So I wanted to test out the Power Law Correlation Indicator contraction -> expansion dynamics. This is when a stock goes flat and there is little activity and then it goes parabolic and basically explodes up or down.
Well there are good places to get in on a trade just before they go parabolic. So when the Power Law Correlation Indicator drops below zero it means that the stock has gone flat and there will soon be an explosive reversion to the mean.
At least that's my theory anyway.
So today I tried this using a strangle.You can also use straddles too.
TA (Travel Centers America LLC) had dropped below 0.0 on the Power Law Correlation Indicator, so I bought 3 contracts of strangles for 0.20 on 2/16/16. The options would be expiring in 3 days.
Well the next day, the market rallied and so did TA. So I got out for a $75.00 profit.
So its a viable strategy.
I have set up alerts on TradingView to tell me when certain stocks' Power Law Correlation Indicator levels fall below zero.
Cheers
SpreadEagle71
Well there are good places to get in on a trade just before they go parabolic. So when the Power Law Correlation Indicator drops below zero it means that the stock has gone flat and there will soon be an explosive reversion to the mean.
At least that's my theory anyway.
So today I tried this using a strangle.You can also use straddles too.
TA (Travel Centers America LLC) had dropped below 0.0 on the Power Law Correlation Indicator, so I bought 3 contracts of strangles for 0.20 on 2/16/16. The options would be expiring in 3 days.
Well the next day, the market rallied and so did TA. So I got out for a $75.00 profit.
So its a viable strategy.
I have set up alerts on TradingView to tell me when certain stocks' Power Law Correlation Indicator levels fall below zero.
Cheers
SpreadEagle71
