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So far, we’ve played with trading options in equities (stocks) and exchange traded funds (ETFs).Today, we’ll look at a third underlying, index funds. Specifically, we’ll take a dive into the SPX. It’s quite a different animal compared with an equity or an ETF. The SPX doesn’t have shares. It’s a theoretical index that tracks the S&P 500. Still, you can trade options for the SPX. In fact, the SPX has some of the highest open interest rates you’ll find in the options market.
Let’s consider what it means to buy options in something that doesn’t have shares. First, it means that there can be no exercising or assigning of an option contract. In this respect, SPX options are somewhat like European options rather than American options. But there are differences. The SPX can be traded until the market closes on expiration day (DTE). After expiration, they are cash settled.
We’re going to spend some time experimenting with SPX options. We’ll begin by trying to bracket the movement of SPX with an iron condor. An interesting feature about SPX options is that it has option contracts that expire every day of the week. We’ll take advantage of that and open trades on expiration day. Some people refer to this type of trading a 0DTE or zero day trading.
Later today, I’ll open a 0DTE iron condor on SPX, and discuss it.
1400 ET. Earlier, I opened an iron condor:

At 1420, here’s what the chart looks like:

The short strikes were chosen by using the Average True Range (ATR) indicator. I went one ATR above and one below the current price when I sent in the order. I set the stops at the short strikes for each vertical that made up the IC.
I’ve been informally studying the SPX0DTE trade for a few weeks and I’ve noticed that the SPX tends to be more volatile in the morning than in the afternoon. Likewise, the option prices vary more in the morning. Although, I ordered the IC as a single trade this morning, if I’d had more time I would have constructed as two credit spreads and tried to get the best fill price for each. Further, my thinking is that late morning to early afternoon may be the most advantageous time to open this trade. Ideally, this trade will expire at market close giving us a profit of $200. Our max loss of $300 on each side of the IC makes this trade very capital efficient, and provides a strong return on our risk.
The market has closed. SPX soared today by 1.68%, and broke through our upper short strike, causing the call spread to close at market. The IC ended with a slight profit, $20. We had transactions fees of $3.90, leaving us with a net profit of $16.10. Tomorrow, I’ll provide further analysis, and we’ll try another trade.
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