$5400 LOSS on the 0DTE /NQ today!

hey guys today is friday september the 25th 2020 and i'm gonna do one trade here today for an example for you guys that uh i have about nine thousand dollars of buying power right now i'd like to make about a thousand dollars off of that nine thousand dollars of buying power that would be a great day for me that would be an awesome success if i could do that and we're going to do another zero data expiration trade on the indices and i think that today i am going to use uh the nasdaq now the nasdaq is tougher to use because it doesn't have options that expire as a zero data expiration trade on mondays wednesdays and fridays we are here on a friday and they do obviously have options that expire on a friday today so it works today and the reason is uh if we look at the s p 500 here's the futures on the s p 500 well that's uh that's today let me pull out here a little bit let's just go to a daily chart first of all uh and look at a little bit of time frame that's the futures on the the uh s p 500 here's the futures on the nasdaq now it's a subtle difference it's very very subtle but there's actually more stability in the nasdaq right now than the s p 500 which is crazy of course what drives um the nasdaq is what we refer to as the monsters of tech you know there's thousands of stocks you can look at in the marketplace but really because indices are cap weighted the the the bigger the company the more import they have inside that index really the nasdaq index is driven by these five stocks by apple microsoft amazon google and facebook that's what drives it and uh there's a little bit of a mixed bag there today you can see google is down a little bit on the day um but it's more of a mixed bag really than what we see happening in uh the s p 500 and so i feel that basically right now as we look at the day now we can pull in now to a little bit closer time frame we'll just look at today's action in the marketplace it's about 807 a.m the market's been open here for just a little bit over a half hour but you can see that really since about 5 am my time the futures have been sort of stable to rising stable to rising and i believe that that's probably going to hold with the nasdaq now again one other reason here i'll just show you uh that i do like the nasdaq if we look at the e-mini futures on the s p here's your options that expire today this is zero date expiration and you can see that the implied volatility here's at the money implied volatility is about 16 okay on the on the s p which is a pretty typical but if we look at the nasdaq we can see that implied volatility is about 21 22 percent now in theory the higher the iv the higher the implied volatility the more expensive options are the more expensive options are as option sellers you have the potential to make more money right so i'm going to i i feel like there's a little bit of an anomaly here where we have maybe a little bit more stability in the nasdaq i mean it's not a time you saw the chart differentiation there it's not a ton but i feel like we have as much if maybe a little bit more stability in the nasdaq right now versus the s p 500 but we've got more implied volatility and so we're going to go ahead in here and i'm going to probably start uh with the call leg i'm just going to give the market here a little bit more time i'm going to put this trade in at about 8 30 a.m just to let the market sort of find their legs here a little bit it was trying to jump up there at the open looks like it's selling off a little bit right now so i'm going to wait here about 20 minutes or so see what the market direction looks like and then i'm going to put in my first leg of today's trade all right it's not it's not 8 30 yet it's about 8 24 but it's close enough here i think i'm starting to see a trend here in the marketplace and it is to the upside again and my um assumption seems to be correct so far today in that the nasdaq is uh showing a lot more strength than the s p 500 um we're at the highs of the day granted we're an hour into the day but we are at the highs of the day and this is the challenge you know that um you face with this generally speaking i would like to put in the strong leg first of the trade so if the market is trending up i want to put in the put leg i want to put in whatever leg that the market is trending away from if the market was trending down i would put in the call leg so the problem of course with that right now you know if you look at putting a put leg down in here this is about at a 13 delta and we look at putting a call leg up here now again that's a little high that's uh let's put it here at a 13 delta 2. you can see the challenge down here man there's almost no premium in that put side or or at least there's a lot less there's a lot less premium than what we're getting on the call side but nevertheless i'm going to try to follow my rules here and see if we can put in a put leg on this trade and i'm going to try to maybe come in here a little bit higher on my deltas just simply because that seems to be the direction that the market is trending and that would be about a 19 delta right there it's about as high as i usually like to go and again i've got about i've got about 9 000 of buying power i would like to make about a thousand dollars on the day um this could be about seven hundred dollars of that thousand dollars right here if again granted you don't have to adjust that at all so it's bouncing around here at the mid price of about 225. i'm going to see what i can get price-wise on this to adjust that here a little bit let's put in just the end cues since that's what we're going to be looking at and there she is place that order i'm going to come down just one little bit here moves in five cent increments this would be about 633 dollars of income on the trade the market again still showing some pretty good strength there uh man we should be close we should be close the problem of course is we're showing the nap price all the way down to 50 cents order can i be updated i got to refresh this hold on okay i had to reboot that happens every once in a while sometimes where it will just