Frequently Asked Questions

Options trading might seem complex at first, but with a solid understanding of the basics, beginners can navigate the options market with confidence. Whether you’re looking to hedge against risk or generate profit from market movements, options provide a flexible tool to achieve your trading goals.

In this guide, we’ll walk you through what options are, how they work, and some beginner-friendly strategies to help you start trading options confidently using SPX Option Trader.

What Are Options?

Options are financial contracts that give you the right, but not the obligation, to buy or sell an asset at a predetermined price within a specified timeframe. The asset in question is often a stock, ETF (exchange-traded fund like SPY), or an index like the S&P 500 (which is where SPX options come into play).

There are two types of options:

• Call Options: The right to buy the asset at a specific price (called the “strike price”) before a set expiration date.
• Put Options: The right to sell the asset at the strike price before the expiration date.

Options trading provides flexibility because you can control a large amount of the asset for a relatively small amount of capital (called the premium). However, it’s also important to note that options come with risks, which we’ll cover later.

How Do Options Work?

Let’s break down the mechanics of an option contract:

• Strike Price: The price at which you can buy (for call options) or sell (for put options) the underlying asset.
• Premium: The price you pay to buy an option contract. This is usually a fraction of the price of the asset you’re trading.
• Expiration Date: The deadline by which you must exercise your option or let it expire. Options are time-sensitive, and they lose value as they get closer to the expiration date.
• Underlying Asset: The financial asset on which the option is based. For example, with SPX options, the underlying asset is the S&P 500 index. For SPY options, the underlying asset is the SPY.

Call and Put Options in Practice

• Call Option Example: Suppose you believe that the S&P 500 index (SPX) is going to rise in value. You could buy a call option with a strike price of 4000 that expires in 30 days. If the index goes above 4000 within that timeframe, your option will be “in the money,” and you could profit from the price difference. If the SPX stays below 4000, the option expires worthless, and you lose the premium you paid.
• Put Option Example: Now, let’s say you think the SPX is going to decline in value. You could buy a put option with a strike price of 4000 that expires in 30 days. If the index falls below 4000, your option will be “in the money,” and you’ll profit from the difference. If the SPX stays above 4000, the put option expires worthless.

Why Day Trade Options?

Options offer several advantages for traders:

• Leverage: You can control more shares (or points in the case of index options like SPX) for a fraction of the cost.
• Flexibility: You can profit in both rising and falling markets.
• Liquidity:  SPX and SPY options are known for their high liquidity, allowing traders to easily enter and exit positions with tight bid-ask spreads, making them a preferred choice for both retail and institutional investors.

However, options trading also carries risks, which is why it’s important for beginners to start with a solid foundation before diving into more advanced strategies.

Basic Terminology for Beginners

Before getting into strategies, it’s essential to understand some common options trading terms:

• In the Money (ITM): When the current price of the underlying asset is favorable for the option holder (e.g., the price is above the strike price for a call option).
• Out of the Money (OTM): When the current price of the underlying asset is not favorable for the option holder (e.g., the price is below the strike price for a call option).
• At the Money (ATM): When the current price of the underlying asset is equal to or very close to the strike price.
• Premium: The cost of buying the option.
• Bid/Ask Spread: The difference between the price buyers are willing to pay for an option (the bid) and the price sellers are asking (the ask).
• Open Interest: The number of open contracts that exist for an option. High open interest indicates a liquid market, making it easier to trade that option.
• Volatility: The degree to which the underlying asset’s price fluctuates. Options prices are highly sensitive to changes in volatility, particularly implied volatility, which reflects the market’s expectations of future price movements.

How to Start Trading Options for Beginners

• Set Up Your Trading Account

The first step is to set up a brokerage account that allows options trading. You’ll need to complete an application that assesses your financial knowledge and risk tolerance. Options trading isn’t allowed in basic accounts due to its complexity and risk, so expect the broker to ask questions about your trading experience.

• Learn the Basics with Simulations

Most brokerages offer virtual trading platforms where you can practice trading with simulated money. This is a great way to gain experience and understand how options work in real-time without risking actual capital. Paper trading allows you to practice strategies and learn from mistakes before committing your funds.

