Figure a little over one and one-half standard deviations for ideal markets, a little over two and one-half for volatile markets and three and one-half or sit out for black swan event panic. This equates on the Chaikin Volatility 10,10 to roughly negative is 1.5 lanes, 0 to 200 is 2.5 lanes and over 200 is 3.5 lanes or sit out. A lot of times this is overly cautious and sometimes this is underly cautious, so play it by ear.
The LRCs and the MACD 9,26,26 give a sense of overbought and oversold. Awesome Oscillator 9,26,1 tends to demonstrate what the MACD 9,26,26 says. As a general rule for the Awesome Oscillator 9,26,1, a green bar says to sell a put and a red bar says to not sell a put. The MACD 9,26,26 has the final say. 9,26 is an Ichimoku setting.
I've been overly conservative in my put selling lately and looking for a system to avoid that. Don’t deal in securities that don’t have weekly options. Deal in only the highest-volume ETFs and stocks above $40, as basically if you can’t make money in them you can’t make money in anything else. Be wary of dealing in volatility ETFs and inverse ETFs and sluggish bond ETFs and leveraged ETFs and commodity ETFs. Deal in SPY as your bread and butter and deal in the other major ETFs and top-notch stocks when you have room in your portfolio for their expiration dates and they will pay off enough. Play the market appropriately with the wheel strategy. LRC 2 contains 68% of all prices, LRC 4 contains 95% of all prices, LRC 6 contains 99% of all prices and LRC 8 contains 99.5% of all prices. As for how far out of the money to sell a put, figure for a green bar on the Awesome Oscillator one LRC standard deviation lane and for a red bar on the Awesome Oscillator one-and-one-half or two LRC standard deviation lanes depending on the severity of the situation.
I thought I should make it more screenable. 7-day Average Directional Indicator tends to demonstrate what the MACD 9,26,26 says and is used for determining deal or no deal. Sometimes you can see divergence on it. As for how far out of the money to sell a put, figure for a green +DI higher on the Average Directional Indicator at least one LRC standard deviation lane and for a red -DI higher on the Average Directional Indicator sit it out.
The way to screen for the currently-hot stocks is with positive Weighted Alpha. It does severely cut down on eligible ETFs, but it is what it is.
I got to thinking it doesn't really matter what a stock's weighted alpha is: what really matters is that it has a good chance of being bullish or not too bearish. And how do you screen for that? The 7-day Average Directional Indicator is fairly good but keeps you out of the market too much when you could be in it making money. Got to go with a shorter period than seven days and the only way to do that on Barchart is with the 5-day moving average. And to represent it on the chart I use RSI-5. You can see RSI divergence and RSI trendlines.
I replaced the RSI-5 with an Awesome Oscillator. Positive green bar means deal; anything else is no deal. It seems the vast majority of times you’ll end up making money by selling puts one standard deviation or more out of the money according to the system and about the only time you’ll have a loss is by selling a put at one standard deviation in a time of crisis when you should have went farther out of the money or sat it out. Such a situation is not hard to see if you’re not too blind to see it or too stubborn to heed it. Using a 5-day Awesome Oscillator is kind of like using an Accelerator Oscillator or fractals.