Leveraging Juice for Options Trading: A Dynamic Oscillator that Uncovers Hidden Market Opportunities
Introduction to Juice: The Dynamic Oscillator for Options Trading
Juice is a dynamic oscillator that employs a unique algorithm to compare put and call option prices, helping traders detect unusual options market activity and shifts in sentiment. With the ability to study ATM, OTM, and DOTM options and switch between different expirations (short term, medium term, and long term), Juice provides valuable insights for making informed trades.
How Traders Can Benefit from Juice: Uncovering Unusual Market Activity
Juice is a powerful tool that assists traders in making informed decisions by detecting unusual options market activity and shifts in sentiment. By comparing put and call option prices using a unique algorithm, Juice offers valuable insights into the market. One key insight provided by Juice is the ability to study short-term ATM skew, which tends to be highly correlated with itself and disparate from medium-term and long-term OTM and DOTM skew. This information can help traders identify potential trading opportunities and make more informed decisions.
Skew Analysis with Juice: Identifying Trading Opportunities
In addition to skew analysis, Juice allows traders to toggle between skew by volatility (BIV) or skew by option price (MID) to find the information that is most relevant to their strategy. As an example, see the case study images below on $VIX and NVDA.
Juice as a Tool in a Trader's Arsenal: Making Informed Trades
Juice is a valuable addition to a trader's toolkit because it provides insights into unusual options market activity and shifts in sentiment. By comparing put and call option prices using a unique algorithm, Juice helps traders detect potential trading opportunities and make more informed trades. Traders can toggle between skew by volatility (BIV) or skew by option price (mid) to find the information that is most relevant to their strategy.
Data scientists have back tested skew spikes and found two noteworthy signals. Two general patterns in skew graphs were identified, and the team plans to further analyze these patterns by rerunning the analysis on the two categories of stocks separately. The team also found that when skew values are higher than +40, the underlying security decreases in price, averaging ~3.5% after 20 calendar days. When skew values are lower than -40, the underlying security increases in price in the following days. The effect of high or low skew values on the underlying security is consistent across different spans and deltas but is more pronounced in Span 2 and OTM.
However, Juice doesn't always work, and traders should use it in conjunction with other analysis techniques. Additionally, from the examples provided, DOTM spikes are the most common and mean the least, whereas OTM and ATM spikes, especially ATM spikes, mean a lot more.
