September 2025
First trades on 9/3/25
Updated my stats to get better picutre.
I have an average risk column as of course you need that to get your RR. That risk is based on stop.
My stop for simplicity sake I am using an average of -.5 ATR against, Sold Strike, and -1% against.
As for average risk it has always been troublesome. But now that I am trading closer strikes, higher delta, the delta is a bit more accurate in what happens to the option should it go striaght to stop.
So I can ignore random multipliers for now.
Compairng to old losses, they had a ration of 3:1 for MaxL to Est Risk.
With closer strikes, I think I can get away for now with assuming it can be Half max loss, as the hedge is more of a hedge now, and less of just a requirement.
Week 1
NFLX
So got in the sell at 6.65. Within the first 15minutes on day 2, we had a rip, and retest of HOD.
The sell is now at .55
There is no add here.
RR is gone.
Most of my trades do not do this
Its a bit upsetting seeing such a large move in your favor and I have no way to capitalize on it.
I can place a low RR trade but that leaves me exposed the rest of the day and all day tomorrow
That black swan isnt worth it.
An out I see here is stepping up the strike but im not sure thats the right move
I had a thought the other night on what Day 2 really means.
What if I hadnt gotten in the previous day? But meant to.
Now my Day 2, becomes Day 1.
Does that really make a difference?
My old way of trading I expected to hol trade to friday close.
There was almost a certainty there was going to be a day 2.
With this closer style of strikes, and still trading range expansion, vol expansion trades. They move to 0 even faster.
A day 2 add on closer strikes, after a favorable move is a low RR trade.
What am I aiming for here?
Feels like im missing something.
Problem is acceleration. If I miss that breakout, I miss that huge flush in prem. I cant enter on Day 2 because of this. RR drops, it doesnt have to do with picking the right strike that it wont epx against, it has to do with prem decay, and how it already occured.
Day 2 in favor was a key variable in my OTM swing trades. 93% of winners had favoarable day 2 action.
That meant I should be adding more on Day 2 when it confirms.
Why does this change with NTM options.
NTM has higher delta and theta meaning it loses prem much faster than OTM.
IF the trade should make any good moves in favor, that means any adds after entry will be lower RR.
If any rips in favor occur, that really drops it fast.
Ex. NFLX lost 66% of its value by end of day 1.
lost 93% of its value in the first 15min on day 2.
That came after a large 25pt rip in the first 5min of the day.
That doesnt happen too often.
But when it does, I cannot capitalize on it.
Why do I NOT want to get big before Day 2?
I DID NOT want to get large on Day 1 holds with OTM swings because I was expecting to hold to friday Exp.
With NTM swings I am not expecting to hold to friday close. I am expecting a move in my direction, to hold it, and then watch theta kill prem, and take it off at 80%.
There is a big difference here.
OTM Day2 confirmed that it was going to exp at 0.
NTM Day2 confirm means its going to hit that 80% PT probably on Day 2.
-That can still mean exp at 0 on friday, but that is riskier. That is not what I am looking to do with these.
Grok:
With NTM + vol expansion, trades zero faster (higher theta absolute, delta accelerates on moves), so Day 2 adds are rare/low RR. Aim: Capture 80% quick, not hold for full. You're not missing something fundamental—it's a shift from swing scaling to tactical hits.
NTM Shift: Higher delta (0.40+) means moves hit harder
I think a good combination of thought here, is looking at my old trades, I saw that my trades rarely broke against prev day hi/lo. And now I am betting that strike that it wont hit there again, and that combined with previous data tells me that not only will price not get to that strike majority of the time, the prem decay will happen so much so fast that I can capture 80% much faster with NTM spreads.
I am banking on trades doing 2 things.
-Not breaking Day of Entry hi/lo against
-Day 2 confirming price action, wasting prem quickly, still not breaking against strike.
Day 2 is most likely my profit taking day, as long as price action is favorable.
Im trading breakouts, profiting by means of theta decay, and reducing my risk by means of credit spreads.
I added some more columns in stat sheet.
My trades need to have a tightening in the spread in order to reach 80% profitability of MaxP
At the open of my NFLX trade there was a .77 spread.
If that spread never drops, I never make money.
An 80% profit win here means that spread has to drop to .08 (.77 * .2)
The sell loses extrinsic value faster which speeds up the tighetning as the trade moves in favor.
