How Simon Black made 100% with his Time Flies options strategy

And again, I'm up about 40% after 4

months, so it's pretty consistent. So,

for me, getting more than 5% on a trade

that is on average lasting less than 6

days, that's something I'm very happy

with. Just knocked over 100% return last

year. 1 year ago, Simon Black presented

his time flies strategy here on Theta

Profits.

Since then, it has become one of my

favorite strategies to trade, and so

far, I'm very happy with the results.

But, strategies evolve. What has Simon

learned during this last year? Welcome

back, Simon Black. Hey John, how's it

going? Great to be back. Uh give us this

short summary of what a time fly

strategy is and how it has worked for

you.

Yes, so a time fly spread strategy is um

it's my go-to strategy. It's a delta

neutral strategy, and it's a short-term

strategy. So, the strategy lasts about a

week. So, being a delta neutral

strategy, it's a kind of strategy I like

to trade where I don't want the market

to move much.

Uh and the nature of the strategy and

how it's um put together is such that

um it handles volatility expansions

and contractions. So, this looks at the

contractions pretty well. And

importantly for me, being in a country

where I'm asleep for half the market,

it's the kind of trade where I only have

to look at it once a day. So, that's the

trade I like to trade. Tell us, who are

you? Well, as you said, my name's Simon.

I am in New Zealand, uh capital city

Wellington. I have an engineering

background. I'm an electrical engineer

by trade, and I'm focusing mainly in

software engineering these days. I have

always been interested in numbers and

finance, and I was naturally drawn to

options trading. Um

and I just find it fascinating. So, now

it's kind of it's my hobby, and it's

sort of my my goal, long-term goal, is

to stop doing

this engineering work and and ramp up my

trading to be a full-time trader.

But yeah, and then one of my favorite

hobbies is playing with new strategies,

inventing new strategies, seeing what's

what's possible. Um I just love that

part of it so much. And this is actually

the first time I had to do a second

interview interview on the same

strategy, but this was a very popular

video on on the channel and I'm sure you

have developed it further during this

year and also, as I mentioned, this has

become one of my own favorite trading

strategy strategy I really like doing.

So, I think it's time for an update. But

let's start with the basic. What are you

trying to achieve with your time flies

strategy? So, I'm trying to build a

trade, um like I mentioned, that it's

delta neutral. So, if you've traded

something traded something like an iron

condor in the past, um you'll know you

sort of put

uh a boundary around sort of a central

point and you want the market to try and

sort of stay in the middle. Myself, like

many people, uh

aren't very good at predicting market

direction, and so I gave up on that a

long time ago, and so I'm hoping to for

the market to not move much. But if the

market does move, I'm hoping to build a

trade where the volatility contractions

and expansions that happen with market

moves hopefully

um are taken into account and

let the trade withstand that a little

bit. And let's describe the basic trade.

Maybe it's easier if we bring up an

example or build a stra- build a trade

from the beginning. A time flies spread

is a combination trade of two trades and

if you've seen me talk about this before

on your channel, it's two components,

one of which is a put diagonal and one

of which is a call broken wing

butterfly. So, just for reference, it's

outside market hours, so the pricing

might be slightly off. It's um

just before market open uh here, but

what I'm going to do is I'll go into

this QQQ. I'll pick

uh Russell cuz it's my favorite thing to

trade, the um tight price spread on.

I'm going to build a put diagonal. So,

what I'm going to do is I'm going to

make it

uh

this is a Friday expiration. I'm just

going to change alter this long date to

be a bit tighter in. And what I'm going

to do is go um some percentage below the

market.

Um so, you can see here this this short

strike is about a week out, right? So,

I'll go a little bit below.

Um I'll I'll just going to go percentage

in a 2% or so below. Uh let's going to

go

somewhere around here, give or take. Um

and I'm going to drag this. So, a

diagonal is a is a trade where you sell

um

you sell an option and you buy an

option, but they are different in strike

and

and expiration. So, this one is closer

in.

That's a shorter time and longer time.

So, I've always start with this. I don't

know.

Let's say 10 wide as an example. So,

um here is a diagonal. If I just pull

the range out a bit here,

and so, this is what a diagonal looks

like. And so,

the idea is that

over time, if the market drop down a

little bit and volatility what will move

time forward a bit here,

the idea is that that um slider could

move up.

Um sorry, the time as the slider moves

forward, it pulls up. Um and so, that's

sort of what's below the market price.

And we've mentioned in the past that

usually when the market starts

you know, dropping 2 3%, you might get a

little bit of a volatility increase. So,

if I drag the vol slider up, you'll see

that

it also pulls up. So,

that's kind of what I put below the

market. So, let me just reset

uh of

Um what I like to do normally when I put

these trades on is drag the time side

all the way to sort of 24 hours to go

cuz that's sort of we'll talk about that

later about exit criteria, but that's

sort of where I want to be out of the

trade um

by the time I get out. So, that's the

that's the bottom half. And so, what I

like to do then is put a trade above the

market and I want to

again have a trade that can handle what

would happen potentially when the market

starts

drifting up, which is normally

volatility might contract a little bit

when things are good, volatility goes

down. So, I'll go I mean I'll just pick

a point yeah, some percentage above the

market again, maybe a similar amount.

