If you’re tired of the emotional ups and downs of day trading SPY, there’s a better way. SPY is an ETF a basket of stocks representing the S&P 500. Day traders love to trade SPY mostly because it’s highly liquid. Even better, the options are also highly liquid too, this can lead to some amazing profits.
Unfortunately, less than 10% of day traders actually make any money, and quite honestly that statistic is probably even lower. Not more than 5% of day traders make money consistently. I mean, it’s common for a day trader to have a streak, but then give it all back.
What we’re looking for is a system in which we can trade SPY that takes a lot of the emotion out of the trading process, but has consistent returns. If you have consistent returns, well, the end game is an infinite upside. You can just keep compounding until you have to start to diversify. And that’s a problem I think we all want to have.
This is why I recommend SPY-T trading. It’s a short-term overnight swing trade. You buy SPY (or your favorite stock or ETF), usually options, just before the close and you sell them the next morning at the market open. This way you can move on with your day and pull in some good profits much of the time.
Of course, it’s a numbers game. If you can be profitable over 55% of the time, I would say you will be doing okay in the long run. But the question is, how do you trade and what do you buy? And even more importantly, what signal do you use to trade up or down?
The best news is that our signal is available for free and it’s easy to find on the front page of spytomorrow.com at the end of the trading day. What this signal does is measure what we refer to as the pressure based on our algorithm. And that pressure correlates, quite often, to how the market will open the next day. So if the signal is up, you buy Calls if the signal is down, you buy Puts.
Of course, we know directional trading with options can be a little dangerous. You could lose all of your money, so I recommend SPY-T trading which uses a two-to-one option ratio. For example, let’s say spytomorrow.com says up, however, there’s a major crash in the market the next day. Well, because you have a protective Put in play with your two-to-one ratio setup, you can still actually make money.
There are certainly a number of ways you can approach this trading method. There are a few SPY-T trading approaches. Each has three parts to it. The first part is the short-term swing trade. It’s an overnight trade, you buy stocks or options at the very end of the day, and sell them in the morning. Then go on with your day be productive and don’t worry about a thing until it’s time to buy again at market close.
The second part is the two-to-one option ratio. For example with SPY-Ta the more aggressive SPY-T trade you buy two options in the direction and one in the opposite direction.
There are many signals out there, and if you find one that works better for you, you don’t have to use the SPY tomorrow signal. I believe it is just a really good one to consider. It tends to work about 70-80% of the time over the long term. Some months it’s over 85% Correct.
It’s sometimes nice to have a few options and maybe compare a few indicators before you decide which direction you’re going to place your trade. There are a lot of ways to approach how you buy your options too. You can buy or sell combinations of options based on the style of option trading that you’d like to use.
You can use simple directional option trading. If the SPY tomorrow indicator says up, well, just buy calls. As long as you understand how to best position size based on your risk tolerance.
Ultimately you want to grow your portfolio in a way that doesn’t take all of your valuable time. You want to trade SPY in a better, more consistent way that’s profitable and it’s certainly not going to give you the headaches that day trading does