AI Summary
The video demonstrates how to achieve a 45% ROI in one day using zero-day-to-expiration (0DTE) credit spreads on the S&P 500 index. The presenter explains a four-step framework called MAX (Market trend, Area of interest, Criteria of entry, Stop-loss) to identify and execute high-probability trades.
Chapters
The presenter made 45% ROI by selling a put credit spread on SPX (5775/5770) with six contracts, collecting $930 credit. SPX closed above the sold put, yielding max profit.
MAX stands for Market trend, Area of interest, Criteria of entry, and Stop-loss. It is a four-step process for trading credit spreads.
Identify the overall trend (uptrend, downtrend, or sideways) to trade in the direction of the trend.
Find support/resistance levels with higher-than-average implied volatility for high-reward opportunities.
Look for candlestick patterns (e.g., bullish engulfing, hammer) that confirm entry at the area of interest.
Set a stop-loss to minimize losses, typically below the entry candle's low.
On October 23rd, the long-term trend was up, short-term consolidation. Area of support around 5770-5775. Entry triggered by a hammer candle at 11:00, confirmed by next candle breaking above 5777.
Stop-loss set at 5770, slightly below the formation, to exit if retracement occurs. Risk-to-reward ratio was 1:3.
Earlier in the day, a bearish trade was missed when support broke. The same MAX principles applied: trend down, area broken, entry on break, stop above the candle.
The MAX framework provides a systematic approach to trading 0DTE credit spreads, emphasizing trend following, key levels, confirmation, and risk management. Consistent application can yield high returns while controlling risk.
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85% Legit"Title accurately reflects the 45% ROI achieved, but the strategy requires skill and carries risk."
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Tutorial Checklist
Study Flashcards (7)
What does MAX stand for in the trading framework?
easy
Click to reveal answer
What does MAX stand for in the trading framework?
Market trend, Area of interest, Criteria of entry, Stop-loss.
01:44
What was the credit collected per spread in the example trade?
easy
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What was the credit collected per spread in the example trade?
$155 per spread.
00:29
What is the max loss for the trade if SPX closes below 5770?
medium
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What is the max loss for the trade if SPX closes below 5770?
$2,070 (6 contracts × $500 spread width - $930 credit).
01:28
What candlestick pattern was used as a bullish entry signal?
medium
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What candlestick pattern was used as a bullish entry signal?
A hammer candle followed by a candle breaking above the hammer's high.
06:37
Where was the stop-loss placed in the example trade?
medium
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Where was the stop-loss placed in the example trade?
At 5770, slightly below the formation candle.
08:16
What was the risk-to-reward ratio of the example trade?
medium
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What was the risk-to-reward ratio of the example trade?
Approximately 1:3.
08:56
Why did the presenter wait for the second candle before entering?
hard
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Why did the presenter wait for the second candle before entering?
To confirm the bullish trend by seeing the second candle break above the high of the previous candle.
07:18
💡 Key Takeaways
45% ROI in One Day
Demonstrates the potential of 0DTE credit spreads with a concrete example.
MAX Framework
Provides a systematic, repeatable process for trading credit spreads.
01:44High Implied Volatility Areas
Key insight: trade where implied volatility is elevated for better premium.
02:29Stop-Loss Discipline
Emphasizes risk management by exiting quickly when wrong.
08:16Full Transcript
[00:00] In one day, I made 45% ROI with just one zeroDT credit spreads. So, first, if you don't know what credit spreads are, make sure you check out this tutorial linked in the upper right hand corner. Pause this video, watch that, then come back.
[00:14] So, first, let's take a look at the trade. I sold a credit spread on S&P, the S&P 500 index, put credit spread at 5775, 5770. So, a fivepoint spread. I traded six of
[00:29] this and I collected $155 of credit for every single one of these, which means that my total credit collected
[00:42] is $930. Now, at the end of the day, SPS ended out way out of the money, around like 5,800 or so. So, we were out of the money, which means that we made max
[00:57] profit. of $930. And we know this because anytime SPX ends above our sold put, which is the
[01:09] 5775, so it's greater than 5775, we'll make max profit. And if it's below 5770, which is below our bottom leg, our protection leg, we'll take our max loss, which will be $3,000. 500 * 6 - 930
[01:28] which will be $2,070 which is our max loss which means that means that it will be 930 / 2070 which will equal 45%.
[01:44] Actually just in an hour or so I made 45% return on investment. This looks great and all right 930 45%. But how do we actually trade this? And this is guys trade credit spreads. In order to find these great trades, there is four
[02:00] simple steps that we have to follow that I like to call max. M stands for market trend. A stands for area of interest. C stands for criteria of entry and S stands for stop-loss. So what is M? M is us identifying the
[02:15] trend because we ultimately want to follow the trend whether it's an uptrend, downtrend or going sideways. Once we know what the trend is, then we'll move on to the next step, which is finding an area to potentially trade at.