The bot drops as well, but not as fast.
The question I am trying to answer, is where do I think the sold option will be when the trade hits 80% of Max P. And where does the spread need to be for that to happen?
There is a relationship here I am trying to figure out.
So far is looks as simple as ~85% of the sell option needs to decay in order for the spread to tighten to 80% of the beginning of the trade spread.
Ex. Im in TSLA. Bot at 4, sold at 5. Max P is 200. I want 160$ for profit target.
The open spread is 1$
That would mean the spread needs to reduce to .10 difference between bot/sold
That would also mean the sold would drop to .50, then the hedge would be .40
All in all, from going back to other wins and this weeks wins, I think its safe to make the assumtion the when I open a trade, its going to have to lose nearly 85% of its value, in order for me to take 80% of max profit out of the trade.
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Its not even necessarily about catching a wave, or riding a trend. Sometimes its just about a buyers market and expecting there to still be dip buyers at very near S.
Week 2
Some serious what the fuck moves again. It is astonishing how fast we can go from loooking so good to so bad in 15 minutes. agian with the 2x ATR moves in a straight dump.
Recognizing on these setups, if there is distance between price and 9/20DMA, then there is a reason for price to retrace after a move in favor and retest lower prices. There is a too far too fast aspect.
BX was entered with 9/20dma both .25 ATR under price. This was my best trade.
NFLX was entered with 9dma .9ATR under price and 20dma even more.
BSX was entered with 9dma .6ATR away and 20dma 1.4ATR away
SPOT .6 from 20dma and .7 from 9dma
TEM .8 from 9dma and 1.5 to 20dma
FTNT .75ATR to 9/20dma
I am again caught in the LTF tightness.
These trades made great initial moves, then a day or 2 later collapsed back in.
This means I need to look at old winners and compare this same stat.
Avg ATR Away from 9DMA 20DMA Avg ATR
W Bear Flag .57 .65 .61
W Bull Flag .44 .71 .57
W OverX 1.18 2.41 1.8
Going through this I am already seeing a lot of huge pullback days happening. If there is distance, there is deifnitely a vacuum.
There are some outliers, some are taking into MAs.
Theres only one question lef there. What about the losers
Avg ATR Away from 9DMA 20DMA Avg ATR
Losers .76 1.35 1.06
L Flag .55 .71 .63
L OverX 1.19 2.71 1.95
How did MAE Measure up?
% Against ATR Against Ratio to Stop
W Avg ATR <.5 1.4% .45 .42
W >.5 1% .56 .46
L <.5 3.08% 1.17 .94
L >.5 2.4% .87 1.06
Im surprised. Theres nothing here. Distance from MAs didnt make a difference in trade performance. No distiction between W or L. Just W are a small small bit tighter than losers. But .05ATR means nothing
Lets try again, but only focus on 9DMA
% Against ATR Against Ratio to Stop
W Flag Avg ATR <.5 1% .36 .38
W Flag Avg ATR >.5 1.43% .62 .5
W OverX Avg ATR <.5 1.18% .36 .29
W OverX Avg ATR >.5 .89% .28 .29
Losers Avg ATR <.5 2.5% 1.14 1.11
Losers Avg ATR >.5 2.79% .88 .95
The expectation here is that the closer we are to the MAs, the less drawdown the trade would have from entry price.
This is appearing in my flag trades.
There are too many outside variables to consider though. Day of exit, MFE, ATR against MFE. I did not keep well enough stats here to determine these.
It feels right though. The tighter the range, the tighter the MAs, the more likely we are to breakaway and not come back to revisit the MAs.
If I take trades away from MAs, that means a move has already happened. That means the buyers that are already in, will become sellers.
This makes these 'random' 2% sell days, 2x ATR against in first 30min of day more likely and makes sense.
Breakouts rarely, especially in the Mega cap names i am trading, go straight and never return even on a daily basis.
Breakouts happen on hourly all the time, And in nearly all the trades ive taken this month so far, that has been the case.
But now those breakouts arent enough to capture that 80% decay as they revert later in the week.
They make great moves to capture on an intraday basis (debit trades, take at 25% gain), but With credit trades I am still stuck holding.
