to2 in spy what you're doing is you're significantly reducing the amount of margin requirement required to sell a
[15:15] strangle right or effectively have a a a risk profile that's very similar to being short a strangle but you're giving up some p&l and exchange for having a much lower margin requirement so and and that margin requirement reduction I
[15:28] would imagine is probably in the order of 80 to 90% reduction in the margin requirement to to versus selling a strangle to use an iron Condor yeah it's about it's about 80% plus right so you know from my
[15:44] perspective I think for a lot of Traders especially Traders with smaller accounts would prefer selling uh you know a defined risk strategy because of the significant reduction in the margin requirements and giving up that you know
[15:57] $10 to $15 an s p y or1 to2 and I'm sorry SPX And1 to2 in spy sure that makes the whole sense um okay so with that I think what it makes sense for us to do is to kind of look because I think you know the research that you guys have
[16:12] done a lot of the research has been done on selling strangles right straddles and strangles because you're basically saying let's do the research on the on the pure strategy and then you can always give up the 10 to $15 uh you know
[16:24] stradle gives you the or the stel and strangle gives you the insights into how strangles right you know you can obviously sell a a 50 Delta in a the
[16:40] going out to 10 Deltas So based on your research kind of which Deltas have have suggest have shown better performance on this type of strategy okay so now we're
[16:54] getting into the fun stuff because because these the things so I I should give you a little background on our research um we research zero DTS we have a massive database a private database to research zero DTS our one of our top
[17:12] researchers who is a mathematician Jacob proman and a a bril he's a brilliant mathematician and he's our lead researcher on zero dtes um and like like
[17:24] just crazy smart and we've looked at this every which way and what we do is we research basically um every tick 10 minutes apart going back now for 20
[17:39] months because there's there's 20 months of good SPX or spy research um I'm sorry of of data and what we found is it is very easy when you're doing research to
[17:51] pick a Delta like you're doing here 20 Deltas 30 Deltas you know basically we pick either um 20 or 25 let's just say as an example but when you're not doing
[18:03] a discussion Tony like this the way the way Tony Batista and I trade zero days is we actually use expected move so like if I was giving a lecture like like you
[18:16] are now I would say either the 16 or the 20 Delta is where we would start but in reality my preference is to look at the expected move can can we pull off the software for a quick second yeah let's do that okay um and I'd love
[18:32] a 16 Delta and expected move sure sure sure let's do this um so can you see my software yet or no not yet you just have to hit share screet okay hold on let's
[18:47] see yes I'm gonna go here and share okay okay can you see this I'm going to go to the the reason I'm going to the one day is because that'll the zero day tomorrow right yeah okay so
[19:02] this is the zero day in the SPX I hope everybody can see this I know it's a little small but I just want to give you and and almost every platform has this I see right here it says 1D that's one day so tomorrow morning these will be the
[19:18] zero dtes so if you were listening to this conversation I me you are listening would say is you go over here and you look at this this in parenthesis is the
[19:30] expected move for tomorrow now that move is a derivative of black scholes which basically takes the implied volatility of the at the money strikes not the out
[19:42] of the money strikes but the three at the money strikes 60% of the at the money 30% of the nearest and 10% of the next nearest and what it does is it backs out an an expected move which in this case for tomorrow is $22 you can
[19:57] see it there it's $219 right so when Tony said what strike would I use I would subtract $22 from the closing price which you can round you know like you could say $25 for example so the closing price was 6051 so
[20:12] by default I would sell just as an example the 6025 and the 60 let's just call it 6075 those would be the two options I pick now it turns out they're the 22 Delta and the 19 Delta so but what I do is we
[20:29] go to the expected move and then that's where we start and pick our strikes because again if I was teaching a course tonight I would say I'd go to the 20 Delta and obviously 19 and 22 the 20 Delta is the average but when you're
[20:43] doing it in real time what you want to do is take the expected move whatever that expected move is because that's the marketplace telling you that 70% of the time that number is going to be spoton and you take that expected move and that
[20:56] becomes your short strikes now whether you're selling um a strangle or you're iron conding this off by buying the wings way out here or buying the wings in the back month that's the way you do it and if you were going to go and let's
[21:10] say you had a smaller account like you said and you did it in spy you would do the exact same thing you'd go to the one day the expect to move tomorrow is $2 so you'd go to the at the money strike and which Clos to you know 634 and you can
