Threshold List Trade

Entry Logic

• Exact Entry Trigger: A stock appears on the NYSE or NASDAQ Threshold Security List for 5 consecutive days.
• Confirmation: The stock is also hard-to-borrow and has a high level of Fails-to-Deliver (FTDs).
• Timeframe: Daily chart.
• Location Context: The stock is typically in a consolidation or a slow uptrend.
• Market Condition: Any.

Exit Logic

• Profit Target(s): A 20% gain, as the mandatory close-out period (T+13) approaches.
• Scaling Out: Sell in thirds at 10%, 15%, and 20%.
• Trailing Stop: A close below the 20-day EMA.
• Signal Failure: The stock is removed from the Threshold List before any significant price appreciation.
• Opposite Signal: A large secondary offering is announced, providing shares to close out FTDs.
• Time Expiration: 13 trading days after appearing on the list.
• Momentum Loss: The stock fails to move as the T+13 deadline nears.

Stop Loss Structure

• Hard Stop: 10% below entry.
• Soft Stop: A close below a key daily support level.
• Maximum Dollar Loss: $1000 per trade.
• Maximum Percent Loss: 10% of the trade value.
• Structural Stop: Below the low of the week the stock appeared on the list.

Risk Management Framework

• Risk Per Trade: 0.8% of the account.
• Maximum Daily Loss: Not applicable.
• Maximum Weekly Loss: Not applicable.
• Maximum Drawdown: 18% of the account.
• R:R Requirement: Minimum 2:1.

Position Sizing Model

• Sizing Approach: Fixed fractional.
• Volatility Adjustment: Reduce size if ATR is unusually high.
• Conviction Sizing: A+ setups (on the list > 10 days) get full size.
• Scaling In: Not recommended.
• Scaling Out: As per exit logic.

Trade Filtering

• Market Conditions to Avoid: None, this is a regulatory-driven setup.
• Specific Setups: Focus on stocks that have been on the list for multiple days.
• Instrument Requirements: Any stock that appears on the official Threshold List.
• Time Restrictions: The trade has a built-in timeline around the T+13 settlement cycle.
• Chop/News Avoidance: Be aware of any corporate actions.

Context Framework

• Trend Direction: Can be in any direction, but an uptrend provides a tailwind.
• VWAP Relationship: Not a primary factor.
• MA Relationship: Trading above the 50-day SMA is a positive sign.
• Range Location: Often in a consolidation range.
• Higher TF Alignment: Not critical.

Trade Management Rules

• Breakeven: Move stop to entry after a 10% gain.
• Scale Out: Take profits as the T+13 date approaches.
• Add Size: Not recommended.
• Fast vs Slow Moves: The move can be abrupt in the final days of the settlement period.

Time Rules

• Optimal Window: Enter between day 5 and day 8 of the stock being on the list.
• Times to Avoid: Chasing the entry on day 12 or 13.
• Session Notes: The forced buy-in can happen at any time on the final day.

Setup Classification

• A+ Criteria: On the list for 10+ days, high short interest, and high cost to borrow.
• A Criteria: On the list for 5+ days.
• B Criteria: On the list for 1-4 days.
• C Criteria: Avoid.

Market Selection Criteria

• Instruments: Common stocks.
• Volume/Liquidity: Any.
• Volatility: Often high.

Statistical Edge Metrics

• Expected Win Rate: 50-60%.
• Average Win Size: 15-25%.
• Average Loss Size: 8-10%.
• Profit Factor: 2.0+.
• Expectancy: Positive.

Failure Conditions

• Market Conditions: Not the primary driver of failure.
• Specific Scenarios: The FTDs are resolved through means other than open market purchases (e.g., a share offering, an exemption).

Psychological Rules

• Mental Discipline: This is a rule-based, time-sensitive trade. You must adhere to the timeline.

Advanced Components

• Market Regime Detection: Not applicable.
• Filters: Monitor the official NYSE and NASDAQ Threshold lists daily.
• Correlation: Not a factor.
• MTF Alignment: Not applicable.

Location

• Where Strongest: In stocks with legitimate settlement failures, indicating a high level of synthetic shorting or other anomalies.
• Where Weakest: If the appearance on the list is due to a temporary, administrative error.