SteadyOptions is an options trading forum where you can find solutions from top options traders. Join Us!

We’ve all been there… researching options strategies and unable to find the answers we’re looking for. SteadyOptions has your solution.

The “OOPS signal” trade


Have you been taken by surprise by movement of your stock? Options traders who find themselves on the wrong side of a trade have experienced this dilemma, but as often as not, it occurs as part of a move and retracement.

 

The “OOPS signal” was developed by trader and author Larry Williams. It was named for the experience among traders, upon discovering, “Oops, we lost.”


When the market opens lower than the previous day’s close, a trader places a buy-stop order above the previous day’s low price. When the market opens higher than the previous close, a sell-stop[ order is placed below the previous day’s high.


Most traders recognize that gaps from one day’s close to the next day’s open occur for any number of reasons: news, rumor, earnings, etc. However, the move often exaggerates the impact of news. You see this all the time with earnings surprises. A big gap in the price (upward for positive surprises, downward for negative) is next offset by a move back to the previous trading level. This reversal is the “Oops moment.”

 

Trading on this system is contrarian. You recognize that “the market” overall tends to follow the news, and often acts inefficiently. Rather than buying after many others have bought, or selling after others have sold, the “Oops trader” is a true contrarian, who sees the exaggerated movement and times trades to exploit the likely retracement and closing of the gap.
 

The expected retracement not only closes gaps and  corrects exaggerated price movement. With a well-timed trade, the Oops trader is able to anticipate profit-taking or loss cutting, not in response to smart market timing and moves, but to the gut reaction among “the crowd” to the gap in price.


Larry Williams himself referred to this condition as a market “mistake,”a reference to the tendency for price to react to surprises in an exaggerated manner and then to quickly correct. In this respect, the market is extremely inefficient. The efficient market hypothesis is misunderstood; it points out that price discounts information efficiently, but it does not claim that price movement is efficient. And every options trader knows that in fact,  markets are inefficient, irrational, reactive, prone to greed and panic, and overall neurotic.

For example, look at the six-month chart for Tesla. It has been erratic and volatile throughout this period, moving between $260 on the low side and $390 on the high side. That’s an extreme range of 130 points. You can find numerous examples of an “Oops moment” on this chart. A few have been highlighted.

image.png

 

For example, in May, price opened at about $305 and dropped the same day to under $295; then gapped lower to $285. As all of this occurred, price also moved below the t-line (in blue). Recall that this is an 8-day exponential moving average and price crossover indicates a change in sentiment. Even so, within a moment price had recovered and quickly moved up to $370  -- quite a lot of back and forth in a single month.


A second example occurred in August. Price again fell below the t-line and this time remained there for a month before a partial recovery.


The third and fourth examples, both in September, were the most interesting. Both were island clusters, single sessions gapping below price levels with gaps on both sides. Both of these patterns were bullish abandoned baby patterns.


Here’s the dilemma for options traders: The signals were clear and all represented bullish reversal predictions. The first Oops did reverse, but the other three did not. This reveals that the usual signals options traders seek are less reliable in volatile times. Tesla was so volatile that the Oops signal did not provide the guidance you normally find with strong retracement patterns.


In “normal” circumstances (low to moderate volatility) the Oops signal is one form of retracement timing, allowing a swing trader to exploit market behavior. This also points to the maximum timing for leverage through opening of options trades. As such moments, single long calls or puts are likely to perform better than elsewhere on the chart. Short options may also be used as long as the price move is dramatic enough, and confirmed by other signals, to raise confidence as high as possible. To hedge risks, traders may also exploit the Oops signal with vertical spreads, synthetic stock positions, or collars.
 

In the case of volatility, everything is less predictable, including even the strongest of reversal signals. So for options trading, the “Oops” might refer not to the initial signal for timing purposes, but to the entire pattern. It’s not just a matter of “Oops, we lost” but perhaps one of “Oops, the reversal was not reliable.”

Michael C. Thomsett is a widely published author with over 80 business and investing books, including the best-selling Getting Started in Options, coming out in its 10th edition later this year. He also wrote the recently released The Mathematics of Options. Thomsett is a frequent speaker at trade shows and blogs on his website at Thomsett Guide as well as on Seeking Alpha, LinkedIn, Twitter and Facebook.

 

What Is SteadyOptions?