[21:24] go down to the two and a half and you can go up to let's just say the sevens and there is your expected move short strikes that's where you start at and premium you want to collect or what what you're willing to accept
[21:43] probabilistically does that make sense yeah that makes a lot of sense um and you know as you can see here in the 602 and a half that's actually a 27 Delta you know versus like the 20 Delta would have been closer to the
[21:56] 602s um so Sor you know what you know what I actually probably yeah probably to do this thing equal it probably would have been yeah 602 607 I'm sorry it's you're right yep so you're still very close to
[22:09] that 20 Delta so yeah so expected move is close to 20 Delta it's might not be exactly 20 Deltas but you're getting pretty close to that for a lot of walk through kind of buying the wings right because as you say selling this
[22:25] you know the margin requirement on selling uh um we can go back to the this is the 11 days oh I'm sorry let me do this again apologize uh one day let's see one day
[22:41] okay go got it so I'm going to do the 25 and the 75 uh 75 right there okay that's the one day right so I I want if you can can we
[22:56] undefined risk sure so here's how now we've done a crazy amount of research on zero dtes and the reason before I suggested the 20 Delta is because the
[23:11] expected move always is going to come up right near the 20 Delta it's just a little cleaner when you do the exact expected move now the key to buying the wings when you want to buy them because this is discretionary there's nothing
[23:25] there's there's not a set rule on wings but but there's a couple of very interesting choices if you are one of those people that liked to do a zero DTE trade every day you might choose to buy wings that
[23:40] go out a little bit further in time like go to the 30 days and go out to the of days so you don't have to trade in and out of them every single day but if
[23:52] you were doing it as a one-day trade our default is $20 so our default based on our research which is very mechanical like would take you to These Wings $20
[24:05] wide and the reason is $5 is too narrow our research shows that $10 is a little too narrow and $20 seems to be the sweet spot research-wise but the difference
[24:18] between $20 $15 and $25 wide is pretty marginal it's just that $20 seems to be optimal in all of our studies if you're going to go
[24:30] same with the front month so if you're doing it in the Spy it would be $2 wide wide so let me just recap what you said um if you are the type of Trader where
[24:43] you want to effectively sell a strangle every single day you're saying that instead of buying the wings that expire the same day you want to buy wings that are roughly 30 days out you're effectively turning it into
[24:56] a I guess a you know a double diagonal sure sure right but what you're doing is what you're doing is you're trying to cut down on the slippage so like if you
[25:08] knew if you knew you every single day you were going to do a zero DT trade you'd buy the wings let's just say 30 days out at the expected move so you'd pay a lot for this trade but every single day you don't have to touch that
[25:20] morning so what you're doing is by buying those 30 30-day out out of the money Wings you are remaining fairly delta neutral on the trade but what you
[25:34] have is much faster Decay on the one day exual that youve sold versus the Decay that you're paying on the 30-day that you've purchased and you're effectively decay that's correct exactly um most of the time people opt for this layout that
[25:53] we have right here because this layout as you can see it's just cleaner and it gets you in now it costs less money so this layout would be you know easier now on tasty you know if you said hey I want to put up a little less money you can
[26:06] money than that take less risk you make it $10 wide it's just the 20 was optimal you go to the expected move you set your wings out 20 um
[26:19] but all of these mechanics well I'll let you keep going then I'll tell you what they pale in comparison to okay um and and just to kind of compare that right so when you say the optimal
[26:33] is around 20 $20 wide on an iron Condor the the buying power on that or the margin requirement on that is around $10,000 in this particular case for one lot in in this particular case oh sorry no in this particular
[26:48] $1,000 $1,000 for for one lth right minus the credit you receive right okay so as you said you know your preference is
[27:01] is to is this particular structure which from my the way that I kind of interpreted what you said is that you're not selling this type of strategy every single day you're being more selective in terms of when you choose to sell that
[27:13] so before we get into that I do want to talk a little bit about timing right I know you guys have done a lot of research with regards to when to enter this trade do you enter at the open do you enter this trade near the close do
[27:25] the research show around that okay this is the most important thing you're going to hear today um is entry and exit on zero days one of the things that we've
