SPY/SPX 0dte Option Incoming Trading: Bull Put Entry Criteria
Over the past month I've been posting many of my SPX 0dte trades, I would like to touch briefly on my entry criteria from the technical perspective.
First off, you'll notice my chart is of the SPY and not the SPX. My trades are taken on the SPX, however, I conduct my technical analysis on the SPY
for two main reasons,
1. The SPY trades post and pre-market, and with the inclusion of this data more precise signals are drawn.
2. The availability of the Volume study, which is not a major component of my strategy but is occasionally referenced.
My trades are classified into three categories "type of trade", this allows me to have clarity on my expectations, to know quickly when I'm wrong, and how I'm positioned relative to the primary trend.
1. Trend Continuation: is when price is trading either above the previous sessions high (bullish) or below the previous sessions low (bearish) signaling continuation of the trend. We want to see market direction confirmed by increased volume.
2. Range Bound: is when price is trading within the high and low of the previous session. These days tend to trade sideways with low volatility and often occur as a pause or slowing in momentum after a multi day move in one direction.
3. Mean Reversion/Contra: is a trade taken against the primary trend, typically on a trend continuation day where the price has been overextended from the mean.
- Rather than selling an Iron Condor all at once, I leg into the trade, selling one side followed by the other if the conditions are met.
- Trade entries and exits are often based on the 5 minute time frame, but context is important, so the 15 min and 1 hour is commonly used to determine direction.
- When the 15 minute momentum is moving up from the trough-to-peak my preference is to write puts and when momentum is moving down from peak-to-trough I write calls.
- The main focus intraday is on the 5 minute and 15 minutes chart but I keep this in the context of the 1 hour time frame and apply the same concept.
- Based on the 1 hour momentum cycle and the "type of trade", I can determine how aggressive or defensive I should be positioned, If I should be quick to take profits or I whether I can be more patient.
Bull Put Spread (Long) Requirements
1.) Significant Level: price is holding above a level of importance, (i.e, pivot point, gamma level, previous low, etc.) *Leading Indicator
2.) Momentum: trough or change in momentum direction *Leading Indicator
3.) Break of Structure: Trendline break, breakout of a key level. *Coincident Indicator
4.) QQE Buy Signal: this is an RSI based indicator *Lagging Indicator
5.) 20 and 50 Moving Averages: Flat or Sloping up *Lagging Indicator
See related ideas, to see the Bull Put spread signal based on the above requirements and a Bear Call spread which was also placed but not discussed here.
______________________
WHAT IS 0DTE TRADING?
0dte or zero days to expiration refer to the last trading day for an option contract. The Chicago Board Options Exchange (Cboe) lists weekly options on the S&P 500 Index (SPX) with expirations every Monday, Wednesday, and Friday. Since most options expire worthless we take advantage of this by selling credit spreads to collect premium. Our option trading strategy allows us to profit if the market moves up, down or doesn't move at all.
✅ Consistent Cash Flow
✅ High Probability of Profit
✅ No Overnight Risk
First off, you'll notice my chart is of the SPY and not the SPX. My trades are taken on the SPX, however, I conduct my technical analysis on the SPY
for two main reasons,
1. The SPY trades post and pre-market, and with the inclusion of this data more precise signals are drawn.
2. The availability of the Volume study, which is not a major component of my strategy but is occasionally referenced.
My trades are classified into three categories "type of trade", this allows me to have clarity on my expectations, to know quickly when I'm wrong, and how I'm positioned relative to the primary trend.
1. Trend Continuation: is when price is trading either above the previous sessions high (bullish) or below the previous sessions low (bearish) signaling continuation of the trend. We want to see market direction confirmed by increased volume.
2. Range Bound: is when price is trading within the high and low of the previous session. These days tend to trade sideways with low volatility and often occur as a pause or slowing in momentum after a multi day move in one direction.
3. Mean Reversion/Contra: is a trade taken against the primary trend, typically on a trend continuation day where the price has been overextended from the mean.
- Rather than selling an Iron Condor all at once, I leg into the trade, selling one side followed by the other if the conditions are met.
- Trade entries and exits are often based on the 5 minute time frame, but context is important, so the 15 min and 1 hour is commonly used to determine direction.
- When the 15 minute momentum is moving up from the trough-to-peak my preference is to write puts and when momentum is moving down from peak-to-trough I write calls.
- The main focus intraday is on the 5 minute and 15 minutes chart but I keep this in the context of the 1 hour time frame and apply the same concept.
- Based on the 1 hour momentum cycle and the "type of trade", I can determine how aggressive or defensive I should be positioned, If I should be quick to take profits or I whether I can be more patient.
Bull Put Spread (Long) Requirements
1.) Significant Level: price is holding above a level of importance, (i.e, pivot point, gamma level, previous low, etc.) *Leading Indicator
2.) Momentum: trough or change in momentum direction *Leading Indicator
3.) Break of Structure: Trendline break, breakout of a key level. *Coincident Indicator
4.) QQE Buy Signal: this is an RSI based indicator *Lagging Indicator
5.) 20 and 50 Moving Averages: Flat or Sloping up *Lagging Indicator
See related ideas, to see the Bull Put spread signal based on the above requirements and a Bear Call spread which was also placed but not discussed here.
______________________
WHAT IS 0DTE TRADING?
0dte or zero days to expiration refer to the last trading day for an option contract. The Chicago Board Options Exchange (Cboe) lists weekly options on the S&P 500 Index (SPX) with expirations every Monday, Wednesday, and Friday. Since most options expire worthless we take advantage of this by selling credit spreads to collect premium. Our option trading strategy allows us to profit if the market moves up, down or doesn't move at all.
✅ Consistent Cash Flow
✅ High Probability of Profit
✅ No Overnight Risk
Comment:
Option Income Trading*