lock out like that but uh i rebooted and we should be good now showing the mid price at 210 down from my 220 request so i'm just going to keep following this down i'm going to do a 205. that'd be 582 net on that trade man market is just rallying so quickly i can't get a fill here same deal i'm gonna let me update that order order cannot be updated all right let's reboot again okay let's try this again we've rebooted it for the second time market is still up about 40 plus points on the nasdaq so i think it's the right trade here to get that put leg in i just got to find a price that it will execute at this would be about 531 dollars it's still dropping where the market is moving up faster than we can adjust this and so i think maybe i'm going to go ahead and try to cancel and uh there we go oh it filled there we go i was going to say don't tell me i got to reboot again so filled at 190 even though it's apparently showing still working here let's see uh yes there is the order right there it did get a fill still still showing working it's uh but it's obviously filled um i filled that at two bucks looks like is what i got to fill on that in which would be about um six hundred dollars so again you know i'd like to get uh i'd like to get somewhere around a thousand dollars off of this nine thousand 000 of capital i've got about 7 000 of the 9 000 committed i can obviously still do the call side without putting any extra premium into it so i think i'm well along the path to getting to where i want to be today i'm going to wait another half hour or so i'm going to wait about the the nine o'clock hour to look and see if this holds and this pattern continues or if it's going to stabilize so that i can get a little bit better idea of where to put the call leg in all right i said i wouldn't be back until the nine o'clock hour it's not it's 8 50 right now but we've just got we've had this nice little rally take place here really strong and nothing but up up up and now we're starting to sell off a little bit we're up 70 80 bucks on the nasdaq here and starting to come back a little bit now i think this is probably an opportune time uh to start putting in my call leg i'm looking at these 11 1 10 level and 11 130 level for my cell and my buy on this i want to be equi are equal on my contract size i've got 17 contracts down here on the put side those are looking great right now we timed those really well those are already showing a profit on the day here um again i put up about seven grand to do those brought in about 600 or so in income on those uh i'm going to do 17 up here as well a little bit closer on the delta but again hopefully that will be able to bring in uh about five or six hundred dollars as well on this side and then that should still leave me um it should leave me some buying power to be able to get in and do some some other stuff so i get filled there at the 175 there's that fill so if we take a look at the overall position now you can see i've got both wings filled out i got the put leg i've got the call leg in here um still showing about you know just under seven thousand dollars of committed capital to this i have about nine thousand dollars to trade with so i've got another two thousand dollars here that i can come in here maybe in the next hour to uh hour and a half maybe two hours out into the future and still get some good premium in adjusting this uh almost certainly uh an hour and a half two hours from now we're not going to be at this same level of up 77 bucks it's going to keep pushing up in which case i want to sell some additional puts or it's going to fall back down in which case i want to sell some additional calls so i i think i'm well positioned here i've got about you know 7 000 tied up 1200 of income coming in still a little bit of dry powder there to be able to make some adjustments as it goes forward here so we'll continue to watch this here i am a little bit delta negative on this tray you can see that there so if it does continue to push up here um we'll probably need to come in here and add some strength to the put side but we'll watch it here over the next few hours okay uh it's about 9 37 right now and you can see that the nasdaq's run up pretty decently here the last one two three four five so the last 20 minutes it sort of uh hit this resistance level up here but it's definitely shot up quite a bit and so because of that i'm going to try to add a little bit extra on the put side down here i'm going to try to shoot for something like right in here maybe um maybe even a little bit higher than that a little bit more aggressive than that since it's going to be a smaller position size and uh just add to that to get me a little bit more delta neutral bring in a little extra income and use up the remainder of my buying power that i have here let's see if i can go that's about right with a max that i can go um yeah it won't let me make sure i'm in the right account that always helps and let's see if we can get that filled so i send that let's see if we can find that order here like it is just running so slow today i'm gonna have to reboot again guys wait for just a second here and see if it clicks through ah man that is slow my internet is just horrible today i'm a little off there on the pricing um trying to get 175. showing a two dollar credit there it should go but it's bouncing down around that 175 oh i get it filled there we go got that little leg filled there at 175 i mean you can see my connections just popping in and out uh but that gives me uh a little bit extra there on the put side and it now takes me to about my nine thousand dollars capital committed to the trade and about fourteen hundred dollars of potential income on the trade if we look at the trade as it is now currently constituted um you can see that it's not quite equidistant but it's okay so we'll just watch this here for the next few hours and see if we need to make any adjustments we're basically out of dry powder i've pretty much committed all of my funds so i could close this leg and ramp that up could close these legs and alter those but i would need to probably close something before i reopen