A Schaeffer's Strategist's Overnight Trading Strategy

This special presentation from Bryan Sapp is from Benzinga's first-ever virtual Benzinga Options Boot Camp, which took place April 18. Click here for more coverage of this event with options trading experts giving traders of all experience levels real, dependable strategies for hitting the ground running or expanding an existing portfolio.

Bryan Sapp, CFA, senior market strategist at Schaeffer’s Investment Research, is a short-term equity trader who specializes in volatility and macro analysis.

Once a highly ranked poker player who said he amassed over $2 million in tournament winnings, Sapp leverages his years of statistical and investment studies to execute winning leveraged bets in the market.

Sapp shared three rules for trading the markets overnight during the Benzinga Options Boot Camp: 

• Buy the dip or sell the rip.
• Protect your money with perfect timing.
• Limit your downside risk.

Sapp said he starts by finding a security with a chart pattern and macro analysis that fit a directional theme.

Since short-term movement is a reflection of inventory positioning and sentiment, Sapp said limited risk weekly option trades are best due to the high rate of change and limited overnight time decay.

“By using weekly options, you can limit the amount of time premium outlaid.”

Sapp provided an example with Peloton Interactive Inc PTON, which was in recovery from an intermediate-term downtrend.

“Trading against the short-term trend can often give you the most bang for your buck,” he said.

“I bought the Peloton March 20 $18-strike call at a maximum entry price of $3.10 on March 16.”

Peloton quickly retraced its rip to the upside and allowed Sapp to quickly reduce risk and take profit, he said. 

“The best trades work right away,” the strategist said. “Embrace intraday volatility to find optimal entry points, [and] take partial profits the following day, allowing convexity to work on the rest of the trade.”