ICT & Options Pricing
TLDR; The market cannot likely move in a given direction if the move is not probable in Algo’s eyes, thus algo tells pricing model, “It’s time to shift the tide.”
I’ve just joined the thread because I too love ICT, and been trading the 2022 model for 3 years now, yet I can’t help notice a repeating pattern in all my biggest winners, and I want to share :). ie; capturing the entire daily range to the very end, or catching quick 15m reversals to an absolute ripper.
It has to do with how the options change across the big 3 indexes when a reversal comes.
I know options are usually priced “fairly” according to the Black-Scholes Model, but I’ve recently looked into HOW they actually price. I won’t bother going into it, that’s for you to research but going back to my recorded trades I can’t help notice at a HTF PD-Array of importance, or a HTF DOL, IV collapses if it wants to reverse, and then spike, then delta gets a big boost. So, entering at the retrace of the FVG gets me a contract that is cheaper because of the liquidity sweeps IV crush, and then moves into said direction where my delta picks up and my IV raises, making the contract worth way more, just from entering on the FVG/retrace. I believe this comes from the model not being able to account for a probable continuation move prior to the reversal, so the algo/smart money funds get more valuable contracts, thus repricing the market in reversal. Correct me if I’m wrong but it’s too good notice and not share and collect opinions based on this.
Sincerely asking for input and insights.