[27:37] found out through our research is that all zero day trades are not created equal at all and if you want to trade zero days you want to do it early on
[27:50] there's no there is zero Edge or there's there's no advantage to waiting so when we talk about early on I'm saying in the first half hour of the day it doesn't have to be in the first five minutes of the day but if you want to trade zero
[28:04] DTE trades you want to put your position on in the first half hour of trading that is the optimal time you know in Chicago prior to 9 o'clock in New York prior to 10 o'clock that that's the optimal time to put the trade on in the
[28:17] trading um and okay perfect um and then I want to talk a little bit about holding periods and and kind of when like once you put it on how do you when
[28:31] whether or not it makes sense to take profits whether it makes sense to cut losses so let's walk through both of those separately let's talk about taking profits first right the research on if you were to sell let's say this expected
[28:47] move uh iron Condor that's $20 wide you put it on you know within 30 minutes of the open how long do you hold on to it do you put in uh do you take profits uh you know when where do you take profits um if you if you do put on a position
[29:01] like this okay so this particular zero day this is would be for tomorrow the credit if we assumed we filled at the mid price the credit would be $2.80 so the amount of money that we'd be putting up to make this trade is $720
[29:16] everybody understands the risk is 720 the potential profit is the inverse of that you know obviously or 280 um and um you want to put this trade on in the first 30 minutes of the day but here is the single most important thing you're
[29:32] going to hear today with respect to zero TTS every piece of research we've done for the last 20 months on zero DTS all points to taking profits at
[29:45] approximately 25% of your max profit if you want to have a success rate that's up in the high 80s to low 90s okay which is a which is a you know obviously a
[29:57] very very high success rate but if you want to have a very high success rate on zero DTE and remember these are 20 Delta options so it's not an unreasonable thing to have you know an 80 to 90 to 92% success rate but if you want a
[30:12] success rate and because we've had Contracting volatility over the last you haven't had a prolonged down move um you have to take profits at 25% of Max
[30:26] profit so 25% Max profit on this particular trade would be 70 cents so you'd put it in order to buy this back at to10 um and if if if if
[30:39] this if the iron cond that you sold at originally for $280 is trading at $20 cents time to get out of the trade so uh a relatively small percentage of the max gain 25% of Max gain is the optimal percentage now let me tell you something
[30:54] that's really interesting if you think that over time waiting for a larger percentage like 50% 75% or letting it go to the end of the day the amount of
[31:06] money that you make on a per trade that you do will actually go down not up if you hold out for a larger profit the biggest mistake people make when they trade zero days is they try to squeeze it for Max profit or for more than 25%
[31:22] you actually make more money per trade over the last 20 months if you manage at 25 5% than if you manage at 35 45 55 65 75 85 whatever it is so managing a 25%
[31:35] gives you the highest pop the highest probability of profit close to 90% And and also the most pnl per trade and per day and what I found really interesting
[31:48] about this piece of research was that um I I forget the exact time but the average time that you end up getting out of the trade at 25% of Max game is something like I think it was 11 a.m. or or sorry 10:30 a.m. Central Time right
[32:05] which was roughly about two hours from Market entry you it's it's between it's between 90 minutes and 120 Minutes um that's the average um and you are
[32:17] exactly right you read that right so so basically if you enter at the open and you put on an iron Condor like this and you take profit at 25% of Max gain you're usually typically out by about two hours in of the trading period now
[32:31] let me ask you this let's say you take profits at at you know 10 10:00 10:30 on on an iron Condor like this do you establish a new Iron Condor and continue trading in the day or do you just stop trading for the rest of the day that is
[32:45] a great question because we have done extensive research on that and our research shows and this is crazy because because of the risk because how the risk changes over the course of the day and because as you get later on in the day
[32:59] the risk is very different it turns out that if you try to redeploy the capital on the same day your success rate goes down and your net p&l goes lower so
[33:12] reloading and redeploying the same day is not a viable strategy really interesting research um entering at the open Crazy yep entering
[33:26] at the open taking profit of the 25% Max gain if you hit that you get out and you don't Place Another trade but let's say what happens when the trade goes against you what do you do do you close out at a specific point do you hold it to the end
