Date: 12/30/2022
Author: Chris Hood
The last trading day of 2022 is upon us.
I hope everyone has had a great year – it’s definitely been great for us in the Trade Command room.
Some of the most profitable strategies we’ve used over the past couple of months have been credit spreads and iron condors.
Many traders assume these strategies are only for longer durations. And they do work well if you have a system for setting up and managing them over several weeks or months.
But we’ve been raking in profits hand over fist using same-day, 0DTE spreads.
We’ve traded them on the 5-min, 12-min, 21-min, and other intraday charts with astounding success.
So let me give you a few guidelines if you’d like to put these to work for you.
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First, allow the early morning volatility to subside and establish a range for the day.
This might happen quickly when the market is flat, or it could take a moment.
Using whichever system you prefer – daily pivots, standard deviations, or even Bollinger Bands – determine where the likely highs and lows will be.
I personally use a tool I developed specifically for day trading.
Next, decide whether you want to be directional or neutral.
If the market seems flat or down trending, call credit spreads well above the stock price work well. And if they’re uptrending, put spreads below could be the better choice.
If your analysis suggests sidewise action (or a very tight range), you can win on both sides with iron condors.
Do what you prefer based on your own trading style.
Third, open your 0 DTE trades before about 10:30 am EST. The reason is that you want the best premium and the greatest time decay.
As an options trader, you’ve likely noticed how volatility declines after the early morning algo trading subsides.
By 10:30 am volatility contraction and vega start really sucking out options premium.
Place your trade early.
Get paid more for the options you sell and make maximum use of time decay.
Even if you’re not a day trader type, this can help you book some quick gains to supplement your longer-duration positions.
It’s working for me, so give it a try.
Cheers,
Chris Hood
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