Stock Market Options Trading

161: Option Omega Review, Backtest, Strategy, and Automation


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🎁 50% OFF: Option Omega (code SMOT) • Alpha Crunching (code SPX50) — grab both and build + automate your SPX playbook.

This episode is a fun, nerdy deep-dive with Troy and Matt from Option Omega. We cover how to build realistic backtests for options (especially 0DTE) and when it makes sense to automate entries/exits so you’re not chained to the screen. We also walk through a few trade structures—including the much-misunderstood Reverse Iron Condor (RIC)—and talk about portfolio-level thinking: position sizing, diversification across edges, and why “one-lotting” more often than not can save your sanity.

What we cover:

  • Why end-of-day data lies for options backtests and how 1-minute, intraday pricing changes the conclusions (stops, profit targets, and whether you even got filled).
  • The rise of 0DTE and why intraday realism matters way more than it did for 45–90 DTE trades.
  • The “Punisher”: stress-testing backtests with slippage, fills, and tougher assumptions so results hold up in live trading.
  • Liquidity matters: why OO focuses on top tickers (SPX, SPY, QQQ, etc.), and the pros/cons of instruments like XSP.
  • RICs (Reverse Iron Condors) as long-gamma plays: when long premium + the right signal can still have positive expectancy, and sizing so a few losses don’t nuke the account.
  • Credit-spread philosophy: structure ≠ edge. Edge comes from when you put it on (signals), then you pick the simplest structure that monetizes that edge.
  • Automation better than willpower: broker-resting stops, time windows, and signal-gated entries so your plan runs even when you’re walking the dog.
  • Sizing & psychology: allocations as a strategy; why many traders should downshift to one-lots more often; diversifying edges (theta harvest + long-gamma + price-action) on the same ticker.
  • My ASD signal (Alpha Crunching): using Average Strength Deviation as a weekly, day-of-week filter; combining ASD with simple MAs/EMAs for “aggressive” ATM put-credit spreads; converting those rules into hands-off automations.
  • Broker support today: Schwab, Tastytrade, Tradier (IB not currently supported for U.S. retail cloud API).

Key takeaways:

  • Backtests need intraday realism or they’re just stories.
  • Structure is just the container; edge = timing + conditions.
  • If your edge is “market stability”, credit spreads monetize it better than naked long calls.
  • Automation lets you run more strategies with smaller per-trade risk and fewer emotional mistakes.
  • Test harshly (slippage, fills, stops) so live results rhyme with backtests.

Resources & links:

  • 🔧 https://OptionOmega.com (backtesting + automation) — Use code SMOT for 50% off.
  • 📈 https://AlphaCrunching.com (signals, forecasts, ASD/WTR/TTR, weekly trade ideas) Use code SPX50 for 50% off first year.

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Stock Market Options TradingBy Eric O'Rourke

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