Iran-US Oil 0DTE opening strategy with 83% win rate

tldr: Oil futures down premarket = upwards opening move for SPX, take gains by trading 0DTE options in the first 30 minutes. 

Okay so to preface, the strategy is non-traditional in the sense that most ORB strategies, reasonably so, are about observing the opening range and then waiting for the stock to break out of the range. Then depending on the direction of the move, most traders decide which way to trade.

However with the Iran-US situation lately I have found some interesting patterns, in particular with the correlation between crude oil futures and SPX opening price.

Basically what I have noticed is that if the price of oil futures are trending down prior to market open, then SPX will likely rally at least for a little bit during the first 30 minutes of market open. This is where we take action.

4 examples of the pattern I noticed. There's many more, but these are the cleanest ones that illustrate the idea the best. Left granular charts are OIL futures $CL leading up to session open , and right side is the opening price action of SPX 9:30 AM and onwards.

The reason I think this has been the case is because with the current war, lower oil price likely means de-escalation. Cheaper oil also means more consumer spending and a more robust economy. So the opening tends to be hopeful and a relief rally occurs. Now of course I don't expect this to carry over infinitely but with the current situation I think this is at least a viable signal to observe.

But I don't just blindly buy because oil is red. There are usually three more filters I check before entering.

1. Any overnight news that may over turn this signal. Think last minute escalations, or fed rates etc. just keeping an eye out. Or de-escalation that would give me further confirmation. De-escalation /US winning good, opposite is likely bad. 
2. I look at the last 30 minutes of the previous day’s options flow on today's expiry options. (hopefully that makes sense, ill show an example in a bit)
3. I also look at gamma walls to ensure we are not being pinned, lately spx been in negative gamma regime so this one is just more of health check for anomalies that might take sideways. DW if you dont get this , its basically just checking to see if price can move freely here or nah. 

A good example of this was literally the trade i made this morning:

1. Overnight March 15th – March 16th,  a major story broke out that Trump allowing Iranian tankers to pass through the strait. This is good news for oil prices dropping.
2. Oil prices had  already been steadily dropping overnight.

https://preview.redd.it/gdxi5mdufqpg1.png?width=930&format=png&auto=webp&s=caa781db3b21d557b092ef5f2b39dba35d90d457

1. For the closing session on March 15th, the next-day expiry flow was: 94 bullish trades totalling $4.4M vs 57 bearish trades totalling $1.1M. That's a 4:1 ratio in dollar terms

Raw large flow data from 3:30 March 15th (many more data points but here’s a sample)

1.  At yesterdays close SPX was sitting at 6699 in a negative gamma regime. Negative gamma just means dealers hedging allows for free price movement, even amplifies it depending on the intensity. But really for this step i just want to check like hey are pinned or close to a gamma resistance wall or nah. And in this we were not.

SPX Gamma positioning on March 15th. SPOT was far away from any positive gamma positioning. Although it does NOT tell us the direction. Large negative gamma 1 point above the closing is good sign that price will be volatile and we can expect a free big moves.

The contract opened at $41.15 at 9:30 AM, and then got upto at $56.70 at 9:46 AM, literally 16 minutes later. Theta decay is massive here since we are fighting against time. For this reason I always just exit early even if there potential upside left. Here I obviously was not able to enter nor sell a the best of prices but still. But still not a bad (by my standards).

My trade from this morning March 16th

A comparison of the oil drop and the ideal setup to capture maximum momentum in shortest period of time for this trade

Okay so  is this edge real or nah? Guess we’ll have to find out. I've traded it successfully 10/12 times now. By no means do I expect that win rate to continue forever. But I think as long as oil remains a proxy for geopolitical temperature, which right now it clearly is, I think the correlation is worth looking at. I'm sure there's someone smarter here than me who’s already doing this and if so please lmk.