[33:40] of the day what's your thoughts there so this is another really interesting piece math based so it's it's it's it's crazy um all crazy derivatives of black schs
[33:54] and all crazy math formulas that we use with our database but um here's a really interesting statistic as well if the trade goes against you I my preference okay and I'm saying my preference is I like to close out the
[34:10] trade whether it's one times or two times the loss okay whatever it is I prefer to close out the trade um by noon now that doesn't mean because I also will adjust trades I'll also move strikes all that kind of stuff but when
[34:25] I have a losing zero DT trade I don't hold it past noon that's a personal preference of mine but if you hold it to the end of the day or if you close it out for a profit over I mean I mean for for a loss whether it's one two or 3x
[34:41] our research shows that in the end they all work out exactly the same like all the losing trades whether you hold to the end of the day and go for Max loss or whether you take a smaller loss more often because a lot of times you're you
[34:55] profit at the end of the day so you wouldn't have realized that if you close out early like I do the end result is they're very similar so it comes down to a matter of preference on losing trades I prefer to close and move on because I
[35:09] don't like it messing with my head other people prefer to just you know set it and forget it in the end if you're active it doesn't matter but I prefer to take my losses based on time which is before noon I'm
[35:24] out that's really good insight as well so it kind of I mean chances are if you're trading Zero D exp and strategies you're probably glued to a screen for a good portion of the day but if you happen to be uh you know putting on the
[35:36] trade at 930 putting in that that takeprofit uh you know takeprofit order and and it simply is especially in a cash sell like SPX then you're saying is
[35:50] that you're not getting any additional benefit or a bigger loss by using by leaving it to expiration rather than managing it early which is I think really which is really good insight and if you if you do decide to look at Tasty
[36:05] research all our research assumes that on losing positions you do nothing and and you to go to the end of the day so the losses for us are all Max losses not because it's easier to do research that way because it's
[36:22] consistent right um understood um really really amazing insights so I think this leaves us to the last part which I actually thought specific strategy because as you said this type of strategy the one where
[36:39] you're trading an iron Condor right is you put on you you it's not something you trade every single day so when do you put on this trade I thought that was between SPX and vix and the relationship there and how that has affected the p&l
[36:58] mind yeah now we're getting into some of the heavy stuff um and there are lots of different schools of thought on this me for me personally and again I'm a little
[37:13] different than others um I I have been studying zero TTS on I've been studying the concept of zero DT trades since 2005 I mean that's how far back this goes to
[37:25] give you a little backstory the whole the whole Genesis of zero DT trades was that myself and Tom Preston presented zero and weekly tra DT trades to the sio
[37:39] we presented to the new product Committee in 2005 and they started it for the SPX so it was kind of like a we put together this whole presentation because we wanted it for our customers so so I have a lot of history with zero
[37:52] DTS um to answer to answer your question um let me think about this for a second to get in
[38:09] um I want to get into the um I want to get into the specifics this without confusing people there is a a lot of schools of thought about is it better to put on zero DTE when volatility is low because there's less movement so there's
[38:26] potentially potten po Al you know less risk or is it better when volatility is high because you collect a bigger credit so you can get much wider right those are the two schools um I have found from for myself personally that I do better
[38:41] and again volatility as measured by the vix doesn't really come into play when you're doing zero days because the vix is a 30-day out and so so daily volatility is more important than normal volatility the one like the vix and the
[38:54] but if you look at the vix one day which is VI 1D which I have in my um in my
[39:06] market view my market watch you know what my watch list so I look at um did I happen here hold on I say vix1
[39:18] day vix1 day um it closed at 871 today this morning it was like almost under six and then this afternoon to close almost at 9: the the most important
[39:31] thing is that um I like this number when it's higher it makes me nervous when it's down under 10 our research has shown that when this number the vix one day is over 12 or it's over 15 it's a little bit more
[39:48] interesting for us and we have a higher success rate but the opposite side of when vix one day is very low then there's less you know less intraday risk
[40:00] because we don't really do that much but I like the vix one day higher and that's the only vix instrument that actually matters I'd love thank you so much for that for that Insight um I also saw a
