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Credit Day Trading Strategy Summary

Strategy Overview

In this lesson, Eagle CEO Ishaan explains an options day trading strategy that Eagle Investors has been exploring since the latter half of 2022. The strategy is primarily rooted in credit trading, specifically using credit spreads. Please review the Eagle Infinity Modules explaining advanced option spreads before continuing this lesson to ensure you have a deep understanding of the credit call spreads and credit put spreads that will be placed. The asset that is traded in this strategy is SPX or the S&P 500 index. The specific product we use is the SPX 0DTE option (0 days until expiration), implying the same-day expiration options for SPX. In total, we will be conducting SPX 0dte credit spread trading in an effort to generate profits intraday from the movement of the market. 

Broker Setup and Parameters

In order to begin testing the SPX 0dte credit spread strategy, you need to ensure that you are using a broker that gives you the ability to trade the SPX same-day expiration option contracts. This is often found on brokers such as Tastyworks, ThinkorSwim, Interactive Brokers, and a few other platforms. Eagle strongly recommends the use of a margin account for this strategy with a minimum deposit of $28,000 USD (preferred starter account size) as with a margin account the PDT rule can be avoided. Small accounts under $25,000 USD will incur PDT and will incur a variety of additional restrictions such as limited day trades and the inability to roll as frequently as a margin account meeting the PDT threshold.

Time and Skill Commitment

This SPX style is only recommended to active day traders as it is a relatively complex trading style compared to other alternatives. Ideal commitment parameters include checking every 10-15 minutes to monitor and manage positions. The trader also needs to have a strong background in option spreads, specifically 2-4 leg credit option strategies. One also needs to understand that the style aims to develop consistent growth through base hits and is not a strategy to multiply any account size quickly. Finally, the trader needs to possess traits such as mental toughness and discipline to execute the style effectively. 

Strategy Tutorial

The strategy begins with entering an SPX 0dte Iron Condor. This is a mix of 1x credit put spread and 1x credit call spread in order to generate the 4-leg Iron Condor. The strategy can work with $5-$20 wide spreads however Ishaan prefers $5-10 wide spreads for both legs of the iron condor. Trade parameters for both spreads need to be as follows:
0.25 to 0.55 target credit for entry
0.10 take profit
2.00 stop loss
Other important considerations are to manage risk and begin to size lower as the day grows older and continuing to trade even if a spread hits the 2.50 stop loss. Ishaan has been using a hard stop on trading between 1:00-2:00 pm ET depending on market conditions.

Advanced Strategy Tutorial

Once the trade is entered and the trade parameters are set, the most important concept to understand is rolling the spreads up and down if a take profit level (PT) or stop loss (SL) is reached. With how far out of the money we are entering the spreads due to the target credit, price targets, and stop losses hit frequently (more often price targets). In this case, if either credit spreads hit the price target, roll up or down accordingly to adjust for the movement of the market. For credit put spreads (CPS) we will almost always roll up. For a credit call spread (CCS) we will almost always roll down. The strategy works best upon the completion of 6+ trades a day which entails at least 4 rolls. The style is shown to work best in relatively higher frequency as well. When beginning to test this style, start small with only taking one contract per spread and test for multiple weeks to determine if this style is fit for you. Size up with multiple spreads per trade as you see fit as results become more clear, if positive on a week-by-week basis. 

Entry Demo (Screen Share)

Please view the live demo broadcast on the lesson video to view Ishaan navigate, plan, and take SPX 0DTE Credit Spreads.

Final Considerations

This SPX strategy aims to produce a relatively high win rate compared to debit trading. Ideally, the win percentage over a period of 3months+ exceeds 85-90%. With this in mind, the losing trades will almost always be larger than the winners which offsets the higher win rate. By journaling your trades and testing the style for yourself you can gain a deeper understanding of if this strategy will be fit for you. Please view SPX credit advanced after the completion of this lesson for more very important tuning principles for this style.