Entering/Exiting Trades

May 7, 2024

How To Enter/Exit 0DTE Trades.

Entering Trades:

1. Check the chart
   • Where is the alert in relation to the OP (days open price)?
     • Calls above the OP and puts below the OP are higher risk.
2. What is the Tradescape mode of the day?
   • High Mode = More Movement (3+ Strikes)
   • Normal Mode = Average Movement (3 Strikes)
   • Hard Mode = Low Movement (2 Strikes)
     • Remember to check the volume displayed on the alerts as well. If the volume is increasing with each pulse/alert, then it’s more likely that the move will continue.
3. Are you late to the move (the move already went 2+ strikes)?
4. What is the pulse indicating? Always use this as additional verification. If the alert is for bulls, but the pulse is all red…don’t trade it.
   • Example of Pulse (green means calls, red means puts):
   • 12:50 SPY – [ 🟢 – $99,000 ] – V 99.02%
   • 12:50 SPY – [ 🔴 – $124,000 ] – V 102.12%
5. You can always find a better entry. Patience is a virtue. Try entering alerts at Target Entry.
6. Remember, you can enter small and then add to a winning position. NEVER average down; it’s how you blow up your account.
7. Where is the price in relation to the strikes (if it’s near, you can wait for interaction before entering)?
   • Strike interaction is seeing if the price blows through, reverses, or chops at the strike before entering.
8. Buy Calls Below The Strike Price Ex: 510.85 And Buying The 511 Call Option
   Buy Puts Above The Strike Price Ex: 510.10 And Buying The 510 Put Option
9. Once everything matches, you can enter the trade with confidence!

Here’s how the alerts appear:

1. Strike Price: The strike you should trade the option at.
2. Premium: The value of the trade detected.
3. Score: The sum of the open price, intraday high, and intraday low, and is displayed on each alert.
4. OP: The distance we are from the open price.
5. Volume: The volume at the time of the alert.
6. Spot Price: The current price of the ticker.
7. Start Price: The price the option is at the time of the alert.
8. Target Entry: Where you should set your limits when the alert is sent (for the HWR alerts).
9. Win Rate: The success rate of each alert (higher numbers indicate a higher chance of winning).
10. Statistically Significant (SS): Determines if the win rate is meaningful.

In The Trade:

Our goal is to win big and lose small. If the price isn’t moving in your favor, cut your losses early. There’s no point in holding until the value drops to zero. Aim to take winners to 100%+ and cut losses at 10-20%. By doing this, you only need to win 2 out of 10 trades to break even. If 2 trades go to 100% and 8 trades go to -20%, you’ll still break even.

1. If you’re new to 0DTE, you can get 100%+ gains with “runners,” which are essentially free contracts.
   • If you buy 2 contracts at 1.00 and they go up to 1.50, you have two options: you can sell both for a 50% gain, or sell 1 for a 50% gain and keep the other one as a free contract. Set the stop-loss to breakeven plus commission, and let it ride.

For more details on the average moves for different tradescape modes please read here.

Exiting Trades:

1. Depending on the Tradescape, we can expect different moves in different modes. Be prepared to exit your position (or at least most of it) at the strike price corresponding to the maximum estimated move.
2. If the price doesn’t hulk (go up) or nuke (go down) through the strike price, take profit and switch to runners.
3. The only times to hold at the strike is
   • If volume is > 120%.
   • If the price is highly volatile, indicating a trend day.
4. Always set trailing stop losses for your runners to capture maximum gains.
   • Brokerages that offer trailing stop-losses on options:
     • E*TRADE
     • Charles Schwab (ThinkOrSwim)
     • Interactive Brokers