Day 112

The Zero DTE gods had abandoned me. I got a chance over the long weekend here to take a break and went to the beach with my family. I am back now and maybe the tide has turned? Read on to find more about how the last 2 weeks went for me.

Market Recap

The market is on a tear. SPY and QQQ are at all time highs.

SPY is at ~$756, and QQQ is on ~$738.

VIX has cratered to ~15.

Trading Update

As I was expecting, I ran into a losing streak.

Started the week before current one with Zero DTE losses over two consecutive days and was set back by nearly $1500. But I had several other trades on from prior weeks that had started to come off (either profitable or nearing 21-DTE), and so a lot of the loss got negated by those small wins.

I paused the Zero DTE setups for nearly 10 days before finally attempting a couple of setups again over the last 2 days. I lost on a skewed Iron Condor as the market shot past my call spread, so on the next day I thought why not try a lottery ticket in SPX. And so I did. And it luckily came off! It wasn’t something big but it brought me back to where I was a couple of weeks ago in terms of net gains for the year.

The anatomy of a lottery ticket trade

After a string of losses in Zero DTE Iron Condors, I thought to try a non-Iron Condor setup just as an experiment.

The aim was to keep the cost under a hundred bucks.

Hypothesis: The likelihood of the SPX expected move late on Friday to be correct in terms of the range would be highly accurate.

Idea: Sell a butterfly for a credit, expecting to pin the final price at expiry. If I am wrong, I get to keep the premium, if I am right, I get to keep the premium + reward.

Execution: In a butterfly, you sell 2 Puts (or Calls) at one price, and then buy one Put (or a Call) each on either side of the sold Put (or Call).

Since I had no idea what direction to speculate in, I placed a Butterfly at the expected move in each direction.

While I did not get any credit/premium, the price of the Put butterfly I sold was $25 and the Call butterfly cost me $50.

After just a few minutes, the Put butterfly had started to lose value since SPX was trying to inch up - I closed the Put butterfly. And then I let the Call butterfly expire.

SPX closed at $7580.

A perfect guess!

Since SPX is cash-settled, the rich premiums I had received for selling 2 Calls at $7580 offset the other trades that got settled, netting me ~$434 effectively across all the trades and settlement.

However, this is not a repeatable trick - yet I think I might try this setup more frequently now.

HOOD

Ever since I was assigned HOOD at $90, I have been selling Calls against it whenever the stock rose and puts on it whenever it fell, with the intent being to reduce the cost basis.

This has been so profitable that I have now made over $1000 in premiums in HOOD for a capital outlay of just under $9000 (I no longer remember what the exact premium was when I had sold the $90 Put that got assigned).

I sold another $90 Call this week, and with HOOD being > $90, I am hoping it gets called away.

All in all, I lucked into a golden goose, which now I would like to get rid of since this is good enough gold for now. I want to allocate the capital to other experiments since $9K is a lot to keep locked for long.

CRM

An earnings play in Salesforce (CRM) saw me speculate CRM not falling below $165 in 3 days.

But I got out in just over a day, since CRM zoomed up. I made over $162 in profits.

INTC

A scalp. I noticed INTC had not gone anywhere in the last few days, but there had been other hardware stocks that had seen quite a bit of movement up.

I speculated that Intel (INTC) may also go up but maybe not as much as other stocks since it has been sluggish over the past few years and only recently breached $100.

I hence sold a conventional strangle. Closed the Put when price moved upwards, then closed the Call when price moved down.

Made over $100.

IWM

Sold a Strangle at the expected move prices.

Bought back the call on a dip next day after I sold the strangle. Then bought back the Put a day after that when the market started to rally up.

Made ~$80 in profits.

NVDA

Smallest scalp amongst the trades I did.

Post earnings, I speculated NVDA wouldn't go anywhere. But I was afraid of a tennis ball bounce because selling naked calls in any tech stock is super risky as they keep breaching their all time highs.

I sold a Jade Lizard.

I soured on the trade a few days later though - my thesis didn't change much - but maybe I got bored. I got out while I was ahead. It was important to exit because when my instinct tells me something, regardless of reason, I still want to trust it.

Scalped nearly $30.

SLV

Silver continues to give me small steady wins.

I closed a Strangle, and then a Put.

Made nearly $140.

TGT

I had a regular Strangle open in TGT which I expected to close around 21-DTE, but the catch was there was an earnings around.

I speculated that the expected move was good enough range and Target wouldn't breach either end. I held through the first couple weeks as theta was accumulating, and then as earnings approached, a pop in volatility game me nearly $270 in profits.

SPY

Finally, there is SPY, which I do not trade, but I use it as a hedge.

I buy puts that are 30% below the market, expiring in 60 days, and roll them every 30 days. Since it was time for one of them to come off this week, I put a new one in.

Here is my hedging philosophy in detail: https://www.foolishtrader.com/the-arithmetic-of-survival-one-path-and-the-geometry-of-wealth/

Here is the entire Year to Date P/L list for closed positions - I added previous week's list here for comparison.

I lost $54 in realized premiums in the last 2 weeks, taking down my realized gains for the year to date from $4,151 to $4097.

Trade Ideas

Maybe I will try another butterfly in SPX close to end of day on one or more days.

With Pattern Day Trade rule set to change on Monday, I suspect I may be placing and closing even more trades for small scalped wins. Because my edge is volume. Just stack as many winners as I can to keep offsetting the big losses.

This does mean a high cost in terms of brokerage fees and commissions, but this is the game I have decided to play so I am rationalizing this as a cost of doing business.

Portfolio Status

Here is the current portfolio status, including unrealized P/L.

I am trying to get into the habit of visualizing whether a trade can give me $100 with my hypothesis at the point of entry. I recognize I should not be chasing premiums but with so many good opportunities in the market, deciding what trade receives my capital requires some comparison of the premiums being offered, among other things.

I lost ~$860 due to SPX Zero DTE trades, and I made ~$800 of those back through other wins. The more I trade, the more I am convinced that many small wins are good enough to offset large losses, as long as you keep your position sizes small. I have a hedge too as I mentioned above. But it seems to be I can keep it as simple as trading in positions that help me sleep without worry - and the rest of the things take care of themselves.

Thanks for reading. See you next week!

📌 Disclaimer: Nothing on this site is financial advice - I’m just here to entertain! Here’s my introduction, my trading philosophy, and some ground rules.