And I am seeing my results here by recording end of day option data. And remember, I am only profitable, if the spread is profitable. They sell must decay faster than the hedge. If im short at 8 and long at 7, and 2 days later options are short at 3 and long at 2. I have made no profit. The only things that have happened are time decay, and underlying in favor.
These trades made great underlying moves in my favor.
SPOT +1.8%
NFLX +.9%
BSX +1.5%
TEM +1.5%
BX +4%
Theres nothing wrong with the trade. But there is with how I manage it.
On the 1hr /4hr time frame the 9/20 are nice and tight and celarly on edge of Value Area. Markers of a good breakout with tight risk.
BUT the dailys are where the vacuum is, there is reason to come back and retest lower prices.
So taking an ATM/NTM credit spread swing is ok when everything HTF is tight and just under price, but it is not ok when there is distance.
Why?
Because these credit swings rely on time passing AND range expansion to decay premium.
When MAs are far away, the range expansion may happen short term LTF great, but long term (a day or 2 after break) it is due for a retrace, so while time passes, that is a check in favor, the range expansion I see is eliminated. So now instead of having price and time in favor, I only have time.
I watch trades go from up a percent or two, to breakeven or losses again
BSX became an at Est Risk Loss and I got out a dollar (.6ATR) under the sell strike.
SPOT became a breakeven trade even though I got out 4 points above sell strike.
FTNT became a -.8R trade because the loss weas immidiate. A dollar under sell strike but it happened so fast, there was no decay on the hedge, it was able to hedge appropriately.
These distanced out trade must be managed differently.
I like the trades. I like the setups.
They are not good enough to be multiple day holds.
Why?
Distance from MAs on HTF charts.
There have already been moves.
The wave already started.
There are already buyers in the game who are now sellers looking to take profits.
Im late to the party.
Doesnt mean the trend cant continue. These trades still went another percentage or two.
But selling time is not a huge edge here. Price is
Debit trades have entered the party.
This is where these come in.
Buy 60+delta, sell strike under
Books have taught me look to capture a 25% move on these.
Why Debit Spreads and not just Buy Call?
-Cheaper, Less BP
-Less Theta Risk
-Still Theta helping.
-Defined Risk and Reward
I need to figure some things out here.
Max Profit when
Take off when Sold option is hit?
Sell where I want to take profits?
-ATR?
-MM?
-Delta?
MAX Profit is defined by friday Exp. What happens when sell strike is hit same day?
-Why hold?
-DO NOT hold because HTF distance says PB more likely to happen.
Ideally one day trades, not swings?
I need to be cautious when there is a trend. How far has it gone on already?
-Is it truly a trend CREATION point? or just an ABCD and im at the C
Weekly / Monthly ATR?
So now, I want to run some simulations. What if I took debit spreads on thses trades. And I take debit spreads on them because of the distance from MAs on D. And the fact that these trades have already made a move either the day before or week before in favor. They have already broken out and resting. Meaning I am late to the party, trying to catch the end/middle of the wave.
Lets check performance on
buy 50 delta, sell a strike higher.
Buy just ITM, sell just OTM
Buy 65 delta, sell ATM
Just 1 Contract
The goal is take profits when there is a 25% gain on the debit
SPOT
Credit
sell 700 35delta buy 697.50 33 delta, underlying at 712
Just 1 Contract. Max L $183, Max P $55, TgtP $44, est Risk $92 .6RR
-Opened with .72 avg spread, roughly .11c spread needed to reach profit target
-EOD 1, option favorable, sell down 30%, low liquidity not clear picture on how close to target profit, 4pts underlying in favor
-EOD 2, option favorable, sell down 50%, 30% to target profit, 5 points underlying in favor
-Mid Day 2, MFE underlying up 13points (6ATR, 2%), MFE option up roughly .60c spread, still had a long way to go. Sell option down 50%
-EOD 3, Lost it all an fast. Out with spread at .80 for small loss. Underlying against me 10pts.
-Down 13 points MAE. Worst trade got was sell option 25% against me, 75% of estimated risk. Wait on bounce and got out appropriately.
Debit
Buy 712.5, sell 715
Buy 710, sell 715
Buy 705, sell 712.5
NFLX
Credit
Debit
Buy 1255, sell 1257.5
Buy 1252.5, sell 1257.5
Buy 1245, sell 1255
I got about this far and I am realizing this is going to be a repeat of what i did last month and it took a week+ to finish it out. Im not typing all this out this time. I will just write what I am seeing.