[40:14] research piece that you had on whether the relationship between when SPX was up for the day versus when vix was up for the day like when SPX was uh was down on days when SPX was up but vix was down on the day you had some interesting
[40:31] research on that front where um on the days where SPX was down and vix was up that you had a higher success rate of this strategy versus the days when um SPX was up and vix was down yeah that was weird too like that one's a hard one
[40:47] because that you you realize that that only happens about like 15 to 20% of the time because the vix and the SPX are the inverse Rel relationship there is really strong so right when you get you know Market down vix down or market up vix up
[41:04] it it's only happens like 15 to 20% of the time so I didn't want to make a big you know I didn't want to use that as a as the primary use case for zero DTS I like the vix one day better because I think it gives you a better indication
[41:18] of kind of you know what what the marketplace is thinking premium wise um what we have found is I I I think I think that my biggest takeaways with zero DTE in the when we when you kind of boil it all down is you have to manage
[41:34] early you have to stay incredibly small if you can afford to I prefer to use the SPX because the cash settlement it just gives you a piece of Mind in case you get stuck with the trade until the end of the day and if you're not familiar
[41:48] with how stock settlement goes I I think you should just you know you should be careful about you know using spy if you're trading zero days that's all you cover before the end of the day right and in the iron Condor
[42:04] thousand dollars in terms of margin requirements on a $20 wide uh iron Condor I think that's manageable for a lot of Traders even with relatively
[42:17] small accounts in terms of uh C in terms of capitals you know it's it's not like requirement so it's definitely a product that I think for those of you that have
[42:29] a mediumsized account should definitely consider versus spy because of that cash settle nature um but I think your the insights that you have with regards to managing early is incredibly helpful because that is one way to also offset
[42:43] that exercise and assignment risk that you have if you are trading this using spy for those of you that prefer that smaller product there is there is another topic Tony that I think we have to touch on that with zero days which I
[42:56] think is important when you look at your entire portfolio let's say you have a I'm just going to use an example you have a $100,000 account okay and because $100,000 account is easy to multiply by or divide by whatever and I think you
[43:12] have to recognize that when you're talking about zero DTE there's a lot less what we call like mechanical Edge so when Tony gives a lesson or has a discussion on a trade that's 30 or 40 or 50 days out and you you're you have
[43:28] duration you're buying duration you can talk about things like you know what I'm volatility I'm selling High ivr I'm doing you're doing all these things mechanics when you trade zero DTE it's very much an engagement tool
[43:49] it's very much an engagement strategy it's much less of a strategy that has any kind of a mechanical or theoretical or optimized edge meaning it's it's it's very close to like you know you're playing almost a zero sum game so the
[44:03] point I want to make is that if you're going to trade the zero DTE and you have like a $100,000 count or something what you really want to be careful with is that you don't allocate much more than you know three five seven 10 Max 15% of
[44:19] the account like you never want to be much more than that 10% of the account because there's just not a lot of edge there has been a lot of profits in the zero gtes simply because we've spent essentially a year with volatility
[44:33] Contracting and it's a it's a short B play every single day essentially a version of it so if you've used that strategy it's been very effective in 2024 but I still would not go much higher than 10% of your account and in
[44:48] account maybe 15% but you have to be very careful about account allocation is you know you can't really like roll forward you can't really adjust those
[45:04] trades that much things move really quickly you know it's it's kind of um um see people hang around you know Tony you and I have talked about this a lot
[45:17] longevity is the key to this business you got to hang around forever and if you're going to you got you can't put into trades where it's all or none infinite versus finite game you know this is not like a a game like
[45:35] winning it's about staying in business and continuing to to have enough Capital to trade another day um so very different mindset when you when you winning and losing but you know there's no winning and trading you either have
[45:52] enough Capital to trade another day or you don't um so um with that thank you so much Tom this has been incredibly incredibly um insightful um for those of you that want to have access to uh the tasty trade platform that Tom just
[46:07] actually a bonus that they're currently running for uh setting up a tasty trade docomo you can point your phone to that QR code on your screen but overall this