• Start Small with a Simple Strategy

As a beginner, it’s wise to start with a straightforward strategy before moving on to more complex trades. A good starting point is buying calls and puts. These strategies are easy to understand because you’re simply making a directional bet on whether the market will go up or down. We offer 3 strategies that focus on simply buying a call or put option. The Daily Outlook, Aggressive Trader, and SPX Late Day Trader are strategies that do a single trade each day.

This is a relatively simple approach to trading options. If we predict the market will rise, we buy a call option; if we expect it to fall, we buy a put option. The objective is to sell the option for a profit if the market moves in the direction we anticipated. If it moves against us, we will close the position at a loss.

• Understand Option Expiration Dates

When you buy an option, it has a limited lifespan. At SPX Option Trader we only trade options on expiration day (0DTE). This means they expire the same day we are purchasing these options. This has proven a highly effective strategy, but also can carry increased risk.

• Use a Stop-Loss to Manage Risk

Risk management is critical in options trading. While options limit your risk to the premium paid, that premium can still be a significant amount. By using stop-loss, you can be ready to exit a trade if the market moves against you by a certain amount, limiting potential losses.

Advanced Options Strategies

Once you’re comfortable with the basics, you can start experimenting with a bit more advanced strategy such as the SPX Spread Trader.

An SPX credit spread is an options strategy where a trader simultaneously sells an option and buys another option with the same expiration date but a different strike price. The goal is to collect the premium from the sold option, which generates a net credit, while the purchased option limits potential losses. The maximum profit is the premium received, while the maximum loss is the difference between the strike prices, minus the premium collected.

Conclusion

Options trading can be an exciting and profitable venture for beginners, but it requires patience, discipline, and an understanding of the risks involved. Start with small, manageable trades, and gradually build your skills as you become more comfortable with the complexities of the options market.

At SPX Option Trader we provide educational resources, and expert advice to help you succeed in the world of SPX & SPY options trading.

SPX Index Options are an integral part of the financial markets, offering traders and investors a unique way to speculate on the performance of the S&P 500 Index. Understanding SPX options is crucial for anyone looking to navigate the complexities of options trading effectively. This article delves into the fundamentals of SPX Index Options, their characteristics, benefits, risks, and how to trade them successfully.

Understanding SPX Index Options

Definition

SPX Index Options are options contracts based on the S&P 500 Index, a benchmark that tracks the performance of 500 of the largest publicly traded companies in the U.S. These options allow traders to speculate on the future movements of the S&P 500 without needing to purchase the underlying stocks directly.

Key Characteristics

1. Cash-Settled: Unlike traditional stock options, SPX options are cash-settled. This means that upon expiration, if the option is in the money, the trader receives a cash payment based on the difference between the strike price and the index value.
2. Expiration Dates: SPX options typically have weekly and monthly expiration dates, providing traders with flexibility in choosing their trading strategies. At SPX Option Trader we focus on weekly expiration. We trade these options on expiration day, 0DTE.
3. High Liquidity: SPX options are among the most actively traded options in the market, offering high liquidity. This makes it easier for traders to enter and exit positions without significant price slippage.

Benefits of Trading SPX Index Options

1. Diversification

SPX options allow traders to gain exposure to the broader market without investing in individual stocks. This can help diversify their investment strategies and reduce overall portfolio risk.

2. Leverage

SPX options provide a way to gain leveraged exposure to the S&P 500. A relatively small investment in options can control a larger amount of underlying index exposure, amplifying potential returns.

3. No Dividend Risk

Since SPX options are based on an index rather than individual stocks, traders do not have to worry about dividend payments affecting the value of their options. This can simplify trading strategies, especially during earnings seasons when individual stocks may experience volatility.

4. Tax Advantages

In the U.S., SPX options may be subject to different tax treatment than regular stock trades. Specifically, profits from SPX options may be taxed as 60% long-term and 40% short-term capital gains, regardless of the holding period, which can be beneficial for active traders.

