YT YouTube2Text

YouTube2Text → Transcripts → 11 “Boring” Trading Strategies the top 1% of Retail Traders Use

11 “Boring” Trading Strategies the top 1% of Retail Traders Use — Transcript

by Tom Sosnoff · 2,980 words · 432 segments · language en · Watch on YouTube

Open in transcriber Summarize with AI Download SRT/VTT

Full transcript

0:00I'm Tom Sosnoff. I've made over a
0:01million trades in my life. Last month, I
0:04looked back at everything I've traded
0:05and something clicked. Nearly every
0:07single trade I made was boring. I've
0:09been trading for 44 years. I've watched
0:13every genius strategy come and go.
0:14What's left are these 11 boring
0:16strategies that actually work. In this
0:18video, I'm going to walk you through
0:20what they are and how to use them. And
0:22at the end, I'll reveal the two that
0:24probably account for more than 70% of my
0:26profits. Number one, to get long, short
0:29puts. This is the simplest, highest
0:32probability, and most capital-efficient
0:33strategy. I always sell out of the money
0:35puts in the 35 to 50 DTE range at the
0:38expected move, targeting deltas between
0:4116 and 22 with a buying power reduction
0:43of 20% of the strike price and a
0:45probability of profit, which we call
0:47POP, over 80%. This is one of the most
0:49straightforward strategies in trading.
0:51It's simple, clean, and easy to adjust.
0:54Your profit target is about 50% of the
0:56premium collected. Also, I prefer
0:58selling puts on stocks that have been
1:00beaten down and where the IVR is 30% or
1:04more. There's an old saying in this
1:05business, puts are schmaltz. This is my
1:08favorite go-to strategy and probably my
1:10primary default approach to trading. A
1:13high POP approach every trader can
1:15execute. Number two, to get long, how
1:17about a jade lizard? Short puts and
1:20short call spreads. The jade lizard is a
1:22short put combined with a short call
1:24spread kicker. This is a great strategy
1:27for bulls who want just a little more
1:29downside protection. The keys to a jade
1:31lizard are to position the trade so
1:34there's no upside risk. To do that,
1:36[music] you need to sell a put and a
1:37short call spread where the combined
1:39premium collected exceeds the width of
1:41the strikes on the short call spread.
1:43The optimal duration for a jade lizard
1:45is around 40 DTE. That's 40 days to
1:47expiration. Selling the out of the money
1:49put and the call spread at just inside
1:52the expected move usually yields the
1:54necessary premium. The jade lizard is a
1:56capital-efficient, very high pop trade
1:59that can be done with a single click on
2:01[music] virtually any platform. Your
2:02profit target is approximately 50% of
2:05the total premium collected. This is a
2:08heavily used strategy, especially with
2:10oversold stocks and futures options.
2:12I've used this strategy recently in
2:14Nike, in Uber, in Netflix, and in crude
2:17oil. I would say that Jay's Lizard, next
2:20to short puts, is my go-to long
2:22strategy. Number three, to get long,
2:25covered calls. This is the classic basis
2:28reduction high pop trade that every
2:30trader has used in their journey.
2:32Ideally, you would execute a covered
2:35call on a stock that has a low basis,
2:37that means low price, and high implied
2:39volatility. This is not the most capital
2:41efficient strategy, but it does improve
2:43your pop from approximately 54% to
2:47around 64%, which is significant. The
2:50perfect covered call duration is 40 to
2:5260 days to expiration, which gives the
2:54buyer time to be right. We always
2:56execute covered calls as a single trade,
2:59the stock and options together, and the
3:01short strike will be somewhere between
3:03the 25 and 30 delta option. You should
3:06consider taking profits if the short
3:08strike is breached. Not everybody tells
3:10you that. We will always close a covered
3:13call strategy as a single trade, never
3:15legging out. Also, if you want to
3:18maintain some long deltas after you
3:20close the trade, you can always replace
3:22a covered call with an out-of-the-money
3:24short put. Now, I like this strategy for
3:26cheaper stocks that I believe are
3:28oversold and stocks that have crappy or
3:32non-existent option markets, [music]
3:33such as stocks like maybe like Lucid
3:36LCID or SOXS, different ETFs like that.
3:40I would say that I use covered calls
3:42less often than short puts and less
3:44often than Jay Lizards, but it's kind of
3:46like a once-a-week cheap stock strategy
3:50for me, and it's something that I think
3:52every trader should experience because
3:54the combination of stocks and options in
3:56a single trade is important to
3:57understand how that works. Number four,
3:59to get long, short put spreads. For
4:02those looking for a defined risk trade,
4:04an out-of-the-money short put spread is
