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Opening (Margin): /MES April 21st 3960 Short Straddle... for a 225.00 ($1135.00 max) credit. Comments: The 30-day IV isn't as high as I would like at 20.5, nor is the IVR (11.5%), but you can't always have everything. Will look to make additive adjustments first to get to the size of position I want and then look to just manage sides to delta balance. Starting out skewed just a smidge short here, but I'll naturally adjust if the market has other ideas on its mind. I'm generally looking to get 25% of total credits collected (25% of $1135.00 would be $283.75 in profit), but won't be hesitant to take quick profit and then re-establish.
CME_MINI:MES1!
by NaughtyPines
How to trade Smart Money Concepts:Smart Money Concepts is a more sophisticated way of trading price action, while taking advantage of where institutions are likely to place their orders. This makes Smart Money Concepts a usable tool whenever you are dealing with hedge funds. What you are about to read is an elaborate tutorial explaining a lot about this trading strategy, including some trading strategies (NOTE: there are many SMC indicators and the one I’ll be using is the one by LuxAlgo since I believe is the most “complete” out of all). Let's start. 1) Order Blocks: Order Blocks are, in my opinion, the most important feature in SMC trading, as it shows where these institutions are likely to place their orders. In order for an order block to form, look at where the market is consolidating, creating an area of volume price is likely to be attracted to (some order blocks are formed due to imbalances in the market). In this image, you can see how order blocks are formed right after a ranging market has been broken. Because of this unique feature, order blocks are not the same as support/resistance zones. In order for us to trade using order blocks, look for where an order block has been formed recently, as the longer an order block survives, the weaker it becomes. Buy when the candle that hit the order block closes and set your stop loss under that order block. In this example it worked since the volume wasn’t too high and the order block had formed a few candles before the retest. You can do this for shorts as well (NOTE: the more retests the order block gets, the weaker it becomes) 2) BOS & CHoCH: Supports and resistances usually apply on Price Action, but they can be applied in Smart Money Concepts as well. The difference is that in Smart Money Concepts, you these supports and resistances when the price breaks through them. However, in many occasions these signals can be false and it’s only a retest of the support/resistance. In order to understand what BOS/CHoCH means, we need to look at the graph: This is an example I made. From the graph, a BOS or a Break of Structure is whenever the price breaks the most recent support/resistance in the direction of the trend direction(bullish/bearish). A CHoCH or a Change of Character is whenever the price breaks the most recent support/resistance in the direction opposite of the trend direction. What I mean by this is that in the example I have shown, the trend was bullish until it was not. Normally a bullish trend breaks the resistances instead of the supports, and vice-versa. This is why the name Break of Structure since the price continues going the direction it wants while solving any “issue” in its path. If this “issue” is big enough to break the support/resistance maintaining the trend intact, then it’s known as a Change of Character , since it changes the character of the trend. When this happens, there is a chance for a trend reversal to happen, which is the case for the example I’ve shown. Now I’ll show how to trade BOS/CHoCH in a real graph. As you can see from the chart, there are a lot of Breakthroughs of Structure and Changes of Character, but this indicator actually shows which of these BOS/CHoCH are major. The trick is that if the indicator shows a BOS/CHoCH marked by a straight line instead of a bunch of lines, this means that it is more accurate. In this example, we ignore the smaller BOS/CHoCH and just look at the 2 important ones. We know they are important because they are marked by a straight line. You buy after the CHoCH/BOS label appears and when the candle that retested the broken resistance/new support closes and the volume doesn’t increase before that (unless the market is ranging after it broke). Same thing with shorts. You short after the BOS/CHoCH label appears when the candle that retested the broken support/new resistance and the volume doesn’t increase from the candle before that. 3) EQH/EQL: In Price Action , there are chart patterns. One of the most known ones are the double top and the double bottom . Smart Money Concepts refers to these double tops/bottoms as Equal Highs and Equal Lows (EQH/EQL for short). Here’s an example: As you can see, there is a double top (EQH) which came after an uptrend, meaning that there is a chance that the price will break the necklace (the support line made in the middle of the double tops), causing a change of character, which it did. Due to the nature of double tops and bottoms, this rarely happens. You should use this tool in confluence with other SMC tools like Order Blocks and BOS/CHoCH. Personally, I don’t use them much. I just use them to identify strong supports and resistances, as well as double tops and bottoms. They could also be used to identify trend reversals on major areas of support and resistance. 