This forum is for students of the M3 trading strategy to share information.

Short term M3 and other questions

1 reply, 2 voices Last updated by John Locke 2 months, 3 weeks ago
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    • #17292

      John Locke
      Going to The Trading Triangle LIVE 2016Locke In Your Success CoachAPM2Trade JournalsUltimate Income Trader Workshop

      Last question first.

      For the M3 entry, if you have the M3 program, please review the 2020 M3 program update. This will explain the new guidance on entering the position in the current environment.

      As a GO Member, you also have access to the Options Trading For Income recordings. So if you do not own the program, you go back to any week we covered an M3 entry in the last 9 months and you can review those entries as well.

      Regarding the Pros and Cons of shorter timeframe vs longer timeframe, there would not be a static answer to that question. There are too many specific variables and nuances that would need to be considered to provide a useful answer.  The best thing you can do is to back test the positions in their entirety over long periods of time and notice the differences in reaction over different timeframes and in different types of situations.

      Some very nonspecific generalities would include the following:

      Short to expiration timeframes are much more active or require more frequent adjustments.

      Short term timeframes have much larger p/l swings.

      The volatility structure in the market can sometimes create a situation where the shorter timeframe is not viable.

      Regarding the M3c, in general (which will apply to all strategies), the position runs through cycles where the trade makes most of its money far from expiration and then spends the rest of the time without gain or drawing down from the peak p/l. It also has other cycles where it doesn’t gain, or draws down, far from expiration and then makes the majority of its profits near expiration.

      Trading non subjectively, trading the entire timeframe helps the trade do well more often. Trading only far from expiration, or only close to expiration, will tend to lower the win rate.

      That said, if you take the time learn the nuances of the environments that each cycle tends to occur, you can be subjective and alter your timeframe based on environment.

    • #17289

      Nate Mallard
      Points: 90
      Rank: Newbie

      What are the pros/cons of trading the M3 shorter term? Say 15-30 days, vs the traditional 56 DTE?

      also, is it managed the same on shorter durations?

      Last question: a standard M3 20 points below the money, with 50 point wings (10 butterflies) isn’t producing much negative delta like you show in the course videos. I sometimes get -30 delta sometimes closer to 0 when I enter them in risk analysis software.  This makes it super hard s to find an ITM call to flatten delta. Has the environment changed causing the trade mechanics to change?



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