4:05a high pop, low risk, low reward
4:08strategy. Another reason for using a
4:11short put vertical is capital
4:12efficiency. Sometimes, the buy power
4:15reduction or BPR on expensive stocks
4:17simply requires too much portfolio
4:19capital on a percentage basis. The
4:21target credit for a short vertical
4:23spread is somewhere between 30 and 35%
4:27of the width of the strikes. The
4:28probability of profit is the inverse of
4:30the credit received from the width of
4:32the strikes. Simple math. The profit
4:34target is still 50% of the credit
4:36received, but it may take a little
4:38longer to reach your number when
4:39compared to a naked option. The short
4:40put spread is a great go-to strategy and
4:44also a great introduction to option
4:47trading. Now, here's my little side note
4:49on short put spreads. Because short put
4:52spreads generally trade cheap, I like
4:55short call spreads to get short better
4:57than I like short put spreads to get
4:58long. I will occasionally use short put
5:00spreads, especially if I think a stock
5:03is just requires too much capital to
5:05use. Normally, I prefer naked short puts
5:08to short put spreads. Still, I do use
5:11short put spreads. I like to use them in
5:13combination sometimes with other
5:15strategies, and I would say it's a once
5:17or twice a week strategy for me. Number
5:18five, to get long. We're switching to
5:20the long side now. Put ratio spreads. A
5:23put ratio spread is another high pop
5:25strategy that works best with oversold
5:28stocks that have high implied
5:29volatility. It's a version of a naked
5:30short put, but with some additional
5:32downside protection. You can use any
5:34ratio you like, but most traders use a
5:36straightforward 1x2 approach. The
5:38objective of a put ratio spread is to
5:41set a trade up outside of the expected
5:43move. That's where your long strike is
5:45set, and then sell twice as many further
5:47out of the money puts to generate a net
5:49credit. It's a long delta short premium
5:52trade that does require some undefined
5:55risk. The profit target for a put ratio
5:57spread is at least the net credit
5:59received. Any strategy where you
6:00potentially risk a lot to make a little
6:03should deliver an incredibly high win
6:05rate. The one thing that I always take
6:07from my experience trading for, you
6:09know, over four decades, is that put
6:12ratio spreads as a market maker and a
6:14floor trader was one of the first things
6:16that every trader learns how to do. Sell
6:17some puts and then buy a few bigger puts
6:19against it. I think as a retail
6:21investor, we have popularized the short
6:25put ratio spread or the put ratio spread
6:27simply because it has such a high pop. I
6:29would say this is a strategy I use um
6:31maybe not every day, but at least three
6:34to four times a week. Number six, also
6:36to get short. Short call spreads. A
6:39short call vertical is possibly the most
6:42capital efficient and best way to get
6:45short a stock with limited risk. Call
6:47spreads generally trade expensive
6:49because of the inherent call skew priced
6:51into options. The velocity of risk to
6:53the upside is what we call call skew. I
6:55prefer to sell call spreads just inside
6:57the expected move. Collect about 1/3 the
6:59width of the strikes. Your pop or
7:01probability of profit will be the
7:02inverse of the credit received minus the
7:04width of the strikes. A short call
7:05spread should have between a 60 to 70%
7:09pop, meaning you're collecting between
7:1130 to 40% of the width of the strikes.
7:13And they are great use of capital to
7:14reduce some portfolio long deltas. The
7:17optimal duration for a short call spread
7:20is between 30 and 50 DTE. And the profit
7:22[music] target should be around 50%. I
7:25feel that the short call spreads work
7:26best with stocks that you believe are
7:28overpriced or too expensive relative to
7:31the rest of the market. Again, I use
7:33call spreads in ETFs, indexes, and
7:36expensive stocks all the time. I would
7:38say I have more short call spreads on
7:40right now. It's probably my second
7:42largest portfolio position next to naked
7:45strangles, which we'll talk about a
7:46little bit later. But, naked short call
7:48spreads is the way that I get short
7:50deltas in the Qs and the Spys,
7:52>> [music]
7:52>> in a lot of stocks that have kind of
7:54what people believe is this just crazy,
7:57you know, one-dimensional upside or
7:58hyperbolic upside risk. And I feel like
8:01short call spreads, because of the skew,
8:03just trade very rich relative to put
8:04spreads. Number seven, also to get
8:06short, the BWB or broken wing butterfly
8:09is a two-part strategy built into a
8:11single order. It's a combination of a
8:13long butterfly and a short vertical
8:15spread. The broken wing butterfly has
8:17net short deltas, but offers added
