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Here's a quick video I recorded on the exhaustion statistics
Thanks for creating/posting this educational video on this rare
Thanks Matt for the helpful vid! It's good to know that this
short is probably one that is occurring within a trend vs capping
the end of the trend.
Btw, are you still working on or considering including the ES
system on the website? Does that have any short
yes generally that exhaustion trade occurs in the middle of a
trend just like it did in late Nov, however also as I commented in
the video the fact that this is occurring once again so soon is
rare, so maybe that's indicative we are nearing the end of this
particular trend, kind of in the back of my mind anyway. Not bull
market top mind you but maybe a larger pullback is finally getting
close and we are starting to see some parabolic nature now
as far as bringing the ES system signals to the website, that's
still in the works. However see my previous posts about the issues
we could have since the ES system trades do not actually confirm
until 1 hr after the cash SPX market closes. Options no longer
trade when ES closes at 5 PM EST, thus we'd have to buy the options
an hr before ES closes and the signal actually confirms. As
you have seen with the SPY system, many times we have trade signals
showing intra day only to disappear before the close, thus it's s
possible we could do the trade at the 4 pm EST, but the signal
disappear by the time the ES closes at 5 pm EST. Now because
the market is generally FAR less volatile after the cash market
closes I think it would be rare for signals to change within that
1hr time window, but it is a possibility. Also what do we do
in a situation like that? ETF's can be bought and sold in after hrs
markets so no real issues there, however for options you either
have to sell the next day or hold with some sort of exit plan
outside of the system.
Because of all this it might make sense for me to stick to he
futures signal trade instead of the other instruments. ES is highly
leveraged futures and not for everyone. However the micro ES
futures contract my be an option I can consider as it's 1/10 the
value and margin over the ES. For example trading 5 MES contracts
is like trading 1 ES contract, or 2 MES contracts is like trading
1/5 of an ES contract. Anyway for those scared of futures or
waiting to go really small or with small accounts that could be an
option. Futures also have the 60/40 tax benefit over trading ETF's
and SPY options.
anyway I have not decided the best course of action there.
Hi Matt, am I missing something here on the micro contracts. I
was/am of the view that the micro is 1 tenth of the
In my experience, one MES contract is roughly equivalent to one
SPY option. MES trades 23 hours per day. and can be used to hedge
SPY options, or vice versa, a position in MES can be hedged with
SPY options in heavily trending markets. 1 MES is one tenth of a
one ES contract.
thx for the info, though you leave out one very important piece
of info which is what type of SPY option. There's a big difference
in price between a SPY option with a 0.9 delta and one with a 0.5
delta and of course price movement, and the amount of time
you go out, 1 or 2 months. However the most important part is the
delta really. If you can reply back approximately which SPY
options you are referring to that have about a 1:1 correlation with
an MES contract (delta especially).
Options with 0.9 delta. One difference though is that options
require a constant margin while MES contracts eat the margin slowly
but relentlessly. However, for hedging overnight between market
closes that is not a problem. If there is a trade at 4pm but it
disappears by 5pm, selling one MES till the next morning as a hedge
Then there is a slight difference between MES and MNQ: MNQ moves
more than MES nowadays. One could combine a SPY option with one MNQ
contract for a fine hedge.
Sorry, I got it backwards. It is SPY options with 0.5 delta
which you use for your 1st entries. Options on SPY with 0.9 delta
behave like MNQ. Both MNQ and MES are worth about $15,000 of the
Any update on PRED???
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