And this is where you can play and

decide whether you're bullish or

bearish, whether you want to

um, skew it in a certain direction which

is perfectly possible. So, what I'm

going to do is do a a broken wing

butterfly. Um,

this is sort of a normal kind of

butterfly. What I'm going to do is make

it a broken wing butterfly by moving

this further away. And so, what I'm

going

>> broken wing butterfly you have unequal

distance to That is right. So, as an

example here, let's just make this so

it's something we can see. This is 15

and 30 yeah, 29 15 29 35. So, that's 20

wide. This one here, let's make it a

little bit I don't know.

Like say there somewhere. Um, and now

what we have is this sort of this is

sort of the basis of the trade. Now,

this isn't quite exactly how I would

get it looking. We'll talk about a

little bit later about getting the curve

right, but this is the basic structure

of this trade and that we have a trade

below and a trade above. So, we will get

back to a little bit more how you adjust

this to get the

the perfect curve so to speak, but

essentially to sum up so far, you have a

put diagonal below the market and you

have a call broken wing butterfly above

the market. Yes, and just to clarify

that the expiration of the short of the

diagonal matches the expiration of all

the legs on the broken wing butterfly.

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All right. Back to the interview.

All right. So, let's get a bit more into

your entry mechanics. Let's start with

underlying. You mentioned that you your

favorite underlying is root. Why is that

and what other underlying could this

work on? Yes, I initially started

trading this on SPX and SPX was

fine and I was doing great and then

tastytrade changed the margin

requirements

such that I couldn't cuz I was trading a

single contract in a separate account

for the purposes of record keeping and I

didn't want to

change what I was doing. So, I thought

what if I just what would happen if I

just moved to the Russell instead, you

know, Russell and SPX. Obviously, SPX is

the top 500 companies. Russell 2000 is

the

best quote unquote best 2000 small cap

companies. I thought how different could

it be? But the moment I started trading

Russell, I found I could get

a better looking curve and a wider

range. Now, the wider range you think

okay, that's great, but Russell does

move more than SPX. Like, when the

market drops

when SPX drops 2%, Russell might drop

3%, whatever. But, I just found that I

was getting good results with Russell.

And so, in the end, I was like, well,

this is fine. Why bother going back? To

be clear, it's still perfectly valid to

trade it in SPX, and you can definitely

get trades winning trades, as you you

know. But, I just like Russell. But, in

terms of any other underlying as we just

I just mentioned that this trade is all

about

a diagonal below which benefits from a

volatility increase and a broken

butterfly above that benefits from a

volatility decrease. So,

any instrument's fine where that

relationship is true. And so, things,

for example, like trading gold like,

sometimes when the market's crashing and

dumping

and volatility's going up in general

across the market, the price of gold

might go up. It's almost

counterintuitive. And things like the

bonds, if you trade anything about the

bonds, volatility can increase in both

directions. So, it has to be a an

instrument where

what we think of as a normal thing where

ah, it's crashing and burning, vol's

spiking, or everything's happy, it's

going up. So, any of the indexes are

great. I personally like indexes because

they're cash settled, no no assignment

risk. But,

I've traded these in um

QQQ, which is the

Nasdaq 100

ETF. I've traded them in options on

futures / NQ

uh / ES and the Russell one as well. So,

there's a wide variety of instruments

you can use. What are the days to

expiration you are using? I've had a lot

of people who trade this try short-term

trades, and I also tried

you know, when I was experimenting

building this short-term trades. My

biggest

tip is it has to be a minimum of 7 days

to expiration from when you put it on to

that um

expiry. You can go longer. When I first

started this, I was sometimes I was

trying ones where

the those shorts were 14 days to

expiration. I thought maybe further out

you can get a wider range. Is this

better? And in the end it I sort of

discovered that

that whole window

of sort of 7 to 14 days gave very

similar results. So,

now I personally like to trade

[clears throat] on um

it's

Thursday market time.

Um for me that's Friday morning. It just

suits my lifestyle better. There's

nothing magical about a Thursday. It's

just what I like to do. So, when I'm

putting the trade on for the new

expiring the following Friday. So, for

me it happens to be 8 days to

expiration.

Could be 9 days, 10 days, whatever. And

then the long is the week after that. Uh

and you can you can play with that and

get different curves. But that's sort of

a I'd say don't try to trade this trade

less than 7 days. Let's get back to

options trade. And so, uh what happens

with this trade when the volatility go

up and down as you have mentioned a bit.

Right. So, here is um

a trade just sitting here. And so, at

the moment the volatility slider is um

sort of where the market is at. Um of

course, if the market started falling

dramatically for whatever reason,

there's some big news or whatever, quite

often volatility spikes. So, if I start

dragging the vol slider up, what you see

is the overall quick curve both to the

upside and to the downside, but

especially the downside, um starts to

rise. And the break even at the bottom,

it wasn't screen before, now it's gone

completely out of screen. So, what would

have been a

whatever 3.5% or whatever break even to

the downside, a vol spike has made that

much bigger. So, there's a little bit of

natural buffering built into the

downside.

And just resetting that,

volatility never really crashes down

like it spikes up and then just drifts

down slowly.

