The Advantage of Short-Term Options Trading: Unlocking Market Opportunities

Editor’s Note: Studying seasonality and historical trends can be a useful tactic for long-term investments. However, staying informed about current events is crucial for short-term market activities, regardless of past performance.

One expert in this field is Jonathan Rose, the lead analyst at our corporate partner Masters in trading. With 25 years of experience from the Chicago trading floors to private investment firms, Jonathan now shares live trading ideas, market insights, and trading education every morning. He has also been developing a new tool aimed at helping traders seize short-term market opportunities.

Join him on Tuesday, November 26th at 11 a.m. Eastern, for a live presentation where he will share his insights and introduce an innovative options-trading strategy (sign up here). This is a unique opportunity that you won’t want to pass up, and attendance is completely free.

Now, let’s hear more from Jonathan about the trading patterns he’s uncovered…

Many of the most lucrative chances in the stock market often happen when investors are not paying attention. These opportunities can materialize quickly and disappear just as fast, usually before the average investor recognizes them.

During my time at the Chicago Board Options Exchange (CBOE), my role was to assist institutional investors in executing market-making options plays. These strategies often lead to significant financial success for only a few.

For instance, in March 2020, as the COVID-19 crisis intensified and panic engulfed the market, institutional investors focused their attention on volatility.

On one notable day, the Dow Jones Industrial Average plummeted by 2,997 points. Remarkably, just a few days later, it rebounded by over 2,000 points, showcasing the market’s unpredictability.

Amid the chaos, I was on the trading floor, witnessing the frenetic activity that proved immensely profitable for institutional traders.

In March, the CBOE’s four options exchanges reported nearly 12 million contracts traded daily, with prices swinging dramatically.

The savvy investors mastered quick options trades that generated double- and triple-digit returns in less than 72 hours… and often in just 24 – without holding trades for extended periods.

Today, these rapid options trades account for nearly half of the daily volume in S&P 500 index options, up from 17% in 2020, when this method was still a somewhat guarded secret.

Short-volatility options enable traders to secure gains that traditional stocks rarely offer. While institutional investors have monopolized this method for years, it is now accessible for you to leverage short-term options to trade similarly while reducing risks and maximizing profit potential.

The Power of Short-Volatility Trading

Elite traders often seek to leverage opportunities by committing their capital early in the day for notable gains by day’s end. This is the goal of 0DTE options—zero days to expiration.

In essence, a 0DTE trade allows you to buy an option that expires by the end of the trading session, making it ideal for capitalizing on intraday price changes.

There are also options with a short time to expiration of one to three days, called 1DTE, 2DTE, or 3DTE options, providing a longer timeframe for executing trades while minimizing risk exposure.

By strategically timing your trades and managing short-term risks, you can identify some of the stock market’s most lucrative opportunities.

As an example, when the Nasdaq surged by 2% on September 19, savvy traders could have realized profits of 344%, 1,402%, or even 1,788% with these tactics. A $500 investment could have transformed into $2,220, $7,510, or even $9,440 in just a few hours.

Short-term options trading equips you with tools to enhance your gain potential in ways that simple stock investments cannot match.

Now that you understand the enormous potential of short-term options trades, you might wonder how to find these opportunities.

Following the Smart Money

To unlock the benefits of short-volatility trading, it’s essential to adopt the mindset of institutional investors and utilize the same resources they trust.

The smart money relies on various indicators to help gauge market conditions. I keep track of key volatility indicators, including the 1-day (VIX1D) and 9-day (VIX9D) indices. The VIN and VIF metrics also provide insights into long-term volatility trends.

We follow a straightforward principle here:

If short-term volatility rises while longer-term volatility stays low, it typically suggests a brief but significant spike in volatility. This scenario presents a prime opportunity for executing a short-term trade.

Of course, it’s important to complement indicator analysis with knowledge. In the realm of extremely short-term volatility options trading, education is the best way to reduce risk.

The insights shared here about single- and multi-day options trading serve as a foundational step for you to explore the potential of short-volatility setups.

Yet, I want to encourage all readers to dive deeper into this. To fully grasp the effectiveness of these options trades, learning how to trade volatility rather than direction is critical. This involves developing the skills necessary to consistently identify the best trading opportunities in the market.

As we continue to explore this exciting realm, I aim to assist anyone seeking to enhance their understanding of short-volatility trading.

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Unlock Quick Gains in Options Trading: Join Our Exclusive Masterclass

This is your chance to discover key strategies in options trading that can lead to quick profits.

Learn Proven Techniques for Consistent Profits

I’ve created a detailed presentation designed to help you find the best opportunities for rapid options plays in today’s market. You’ll explore my unique trading system, which reveals how successful traders protect their portfolios against market changes. This approach includes both upside and downside options, allowing you to adapt, regardless of market conditions.

Understand Market Volatility to Enhance Your Trading

The upcoming presentation will clarify how volatility influences the options landscape. You’ll gain insights to help you implement innovative trades based on the various market factors I will discuss.

Don’t Miss This Chance to Learn Valuable Skills

This event presents a unique opportunity to understand an approach to options trading that is currently generating millions of dollars in trading volume. Missing out could mean you lose out on this significant market trend.

Reserve Your Spot for the Exclusive Event on Nov. 26

I will host a special edition of my Masters in Trading Live event on November 26. This session will cover all the critical aspects in depth, and I invite everyone interested to learn how to outperform the market’s sharpest players.

Click here to reserve your spot now.

Remember, creativity is key to winning in trading.

Jonathan Rose

Founder, Masters in Trading