8:20protection against an up move. Kind of a
8:22little weird. The perfect duration is
8:24about a month out in time, and you'll
8:26want to set up your long strike at the
8:28expected move and your short strike just
8:30outside of the expected move. The
8:31strategy is a long one short two long
8:34one, which we also call a skip strike
8:37butterfly. In order to increase your
8:38POP, you should always execute broken
8:41wing butterflies for a net credit. This
8:43is a strategy you could use for earnings
8:46or for any stock you believe has gotten
8:48ahead of itself based on price. The
8:50profit target for a broken wing
8:51butterfly is at least the net credit
8:53received. If the trade goes your way, it
8:56is also possible to buy back the
8:58embedded short call vertical for less
9:00than the credit received, and then you
9:01own the remaining original butterfly for
9:04free. When that happens, it's fun. I
9:06love broken wing butterflies for the
9:08upside, much more so than I like them
9:09for the downside. The reason I don't
9:10like the downside is because the
9:12downside trades too cheap, but the
9:13upside trades rich. So, I think broken
9:16wing butterflies as a way to get short
9:18deltas with upside protection is a
9:20strategy we use, especially for
9:22earnings, but also for runaway stocks. I
9:24would say I use this strategy a couple
9:26of times a week, one, two, or three
9:28times a week. Number eight, to get
9:30short, sell a skewed or unbalanced iron
9:33condor. The unbalanced iron condor is a
9:35short premium trade with a directional
9:38kicker.
9:39Because call spreads trade richer than
9:41put spreads, for a skewed Iron Condor,
9:43we like to sell a call spread that is
9:45wider than the put spread. Also gives
9:46you the short deltas that way. For
9:48example, an unbalanced Iron Condor may
9:50be a short $10 wide call spread and a
9:52short $5 wide put spread. It's still
9:55done as a single trade. This is a
9:57capital efficient high pop trade with
9:59defined risk, short premium, and some
10:02short deltas. The optimal short strike
10:04will be at the expected move of some 40
10:06days to expiration. You should look to
10:08collect around half the width of the
10:10strikes in total on the narrower side,
10:12and the profit target is 50% of the
10:16total credit collected. This is not a
10:17trade we will leg into or out of. Even
10:20with configurable strikes, it is a
10:22single click trade. And again, just to
10:24refresh something, you'd look to collect
10:2750% of the credit of the narrower
10:29strikes in this case, cuz you won't be
10:31collecting 50% of the wider strikes.
10:33This is a strategy that I use all the
10:35time when I want to get directionally
10:37short, but I want to have myself have a
10:40little bit of a downside kicker. It's
10:42like a Jade Lizard with a kicker. I love
10:44this trade for getting short, but giving
10:46myself a little bit of deltas from the
10:49short put spread to offset some of the
10:51upside risk. It's a trade again that we
10:53use maybe one to two times a week, but
10:56it's a trade that I especially like in
10:57runaway markets. Number nine, something
11:00different. To sell volatility and to
11:02sell premium. First, we like to sell an
11:04Iron Condor. A short Iron Condor is a
11:06defined risk version of a short
11:07strangle. An Iron Condor usually seeks a
11:10combined credit of between 30 and 40% of
11:13the width of strikes. It's a high pop
11:15trade, limited risk trade that requires
11:19a stock or index to remain range bound.
11:21You're essentially challenging the
11:22underlying stock to beat you rather than
11:25the other way around. It's a simple
11:27strategy executed with a single click.
11:29We generally target between 30 and 50%
11:32of the credit received, but it is not a
11:33strategy that is easy to adjust or
11:35modify. So, I find iron condors a great
11:38engagement strategy that requires super
11:41high IVR to be profitable over long
11:43stretches. Most iron condors are easy
11:45fills that execute just a penny or two
11:48around mid price, and you can use the
11:50same approach for ETFs and futures
11:53options. At the beginning of this video,
11:55I mentioned that at the end I'll reveal
11:58two strategies that probably account for
12:01more than 70% of my profits. So, here we
12:05go. Number 10. This one is a strategy to
12:08sell volatility or premium. I like to
12:10sell out of the money strangles. The
12:13short strangle is my go-to trade. It's
12:15been my number one and best performing
12:17options strategy throughout my career.
12:19We're going back four and a half
12:20decades. I prefer to use the 16 to 20
12:23delta short strikes at the expected
12:25move. I target 45 days to expiration.
12:28The short strangle is the most capital
12:30efficient, undefined risk trade, and
