SPX 0 DTE Non-Directional Options Setup For ThinkOrSwim

[Drum Rocker]

Is anyone trading 0 DTE SPX options non-directionally and interested in sharing results, both good and bad? In between trading my directional options strategy I have been testing a new (new for me) strategy and beginning to have some success as I learn the ins and outs of trading these. Not for the faint of heart as you need to be in front of your screen and be focused, but I do believe there is opportunity here.

Here is what I am doing for the strategy so far (see text below and picture):

1. I do not trade these on major news days.
2. I put the trade on between 5-10 minutes after market open.
3. I place a Iron Butterfly trade at the money and put the wings out so that the margin requirement is equal to or less than $2,500. This allows for an average return of around +4% based on the profit target of $100. Usually I get a credit of around $12.00 to $15.00 depending on the implied volatility that day.
4. I immediately put a limit order in for a $100 profit target per contract. I have had these fill in as little as 45 minutes on some days.
5. I then monitor the analyze tab and keep an eye on the SPX price. If price moves and gets close to 75% from the center to the breakeven of either side (see red lines in picture below), I then make an adjustment.
6. Adjustment: I call this the kick stand adjustment because it keeps the trade upright . When price moves to the 75% area of either side of breakeven I look at the delta of the position and buy a single call or put at the same delta as the Iron Butterfly to bring the total position back to neutral (0). It flattens out the real time P&L purple line on the graph in the analyze tab. If later in the morning I buy the next days expiration to lower the Theta decay.
7. If price reverses back to near the center (which it does frequently), I will sell the single call or put and write down the loss so I know what I need to make up to get to the $100 profit target.
8. If the price continues to go up or down past the breakeven of the Iron Butterfly, I will then exit the entire position sometimes with a small profit of $10-$25 or at breakeven.
9. If I am still in the trade after three hours I close it down.
10. My stop loss for the entire campaign is currently $200.

This is a work in progress. PLEASE do not trade this live until you have practiced using the Paper Money account and you understand the risks. Some days it can be fast and furious so you need to make adjustments without spending a lot of time thinking about what to do.

Any thoughts from those trading a similar strategy and how to make this better?

 

[Drum Rocker]

Below are live screen shots from my trade today. Price moved up past the red line and I made the kick stand adjustment by buying a call. Since it was later in the morning I bought the expiration for Monday instead of today to reduce the Theta decay. As mentioned in post one, price usually will return to the mean (center of the Iron Butterfly), which it did today and I jettisoned the call. With time decay in my favor I was able to achieve my profit target including the small loss I had from the call.

This is still a work in progress but it's favorable so far, but definitely intense.

 

[Lionage]

Hi Drum Rocker, What I am doing is a bit different though. I enter a BF w 70 points wings on SPX at about 9:33 once price somewhat settles. I set two conditional orders on both sides of my trade. At 10 points on either side of my shorts I roll out my wings 7 days and at 20 points on either side of my shorts, my second adjustment is to add a Calendar 20 pts farther out in price. I have been doing this for a few months now on paper and have gotten good results. My risk is typically about 5K and my goal is 250 per day which is 5%. Most days I am out without any adjustments. Its seems the drop in theta happens pretty quickly at market open so am out in less than 2 hrs most days. The game changer for me with this strategy was to set up BOTH adjustments WITH my entry trade as contingent orders based on price as a first triggers all advanced trade. I have saved the trade as a template so all I have to do is rt click on the ask and pull up that template. Then I adjust the contingent prices and enter the trade. As the morning progresses, I just manually change my adjustment points farther out as I make profit. I also input my exit trade based on the 250 profit target right after entry. My next step to streamline things up even further is to write an Excel spreadsheet where I can just paste my trade to the entry screen and not have to go in to change the contingent pricing.

 

[Drum Rocker]

Hi Drum Rocker, What I am doing is a bit different though. I enter a BF w 70 points wings on SPX at about 9:33 once price somewhat settles. I set two conditional orders on both sides of my trade. At 10 points on either side of my shorts I roll out my wings 7 days and at 20 points on either side of my shorts, my second adjustment is to add a Calendar 20 pts farther out in price. I have been doing this for a few months now on paper and have gotten good results. My risk is typically about 5K and my goal is 250 per day which is 5%. Most days I am out without any adjustments. Its seems the drop in theta happens pretty quickly at market open so am out in less than 2 hrs most days. The game changer for me with this strategy was to set up BOTH adjustments WITH my entry trade as contingent orders based on price as a first triggers all advanced trade. I have saved the trade as a template so all I have to do is rt click on the ask and pull up that template. Then I adjust the contingent prices and enter the trade. As the morning progresses, I just manually change my adjustment points farther out as I make profit. I also input my exit trade based on the 250 profit target right after entry. My next step to streamline things up even further is to write an Excel spreadsheet where I can just paste my trade to the entry screen and not have to go in to change the contingent pricing.

That's really interesting Lionage! Thanks for sharing. So you are starting with an ATM Butterfly with 70 point wings and adjust at 10 pts on either side, correct? Also, is the calendar adjustment for the 0DTE plus the next day or is the calendar 7 days out? Thanks again for sharing.

 

[yiwang]

Hi @Drum Rocker , how does your strategy go? Did you learn something new and add some new rules to it?

 

[Drum Rocker]

Hi @Drum Rocker , how does your strategy go? Did you learn something new and add some new rules to it?

Hi @yiwang, Thanks for checking in. The strategy posted above is still valid. I am doing research on finding the best trade set up based on the level of the volatility index (VIX). When the VIX is low like it's been recently, the option premiums and therefore credit received on opening the trade are much lower. I am also working on some other adjustment methods to turn this into a risk free trade when the initial position hits a certain profit level. I am not ready to post anything new on these but hopefully soon.