If I wanted to make $1,000 a week trading options, this is exactly what I’d do

in this video our head of options trading reveals the five steps necessary to develop an options trading strategy that has the potential to produce an average of $1,000 per week and I'll even give you a real world example of a system developed by one of our prop Traders which accomplishes that exact goal I'm Mike Bella Fury and we're one of the top proprietary trading firms located in New York City since 2005 and proud to have developed numer 7even and even eight figure per year Traders watch take notes and learn from the head of options trading at SNB so you can grow your trading account hi I'm Seth freudberg and I'm the head Trader of S&B capitals options trading desk here in Manhattan and one of the major reasons that people start trading options is to produce extra weekly income for themselves to be able to buy things they can't afford or just plain keep up with the expenses of their lifestyle and so if you've ever asked yourself how can I make an extra, a week through trade trading then you're going to want to pay attention to what we're covering in today's video because we're going to be showing you the process that professional Traders use to achieve their income goals so stick around if that's of interest to you before we get into that process if you're absolutely brand new to options trading and you don't know much about how options work we've actually put together a video for you to understand options Basics and if you click the video appearing on your screen right now it will lay out the groundwork for you to understand the option strategy that we're going to be sharing with you in this video Then when you're finished you can come back and watch the rest of this video the way that professional options Traders develop trading systems to produce extraordinary returns is very similar to the way a scientist thinks he comes up with a hypothesis which basically means an educated guess that something is likely to work out and then he does an experiment and he tests that guess against reality to see whether he guessed right or not and so if you think of yourself as a scientist trying to come up with a way to make $1,000 a week trading options then the first step is to come up with a hypothesis and this doesn't have to be complicated this could be really simple and so let's take a look at an example from one of the Traders on our desk here at SMB and because this strategy is proprietary to that Trader we're not going to go over the exact times of day and granular specifics but we're going to give you a very close general idea of how this works so you'll get the concept of how a strategy is developed so let's go back to last week June 6th and as you can see the SPX index the index measuring a basket of 500 large cap stocks had opened at its all-time high of 53 5780 as the Market's been slowly grinding up all year and so that morning suppose that you pulled up an options chain that was that same day June 6th what Traders refer to as Zero D te options the options that expired that day in other words and with the index at that point in the morning trading at 5350 you went ahead and sold six of the 5350 calls right where the Market's trading and you also sold six of the 5350 puts and then moved 80 points above that to the 5430 calls and you bought six of those and then went down to the 5270 puts 80 points below the puts you sold at 5350 and you bought six of those and when you do that selling the at the money calls and puts and buying equidistant long calls inp puts further out of the money when you do that you've entered into what options Traders refer to as an Iron Butterfly now let's break down what happened here from a cash flow standpoint so you understand how this trade works and so starting with the six calls we sold at the money at 5350 we received the price of 1065 buy for those but remember index options pay off at $100 per Point beyond the option strike price when they settle so you multiply that by 100 and we sold six of them so when you multiply it all out we received $ 6390 for the short calls and using the same equation we received $54. 90 for the six 5350 puts and then the protective calls up at 5430 cost us just $48 while the protective puts down at 5270 cost us $198 so netting it all down we received $1,644 in cash in our account when we entered this trade for which your broker is going to require you to have 36,3 66 in capital now let's move to about 90 minutes later and what you're going to witness is a really important principle in options trading and that is the concept of time Decay and that's what happens when options begin to approach their expiration time which for zero DTE options is only a few hours away and so on that day if the index is trading at around the same price as it was when you put the trade on 90 minutes earlier then purely because time has passed the options get cheaper why because there's less time for the market to move to the strike prices of the options than there was 90 minutes earlier and so the market values them less because if the market has say 5 hours to reach a strike price by 4 p. m.

when the market closes the options Market would use one price but when there's only three and a half hours to go and the index is at basically the same price then it still has to make that same size move as when you first put the trade on but it has less time to make that move so the chances of the market never reaching that option by expiration has increased and so the options Market is is naturally going to value that option a lot less as time goes by so that's the concept of time Decay and so the trader had a rule that he would exit the trade 90 minutes after he put it on subject to a certain stop and a certain Target profit but neither of those were reached on this day and so 90 minutes had passed and it was time to close the trade and so the way you close a trade like this is to just reverse it you sell the options you bought and you buy back the options you sold and so remembering that each of the options were trading far less for far less than they were when you first put the trade on let's see how the trade came out and so starting with the cash we first received when we first opened the trade because we've collected that cash and U then we turn to the calls we sold for $10. 65 before well those have dropped to $9 so we have to pay 5,400 to buy those back and we only had to pay 3870 to buy the at the money short puts that we sold and of course the very far away 5430 calls and 5270 puts weren't worth much when we sold those and so when you start with that much cash and have to pay so much less to buy the short calls and short puts back even though we lost money on the long calls and the long puts compared to when we bought them 90 minutes earlier we ended up spending to close the trade a fair amount less than when we received than what we received initially when we got into the trade resulting in us being left with $2,466 out of that original cash and so with the trade closed our profit is just that $2,466 and so that was a successful Iron Butterfly trade and so our Trader here having observed this asked himself well what if we do this every day around the same time and close the trade every day 90 minutes later unless we hit a certain stop or Target profit what would be the outcome if you did this exact same thing every day selling six at the money calls and six at the money puts and buying six calls and six puts about 75 80 points further away from the market as the case may be and so that was his hypothesis so he now moves to step two the hypothesis the experimentation phase when he runs a back test using real historical data using commercially available options back testing software that our Traders have access to and which any retail Trader actually like yourself can buy and in this case the back test we're running is intended to find out whether you do this exact trade repeatedly all year will you make money or lose money overall for the year and so in the case of this this Trader who's a very diligent guy he did just that and he ran this same trade through the back testing software