12:33it's always done as a single click. No
12:35legging here. The trade works best when
12:38IVR is super high. The higher the
12:39better. The profit target is always 50%
12:42of the credit received, and the
12:44adjustments to a short strangle are very
12:46common, and they're also necessary to
12:48keep your deltas under control. You
12:50adjust your strikes of a short strangle
12:53by rolling the untested side up or down.
12:56You can always skew your deltas with
12:58strangles to reflect bias, but the trade
13:02is much more about short premium, short
13:04time value, than it is about anything
13:06else. The strategy can be used on listed
13:09equity options, can be used on index
13:11options, ETFs, and even futures options.
13:16The short strangle has been, you know,
13:18something that I think, you know, every
13:20trader has kind of lived or died with
13:22for their entire career. The mistake
13:23that most people make when it comes to
13:25short strangles is that they trade them
13:27either too big and they don't have
13:28enough capital to support their size, or
13:30they trade them when volatility is too
13:31low. Your friend is high IVR, your
13:33friend is high implied volatility, and
13:35you must keep your size in check, and
13:37then keep your short strangles
13:39non-correlated. I would say that on an
13:41average day, I do at least two, three,
13:44four, or five short strangles in
13:45different underlings, and I adjust at
13:47least two, three, four, or five short
13:49strangles. So, it is absolutely the
13:51majority of my trades. Last and number
13:5411 is price reversion to the mean.
13:57This is where I get directional. There
13:59are two ways to play price reversion to
14:01the mean. One is by selling volatility,
14:03because volatility is a mathematical
14:05equation, and the other is by using a
14:06strategy that we call basis arb or pairs
14:09trading. It's a little more complex, but
14:11when volatility goes up, it must come
14:13down.
14:14And that is very different from price.
14:17When price goes up, it doesn't
14:18necessarily have to come down, but when
14:19volatility goes up, it has to come down.
14:21So, but selling volatility or buying it
14:24is not easy. Volatility contracts about
14:27double the time it expands. So, that's
14:29why we prefer the short side of implied
14:31volatility. As for pairs trading, you're
14:32essentially trading the spread between
14:34two products. We prefer to use futures
14:36for this, but you can also use stocks.
14:38Futures are just much more capital
14:40efficient than stocks. Pairs trades can
14:42also reduce the risk of two highly
14:45correlated underlings by up to 80%. But,
14:48the strategy still holds a ton of risk.
14:50So, no misconception here. The key to
14:52pairs trading is understanding
14:54volatility adjusted notional when it
14:56comes to the correct ratio to use. The
14:58profit target is subjective, but it
14:59should be in line with the risk or
15:01percentage of the daily move. Now, I
15:04don't use pairs trading every day, maybe
15:06a couple times a week, or maybe once or
15:08twice a week, but I do use what I call
15:12more of a subjective contrarian approach
15:14to implied volatility. Sometimes it's
15:16not a strangle, sometimes it might be a
15:17short call, sometimes it might just be a
15:19short put, sometimes it might just be
15:20the way I trade, and that makes up the
15:22majority of my trades along with short
15:23strangles. And that's where that 70%
15:26number comes in. All totaled, these 11
15:28strategies have served me well through
15:3045 years of trading. If you found this
15:32piece helpful, please like and share
15:35this video. Also, let me know your
15:36thoughts in the comments. I read
15:38everyone and I try to respond to every
15:39single comment. Thank you so much for
15:41your time.

About this transcript

This page contains the full transcript of 11 “Boring” Trading Strategies the top 1% of Retail Traders Use by Tom Sosnoff, generated from the public captions YouTube serves with the video. The transcript has 2,980 words across 432 segments, with the original timestamps preserved so you can click any line to jump to that moment in the embedded player.

What you can do with it

Use the transcript to take notes, quote the speaker, build a study guide, generate a summary with ChatGPT or Claude via the YouTube Summary tool, or export it as a timed subtitle file with YouTube to SRT. You can also re-open it in the transcriber to translate the transcript into 100+ languages.

Free YouTube transcript tool

YouTube2Text is a free YouTube transcript generator — no signup, no daily limit. Paste any YouTube link and get the full transcript instantly, with timestamps, click-to-jump, translation to 100+ languages, AI prompts for ChatGPT, Claude, and Gemini, and exports to TXT, SRT, VTT, or Markdown.