We all know there are risks to 0DTE trading – mostly the swift time decay, changing delta and gamma, and potentially violent price moves by the underlying. But serious option traders are not deterred by those things; they can avoid most of them by merely paying attention. It then becomes a matter of how much time do you want to devote to a daily trading strategy. But this week, I read about a different kind of risk – one that I was not aware of, but which is apparently very real. To give credit where it’s due, the following article is based on this article by Cabot Wealth.
Back in 2014, we published an article entitled “Sell In May and Go Away...or don’t.” At this time, we’re going to update the data in that article and discuss what it means. It was in the double issue, TOS Volume 23, Nos. 9 & 10, published on May 23, 2014.
We have had a proprietary volatility premium indicator in place for some time. Now, we are going to begin to use it in a trading system that we have developed.
There is a developing divergence between Cumulative Volume Breadth (CVB) and $SPX. That is, $SPX is making new all-time highs, but CVB is not. CVB is merely the running daily total of “advancing volume minus declining volume.”
February has been a big problem for the stock market in recent years. The table below shows the $SPX results for February going back to 2002.
The title of this article is a question that seems to be asked in many places recently. We have written about this in the past, and our intention in this article is not to re-hash previous discussions. Rather, in this article, we’ll document periods of time where $VIX got low and stayed low for a long while.
We have been trading this seasonal spread annually every year since 1994, except for 1995. Last year, we were stopped out, but still with a gain.
