March 17, 2023 SPX, SPY, ES Trade Plan
OPEX...
Good morning traders. Today brings us OPEX - and what could be kangaroo like action today.
Last session trading recap
I posted two trades that hit yesterday on Twitter here and here. Nothing major to recap out of them, but having #paytience. Our bullish bias didn’t come true until almost the end of the first hour of trading - initial balance - and then continue to run its way up and chop the rest of the day.
One of my key intraday tools I use is Quant Data. I have a 7-day free trial I can provide by following this link. Two key features they provide is the Net Flow and Options Exposure by Strike - both updated in real-time. This helps seeing the other side of the picture as the Volland data provides us dealer positioning where as Quant Cast shows us what institutions and retail - aka the customers - are doing. Try it yourself and reach out with any questions and visit the Quant Data YouTube for more tutorials.
I enjoy interacting and learning from other traders so continue to share your trades, ideas, and how you use this trade plan by messaging me on Twitter @DarkMatterTrade.
News Catalyst
10am est - Prelim UoM Consumer Sentiment
For more information on news events, visit the Economic Calendar
SPX/ES/SPY Trade Plan
Remember you can use this SPX trade plan to trade ES or SPY.
Bullish bias:
If there is a failed breakdown of 3930-35 target 3960
If there is a failed breakdown of 3915-10 target 3930-35
Bearish bias:
Below 3965 target 3940
If there is a breakdown of 3910 target 3860
SPX - The Why Behind the Plan
Weekly Option Expected Move
SPX’s weekly option expected move is ~111.90 points. SPY’s expected move is ~11.86. Remember over 68% of the time price will resolve it self in this range by weeks end.
This should just be used as another data point. Most times than not price will end the week within this range, but when unaccounted news events occur - such as SVB failing - the expected move should be a muted data point then.
VIX Update
Let’s review the VIX chart. Major drop in the VIX fear index allowed for yesterday’s rally. If you haven’t, watch a reply of the VIX chart and compare it to SPX or SPY and you will see why having the VIX up while you trade is so critical…
VIX retested the prior wedge it broke out of and is a key critical demand zone. If VIX holds this area I would expect a red market. Keep an eye for this, this demand zone is sitting at 23.06-21.79.
Should we lose this demand zone it will take us straight down to the next demand zone sitting at 19.30-18.90.
Remember, typically VIX going down correlates with a uptrend in the market and vice versa for a downtrend in the market.
Vol.land Data
For a better understanding of the various greeks below I would suggest you visit the Volland YouTube Page. Volland provides unique data showing where dealers are positioned providing in my opinion a higher degree of conviction to where price may move to.
Vanna - Levels where price may repel or act as magnet
Remember for price to go above spot through a magnet or repellent VIX and IV must decrease or stay flat. For price to go below spot through a magnet or repellent VIX and IV must increase.
Above Spot:
3960-4000 is a cluster of negative vanna - acting as repellent
In order for price to get through this zone the VIX needs to go lower
4005 is positive vanna - acting as magnet
4010-4025 is a cluster of negative vanna - acting as repellent
Below Spot:
3955-3940 is a cluster of positive vanna - acting as magnet
3935-30 is negative vanna - acting as repellent
3925 is positive vanna - acting as magnet
3915-10 is negative vanna - acting as repellent
3900-3860 is positive vanna - acting as magnet
3855 is negative vanna - acting as repellent
3840 is a negative vanna - acting as repellent
Gamma and Delta-Adjusted Gamma (DAG)
Above Spot:
4005 is positive Gamma - acting as resistance
4030 is positive Gamma - acting as resistance
4050 is positive Gamma - acting as resistance
Dealers must buy above 3965
Below Spot:
3935-30 is positive Gamma - acting as support
3915-10 is positive Gamma - acting as support
Dealers must sell below 3960
Charm
Charm is bearish on SPX. This suggests that Charm will have little a more bearish impact on SPX today.
When reviewing Charm we also need to account for SPY’s charm. It is leaning bullish. Between the totals of SPY and SPX, SPX charm will outweigh SPY.
Keep in mind the total notional value of SPX should be multiplied by 10 for comparison to SPY.
Final Take
Today is OPEX I wouldn’t be shocked if we see a selloff that is then followed by a rally. OPEX gives wide ranges and traps all over the place with failed breakdowns or breakouts. It can also produce V shaped rallies or upside down V’s.
Stick to the key level and IF we are not in one of our key levels to trade don’t trade then. There is a reason why some of the data has gaps in levels cause they will be hotly contested zones and the last thing you want to do is be caught in the middle of it.
Stay #paytient and react to the key levels - no predictions! Good luck traders.
I am going to share my key rules to intraday trading in the end of the plan moving forward to build better habits and allowing you to grow as a better trader.
My Intraday Trading Rules
I do not trade within the first half hour UNLESS I am in a trade from the prior session and looking to close the trade or we have a major gap or a key level already broken
I let the initial balance do its thing - I am just a small fish in a large ocean of traders so let's let them fight it out
I then wait for key levels targeting one level to the next and taking profits at each one.
If there are key levels that are 10pts apart that is when I have scalping mindset and anything above 10pts I want to give it the room to hit the price target with a 5 pt buffer to take profits once we reach within 5 pts of a target - I also tighten my stop loss once at 10-20% profit with the goal of never allowing trades to go red when I have a nice profit)
I supply options greeks with OB (order blocks) and FVG (fair value gaps) otherwise known as Smart Money Concepts
When I am scalping - ie targeting 10pt trade levels I will take profits and never go more than 10% red. Simple as that, know your trade plan strategy and the risk. When you are wrong you are wrong and reset
For 20pt trade level targets I will increase my stop losses to 20% and allow more of the trade to play in the event I entered too early
I try - key word try ha - avoid trading lunch hours defined as 12pm to 2 pm est. Money for the most part unless you are scalping - is made in the first 2 hours of the trading day and the last 2 hours
I always stick to two EMA’s on my chart and that’s the 10/50 EMA’s
When the 10ema is above 50ema we are bullish
When the 10ema is below the 50ema we are bearish
Go put these on your charts and when you view them on timeframes less than the daily timeframe you will see the power they provide
For scalpers out there the smaller timeframes provide great opportunities to scalp 5-10pt moves
There are more we could discuss including volume profile, low volume nodes that I think are great strategies to compliment option greeks. Maybe in the future we can include more details.
Trading is not for the unprepared. It is critical you abide to a strategy and checklist and walk into every trade with a plan. Without a plan you are simply gambling and have a better chance at the slot machines. There are more nuances to my weekly and daily checklists, but I think this provides a good read for now and we will/can continue adding to it.
To cover our basis…
Welcome to my Substack where I provide a daily SPX trading plan to help guide my intraday trading. The purpose of this letter is not to advice you on your trading or investment decisions. I am simply documenting my daily trading plan for myself to help with planning and execution. These are simply my opinions and the data sourced from the likes of vol.land, TradingView, Quant Data and others. The stock market is risky, gains are not guaranteed. This is not about getting rich quick, but learn to educate yourself and make the necessary financial decisions on your own. This is not financial advice.