SPX Trading Strategy for ThinkorSwim

[rad14733]

@Earthian The use of extended hours is subjective... Some trading instruments suffer skewed indicator readings due to reduced trade volume outside the regular trading day while others are not nearly as effected or may even benefit from the extended hours - internationally traded instruments such as Forex being one of those exceptions... If you review different symbols to see how they move or gap in EH's you should be able to determine which market sectors are most effected... My evening and morning reviews are done with EH's on and then I trade with EH's off, but that's just my preference... That method allows me to help determine whether there was a market-wide shift or whether it was symbol-specific... Hope this helps clarify...

 

[Noccm]

Hypoluxa originally presented this strategy as an options scalping strategy against SPX. Over time it sounds like there has been a number of people who have successfully used the strategy against /ES which moves very closely with SPX because they both represent the S&P 500.

I'm a relatively inexperienced trader so maybe I'm missing something but it seems to me that future contracts would be preferable to scalp with over options:

1. Futures require less money upfront. This differs for each broker but you need roughly $500 to day trade 1 /ES futures contract while a SPX option with 1 DTE and around .36 delta usually cost $1000+.
2. Futures contracts have a direct 1 to 1 correlation between the underlying price and your profit (every .25 cent increase on /ES is always $12.50 profit) vs SPX options that are almost never 1 to 1 and depend on many factors/greeks that make them sometimes feel like they are lagging behind the underlying movement.
3. They are both taxed as 1256 Contracts so the tax savings are equal.
4. No PDT rule when trading Futures for those with smaller accounts.

I have never traded Futures before but I am in the process of opening an account for these reasons. I'm interested in hearing everyone else's opinion and especially if there are any advantages to SPX Options that I might have missed.

 

[_Merch_Man_]

Hypoluxa originally presented this strategy as an options scalping strategy against SPX. Over time it sounds like there has been a number of people who have successfully used the strategy against /ES which moves very closely with SPX because they both represent the S&P 500.

I'm a relatively inexperienced trader so maybe I'm missing something but it seems to me that future contracts would be preferable to scalp with over options:

1. Futures require less money upfront. This differs for each broker but you need roughly $500 to day trade 1 /ES futures contract while a SPX option with 1 DTE and around .36 delta usually cost $1000+.
2. Futures contracts have a direct 1 to 1 correlation between the underlying price and your profit (every .25 cent increase on /ES is always $12.50 profit) vs SPX options that are almost never 1 to 1 and depend on many factors/greeks that make them sometimes feel like they are lagging behind the underlying movement.
3. They are both taxed as 1256 Contracts so the tax savings are equal.
4. No PDT rule when trading Futures for those with smaller accounts.

I have never traded Futures before but I am in the process of opening an account for these reasons. I'm interested in hearing everyone else's opinion and especially if there are any advantages to SPX Options that I might have missed.

The margin requirement for 1 /ES future on my TDAmeritrade account is $12,100. Are you saying your broker only requires $500 margin?

 

[Noccm]

The margin requirement for 1 /ES future on my TDAmeritrade account is $12,100. Are you saying your broker only requires $500 margin?

Yes. I can't find the list of TDA's Futures margin fees so I dont know if that $12,100 is their daytrading margin or not but I've seen people complain about TDA having high margins on futures. It's usually recommended to instead go with a broker that specializes in futures. Some of the more highly recommended ones that I have come across while looking into this are:

• NinjaTrader (Mentioned by others in this thread already) - $500 margin to daytrade /ES.
• Tradeovate - $550 margin to daytrade /ES
• AmpFutures - $400 margin to daytrade /ES

These numbers are for daytrading only. You MUST sell before market close at 4pm or you will be hit with the higher initial maintenance margin requirements. Please someone correct me if I am misunderstanding how futures margins work.

 

[barbaros]

Also keep in mind that option pricing can move with not much movement from the underlying security. In this case, SPX can have momentum going in a direction and stop and options can overshoot and correct. You can even scalp that small movement. Not the case with /ES.

 

[barbaros]

Yes. I can't find the list of TDA's Futures margin fees so I dont know if that $12,100 is their daytrading margin or not but I've seen people complain about TDA having high margins on futures. It's usually recommended to instead go with a broker that specializes in futures. Some of the more highly recommended ones that I have come across while looking into this are:

• NinjaTrader (Mentioned by others in this thread already) - $500 margin to daytrade /ES.
• Tradeovate - $550 margin to daytrade /ES
• AmpFutures - $400 margin to daytrade /ES

These numbers are for daytrading only. You MUST sell before market close at 4pm or you will be hit with the higher initial maintenance margin requirements. Please someone correct me if I am misunderstanding how futures margins work.