[02:29] areas of supports and resistances that have higher than average implied volatility. Once we identify these areas of high reward, we're going to move on to step number three, which is criteria of entry. All because it enters an area
[02:43] good reason to take that trade. This can be candlesticks patterns such as bullish engulfing candlesticks. Lastly, after we enter this trade, we're going to set our
[02:55] lost so that we can minimize our losses. So, we're going to see these four principles in action by reviewing that trade that I took and applying these four principles. If you're enjoying the content right now, make sure you guys
[03:10] building those passive income streams. First thing that we have to do is is to look at M, which is market trend. So the trade I took was on October 23rd. So
[03:22] trend is. So you can see right here the market is in a pretty obvious uptrend, right? Go from a low to a high to a higher low to a higher high again to a
[03:36] higher low again to a higher high. But the overall long-term trend is up. But do is I like to drop it down to the 30 minutes. And what you can see here is that in the 30 minutes the market is actually consolidating and running
[03:50] sideways to a certain extent. We go from a low to a high to a low to a high the same high actually and then to a lower low to a higher low again to the same low and now to a higher high. The long-term trend is up and the short-term
[04:05] But how do we know when to trade? So this is where we would then start identifying areas of interests. One thing I like to do again is to identify
[04:17] So here we will start drawing areas of resistances and supports. So the first thing you'll notice is that there's an area of potential support around 5770.
[04:30] Right? Why this is the previous swing low that broke up to a higher high and if it retraces it could also potentially be another swing high. So this is an area of potential support around 5775. Our area of resistance would be at 5878
[04:48] because that is the last high that we hit. We're going to draw two lines here. One and two. Okay. Now we're going to go drop it down to 30 to just reconfirm
[05:00] 5820 that can act as a short-term area of support. So, if it ever retraces into here and it bounces up, then we can in a bearish direction. Now that we have the areas, let's talk about some
[05:17] criterias. And I kind of already alluded to it. If it enters these areas and it shows something like this, for example, right here, that is a very strong rejection of this 5880 level, which means that you can potentially trade in
[05:29] the bearish direction, right? Because this is a large candlestick. At the same time, this could also act as a bullish confirmation. I actually wouldn't take something right here, right? This is what we would call a hammer with a
[05:43] this can also be a confirmation of bullish intent. And so, if you see this, relatively solid examples of what criteria of entry could be. So, now that
[05:57] we have this game plan, we're going to move on to the day of the trade, which is the 23rd, to see how we apply MAC. And then finally S. So let's talk about the trade that I took and then also as an example the trade that I missed
[06:13] because I want to trade the trend usually speaking, right? The trend is in clearly see at the day open, the market is kind of in a bearish trend now. Broke
[06:25] potential support. And once it enters this 5780 level, I'm actually interested in trading in a bullish direction. But I need to get is a criteria of entry which
[06:37] is a bullish confirmation that the trend will continue up. So we're going to look at this trade and this is the trade that I took. So at 11:00 this is what we would call a hammer. This is a very good bullish signal in an area of support.
[06:52] higher implied volatility. If you don't know what I'm talking about, make sure explain in depth what that means. But here below is an implied volatility
[07:04] chart. So you can see one that the market is telling us that this is a potential support because implied volatility has spiked. But for me I need one more candle to understand that this is a bullish trend. And what I like to
[07:18] do is I like to wait for the next candle to form right at at 11:30. So my criteria of entry my C right because we already talked about T which is up. We talked about A which is this area of support. Now C is I want to see this
[07:31] second candlestick break above the high of the previous candle. So right here at 5777. Once it breaks up above that then I'm going to enter the trade. The market has confirmed to me to a certain extent that the bullish trend is starting.
[07:47] We're going to we're going to take this candle right here this dryer and we're see that I basically traded right at the money 5775 5770 because I'm anticipating
[07:59] that the market is going to go up and for that I took on $155 of credit. Now after we enter this trade we have to then figure out what S's what is our back to 30. I'm going to set my stop loss slightly below below the candle
[08:16] that was formed the formation about 5772. I'm going to set it around 5770. So if the market ever retraces back to 5770, then I want to get stopped out and I want to exit this trade. And the reason behind that is really simple. I'm
[08:28] uptrend, right? I can be wrong. And so the fact that this is retracing back I'm going to exit first, reevaluate, and see whether or not the market is going
[08:42] to go up again. So you can see the risk and reward is actually pretty solid. If bucks per spread, but I'm planning on making 160 give or take, right? So, my
[08:56] riskto-reward ratio is around 1:3. But, as you can see, the market went all the important. You'll end up losing some trades, you end up winning some trades, but the thought process and strategy behind it is the most important thing.
[09:10] We're going to do one more on the trade that I missed earlier in the morning. So, we know for a fact that the market in the short term is consolidating. If it breaks past this area of support, then it could potentially be in a
[09:23] a lower low. So, a good trade for us to take is that if the short-term trend is now down because this area of support is broken, you see the same principles M,
[09:37] A, and C is if it breaks this area of support and starts dropping below it, you can enter this trade. So, because this is a short-term trend, I like to drop it down to the five. So, here, right, it's still in this level area and
[09:51] area of support and it's closing below. So, after it's broken the support, we can then now trade on the bare side by entering a call credit spread basically right at the money. Why? Because at this point in time, we're anticipating that
[10:06] aggressive. What is our S stop loss? One thing you would do is you would set it slightly above this candlestick right here. And I would say right around if
[10:19] If it loses, you'll lose again like 50 bucks. If you win, you'll make maybe 150, maybe 200. And you can see the market then would continue all the way
[10:31] down and then you would have made max profit on the day. If you guys have any see how you can apply the MAX principle to 1DTS, make sure you guys check out
[10:43] safe in the market.