Risks Associated with SPX Index Options

1. Market Risk

Like any investment, SPX options are subject to market risk. Price movements in the S&P 500 can result in losses, particularly if the market moves against the trader’s position.

2. Limited Time Frame

Since SPX options are European-style, traders have a limited time frame to realize gains. If the market does not move favorably before expiration, the option can expire worthless.

3. Complexity

Options trading can be complex and may not be suitable for all investors. Understanding the mechanics of SPX options, including pricing models and volatility, is essential for successful trading.

4. Liquidity Risk

While SPX options generally have high liquidity, there can be times when liquidity decreases, making it harder to execute trades at desired prices.

How to Trade SPX Index Options

1. Choose a Brokerage

To trade SPX options, you’ll need to choose a brokerage that offers options trading on index products. Ensure that the broker provides the necessary tools, educational resources, and support. Several reputable online brokers offer complete access, including Schwab, Scottrade, Interactive Brokers, E-Trade, and Tradestation, all of which have been utilized by our members. Personally, we use Schwab with the Thinkorswim platform and are very satisfied with their service.

2. Understand Pricing and Volatility

Before placing trades, it’s crucial to understand how SPX options are priced. Factors such as the underlying index value, strike price, time to expiration, and implied volatility all play significant roles in determining option prices.

3. Develop a Trading Strategy

Successful trading requires a well-defined strategy. At SPX Option Trader we have 4 distinct strategies that are specifically designed for trading SPX index options on expiration day.

4. Manage Risk

Effective risk management is crucial. Set stop-loss prices, limit position sizes, and diversify your trades to protect your capital.

Conclusion

SPX Index Options are a powerful tool for traders and investors looking to capitalize on the movements of the S&P 500 Index. With their unique characteristics, benefits, and potential risks, SPX options can enhance your trading strategies and provide opportunities for profit. Whether you’re a seasoned trader or just starting, understanding SPX options is essential for navigating the financial markets successfully. By leveraging this knowledge, you can unlock your trading potential and make informed decisions that align with your financial goals.

Explore the world of SPX options today and consider how they can fit into your overall trading strategy!

If you’re looking to grow a small trading account, SPY 0DTE (zero days to expiration) options represent one of the best markets to explore. These options, linked to the SPDR S&P 500 ETF Trust (SPY), are an excellent choice for those aiming to achieve quick returns while managing risk effectively.

When building a small trading account, it’s crucial for traders to understand pattern day trading regulations. Often, it’s beneficial to avoid using a margin account and instead focus on strategies that utilize a cash account. This approach can help you stay compliant with regulations while effectively managing your trading activities.

Understanding SPY 0DTE Options

SPY options are derived from the S&P 500 Index, which represents 500 of the largest publicly traded companies in the U.S. This broad exposure helps mitigate the risks associated with trading individual stocks. When you opt for 0DTE options, you’re choosing contracts that expire on the same day they are traded, allowing for rapid execution and potential profits within hours.

The primary advantage of trading SPY 0DTE options is the ability to capitalize on intraday market movements. Due to their short lifespan, these options can exhibit high volatility, creating opportunities for significant gains. Traders can implement strategies that focus on quick price changes, making this a dynamic and flexible trading method.

Advantages of Trading SPY 0DTE Options

1. Low Capital Requirements: SPY 0DTE options typically have lower premiums than their SPX counterparts. This affordability makes them accessible for traders with smaller accounts, allowing them to enter positions without significant upfront investment.
2. High Liquidity: SPY options are among the most liquid in the market, meaning you can easily buy and sell contracts without affecting the price significantly. This liquidity is crucial for day trading, as it allows for rapid entry and exit points, essential for executing short-term strategies.
3. Quick Returns: With SPY 0DTE options, traders can realize profits in a matter of hours, rather than days or weeks. This quick turnaround is particularly appealing for those looking to grow their accounts rapidly.
4. Profit from Both Market Directions: One of the significant advantages of trading SPY options is the ability to profit in both rising and falling markets. By using call options, traders can benefit from upward price movements, while put options allow traders to profit when prices decline. This flexibility is particularly useful in volatile market conditions, where quick shifts in sentiment create frequent trading opportunities.
5. Defined Risk: When trading SPY options, the maximum risk is typically limited to the premium paid for the options contract. Unlike shorting stocks, where potential losses are theoretically unlimited, buying options caps the downside risk to the initial investment. This is a key reason why many day traders favor options over other speculative instruments.