4) Premium and Discount zones: Premium and Discount zones are ranges that form in the market when a recent major support and resistance has been established. In this example, you can see when did the premium and discount zones form. The price made a major support and resistance. The equilibrium zone is the 50% line in the Fibonacci Retracement tool if you pay close attention. This means that price can react off of the Equilibrium zone, and if you pay close attention, you can see it was ranging for a while. For a trading strategy, wait for the price to reach the Premium or Discount zones, and, if the market's volume decreases, enter a trade and set your take profit at the equilibrium zone. The reason why you should set your take profit at the equilibrium zone is because there is a chance the price rejects off of the equilibrium zone. 5) Fair Value Gaps: Fair Value Gaps are imbalances that form in the market and can be good support/resistance areas. They usually form when the market is volatile and when a breakout or retest just happened. In order to identify what a fair value gap is, look for a huge candle body like the one shown in the picture, then, draw a rectangle with its base being at the highest point of the previous candle's upper wick and with its top being the lowest point of the following candle's lower wick. Now, extend the rectangle to the right and now you have a fair value gap. For a trading strategy, look for the line in the middle which is shown in the fair value gap. This line acts as a support, and the price can bounce off of it. For an entry point, wait for the price to react to the fair value gap, and, if the volume decreases while the reaction is happening, enter. 6) Liquidity Grabs: Even if you think your trading strategy is amazing, you will always have to deal with scams. No matter how good your trading strategy is, all trading strategies fail to deal with hedge funds and whales. They sometimes act when the price is very close to a support or resistance, and when the people expect a bounce, they place their stop losses under the area of confluence. These hedge funds then act, and end up manipulating the market, forcing the people to panic buy or panic sell, depending on the area of confluence. One major example of market manipulation is in the Crypto Exchange. Trading Crypto is almost like gambling. Liquidity grabs perfectly reference the scam. You can spot them if, on a ranging market, there is a sudden increase or decrease in price. Always pay attention to traps like the ones in these examples shown below: For a trading strategy, wait for the scam pump or dump to stagnate and then enter your trade in the opposite direction that the candle was going to. In conclusion, Smart Money Concepts is a fascinating trading strategy for me, and it could be for you too. There are many aspects of it, and it is another way of trading Price Action, which itself is already fantastic. This tutorial took me 3 hours to make, so please make sure to heart and comment your opinion on this. Thank you for reading through all of this.
BITSTAMP:BTCUSDEducation
by lorinstocksinvesting
15
Opening (Margin): /MES March 31st 4000/4330 Short Strangle... for an 81.75 credit. Comments: After closing out my last setup in profit, reentering anew, selling the 26 delta on both sides to get about 50% of the buying power effect of the setup in credit. I'm staying with the March 31st here, as the April expiry is a bit too far out in time yet. 81.75 credit (408.75 max) on BPE of 940.00 or so; 43.5% ROC at max; 21.7% at 50% max. As before, I'll look to do additive delta adjustments at intervals to keep the delta/theta ratio <1.0.
CME_MINI:MES1!
by NaughtyPines
4
Opening (Margin): /MCL March 16th 78 Short Straddle... for a 7.10 credit. Comments: I still have a little bit of time in this cycle (35 DTE) to putz around with reverse gamma scalping /MCL, so putting on a fresh short straddle at the 78 strike for the starter position. Will generally look to make additive adjustments to keep the delta/theta ratio <1.0 right up until 21 DTE, at which time I'll take the whole pile of pasta off. Current break evens for the setup are 70.90 on the put side, 85.10 on the call. 7.10 credit on buying power effect of 9.88, 71.8% return on capital as a function of buying power at max, 18.0% at 25% max.* * -- Generally, I look to take profit on short straddles at 25% of max.
