Event Volatility Trade

Entry Logic

• Entry trigger: A scheduled event with a high potential to move the market.
• Confirmation: Implied volatility is high leading up to the event.
• Timeframe: Not applicable.
• Location context: Not applicable.
• Market condition: The market is anticipating a significant news release.

Exit Logic

• Profit target: A large move in the underlying after the event.
• Scaling out: Not applicable.
• Trailing stop: Not applicable.
• Signal failure exit: The event is a non-event and the market does not move.
• Opposite signal exit: Not applicable.
• Time expiration: Exit after the event.
• Momentum loss: Not applicable.

Stop Loss Structure

• Hard stop: The maximum loss on the options position.
• Soft stop: Not applicable.
• Max dollar loss: 2% of account capital.
• Max percent loss: 2% of account capital.
• Structural stop: Not applicable.

Risk Management Framework

• Risk per trade: 1% of account capital.
• Daily limit: Not applicable.
• Weekly limit: Not applicable.
• Max drawdown: 15% of account capital.
• R:R requirement: The potential reward should be much greater than the risk.

Position Sizing Model

• Sizing approach: Position size based on the maximum loss of the options trade.
• Volatility adjustment: The strategy is based on high implied volatility.
• Conviction sizing: Not applicable.
• Scaling in: Not recommended.
• Scaling out: Not recommended.

Trade Filtering

• Market conditions to avoid: When there are no scheduled events.
• Specific setups required: A major scheduled event.
• Instruments: Options on the instrument that will be most affected by the event.
• Time restrictions: The trade is based on the timing of the event.
• Chop/news avoidance: The strategy is based on news.

Context Framework

• Trend direction: Not applicable.
• VWAP relationship: Not applicable.
• MA relationship: Not applicable.
• Range location: Not applicable.
• Higher TF alignment: Not applicable.

Trade Management Rules

• Breakeven: Not applicable.
• Scale out: Not applicable.
• Add size: Not applicable.
• Fast vs slow moves: Expect a very fast move after the event.

Time Rules

• Optimal window: Just before the scheduled event.
• Times to avoid: When there are no scheduled events.
• Session notes: Not applicable.

Setup Classification

• A+ setup: A major event with a very high potential to move the market.
• A setup: A moderate event.
• B setup: A minor event.
• C setup: No event.

Market Selection Criteria

• Instruments: Options on the instrument that will be most affected by the event.
• Volume: High volume and open interest in the options.
• Volatility: The strategy is based on high implied volatility.

Statistical Edge Metrics

• Win rate: Low, but the winners are very large.
• Avg win: Very large.
• Avg loss: The premium paid for the options.
• Profit factor: High.
• Expectancy: High.

Failure Conditions

• When strategy fails: When the event is a non-event.
• Specific scenarios to avoid: Paying too much for the options.

Psychological Rules

• Mental discipline: The ability to accept a 100% loss on the trade.
• Key mental discipline requirements: The conviction to hold the trade through the event.

Advanced Components

• Regime detection: Not applicable.
• Filters: Not applicable.
• Correlation: Not applicable.
• MTF alignment: Not applicable.

Location

• Where strongest: Around major, market-moving events.
• Where weakest: In quiet, news-less markets.