I use volume profiling and auction market theory for my market analysis. As part of my analysis, I look at a long term chart that has daily bars that are set to 405 minutes per bar (RTH session minutes). From there, I look at days/areas that are "in balance" meaning they are in a range.
Conceptually, the market moves from balance to imbalance and back to balance...it does this on all fractals of time. On the larger timeframe, I am looking for these balance areas above and below where ES is currently trading and will determine what I think is support and resistance.
Also, I use R Project (R Studio) and a data set that has 322 weeks in it to run some stats. I look for most common weekly range, two week range, distribution of range extension past previous weeks highs/lows, etc...
I put this all together and get areas, or strikes where I think (and Ron as alluded to) the market is not likely to go in the period of time represented by the time left to expiration.
Once I have my areas outlined, it's time to wait for an opportunity. Those opportunities come when there is a big-ish move in the market and volatility increases. As the market moves and IV expands, further OTM option values expand with it...I want to get into deep OTM options as the IV's are increasing.
For example, on 4/15 as the market was going down, I scaled into 1465 puts. I sold my first bunch at 2.00 and then at the end of the day, I sold my second bunch for 3.15 giving me an average entry price of 2.57. My plan was to add another bunch if the value of the strike moved into the 4 - 4.30 range.
The stop on the position is always 2X the average entry price, giving this a 1:1 R/R.
Once I have my position, all I can do is sit back and wait...I'm either going to get stopped out or the contracts I sold will expire worthless.
It doesn't always work like this every week...in this environment, it's been hard. There have been some Friday's where I don't have anything expiring...but, this is the way I know how to do it and I can force a trade that doesn't fit. Hope this has been somewhat helpful.
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The push down last week got to the low 1530's and also neutralized all longs from 1480 area, as they covered longs into the selling. This prevented any more downside as there was no-one left to sell to.
So we rise again, the sellers have taken their foot off the gas and we rise on low delta volume. Sellers are inviting buyers in and are likely waiting for a double top to form before hitting it down again. Strong bearish divergence is forming here. Just my thoughts.
We shall see.
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So you are monitoring these on an intra-day basis correct?
""For example, on 4/15 as the market was going down, I scaled into 1465 puts. I sold my first bunch at 2.00 and then at the end of the day, I sold my second bunch for 3.15 giving me an average entry price of 2.57. My plan was to add another bunch if the value of the strike moved into the 4 - 4.30 range.""
is it worth setting up a separate thread for weekly stock/index options as they are quite a different beast to FOPs and the strategies which most ppl are trading FOPs on here? ie high probability of vol spikes for one.
i will be keen to contribute, and have been demo trading them for few months using IB/OX. i wld set one up myself but wont be free to give full attention til a cpl of weeks time.
Not in PC SPAN. It only does current, no projections. And I doubt you can do that anywhere because there are too many variables to get a concrete answer.
A back of the napkin way is to look at margin for strikes closer to ITM.
For example, you are looking for what margin would be if ES dropped 27. So look at the margin required for an option that is 27 closer than your 1500. But that won't answer your question about where it would be if it took 3 days to do that.