Gamma Exposure (GEX) Level Trade

Entry Logic

• Long entry: The market (SPX) is falling towards a major positive gamma exposure (GEX) level. This level should act as support, as dealers will be buying to hedge their positions. Enter long on a bullish reversal pattern at the GEX level.
• Short entry: The market is rallying towards a major negative GEX level. This level should act as resistance. Enter short on a bearish reversal pattern.
• Confirmation: A decrease in selling pressure as the market approaches the level.
• Timeframe: 1-hour chart.
• Location: At major GEX levels.
• Market Condition: Any.

Exit Logic

• Profit Target: The next major GEX level or the other side of the expected trading range.
• Scaling Out: Not recommended.
• Trailing Stop: Not recommended.
• Signal Failure: If the market closes decisively beyond the GEX level.
• Opposite Signal: Not applicable.
• Time Expiration: Exit by the end of the day.
• Momentum Loss: Not applicable.

Stop Loss Structure

• Hard Stop: A few points beyond the GEX level.
• Soft Stop: If the market is accepted beyond the GEX level.
• Max Dollar Loss: $200 per trade.
• Max Percent Loss: 1% of account.
• Structural Stop: Not applicable.

Risk Management Framework

• Risk Per Trade: 1% of account.
• Daily Limit: 2 losing trades.
• Weekly Limit: 5% drawdown.
• Max Drawdown: 10%.
• R:R Requirement: Varies, but should be at least 2:1.

Position Sizing Model

• Sizing Approach: Fixed fractional.
• Volatility Adjustment: Not a primary concern.
• Conviction Sizing: Not recommended.
• Scaling In: Not recommended.
• Scaling Out: Not recommended.

Trade Filtering

• Market Conditions: Only trade when there are clear, significant GEX levels.
• Setups: A clean test of a GEX level.
• Instruments: SPX, SPY.
• Time Restrictions: Any.
• Chop/News Avoidance: Be cautious around major news.

Context Framework

• Trend Direction: Not applicable.
• VWAP Relationship: Not a primary concern.
• MA Relationship: Not a primary concern.
• Range Location: The GEX levels often define the expected trading range for the day.
• Higher TF Alignment: Not required.

Trade Management Rules

• Breakeven: Move stop to breakeven after 1.5R of profit.
• Scale Out: Not recommended.
• Add Size: Not recommended.
• Fast vs Slow Moves: This is a mean-reversion trade.

Time Rules

• Optimal Window: Any.
• Times to Avoid: The open can be volatile.
• Session Notes: A strategy based on options market structure.

Setup Classification

• A+ Setup: A perfect test of a very large GEX level.
• A Setup: A good test of a GEX level.
• B Setup: A messy test or a minor GEX level.
• C Setup: No clear GEX levels.

Market Selection Criteria

• Instruments: SPX and SPY.
• Volume: High.
• Volatility: Any.

Statistical Edge Metrics

• Win Rate: 65%.
• Avg Win: 2R.
• Avg Loss: 1R.
• Profit Factor: 1.3.
• Expectancy: 0.3R per trade.

Failure Conditions

• Market Conditions: A strong, trending market that blows through the GEX levels.
• Specific Scenarios: A major news event that overrides the options market structure.

Psychological Rules

• Mental Discipline: Requires trust in the data and the ability to fade moves.

Advanced Components

• Regime Detection: Not needed.
• Filters: Use a service that provides GEX data.
• Correlation: Not a concern.
• MTF Alignment: Not required.

Location

• Strongest: In a range-bound or moderately trending market.
• Weakest: In a very strong, one-directional trend.