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TraderDan1 OP t1_j293xc6 wrote

Reply to comment by AutoModerator in My PUTS from yesterday doing well 24 hours in. by TraderDan1

As per the moderator, my rationale for playing these puts, and most of my option plays, are based on statistical analysis of morning gaps. I have developed my own algorithm that tells me the probability of any instrument backfilling and closing its morning gap within 1-5 days. If the gap is right, and has not been filled within the first hour I begin to look at a 5 day CALL or PUT at the level of the previous day's closing price. I only do it when I have the right gap size (enough profit) and 80% or higher probability of gap fill based on my program.

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RobertsonvsPhillips t1_j29dwrr wrote

Big brain shit! How's your performance since starting your program?

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TraderDan1 OP t1_j29opmr wrote

This is only one strategy that I use for short term stuff. I'm pretty conservative really and work with a flavor of the general "wheel" strategy. This doesn't provide me trades every day. With that said, I've been using this method for almost 3 years, and the aggregate of my trades in this way have produced 80% winning trades within 3 days. If my profit reaches greater than 50% I close it. Some days, like today, it really popped right at the open so I jumped in to close my QQQ as quickly as possible. Average profit on each winning trade is 27%.

Again, the morning gap level, that is the previous day's closing price is a magnet in general. Now if a stock gaps 5% or higher in one day, the likelihood of backfilling it becomes statistically less likely, so I'm looking for gaps that are between 1-2% in size, maybe 3% and plan for a 5 DTE.

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