something else but right now uh we're pretty well positioned and i like those numbers putting up about nine thousand dollars of capital to bring in 1400 of income we are in the positive here uh which is good for this early in the in the day all right it is almost the 10 o'clock hour here and we've leveled off a little bit here in the nasdaq which is great it puts us about you know delta neutral we're pretty equidistant on our positions here i do have i know it's hard to see here um but i do have i don't know why it's showing let's just make sure it's it should it's showing all of these different positions from different accounts you can see these different colors here sort of this orange color is a different account uh which i have an iron connor going on inside of that account as well but in this account you can see i've got 17 contracts down here on the put side and 17 contracts up here on the call side and then i added those six contracts in on the put side as well i i want to utilize that buying power i think we've sort of found a top range here and add a call leg in there as well on that trade my internet is just horrible today and uh i don't know why it's showing all of my positions in there but i want to add to that and uh so i'm gonna maybe add right here to that and let's see what do i have down here i've got six six contracts that i added right in there and so i should be able to add six or so contracts here yeah and it doesn't it actually increases my buying power brings in another couple hundred dollars of income as well so let me see if i can send that i'm sending that at a buck 95 um and i might have to let that sit here my internet is so slow and things are going through so horrible that i'm just gonna have to maybe sit and watch this for just a second here let me see if we can figure it i might have to just even reboot let's try that okay the trade is showing in here it's showing at 169 i put it in at 195. let me come adjust that down to that 165 level that'll give me an extra 150 bucks uh on the trade and i man i feel like i should get a fill there except it's just continuing to drop we're getting uh the markets pulling back here at the exact same time that i'm trying to get this filled i don't know how much lower i want to go on that if i go to the mid price of 155 that's only bringing me in like an extra 150 bucks or so i'm gonna let that order sit for for just a bit here and we'll see if we can get a little bit of a pop back to the upside the internet is horrible here but we're not even close right now i'm i'm sitting at 195 on that order and it's showing 130 so we'll let that sit for just a bit it's about 1008 and we're coming back again here up 113 points on the nasdaq still we're still in the positive here we got a lot of time probably two and a half hours uh in the day before that theta really can start kicking in as you know i was trying to put in this call leg i just left it there at the dollar ninety five credit and it's showing a mid price at 255 right now still not executing still not executing a dollar ninety five so i'm just gonna let it sit there but uh right now i think we're fairly well positioned uh as we look at the curve obviously pushing closer to the call side then the put side um i don't know i i don't know why that's not feeling right now showing two 270 290 and that is still not filling there so we'll see if we can get a feel there or not i might just need to pull that off if the market continues to move like it is um push into those newer highs but we got uh you know four hours still left in the trading day okay 10 16. i can't even tell you how bad my internet is right now how slowly this thing is moving i had to refresh again i tried to cancel that order on the call leg because you know it was up at 210 or whatever and i was trying to fill up 165 and it had already filled it just wasn't updating on my screen literally had to reboot once again but i did get that leg filled and in and so you can see right now uh that i am pretty maxed out on both sides on the call side and the put side it got about nine grand tied up in the trade sixteen hundred dollars of income potential on the trade my goal this morning initially was to bring in about a thousand dollars so the potential is obviously there uh in this trade it just obviously depends on if i need to pull a leg off or not take a loss on one side or the other right now the market is continuing to push higher but let's see if we look at maybe just a five minute chart here give us a little bit better idea of what's happening you can see that we're for all intents and purposes at all-time highs on the day up about 125 bucks and so if i look at my trade in the curve you can see that's where i'm positioned right now um i in hindsight if my internet was working and things weren't lagging and i wasn't having to freeze and reboot and everything i probably should have and would have uh taken that extra call leg off those extra six contracts that i select that i put on the call side probably would have put those down on the put side but we're okay for right now um it's that if we look at our positions right there you can see that the colleague is at 1100 110 the 11 000 110 level um just about 90 points above where we are right now so you know we would have to have uh we'd have to have a 210 point update a 205 point update uh before that leg started to really get threatened um we're 10 almost 10 30 right now you know three and a half hours or so left trading in the day uh i think we're okay i think we're okay so i'm going to continue to watch this right now and uh and we'll see you know it would be nice if i could move some of my put legs up that starts to make the trade greedy where you're now bringing the wings in on the trade so we'll see we'll watch this uh it keeps pushing up to these highs and sort of backing back down but the overall trend has definitely been up today so we'll just watch this for the next hour or so and see where we end end up at just past the 11 o'clock hour now three hours left in the trading day we're at the highs of the day right now nasdaq is up 140 bucks sitting at that high right