Pro Trader Targets Gains With 2 Setups, 1 Ticker
Can one stock ticker and two trading setups be the answer to navigating this wild market?
The financial industry is reeling from recent bank failures and the stock market is on pins and needles ahead of the next U.S. central bank meeting.
Often in the world of trading keeping it simple is the best path forward.
Pro trader targets multi-leg setups on S&P 500
Current stock market conditions aren’t giving traders much leeway when it comes to trade setups.
Market momentum can shift almost as soon as a trade is executed. Traders must adapt if they want to stay in the fray and target profitable trades.
Finding the right trading options sends traders into a world with a great deal of “noise” where everyone seems to be trying something new.
The Simpler Trading team always turns to what has worked and then maximizes the potential with current conditions.
Kody Ashmore, Director of Weekly Options Strategies at Simpler Trading, has experienced success with quick overnight trades that avoid too much exposure in this crazy market. He has shared these setups in the Simpler Trading online trading rooms.
The key, Kody pointed out, is assessing price direction and then taking the trade as the market presents the opportunity.
Two key strategies he has focused on recently are the zero days to expiration (0DTE) options trades and overnight iron condor setups.
Unlike weekly or monthly options, 0DTE options are usually found on a stock or exchange traded fund (ETF) with high liquidity. Traditional stock options contracts will have monthly expiration dates on the third Friday of each month. 0DTE options contracts expire daily at the close of the session.
An iron condor is a neutral options trading strategy that involves selling both a call option and a put option with different strike prices while simultaneously buying a call option and a put option with different strike prices.
Within this multi-leg setup, the call and put options sold are further away from the current price of the underlying asset, while the buy options are closer to the current price of the underlying asset.
An iron condor has a central goal – to profit from the difference between the premiums received for selling the options and the premiums paid for buying the options. This goal holds as long as the underlying asset stays within a certain price range.
Breaking it down, traders sell an iron condor for a credit, allow it to depreciate from theta decay, and buy it back for a reduced price.
“That’s where I’m going to be focusing on probably for the rest of the year,” Kody said. “It’s where I’ve found a lot of success. I don’t care what happens with everything else. I have one ticker and two setups. I just do it over and over.”
Avoid market confusion with drama free trades
Kody has targeted the S&P 500 (SPX) as his primary ticker for trading.
The stock market has shifted constantly in the opposite direction of what one might think, i.e. bank failures and the market moves higher. His setups help avoid the constant market confusion.
“For me I find it easier to do these zero days to expiration trades, drama free,” Kody said.
Add in the short-term, overnight iron condor setups and he has a trading plan to tackle this range-bound market. In this choppy environment market movement, either up or down, likely won’t last long before shifting again.
Combine charts, indicators for bullish, bearish trades
Kody uses a combination of charts and indicators to find multi-leg setups like the iron condor or butterfly for these short-term trades.
He uses the squeeze and moving averages to help determine the best possible direction, either bullish or bearish, to target with these setups.
“I look at the squeeze – which way it’s going – particularly the hourly squeeze,” Kody said.
He pointed out the importance of setting up the best combination of trade structure through charts (minutes, hours, days) and indicators (various free and Simpler Trading tools) to see how the trade could play out.
Kody focuses on targeting the correct price direction, up or down, for a short duration. The goal is pulling together this combination of information and developing a high-probability trade.
If the direction is on target, Kody said, these short-term, multi-leg setups can gain half or more of target profit within minutes or just a couple of hours.
“So you can come in, get your profit, and get out,” Kody said.
He pointed out that one of the advantages of a next-day iron condor is that the setup only has to be right for a short time.
“Everything else is noise,” Kody said. “I’ve been doing zero day to expiration trades or an overnight condor, maybe a butterfly. That’s it. Rinse and repeat.”
Kody is available during live trading in the Small Account Mastery program and the Simpler Options online trading room.