It was a slow but profitable week for us at SPX Option Trader.  We ended this past week +11% ROI in our SPX weekly option trading, +13% ROI in our SPY weekly option trading, and +39% ROM in our SPX Spread Trader.  We only had 1 trading day this week in the SPX Daily Outlook due to the holiday and the high price of options. However, we were able to trade 3 days in the SPX Spread Trader. In times of extreme market volatility, the weekly options tend to be a higher price. The higher the price, the more difficult it is to trade.

Part of being a successful trader is knowing when to trade and when not to trade. In our opinion, when the options are so expensive, it is best not to day trade them. For example, when the option on SPX is near 30 a contract, it means the SPX must move 30 pts just to make 100% profit. That historically has not been a good risk to reward ratio. Because even if we see a huge move in the market, we only stand to make 100% and we are still risking a -70% loss. We prefer to trade when we can make over +100% gain with about a 15 point move.

No matter the price of the options, we still provide our SPX Daily Outlook each day, so a trader can certainly continue to trade the market on these days, if they desire. But we believe it is best to wait when options are so expensive and not take the risk. We’ve seen this happen before and eventually the volatility will settle out and the markets will return to more normal trading. Until then, we stay consistent and trade only when conditions are favorable. We look forward to what this new year will bring.

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