The debit spreads need to be wide.
There is a similarity with my old OTM spreads. The hedge isnt really a hedge. Now if I am heding to close, I get these great moves in the underlying (1%, 1 ATR etc) but that hedge is too close in delta that it offsets the gains too much. The sell must be wider. Much wider.
Like if I take a 55delta, dont hedge with a 45, the MFE on a NFLX like that was only 13% despite the option being up 60%
This also means stop must be much tighter, LOD at the most. There are no red flag waiting here. Giving some time is fine, but now time is my enemy again. I am not swinging here. I am in expecting a pop here and now. And market has been giving that lately.
The higher delta gains value faster and the sold gains much slower, allowing the bot higher delta to much offset the loss on the sell side. This preserves BP and allows some protection still on adverse moves.
It seems if I am buying 60delta and selling 40, or buying 70 and selling 30, it results in 1:1 Max L : Max P
A 50% gain in each option results in 50% of MaxP
But again, higher delta buys move in favor faster, and sells slower, so a 50% gain in bot, probably means something like 35% gain in sell.
So if I am wanting a 25% gain on the trade overall, I would need bot to gain about 30% and sold would gain about 10
Must keep in mind theta is not on my side anymore. I am in and out when stock moves in favor. These are not holds. Holding a winner too long is how I give it back.
And im only using 25% as a marker from a book I read on credit spreads. I myself perfer to let the chart tell me where I should be taking off profits and letting smaller size ride the trend.
So NOW lets test it with a bot 60delta sold 40, and bot 70 sold 30
After 3 days.
PT is 25% of MaxL which is same as 25% of buying power required.
NFLX bot 60delta sold 40delta MaxP $620 Max L $630 Target $155
Day 1
-MFE +$179 bot up 6.3pts +40%, sold up 44%
-MAE -$120 bot down 4pts -25%, sold down 30%
-EOD +$224 bot up 4.8pts +30%, sold up 26%
Day 2
-MFE +$175 bot up 3.8pts +24%, sold up 21%
-MAE -$141 bot down 7pts -40%, sold down 50%
-EOD -$144 bot down 6.5pts -40%, sold down 51%
Day 3
-When I exited -$382 bot down 11.5 -71%, sold down 77%
NFLX bot 70delta sold 30delta MaxP $1040 MaxL $954 Target $240
Day 1
-MFE +$187 bot up 6.2pts +32%, sold up 48%
-MAE -$196 bot down 4.2pts -22%, sold down 27%
-EOD +$293 bot up 5.68pts +29%, sold up 31%
Day 2
-MFE +$234 bot up 4.4pts +23%, sold up 24%
-MAE -$251 bot down 7pts -35%, sold down 50%
-EOD -$154 bot down 6.2pts -32%, sold down 53%
Day 3
-When I exited -$489 bot down 11.8 -61%, sold down 79%
70delta carries more risk, more reward. Its just a tad more volatile.
I think I like the idea of meeting in the middle and aiming for 65delta, sell 35.
Because I like to add to winners for one. And when I add to a 65delta thats a winner, those adds become 70delta adds. Which means more risk as well
Which means I need to be taking off trades faster.
Because Theta is the enemy here.
I still need to give my trades some time to work. That will mean a LOD test.
A 70delta starter that turns into a LOD test, in the case above meant a 25% option value loss. Which even on 1 NFLX contract was a lot. But that will vary from stock to stock.
My other trades just dont have neough volume to really compare
The bot60delta sell 40delta hit PT same day, but the bot70delta sell40delta came up short of hitting profit target. Why? NFLX Hit 1265 on that day which would have been sold option on the 30delta sell. 1262.50 was 40detla sell on the 60delta bot trade.
Also, why did the 70/30 fall short of PT when the 60/40 hit it?
-It seems wider spread is not a great a thing as first thought. The gamme on the sell causes the sell option prem to increase faster than the 70buy delta can increase, as gamma falls.
-So INITIALLY, maybe .5ATR at the most, the 70/30 is better, but as the sell gets closer to the stirke, its gamma and delta increases offsetting the gain from the 70.
