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Options Trading Strategy Using Ichimoku Cloud, 200 SMA & Monthly Contracts
(Following Your 3 Trading Rules)
This strategy adapts the Ichimoku Cloud & 200 SMA trend-following method for trading monthly options contracts with a focus on high-probability setups. It leverages time decay (theta), trend strength, and proper timing to maximize gains while reducing risk.
🔹 Strategy Overview
We will trade monthly options contracts using:
Trend confirmation via Ichimoku Cloud & 200 SMA
Directional bias based on price positioning
Entry timing rules to avoid low-probability setups
Theta-friendly positioning (avoiding weeklies to reduce time decay risks)
📈 Trading Rules & Setup
(My 3 Golden Rules)
🚫 No trading on Mondays → Avoids choppy market structure from weekend gaps.
🚫 No trading on Fridays → Avoids gamma risk and weekend time decay.
⏳ No trades before the first 15-minute candle closes → Ensures market direction is established.
📊 Selecting the Right Option Contract
For monthly expiration contracts, select options that:
Expire within 30 to 60 days (avoid weekly contracts to minimize rapid time decay).
Are slightly in-the-money (ITM) or at-the-money (ATM) for higher delta (0.55–0.70).
Have open interest >1,000 and a tight bid-ask spread to ensure liquidity.
Example: If today is June 11, trade the July monthly contract (third Friday of the month).
📉 Bearish Put Play (Short Trade)
200 SMA Bias: Price is below the 200 SMA
Ichimoku Cloud Confirmation:
Price is below the cloud
Tenkan-sen is below Kijun-sen (bearish momentum)
Chikou Span is below price from 26 candles ago
Future cloud is red
Entry Trigger (After First 15 Min Candle):
Price pulls back into the Kijun-sen but rejects it
OR price breaks below the cloud after a weak consolidation
Enter PUT contract (monthly expiration)
Stop Loss & Take Profit:
SL: Above Kijun-sen or recent swing high
TP: First at the cloud’s lower edge, second at a key support level
Exit before Theta decay accelerates (last 14 days before expiry)
📈 Bullish Call Play (Long Trade)
200 SMA Bias: Price is above the 200 SMA
Ichimoku Cloud Confirmation:
Price is above the cloud
Tenkan-sen is above Kijun-sen (bullish momentum)
Chikou Span is above price from 26 candles ago
Future cloud is green
Entry Trigger (After First 15 Min Candle):
Price pulls back into the Kijun-sen but holds
OR price breaks out above the cloud
Enter CALL contract (monthly expiration)
Stop Loss & Take Profit:
SL: Below Kijun-sen or recent swing low
TP: First at the cloud’s upper edge, second at a key resistance level
📊 Trade Management & Adjustments
Rolling: If trade is profitable near expiry but not at the full target, roll to the next monthly contract.
Closing Early: If the trade is at 70-80% max profit, close early to avoid decay risk.
Cutting Losses: If price closes inside the Ichimoku Cloud, consider exiting early (trend loss warning).
🛠 Why This Works for Monthly Options?
✅ Avoids time decay risks of weekly options by trading monthly contracts.
✅ Uses strong trend confirmation from Ichimoku & 200 SMA.
✅ Only trades at high-probability times, avoiding choppy Monday & Friday moves.
✅ Allows scaling into strong trends rather than short-term noise.
(Following Your 3 Trading Rules)
This strategy adapts the Ichimoku Cloud & 200 SMA trend-following method for trading monthly options contracts with a focus on high-probability setups. It leverages time decay (theta), trend strength, and proper timing to maximize gains while reducing risk.
🔹 Strategy Overview
We will trade monthly options contracts using:
Trend confirmation via Ichimoku Cloud & 200 SMA
Directional bias based on price positioning
Entry timing rules to avoid low-probability setups
Theta-friendly positioning (avoiding weeklies to reduce time decay risks)
📈 Trading Rules & Setup
(My 3 Golden Rules)
🚫 No trading on Mondays → Avoids choppy market structure from weekend gaps.
🚫 No trading on Fridays → Avoids gamma risk and weekend time decay.
⏳ No trades before the first 15-minute candle closes → Ensures market direction is established.
📊 Selecting the Right Option Contract
For monthly expiration contracts, select options that:
Expire within 30 to 60 days (avoid weekly contracts to minimize rapid time decay).
Are slightly in-the-money (ITM) or at-the-money (ATM) for higher delta (0.55–0.70).
Have open interest >1,000 and a tight bid-ask spread to ensure liquidity.
Example: If today is June 11, trade the July monthly contract (third Friday of the month).
📉 Bearish Put Play (Short Trade)
200 SMA Bias: Price is below the 200 SMA
Ichimoku Cloud Confirmation:
Price is below the cloud
Tenkan-sen is below Kijun-sen (bearish momentum)
Chikou Span is below price from 26 candles ago
Future cloud is red
Entry Trigger (After First 15 Min Candle):
Price pulls back into the Kijun-sen but rejects it
OR price breaks below the cloud after a weak consolidation
Enter PUT contract (monthly expiration)
Stop Loss & Take Profit:
SL: Above Kijun-sen or recent swing high
TP: First at the cloud’s lower edge, second at a key support level
Exit before Theta decay accelerates (last 14 days before expiry)
📈 Bullish Call Play (Long Trade)
200 SMA Bias: Price is above the 200 SMA
Ichimoku Cloud Confirmation:
Price is above the cloud
Tenkan-sen is above Kijun-sen (bullish momentum)
Chikou Span is above price from 26 candles ago
Future cloud is green
Entry Trigger (After First 15 Min Candle):
Price pulls back into the Kijun-sen but holds
OR price breaks out above the cloud
Enter CALL contract (monthly expiration)
Stop Loss & Take Profit:
SL: Below Kijun-sen or recent swing low
TP: First at the cloud’s upper edge, second at a key resistance level
📊 Trade Management & Adjustments
Rolling: If trade is profitable near expiry but not at the full target, roll to the next monthly contract.
Closing Early: If the trade is at 70-80% max profit, close early to avoid decay risk.
Cutting Losses: If price closes inside the Ichimoku Cloud, consider exiting early (trend loss warning).
🛠 Why This Works for Monthly Options?
✅ Avoids time decay risks of weekly options by trading monthly contracts.
✅ Uses strong trend confirmation from Ichimoku & 200 SMA.
✅ Only trades at high-probability times, avoiding choppy Monday & Friday moves.
✅ Allows scaling into strong trends rather than short-term noise.
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.