Best Option Strategies

drasp

Member
look into the most proven and easiest strategy there is. Its called the wheel strategy. Only used for bull markets tho so don't get too excited.

You sell a put, if it doesn't make money you execute the option, and ride it long. Then you sell at some defined point.

disclaimer:
there is still risk with this strategy, and your account can blow up, make sure to understand this before you try it.
You have to have enough money to be able to purchase 100 shares of whatever it is you want to buy
Id suggest sticking to DOW 30 stocks only, don't get into high risk growth or penny stocks.
 
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quantumomegallc

New member
VIP
Thanks for the input. Your strategy helps me to understand I have much more to learn.
The flip side of this coin is Gamma Exposure (the reason Market Makers re-balance Delta at market open/close). Expiring Gamma (Theta) is why people sell options to hedgers who buy straddles and then scalp Gamma to get back Theta.

I take back about not using indicators. Bollinger bands combined with IV for confirmation is useful. When the bands narrow I focus on buying long options as the price should be relatively cheap. When the bands widen I focus on selling options to collect larger premium with higher volatility.
More accurate are the GEX (and derivative gamma scalp formulas) levels themselves. I managed to chart them for TOS (roughly) and they're pretty accurate - often to a penny. You can see the gamma squeezes for on the price charts, and pick off target levels based on stdev away from the mean.
 

DB01

New member
Steer your position towards a targeted delta/gamma neutral position and adjust to generate income against it.

Positive gamma is long calls and log puts. Negative gamma is short calls and short puts. Positive Delta is long calls and short puts and negative delta is short calls and long puts.

So suppose you are sitting at 100 long shares of XYZ stock. I want to generate income against because its not doing anything....I would sell a .45 delta call option against it for premium which would offset my long shares and put cash in pocket then I would hedge the downside risk by buying 2 long puts at say .45 Delta at a long expiration date and sell 2 short puts at a closer expiration date to generate income on the put side. It should equate to more or less a slightly positive position with both downside risk covered and income producing.

Now instead of using stock shares you can use stock replacement by purchasing 2 long dated calls at .5 Delta and then you can sell 2 near term calls to generate more income instead of holding shares.

I am almost completely using stock replacement and don't even use indicators because all of the information about the future expected price is encoded within the options pricing.

Easy Peezy.
What sort of monthly/weekly whatever, profit percentage are you seeing and how big of an account are you trading?
 

PapaBear

New member
The flip side of this coin is Gamma Exposure (the reason Market Makers re-balance Delta at market open/close). Expiring Gamma (Theta) is why people sell options to hedgers who buy straddles and then scalp Gamma to get back Theta.


More accurate are the GEX (and derivative gamma scalp formulas) levels themselves. I managed to chart them for TOS (roughly) and they're pretty accurate - often to a penny. You can see the gamma squeezes for on the price charts, and pick off target levels based on stdev away from the mean.
Hi, interesting I have been looking into GEX levels, if you have found a way to chart them would, you care to share? I have currently only a GEX column I added to my doe spx options chain (something I found in an options post on website here) that I watch with different strikes to see which prices are likely to be a magnet for price action.
 

drasp

Member
Hi, interesting I have been looking into GEX levels, if you have found a way to chart them would, you care to share? I have currently only a GEX column I added to my doe spx options chain (something I found in an options post on website here) that I watch with different strikes to see which prices are likely to be a magnet for price action.
https://squeezemetrics.com/monitor/dix

I think you'll find this website helpful
 

quantumomegallc

New member
VIP
Hi, interesting I have been looking into GEX levels, if you have found a way to chart them would, you care to share? I have currently only a GEX column I added to my doe spx options chain (something I found in an options post on website here) that I watch with different strikes to see which prices are likely to be a magnet for price action.
Another guy Dr. Harlin has some similar indicators but I think mainly oscillator types.
 
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HODL-Lay-HE-hoo!

Active member
Hopefully this is on topic... enough... if someone could please enlighten me on the following.

