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Advanced Credit Day Trading Summary

SPX Advanced Concepts 

In this lesson, Eagle CEO Ishaan dives deeper into the SPX 0dte credit strategy. Please review SPX Credit Day Trading Basic Concepts before completing this module. As stated in the prerequisite lesson, a trader is ideally using a $25,000+ margin account with a style goal of income generation. At this point, a trader should have all the necessary components needed to enter and exit positions, as well as roll credit spreads up or down based on the price action of SPX intraday. The question every trader of this style begins to ask themselves around 1 pm ET is “When to Roll and When to Walk Away”. Ishaan has been finding more success walking away during the time frame of 1-2 pm ET and refraining from trading at the end of the afternoon session. With this in mind, a trader should roll often earlier in the day and stop rolling after the time frame of 12-1 pm ET.

Risk Management

By trading the SPX credit style for over 3 months, Ishaan has found it crucial to never size over 20% per spread. This totals a maximum size of 40% Risk on 1x SPX 0dte Iron Condor. Although this may seem like a massive position size for most accounts, it is important to consider that the stop loss on each spread is placed at slightly under 25% loss of the full collateral. It is also crucial to note that if one spread is stopped out, the other spread is highly likely to hit the price target. In total, if a trader puts on a maximum 40% iron condor, the account loss should never exceed 4% from one full trade with the worst-case scenario (1x spread hitting stop loss). Common sizing includes 8%, 10%, 12%, 14%, and 16% per spread.

In addition to sizing, risk management includes setting a daily goal and a daily loss cap. Ishaan has been using a Weekly goal of $3,000 a week on a $100,000 account (3% Return) and is targeting a 2,000-3,000 Daily Gain while capping losses at $4,000 daily maximum. Expecting a majority of winning days, testing has so far shown these goals as being feasible. By setting these goals and additional trading rules, a trader can aim to make this process as replicable and consistent as possible. Daily entry and exit time is another r risk management rule a trader needs to consider including in their plan for this style. Ishaan trades from 9:40-2:15 pm ET each market day with this style.

Directional Traders vs Volatility Traders

In this section of the lesson, Ishaan makes a clear distinction between directional traders and volatility traders. The vast majority of retail traders in the market are speculating on direction, however very few are volatility traders. A directional trader employs strategies based on the investor’s view of the future course of something. In contrast, a volatility trader uses strategies based on the trader’s view of the expansion and contraction of implied volatility. This SPX credit strategy aims to be a volatility-based strategy, however, directional traders can add certain metrics in an effort to speculate on direction as well. If you are looking to add a directional element to this strategy, a trader could develop strikes, price targets, and stop losses for each spread based on a directional bias. On the contrary, a volatility trader with this style will move primarily with iron condors and continue to roll each leg continuously. Power Hour (3:00-4:00 pm ET), or the last hour of the market day is regarded as being highly directional. Ishaan makes it clear that his data has shown that implied volatility has already been crushed throughout the day. However, during the final trading hour, volume can step in often causing the price to outpace implied volatility. For this reason, he does not recommend trading the SPX credit strategy during power hour. 

Technical Indicators

During the live demo portion of the lesson, Ishaan showcases the VWAP & ATR as his favorite indicators to utilize when trading the SPX 0dte credit strategy. As outlined in the video, the VWAP stands for the volume-weighted average price, and the ATR stands for the average true range. VWAP is used to generate a likely intraday range that would be feasible to trade, and ATR is used to watch for volatility expansion/contraction. When using ATR, the strategy works best when the ATR is decreasing, as volatility is contracting from the market. Finally, he also showcases stochastics, MACD & rsi for directional bias trading.

Predicting Opening Range

Eagle strongly recommends all active day traders to be awake at least 1 hour before the US markets open (9:30 am ET). During the hour preceding the US opening, traders interested in utilizing the SPX credit strategy need to monitor /ES & /NQ futures contracts. By identifying the previous day’s high & low including market and futures price action, a trader can develop levels that they would feel comfortable putting spread strikes on. Evaluating historical ranges in the past week, month and year can also assist a trader in predicting an opening range. Finally, after developing a potential range you would feel comfortable with, compare the /ES & /NQ levels with SPX. When the market opens, see if the target credit matches the strikes you selected premarket. In many cases, they will be close but you may have to go closer to the money. If that occurs, you will need to negotiate in the market to find a fill for the strikes you feel comfortable with within the target credit range. 

Rolling Advanced Concepts

In the SPX credit day trading basic concepts lesson, Ishaan made it clear that rolling is simply closing the old position and opening a brand new position. Rolling is one of the most important parts of the strategy as it allows a trader to adjust to the market’s movement and reposition. Traders with this style are using $5/$10/$15/$20 wide spreads based on preference & account size. One may decide to roll as a price target or stop loss hit and the trader needs to reposition. When rolling, it is important to understand that you can mix and match spread width based on liquidity and the strikes you have open. Ishaan finds himself nearly overlapping strikes in some cases, and adjusts by making $5 and $20 wide spreads as fit. Rolling is crucial as when one side of the spread loses, the other side wins. In this case, a trader needs to close each leg and roll it up or down based on the market action to continue executing the style. 

Additional Rules & Considerations

Additional rules for the style include practicing for an absolute minimum of 2-4 weeks on paper to identify if this style would be something that works with your schedule, risk tolerance, and assets as a trader. Recommended brokers include ThinkOrSwim (TOS), TastyWorks (Tasty), or Interactive Brokers (IBKR). As stated previously, we will incur red days where we must limit to -3k to -4k at the maximum. However, we expect to incur more green days where we target +2k to +3k as frequently as possible.