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.
(click on the chart for a larger view)
When something looks too good to be true it usually is.
But so far not this year.
The day-trading strategy developed here last November and dubbed in earlier posts “The Fool’s Game” has now had 32 days like today since the start of this year.
Thirty-two trending days.
I define a trending day as any day the SPY calls or the SPY puts or a combination of both gain more than 100% on the day trade. All trades are long only. The 276 in-the-money put for today closed the day trade up 166% on each $10K traded (see the chart on the left below). There were no trades triggered in the calls.
This was one those great trending days that goes one way all day.
And by the way, the market, with today’s hard sell down, is now wildly oversold so the chance of bounce tomorrow is very high. I say that chance is about 85%, but that’s mostly a guess based on the past six months market action. No telling how high. There’s also about a 75% chance the bounce will be a one-day wonder.
For fun, I’ve included a chart of the “at-the-money” 277 Put for today below on the right just as a comparison between one strike and another on a day of expiration. The gain per $10K traded, $25,384 (also the percentage gain, 253%) is in the white flag on the lower right of the chart.
Obviously, the greater the risk the greater the reward.
Remember these posts are meant solely for entertainment purposes and for the educational purpose of showing what the possibilities are in options if one has persistence, experience and discipline. They are in no way be construed as any kind of direct or indirect trading or investing advice.
(click on the charts for a larger view)