Risk Management Strategies

While SPY 0DTE options present fantastic opportunities, they also come with inherent risks. It’s crucial to adopt a robust risk management strategy to protect your capital. Here are some effective strategies:

1. Limit Your Position Size: As a general rule, never risk more than 5% of your total account balance on any single trade. This ensures that a few losses won’t significantly impact your overall portfolio.
2. Use Stops: In day trading SPY options, setting stop losses is essential for managing risk. A stop-loss price helps limit potential losses and prevents emotional decision-making when trades move against you. At SPX Option Trader, we provide a stop-loss price with every trade and update it throughout the day as needed to adjust to market conditions.
3. Maintain a Trading Journal: Keeping a detailed record of your trades, strategies, and outcomes can provide valuable insights over time. This practice helps you refine your approach and make informed decisions based on past performance.
4. Avoid Overtrading: Overtrading can lead to higher transaction costs and emotional fatigue, especially when trading SPY options. It’s crucial to focus on high-probability setups and avoid chasing the market or forcing trades. At SPX Option Trader, we limit trading to one trade per day per strategy, helping us avoid the pitfalls of overtrading.

How to Day Trade SPY Options: Key Strategies

To trade SPY 0DTE options successfully, having a well-defined trading strategy is crucial. At SPX Option Trader, we equip our members with an effective method for trading SPY options. We focus on two key strategies for day trading SPY options that have consistently proven effective for quick, intraday movements.

• Daily Outlook Strategy: This strategy emphasizes early morning directional trades. We provide detailed information on entry points, initial stop-loss levels, and profit targets, along with real-time updates throughout the day to communicate any necessary adjustments and market insights. Most trades are entered by 9:35 AM, and we typically exit within an hour.
• Aggressive Trader Strategy: Tailored for traders willing to take on more risk, this strategy follows the same entry criteria as our Daily Outlook. However, once a trade is initiated, it is managed differently, allowing for greater flexibility throughout the day. This often results in holding positions for several hours rather than just minutes.
• Daily Market Forecast: At SPX Option Trader, we offer daily forecasts predicting the market’s direction, along with key support and resistance levels to monitor. This valuable insight on SPY equips traders with a strategic edge when day trading SPY options, helping them make informed decisions and optimize their trades.

Trading SPY 0DTE options offers a unique opportunity for those looking to grow a small trading account. With low capital requirements, high liquidity, and the potential for quick returns, SPY options can be a valuable tool in your trading arsenal. However, successful trading requires a solid risk management strategy and a well-defined trading approach. By focusing on disciplined trading practices and leveraging the advantages of SPY 0DTE options, you can effectively navigate the markets and work towards your financial goals. Whether you’re new to options trading or an experienced trader looking to refine your strategy, day trading SPY options present an exciting path for account growth.

If you’re looking to trade SPX options using a cash account, you might be wondering about the best strategies to employ. At SPX Option Trader, we believe we have some of the most effective approaches for day trading SPX and SPY 0DTE (zero days to expiration) options. These strategies can be seamlessly utilized in a cash account, which offers unique advantages.

Benefits of Trading with a Cash Account

One of the main benefits of trading with a cash account is that you avoid the limitations imposed by Pattern Day Trading (PDT) regulations. This means you won’t face restrictions based on your account balance or the number of trades you can execute within a given period. If you have options trading permission on your account, you can implement strategies like SPX Daily Outlook, SPX Aggressive Trader, and SPX Late Trader—all without worrying about PDT rules.

However, regardless of the size of your trading account, it’s crucial to maintain sufficient funds to trade consistently and manage potential drawdowns associated with your chosen SPX trading strategies.