-For small/moderate breakouts (your +0.9-1.8% cases), the 60/40’s narrower width and milder gamma drag make it hit 25% PT faster. The 70/30 needs NFLX to push closer to or past the sell strike (e.g., +20 pts) to hit $240, as its short leg’s value spikes too soon relative to the buy.
-Wider spreads shine for parabolic moves (e.g., +3%), where the buy’s high delta compounds and the sell stays OTM longer. Your HTF distance setups favor quick pops, not multi-day trends, so 60/40 aligns better.
-Wider spreads require different PTs. 25% of a 100$ max L is 25$. 20% of a $120 maxl is 25%
With a higher delta shouldnt it move up faster? The 30sell offset this too much?
Gamma is highest ATM.
Gamma is on its way down on ITM
Gamma is on its way UP on OTM.
6. Addressing Gamma as a Problem
- Why Gamma Hurts: Debit spreads have negative net gamma (buy’s gamma < sell’s). As S rises, the sell leg’s delta accelerates (e.g., 30Δ to 38Δ), shrinking the spread’s growth rate. Your 70/30’s sell leg (+48%) outpaces the buy (+32%), capping % gains. The 60/40’s sell (+44%) is closer to buy (+40%), lessening the drag.
- Impact on Your Goal: You want the buy leg’s value to soar (delta-driven) with minimal sell offset. The 30Δ sell’s high gamma makes it “too noticeable,” eating into spread widening. A 40Δ sell (lower gamma) stays quieter longer, aligning with your “barely noticeable” goal.
The 30 sell leg catches up faster than the 70delta buy moves up?
Does delta ITM offset gamma OTM 1:1? What is the relationship here?
is 70/30 pt at 20% the same as 60/40 pt at 25%
-Only in trying to make it same in terms of total $$ maxp.
-Gamma shows difference maker.
If gamma on 70delta is 44 and dropping, and 30 is 50 and rising. ATM gamma is 54, what does that tell us about spread, and moving up and down is option price?
- 70Δ Buy Gamma=44 (dropping): Low gamma means delta changes slowly (e.g., from 0.70 to 0.71 on +1% S). Price increases linearly but decelerates—good for steady breakouts, less acceleration.
- 30Δ Sell Gamma=50 (rising): Higher gamma means delta ramps fast (0.30 to 0.37). Price increases convexly—starts slow, then explodes as ATM (gamma peaks at 54 for ATM option).
- Net Gamma: ~44 - 50 = -6 (negative). Spread convexity hurts: On upside, sell accelerates faster than buy, shrinking spread growth. On downside, buy drops slower than sell (sell's gamma helps recovery).
- Tells Us: Negative gamma = "fading engine"—spread expands easiest early (low sell gamma), but shrinks on big moves (sell catches up). For up/down: Upside price = spread widens then plateaus; downside = tightens fast then stabilizes. ATM peak (54) warns: As S nears sell strike, spread P/L flattens (MaxP near).
Is either easier to reach?
What are benefits to both?
I am learning Gamma is a problem here. A higher delta spread trade may be an issue because of this.
The goal is to capitalzie on a breakout and watch th buy option value increase. I dont want the sell to offset this so much.
So is there anything wrong with trading a 70delta long, and shorting a 10 or 15 delta? What about a 50delta long and a 10 or 15delta short?
70Δ Long / 10-15Δ Short (Very Wide, e.g., Width $30+, Net Debit ~$12-15, MaxL $1200-1500):
- Pros: Minimal short drag (10-15Δ sell gains ~10-20% on +1% S, vs. buy's 50-60%). Almost like a naked 70Δ call but 20-30% cheaper BP. Lets winners run far (+5%+ before MaxP). Low assignment risk (15Δ needs +4%+ to ITM).
- Cons: High gamma drag (sell's gamma ~0.06-0.07, spikes to 0.08 at ATM—rising fast, offsets buy's dropping gamma ~0.01). Theta hurts more (~0.30/day net). PT harder (needs +2% for 20% MaxP). Volatility whiplash on pullbacks (net delta ~0.55-0.60, but negative gamma amplifies fades).
- Fit: Good for strong trends (let run), but your HTF distance/retrace risk makes it volatile—MAE could hit -30% fast.
