How to Trade 0 DTE SPX Options: 2022 Income Strategy

📍 In this video I cover my personal strategy on how to earn income in 2022 trading 0DTE SPX Credit Spread Options.

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1. PDT (Pattern Day Trader):
Pattern Day Trader is a name that brokers placed on traders that day trade frequently. There are restrictions based on an account that's under 25,000 of usable margin. A day trade is the buying and selling or selling and buying of the same security on the same day. You cannot day trade more than three times in any five consecutive day period. If you do, you could be restricted to only selling securities for three months. If that happens most brokers will give you a “get out of jail free card” or give you a pass up to three times, but you should avoid this.

How do you avoid being labeled as a Pattern Day Trader? First, you can trade 0 DTE for the SPX three times a week, on Monday, Wednesday, and Friday. If you trade a wide Iron Condor let it expire but there is risk that the trade can go against you. Also if you close an Iron Condor separately or each side, that will count as two trades. So understand the rules and restrictions, and you'll be a more educated trader and know how to manage it.

Another way is to manage from multiple accounts, so you can double the amount of day trades. If you do it from two accounts or more accounts.

And yet another way is you can trade future spreads and they're not subject to PDT restrictions.

2. Entry Criteria:
I generally enter a trade within the first five or 10 minutes. And the reason for that is because the implied volatility is really the highest during that period of time. So you take advantage of that volatility because volatility decreases throughout the day, and the premium price shrinks.

For a range-bound market, Iron Condors are good.

I now trade 15 wide spreads. Some traders trade 25 or 50 wide. Trading that wide gives you less risk as long as you're trading based on the same premium amount .35 to .70.

The shorter width like five wide, let's say it really does require you to have more of an understanding of the market direction.

My recommendation is that the wider that you can go the better. However, if you get into the wide spreads and get a market that's aggressive and moves into your threatened position, you're going to be looking at a much greater loss.

Max risk on a five wide spread is $500 per contract. For a 25 wide spread, the max risk is $2,500

Call spreads will be closer to the market than a Put spread based on the same premium amount so call spreads have more risk than put spreads.

It is important for you paper-trade for a while so that you can understand and experience the trade.

3. Managing the Trade:
If you place the trade and it immediately goes against you and continues, it is best to close out the trade for a loss. If you do, don’t let it get larger than 3X the credit. Many times, the trade will go against me in the first few minutes, I will add a position on the same side and hold until I exit.

4. Exiting the Trade:
Once I enter the trade, I immediately set a close price of $.10. I may change it higher but never lower. If I trade an Iron Condor, I will set the close price to .$20 or I may set each side to $.10. I never let a trade expire. The reason is because most of the time, I am out by 1 PM Eastern or earlier, many times by 11 AM eastern. Allowing it to expire or close at $.05, it will take several additional hours. Time is risk and markets have a tendency to reverse at the end of the day, which can turn your profit into a loss.

Видео How to Trade 0 DTE SPX Options: 2022 Income Strategy канала Al Losada