Daily Zoom for Tuesday November 29th
By Ernie Varitimos
November 29, 2022
0:00 / 59:31
Daily Zoom for Tuesday November 29th

So I would like to talk about the Batman trade and what's the basic setup? So the basic setup is pretty simple. We open the Batman trade at the open of the market, right? I don't know how much simpler that can be. You can get a feel for what the setup will be just by looking at the futures and where the futures are.

And cuz that will give you the implied open. Of course the spx, if you want to trade the spx, it's about a five point difference than the future. So whatever the futures are saying, just add one strike on top of that. And so you wait for the futures to open

and then execute the SPX trade. I generally like to do a 20 wide on either of 'em, on both of them. And I usually go the center strikes. I usually go six strikes out from at the money. So six strikes deep into the, put six strikes deep into the call, and then make each one of 'em 20 wide. And what that comes out to in terms of a debit Each one will be somewhere around $3, a little bit above, a little bit below.

If you have a nice volatile day, they'll both be below $3 and you can get 'em for, $5 and 50 cents total. But for the most part I'm thinking that the combined price is gonna be around $6. So that means that your max loss is $600. Your max profit will be approximately if it's 20 wide and 300

it's easy to do the math, right? So if each one is 300, let's say on average, and it's 20 wide, then you take 2000 and then you subtract 300. So that's $1,700. And then divided by 300, that's a one to 5.6. That's like our minimum risk to reward, but it's okay with, because now we're going to a double fly situation.

And unlike when we have just one fly before, I was looking for a one to seven, to one to eight risk to reward here our our probability of profiting is gonna or our win rate is gonna go up dramatically. And really our only risk is if we have a a dramatic move either up or down in the market.

But even then you can always get out after the dramatic move and you'll probably, you might not even have to get out to tell you the truth, but the loss is gonna be in the order of maybe a hundred dollars or so. So that's like the worst case scenario. Other than that, the price in between the two flies is your, is really your only risk.

And for most of the day at least for the first half of the day if you're just sitting right in the middle, you're gonna either be at zero or maybe a little bit above with a little bit of profit or a little bit below. And your only risk really then is if you just stay, if price decides to stay there for the entire day or moves out and then moves back into it a little later on.

And what I would say is just, decide what is a good stop loss for you. If it gets down to say $150, then take the loss, right? That shouldn't happen very often. Most of the time you're gonna be close to one of the. One of the flies, and you'll be either outside of it or inside of it there.

And your profits on the outside are going to be not as great as they were before. They're gonna be less probably, under a hundred dollars between 25 and maybe $125. Once it gets inside the fly, then now this is assuming you're keeping both flies on, there could be at some point where you decide that I'm just gonna take the other fly off and it has, I don't know $20 of, or 30 or $40 or how much is left in it, and then just recover that.