But when news is when things are good, I

mean, I guess if say the Iran war ended

tomorrow, maybe vol would really drop,

but in general vol just gradually goes

down. So, if the market was just

gradually moving up and vol was just

gradually moving down, so imagine this

price line is moving up and you know,

sort of slowly moving up. If we start

dragging the vol slider down, the line

where the market is now is going to pull

[clears throat] down. But the

the tent

the curve under the tent starts pulling

up. So,

if things work nicely, the market drifts

up,

and then you end up in a curve end up

under the tent where

where the vol decreases sort of giving

it some help, if that makes sense. I'm

curious now how you choose your strikes

and how you kind of define what is the

best trade to make this week. If you've

traded

an iron condor before or something like

that, you'll know that when volatility

is high, um

options are more expensive. And so, the

options you're selling, you you you get

more for them, of course. So,

when volatility is high, you can make

your strikes

further out because

it's just a a wider range. Volatility

literally means the market is volatile,

the market could move more. So, my

strike selection is pretty much and

there's no magic formula for this, but

when VIX is quite low, my strikes are

closer in. You know, maybe I think when

I put a trade on, I've got a trade I can

show later, one I'm actually in. I put

the trade on today.

Um VIX is about 17 at the moment, which

is it's not high, definitely, but it's

not super low. It's sort of

on the lower side of low. I think I

decided to go about 2.2, 2.3%. That's

just an arbitrary number in my head uh

either side if the VIX was higher in the

20, 25, I could go much further out of

maybe 3% above and below. And so,

what you do find is that

with getting trying to get the curve

right is that it it's sort of

it's sort of self-correcting. If you try

to go too far away,

like you try to give it too big a range,

you get a big sag in the curve in the

middle. It will make more sense when we

we really focus on the on the curve

later. But, um yeah, so I think

the volatility kind of helps you

naturally pick it, and the curve helps

you pick it. If you get it wrong, it you

you can't get a good curve. So, I think

the first thing you can try is let's

move the

short strikes. It's all about the short

strike. You get the short strikes kind

of in the right place,

the rest are kind of easy. So,

if you think about it about the short

strikes a little bit like I'm putting on

an iron condor,

where is the market going to going to

be? It's a good way to think about it.

You have mentioned the curve if you

times, and I know that you are very

concerned that you want to create the

perfect curve when you open a new trade.

So, please explain for us how you choose

your strikes, and what is a perfect

curve for this trade?

Well,

the the perfect curve for me is one that

gives a nice

round

curve, and it sounds so simple. The

trade on the screen at the moment is an

actual trade I'm in. I entered it uh

today. Um if you come back to my website

later and look at the trading results,

some point you'll better see how this

trade worked out. But, what you can see

with this trade, it's exactly the same

structure you saw before. There's a put

broken wing butterfly below, and a call

broken wing butterfly above. But, what I

want to do is I'll pull the time slider

forward. And unlike the last demo where

the curve kind of

looked a bit janky, to be fair, it was

kind of sagging in the middle. As this

one pulls up, and just to be to be

perfectly um

transparent, the market has dropped

about a percent overnight since I put

this on outside of hours. But notice

this curve as I move forward, it's nice

and round. Like it's it's kind of

even either side. It's going up and up

and up. This is the kind of thing I'm

looking for. I don't want

And as I get closer to like a day to

expiration, say 24 hours, it's starting

to bend a little bit here, just sort of

here. It's bending here. But almost all

the way up. It was almost I think I'll

go back just a little bit where I was.

Is it so that the further out shorts are

the the sooner you will get this sagging

or bending?

Yeah, I think if you if you move the

broken wing butterfly too far away, it

it will sag. And one way to see that

actually, if I bring the time slider to

the extreme expiry, right? The reason

why is this is this this big low point

here, right? This is clearly the

This is going to pull it down.

Right? But leading up to that, if I move

back a little bit again,

see how this is kind of nice and round?

So this is what we're aiming for because

it gives it a nice range, right? So you

can sort of see here this trade expires

on you can see there May 22nd

and

with a day and a half to go according to

the Option Strat. Again, this is all

theoretical pricing, you know, you can't

trust exactly Option Strat, but it's a

guess. But this is sort of showing this

trade could handle a 3.6%

jump to the upside and a

What is it to the downside?

About 3.8. So it's a a pretty balanced

trade. So you'll see here this dotted

line is sort of right in the middle.

This is a classic delta neutral trade.

The fact that the curve is the highest

where the price currently is

is it shows you how delta neutral this

is. If if the if the peak of the curve

was

either side of where the price is,

you've either skewed it to the downside

or the upside, and that's a perfectly

valid um

thing. The thing about this trade is

nothing stops you making this trade

completely centered

higher or lower if you have a feeling

that the market's going up or down.

I never get those feelings cuz I don't

know what's going on, so I just try to

center it and hope that the market can

last. And so, you want a nice smooth

round curve.

You also have those tops of the profit

attends on the input diagonal on the

call butterfly. Um

does that matter how high they are in

relationship to each other? It it kind

of does. It it it

I mean, I think so. I like to think of

use the analogy before. I like to think

of

imagine that green line is a rope

and those points are pulling that rope

up. And so, it's

what you find is this diagonal here,

this is higher up. It's almost got more

force. It's going to pull that bit up

higher. And so, if you find, for

example, your curve is sagging quite a

bit,

say to the upside, you want to make sure

this this point is up higher. And how do

you make the point higher

in a broken wing butterfly? It's quite

simple. You just make it wider. So, if I

wanted, just as an example, I'm just

going to make this wider.

