This is a discussion of the "Fade the Dip AI" strategy.
Fade the Dip AI Short Put Spread is a neutral-to-bullish strategy that sells a put credit spread when a stock reclaims its 200-day SMA while above its 10-day EMA, with 20-day RSI below 70, one-year skew above 0, one-year kurtosis above 1, and option liquidity of at least 4, exiting when 50% of the credit is captured or two days before earnings—whichever comes first.
Overview
- Short Put Spread
- 2 legs
Fade the Dip AI Strategy Settings
Fade the Dip AI Open Conditions:
- Stock Crosses Up Through SMA 200 Days
- Stock is above EMA 10 Days
- 20 Day RSI below 70
- 1 year asymmetry (skew) of up vs down stock returns above 0
- In the last year, the kurtosis (tailedness) of the stock returns has been above 1
- On a scale of 1 to 5 (best) the minimum liquidity for an option trade is 4
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Details on Options TradeMachine is Selecting for Fade the Dip AI Strategy:
- 1x short 50 delta call near 30 days to expiration
- 1x long 40 delta call near 30 days to expiration
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Earnings Handling for Fade the Dip AI Strategy:
Fade the Dip AI Close Conditions:
- Close 2 days before earnings
- Gains are above 50%
- Options reach expiration
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Open next trade for Fade the Dip AI:
