This strategy is something I assume not many people use as it combines quite a few different indicators as well as uses the 3m chart intraday. This strategy has been backtested and traded a ton and I have found that this really only plays out when trading SPY. Other stocks don't seem to have the same success so I would recommend utilizing this only on SPY and not with other stocks. This strategy also tends to yield 10-15% gains when trading options pretty consistently. You can usually expect at least a 20-40 cent move on SPY when this strategy lines up. Let's go over how this works and see it in action.
How It Works
So the way this strategy works is first it only works on SPY, second you need to make sure the chart you are viewing is the 3m chart. Lastly, the indicators that are used are as follows:
- Money Flow Index
- Stochastics Full
- Intraday Momentum Index
So now that we got all the technical information out of the way you may be wondering what am I supposed to be looking for to get in a trade using this strategy? Let me show you how it works.
So check out the chart above, as you can see we are looking for all 4 indicators to line up in the same way to execute the trade. So if all 4 indicators show oversold we are going to buy calls on SPY, if all 4 indicators show overbought, we are going to buy puts on SPY. As you can see in the above chart, playing this out when all 4 were oversold would have netted you a pretty big gain. Where as playing the overbought levels late in the day, we still got about a 40 cent move down on SPY but this probably would have net 10-15% on that trade unless you held out for the end of day dump.
I have created this ThinkorSwim Study Set for SPY and will include it below. I have also created an alert system and built in scanner to alert you when all 4 conditions are met in either direction and will also include that below. Try this strategy out and let me know in the comments how it works for you and if you had success with it!
SPY Study Strategy
SPY Scan TOS Alerts
PUT Alert: http://tos.mx/ut8D9V
CALL Alert: http://tos.mx/xoQWtL