Juice: Detecting Market Tsunamis with Precision
Each day, 440 million data points are collected, piped into a database, and analyzed with data science techniques to detect anomalies. Initially, the sheer volume of data created a lot of noise. Strategic placement of beacons across the ocean floor for tsunami detection was necessary.
The system detects massive movements beneath the surface by evaluating the underlying data with something called Juice, which measures skew by tenor and delta. GME Price is shown in blue, while Juice is depicted in orange. When ATM (orange) Juice spikes below negative -55 and remains in the green zone, it indicates a massive signal and is extremely rare.
Three graphs are available: GME price and Juice from 2020 to the current date, demonstrating how rare these signals are. A focused view on July 2020 to early 2022 for a detailed examination. Another from 2023 to the current date for the latest insights.
Additionally, there is a sheet with raw data that includes various columns such as the date, Juice value, GME closing price, and future prices for 3, 5, 10, 30, and 90 days. Calculations were made to add these business days to each given date, ensuring to skip weekends and holidays so that all future dates fall on days when the stock market is open.
Trading Strategy Based on Juice Value and GME Price
Broad Trading Strategy - Juice Value Overview:
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Juice is an oscillator that compares put and call option prices using a unique algorithm.
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It helps detect unusual options market activity and shifts in sentiment.
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When the Juice value spikes below negative -55 and stays in the green zone, it signals a rare and significant trading opportunity.
General Observations:
Negative Juice Values:
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Below -55: Indicates a strong potential for market movements when it stabilizes in the green zone.
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Between -50 and -55: Suggests monitoring closely for potential stability and market movements.
Juice and GME Price Relationship:
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Juice spikes correlate with significant future price movements.
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Use Juice to predict and capitalize on short-term (3-10 days) and long-term (30-90 days) price trends.
Trading Strategy:
Short-Term Strategy:
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When Juice value drops below -55, consider initiating a position.
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Monitor the GME price for 3, 5, and 10 days to capture short-term trends.
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Example: On 03/08/21, Juice value at -75 and GME price rose from $48.63 to $65.00 within 3 days.
Medium-Term Strategy:
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Continue holding the position if the Juice value remains in the green zone.
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Evaluate price movements over 30 days.
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Example: On 01/27/21, Juice value at -83 and GME price decreased from $86.88 to $56.25 within 30 days. Additionally, based on this analysis, it is advised not to buy on the highs as there will likely be a better entry point in a few days.
Long-Term Strategy:
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Consider positions based on 90-day projections, especially when Juice shows consistent trends.
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Long-term positions are riskier but can yield high returns.
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Example: On 12/02/20, Juice value at -58 and GME price increased from $4.14 to $29.55 in 90 days.
Analysis Insights:
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This strategy relies on the historical correlation between Juice values and GME price movements.
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Future prices were calculated by adding 3, 5, 10, 30, and 90 business days, avoiding weekends and holidays.
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Additionally, there is a sheet with raw data that includes various columns such as the date, Juice value, GME closing price, and future prices for 3, 5, 10, 30, and 90 days. Calculations were made to add these business days to each given date, ensuring to skip weekends and holidays so that all future dates fall on days when the stock market is open.
Rows Highlighted in Purple and Their Implications: There are six periods where Juice has "punches in bunches" or multiple days in a row (or exactly 4/5 days in a row) with significant changes in Juice values, we can examine the periods where the Juice value remains below -55 or demonstrates significant changes for several consecutive days.
01/20/21 to 01/29/21:
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Dates: 01/20/21, 01/21/21, 01/27/21, 01/29/21
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Juice Values: -75, -57, -83, -86
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Implications: Indicates a strong and consistent sentiment in the market, signaling significant potential movements. The price of GME experienced major spikes during this period, which is reflected in the high Juice values.
02/01/21 to 02/08/21:
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Dates: 02/01/21, 02/03/21, 02/04/21, 02/05/21, 02/08/21
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Juice Values: -79, -76, -76, -73, -68
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Implications: Prolonged high activity period indicating continued market volatility and significant sentiment shifts. The GME price remained volatile with notable movements.
03/08/21 to 03/12/21:
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Dates: 03/08/21, 03/09/21, 03/11/21, 03/12/21
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Juice Values: -75, -76, -75, -75
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Implications: Sustained negative Juice values over a short period, signaling a high potential for continued price movements. The GME price indeed showed upward movement during this period.
05/13/24 to 05/17/24:
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Dates: 05/13/24, 05/14/24, 05/15/24, 05/16/24, 05/17/24
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Juice Values: -72, -78, -75, -65, -60
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Implications: Consistent negative Juice values, indicating strong market sentiment and the likelihood of price changes. As the exact future prices are unknown, this period would warrant close monitoring.
05/20/24 to 05/24/24:
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Dates: 05/20/24, 05/21/24, 05/22/24, 05/23/24, 05/24/24
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Juice Values: -58, -56, -68, -59, -64
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Implications: Continuous monitoring required as prolonged negative Juice values suggest potential price volatility. The price trend during this period can provide insights into market sentiment and future price predictions.
06/03/24 to 06/07/24:
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Dates: 06/03/24, 06/04/24, 06/05/24, 06/06/24, 06/07/24
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Juice Values: -66, -66, -65, -75, -72
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Implications: Sustained negative Juice values indicate a strong potential for significant market movements. This period requires close observation for potential trading opportunities.
Data Science Implications: Periods of consecutive negative Juice values typically indicate strong market sentiment and increased options market activity. This can mean:
Increased Volatility: Consecutive negative Juice values signal increased market volatility. This often corresponds with significant price movements, making it a critical period for traders to monitor closely.
Market Sentiment: Sustained negative values suggest bearish sentiment or strong selling pressure in the options market, often leading to downward price trends.
Trading Opportunities: These periods can be used to identify potential trading opportunities. For instance, if the Juice value is consistently negative and the price has already decreased, it might indicate a potential buying opportunity once the Juice value starts stabilizing.
Risk Management: Traders should be cautious and employ risk management strategies during these periods to protect against potential losses due to high volatility.
Conclusion:
Highlighting the rows with multiple days of significant negative Juice values on the chart helps visualize periods of high market activity and sentiment shifts. These periods are crucial for identifying trading opportunities and managing risks effectively. Additionally, based on this analysis, it is advised not to enter positions at the highs as there will likely be a better entry point in a few days.
Disclaimer: This strategy is based on historical data and correlations. Past performance is not indicative of future results. Always perform your own research and consider your risk tolerance before making any trading decisions.
