Wrinkle Brain Plays

Tickers of Interest - TL;DR

Gamma Max Cross

• JNJ 05/19 160P for $1.50 or less
• TJX 05/19 77.5P for $2.05 or less
• EDR 05/19 22.5P for $0.50 or less
• CME 05/19 190P for $3.90 or less
• RMBS 05/19 50C for $2.55 or less

Delta Neutral Cross

• UBER 05/19 32.5C for $1.30 or less
• MU 05/19 62.5P for $2.65 or less
• COIN 05/19 70C for $6.05 or less
• CLF 05/19 18C for $0.90 or less
• BILI 05/19 21C for $1.90 or less

Trading Thesis - Why These Crayons Possess a Most Delectable Flavor 🎩

As our forefathers before us, technical analysis and indicator-based trading look to the past price performance to predict today’s crucial price levels.

This analysis hinges upon the current option open interest. Armed with that option open interest, it computes portfolio-level greeks—most notably Delta and Gamma. More importantly, once these greeks are established at the portfolio level, I can now simulate the change in greeks at various price points. From thence, I can discern the price levels where portfolio-level gamma is the highest and the portfolio-level delta is close to naught.

For certain tickers, the underlying price reacts most vigorously off of delta neutral, gamma max, and occasionally both.

It is the reaction off of these price levels in the past that is employed to drive trading signals.

The plays and target entry prices provided are calculated using a binomial option pricing model that reflects the expected magnitude and duration of the reaction from gamma max or delta neutral. A great many of these plays are profitable due to underlying moves in stock. The finest plays benefit from both the directional move and the increase in IV.

Notes - A Wrinkle in Your Brain, Courtesy of Honest Abe 📜

• If the price has advanced beyond the entry price, proceed with caution. Something has shifted betwixt the time these plays were generated and the market’s opening.
• Endeavor to sell half your position upon doubling, and freeroll the remainder to exit at your discretion.
• I am inclined to risk up to 1% of my total capital on any trades I undertake. If my conviction is lesser, I shall allocate a mere 0.5% or even 0.25% of my capital to the trade, and dollar cost average in.
• These trades were calculated prior to the market’s opening, and thus are based on information up until yesterday. Keep this in mind when deciding to enter well after the fact. New price movement may render the original thesis null and void.

FAQ - Inquiries Answered by the Great Emancipator Himself 🎩

• These plays are mostly puts. Art thou a gay bear?
  • Nay. It so happens that the companies have experienced a recent run-up, suggesting they are overextended. These trades are primarily a form of mean reversion, either toward or away from a significant price level.
• Art thou entering all these plays?
  • Nay. There has been a scarcity of plays in the WSB morning discussions, and so I have expanded my bag of tools slightly to highlight more plays with a probable edge, in order to guide apes toward greater gainful imagery. Peruse this curated list of plays, select those that appeal to you based on any additional analysis you employ, and acquire that gainful imagery.
• Thou hast mentioned a new play on the same ticker in the past. What dost that signify?
  • The new play should supplant the old play. The old play is likely now invalid, and if thou hast not entered, do not pursue the price. Remember that a new day’s worth of data hath been produced, and the newer play reflects that data, whereas the older play does not.
• Where are the crayons? I see only words.
  • Click the links above, my good sir or madam.
• Hast thou back-tested this?
  • Indeed. Results display a moderate Sharpe Ratio (1.76), with an expected win rate of 63% of trades (7% margin of error).
• What is the historical performance?
  • The realized Sharpe Ratio is 1.85 with a 68% win rate. Based on the trade performance thus far, there is a 95% chance the expected win rate will fall between 63% and 75%. (Stats as of 2023-03-31)