and while we don't have time to run through every month that he's tested let's take a snapshot of the full year 2023 so you can see how this flows and so you can see that the strategy made money in most months but in three of them February April and June the strategy lost money and so that brings up a very important Point here and that is there is no trading strategy in the world that wins every single day or every single week or every single month any healthy solid strategy has both winning months and losing months and so you need to accept that and understand that when we have a certain weekly income Target you need to understand we're discussing an average outcome per week how that result will come out is going to vary every single month every single year but at the end of a reasonable period of time let's say one year like we're displaying here you ought to be able to draw some conclusions as to how much the strategy could produce in a year on an average and as you can see in 2023 this strategy produced a little bit over $1,200 average per week and so our hypothesis is proved correct in this case and believe me there will be many trials and errors and hypotheses that don't pan out at all all but if you keep working it and tweaking strategies you usually can find an approach that is predicted to produce the amount of income that you're seeking and so at this point we're ready for step number three and that is to paper trade the strategy for some time say a month before you actually put the strategy into production with live Capital now most Brokers will provide you with a paper trading account which is basically Monopoly money it's not real money but you can execute simulated trades as though you were trading real capital in the real market and they are more or less realistic executions but why are we asking you to do this well for one thing you need to flat out get practice trading the strategy using your broker platform iron butterflies are a pre-loaded complex order ticket in any options broker platform and you need to just practice understanding where to find that on the drop down menu how to populate it and so forth you don't want to be practicing how to use a broker platform's order tickets while you're risking live capital for God's sakes also if you paper trade the strategy you're going to experience winning and losing trades and when you lose especially I want you to stare at the number that you just lost and ask yourself honestly am I willing to lose this much on a single trade because I realize I'm trading A system that has has a tremendous potential but in order to achieve that potential I'm going to have to endure losses to achieve my larger goals you see when you back test the strategy it's often with software that conducts the test in under a minute sometimes under 10 seconds you don't experience those wins and losses when you paper trade you slow it down to real time and you really feel those wins and losses and you're in a better position to really assess whether you've got the cycle logical strength to trade this strategy and put up with those losses so that's why we ask you to paper trade for a while before taking the trade live did you ever wonder why NASA first sent monkeys up to space before they sent real astronauts back in the day well whether you morally agree with that or not they were trying to reduce the risk of anyone getting killed doing whatever maneuver they were about to send real humans up to perform in space And even though they did T of testing and mathematical equations and simulations it's still pretty scary to send a human up there to do something for the first time that no human has ever actually done in the real world not just in a laboratory at Nasa and so it's the same with trading when you first start trading a system we strongly recommend you're trading the strategy with the smallest possible lot size that you can and still be able to fully execute the strategy for instance in the example we showed you earlier in this video you'll remember we executed six options for each of the four parts of the Iron Butterfly six short and long calls six short and long puts well this strategy can easily be traded as a one lot meaning one option at each of the options positions instead of six that way you'll of course win about 16% of the size of a six slot but more crucially you'll only lose about 16% of what you would have lost with a six lot so that's the trading equivalent of sending a monkey up there instead of you before you really know what's going to happen and exactly how you'll react to the losses that come along with any trading system and that's crucial because now we're talking real money and if you feel you know unduly traumatized by a totally predictable normal loss from Trading a one lot then there is no way you're going to be able to handle a loss on a six lot trade six time S as large also even though you back tested it paper traded for a while you may in certain cases encounter some problems when you actually try to trade the strategy live as opposed to testing it you may not be able to pick up on every issue in a back test that you'll encounter live and so if you do encounter an issue you have less at stake as you're working out the solution to that issue and finally don't forget that most people get nervous when they trade live Capital nervousness gives gives rise in turn to executioners and those almost always end up costing you money so while you're getting a feel for the flow of the trade you might as well experience losing trades caused by executioners on as small an amount of capital as possible that way a small mistake becomes a small loss until you've built the muscle memory to no longer make those mistakes again and so now we're ready for step five which you take after you've traded the Strat Str y small for a while at which point you can slowly and gradually take your Capital level up to the size you'll need to actually accomplish your dollar Financial goal which in this case was a six slot to make about $1,000 a week on average now why do we say gradually well first of all you'll notice very quickly that while your winners are going to be larger as you increase your Capital so are your losers and so the process that we recommend is that after you've begun to increase your Capital level say every month or two then ask yourself honestly was I able to easily and non- emotionally endure that loss knowing that my larger system has Edge and has proven itself historically and if the answer is no then you're not emotionally ready to increase your Capital level what will likely happen if you increase your Capital level too quickly is that you'll end up bailing out on the strategy usually at the the worst time right before it's going to have a string of wins that will restore that loss and bring your Equity curve to new heights except you quit trading so you never found that out and so you need to do that mental check-in with yourself before you increase your Capital at each level only when you can honestly say that you can handle increasing levels of loss when they happen only then can you finally size up to your goal Capital level to achieve your financi Cal goals if you follow carefully what we've shared with you in this video then you'll be developing a strategy like a professional options Trader does when you're trading your own capital or a prop firm's Capital the process is going to be exactly the same and you'll maximize your chances of success if you go through a process like this carefully now if you'd like to learn three more option strategies that our prot Traders use including the unique options trick that allows to make money while you wait to buy stocks or ETFs at the price you want and the options income strategy that allows you to make consistent money whether the market goes up or down or sideways and how to make money on a stock or index trade even if you're wrong on the direction then click the link that's appearing right now at the top right hand corner of your screen that will open up the free Workshop registration page in a new window so don't worry you won't lose this video or you can register directly for free at options.