I posted about 2 months ago regarding a trade idea on SPX, where I wait for a 1 SD move in one direction, and sell a vertical spread with the short leg at the 2 SD strike. Full post here: https://www.reddit.com/r/options/s/2Vh3dLrdu3
This has been a successful strategy with a small number of outlier days, and I modified my approach in two ways: only sell the vertical spread on the side being challenged (don’t complete the condor), and don’t calculate the expected move until 60 minutes into the trading session. Had I used the modified expected move, I would be at zero losses over the last 70 days (albeit a few fewer fills). I also employ an additional ladder of credit spreads if the 2SD strike is touched, by selling more credit spreads an additional SD away. I do not trade on catalyst days.
I am risking 5% of portfolio each trade, getting filled on 76% of days, the 2SD strike is being touched on 9% of days and has yet to close below, at least on the modified strategy. Total portfolio is up 27% in two months, and would be more if I used the modifications above. I am obviously suspicious of this rate of return.
Please share criticisms, thoughts, or possible modifications. This is not a “everyone is a genius in a bull market” trade, as this trade actively fights the trend, per se.
TLDR - Bullet list of strategy:
• Wait 60 Minutes: No order placed until 10:30 ET
• Check Catalysts: Ensure no major economic news (CPI, FOMC) is scheduled
• Calculate Zones: Calculate the ATM Straddle at 10:30 AM to define 1SD and 2SD from this point.
• Set GTC order: Place limit orders to sell 5-wide spreads at the 2SD strike for the current credit of the same spread at the 1SD strike.
• Deploy the Ladder: If the 2SD is touched, immediately sell a second spread 1SD further out (potentially could increase number of contracts given the PoP).
• Trust the Math: Use the spread width as your hard stop; do not manually close trades early or chase price. The risk is baked in to the timed entry, not stop loss management.
• If a sudden catalyst emerges (tariffs, war, covid etc) immediately exit all positions to the downside .