[46:23] days expiration I learned a lot I hope many of you have uh on this type of this these are the types of things that you need to be able to uh understand and
[46:39] Implement into your into your um strategy if you want to be successful with zero daysa expiration so I have found this incredibly insightful Tom thank you so much for your time here today um what I'll do is I'll I'll open
[46:53] this up for Q&A for a couple of minutes here um and you know if you want access to today's slides which many of you might your screen or optionsplay outcom Signum what I will do is I will type up the
[47:10] notes from today's session on each of the slides and give you kind of not only the questions we asked but also some of the responses that Tom gave to help you give you kind of a cheat sheet of all the things that we discuss during
[47:23] today's session and I'll put this slide up here for one more second for those that want to um start your tasty trade account and what I'll do is I'll open the the Q&A section here for one second and see if there are any questions that
[47:36] we can uh look at it take to reach your profit Target for a straddle we've we've we've actually
[47:48] already addressed that um can we use the same strategy on spy and very much we we we said you can there's obviously a difference in terms of the fact that spy is not cash settled uh so you do have to make sure that you manage that around
[48:02] expirations but if you follow the rules yeah go ahead sorry Tony one thing I product and some people don't like the pattern day trading rules and so we also
[48:16] support you know the zero DTS in the es Futures which the there's no real difference between es Futures and and the other products except they're future settled but they have no pattern day trading rules so I just bring that up
[48:31] because people it doesn't matter what product you use they're all the same right um yeah so for those of you that are not familiar es future we're talking about options on the on the SNP e mini Futures is what Tom is referring
[48:46] to those are also super liquid and uh suitable suitable product for trading and and it's it's almost equivalent to trading the SPX um uh SPX index options from a sizing perspective yep perfect um can use the
[49:04] strategy for individual stocks so individual stocks do not have uh I mean Fridays but Tom I don't think I would recommend doing that um most individual
[49:17] stock I mean clearly if you wanted to try something like that in like Tesla or Nvidia that are super liquid you could but it's it's much cleaner in the indexes I promise you
[49:35] right any research on days of the week like Monday through Friday is there any Edge on a specific day of the week that's a great question it's a great question and the answer is no it doesn't matter what day it is they are all
[49:49] completely random we've done that study and the results are completely random good to no you know a lot of people like you know I still every single time it's it's it's a triple or quadruple Witching Hour on CNBC they're
[50:04] difference on any of those things uh in terms of uh you know trading um certainly not certainly the same with days of the week um one question saying
[50:18] the notes if you already have an options Play account we will send that out this weekend along with the recording and the notes I will be typing up um you know Tom's responses to these questions and I will be including it in the slides
[50:34] today um do you put on trades when there uh when there's news like CPI or fed fed news coming out and some of them come out at 10 AM Eastern any thoughts there Tom yeah well luckily most of the um most of the economic reports come out an
[50:51] hour before the equity markets open but there are times like a Fed report at 1:00 in the afternoon one of the reasons we like to cover by noon is you don't have to deal with like fed reports that come out then there are some numbers
[51:05] remember in an efficient market which obviously the snps are everybody knows movement is already built into the option
[51:22] prices so you're saying on those days you're you're typically getting a higher premium and and to some degree offsets that that uh expected or potential volatility on that day it's already built into the prices
[51:39] exactly um oh can you repeat the symbol that's not subject to day trading rule that's the that's the e- mini that's the options on the e- mini Futures sles yes yeah you know um my my
[51:55] Twitter Handle from the days of learning how to trade with you was uh e Mini Toss um because I learned how to trade Futures on The Thinker platform you can can see all my trades from back then when I was learning how to trade um so
[52:11] it's a bit of a uh flashback um to to the days when I was learning how to trade options with Tom on thinker swim um with that that seems to cover all the by Anthony in the chat window so thank you so much um for for having uh one of
[52:30] your guys jump in on the chat window answering questions again Tom thank you so much for your time and your insights this has been incredibly insightful for me and I hope that this is incredibly insightful for all of you that have
[52:42] recording and the notes this weekend so thank you so much thank you Tom um and I hope you guys all have a great trading day thanks Tony thanks everybody have a
[52:54] great holiday