50Δ Long / 10-15Δ Short (Wide, Width $25+, Net Debit ~$8-10, MaxL $800-1000):
- Pros: Even less short drag (sell +15-25% on +1% S). 40-50% BP savings vs. naked 50Δ. Runs to +4%+ easily. Assignment low (needs +3%+).
- Cons: Similar gamma issue (sell gamma ~0.07 rising to 0.09), but buy's ATM gamma (~0.04 dropping to 0.03) nets more negative (~ -0.03). Theta ~0.25/day. PT at 20% MaxP needs +1.8% S—misses on weak pops.
- Fit: Balanced for your "barely noticeable" sell—better than 70/10 for moderate breakouts, but still high vol.
50Δ Long / 30Δ Short (Moderate, Width $15+, Net Debit ~$5-7, MaxL $500-700):
- Pros: Good balance—sell drag ~30-40% on +1% S (noticeable but offset by 50% BP save). Gamma milder (sell gamma ~0.05 rising, buy ~0.04 dropping, net -0.01). Hits 25% PT on +1.2% S. Low assignment (30Δ needs +2%+).
- Cons: Less "run" than extremes (MaxP caps at +3%). Theta ~0.18/day.
- Fit: Best for your goals—directional with reduced BP, minimal drag, holds trends without gamma killing.
The buy 65, sell 15 is clicking with me. Its ALMOST a naked long call. But some minor protection.
I need to abandon the idea of taking profits at 25% etc or whatever.
What is coming clear to me now tough, is Gamma. Sell gamma hurts on these. Gamma is most in favor on near 40delta options that move in favor. You get the ride is gamma which leads to faster gain in delta, which leads to prem increasing faster when it goes ITM, and then slows back down as it keeps going.
The sell gamma does the same, but starts off slower, then catches back up as it gets also near 40delta. So it makes sense to take the trade off before then. And whateve % that is, then thats just the % gain on the trade.
So maybe just ignoring this as a debit spread idea is best altogether? Just buy the call? It seems BP is the main point of having the sell on the trade.
I have always been a chart trader. Not a P/L trader. I get in on the chart, I take profits on the chart, I get out on the chart. All price based decisions. This 70/30 60/40 back and forth 20 or 25% PT is all unrelated to what the stock is actually doing.
That is, and has not been my strength.
Again we are talking about LTF momo trades that are day trades. These are not swing trades. The only time I am swinging, is on a winner that trends all day.
It seems like I can capitalize on a breakout that happens fast like I have in the past. And take it off when its done.
LTF momo trend continuation trades are an in and out 65delta buy for delta gains with minor protection
HTF trend creation/continuation trades are in and swing hold. 35delta sell for max decay
This is clearly defining my day trading and swing trading setups.
I could just say F all this and just buy a call.
If im going naked, then just do it ~45delta calls.
If I want the debit, it seems ATM 50delta and sell 15delta, with intentions on taking profits based on the sell delta reaching the point that the spread begins to narrow and no longer widen. So rouglhy 35/40delta. And whatever % PT that is, thats just it. The end of the trade.
-The debit allows 2 things
-Longer hold time for trade to work
-Less BP
-The debit could be a core, then add naked as it works.
-Adds stop losses must be if no momo right here right now. Theta will kill me on weeklies, especially later in week.
-The core buys some time in the trade. I can hold the core to a LOD test.
a 15 delta becoming 35, means the 50 becomes a 70. And spread is the profit gague.
I want the 50delta gainig prem fast as delta and gamma influence.
I want the 15 gaining prem slower as delta and gamma start ramping.
When the 15 reaches 35/40ish, now the 50 reaches 70 and starts increasing prem slower while the 35/40increases faster, thereby reducing the spread.
There is a widening of the spread at the start of the breakout, and a shrinking of it as it gets too far in favor.
So gamma is really the pinpoint of issues here. Gamma is the acceleration variable that needs checked.
What is this spread widening and shrinking effect called? Where else does this appear in the trading world?
