{"id":510,"date":"2025-11-28T20:47:48","date_gmt":"2025-11-28T20:47:48","guid":{"rendered":"http:\/\/osonwanne.com\/?p=510"},"modified":"2025-11-28T20:47:48","modified_gmt":"2025-11-28T20:47:48","slug":"proprietary-trading-playbook","status":"publish","type":"post","link":"https:\/\/osonwanne.com\/?p=510","title":{"rendered":"Proprietary Trading Playbook"},"content":{"rendered":"\n<p>The Osonwanne Group deploys a range of <strong>proven option and stock strategies<\/strong> tuned to specific market conditions. The core playbook includes high\u2010leverage directional trades (targeting ~20\u00d7 upside), option arbitrage (e.g. reverse conversions), event\u2010driven hedges (short stock + long call for anticipated bad news), trend\u2010following signals (Turtle breakouts, \u201c3 green arrows\u201d\/\u201c3 red arrows\u201d momentum indicators), and a systematic wheel of <strong>cash\u2010secured puts<\/strong> and <strong>covered calls<\/strong> on high\u2010quality names. Each strategy has clear entry\/exit rules and risk controls. Below we outline when to use each strategy and give past examples of their application.<\/p>\n\n\n\n<h2>High\u2011Leverage Directional Trades (20\u00d7 Risk\/Reward)<\/h2>\n\n\n\n<ul><li><strong>Setup:<\/strong> Use deep out\u2010of\u2010the\u2010money long call or put spreads to cap max loss and allow a very large gain if the stock moves strongly. For example, a bull call spread (buy low strike call, sell higher strike call) limits upside but can yield a very high reward\u2011to\u2011risk when the stock rises.<\/li><li><strong>When to apply:<\/strong> After a fundamental catalyst (e.g. biotech trial, FDA news, macro data release) is identified, with no other major events imminent. Ensure the target stock is one you\u2019d be comfortable owning at the strike (to align with wheel\/put\u2010selling discipline). Avoid buying expensive options right before earnings or binary events (gaps often occur around earnings).<\/li><li><strong>Risk profile:<\/strong> The maximum loss is the small premium paid; the max profit (spread width minus premium) can be many times larger. For instance, a 20\u00d7 reward\u2010to\u2010risk means a $1 premium could target $20 profit if both legs move favorably. This fits \u201cone happy scenario, limited loss\u201d trades.<\/li><li><strong>Example:<\/strong> In late 2025, <strong>Terns Pharmaceuticals (TERN)<\/strong> jumped ~165% in one month after positive clinical data. A well-timed deep\u2010OTM call spread in early November could have turned a small debit into a <em>many\u2011fold<\/em> gain (approaching our 20\u00d7 target). Even if the trade went wrong, the loss was capped at the premium. (Terns\u2019s rise shows how biotech catalysts can fuel explosive moves.)<\/li><\/ul>\n\n\n\n<h2>Option Arbitrage &amp; Reverse Conversions<\/h2>\n\n\n\n<ul><li><strong>Setup:<\/strong> Exploit pricing inefficiencies by creating delta\u2011neutral spreads. A classic example is <strong>reverse conversion arbitrage<\/strong>: short the underlying stock and offset it by buying a call and selling a put (all same strike\/expiration). This positions a synthetic long vs an actual short, locking in a tiny arbitrage profit if put\u2011call parity is broken.<\/li><li><strong>When to apply:<\/strong> Very rarely, and only in highly liquid names or indexes. Requires virtually zero borrow cost on the short (ETB stocks, 0% fee) and low transaction costs. Also monitor interest\/dividend assumptions. Because true arbitrage opportunities vanish fast, this is mainly done by quant funds.<\/li><li><strong>Mechanics:<\/strong> In theory, you profit if the call is slightly overpriced or the put underpriced. The position is delta neutral (short stock = \u2013100 delta; long call + short put = +100 delta). Over time you collect the discrepancy.<\/li><li><strong>Example:<\/strong> Hedge funds historically have found tiny put-call parity gaps in index futures. For instance, if S&amp;P options are mispriced, one could short the index future and buy a call + sell a put to lock in a risk-free differential. Such trades rarely show up in daily retail trading but are conceptually part of our toolkit.<\/li><\/ul>\n\n\n\n<h2>Gap\u2011Event Hedging (Short Stock + Long Call)<\/h2>\n\n\n\n<ul><li><strong>Setup:<\/strong> When deep research or catalysts suggest a likely downside gap (e.g. failing to meet guidance, negative announcement), enter a <strong>short stock position hedged with a long call<\/strong>. This \u201ccovered short\u201d caps upside risk. Buying a call on a short sale guarantees a maximum repurchase price.<\/li><li><strong>When to apply:<\/strong> Just ahead of a high\u2011probability negative event on an easily shortable stock (low borrow fee or ETB). Combine this with bearish technical signals (e.g. a 3\u2011red\u2011arrows trigger). Only short stocks with weak fundamentals or overextended charts that you wouldn\u2019t mind buying at the strike price. Ensure you have margin capacity to hold the short if it works, and enough cash to buy the call.