NYMEX:MCL1!
by NaughtyPines
2
Opening (Margin): /MES March 17th 4075 Short Straddle... for a 199.75 credit. Comments: 199.75 credit (998.75 max) on buying power effect of 1038.55; 96.2% ROC at max; 24.0% at 25% max.* A different form of a reverse gamma scalping setup using short straddles. In this case, delta adjustments are made using additive skewed short straddles to delta balance. For example, if the position skews out to -20 short delta, you sell a slightly skewed long delta short strangle to delta balance. I'm intending to leave the entire position on (the original plus any skewed straddle adjustments) running into no later than about half way into the cycle (21 DTE), but will pull the entire thing off in profit earlier if I get an opportunity to do so. An example of a short straddle that is skewed long delta: March 17th 4140 short straddle, +19 delta (put deeper in-the-money than the call). An example of a short straddle that is skewed short: March 17th 4020 short straddle, -20 delta (call deeper in-the-money than the put). * -- With short straddles, I generally look to take profit at 25% max, since these have less room to be wrong than a short strangle. Most at-the-money short straddles set up with expected move break evens, which is less room to be wrong than I would ordinarily set up with a short strangle, where I generally set up sides at 2 x the expected move.
CME_MINI:MES1!
by NaughtyPines
2
Opening (Margin): /MCL March 16th 79.25 Short Straddle... for a 9.19 credit. Comments: A short delta additive adjustment trade here to cut net long delta in my entire /MCL position by about half, with the goal being to keep the delta/theta ratio under 1.0. The entire position still leans net long, but I will leave it that way to see if the market does some of the lifting for me. Total credits collected of 13.90. As with my /MES reverse gamma scalping setup, looking to take about 25% of total credits received out of the position, closing it out in its entirety at no later than about half way through the cycle (i.e., around 21 DTE) before moving on to the next monthly. For those of you just tuning in: This is not a standalone trade. It is an adjustment to an existing position with delta/theta metrics peculiar to that position. Unless you have that exact same position on with the exact same delta/theta metrics, this trade will only be informational or educational as to how to make an additive delta adjustment to a position you currently have on, particularly using a skewed short straddle to accomplish the task. I would note that this isn't the only way in which to adjust position net delta; it is just the tool I am using in this particular case. The entire position is also nondirectional by nature with the sole effort being to keep the net position's zero delta/gamma point within shouting distance of current price with various delta adjustments, some of which will be additive (adding contracts), some of which will be subtractive (closing out contracts). I have no opinion as to where oil goes from here or how much it will move in any given day or over a given time frame or whether a particular level is important or not for price action purposes. This type of setup is basically a bet that the underlying stays within the expected move (EM) or some factor of the expected move as determined by options delta and little else.
NYMEX:MCL1!
by NaughtyPines
Assignment (IRA): QQQ October 21st 300 Short PutComments: The one rung I couldn't strike improve very much with duration, so opted to let this rung go to assignment. I collected a total of 10.46 in credits (See Post Below), so the way I generally look at assignments is that the credits collected of10.46 ($1046) represent a realized gain. Unfortunately, the difference between the strike price (300.00) and current price (275.42) is that it is an unrealized loss. For purposes of tracking my cost basis post-assignment, I look at the strike at which I was assigned as my cost basis going forward, which starts out at 300.00, with credits received in short call premium reducing that over time. I'll look at selling a call against on Monday at the 300 strike, targeting the expiry that is going to pay me 1% or greater of the strike price in credit. Currently, that would be the December 16th 300, paying 5.13, but we'll see what the market does with the underlying post-mopex.
NASDAQ:QQQLong
by NaughtyPines