Understanding SPX Options Costs

When trading SPX options, keep in mind that they generally have a higher price point than SPY options. For instance, the capital needed to trade a single SPX option contract on expiration day can range from $1,000 to $2,500 or more, depending on the strategy. In contrast, trading a single SPY option contract may only require between $100 and $250.

This higher cost emphasizes the need for sufficient capital in your cash account. The SPX Daily Outlook and SPX Aggressive Trader strategies usually demand a larger upfront investment than the SPX Late Day Trader strategy. This difference arises from the pricing variations of options throughout the day. For the Late Day Trader strategy, typical option contracts range from $200 to $700 each.

Risk Management in SPX Trading

Every trade involves risk, and it’s entirely possible to lose your entire investment in a single trade. At SPX Option Trader, we prioritize risk management by utilizing stop-loss orders and sharing these levels with our members. However, it’s essential to prepare for worst-case scenarios, which is why we recommend never risking more than you can afford to lose.

In our trading practices, we adhere to a guideline of not risking more than 5% of our total trading capital on any single trade. Individual risk tolerance can vary, so it’s important to establish a strategy that fits your personal comfort level and financial situation.

SPX Strategies Suitable for Cash Accounts

1. SPX Daily Outlook Strategy: This strategy emphasizes early morning directional trades. We provide detailed information on entry points, initial stop-loss levels, and profit targets, along with real-time updates throughout the day to communicate any necessary adjustments and market insights. Most trades are entered by 9:35 AM, and we typically exit within an hour. Both SPX and SPY options work effectively with this trading strategy.
2. SPX Aggressive Trader Strategy: Tailored for traders willing to take on more risk, this strategy follows the same entry criteria as our Daily Outlook. However, once a trade is initiated, it is managed differently, allowing for greater flexibility throughout the day. This often results in holding positions for several hours rather than just minutes. While this approach carries increased risk, it can still be effectively executed in a cash account, enabling quick trades based on market dynamics. Both SPX and SPY options work effectively with this trading strategy.
3. SPX Late Trader Strategy: Ideal for those who prefer trading later in the day, this strategy targets potential last-minute price movements. With lower contract costs, it’s a practical option for cash account traders, particularly those with smaller balances. This strategy is designed specifically for SPX options only.

Important Considerations

If you’re interested in the SPX Spread Trader strategy, it’s important to note that this requires a margin account due to the nature of credit spreads. Therefore, if you’re limited to a cash account, this specific strategy won’t be available to you.

Additionally, if you do opt for a margin account, be aware that you will be subject to Pattern Day Trading regulations, which could limit your trading flexibility.

Conclusion

Trading SPX options with a cash account can be both rewarding and straightforward, especially when you employ the right strategies. By understanding the costs involved, practicing sound risk management, and choosing suitable strategies like the SPX Daily Outlook, SPX Aggressive Trader, and SPX Late Trader, you can navigate the complexities of SPX trading effectively.

Always remember that trading involves risks, and it’s essential to do thorough research and plan your trades carefully. By leveraging our strategies at SPX Option Trader, you can enhance your trading experience and work towards achieving your financial goals.

At SPX Option Trader, we specialize exclusively in trading 0DTE options. But what exactly are they, and how can they enhance your trading strategy? In this article, we’ll delve into the fundamentals of 0DTE options, highlighting their key features, benefits, and associated risks.

Defining 0DTE Options
0DTE options are contracts that expire on the same day they are traded, essentially having zero days until expiration. These options have gained traction among traders seeking to capitalize on short-term market movements and volatility. At SPX Option Trader, we specialize in SPX and SPY 0DTE options, focusing on trades based on the S&P 500 index and its corresponding ETF.

Key Characteristics of 0DTE Options

• High Sensitivity: With mere hours before expiration, 0DTE options exhibit heightened sensitivity to fluctuations in the underlying asset’s price.
• Accelerated Time Decay: The extrinsic value of 0DTE options diminishes rapidly as expiration approaches, intensifying the impact of time decay.
• Potential for High Returns: Their brief lifespan allows for substantial returns if the underlying asset moves significantly in the anticipated direction.