<\/li><li><strong>Mechanics:<\/strong> Short the stock at current price and simultaneously buy an out\u2011of\u2011the\u2011money or at\u2011the\u2011money call. If the stock crashes, the short profit dominates (minus the call cost). If instead the stock rallies unexpectedly, the long call limits the loss, turning an <em>unbounded<\/em> short loss into a capped one.<\/li><li><strong>Risk profile:<\/strong> Example (from Investopedia): short at $76, buy a $75 call for $4. If the stock rockets to $100, the raw short loss is $2,400, but the call gains $2,100, netting only a $300 loss. Thus, even extreme moves hurt only minimally. If the stock falls as predicted, profits can be large (short gain minus small call premium).<\/li><li><strong>Example:<\/strong> Suppose a stock is expected to miss earnings severely. We might short it at $50 and buy a $50 call for $2. If it gaps down to $30, the short gains $20 (per share) minus $2 = $18 profit. If it unexpectedly gaps up to $70, the worst-case net loss is ~$2 (the call premium), as in the Investopedia example.<\/li><\/ul>\n\n\n\n<h2>Technical Signals &amp; Entry\/Exit Rules<\/h2>\n\n\n\n<ul><li><strong>Trend Indicators (\u201c3 Green\/Red Arrows\u201d):<\/strong> Use proprietary momentum signals that combine multiple indicators (e.g. moving averages, MACD, RSI) into a bullish \u201c3 Green Arrows\u201d or bearish \u201c3 Red Arrows\u201d alert. A \u201c3 Green Arrows\u201d means all our momentum filters have turned positive, signaling a strong uptrend; \u201c3 Red Arrows\u201d signals a confirmed downtrend. For example, SeeItMarket notes a 3\u2011arrow signal occurs when major indices align momentum (often via MACD).<\/li><li><strong>Turtle Channel Breakouts:<\/strong> Follow the classic Turtle rules: <strong>buy breakouts<\/strong>, <strong>sell breakdowns<\/strong>. Enter long when price exceeds the high of the last N days (e.g. 20\u2011day or 55\u2011day high), and exit (or go short) when price falls below the low of M days (e.g. 10\u2011day low). This captures big moves in trending markets. (Richard Dennis\u2019s turtles famously bought 4\u2011week highs and sold 20\u2011day lows to make large profits.)<\/li><li><strong>Sentiment (\u201cBuy Opinion\u201d trends):<\/strong> Incorporate market sentiment tools (e.g. aggregated analyst buy\/sell ratings, sentiment surveys or proprietary \u201copinion\u201d indexes). A rising bullish sentiment can confirm an entry; a sudden fall in sentiment can warn of a reversal.<\/li><li><strong>When to apply:<\/strong> Use these signals to time entries and exits. For example, go long when a 3\u2011Green\u2011Arrows or Turtle breakout occurs, and exit if a 3\u2011Red\u2011Arrows appears or the Turtle trend breaks. This ensures we trade <em>with<\/em> the dominant trend. Avoid counter\u2011trend entries with these signals. In choppy markets, these signals will simply prevent trades.<\/li><li><strong>Example:<\/strong> In a recent bull market, Tech stocks often gave Turtle breakouts above 20\u2011day highs, which we would have bought. If NVDA, for instance, makes a fresh 55\u2011day high on strong volume, our Turtle signal triggers a long entry. We then trail a 20\u2011day low stop to exit. (Historically, such breakouts have led to multi\u2011week rallies.) Also, if the S&amp;P500, Nasdaq and Russel all flashed 3 Green Arrows, we\u2019d increase position sizing; if they lose that signal, we\u2019d be cautious.<\/li><\/ul>\n\n\n\n<h2>Wheel Strategy (Cash\u2011Secured Puts + Covered Calls)<\/h2>\n\n\n\n<ul><li><strong>Setup:<\/strong> Combine put-selling and covered calls on fundamentally sound stocks in a <em>rotating<\/em> manner. Sell an out\u2011of\u2011the\u2011money <strong>cash\u2011secured put<\/strong> on a stock you\u2019d like to own (put aside cash for assignment). If the stock stays above the strike, you keep the premium and repeat the put sale. If the stock falls below the strike, you are assigned and buy 100 shares at that strike. Immediately thereafter, <strong>sell a covered call<\/strong> (usually out\u2011of\u2011the\u2011money) on those shares to earn income or exit at a profit. This cycles repeatedly (hence \u201cWheel\u201d).<\/li><li><strong>When to apply:<\/strong> After we see a bullish signal on a high-quality stock (from the above technicals) <em>and<\/em> the stock is fundamentally strong. For example, within a few days of a confirmed uptrend (but before exhausting gains). Only use on names with no earnings or major catalysts in the next several weeks (we avoid entering puts just before earnings). Stocks should be in solid sectors where holding long-term is acceptable. The strike is chosen slightly below market (for puts) or above cost (for calls), so we\u2019re happy either to collect premium or to have shares called away.<\/li><li><strong>Risk profile:<\/strong> Puts: max loss occurs if stock goes to zero (but reduced by premium received). Covered calls: profit is capped at the strike (plus premium) but downside risk remains on the stock (mitigated by the premium collected). Because we only sell puts on stocks we want to own, the strategy effectively pays us to accumulate positions at a net discount or generate income on owned shares.