All right. Now, this is outside market

hours. It's sort of weird. I'm going to

try to get it like that. Now, now these

points this point's higher, right? So,

it's just, you know,

it

you can play with all these sliders to

to see what you you want to do, but

definitely

if you can think about both of these

trades are trying to pull the curve in a

different direction, then if it's

pulling one way or the other, you can

adjust one way or the other to try to do

it. Basically,

it's kind of

it's almost counterintuitive if you're

not used to trading these trades. Making

the the

widths wider

we'll pull the butterfly peak higher,

but making a diagonals widths

uh closer actually pulls up the diagonal

point. So, something to play with an

option strat. It's It's quite easy just

to slide the sliders and and see what

happens, move prices around. So, So,

this is basically an artistic approach

to opening a trade where you kind of

play back and forth and until you find

what I've been asked by so many people,

can I automate this trade? Could Could I

make a, you know, a formula like enter

sell the 20 delta, whatever, buy the 30

delta, whatever it is. And it's like,

well, I've never considered it because

every week volatility is different, the

market conditions are different every

week.

And people who who follow my trades will

will see that the the the the the

diagonals are actually pretty

consistent,

but the broken wing butterfly widths are

different almost every week

depending on what's happening in the

market just just to get the curve right.

Um

So, I quite like this approach. I want

the trade to look look good. It's It

seems so simple, but um

yeah, that's how I do it. So, Simon, you

have the beautiful curve you can admire

and you are free to open the trade, but

what then?

When do you take it off? What are your

rules? So, I like to use buying power as

my metric. So, if a trade has a buying

power, and for these trades the buying

power and the max loss are very similar.

Um so, in option strat you can actually

can show you in this trade I'm in. If I

slide the range slider to the extreme,

you know, how much could I lose in this

trade? You know, you're getting down

here. I mean, you can go all the way to

the bottom, but let's say the market

dropped, I don't know, 10%, which is

probably unlikely, but let's say it

does,

about $1,300 or whatever. So, let's say

the max loss or Well, it's not the max

loss, but let's say the buying power is

about that. So, I would say buying power

is about

$1,300. I would be [snorts] keen for 10%

profit. So, if this trade shows

10% of a $1,300, which is $130,

I would get out. I'm happy

um with that 10%. If

you know, the trade is going through the

week and you're

still price is still right in the center

of the curve, you can try and, you know,

hit more of a home run and get a higher

return. I've had over 20% returns

in the past number of times. I've had as

high as 40%, but that was usually due to

a big volatility spike. But, um

it somewhere between 10 and 20% is

definitely where I'd like to get out.

I've been in situations before where

it's been hovering just below 10%

getting near the market close for the

day.

And I'm like

it's it's the almost the most

interesting time. It's like, should I

just take 8% and run? Or should I wait

and see? And sometimes you wake up the

next day and it's back down to 3% or you

wake up and it's 15%. So, it's a bit of

a lottery. So, I

you asked me how this trade has changed

over time and I think one thing I've

done more of and this year especially is

if it's close enough for a profit, I

will take the money and run. And to be

in some part to be fair, it's

the market at the moment is crazy with

this Iran conflict, oil dramas. And so,

you know, the market who knows what's

going to happen. So, at the moment I'm

being being quite conservative. I think

in a more

sort of quote-unquote normal market, you

might be able to hold these trades a bit

longer if the market's not moving much.

So, that's what I like to do

in terms of getting out. And I think

that's also my experience from trading

this that you it's very smart to take

the profit when you have it because it

can

it can change quite quickly, especially

as you

>> [clears throat]

>> get nearer to the nearer to the

expiration. And what looks like a very

positive trade one day can have changed

completely. Uh

in fact, my biggest loss in it in April

where I had two contracts on and they

reached 10% and I was

took only one off and the other I left

for the next day hoping for more and

that ended up as one of my biggest

losers. So, take your profit I think is

a good advice here. It's it's always

good advice and one thing I always say

to to people who are in my discord and

and follow my trades is there's actually

nothing wrong with taking a loss.

Sometimes you'll wake up and markets

dropped a couple of percent and it might

be showing a small loss.

And people are like, "Oh, what should I

do? Should I adjust?

Should I just hope? Should I get out?"

And to me, taking a 1 or 2% loss is

like, "No,

you know, who cares?" Like that's

that's the least of your worries taking

a small loss. So,

I I want to get out for 10%. I will

definitely get out if if the if the

whole trade is down 30 40% like a big

big move, something has gone crazy.

I'll just get out. There's There's no

point trying to risk your trade which is

beyond hope price. Sometimes, you know,

people always

try to they try to save every trade. I'm

in a delta neutral trade. I don't want

the market to move. If the market moves

a lot,

okay,

this is not the trade for me. I was

wrong. You know, I I can't you can't

sort of you can't have it both ways.

Either you're trying to be delta neutral

or you're trying to pick a direction. If

I'm in a delta neutral trade and the

market absolutely just

bombs or for some reason flies up, I'm

happy to take a loss. I think taking a

loss is just part of trading. I'm not

afraid of that at all.

I know you also have a deadline for when

you

have want to be out of the trade no

matter what.

