Day 113

After breaching $5K in profits for the year, I thought I knew something. And the markets humbled me. Fast!

Market Recap

And finally there is a cool down. Both SPY and QQQ went down this week, with losses primarily coming on Friday.

SPY is at ~$737, and QQQ is on ~$705.

VIX shot up from 15 to 21, with most volatility showing up on Friday.

Trading Update

I was having a great week all the way up until Friday when I chose to break my own rules at the worst possible time.

I had been disciplined and trading small, racking up small wins, and my net profits for the year had gone past $5K.

Then I saw the market down ~60 handles on SPX, and thought surely this is just a small correction and at worst we will see a 100 points drop in SPX. Bad idea!

Risks of Zero DTE with a Full-time job

Zero DTEs need active management.

With a day job, its hard to do active management.

I like to place Zero DTE trades because of fast feedback cycles.

So the path I have figured out is to place a Zero DTE as soon as I wake up (I am on West Coast so the market open for me is 6:30 AM), and then either let it run all the way to expiry, or occasionally check and close the trade if it goes too badly against me.

It was the latter this Friday.

I opened the trade around 6:50 AM. Got lost in work until 11. Then saw the market and closed the position as I had no hopes of recovery.

I lost $1645.

I placed a $20 wide Put Spread receiving $280 in premium, so my max possible loss was $1725. So maybe I saved myself ~75.

Now before you think, well sure, this is stupid - why would you do this - my answer is - it often does work. And in fact it worked twice in the same day on Thursday!

Here are two trades I entered close to market open (Pacific) and was out in just over an hour. I received $180 in premium for 2 x $1000 in risk (2 $10-wide skewed Iron Condors), each opened and closed at different times.

Here were the other trades earlier during the week that eventually kept me afloat.

SLV

I sold a Strangle at expected move.

Then as SLV moved down, I bought back the Call. The Put is still open.

+$25.

HOOD

I had a $90 Call open as part of my attempt to get out of HOOD (see last week's post where I mention my wheel in HOOD).

Since it moved down, I bought it back. Will look to sell it again later when market moves up.

+$86.

AAPL

Sold a Strangle at expected move.

Bought back the $190 Put when market moved up earlier in the week.

Sold a $95 later when AAPL moved just a little bit down, and bought it back again when AAPl moved slightly up, to close the Put. The call is still open.

+$151.

INTC

Sold a $95 Put on June 1st and bought it back on June 3rd.

+$98.

SMCI

Sold a $40 Put on May 29th, bought it back on June 2nd.

+$85.

IWM

Sold a $65 Put on Jun 1st, bought it back on June 2nd.

+$51.

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

I lost $332 in realized premiums last week, taking down my realized gains for the year to date from $4097 to $3,765.

Trade Ideas

I have a couple of trade ideas I am thinking about. Here is a visual.

The NVDA trade gives ~$18 of theta per day and needs a buying power of ~$4116, whereas the TGT trade gives ~$8 theta per day for a buying power requirement of $1224. NVDA needs 3x the buying power, but is not giving 3x the theta, even when the deltas are higher for NVDA. The only advantage is in the speed to 50% of premium received - NVDA is likely to hit that in a possible 8 days, whereas TGT would at least take 12 days - note this thesis is only if prices stay in the range of the strangle chosen, not if they move adversely or violently up or down.

Portfolio Status

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

Effectively for Zero DTE SPX, my winners made me +$495 over the entire week, and the losers ate up $1705 (with $1645 coming from a single loss!), and thus the net loss being $1210 across various Zero DTE setups.

I think my loss would have been smaller if I was consistent in the position sizes of the Zero DTE setups. All my winners had a $10-wide spread, whereas my biggest loser had a $20-wide spread. So for example, where I lost $1645 on a $2000 bet, I suspect for a $1000 bet, I would have lost half that amount, so around $830. And with me making $495, the net loss would have just been $380, way less than $1210. That is just 4 wins (for a profit target of $100 per trade) - with expected move being around 20-25 ∆, you would expect to recover that amount in 1-2 weeks. Or, on the other hand, if my winners would have been on $20-wide trades, perhaps I wouldn't even be looking at a loss at all.

I think this is the reason why consistent position sizing is so important for statistics and probabilities to play their part and giving mechanics a structural advantage. Since my hands got burnt when I tried to scale up, I am going to stick to $10-wide trade setups for a little longer.

I am revising my profit goal for the year now - I want to target $12K in gains for the year. That is just over 3x my current gains. I am obviously getting quite ambitious here as well as a bit ahead of myself since the year is nowhere near to being over and I could still lose it all. Regardless, my goal at the start of the year was $6K in gains. This is what I wrote in my first post of the year:

My aim is to make ~$6K this year. That turns out to be ~$500 per month.

Absent the SPX Zero DTE trade on Friday, I was up $5K in YTD realized gains! Wonder when I will cross that again - SPX tanked 200 points today. Let's find out whether this is just some profit taking by traders, the start of a downturn, or the start of a stabilization period.

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.