<\/li><li><strong>Example:<\/strong> Suppose our signals fire on <strong>MSFT<\/strong>. We sell a $300 strike MSFT put for $5 premium (cash\u2010secured). If MSFT stays above $300 by expiry, we net $5 ($500 per lot) with no stock purchased. If MSFT falls to $295, we buy 100 shares at $300 (net cost $295 after premium). Then we immediately sell a covered call, say a $310 call for $3. If MSFT rises above $310, we sell at $310 and keep all premium (locking in a nice gain). If not, we keep the $300 shares and can continue selling calls or hold. As Investopedia notes, cash\u2011secured puts generate income or a lower purchase price, and covered calls generate income in a sideways market. Over time, repeated selling of puts and calls on good stocks compounds gains.<\/li><\/ul>\n\n\n\n<h2>Execution &amp; Risk Management<\/h2>\n\n\n\n<ul><li><strong>Signal Confirmation:<\/strong> We only enter trades when multiple factors align: our proprietary trend signals + fundamental research. For instance, a high\u2011reward call spread is only opened if our technicals are bullish and no conflicting event is near.<\/li><li><strong>Event Risk:<\/strong> We strictly avoid holding new positions through known gap catalysts. By rule, we will not sell puts or buy calls just before earnings or binary events. (Gaps often occur around earnings, making such trades too risky.)<\/li><li><strong>Position Sizing:<\/strong> Each trade is sized by its max loss. For example, if a call spread costs $200, that is the absolute risk. We cap each position to a small percentage of capital so that even a string of losses doesn\u2019t wreck the portfolio.<\/li><li><strong>Trailing\/Stops:<\/strong> Trend trades (Turtle\/3\u2011arrow) use tight trailing stops (e.g. exit on 10\u2011day low after entry). We exit broken signals promptly. Wheel positions can be held longer, but we monitor for trend exhaustion.<\/li><li><strong>Tools:<\/strong> We rely on our custom \u201cgreen\/red arrow\u201d momentum indicators, Turtle channel overlays, and sentiment analytics. These are used in concert: e.g. we only sell puts in the wheel when our indicator says the stock is in a confirmed uptrend.<\/li><\/ul>\n\n\n\n<p><strong>Sources:<\/strong> The above strategies draw on classic option and trend\u2010following concepts. For example, cash\u2011secured puts and covered calls are standard income strategies<a rel=\"noreferrer noopener\" href=\"https:\/\/www.investopedia.com\/here-are-4-options-strategies-you-can-try-right-now-to-earn-extra-income-11763714#:~:text=A%20cash,price%2C%20potentially%20at%20a%20discount\" target=\"_blank\">;<\/a> the Wheel cycles these systematically. Reverse conversion arbitrage exploits put-call parity. Turtle breakouts have a long track record of capturing trends. These ideas are adapted to Osonwanne Group\u2019s proprietary signals and risk rules, as illustrated by the cited examples.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>The Osonwanne Group deploys a range of proven option and stock strategies tuned to specific market conditions. The core playbook includes high\u2010leverage directional trades (targeting ~20\u00d7 upside), option arbitrage (e.g. reverse conversions), event\u2010driven hedges (short stock + long call for anticipated bad news), trend\u2010following signals (Turtle breakouts, \u201c3 green arrows\u201d\/\u201c3 red arrows\u201d momentum indicators), and&hellip; <a class=\"more-link\" href=\"https:\/\/osonwanne.com\/?p=510\">Continue reading <span class=\"screen-reader-text\">Proprietary Trading Playbook<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":511,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[22],"tags":[],"_links":{"self":[{"href":"https:\/\/osonwanne.com\/index.php?rest_route=\/wp\/v2\/posts\/510"}],"collection":[{"href":"https:\/\/osonwanne.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/osonwanne.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/osonwanne.com\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/osonwanne.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=510"}],"version-history":[{"count":1,"href":"https:\/\/osonwanne.com\/index.php?rest_route=\/wp\/v2\/posts\/510\/revisions"}],"predecessor-version":[{"id":512,"href":"https:\/\/osonwanne.com\/index.php?rest_route=\/wp\/v2\/posts\/510\/revisions\/512"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/osonwanne.com\/index.php?rest_route=\/wp\/v2\/media\/511"}],"wp:attachment":[{"href":"https:\/\/osonwanne.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=510"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/osonwanne.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=510"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/osonwanne.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=510"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}