Real-time ORB trading on ThinkorSwim: Full Breakdown from Entry to Exit

Key Concepts

• Option Alphabot: An automated trading system used by the speaker for executing option trades.
• Call Credit Spread: A strategy where a trader sells a call option and buys another call option with a higher strike price, both with the same expiration date. This strategy profits if the underlying asset's price stays below the sold call's strike price.
• Put Credit Spread: Similar to a call credit spread, but involves selling a put option and buying another put option with a lower strike price. This strategy profits if the underlying asset's price stays above the sold put's strike price.
• Opening Range Breakout: A trading strategy that involves entering a trade when the price of an asset breaks out of its established trading range during the initial period of the trading session (e.g., the first 60 minutes).
• Magic Eightball: A market prediction software developed by a member of the speaker's Discord community, used to suggest vertical spreads for trading.
• Vertical Spread: An options strategy that involves buying and selling options of the same type (calls or puts) with the same expiration date but different strike prices.
• Mid Price: The average of the bid and ask prices for an option contract, often used as a reference for execution.
• Fill Price: The actual price at which a trade is executed.
• Profit Target: A predetermined price level at which a trader aims to close a profitable trade.
• Stop Loss: A predetermined price level at which a trader aims to close a losing trade to limit potential losses.
• Doji Candle: A candlestick pattern that indicates indecision in the market, where the opening and closing prices are very close.
• Violent Chop: Volatile price action characterized by significant swings in both directions, often testing both the high and low of a trading range.
• Zero DTE (Zero Days to Expiration): Options contracts that expire on the same day they are traded. These are known for their high volatility and rapid price movements.

Trading Day with Option Alphabot and Magic Eightball

This summary details a day of options trading, focusing on the execution of trades using an automated system (Option Alphabot) and a community-driven prediction tool (Magic Eightball). The speaker walks through specific trades, highlighting the bot's actions, manual entries, order fills, profit targets, and stop losses.

Bot Execution and Manual Entry

The trading day begins with the Option Alphabot automatically executing a trade.

• Bot Entry: The bot filled a call credit spread at $1.75 after the market broke the low of the opening range.
• Manual Entry Order: A working order for $2 was placed manually to add to the position if the mid price reached that level. This was an optional addition, and the trade would proceed with one contract if it didn't fill.
• Placeholder Order: An order for $8 was a placeholder to monitor the mid price before the bot's entry and was subsequently canceled as it was unlikely to fill.

The speaker notes that the market was falling, and the $2 manual order did not fill as the mid price dropped to $1.45. The speaker emphasizes that if the bot's closing order fills before the manual order, the manual order would be canceled, and the trade would be considered complete with the single contract filled by the bot.

Trading with the Magic Eightball

The speaker also participates in a private Discord community where a member developed market prediction software called the "Magic Eightball."

• Trading Schedule: The speaker trades a vertical spread suggested by the Magic Eightball every Monday, Wednesday, and Friday at 10:30 AM Eastern.
• Trade Execution: Trades can be copied and pasted from Discord into the Think or Swim platform.
• Delayed Execution: On this particular day, the Magic Eightball was 6 minutes late in providing its suggestion.
• Price Adjustment: The Magic Eightball suggested a price of 78 cents, which was unlikely to fill. The speaker uses a moving average study on ES (S&P 500 futures) to target a better entry price, stating they "almost never enter it for exactly what the magic eightball suggests."
• Order Status: The speaker communicated to the community that their order was working for the spread at a specific price and also stated their profit target and stop loss if the trade filled.

Trade Performance and Observations

The speaker then fast-forwards to observe the price action and trade outcomes.

• Bounce and Profit Target: A bounce in the market occurred, leading to the first order working being a take-profit order for the position that filled at $2. The second working order was the take-profit order for the Magic Eightball call credit spread, which was a five-wide call credit spread.
• Profit Achievement: The trade that filled at $1.75 (bot's entry) reached its 50 cents profit target in 12 minutes. The additional 25 cents credit from the manual entry (if it had filled at $2) would have been beneficial.
• Bot Closing Order: The bot's closing order for the $1.75 contract was not visible until the mid price reached $1.25.
• Community Comparison: A member in the Discord room took the same spread and filled only 10 cents above the bot's price and was out of the trade in 24 minutes. This highlights how even a small difference in fill price can impact the time in the trade.
• Trade Completion: The bot eventually sent the closing order, and the speaker exited the bot's position, waiting for the other trade (Magic Eightball) to fill.