Yep, it's and to me it's very important

rule and if you if you bring up options

spread again, I can can show you why

that is. This trade here this is options

spread again like I mentioned, it's just

theoretical and it it's just a guess of

what's going to happen, but this trade

here is showing what things could look

like with

uh

1.7 days to go. You know, so you're on

you're on Wednesday morning. It's like,

"Yeah, we're going to

go to war whatever it is

Thursday morning, sorry." You got to the

end of Friday. But, if you

if your price was somewhere up around

here, say,

this is great. I'm going to you're going

to make you're going to make lots of

money. As you slide this forward, so I

like to be out

24 hours to go. I like to quote be out

by the Thursday. I don't want to hold it

on the Friday. So, on the third on the

end of trading on Thursday, you're sort

of sitting somewhere around here, 24

hours to go. Still looks pretty good,

but the moment you start getting to that

last day, that curve really starts to

whip around. Now, if you're over here,

if you're up on the diagonal, fantastic.

But, if you're But, because the market

can move a percentage a day easily, next

minute you're here and you've gone

you've your loss has been given away.

And what's worse is if not only if you

were here and the market flies up and

the volatility drops,

not only that, your

your curve can pull along by the line.

So, what was going to be a nice

profit or at least a profit the day

before, you hold into the last day with

a volatility drop, and next minute it's

a

it's a small loss, right? So,

that's why taking the money when it's

there is quite important because

holding to that especially holding into

the last day is a bit fraught.

Personally, I often let the trade be

open in options start after I have

closed it. So, I see where it would have

developed. And of course, there are some

weeks where it would have been fantastic

profitable in the middle of those 10

$2,000 or whatever, but there are just

as often weeks when it would have ended

up with minus 1,500 minus 2,000. So,

that last day is really volatile. Stay

out of it. Yeah, exactly. Yeah, what

they say is hindsight's 20/20. So, yeah,

exactly that. So,

I learned a long time ago not to try to

hold it until the last day.

And you know, like you can look at it

and go, "Oh, if I just held for

tomorrow, what what is actually showing

as a loss might be a profit." So, I will

get out

at the last bit of middle on Thursday

for a loss. I don't want to even try to

do it on you know, Thursday so on

Friday. So, yeah.

But Simon, this trade doesn't always

work out, right? So, what are the most

typical situation when things go wrong

and you need to decide what to do? Um

well, like I mentioned, it's a delta

neutral trade, right? So, the the

the main thing well, pretty much the

only thing that can go wrong well, not

the only thing, but the main thing that

can go wrong, of course, is a big market

move, either up or down, right? Because

we're trying to be in the middle of that

curve. If we move down a lot,

you know, or up a lot, we start to get

beyond what the break evens could be.

The other thing, which is not doesn't

happen as common well, it's not as

often, I should say, is that there's

some big vol crash. For some reason,

volatility is artificially high. Maybe

there's been some big news, and then

that volatility

uh dumps. And we we have seen it this

year with um

volatility's up because of the oil

crisis in Iran, and then next minute,

there's a ceasefire and the vol drops,

and then there's not a ceasefire and it

goes up. So,

the biggest things are big market moves

or a vol crash. Um in those situation,

obviously, one choice is to close the

trade. But if you want to save it or

manage it, could we look at a couple

situations that could happen and what uh

what you could consider doing in those

situations? Again, this is a real trade

I'm in. I like to keep the slider around

this whole about a day to go cuz it sort

of shows me where the trade is going.

So, if you imagine we're in this trade

right now, obviously, it looks great at

the moment where we're going to end up.

But let's say we woke up tomorrow and

the market had dumped down

some percentage, and we you know, we we

get down here somewhere. If we were down

here, there's only a half a percent gap,

right, to break even. We're at the point

now where it's like

if the market dropped, you know, say it

dropped down 2 and 1/2% overnight, and

then it dropped down another 2% the next

day, we would be in this territory here.

Now, like I said, I keep banging on, I

say it often and often all over again,

taking the losses fine, but if you like

you said, if you decide I really want to

try and rescue this trade or make it

last or whatever, maybe it's early in

the trade and you think it's going to

bounce back, whatever reason.

The downside adjustment, my go-to and is

this is where you use your sort of um

your sort of trader's toolkit. You've

You've got a few skills and you know

some trades. I like uh calendars for my

downside adjustment. Calendars are

really simple. I I use I keep it really

simple. It's the same dates as um

as the diagonal. So, let's say the

market's coming down, I might decide to

try and

you know, put a diagonal on. So, I'm

just going to throw one on and then I'll

throw a calendar on and then I'm just

going to have a play. So, I'm just going

to sell put and buy a put.

And I'm going to change the expiration

to match the other one.

And instantly you get this big

curve, right? And so, this is giving you

this

big you know, move to the downside.

Yeah, and so, you know, you've got even

a bigger break even. And of course, if

the market did keep dropping down,

volatility might keep spiking up and

that gives you even more room. So,

to be honest, I'm not afraid of of

downside moves. Obviously, I'm afraid of

a 10% crash, of course, no one can

survive that, but for that sort of

3% shock, I might better recover. But,

this looks great on paper, but the the

issue with this is this trade, I don't

know if you noticed earlier, this trade

cost

I think it was two nearly $270,

something. The point is now the whole

trade costs more, and I don't actually

care about the cost in general, but

because the trade costs more,

if the market then recovered, right?

You and let's say it bounced back up.

You could be like, well, this I don't

need this calendar anymore. I can sell

it. So, you'd sell that calendar at a

loss, which is fine.