---You're describing a classic dynamic in vertical debit spreads (like your 50/15 bull call): The spread value widens initially (profit accelerates) as the underlying breaks out, driven by the buy leg's high delta/gamma ramping premium faster than the sell leg's lags. Then, as the move extends, the spread shrinks relative to linear expectations (profits flatten or grow slower) because the sell leg's gamma catches up, its delta accelerates, and it starts offsetting the buy's now-slowing gains (as the buy goes deep ITM, gamma drops)
---This is called negative gamma drag (or gamma convergence in vertical spreads). It's the inherent negative net gamma of debit spreads (long leg's gamma < short leg's as S rises), causing convexity loss or profit flattening. The position starts with mild positive gamma (buy dominates), flips negative mid-move (sell's gamma overtakes), accelerating losses on reversals and capping upside acceleration. Your delta exit (sell at 35-40Δ) times the peak widening perfectly—right before convergence bites.
You know, the more I dig into this. The less I want to do it. It seems the only pro here is less BP but ofc that comes at a cost. It seems to cap the upside on the trade and gives me reason to take it off and not let it run.
What about the debit as a starter. And add naked as it works?
The debit allows smaller loss. But how significant is that on tight stop losses. With a low delta sell, im really only looking at saving maybe $100 at the most on a NFLX trade. The sell is not going to 0, and the buy is going to lose value a lot faster. The offset here really isnt worth it.
My stop for these LTF trades would be LOD. Does a debit starter really offset my losses that much?
-Grok simulates ~20%
I need to experiment here. I like the idea of starting a core with the debit, then adding. The debit on keeps me in the trade and allows me a logner holding time.
It seems I have found a starting point.
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Heres what Grok is telling me
Debit trades: Price is edge, not time.
Confirming tightness in MAs, or lack of, creating a vacuum.
MAs are coiled energy.
Basically just agreeing with what im already saying.
(tight = credit swing, distance = debit intraday).
PT at sell strike is good. An ATR move as well can be in the mix.
Bringing up Weekly and Monthly ATR to recognize exhaustion/overx
Wider gaps (70-30=40 pts vs. 60-40=20 pts) mean the short starts farther OTM, with higher relative gamma. It doesn't just increase value—it over-accelerates % terms on moderate moves, eroding the net edge.
60/40 hits 25% faster because of gamma lack.
70/30 hits target slower, but wider spreads increases $$$. Would need to aim for smaller %pt
3. Your Goals and Setup Preferences
You want:
- Directional Breakout Trades with Reduced BP: Debits nail this—lower cost than naked calls (e.g., $630 vs. $1740 for 60Δ alone).
- Minimal Short Leg Drag: The sell should be “barely noticeable,” not offsetting buy gains heavily.
- No ITM Assignment Risk: Sell leg OTM at entry, staying OTM during trade to avoid early exercise.
- Hold Breakouts to Let Winners Run: Allow trending moves (not just pops) without gamma/theta killing gains.
- Capitalize on Buy Option Value Increase: Buy leg drives P/L via delta, with sell as a cost reducer, not a brake.
I dont want the sell to be a problem. I want it barely noticable. I want directional breakout trades with reduced buying power.
I dont want ITM assignemnt risk.
I want to be able to hold a breakout, if its going to continue breakinging out and trending in favor.
I want to be able to let winners run.
After all the digging, Grok recommends 65delta buy, 15delta sell.
Reason being, the 65 is more stock like. 1:1. The 50 still has a catch up period that will be offset by the 15 catch up period. Must remember time is enemy. 50 can catch up great on a good move, but time is my enemy. It takes time to catch up and incerase in delta. And the time catch up hurts on other end as well on the sell side. The 65 skips that catch up period as its already baked in to the greeks. I want it close to 1:1 as possible. Becuase of time being the enemy, quick in and outs, and buying power leverage.
Why not a 75 though? or 80?
Convexity. Leverage. At some point there is no catch up to 1:1 and it becomes more a linear path to it.
Around ATH, slight ITM there is still some convexity to catch up.
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So In summary here is what I got
Credit spreads are best when LTF and HTF are tight to capitalize on range expansion plus time passage plus trend holding.
Debit spreads are best when LTF is tight to capitalzie on a one or 2 day momentum continuation / range further expansion. NOT for holding to exp.
To get 25% increase on trade value, it requires stock to get a bit past the sell strike. The sell strike can be a profit target.
There is a BP significance in buying ITM
I am still concerned with spread. Just in debit form. Spread expanding is best case scenario. Spread shrinking is only good with credits.
Everything thus far has been adjusted to a half of soemthng.
ATR
ratio to stop
so can my stop and pt.