You can see the margin requirements in ToS. It's mostly to stop you from gambling your money away

https://www.tdameritrade.com/retail-en_us/resources/pdf/TDA101284.pdf

 

[Noccm]

Also keep in mind that option pricing can move with not much movement from the underlying security. In this case, SPX can have momentum going in a direction and stop and options can overshoot and correct. You can even scalp that small movement. Not the case with /ES.

That's a good point. I see it as a double-edged sword because often times the options price barely moves when the underlying price moves up. Sometimes I feel like I am stuck in the red when I think I should be green based on the underlying. I think I would prefer the tight correlation of the futures contract so that it always does what I expect but I can see how some people might prefer the lagging effect of the options to squeeze out a little extra.

 

[Trader_Rich]

All, I continue to have tremendous success with this strategy /ES. Four things I've added to help keep me out of "bad" trades:
1.) 200 EMA - seems to confirm the trend...just because bars break above/below 89 EMA doesn't necessarily mean we have a valid long or short. I want the 200 below the 89 for longs (or about to cross) and vice versa for shorts....trading when bars are between the 89 and 200 is a definate no-no

2.) Pivot Points (daily) - I typically reference these just for areas of support/resistance, want to make sure I can TP well before the trend reaches these Pivots

3.) Didi Index "Dead Zone" - I've drawn a line at +100 and want the red or green line to touch my +100 before I take a valid long or short

4.) Ichimoku Cloud with Chikou - I was already using Ichimokou, and I'll admit this is a bit overkill, but It seems to help keep me out of trouble

 

[barbaros]

All, I continue to have tremendous success with this strategy /ES. Four things I've added to help keep me out of "bad" trades:
1.) 200 EMA - seems to confirm the trend...just because bars break above/below 89 EMA doesn't necessarily mean we have a valid long or short. I want the 200 below the 89 for longs (or about to cross) and vice versa for shorts....trading when bars are between the 89 and 200 is a definate no-no

2.) Pivot Points (daily) - I typically reference these just for areas of support/resistance, want to make sure I can TP well before the trend reaches these Pivots

3.) Didi Index "Dead Zone" - I've drawn a line at +100 and want the red or green line to touch my +100 before I take a valid long or short

4.) Ichimoku Cloud with Chikou - I was already using Ichimokou, and I'll admit this is a bit overkill, but It seems to help keep me out of trouble

Sounds great. Can you post a chart?

 

[Trader_Rich]

@barbaros https://tos.mx/pfUppcS

 

[rad14733]

@barbaros https://tos.mx/pfUppcS

Can you please post a screen capture rather than requiring members to have to import your setup in order to review it...

 

[barbaros]

Can you please post a screen capture rather than requiring members to have to import your setup in order to review it...

Yep, that’s what meant. Sorry.

 

[rad14733]

Yep, that’s what meant. Sorry.

I'm confused or, more likely, you are... That link points to an active running chart, not an image... Please post a screen shot of the chart, NOT a link to a TOS import... Again, members shouldn't be required to import a working chart into their TOS install in order to view what you are trying to show us...

 

[barbaros]

I'm confused or, more likely, you are... That link points to an active running chart, not an image... Please post a screen shot of the chart, NOT a link to a TOS import... Again, members shouldn't be required to import a working chart into their TOS install in order to view what you are trying to show us...

I'm not sure why you are confused. I'm agreeing with you that a screenshot of the chart should be posted and that's what I meant when I said "Can you post a chart?". But, it wasn't clear, hence "sorry".

 

[rad14733]

I'm not sure why you are confused. I'm agreeing with you that a screenshot of the chart should be posted and that's what I meant when I said "Can you post a chart?". But, it wasn't clear, hence "sorry".

Yeah, it was me that was confused... Long day, and night...

 

[irishgold]

@Trader_Rich very busy chart and thanks for posting the study as it helps me understand your settings. What criteria are you using for your exit strategy? ie SL PT or an actual condition met?

 

[Trader_Rich]

@barbaros @rad14733 https://www.screencast.com/t/sNVHK6pD3Uv

 

[Trader_Rich]

@Trader_Rich very busy chart and thanks for posting the study as it helps me understand your settings. What criteria are you using for your exit strategy? ie SL PT or an actual condition met?

I use a Trailing SL, First TP is 5 Ticks, second TP is 8 Ticks, the third is a runner that I manually exit when it appears we are hitting support/resistance or if momentum is just fading.

 

[Sagar]

@antojoseph Can you please share TOS link for this chart.. looks dope
Post SPX Chart

 

[antojoseph]

@antojoseph Can you please share TOS link for this chart.. looks dope
Post SPX Chart

http://tos.mx/xGHlUlE