But basically now, what that would mean

is this this lower point here

will be quite low now. You've spent more

money, right? So, where this curve was

higher up, now it's lower down. So, that

that's the disadvantage of these

downside adjustments is if if you

turns out you didn't need it and the

market rebounded,

the chance of getting the profit now is

low. And if we talk about my trading

results later, if I I can show you some

examples, you'll actually see that

almost all my adjustments don't lead to

some big win. They just lead to a

minimized loss or maybe a small profit.

So, for me, when I'm adjusting, I'm

like,

it's defense mode. I'm not I'm like,

okay, I'm in a delta neutral trade.

It's not going my way. What can I do to

try and get out of this with the least

damage? So, that's where I think of

adjustments there. You're better to try

and rescue um

that trade if if possible.

You said that you are not so afraid for

the downwards moves,

I guess because you get some extra help

by the increased volatility that

typically follows that move. But when

[laughter] the market jumps up, like we

had in April, we had like

market recovery that was pretty

marvelous and it moved very very quickly

to the to the upside. How do What do you

do then?

Yeah, well, so

what I've been doing recently, this is

not even an adjustment, but when you

set up this trade and play with the

widths and stuff, I'm just going to move

this range about higher.

Again, I don't know if you can s- I

mean, you should be able to see this,

but you'll see here the loss to the

downside, we talked about that before,

1,300 or 1,400. Notice that the upside

is actually deliberately not as much.

So, I've skewed this trade to have less

risk

to the upside. And you can actually skew

it to have less risk to the downside.

So, you can you can actually play with

it at the market at the moment. I'm a

bit afraid of a big upside move. So,

I've made it that even if there was some

crazy move up,

the damage will be less. But back to

your question about actual adjustments.

Now,

it's almost counterintuitive, but quite

often what happens is

when the market starts falling up,

um volatility has probably naturally

dropped down a bit. Things have kind of

back to normal. And one simple thing I

do, and it is counterintuitive, I like

to use just

a a

you know, a call calendar or a sort of a

diagonal above the market. It gives it a

bit of a target to hit, and I know that

a volatility contraction doesn't play

well with call calendars.

But my reasoning is that volatility is

already dropped quite a lot. That's why

we're already on the way up. And so, is

it going to keep dropping more? I don't

know. So, just give an example. To be

fair, I I I'm more prone to like just

take a small loss for a big upside move,

but if I wanted to try and rescue it,

I'm just going to throw a random um

calendar on here. I'm not even going to

sort of look

uh exactly where I'm putting it, but

just to sort of show you what this can

do.

It's going to change the expiration.

So, it gives a bit of a bump here,

right? And so, again, it's got a bit

more room. But what you can do is you

can start playing with this and move it

along a bit. And if you actually

um people Some people aren't really

familiar with the diagonal. We are the

long that's closer, but if you move the

long a little bit closer to the market,

it even goes even further.

All right? So, you sort of get to this

point where it's going further. Now,

like I said about volatility, the

downside of this is if there really is

if there was a lot of juice in the

market and if there's still a a of

volatility to come out, if I start

pulling this down, you'll watch that

break even come closer and closer and

closer and closer and closer.

Right? So, you're trying to protect, you

know, and it's it's still only, you

know, maybe it's fine, maybe it's not,

but I if you want to try and adjust to

the upside, I just try to give it a

little target because calendars make the

most money if you

you pin it right. If you if the you end

up close near expiration on that, you

know,

that that that price. Um of course, like

I said, I don't hold to expiration, but

the curve sort of pulls up. But then

again, there's that downside is that uh

going back now I've spent more money,

so

if vol did drop and then it it it would

sort of maybe there's a big vol crush

and that's sort of now this is the

normal vol amount, right? And then the

market starts coming down again.

Maybe we pull and we get further and

closer I don't know. We we we get Yeah,

you can sort of see the moment you see

this line below

zero, there's always a chance of taking

a loss, right? So,

if I if I keep dumping vol down,

uh

you know, this is more negative now. And

the reason why this is more negative is

I've spent more on the trade

because I paid for a calendar. So, with

every adjustment, there's the trade-off.

It's 100% possible to do adjustments,

but it's sort of a

I wouldn't say it's a a beginner sort of

trade. Luckily, I'm using mainly

calendars and diagonals to adjust and I

think

because that's the basis of the trade

and I understand that really well, I'm

pretty comfortable, but Does it matter

when you make the adjustments? Yeah,

yes, that's a good point, actually. So,

if I like I mentioned, I like to get

into all my trades sort of I get in 1

week for the next week's expiry.

If there's something happens on the day

after I get into the trade, I get on on

a Thursday, there's something on a

Friday or on the Monday,

I might consider adjusting.

Getting closer to the end of you know,

the expiration week, you get to the

point where your adjustments aren't

going to do anything for you, you know,

because it's just

you've

you're trying to counter that that early

move in the trade. If If you get some

big late move,

it's almost like the ship has sailed at

that point, so it's easier probably just

to take a small loss.

Adjustments are possible later, but

that's that's getting into sort of

almost expert territory. And to be

honest, I'd rather just be like, "Look,

I'll take a 5% loss

than to try and adjust it and turn it

into a 20 20% loss or whatever." So,

that's just me.

Approximately how many of your trades

have you ended up adjusting?

I actually was looking at that earlier.