there and as the day has progressed here um i've actually my buying power has sort of come back as some of these trades have started to show a profit on the day i have a think about seventeen or eighteen hundred dollars of buying power still left now in the account i'm going to try to use that to balance this trade out a little bit uh and i'm looking here at adding these uh selling the 810 890 level puts and buying the 10 870s and i think i can do maybe well let's see i think i've got 1800 of buying power so i'll probably need to do four of these contracts that bring in an extra hundred dollars there if i could get that executed at that dollar 25 so again internet is just running ridiculously slow so there it is it's sitting right there at that dollar 25 i'm going to let that sit for just a moment and then if it comes down and hits that that's great if not i'll scale it up a little bit because probably need to get at least a dollar 25 on that credit to make it make sense okay um it's about 11 17 right now i got that leg finally filled i was patient let it just kind of sit there and you know that i'm pretty well if i look at the curve here i'm about as well positioned as i usually end up being at about 11 o'clock in the day uh two and a half three hours left of the trading day here um the bull you know i'm not showing really any profits here i'm actually down six hundred dollars uh put up about i'm about a total of ten thousand five hundred into this trade right now brought in about seventeen hundred dollars of credit um that's up now the extrinsic value on those positions is up to 2200 that's obviously the difference between this between what it's currently offering and what i actually brought in that's of course the difference of our profit and loss right now but it's in the range and it is usually you know up until the 120 hour you know maybe 40 minutes left in the marketplace um that that should start piling in that theta should start showing up in here so assuming that we are not off to the races here anymore to the upside we look at the position and uh my call leg is at eleven thousand one ten so about 90 bucks above where we're at right now that's certainly within the range if we look at the table here you know we can see that we're right there inside that expected range of where we could get in the day very conceivable that we could be up 200 points in a day but we seem to be sort of you know stabilizing up in these ranges we're not quite yet into that race against time that comes at about the one o'clock hour where we've got one hour left of trading and we're trying to just run out the clock uh but we're getting close there and so i think that we're looking good now again knock on wood this is always the big if right if we can expire without needing to make any other alterations today uh that's we're bringing in about seventeen hundred bucks on about ten thousand five hundred dollar investment my goal for the day was a thousand dollars on nine grand of capital so we're above where we would like to be for the day if and that's a big if uh we can expire here at the close with no action needed so we'll just continue to watch it here as we go into the close it's about the noon hour now two hours left in the trading day nasdaq's still pushing higher pushing higher pushing higher slowly but it is pushing higher it's putting pressure on my trade here you can see that i'm still in my range if we look at it in the curve i'm still in the range there but obviously a lot closer to the call side than the put side if you look at the trade here uh you can just see overall if i close it down and there's about two thousand dollars of extrinsic value there you subtract out the 300 open loss that we're sitting on that puts us right at about that 1700 of initial credit that i brought in and uh we're still there you know the call leg is 11 110 so 11 110 is the colleague um was that 45 50 bucks or so above where we're currently at so i think that we're in the ball range and don't need to make any corrections we need to be vigilant on that though because you can see that if i highlight the call leg which of course that's what's being pushed on that's what's being threatened right now you see there's about two thousand dollars of extrinsic value sitting there um and that is just about what is available in the trade so there's really no value left there's a little bit of value but not a lot of value left in the put legs and so if i was to adjust this i probably need to do it really really quick to be able to get out of sort of my current positions at about a break even and then reposition that call leg so i'm going to watch this closely here and see you know again we've just been pushing higher and higher and higher but it's been slow and so the next half hour for me from 12 to 12 30 probably going to be very telling on if i need to take that call leg off and try to reposition it or if as i'm starting to hopefully see here hopefully there's a little bit of red there if we can pull back down a little bit maybe i won't need to do anything so we'll we'll see okay it is the 115 hour 45 minutes until we close today and you might you guys might get what you've been hoping for today which is i've had multiple multiple requests hey scott show us a losing trade all of your trades have been successful that's not the case with these zero data expiration trades about eighty percent of them eight out of ten work two out of ten don't and uh it's always important of course to understand that going in and have stop losses accordingly so that over time you can still have these losses incur these losses and have a overall profitable outlook so you can see where the market is right now again we've got 45 minutes left in the trading day we've pushed above here this was about the one o'clock hour about that 15 minutes ago we've pushed above that uh 11 110 mark that's the mark that i need to stay below in order to stay in the cash flow zone and so if you look at my overall position right now you can see that well let's close it back up here well let's open it up you can see that we're you know we're through that 11 110 level right