Trading with SWAG
By Ernie Varitimos
February 9, 2022
0:00 / 20:36
Trading with SWAG

Okay. 3, 2, 1.

Here we go. Got it right on the button. All right. No timer today. No countdown timer. Just the raw Ernie. Adrian friends. This is Ernie with the zero days to expiration podcast. This is podcast number 75. I love round numbers. We're only 25 away from the Centennial and we do three podcasts a week, every Monday, Wednesday, and Friday.

And those are zero DTE days, zero days to expiration. We trade the very last day of expiration of options on the S and P whether it's the SPX or the E-mini futures, occasionally the spy. I don't really get into the spy. There's no reason to trade the spy if you have the SPX. And that's what we do, we take advantage of premium collection and.

Exponential decay of premium on that very last day, right down to the waning moments, it gives us an edge, a significant edge. And then we add to that other analytical methods using volume profile, for example, and just in our own personal discretion and our experience, our sweat. That's right. We use swag.

Swag is an acronym for scientific wild ass guess. Now that might sound like, you know, willy-nilly what in the world are they doing? Why aren't they systematic traders? Why aren't they following a set of rules lock step with every tick? Well, just because one is a discretionary. And using their own swag does not mean that they do not follow rules.

It does not mean that they do not have a specific discipline. In fact, we do, we have a very regimented discipline when it comes to the actual determination of go, no, go. Part of that is experience. Part of it is based on criteria that we have developed that we have run through that we have iterated through.

We use a continuous improvement process that we review every week. What did we do? Right? What did we do wrong? Where can we improve? And we hope that over time, that iterative process will make us better. That we will codify in our own minds. What is the best decision? And the reason why we act this way is because for one basic and very undeniable truth, and that is that the market is unknowable, who can claim that they can create based on back-tested data, things that happened in the past.

But they can use all of that and do scientific calculations and statistical analysis and say that based on what happened in the past, we can predict exactly what's going to happen in the future. You cannot, it doesn't work. They can get pretty good. Some systematic traders and strategies are quite good.

They required. The assistance of a computer for most part, are you trying to take a black box alert and then apply some to my systemized? Way of approaching or, or entering the market with that alert also is not truly a systematic approach. A true systematic approach would be 100% computer you program it.

You give it all its parameters, you set it and you let it go. It will open the trade. It will manage the trade. It will close the trade. That is very different from someone who takes a black box, where the computer may generate all of the initial information and has done all the calculations and then provide you with an alert or a setup, which you then have to execute.