Trading Log Review: 60-Minute Opening Range Breakout

The speaker then delves into their trading log, specifically reviewing the "60-minute opening range breakout" strategy, with 63 occurrences documented.

• Specific Trade Example (November 11th): The speaker details a trade from Tuesday, November 11th.
  • Breakout: At 7:35 AM, a breakout to the downside of the opening range occurred.
  • Bot Entry: The bot entered one contract at $1.90.
  • Manual Addition: A few minutes later, the speaker added to the position at $2.30.
  • Buy to Close Order: A buy-to-close order was placed immediately and filled 5 minutes later.
  • Stop Out: Unfortunately, this position was stopped out.
• Option Alpha Position Details: Reviewing the position details on Option Alpha for the $1.90 fill, the trade reached the profit target 20 minutes later, and the order was sent but never filled, causing the trade to time out.
• Stop Out Explanation: The call credit spread experienced an upside bounce, leading to a stop out an hour later. The speaker expresses frustration seeing that the profit target was reached but the exit order didn't fill.
• Bot Template Update: The speaker mentions that the current version of their bot template has a fixed stop-loss of $140. In this specific instance, an older version was used, resulting in a higher loss.

Further Trade Examples and Observations

The speaker presents two more trades from their log.

• Manual Fill Before Bot: On one day, the manual position filled before the bot's position.
  • Breakout Trigger: When the breakout triggered, the speaker saw Option Alpha sent an order for a put credit spread at $1.05.
  • Manual Add: The speaker placed a manual order to add if the position reached $1.20, which it did at 7:52 AM.
  • Bot Fill Issue: The bot was struggling to get a fill at $1.05. To avoid missing the trade, the speaker canceled the bot's order and sent a new one at the current mid-price.
  • Trade Outcomes: The manual trade won in 7 minutes, while the bot's trade took 1 hour and 21 minutes to win.
  • Manual vs. Bot Performance: The speaker notes that previously, their manual position hadn't made the difference between a win and a loss. This day marked the first time the manual position won while the bot's did not.
  • Fill Uncertainty: The speaker is unsure why the bot didn't fill, speculating it might have been related to Tradier, as their paper bot also filled at $1.20.
• Unusual Bot Entry and Exit: The speaker describes a peculiar situation where the bot attempted to enter and exit a call credit spread within minutes.
  • Chart Analysis: Using a 5-minute chart (down from 15-minute due to lack of visibility), the speaker shows the breakout of the 60-minute opening range low.
  • Bot Hesitation: The bot did not take a position initially because the call credit spread only offered 55 cents of credit.
  • Entry and Simultaneous Exit: On a subsequent 12-point candle, the bot found 70s and entered the trade at 12:30 PM. Simultaneously, it attempted to stop out the position.
  • Exit Fill: The trade then filled as an exit for $1.65 in the same minute. The speaker cannot definitively explain this rapid entry and exit but attributes it to extreme price action.

Future Bot Setting: Doji Candle Filter

The speaker discusses a new setting being tested for the next version of their bot template.

• Doji Candle Detection: The bot will be programmed to look for a doji candle in the first 15 minutes of the trading session.
• Bot Inactivity: If a doji candle is detected, the bot will not run for that day.
• Rationale: A doji candle signifies indecision. The speaker theorizes that when the first 15-minute candle is a doji, the subsequent price action often involves violent chop, where both the high and low of the opening range are tested. This is detrimental to an opening range breakout strategy, as the speaker prefers to enter on a breakout without the opposite side being tested.
• Past Experience: The speaker recalls knowing a trade was likely to lose because of a doji open, specifically mentioning a put credit spread that ended up losing because the downside was tested.
• Testing Phase: The speaker is still testing this setting and has not encountered a doji day since implementing the logic with "Jack." They want to ensure it works correctly before releasing the updated template.

Conclusion and Call to Action

The speaker concludes by acknowledging the fast-paced nature of Zero DTE trading and apologizes if the explanation was rushed. They invite questions in the comment section.

• Cloning the Bot: For those interested in cloning the bot, a free trial is available at Option Alpha, where the template can be copied and modified.
• Live Trading Community: A link to the Discord community for live trading is also provided.