we're at the 140 level right now we need to be below 110 so we're 30 points out of where we need to be um and we're showing about a 5 000 loss now my number is conservatively i want to do a stop loss at two times uh my initial credit you can go as high as three times your initial credit of course that makes sense if you're winning eight out of ten times and your max loss is three times your initial credit you're losing that two times out of ten times you should still have an overall profitable system so you can see i brought in about seventeen hundred dollars of credit um that puts me if i go three times that that's like 5400 or somewhere in that range of a max loss that i should be able to incur on this and so we're pushing that right now obviously we're right up there and so we're going to continue to watch this here um i don't think that our loss should get too much worse simply because we are both we are through both of these legs we are through the short leg and we're through the call the long leg as well but we'll continue to watch this here where's my chart there's my chart we'll watch this here and see if we can get a little bit of a dip back down below here there's nothing really to lose at this point we've already sort of hit that max loss area so we'll watch it here for the next it's a it's a adult it's a 117 right now probably to maybe 145 you know and then we'll see what we need to do at that point all right we're the 132 time frame just 28 minutes left in the trading and boy it's trying to work for us it's trying to come back down here that's that's our demarcation line right there that's what we need to be below at closing we'll get closed out i mean even if we're even close to that even if we're not in the money we're going to get closed out before that so there's no way we're getting max profit on this but it is trying to come back a little bit here you can see we're still sitting we're maxed out we're through both of the legs we're through our short leg and we're through our long leg so we're maxed out at our basically three times risk of what we brought in credit wise so we're just here in a wait and see mode here until the next 28 minutes well there you go there is the closing bell and it was a close but no cigar that's the line right there that is the line that we needed to be under these are one minute ticks right here that you can see oh we got close but just not close enough and we ended up with the max loss on the day 5700 loss on the day uh and so i want to talk about that a little bit managing losses taking losses how do you know what's acceptable and what's not um you got to have a plan right and that all comes down to expectancy and so one of the things that i know after doing these trades over and over again is that i have about an eighty percent expectancy and what that just simply means is that i know that about eight out of trades are going to work right eight out of 10 are going to work 10 out of 2 are not going to work and so the question really becomes is is risk management right on the two on the two trades that don't work how much money can you afford to lose on those and still be profitable overall so you know i'll just show you a real quick example here this is obviously very simplistic numbers but i think you'll get the idea uh 10 there we go one out of 10 trades here in fact let me let me let me do that a little bit better one out of ten trades let's clean this up and let's look at eight trades being successful and one out of ten two out of ten not there we go a little bit better so let's just say that uh let's just say that we're trading with ten thousand dollars these are these are easy numbers to work with let's say that we're trading with ten thousand dollars and the expected profit is one thousand dollars that's our our expected profit or uh our potential profit right okay so 8 out of 10 work that means that we've got a thousand dollars profit here a thousand dollars profit here a thousand dollars profit here so on and so forth and this is going to hit for us statistically about 8 out of 10 times so what does that mean that we can lose on the 2 out of 10 that don't well typically speaking we're going to use a stop loss on these trades that is somewhere between two times our initial credit two times our credit or if you want to be more aggressive three times our initial credit now you you say well i'm going to definitely go with the two times initial credit because um you know it's it's it's a less risk right remember that that is going to affect your expectancy so it's going to lower your risk but it's also going to lower your probability of profit or your expectancy but let's just take the the aggressive one here let's take the three times credit that would mean that if we have the ability on these trades to bring in one thousand dollars in profit each time the maximum that i would want to risk on these trades is three thousand dollars three thousand dollars right so i think you can kind of see the numbers there if we look at that that's about 8 000 coming in in profit that's about 6 000 in losses that means we should net about 2 000 over on our ten thousand dollars of capital and that's ten trades so that'd be what about three weeks is a two thousand dollar rate of return on ten thousand dollars of capital in three weeks a good rate return yeah i think it is and it allows these numbers to work their way out so guys this is the real key everybody wants to jump into these zero data expiration trades and they want to know what the secret is and this is it right here guys the secret is risk management the trades have enough power in them that if they work out and there's nothing for you to do and you look like a genius right it's really when the trades go against you that you really see how good of a system you have in place do not let your losses get bigger than your three times of your initial credit so there you go guys there's a losing trade on the day

Channel: Scott Stewart

Views: 4,416

Rating: 4.8222222 out of 5

Keywords: #trading, #0DTE, #options, #Stocks

Id: EkHlq-i_ci4

Length: 37min 4sec (2224 seconds)

Published: Fri Sep 25 2020