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@stephenharlinmd

Feb 26

I'll explain.

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Update and Review: The GEX:RVOL Ratio

Why follow the GEX-RVOL ratio?

• Imp vol (IV) represents how much the market will pay to hedge volatility.
• The difference between IV and realized vol (RVOL) represents the markets willingness to hedge volatility.
• Both VIX and IV

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have been shown to be inefficient estimations of RV ... both demonstrating an upward biased forecast.
• GEX simultaneously reflects an anticipatory measure of instantaneous volatility and is a measure of ex-ante skewness.
• Mean reversion in the mispricings of asset prices

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@stephenharlinmd

Feb 25

SPX Options Analysis (New Report Format)

In near-term options, premium was highest in puts bought and ITM calls written. Both conditions express a bearish sentiment.

GEX remains negative and is closer to its flip point. When index gamma is close to 0, vol-of-vol is highest.

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If spot drops to more negative strikes, it will add negative gamma to dealers' books as investors seek additional protection. In this event, downside moves would be accelerated.

SPX closed below the zero gamma level; thus, puts are in control. Should volatility ...

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reverse (decline), dealers would have to close their short hedges (i.e. cover their short futures contracts).

Crash risk begins between 3950 and 3940 below. Below these levels put positions gain value which require dealers to sell futures as a hedge.

...

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@stephenharlinmd

Feb 24

1/
Let's focus on $SPY.

We want to increase our odds of being on the right side of the trade. First we plot a traditional 2-moving average (MA) crossover and color the shorter time frame MA green/red.

Next, we plot NYSE up-volume minus down-volume on the lower subgraph.👇

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Here's the link for the subgraph code:
dropbox.com/s/3nmle7fw3yuw…

• Read the comments on the chart and notice you're watching for a change in slope in the relationship between NYSE $UVOL and $DVOL.
• Read the intro comments in the script to see how I colored the histogram.

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Rather than buying and selling $SPY, the underlying, you could plot/trade the ATM options.

You could buy an ATM put when $UVOL-$DVOL is down-sloping and price is simultaneously breaking below the two MAs in the upper chart ... and vice versa for an ATM call.

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@stephenharlinmd

Feb 20

1/

How to Trade Naked

I want to share two trades I took, this morning. They are important in that the trades were taken using Auction Market Principles … without any “indicators” such as moving averages, oscillators, Sequential, "algos" … not even the Volume Profile.

...

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There are just 3 key levels to tune into. 👇

If you draw a line that intersects as many price bars as possible, you’re marking a price that is important to traders. If, over time, the auction keeps coming back to that price, that is a key reference point known as a TPO.

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Repeat: TPOs (Time Price Opportunities) are reference points. And they exhibit permanence … once on the chart, they don’t disappear on your. Permanence reduces risk by increasing reliability during decision-making.

TPOs are not random and reflect an enhanced probability

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@stephenharlinmd

Feb 11

https://twitter.com/Maddy_Nobody/status/1624455241235148800

I took Julie’s concept and translated into a Thinkscript. Like Julie, I referenced 8 EMA as basis running a 5 min chart and established a threshold from which I’d want to see a reaction with the Bollinger band. To identify a flat VWAP, I calculated the slope of tangents to VWAP.

https://twitter.com/Maddy_Nobody/status/1624455241235148800

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There’s good news and there's bad news.

The good news:

- The resulting short signals were good, although the last one was a little early.
- The subgraph study’s signals filtered well … but … Thinkorswim’s built-in Bollinger Band study set for 2 StDevs gets you pretty much

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the same trades ... without a study. In other words, looking for RTM trades when price breaks a Bollinger Band and VWAP is flattish ... looks reasonable, by itself ... in this *one* chart for one day (emphasis).

The bad news:

- The study missed a nice trade at noon.

...

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@stephenharlinmd

Feb 11

[Sat AM Part 2]

You'd have to read Part 1 before this thread to have this make much sense. Page down 1 tweet for Part 1.

Herein, I describe... in simple language... what the Market Profile graphic is about and the information it provides those who trade auction market process.

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The Volume Profile overlay we saw in Part 1 is now flipped 180 degrees and is composed of transaction volume recorded at each price level, during Friday's auction. I've labeled the key parts with explanations.

We can immediately see that transaction volume for the day

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formed a bell-shaped curve where the fairest price for a futures contract in $ES_F was ~4086. Those who bought at the low end of the Volume Profile ... known as a "buying tail" profited.

Since the day's trading finished around 4100 and since auctions are constantly

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