New BloodHound Template
New BloodHound Template
The purpose of the BloodHound Template has been to read the options market, determine a trend and trade with that trend. It’s difficult to monitor 6 screens and take in all the information they are giving you. It divides your attention from what information is important. With that in mind, ZoneTraderPro has created a new template, that combines the trend signals, with a new faster VIX signal.
The VIX is followed so closely because options dealers must hedge their existing book, and any new trades.
This chart above is from Thursday 2/23/23 and the time of 1040 is important. At 1040 the ZoneTraderPro VIX template indicates the symbols have turned bearish. NOTE: This was not due to the options trade I am going to describe, if the times are accurate in the ZeroHedge article. The challenge when creating a template is that you want to try and eliminate unnecessary signals from small moves in the indicators.
Also at 1040 EST a 0DTE options trade was made. 26,000 2/23/23 4000 strike Put options were bought for $5.5 Million. According to a “shocked” Goldman trader, “This Was The Largest 0DTE Block Trade I Have Ever Seen”
You can read the very interesting full story from Zerohedge.com HERE
The Market Makes A Low
At 1210 EST, the market makes its’ lows. Notice the new ZoneTraderPro template read the instruments and turn bullish. But even though the options trade made 5 times what it cost at market lows, it apparently wasn’t covered and closed for a profit. According to the Goldman trader, $2 Billion was sold by options dealers and later covered by the end of the day.
When viewed full screen, the template flips very quickly back to green after pullbacks were put in. This is because of the “fast” settings in the new template.
A lot has been written by both SpotGamma and ZeroHedge about 0DTE options trading lately. According to SpotGamma sometimes 50% of the options volume traded are 0DTE. This makes them a force in the market on virtually any day, as positions must be hedged, and those hedges unwound as they either expire worthless or are monetized.
The VIX is our key to trading with those order flows from the options dealers.
Two New Indicators
New VIX9D Indicator
Just like the previously released $VIX indicator, there is now a $VIX9D indicator. Because of the heavy 0DTE volume, the $VIX9D is possibly a better choice to use watching it move bar by bar.
I am currently also developing a second indicator. This indicator will be similar to the volume analysis tools in the divergence indicator. It will tell you how much The VIX9D has moved in relation to the 3.5 zigzag on the ES chart. This should be very helpful because you will instantly be able to see the amount the VIX has moved going into a trade.
The chart above is using a different template with just VIX symbols. This is the SPY from yesterday just after the market had made the lows. This template can be used as a trigger into a trade, or to trigger an exit to a trade that has been entered, if the VIX has reversed against you.
Being able to watch the new VIX9D indicator should also be a big help.
How It Works
The chart above is the selloff after 1040 EST and has the VIX only template on it, with the new VIX9D indicator on the bottom.
As price rises, we should see the VIX9D fall in value. If you want to enter a short trade, the less, the better. A higher number is going to suggest the closing of puts and covering at the lows.
As prices fall, you would like to see the values getting larger. This suggests more need to hedge and could be a reason to extend a target. If you were short, and the value barely rises, this can be a signal to close the trade. The -.21 followed by the .33 were warning signs that lows were being put in.
Take note of the long trade at the right of the chart. The value going into that trade was only .01.
Nothing written here is trading advice. It is an idea that you must test and develop a trading plan for.
looks very interesting!