đź’ˇ SPX 0DTE Trading - FOMC Butterfly Strangle (Low risk)
💡 SPX 0DTE Trading - Dec 14’22 Butterfly Strangle (Low risk/high reward)
Dec 14’22 3925/3935/3945 Butterfly Put (Pin:Low on chart)
Dec 14’22 4095/4105/4115 Butterfly Call (Pin:High on chart)
Net Debit: $60
Max Profit: $940
Despite the “pump and dump” activity yesterday, positioning was bullish with calls being added overhead. There was +7% increase in SPX call open interest and -2% reduction in put open interest. It appears participants are under-positioned for a downside surprise.
$4,000 is considered fair value due to balanced gamma (calls + puts) tied to that strike hence the mean reversion activity yesterday. It’s likely we break one way or the other today, $3,900 is major support (Put Wall) and $4,100 is major resistance (Call Wall). If $3,900 support gives way, markets are more susceptible to sharp downside moves and spikes in volatility as dealers may flip to a negative gamma position which adds to the downside pressure. On the upside, positioning between $4,100 - $4,200 is relatively light, meaning overhead resistance is weak.
Since market direction is largely dependent on Powell we don’t see much directional edge. Therefore, we have opted to play a butterfly strangle centered around 4105 and 3935.
This strategy is low risk/high reward with limited directional exposure. Max profit is realized at expiration and with FOMC at 2PM all we need to see is a move one way or the other for one of these spreads to juice up.
0DTE TRADERS
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Dec 14’22 3925/3935/3945 Butterfly Put (Pin:Low on chart)
Dec 14’22 4095/4105/4115 Butterfly Call (Pin:High on chart)
Net Debit: $60
Max Profit: $940
Despite the “pump and dump” activity yesterday, positioning was bullish with calls being added overhead. There was +7% increase in SPX call open interest and -2% reduction in put open interest. It appears participants are under-positioned for a downside surprise.
$4,000 is considered fair value due to balanced gamma (calls + puts) tied to that strike hence the mean reversion activity yesterday. It’s likely we break one way or the other today, $3,900 is major support (Put Wall) and $4,100 is major resistance (Call Wall). If $3,900 support gives way, markets are more susceptible to sharp downside moves and spikes in volatility as dealers may flip to a negative gamma position which adds to the downside pressure. On the upside, positioning between $4,100 - $4,200 is relatively light, meaning overhead resistance is weak.
Since market direction is largely dependent on Powell we don’t see much directional edge. Therefore, we have opted to play a butterfly strangle centered around 4105 and 3935.
This strategy is low risk/high reward with limited directional exposure. Max profit is realized at expiration and with FOMC at 2PM all we need to see is a move one way or the other for one of these spreads to juice up.
0DTE TRADERS
âś… Trade Ideas & Alerts
âś… Market Analysis
âś… Education
View on volatility did not materialize
Pinned at the fair value strike of $4,000
Bulls nor bears are in control