Benefits of Trading 0DTE Options

• Quick Profit Opportunities:
  0DTE options offer traders the chance for rapid profits by leveraging intraday volatility and price swings, enabling quick entry and exit in just hours. When executed well, this approach can yield impressive returns.
• Strategic Flexibility:
  These options support a range of trading strategies, but at SPX Option Trader, we concentrate on two core approaches: buying calls or puts and trading credit spreads. This focus allows traders to tailor their tactics according to market conditions and individual risk preferences.
• Lower Capital Requirements:
  Trading 0DTE options generally requires less capital than longer-term strategies, making them accessible for a wider range of traders.

Risks of Trading 0DTE Options

• High Sensitivity to Market Movements: Even minor price fluctuations can result in significant losses in a short time.
• Accelerated Time Decay: With same-day expiration, these options can lose value quickly as the deadline approaches, particularly if the market doesn’t move in your favor.
• Limited Decision-Making Time: Traders have minimal time to react, which can lead to rushed decisions that may lack careful consideration.

By understanding these aspects of 0DTE options, you can better navigate the exciting opportunities they present in today’s market. At SPX Option Trader, we provide daily guidelines to help traders maximize their profits from 0DTE options.

The main reason we trade 0DTE options, is their High Profit Potential.

• Significant Returns: 0DTE options can yield substantial returns within a single day, allowing traders to take advantage of rapid price movements.

• Flexibility: These options enable swift adjustments to trading strategies, empowering traders to quickly enter and exit positions based on real-time market conditions.

• Lower Capital Requirement: Typically, 0DTE options demand less capital than longer-dated options, making them accessible to traders with smaller accounts.

Each of these factors contributes to the rising popularity of 0DTE options among active traders. The volatility on expiration day often leads to swift price swings, creating opportunities for savvy traders to profit with the right strategy and timing. The dynamic nature of these options allows for a more engaging trading experience, appealing to those who thrive in fast-paced environments.

However, it’s crucial for traders to implement solid risk management strategies. The potential for significant losses can be heightened due to extreme volatility. With options expiring within a day, time decay can quickly erode value for those holding positions too long. Successful trading of 0DTE options hinges on making quick, informed decisions and using a stop-loss to mitigate risks.

Why do we trade only SPXW and SPY 0dte options?

By concentrating solely on the S&P 500, we have developed expertise in forecasting market movements and trading this index. As an index comprised of 500 stocks across various industries, it is less influenced by individual news events affecting single stocks. This diversification allows for more accurate predictions of daily market shifts. Since 2016, we have focused exclusively on trading SPX and SPY options, honing our skills and sharing our insights with our members.

SPXW (S&P 500 Weeklys) options are popular among traders seeking to profit from short-term moves in the S&P 500 Index. Expiring every day of the week, these options offer unique opportunities for intraday and 0DTE (zero days to expiration) strategies, allowing traders to capitalize on rapid price changes without holding positions overnight. SPXW options provide more frequent trading opportunities compared to traditional monthly options and have no assignment risk due to cash settlement, making them ideal for time-sensitive market moves.

Similarly, SPY options are based on the SPY ETF, which tracks the S&P 500 Index. These options also expire every day of the week. Traders can choose between SPY or SPXW options, providing the flexibility to select the best option type based on individual risk tolerance and market conditions. This versatility allows traders to tailor their strategies for optimal market performance.

To support our members, we provide four effective trading strategies, each detailing specific SPX and SPY 0DTE options we recommend, including entry points, profit targets, and stop limits. With this guidance, you can choose to follow our trades or adapt your own strategy throughout the day. These strategies represent the best approaches we’ve identified for achieving consistent profits in 0DTE options trading.

The answer to this question depends on several factors. Regardless of your account size, it’s essential to have sufficient funds to trade consistently and manage potential drawdowns for your chosen SPX trading strategies. To determine the appropriate account size, consider these two key questions:

Are you using margin or cash account?

