On the board for July with a nice base hit. SPY calls for nearly 100% in 40 minutes sipping a coffee on my day off. Nothing like day trading in the stock market. Here's the trade I took today:
SPY continues to consolidate with a bull flag on the daily chart. Price opened above the 9/21 EMAs again this morning with room to the top of the trend line from mid and early June. This set my bullish bias for the day.
Taking a look at the gamma map before market open, we had a very large positive gamma level at 749 with over 95M in cumulative volume and major negative gamma below 746. I knew that we would have to let price develop a bit before being able to take an entry targeting the golden magnet level at 749. If price could hold above the Pre-Market high/ Gamma flip zone around 746, the path of least resistance was up to 749.
Here's why:
An important part of utilizing a gamma heat map is knowing the gamma regime you are trading in. In a positive gamma regime, market makers and dealers are long options, giving them positive gamma exposure on those positions. A dealer's business model is to provide you (the retail trader) the liquidity to execute your options orders. They aim to collect a small fee on the bid-ask quotes. They are not trying to bet directionally on the market; they aim to stay delta neutral. So, when the underlying price of SPY moves, they are forced to hedge their options positions mechanically through buying and selling shares of SPY. With positive gamma exposure, when SPY rallies their delta increases, so they must sell underlying shares to hedge. When SPY dips their delta decreases, so they must buy shares to hedge. This hedging is mean reverting which reduces volatility and soothes out the price action. It also prevents price from being pulled away from large positive gamma levels like the one seen at 749.
At around 10:30 am, SPY had rallied above the Pre-Market high/Gamma flip zone, then formed a very nice bull flag. I actually entered a bit early while price was still forming the flag, after a 9 EMA dip that got bought up with a strong green candle and increasing volume. Getting in early had me holding through the pre-market high retest. This is where SIZING comes into play. As long as price continued to hold the pre-market high/gamma flip zone, this trade is still valid on a technical level, but the position saw -40% before getting the desired move. As an options trader (especially 0dte), you need to size your position appropriately so that seeing drawdown like this doesn't emotionally trigger you to exit the position. After the trade entry your job is over. Price either hits TP or stop loss. Everything else that occurs in between these two events is NOISE and EMOTIONS. Size small enough so that a big red candle doesn't trigger fear.
Sold into the strength once we tapped 748.50, done for the day. You don't need more trades. You need more patience for high-quality trades. Learning to read a gamma map will help you filter for high-quality setups. Comment 'gex' and I will send you the exact trade confirmation checklist I run before every trade entry - gamma levels included.
@ITMatrixHQ
Simple with a gamma map🤷🏼♂️ Catch a 100% move then go about your day. Recap later ✍🏻
@ITMatrixHQ