12 Years CAGR of 123.5%

Full Trading Plan

Complete Portfolio Approach

Real-time trade sharing: entry, exit, and adjustments

Diversified Options Strategies

Exclusive Community Forum

Steady And Consistent Gains

High Quality Education

Risk Management, Portfolio Size

Performance based on real fills

Subscribe to SteadyOptions now and experience the full power of options trading!
Subscribe

Non-directional Options Strategies

10-15 trade Ideas Per Month

Targets 5-7% Monthly Net Return

Visit our Education Center

Recent Articles

Articles

  • The Sell Put And Buy Call Strategy | A Synthetic Long Stock

    The Sell Put And Buy Call Strategy is an example of a synthetic stock options strategy: using call and puts options to mimic the performance of a position, usually involving the purchase of a stock. We saw this when looking at the synthetic covered call strategy elsewhere.

    By Chris Young,

    • 0 comments
    • 57,747 views
  • Long Straddle Option Strategy: The Ultimate Guide

    Straddle Options Definition
    An options straddle strategy is buying (or selling) both a put and call option with the same strike price and expiration date for the same underlying asset, and paying both the put and call premiums.

    By Pat Crawley,

    • 0 comments
    • 58,094 views
  • 7 Helpful Tips To Invest Your Money And Time In 2025

    While many of us would like to not think too much about how much money controls the world, it certainly is a primary motivator for most people in life. Whether you earn to pay the bills or work to succeed in a career you’re passionate about, money is something that can help greatly in making your life more comfortable and enjoyable.

    By Kim,

    • 0 comments
    • 34,944 views
  • Gamma Scalping Options Trading Strategy

    Gamma scalping is a sophisticated options trading strategy primarily employed by institutions and hedge funds for managing portfolio risk and large positions in equities and futures. As a complex technique, it is particularly suitable for experienced traders seeking to capitalize on market movements, whether up or down, as they occur in real-time.

    By Chris Young,

    • 0 comments
    • 24,663 views
  • Short Gamma vs. Long Gamma in Options Trading

    Gamma is one of the primary Options Greeks, which measure an option's sensitivity to specific factors that could affect an option price. Despite traders hyping up several different Greeks and second-order Greeks like "Vanna" and "charm," there are only four primary Greeks that you need to be familiar with to understand options trading.

     

    By Pat Crawley,

    • 0 comments
    • 40,316 views
  • Predicting Probabilities in Options Trading: A Deep Dive into Advanced Methods

    In options trading, the focus should not be on predicting the exact closing price of a ticker on a given date - a near-impossible task given the pseudo-random nature of markets. Instead, we aim to estimate probabilities: the likelihood of a ticker being above a specific value at a certain point in time. This perspective turns trading into a probabilistic exercise, leveraging historical data to make informed decisions.

    By Romuald,

    • 1 comment
    • 11,017 views
  • SteadyOptions 2024 - Year in Review

    2024 marks our 13th year as a public trading service. We closed 136 winners out of 187 trades (72.7% winning ratio). Our model portfolio produced 116.7% compounded gain on the whole account based on 10% allocation per trade. We had only one losing month (of 0.6% loss) in 2024. 

    By Kim,

    • 0 comments
    • 2,706 views
  • The Options Wheel Strategy: Wheel Trade Explained

    The “wheel” trade is variously described as a beginner’s strategy, a combination to exploit features of both calls and puts, and as “perfect” solution to the well-known risks of shorting calls, even when covered. The options wheel strategy is an income-generating options trading strategy that both beginners and experienced traders can leverage for profit.

    By Pat Crawley,

    • 0 comments
    • 63,555 views
  • Why Dollar Delta Will Change Your Trading

    Delta is one of the four main option Greeks, and any serious trader needs to have a thorough understanding of this greek if they hope to have any chance of success in the trading options. If you’re a beginner, you can visit my blog to learn more about understanding option delta

    By GavinMcMaster,

    • 0 comments
    • 32,327 views
  • The 7 Most Popular Cryptocurrencies Right Now

    There are thought to be 20,000 cryptocurrencies currently in existence. While a lot of these are inactive or discontinued, a lot of them are still being traded on a daily basis. But just which cryptocurrencies are most popular? This post takes a look at the top 7 most traded cryptocurrencies.

    By Kim,

    • 0 comments
    • 9,140 views

  Report Article

We want to hear from you!


There are no comments to display.



Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account. It's easy and free!


Register a new account

Sign in

Already have an account? Sign in here.


Sign In Now

Options Trading Blogs