1. GAMMA: Can direction be inferred by option gamma as seen in the option chain or in various studies in this forum?

2. IV: Is Implied vol, IV rank, IV % (plotted intraday) useful as confirmation of direction?

3. Does anyone (reading this) use conditional orders to place option trades for SPY or others of the like? (I know its not full auto just curious if this is part of anyones daily/weekly routine?)
 

quantumomegallc

New member
VIP
If this is a "Fast Money" fan group, ignore this post.
I don't "trade options" or spreads. I buy directional options when price chart of the underlying stock/etf has the pattern/quality desired. Find "underlying" candidates with high volume, low bid/ask spread such as 1cent. In that small group, find same qualities for OPTIONS, as well as Strikes every $1 and every Week. Market should not even blink if you submit order for 100 contracts. Markets/charts are fractals. Look long enough, and you will see your favorite DIRECTIONAL Daily/Weekly pattern show up on 30minute or 3 minute charts. Spend some time with ThinkBack. And learn to right-click on an option in Trading Tab, and copy/paste symbol into Chart to see how the option acted in "shorter than Daily" charts. And you can look at "expired options" from weeks ago by changing the date after you paste it. All other things being equal, for directional options the best returns are usually close to Expiration (Thursday & Friday). And I generally agree with dsvitale post above. Best Wishes.
Quantitative research I've run across stipulate that 5m and 30m timeframes are the two most popular for measuring volatility.
 

DB01

New member
Steer your position towards a targeted delta/gamma neutral position and adjust to generate income against it.

Positive gamma is long calls and log puts. Negative gamma is short calls and short puts. Positive Delta is long calls and short puts and negative delta is short calls and long puts.

So suppose you are sitting at 100 long shares of XYZ stock. I want to generate income against because its not doing anything....I would sell a .45 delta call option against it for premium which would offset my long shares and put cash in pocket then I would hedge the downside risk by buying 2 long puts at say .45 Delta at a long expiration date and sell 2 short puts at a closer expiration date to generate income on the put side. It should equate to more or less a slightly positive position with both downside risk covered and income producing.

Now instead of using stock shares you can use stock replacement by purchasing 2 long dated calls at .5 Delta and then you can sell 2 near term calls to generate more income instead of holding shares.

I am almost completely using stock replacement and don't even use indicators because all of the information about the future expected price is encoded within the options pricing.

Easy Peezy.
What sort of monthly profit percentages are you seeing using this technique?

Thank you for sharing your process.
 

XKamiX

New member
I seriously need help finding a strategy, I keep on losing and not knowing what to do or what I should change I've used EMA crossover and even with hull moving data and Macd and DMI or MFI and i just cant seem to get it down, and I don't know what TF I should trade on if i should go to higher TF's or what and if I should use regular candles or Heikin Ashi Chart I've had good trade both on 1 min and 5 min but honestly probably just luck, but I'm not here for luck I'm trying to find consistency and success and I ask for anyone's help or just to give me a guide or to send me into the right direction on what I should do and if anyone wants I can post my charts of all the strategies I've tried a strategy that consist of me buying puts or calls on the cross over the fast ema is 8 the slow one is 21, and they use hull data not exponential and I look at the DMI to see if what side is stronger and use MFI to see if it's selling off or if people are buying I've tried to use it on 5 min and 1 min to both just me not making as much as I lose I have a 10% stop loss always and 15% Take Profit orders i usually try to move up my stop loss up while I'm up but I always get kicked out fast and I could have been in longer and made more

I have tried the macd cross over as a signal to buy puts or calls and RSI to see if I should get in right now or not, but I just can't get it down I always get in not good times or if I get filled its bad, and then I get kicked out by my stop loss and then just don't make profits and just want to know if I should be using a higher time frame or other indicator's injunction with these or try swing trading and I must succeed to provide for those who care about, so I've the determination so if anyone could help guide me to the right path to go from here would be much appreciated
 
Last edited by a moderator:

w4bmastah

New member
Hi there. The first problem I see is that your charts do not contain any support/resistance levels, so you do not have an anchor about where the price is expected to go. You need to have these to help you establish higher probability setups.

Also, the problem with using indicators in general, is that they give you a false sense of confidence. They are lagging behind the real price action and give you entires and exists too late, and sometimes in conflict with other time frames. The only truly useful indicator is the price itself, along with the volume to confirm if whatever breakout is happening has the buyers/sellers behind it, and where the breakout is happening in relation to the higher timeframe support/resistance level (however you calculate that: fibonnaci, standard support lines, vwap, vwap deviations, high volume areas/low volume areas). You will see breakouts happening, but without knowing how to read volume, you will blindly trust the indicator make it easy to go into a move that fails.

