AAPL and MSFT Reading Charts For Better Entries and ExitsOptions Trading Strategy Using Ichimoku Cloud, 200 SMA & Monthly Contracts
(Following Your 3 Trading Rules)
This strategy adapts the Ichimoku Cloud & 200 SMA trend-following method for trading monthly options contracts with a focus on high-probability setups. It leverages time decay (theta), trend strength, and proper timing to maximize gains while reducing risk.
🔹 Strategy Overview
We will trade monthly options contracts using:
Trend confirmation via Ichimoku Cloud & 200 SMA
Directional bias based on price positioning
Entry timing rules to avoid low-probability setups
Theta-friendly positioning (avoiding weeklies to reduce time decay risks)
📈 Trading Rules & Setup
(My 3 Golden Rules)
🚫 No trading on Mondays → Avoids choppy market structure from weekend gaps.
🚫 No trading on Fridays → Avoids gamma risk and weekend time decay.
⏳ No trades before the first 15-minute candle closes → Ensures market direction is established.
📊 Selecting the Right Option Contract
For monthly expiration contracts, select options that:
Expire within 30 to 60 days (avoid weekly contracts to minimize rapid time decay).
Are slightly in-the-money (ITM) or at-the-money (ATM) for higher delta (0.55–0.70).
Have open interest >1,000 and a tight bid-ask spread to ensure liquidity.
Example: If today is June 11, trade the July monthly contract (third Friday of the month).
📉 Bearish Put Play (Short Trade)
200 SMA Bias: Price is below the 200 SMA
Ichimoku Cloud Confirmation:
Price is below the cloud
Tenkan-sen is below Kijun-sen (bearish momentum)
Chikou Span is below price from 26 candles ago
Future cloud is red
Entry Trigger (After First 15 Min Candle):
Price pulls back into the Kijun-sen but rejects it
OR price breaks below the cloud after a weak consolidation
Enter PUT contract (monthly expiration)
Stop Loss & Take Profit:
SL: Above Kijun-sen or recent swing high
TP: First at the cloud’s lower edge, second at a key support level
Exit before Theta decay accelerates (last 14 days before expiry)
📈 Bullish Call Play (Long Trade)
200 SMA Bias: Price is above the 200 SMA
Ichimoku Cloud Confirmation:
Price is above the cloud
Tenkan-sen is above Kijun-sen (bullish momentum)
Chikou Span is above price from 26 candles ago
Future cloud is green
Entry Trigger (After First 15 Min Candle):
Price pulls back into the Kijun-sen but holds
OR price breaks out above the cloud
Enter CALL contract (monthly expiration)
Stop Loss & Take Profit:
SL: Below Kijun-sen or recent swing low
TP: First at the cloud’s upper edge, second at a key resistance level
📊 Trade Management & Adjustments
Rolling: If trade is profitable near expiry but not at the full target, roll to the next monthly contract.
Closing Early: If the trade is at 70-80% max profit, close early to avoid decay risk.
Cutting Losses: If price closes inside the Ichimoku Cloud, consider exiting early (trend loss warning).
🛠 Why This Works for Monthly Options?
✅ Avoids time decay risks of weekly options by trading monthly contracts.
✅ Uses strong trend confirmation from Ichimoku & 200 SMA.
✅ Only trades at high-probability times, avoiding choppy Monday & Friday moves.
✅ Allows scaling into strong trends rather than short-term noise.