If you’re using a margin account, you’ll be designated as a pattern day trader, which requires a minimum balance of $25,000 as set by the SEC. In contrast, a cash account avoids these restrictions, enabling smaller accounts to participate in day trading without limitations. Cash accounts can effectively trade SPX or SPY options, and our SPX trading strategies are designed to work seamlessly with cash accounts. This means that even those with smaller account sizes can engage in day trading—the key is to avoid using a margin account.

Do you plan to trade SPX or SPY options?

Basically SPX options are more expensive and so require a larger account than SPY options. The amount required to trade just a single SPX option contract on expiration day can range from $1,000 to $2,500 or more. If you trade the SPY the amount required to trade a single contract on expiration day can range from $100- $250 or more. On SPX credit spreads there is a $500 margin requirement per contract.

Remember, each trade is risky, and a trader can potentially lose 100% of what is invested in any single trade. In our own trading we always use stops and we share those levels with our members. However, one should always be prepared for the worst case scenario. So, never trade more than you can afford to lose. It is important to be able to withstand the drawdowns in day trading options. Our own approach is to never risk more than 5% of our trading capital in any single trade. But each trader is different, and you must make that decision yourself. If you are interested in reading more about how we approach account size, be sure and check out this link.

Auto Trading is now available for the SPX Daily Outlook, SPX Aggressive Trader and SPX Spread Trader. Please note that due to the fast moving options market, slippage can at times be quite severe for SPX Daily Outlook and SPX Aggressive Trader. For more information please see this page.

Due to regulations that restrict SMS text messaging for stock alerts in the USA, we regret to inform you that we cannot send text alerts.

For the most reliable access to our daily information, we recommend visiting our website directly. Our platform is accessible from both desktop and mobile devices, ensuring that every member can view real-time postings and receive audio alerts for new updates.

To receive instant notifications about new postings on our site, even when your web browser is closed, simply enable push notifications. This feature is available on both desktop and mobile devices. To subscribe, click the blue bell icon in the lower left corner of your screen. Once subscribed, you will receive immediate alerts whenever a new posting is made.

If you also wish to receive email notifications containing the same information available on our website, please request to be added to our mailing list. Keep in mind that email notifications may be slower than checking our website directly.

For easy daily access to our information on your mobile device, add this link to your home screen: https://www.spxoptiontrader.com/spx-daily-outlooks/.

If you need assistance with this process, please visit our guide here.

Our process of forecasting direction and levels is based on a series of proprietary algorithms that we’ve developed over our years of trading.  The tools we’ve developed analyze trend and price movement over the past in relationship to the opening price. All that goes into making these forecasts is the secret sauce of our trading, and so we don’t share all that goes into it. Overall trend, volume, levels of support and resistance, as well as market sentiment are all involved in the forecasts.

Having the right computer setup is crucial for effective and profitable day trading. While this may seem basic, it’s vital for every trader to understand. Here’s our essential checklist of equipment every trader should consider.

1. Up-to-Date Computer
Invest in a powerful, modern computer. If your system is over three years old, it’s time for an upgrade. You need a reliable machine that won’t freeze or crash during crucial moments. Aim for a computer with ample memory and fast processors. To stay competitive, consider purchasing a near-top-of-the-line computer every three years.

2. Backup Trading Machine
When upgrading your primary computer, keep your old one as a backup. This ensures you can quickly switch if any issues arise during trading hours. Always have your backup computer turned on and ready to use.

3. Fast and Reliable Internet
Ensure you have a high-speed internet connection, and invest in a backup provider. Consider having both cable and DSL options, depending on what’s available in your area. While you may never need the backup, it serves as essential insurance against outages, especially during significant trades.

4. Battery Backup for Equipment
Protect your trading setup by using battery backups for all computers and modems. Choose a battery backup that can power your system for at least 30 minutes, ensuring you can exit trades promptly in the event of a power outage.

5. Multi-Monitor Setup
Consider a multi-monitor setup to enhance your trading experience. Large 27” monitors are affordable and allow you to spread your charts and quote screens for simultaneous viewing. Once you try multi-monitor trading, you’ll find it hard to go back to a single screen.

6. Ergonomic Office Chair
A comfortable office chair is essential for long trading sessions. Set up your desk ergonomically to support your posture and comfort, making it a worthwhile investment for your trading career.