Indicators should really only be used as a suggested warning signal, but the price action is king. It is entirely possible to trade with no indicators by simply learning how to read price action and seeing how it reacts to trend lines, with no other indicators. I would recommend learning about market structure, how to correctly draw support and resistance levels, channels, triangles, regression lines, and fibonnaci retracement levels - and then how to adjust your stop loss according to the market structure (below recent high/low swing) rather than a percentage based stop loss which is arbitrary and likely to be taken out). If you're not familiar with market structure and drawing to market structure, this is a very good introductory video that introduces core concepts that you will need to practice before designing any kind of trading system, or selecting 1, 2, or 3 favorite indicators to serve as supporting roles in your decisions:
It doesn't matter if you trade Heiken Ashi or regular candles - it is a matter of preference, and still does not give an edge unless you are tethered to a foundation about market structure. You will become very confused if you use too many indicators on your charts (I have gone through this myself many times hoping for perfect combination of indicators), and become paralyzed about what is the appropriate action. The vast majority of indicators will never give you confidence that the volume is there to support the action. Research how to read the volume to support whether you should get into or out of a trade. Volume is what predicts if a price has the support at a given level, or if the buyer/seller support does not warrant that price being where it is. You can add volume based indicators, but these are also not always as helpful as learning how to read volume bars, volume profiles, and volume changes at VWAP or VWAP deviation bands. Price travels between high volume and low volume areas and constantly tries to find where is best price. Knowing where those high volume areas used to be is where you will get support and demand zones, and thus you can more easily predict where the price is more likely to go.

The additional problem with indicators is that some work best when the market is trending, but give you many false signals when it is not (MACD for example is very bad in a sideways market). Other indicators tend to work better in the sideways market about the most likely time that a breakout might happen. Because calculations give different results depending on arbitrary settings that someone from some channel or post will tell you, they will only be right a certain percentage of the time in a certain context, in a certain market condition - but conditions change, and you have to change with it. You can buy a book like Technical Analysis A-Z and read about all the magic indicators, but even when you understand how all of them work, your head will spin and you still with not know which one to trust. They all work some of the time, and can only point to the most likely outcomes, but provide no certainty.

1. Always trade on the BEST timeframe that aligns with the BEST market structure and trade setup and not just on the time frame you want to trade on - you may not get a good setup on your timeframe, so you either have to be patient or switch to a timeframe that has a good setup. This means sometimes trading on a 1m, sometimes on a 5m, 15m, or 30m chart, or higher. 1 minute charts are no noisy that it is going to be very difficult to trade on. Always verify your trade ideas on higher time frame charts to make sure you are on correct side of trade regardless of what your indicators tell you.

2. It is always better to have much higher timeframes than 1m, 5m ,15m to confirm the big picture of what is most likely to happen. Without using some kind of support or resistance to back up your theory about where SPY will go, you will try to surf hurricane and lose all your money (I blew up a few accounts this way).

3. Do not get caught in greed of "Oh, I could have made more". You never know where the price will go, and there will be no shortage of opportunity, set your risk to reward ratio so that you only need to be right a minimum of 50% of the time, and still make money by using 2:1 risk reward ratio.

There is a lot to learn; but with persistence, and trading a strategy backed by foundation in price action and volume, in a test account you will be able to start trusting your decisions more and get more consistent income. Good luck
 

XKamiX

New member
Hi there. The first problem I see is that your charts do not contain any support/resistance levels, so you do not have an anchor about where the price is expected to go. You need to have these to help you establish higher probability setups.

Also, the problem with using indicators in general, is that they give you a false sense of confidence. They are lagging behind the real price action and give you entires and exists too late, and sometimes in conflict with other time frames. The only truly useful indicator is the price itself, along with the volume to confirm if whatever breakout is happening has the buyers/sellers behind it, and where the breakout is happening in relation to the higher timeframe support/resistance level (however you calculate that: fibonnaci, standard support lines, vwap, vwap deviations, high volume areas/low volume areas). You will see breakouts happening, but without knowing how to read volume, you will blindly trust the indicator make it easy to go into a move that fails.

Indicators should really only be used as a suggested warning signal, but the price action is king. It is entirely possible to trade with no indicators by simply learning how to read price action and seeing how it reacts to trend lines, with no other indicators. I would recommend learning about market structure, how to correctly draw support and resistance levels, channels, triangles, regression lines, and fibonnaci retracement levels - and then how to adjust your stop loss according to the market structure (below recent high/low swing) rather than a percentage based stop loss which is arbitrary and likely to be taken out). If you're not familiar with market structure and drawing to market structure, this is a very good introductory video that introduces core concepts that you will need to practice before designing any kind of trading system, or selecting 1, 2, or 3 favorite indicators to serve as supporting roles in your decisions:
It doesn't matter if you trade Heiken Ashi or regular candles - it is a matter of preference, and still does not give an edge unless you are tethered to a foundation about market structure. You will become very confused if you use too many indicators on your charts (I have gone through this myself many times hoping for perfect combination of indicators), and become paralyzed about what is the appropriate action. The vast majority of indicators will never give you confidence that the volume is there to support the action. Research how to read the volume to support whether you should get into or out of a trade. Volume is what predicts if a price has the support at a given level, or if the buyer/seller support does not warrant that price being where it is. You can add volume based indicators, but these are also not always as helpful as learning how to read volume bars, volume profiles, and volume changes at VWAP or VWAP deviation bands. Price travels between high volume and low volume areas and constantly tries to find where is best price. Knowing where those high volume areas used to be is where you will get support and demand zones, and thus you can more easily predict where the price is more likely to go.

