Now that SPY Speed Trade is launched and being traded, let’s discuss what to expect from these shorter-term trade types versus longer-term ones, like the Ride Trade.

As I told you before, I tend to prefer longer timeframe trades because they are less volatile. But this is my preference. Some of you like shorter-term trades because they deliver fast profits and deliver more "adrenaline". It is easy to have 15%-20% profit in about a week with the “SPY Speed Trade” – we had examples in the last month. 

Unfortunately, the market will not always behave like it had behaved in the past month or so. Since June, we are seeing a positive bias market (SPY), but fairly range-bound. This is very good for this strategy and profits are coming in. 

That strategy is based on a specific Calendar Spread with a clear selection of expirations that maximizes the probability of profit. It assumes a single adjustment in case the market moves that defends the position reducing its Delta.

Although the strategy can be defended using that adjustment, we should expect losses in case of a fast market movement. The trade could be hurt if the movement is to the upside; when the fast movement occurs to the downside, the positive Vega will act as a small shield and the trade could even gain a little if the down movement is not so violent… 

In resume, we should expect fairly nice gains but also a smaller fraction of losses that we could not avoid, just because sometimes violent moves occur outside open market hours. So, this strategy could have potentially high drawdowns due to the shorter time frame of the options used. This is typical of any shorter time frame options strategy: high volatility of outcomes. The goal is to defend potential losses (keep them as low as possible). Another solution to protect losses if a trader is willing to reduce, for example, the weekend risk is to use a hedging strategy. VXX options are good to produce these types of trades.

From a trader perspective, we should not look to a smaller timeframe of results. We need a longer timeframe to judge a trading strategy's profitability. This means, an edge over the market in the long term, which this strategy appears to have. During the second half of 2020, it produced very high profitability with very low losses. The initial Calendar Spread entered with the strategy guidelines increases success odds and reduces trade risk. Then Theta starts to kick in and profits start to appear. Also, the profit target is set at a conservative level to promote higher success.

During the development of the strategy and backtesting, I understood this has very good potential and that is why I included in my trading and shared it with you. At the moment, this trade produced about 50% profits in less than a month (first trade was entered on 15 Jul) with no losses at the moment. This is good, but we should be prepared for some losses that will occur naturally.

But, how does this compares with longer time frame options strategies? For the ones that are also following the “Ride Trade” you understand this is a slow pace strategy where the profits come slowly, but very consistently! For the ones that are following my trades, this strategy also uses Calendar Spreads on their construction, but in a conservative way. Since the beginning of the year, I do remember having a single small loss on SPY trade (-4%) that was compensated by the other trade (QQQ). So, the profit profile of the Ride Trade is a consistent monthly positive slope of profits. As of today, YTD Ride Trade profits are above $8500, which for a starting account of 10k it turns exceptional! Besides this, it provides enough time to adjust the trade in case of a fast market movement. I usually adjust 2-3h before the market closes. The SPY Speed Trade needs more constant monitoring. I usually use my mobile App to check how the market is moving and decide to adjust or close the trade.  And it could happen at any hour of the day.

I think the Ride Trade will continue to deliver good results, as I trade it for a long time and continue to show very good outcomes in the long run. The SPY Speed Trade has very good potential (positive edge on my backtests and high profitability in the first trading month) and will be good for the king of traders that prefer more action. I need to trade it live for more time to be "in love" with it as I am with the "Ride Trade". I tend to not like shorter-term options strategies - unless they use VXX!