CREDIT SWING
-Taken when trades are LTF AND HTF Tight
-35Delta+ sells
-30Delta Hedge
DEBIT SWINGS
-Taken When trades are LTF Tight, but distance on HTF MAs
- 60+ Delta Buys
-15- Delta Hedge
-Must have LOD Stop.
-That means BO/Momentum failed.
-These are not swings. 2days tops.
-Adds are naked calls with very tight leash
-PT is when sell delta reaches 35 or if breakout turns.
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Something I had not considered, is just a buy-write strategy. Just buy the stock. Sell the call.
Buy 100 NFLX, sell 1 call OTM.
Now obivously this blows up buying power requirements. But also not dealing with option spread/commisions is a plus.
Account for now is still large enough I can get 100 shares of NFLX. But adding is a problem.
SMB notes
-OTM calls for breakouts if perfect.
-OverX trades exp within 2wks.
-Breakout Trades exp same week.
-Have to be OK losing at least half premium.
-The stock will pullback and I have to be ok with this. Trade around Core. MOMO Adds, short leash. Core long leash.
Week 3
First trade on META was a LTF momo breakout. Worked great. In and out in a few minutes.
Im going to have to adapt. I want my trades to run. I want to trade breakouts. I want to set my orders up before the bell. I am not going to be at my desk to be flexible and on the dot in and out.
Im going to have to settle for the fact im not going to be able to pinpoint when and where I want out. Im going to have to setup bracket orders, one sends other, one cancels other. And whatever happens, happens.
This META trade, I was able to sit and see it clearly coil at vwap and turn up and I was in. When im not at desk, I cant do that.
Im going to have to rely on prev day/weekly levels to set orders at and ride it from there.
LTF will have breakout level entries in, and then stops based on my usual ATR/ 1%. Profit targets will be set. Orders to take profits and exit will be set. There cant be a hold and let it go because I may not be able to look at the trade all day. That may change, but now I cant do that.
-The Debit Spread, take off at sell 35delta makes more sense now for my situation. Can est where stock can be at that 35delta
HTF will have credit spreads one sends other. Stops at usual spots. Entries at usual spots. Since these are striclty let it ride trades. I can wait day after day to view and make sure all is well. Stops will be in still.
I must start small to makes sure it all works.
1st WEEK SUMMARY
-Discovered Day 2 adds are sometimes not possible
2nd WEEK SUMMARY
-Some setups have to be debited and taken breakouts faster
-Some can be credited and held to ride close to 0.
-TIGHT 9/20DMA means I can trade more aggressive and take the debit spread.
3rd WEEK SUMMARY
-Discovering ways to trade despite unable to be at desk.
LAST MONTH GOALS
What is good aim for % of MaxP
Theta Warrior. What does this mean.
What really is Vega? Why does Grok keep bringing this up I am missing something here?
Where does Strike Pegger/Max Pain/Min Pain fit in all this?
What does the word acceleration mean in my trading?
How are Day 2 adds working?
-In terms of chasing, RR, pb adds.
Day 2 Add rules. What are they
-Breaks in favor, not more than 50% prem gone, great PA.
Revisit
-Ratio to Stop
-% MAE on Sold Avg for losers.
-Est Risk %
Stop
-More data on ATR and % to stop and MAs
-To find better red flag system and re compare what winners have in common
What are new counts for red flag troubles
-6/12? 4/12?
Explore Small Cap Episodic Pivots?
Separate Stat Recording into Day 1, Day 2, 3 etc
-Dont take the average.
Explore Day 2 RR when trade moves in favor
-What questions need asked?
-Even after a big move, is NTM still worth adding with good RR?
-Avg RR on Day 2 adds
-Goal is 80%, so when at 50% of Day 1 prem, there is still 30% left?
Shadow Trader / Peter Reznichek
At what point does the trade definitely not going to break prev day vol to show a top or bot. -Rel Str past days time.
-Vol at ToD
-Record / find data on candle type prev day/days.
-Red, Green, doji, hammer, ranges
-How many days ago was most recent top/bot
-Explore idea. When stock is 50% to stop, chances are that also means that option is near 100% against, ATR is around 50% against. Against trade -1%. How are these relatable.
NEW GOALS
-Experiment with 2wk credit spreads. Widen time horizon.
-OverX stocks with market theme. High vol, outliers.
(SMB Sniper Trade)
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