This

I can show you my results page if you

want to I can count them exactly, but

I'm pretty sure um

I think last year it was about 20%, but

this year it's closer to 15%, so it's

not a lot. Uh Simon, what has been the

worst loss you had? Really early when I

started, I this is like 2024, I had a a

40% loss and it was actually when Trump

got reelected, the markets went crazy.

Uh ever since then, I um

the probably the biggest trade I loss

I've had on average, I've had a couple

of 20% losses. So, that's 20% on buying

power. As you know, I'm aiming for that

10%, so at the moment a loss might wipe

out two weeks of gains. Uh what what is

the worst that can happen with this

strategy? The worst that can happen is

there's some big,

you know, market

crash, obviously, like any anything. And

of course, I'm trying to be delta

neutral, so some big crash could result

in a near

um full loss. But the best thing about

these trades is they are defined risk.

The moment you enter this trade, you

know the most you can lose, so

you can take that into account. That's

just standard trading risk management,

you know, don't overtrade, don't trade

more contracts than you should if you

can't afford,

you know, like that that trade I was

showing you was a single contract trade.

I can lose it that I lost it $1,300.

Fine. If that's a If that's a black swan

event, 10% crash, and all I lose is

$1,300,

that's okay. So, that's why I'm sort of

I think it's quite a good trade because

yes, you will take losses, but a lot of

people get worried about that big crash.

Um and you will just lose

you know, these are weekly trades. So,

if a crash is you'll lose that trade.

And then maybe vol's gone crazy and

you'll put a trade on and it

wins, I don't know. So, yeah. I always

ask my guests to put their strategy on

the risk profile scale from one being

very low risk and 10 being very high

risk. And where would you put it this

year and has it changed from what what

you said last year?

Yeah, to be honest, I can't remember

what I said last year. I probably said

about a four or five. I think it's

probably still there. I mean,

it's the fine risk, right? So, in terms

of risk levels, I'm not selling naked

strangles or anything like that. So, I'm

not going to wake up $40,000 underwater

if there's a big vol spike. Um so, that

makes it low risk. It but I think the

risk might come from just general

management of it or even getting into it

because, you know, diagonals and broken

wing butterflies, they're not beginner

strategies. So, I would say it's

probably a four

around a four or five for risk just

because if you don't really know what

you're doing, it could be more risky. If

you're an expert trader or

intermediate trader who's really

familiar with the diagonals and

butterflies, then it's pretty low risk.

One of the reasons I wanted to invite

you back is that you have traded this

strategy now for three years. You

publish your results every single week.

So, you have a pretty, you know, solid

results to show. So, let's get into your

actual results of trading this strategy

through three years. Yeah, my results

been pretty good. I'll show you my 2026

results. They're on my website. Like you

mentioned, I trade every week, rain or

shine. I don't skip a week unless I'm

I'm out of out of the country or on

holiday. So, I've had 19 trades this

year so far, 16 winners. So, that's the

percentage. These are

These results I'm showing are per

contract. I personally trade more than

one contract, but for the sake of

transparency, I I show my results as one

contract. That way you can

factor in how you trade. So, clearly you

can see

and ironically, John, I think when you

interviewed me a year ago, you said I

was up 40% after 4 months. And again,

I'm up about 40% after 4 months. So,

it's pretty consistent. And this this

return annualized is just me sort of

calculating it. But you also last year I

ended up I just snuck over 100% return

last year. I actually

I actually took a trade, I think, on um

actually on Christmas It was Christmas

Day my time. Just I took a holiday trade

to try and get it over 100%. If it lost,

it would have got further, but I I

actually I actually added a note to my

trade at the bottom here. I actually

exited on deliberately for $11.60

profit. I literally took a holiday trade

just to get it. The moment I got I

actually I got my calculator out, worked

out commissions and fees, and worked it

out if I hit this, get out, it would be

100%. So,

that's why it's exactly 100% Well, not

exactly 100 103.

So, that's the full full year result.

But yeah, so it's it's you know, it's

100% 200% a year is obviously So, it's

been consistently profitable for all

those three years. And if you move back

to 2026,

I know that you are analyzing what the

results would be. Yeah, I mean, this is

just a You can sort of see up here the

calculation because it's it's 45.4% in

134 days, and that works out to be like

if you times it out, you know, this is

my math geek engineering thing going on

here. So, this is where if things stay

the how they are, this is where you

could end up, of course.

But that's Simon, and that because

I have had many interview guests here,

and one one thing I've found is that

people measure their results in very

different ways. But the most common is

probably to measure by the as a

percentage of the buying power or the

max loss use

used. But you actually do it a bit

different and I would say conservative

or generous way because what you do is

you have allocated a

set of money for your trades, but you

use less than half of that buying power.

So, so so your results is

your results

as a percentage of the allocated

capital. So, if you had measured your

result in the same way as most of my

guests,

it would have looked much much better.

>> Probably twice or 300%. Yeah. Well, what

my my

as you probably

gleaned by talking to me now, I'm pretty

conservative, and my idea is this. Like

you've seen me put on these trades, max

loss per contract of $1,000, say. So,

let's say I take a max loss, right?

Well, if if that's my whole trading

account wiped out,

that's no good. So, my idea is I

allocate $3,000 per contract, right? So,

if I had

you know, I don't know, $12,000 to throw

at this strategy, I might trade four

contracts. I could take a full loss.

