Gamma Squeeze Trade

Entry Logic

• Exact Entry Trigger: Stock price breaks above a key short-term resistance level with a surge in call option volume.
• Confirmation: High open interest in near-term call options, particularly out-of-the-money strikes.
• Timeframe: 15-minute chart for entry.
• Location Context: Above the 50-day SMA and a previous resistance level.
• Market Condition: Bullish or neutral market.

Exit Logic

• Profit Target(s): 5% initial target, then trail with a 10-period EMA.
• Scaling Out: Sell 50% at 5%, 25% at 10%, and let the rest run.
• Trailing Stop: 10-period EMA on the 15-minute chart.
• Signal Failure: Close below the breakout level.
• Opposite Signal: A large bearish candle on high volume.
• Time Expiration: End of the trading day.
• Momentum Loss: Call option volume starts to decline.

Stop Loss Structure

• Hard Stop: 3% below the entry price.
• Soft Stop: A close below the breakout candle's low.
• Maximum Dollar Loss: $600 per trade.
• Maximum Percent Loss: 3% of the trade value.
• Structural Stop: Below the most recent swing low.

Risk Management Framework

• Risk Per Trade: 0.75% of the account.
• Maximum Daily Loss: 2.25% of the account.
• Maximum Weekly Loss: 6% of the account.
• Maximum Drawdown: 18% of the account.
• R:R Requirement: Minimum 2.5:1.

Position Sizing Model

• Sizing Approach: Fixed fractional position sizing.
• Volatility Adjustment: Reduce size if the stock is highly volatile.
• Conviction Sizing: A+ setups get 100% size, A setups 75%, B setups 50%.
• Scaling In: Not recommended.
• Scaling Out: As per exit logic.

Trade Filtering

• Market Conditions to Avoid: Bearish markets.
• Specific Setups: Only trade setups with high call option volume.
• Instrument Requirements: Stocks with a liquid options market.
• Time Restrictions: Avoid trading in the first 30 minutes of the market open.
• Chop/News Avoidance: Avoid trading around earnings announcements.

Context Framework

• Trend Direction: Uptrend or range-bound on the daily chart.
• VWAP Relationship: Price must be above VWAP.
• MA Relationship: Price must be above the 50-day SMA.
• Range Location: Breaking out of a consolidation range.
• Higher TF Alignment: Daily chart should not be in a downtrend.

Trade Management Rules

• Breakeven: Move stop to breakeven after a 4% gain.
• Scale Out: As per exit logic.
• Add Size: Not recommended.
• Fast vs Slow Moves: Use a tighter trail on fast moves.

Time Rules

• Optimal Window: Mid-day, from 11:00 AM to 2:00 PM EST.
• Times to Avoid: First 30 minutes and the last 30 minutes of trading.
• Session Notes: Most effective in the middle of the trading day.

Setup Classification

• A+ Criteria: All conditions met, very high call option volume.
• A Criteria: All conditions met, high call option volume.
• B Criteria: Missing one condition.
• C Criteria: Missing more than one condition.

Market Selection Criteria

• Instruments: Stocks with a history of gamma squeezes.
• Volume: High stock and option volume.
• Volatility: High implied volatility in the options.

Statistical Edge Metrics

• Win Rate: 35-45%.
• Avg Win: 10-15%.
• Avg Loss: 4-6%.
• Profit Factor: 2.0-2.5.
• Expectancy: Positive.

Failure Conditions

• Market Conditions: Fails in bearish markets.
• Specific Scenarios: Fails if the call option volume dries up.

Psychological Rules

• Mental Discipline: Do not get greedy. Take profits at the targets.

Advanced Components

• Regime Detection: Use a market regime filter to avoid bearish markets.
• Filters: Filter for stocks with high open interest in near-term call options.
• Correlation: Avoid trading multiple correlated stocks.
• MTF Alignment: Ensure the daily chart is not in a downtrend.

Location

• Where Strongest: In a bull market with high speculation.
• Where Weakest: In a bear market with low risk appetite.