No surprise today’s rapid bear-market rally notched the 35th trending day of the year in what I call “the fool’s game” – buying calls and puts solely as day trades.
With SPY opening at 269.60, it was today’s expiration in-the-money 268 call that trended all day to a 203% gain on the close, $20,331 on each $10K traded (see the chart below on the left). Today’s at-the-money 269 call trended to a 336% gain (see the chart below on the right). The key to these gains is trading strikes nearest to expiration with the choice between in-the-money and at-the-money (or out-of-the-money for that matter) being entirely up to an individual trader’s risk tolerance.
Trending days obviously are the days when all the profits get booked. The rest of the trading days have resulted in net losses overall. Losses on their own that are rather huge.
This is a highly risky strategy that takes extreme measures of persistence, discipline and experience to execute.