The additional problem with indicators is that some work best when the market is trending, but give you many false signals when it is not (MACD for example is very bad in a sideways market). Other indicators tend to work better in the sideways market about the most likely time that a breakout might happen. Because calculations give different results depending on arbitrary settings that someone from some channel or post will tell you, they will only be right a certain percentage of the time in a certain context, in a certain market condition - but conditions change, and you have to change with it. You can buy a book like Technical Analysis A-Z and read about all the magic indicators, but even when you understand how all of them work, your head will spin and you still with not know which one to trust. They all work some of the time, and can only point to the most likely outcomes, but provide no certainty.

1. Always trade on the BEST timeframe that aligns with the BEST market structure and trade setup and not just on the time frame you want to trade on - you may not get a good setup on your timeframe, so you either have to be patient or switch to a timeframe that has a good setup. This means sometimes trading on a 1m, sometimes on a 5m, 15m, or 30m chart, or higher. 1 minute charts are no noisy that it is going to be very difficult to trade on. Always verify your trade ideas on higher time frame charts to make sure you are on correct side of trade regardless of what your indicators tell you.

2. It is always better to have much higher timeframes than 1m, 5m ,15m to confirm the big picture of what is most likely to happen. Without using some kind of support or resistance to back up your theory about where SPY will go, you will try to surf hurricane and lose all your money (I blew up a few accounts this way).

3. Do not get caught in greed of "Oh, I could have made more". You never know where the price will go, and there will be no shortage of opportunity, set your risk to reward ratio so that you only need to be right a minimum of 50% of the time, and still make money by using 2:1 risk reward ratio.

There is a lot to learn; but with persistence, and trading a strategy backed by foundation in price action and volume, in a test account you will be able to start trusting your decisions more and get more consistent income. Good luck
Thank you for so much help and do you have any recommendations for learning price action and also on this form there is auto fib would that be good to use as support and resistance points ? And also would this be a good time frames to use 5, 30 , 4 hr charts to look at for a potential trade yeah I need to get better at reading price action I refuse to give up ill keep on trying
 

w4bmastah

New member
Thank you for so much help and do you have any recommendations for learning price action and also on this form there is auto fib would that be good to use as support and resistance points ? And also would this be a good time frames to use 5, 30 , 4 hr charts to look at for a potential trade yeah I need to get better at reading price action I refuse to give up ill keep on trying

Lots of good video courses on price action. These would be two good starting points:


Auto fib is not reliable, because what you really have to do is build confluence between multiple fib retracements which have to be manually drawn using drawing tools and most significant highs and lows to build the most likely places of reveral. There's lots of training on how to draw Fib levels, and it is a bit of an art. Here is a good starter video:


Fibonacci levels are also not always reliable either, so these are again suggestions of where pricing is statistically more likely to reverse, but you still have to pay attention to what happens with price action and volume at these levels.
 

XKamiX

New member
I trade SPY every day using my AsGoodAsItGets and AsGoodTrendColorCandles_MTFS and rarely have a losing day. I use the 1 min as a heads up and the 5 min for trading. Because of repaints I exit if a bubble disappears....
Your AsGoodAsItGets indicator how do you use it ? And do you trade options and do you have a chart set up you can share a link ?
 

XKamiX

New member
Lots of good video courses on price action. These would be two good starting points:


Auto fib is not reliable, because what you really have to do is build confluence between multiple fib retracements which have to be manually drawn using drawing tools and most significant highs and lows to build the most likely places of reveral. There's lots of training on how to draw Fib levels, and it is a bit of an art. Here is a good starter video:


Fibonacci levels are also not always reliable either, so these are again suggestions of where pricing is statistically more likely to reverse, but you still have to pay attention to what happens with price action and volume at these levels.
Ok yeah I figured that wasn’t a truly reliable strategy I’ve tried it and it was pretty accurate but just make the chart hard to read at time and just don’t like it on mine and thank you again so much for all this I’m trying to get on the right path to my trading and this will help a lot
 

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