Definitions
  • 21 Mar 2024
  • 6 Minutes to read
  • Contributors
  • Dark
    Light

Definitions

  • Dark
    Light

Article summary

All Correlation

Aggregate probability of a particular condition occurring from 2018 to current

All Count

Sum of a particular condition occurring from 2018 to current

All IV Correlation

Aggregate probability of a particular condition occurring from 2018 to current across all implied volatility levels

All IV Count

Sum of a particular condition occurring from 2018 to current across all implied volatility levels

Analytics

Probabilities which are derived from at least one condition and multiple variables

ATM 'At the Money'

Describes an option strike price closest to the current price of the underlying security.

Category (for Price Conditons)

A set of conditions which have similar behavior around zone levels. See Definitions for each Category

Correlation Coefficient

The correlation coefficient is a statistical measure of the strength of the relationship between the relative movements of a sample of price conditions. Coeffficients above .70 or below .30 are viewed as have strong correlation (positive & negative respectively) while coefficients around .50 are viewed as having weak correlation or being random. Correlation Coefficients are normalized for comparison purposes into probability levels such that an .80 & .20 correlation coefficient will both have an 80% probability level.

Condition Description

An individual measurable price movement within the expected move price framework

DTE 'Days to Expiration'

Days remaining until a Stock Option Term Expires. Same day expiration is a (0) DTE.

Edge

A higher probability than what would be priced in based on the current options pricing.

Exception Correlation

A condition which is measured without certain variables to achieve higher probabilities

Expected Move

The average of the pricing by the aggregate of options traders determinations of the level of price movement for any given underlying security over a specific time frame.

Expected Move Breach

Price closes above the level of the Expected Move during any trading session.

Expected Move Framework

The Expected Move Framework is used as a constant with which to map historical price movements. Within the framework there are seven distinct zones of price movement.

Expected Move Mapping

Price movement (conditions) across the various zones of the Expected Move Framework are observed (mapped) to determine to what extent these moves are or are not correlated over time. We can then use these correlations as a guide to predict similar movements across similar conditions in the future.

Expected Move Touch

Price reaches or exceeds the level of the Expected Move but does not close beyond during that trading session.

Implied Volatility

Used for Options Contracts, is derived from the Black-Scholes formula, and an estimate of the future variability for the underlying asset (e.g. SPY, QQQ, GOOG, etc). Implied volatility is the market's forecast of a likely movement in an underlying security's price. It is used to set prices for option contracts.
#### Indice
An ETF which measures a particular indice e.g. S&P 500

Intraday Trade Period

Price Conditions that begin after market open and end before market close on the same day.

IWM

Symbol for iShares Trust tracking the Russell 2000

Midline

Price level that is equidistant from the Upper and Lower Expected Moves. Also equal to the week prior Friday closing price and is always Zone leve 4.

Lower Midpoint

Price level that is equidistant from the Midline and the Lower Expected Move. Also equal to Zone 3

Multiday Trade Periods

Price Conditions that are longer than one day and less than a full Trading Week.

Multiweek Trade Periods

Price Conditions that are longer than a full Trading Week up to six weeks.

Non Correlated Exception

Non Correlated Exceptions are headline risk events that cause substantial market movement sufficient to move price behavior off of historical patterns. While exception conditions are observed that move price behavior off of historical patterns when correlated events occur (i.e. overbought or oversold conditions), Non Correlated Exceptions are one off black swan type of events.

One Day Trade Periods

Price Conditions that begin at market open and end at market close on the same day.

Price Mapping

The observation and tracking of distinct price movements from one zone to another

Plan Type

QuantDirection subscription level

Price Target

Describes areas on the Expected Move Mapping where price is expected to go expressed as a Price Zone level

Price Zone

Describes areas on the Expected Move Mapping where price may be at any time

QQQ

Symbol for Invesco QQQ Trust tracking the Nasdaq 100

Reversals

Price reaches a zone level and reverses. These moves include those that have a defined start points but uncertain end points.

Risk Level Correlation

Denotes the level of probability of a typical move occuring (scale 1-5) with 100% being 5

Risk Level Aggregate

Denotes the estimation of the aggregate risk level (scale 1-5) as averaged across the 3 risk level variables

Risk Level Move

Denotes the certainty that the move will have a defined amount (scale 1-5)

Risk Level Time

Denotes the risk that the move will occur over a defined amount of time (scale 1-5)

Risk Reward Level

An analytic value for the potential ROI of a move if a specific condition moves as expected

Risk Reward Aggregate

An aggregate analytic value for the potential ROI given the risk of it occurring given it's probabilities

SPY

Symbol for the SPDR Trust ETF tracking the S&P 500.

Top Price Conditions Currently in Play

Dashboard widget that shows price conditions which are in the price zone that price has recently triggered. These are only the price conditions which have the 10 highest probability levels as measured by their correlation coefficients. The widget auto refreshes every 2 minutes. More timely data & alerts is available through the Search & Alert Engines.

Trade Period

The length of time that a particular move is expected to take. Price conditons have Trade Periods of Intraday, One Day, Multiday, Trading Week, & Multiweek.

Trade Type

An indicator for the types of trades that are best for any particular condition

Trading Week

Price Conditions that begin on Monday and end on Friday of the same week.

Upper Midpoint

Price level that is equidistant from the Midline and the Upper Expected Move. Also know as Zone 6.

VIX

Volatility Index - The CBOE Volatility Index (VIX) is a real-time index that represents the market’s expectations for the relative strength of near-term price changes of the S&P 500 index (SPX). Because it is derived from the prices of SPX index options with near-term expiration dates, it generates a 30-day forward projection of volatility.

(Zone 1) Lower Expected Move

The price level within the Expected Move Framework below and up to the lower expected move.

(Zone 2) Lower Expected Move

The price level within the Expected Move Framework at the lower expected move and up to the midpoint between the lower expected move and the price between the upper expected move and lower expected move.

(Zone 3) Lower Expected Move

The price level within the Expected Move Framework above the midpoint between the lower expected move and the mid price between the upper expected move and the lower expected move.

(Zone 4) Midline Move

The price level within the Expected Move Framework equally between the upper and lower expected move. It is also equal to the closing price of the prior Friday when options prices establish the range of expected move for the following week.

(Zone 5)

The price level within the Expected Move Framework between the midpoint (Zone 4) and the midpoint (Zone 6).

(Zone 6) Upper Midpoint

The price level within the Expected Move Framework above the midpoint between the upper expected move and the midline.

(Zone 7) Upper Expected Move

The price level within the Expected Move Framework at and above the upper expected move.


Was this article helpful?