Getting back on track with technical statistical analysis our summary Excel formulas assist in defining the optimal option premium/strike price to trade based on a number of values, set into our GRTS GENERATOR. This is an all encompassing statistical data Excel spreadsheet that combines the underlying asset statistical analysis with their respective option chain.
We’ve calibrated a specific equation to signal an alert when a percentage pullback from the 52WK price high at a minimum of 12% with the optimal being 20%. Second, the asset must show a higher than average liquidity characteristic for intraday trading.
On March 23rd TWITTER (TWTR) signaled an approximate 13% pull back from the previous high on February 26th of this year.
The 1HR Chart shows, compared to the Fibonacci Retracement, that TWTR bounced up from the 50% level, breaking through the 62% level, but there was not enough momentum in volume to keep it going north to the 78.6% level. This is a fundamental move prior to a “breakout”. Think of it like a sling-shot being pulled back before letting it go. Typically, when you see a channel between the 50% and 62% Fibonacci levels that last over a week, there is a consolidation of inventory stacking up for a breakout.
This is where the DARVAS BOX (Devised by Nicholas Darvas who became a millionaire within 18 months by using this method) can validate your point of entry and exit.
The white rectangle box on the chart is the DARVAS BOX, starting with the high price point and down to the support (last price) for the closing day.
On Monday (March 23rd) TWTR price went up, making a momentary breakthrough – $48.86 – before fading back to $48.48 at the close.
Moment of truth was seen during extended hours – the light gray area on the chart – showing that the trend continued to favor the upside. Going into the opening today, TWTR confirmed our analysis that it was a Long Call buy.
Before the close, the price trend surpassed the +7.3%, closing at a a +8.21% overall move from Monday’s support price of $48.06, the best entry point that would have been covered on the intraday pull back before the close.
Taking a look at our GRTS Generator Excel spreadsheet, you can see our profit on the Front Month (APR), where we entered after it broke the “Previous Resistance” high price, shown on the 1HR chart.
Look for the “FRONT MONTH” to see our profit.
|Stock quote and option quote for TWTR on 3/24/15 07:12:41|
|Mrkt Prfm||Volatility||Liquidity||OTM Signal||Last To Open|
|Price Action||4.310||2.87||Inverse P Act||0.0848|
|Strategy||Protective Put – April||Long Put|
|Strike||Entry||Max Loss||Stock Decline||IV|
|Front Month||Back Month|
|APR 15 (24) 100|
|03/24/15 05:17 PM|
|Call Front Month||Put Front Month|
|Entry Price||1.32||TWTR||Entry Price||2.14|
|Premium TGT||1.98||Premium TGT||1.67|
|Delta Hedge||0.3792||Delta Hedge||0.3522|
|Ask-Bid Spread||0.02||~||Ask-Bid Spread||0.02|
|Prob Density||1.4489||Put Spread||Prob Density||1.8033|
The “take-away” here is the validation of the move, and in this case TWTR came through, more so by breaking the 78.6% Fibonacci ceiling, closing today at $51.47.
The advantage of using this statistical analysis spreadsheet (plugged into the TOS platform) is its real-time data feed that gives you the opportunity to see which side of the option chain is being favored overall. It may come early or it may take some time, but given our incorporation of the Covered-Call Return formula (shown in the GRTS Generator table as ‘C-Return’*, and Price Action indicator, we can have “leading indicators” that are based on computational mathematics – adaptive to the inputs and parameters calibrated to our own proprietary formulas.
You can have this GRTS Generator Excel Spreadsheet (Available in Apache Excel only), if you use TOS, for a token fee. All equations and formulas are based on the conceptual approaches presented on Tastytrade by Tom Sosnoff and his team of experts and is meant to augment the Dough options trading platform as a means of seeing the reality of their formula constructs in real-time.
*C-Return: This is a Covered-Call Return monetized formula. If the the “Inverse” number is higher, than it’s a signal to lean into the Put side of the underlying asset. This can change during intraday trading.
For more information regarding the GRTS Generator Excel Spreadsheet send me an email. If you’d like to request the GRTS Generator for a specific equity/asset you’re looking at trading, we’ll put it together for you, for a token payment.)
(Note: This presentation is for educational purposes only and not intended to predict or influence your own trading decisions. The purpose is to show how technical analysis provides more in-depth insight versus the traditional indicators that are all based on historical data. Using the Excel spreadsheet, we be more systematic by providing statistical simulations in the process of day trading.)