These are just a few basic suggestions every trader should consider. Remember, trading is a business, so equip yourself with the best tools and backups to focus entirely on executing the best trades. With the right equipment and our SPX Daily Outlook, you’ll be ready to tackle the markets!

One of the most important questions every trader must answer is this, what dollar amount should I be trading? This is a question we are asked quite often, and the answer we give is always the same….it depends. There is no hard and fast answer to the question of how much should I be investing in my daily trading, but we wanted to share a few guidelines that we’ve developed in our own trading throughout the years.

1. We never risk more than 5% of our Risk capital in a single trade. Now some may want a smaller % or a larger % based on an individual’s situation. You must determine what % will work for you in your situation and then stick to that rule. The goal is to be able to sustain many down days without concern. So be sure your lot size is set accordingly.
2. We trade a consistent dollar value in our trades. Each day we adjust the number of contracts we are trading to try and keep as consistent a dollar investment as possible.
3. When seeking to increase lot size, we normally only do it once per quarter. This helps keep us from going up to quickly. We’ve found it helpful to set a dollar goal that we want to make before increasing our lot size. We wait until that goal is hit, and then consider increasing our lot size if we’ve been at our current level for at least 3 months.
4. We never trade more than we can afford to lose without worry. If you take a full loss on a trade and it causes you great concern or worry, you are trading over your limit. If you can’t sleep at night because of a loss you took the previous day, you are trading too much. Trading involves taking losses, and if the dollar amount you are trading is causing you great concern, lower your investment. A trader must be able to take a hit, and keep going without worry. This is one of the most common mistakes we see traders make, trading too big of lot size. You cannot trade with scared money.
5. Never increase your lot size for emotional reasons. When we increase our lot size, it is because we are willing to risk more and can afford to do so, and have been making money. We don’t increase our lot size trying to make money quickly, or make up for some down trades. We never increase our lot size unless we’ve made our profit target over the previous weeks. This ensures we aren’t increasing our lot size during a down period in our trading.

These are our personal guidelines for money management. We encourage each trader to develop their own, and then stick to them. Hopefully you’ve found our rules helpful to you.

The answer to this question depends upon your situation. SPY options are cheaper, more liquid, smaller spreads and get taxed at short term tax rate. SPX options are more expensive, still liquid, larger spreads, often lower commissions and better tax consequences for most. There is no single answer to which is the best to trade, it depends upon your unique situation. Let’s look at each of these issues a bit more:

Settlement

SPX weekly options are cash-settled while SPY weekly options are not. This means if you end up with in-the-money SPX call options at expiration you will end up with cash in your account. As opposed to being long SPY stock if you held in-the-money SPY options. We always exit before the close of trading, so not normally an issue. But some brokerages will automatically exit a SPY weekly option that is in-the-money on expiration day before the close. Please consult your broker for details, as this can be a key difference of which to trade on expiration day.

Liquidity & spread

SPX weekly options offer good liquidity but the spreads are often quite large. SPY options generally have much greater liquidity and have smaller spreads than SPX options. This often provides the opportunity to have more favorable fills on orders in the SPY options.

Price

SPX options are generally much more expensive than SPY options. The SPY options are 1/10 the size of the SPX options. This lower price may be attractive to traders wishing to invest less dollars per trade. However, this means one needs to purchase more contracts of the SPY options to equal the same value of the SPX options. This means higher commission costs for most traders. So it will normally cost more in commission to trade the same dollar amount in the SPY vs the SPX.

Tax Differences

Please consult a tax professional for specific tax advice. But currently the IRS treats SPX index options differently than SPY options. SPX options get special section 1256 treatment, which allows investors to have 60% of the profits made in trading treated at a long term tax rate and 40% at the short term. This also means no wash sale rule for SPX options. So for many the SPX options can offer a tax advantage.

Summary

Which is better SPY or SPX options? It all depends upon your situation. At SPX Option Trader we provide information for both. Our SPX Daily Outlook provides information for both SPX and SPY options.