Back to the Future #95
By Ernie Varitimos
July 6, 2022
0:00 / 18:49
Back to the Future #95

How do you, Ooh, gotta start all over there. How do you, how I wait a minute? My tongue's getting in the way. How are you doing friends? This is Ernie with zero days to expiration podcast. And this is episode number 95, entitled back to the future. I wanted to say back to the future, you know, the movie and all, but it is futures that we're going back to.

And so what I'm gonna talk about today is the, uh, the decision in our service to focus more on options on the futures. When doing these zero DTE. And I know that, you know, a lot of people are really focused on SPX the options on the SPX for zero DTE. And the reason why they're doing it is because it's so familiar.

It's familiar like stocks and options on stocks are familiar. You can trade them during regular market hours. They have, uh, a hundred multiplier. In other words, one contract equals a hundred. something of something like a hundred shares and it's all, you know, nice and tidy, but there are problems with the SPX.

And particularly with people that, that have small accounts, first of all, the SPX and the options on it from a margin point of view, it's pretty big. It's a big contract. The other problem is. If you want to day trade this and zero DTE trading is in fact day trading. And now that they've gone to five days a week, that's day trading five days a week, if you want to day trade, you need to have at least a $25,000 account.

Otherwise you're going to be tagged as a pattern day trader and nobody wants to be a pattern day trader because if you get tagged as a pattern day trader, then you have the. Uh, distinct possibility that your account will get shut down for 90 days. And that's not good. Who wants to be put out of commission for 90 days?

Nobody does. Now there are ways to work around this and people have become very clever in their ways of working, but it's all just a cluster F right? It's what it is. It's a cluster. Wait a minute. I gotta make use of this, uh, new facility I have here. It is all a cluster. Fuck. Did that work? I have to check that out.

I get, I have this new, um, audio, audio tool here. Gotta find out if this actually works here. No,

that certainly wasn't it. ah, there we go. It's a plus. There we go. Perfect. So what I meant, what I meant to say is that, um, in order to get around being a pattern day trader, you have to do things that are abnormal. For instance, we came up with this whole, um, Technique of, let's see here, this whole technique of, um, doing kind of like a hedge trade where you would do the exact opposite trade to, uh, zero out your, your ex SPX position so that you could let it ride right into expiration.

Therefore you wouldn't get the, get tagged another pattern day trade tag or whatever it is. Another. Because you only get three of these in any five day rolling window. And, um, and that's not good, you know, especially considering that if the zero DTE is five days a week, that certainly wouldn't work. If you wanna trade all five days.

So anyways, there are, those are the, those are mainly the reasons, but there is, there are other reasons as well. The SPX has no volume without volume. How can you have any meat without your volume? You can't, without volume, you can't do any kind of analysis on zero DTE. So all those reasons make SPX the index options on the index, an inferior partner.