Yes, it would wipe

out some money.

I guess in that situation it would be

down to whatever,

uh you know,

take take away 12, you know, 8,000. But

then I could still probably trade nearly

two or three. The point is I didn't want

a lot of full loss on this trade to wipe

it out. So,

this percentage is based on 3,000. I

don't risk $3,000 per trade. I cannot

lose $3,000 per trade per contract. It's

it's impossible by how I place them. So,

as as ironic as it sounds, this 100%

return is the conservative result. It's

I feel really bad cuz people see these

results and they're like, "This is This

can't be real." It's like

I can show you my trading statements.

They're available Some trading

statements are actually available on my

website because people keep asking for

them. It's like, "These are These are

real trades." And anyone who's in my

discourse sees me place these trades

every week and again can confirm that

the numbers these

uh

these numbers and these debits and entry

dates and exit dates are all are all

accurate. And as you know, John, of

course you are in that discourse, so you

you discourse you do see these uh these

trades yourself.

Yep. So, yeah, so those are those are my

results. But John, I know that you also

trade this. So, how have you been going?

Well, this has been a very solid

strategy for me.

I measure my results as the results of

compared to the buying power or the max

loss, which is most common way. Although

I fully agree with your

your way of thinking that you want to

never

risk more than half of your buying power

anyway on on on your trading. But I have

done 57 trades so far

over the last year and a year. And

46 of them have been winners. On

average, my average net profit per trade

has been 5.33%.

It was a bit higher, but I did take a

couple of big losses in April. And I'm

have on average been 5.7

days in the trade. So, for me getting

more than 5% on a trade that is on

average lasting less than six days,

that's

something I'm very happy with for sure.

It's great to hear.

So, let's sum up Sam. How would you sum

up this strategy in a few words?

Uh I would say it's a strategy

not for beginners, but intermediate to

advanced traders who want to have a

weekly trade that's Delta neutral. So,

you you don't know which way the

market's going, you want to try and

capture that theta decay and hopefully

handle some

uh

you know, volatility moves, and a trade

that you don't have to look at

you know,

all day and be glued to your screen. Um

I've mentioned in the past um

I'm asleep for half the market, so

>> [laughter]

>> I can't watch it. So, yeah. I think many

have also watched on this channel an

interview with Steve Gunn's about his

fly diagonal strategy. That is

quite similar

trading strategy. What would you say are

the difference between how you trade and

how Steve is trading this? To be 100%

honest, I've never like I've I've not

done Steve's course. I I don't actually

know his exact mechanics other than what

I've seen on your video. From what I can

glean looking at some of his you know,

option strat or not he doesn't use

option strat, he uses that other tool,

but

>> [laughter]

>> his graphs, it seems to me and this is

just my um

guess. I think he's a little bit tighter

in on the range, and so which can give a

nice a bigger sort of bump up in the

curve in the middle, but I think that

might lead to more adjustment. So,

without knowing the full details of of

his trade, I would say he probably has

to adjust it more than I do.

Um but the mechanics are the same

concept, and we we came up with these

trades independently. What would be the

two or three most important takeaways

you really want the audience to remember

from this interview? I would say that

getting the good curve is the secret.

Uh I would say getting out

with uh

no more than 24 hours to go is very

important, and I would say like we just

just talked about um allocate your

capital wisely. Don't throw all your

money at a single strategy. Good advice,

that.

What would be good resources to learn

more?

Uh well, I've as Well, as showing you, I

have my website. If you want to see all

the trading logs and graphs and um

or you want to

find my email address and contact me,

uh you can do so

through that. It's probably the easiest

way to get a hold of me. And what would

be a couple of good books to recommend

to Well, I was prepared I was prepared

for this, John. So, last time I was on,

I mentioned Julia's book, um

which is the Tastytrade one, The Unlucky

Investor's Guide to Options Trading. Uh

it's still a great book. It's very

mathematical, but I think it's a cool

book. I I bought two more here because

one of the things that a lot of traders

struggle with is mindset and discipline.

And you know, just putting random trades

on. And so, there's a book by um Mark

Douglas called uh Trading in the Zone.

Uh it's a really good book about mindset

and just

uh sorry, it's a bit blurry, but Trading

in the Zone and it's if you're having

trouble with discipline, I recommend

that. And a book which is kind of almost

counterintuitive to to Tastytrade

mechanics and things like the standard

deviation and the expected move, there's

a great book called Fooled by

Randomness.

And uh the little tagline is The Hidden

Role of Chance in Life and in the

markets. And it's um

it's fascinating. It sort of explains

why how

we get all these six

six or seven standard deviation moves

more regularly than we think because the

market actually is

well, random. And so, Fooled by

Randomness is basically uh talking about

how you don't you can never know what's

happening. So, it's a very interesting

read. I it's uh it's not purely a

trading book, but it's if you're a

trader, I think you'll find it really

interesting. Thank you very much, Simon,

for uh coming back here on Theta Profits

to uh share your time flies strategy and

how you uh trade it and how you uh

adjust it and your pretty amazing

results, I would say, over our three

years. We do have a number of other

interviews that might be relevant. I

will

uh show a couple of them on the on the

screen here. Thank you very much again,

Simon.

Thank [snorts] you very much, John. It's

been an honor to be your first return

strategist.

All the and all the best trading with

Tom fights for yourself.