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SPX Trading Strategy for ThinkorSwim

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Hypoluxa

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Hello everyone and Happy New year! I've come across another strategy that I wanted to share with you guys for SPX only.

Setup:
  • 10 Min chart
  • Heikin Ashi candles
  • SMA 3/9
  • MACD Bollinger Bands (the one Ben has posted on here a while back) 8,16,36 and uncheck "show plot" on the BB upper, BB lower and BB mid line. You will only be using the zero line, MACD dots and MACD Line for entry purposes. The inputs of "b length" and "bb num dev" are irrelevant here since you will remove the the plots that I mentioned.
  • ErgodicOsc 2,10,36 (changed the default negative to red)

Option call logic:
1. The SMA's have to cross first.
2. For a call opportunity, you will then wait to see if the MACD dots cross above the MACD zero line. Its critical here to wait until one dot has cleared the zero line...you MUST see a gap....never enter with the dot on the line. Dots must be consistent as well...if its going up...then they must all be white...if a red dot populates between the time a white dot hits the zero line and the time one crosses clear....don't enter. I have a screenshot below showing this example - 13:00 a red dot appears.
3. The ErgodicOsc HAS to be green when the MACD dot crosses above the zero line. You can hold the trade most of the time until this turns from green to red....but I always set a sell limit just in case it whips back in the opposite direction.

Option put logic:
Obviously its the complete opposite of what I've described above for a call. BUT - the SMA's still have to cross first.

I backtested this 90 days and it came back with 95 opportunities. 75 were positive and 20 were breakeven or didn't move more than $1-$2 on the next candle before it changed to the opposite color candle.

For the positives, SPX only needs to move a minimum of $3 for the option premium to move to quick and decent profit. I generally buy 10 contracts with a delta of at least .35 or higher. So there were 75 times the past 90 days that SPX moved $3 or more (up or down) to be claimed a positive for me.

FYI - Since SPX doesn't begin trading until the opening bell, make sure you have your chart set to at least 1 day/10 mins. The 1 day will allow you to get a clear view of the chart and indicators, otherwise it will fill your entire screen if you use current day.

There's 2 opportunities on the attached screenshot: a put at 11:20 and a call at 14:10.

I hope those of you that trade SPX have the same success and feel free to ask questions regarding this strategy.

BxJoZlH.png
 
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Another example of this came at 2:30ET today. Dropped from $3766 to $3744.
 
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What is the stop loss for each call that you are keeping? how far in the week you are buing calls for? i meant are u buyig the available expiry or next week? thanks!
 
Thanks for sharing. Looks really interesting. May I ask you a few questions for a better understanding?

I marked 3 rectangle in my screenshot.
  • Do you take the first trade at the open (white)?
  • Or do you wait for the next signal after the open (red)?
  • How do you handle the nice momentum trade (yellow) after the entry?
As I understand your explanations, you exit the trade when Ergodic goes < 0 (for long trades). Would you advise to stay in the trade till
  • close < SMA9
  • or SMA3 crosses below SMA9?
Options:
You explained you choose Delta 35 Options. Did you try ITM Options and how many DTE (days to expiration) do you choose? Weekly or longer?

Indicator settings:
  • The indicators look really great, a nice combination.
  • How do came to the settings you choose?
  • Do you use the settings only for SPX?
Thanks you very much. Really appreciate your kind help.

0agezlI.png


Maybe its an option to use an ATR Trailing Stop for the exit?

ixOZ55p.png
 
Hi @samoya, I'll answer your first post first:

1. The 3 rectangles you have don't show a cross over on the zero line from lower to upper...so I don't take those trades. However... I have seen many examples where the red dots are ABOVE the zero line in the "green area" and the red dots come all the way down and then bounce off the green zero line and switch back to white as it moves back up....those can be profitable trades as well. But currently I'm only trading the true and clear crossovers.

2. As far as length of trade, I set a sell limit for $1 over the premium purchase price, as I scalp options...not a long holder of them. So I don't wait for an exit signal...unless its swinging back quick and common sense tells me to get out. But with this logic/setup....you can almost guarantee 75 cents to a $1 premium increase.

3. I spend a great deal of time adjusting the indicator settings for one particular stock until I see positive consistency with it....then I backtest it 90 days.

4. I buy a minimum of 10 contracts consistently... the minimum delta for me is .35 cents...sometimes that's ITM and sometimes not.
Yes, this is a great setup for SPX only...but I'm now looking at AMZN as well to see how it reacts to it.
 
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