Lego Strategy Analyzer

XAUUSD
# Lego Strategy Analyzer - Complete Guide

## Overview

The **Options Lego Strategy Analyzer** is a comprehensive Pine Script indicator designed for options traders who want to visualize, analyze, and optimize their multi-leg options strategies directly . Built on the "Lego Approach" philosophy, it treats complex options strategies as modular building blocks that can be assembled, adjusted, and managed dynamically.

## Key Philosophy: The Lego Approach

Just like LEGO bricks, options strategies can be:
- **Assembled** - Combine basic positions (calls/puts) into complex strategies
- **Modified** - Add or remove legs as market conditions change
- **Visualized** - See the complete payoff structure at a glance
- **Optimized** - Adjust strikes, expiries, and positions for better risk/reward

Core Features

1. **30+ Pre-Configured Strategies**

The indicator supports all major options strategies across four categories:

**Market Neutral Strategies:**
- Iron Condor
- Iron Butterfly
- Short Straddle
- Short Strangle
- Butterfly Spread
- Calendar Spread
- Double Calendar

**Bullish Strategies:**
- Bull Call Spread
- Bull Put Spread
- Long Call
- Short Put
- Call Ratio Backspread
- Poor Man's Covered Call

**Bearish Strategies:**
- Bear Put Spread
- Bear Call Spread
- Long Put
- Short Call
- Put Ratio Backspread

**Volatility & Advanced Strategies:**
- Long Straddle
- Long Strangle
- Reverse Iron Condor
- Collar
- Protective Put
- Covered Call
- Jade Lizard
- Condor Spread
- Diagonal Spread
- Box Spread

2. **Intelligent Strike Price Selection**

The indicator automatically calculates optimal strike prices based on:
- **Delta Levels**: Recommends strikes at 10Δ, 20Δ, 30Δ for different risk profiles
- **Standard Deviation**: Uses volatility to place strikes at statistically significant levels
- **Price Rounding**: Automatically rounds to appropriate strike intervals ($1, $2.50, $5, $10)
- **ATM Detection**: Identifies at-the-money strikes for center-based strategies

3. **Dynamic DTE (Days to Expiration) Recommendations**

Each strategy has optimized expiration timeframes:
- **Iron Condor/Butterfly**: 45 days (maximize theta decay)
- **Short Straddle/Strangle**: 30 days (balance premium vs risk)
- **Long Options**: 60+ days (avoid rapid time decay)
- **Calendar Spreads**: 60+ days for long leg, 30 days for short leg
- **Protective Strategies**: 90 days (longer-term protection)

4. **Real-Time Market Analysis**

The indicator continuously monitors:
- **IV Rank**: Percentile ranking of current implied volatility (0-100%)
- **Trend Detection**: Identifies bullish, bearish, or neutral market regimes
- **Volatility Regime**: Classifies as high, low, or normal volatility
- **Technical Indicators**: RSI, MACD, moving averages for confirmation

5. **Vertical Payoff Diagram**

A unique visual feature displaying:
- **Green zones**: Profitable price ranges
- **Red zones**: Loss areas
- **Blue dashed line**: Current price marker
- **Max Profit/Loss labels**: Clearly marked extreme scenarios
- **Current P&L**: Real-time profit/loss at current price

The diagram is drawn vertically on the right side of the chart, making it easy to see how price movement affects your position.

6. **Comprehensive Greeks Tracking**

Real-time calculation of portfolio Greeks:

**Delta**: Directional exposure
- |Delta| < 10: Truly neutral ✅
- |Delta| 10-25: Slight directional bias ⚠️
- |Delta| 25-50: Moderate directional exposure ⚠️
- |Delta| > 50: Highly directional ⛔

**Theta**: Daily time decay
- Positive Theta: Earning money from time passing (seller)
- Negative Theta: Losing money from time passing (buyer)

**Vega**: Sensitivity to 1% IV change
- Positive Vega: Benefits from volatility increase (long options)
- Negative Vega: Benefits from volatility decrease (short options)

7. **Smart Recommendation Engine**

The AI-powered recommendation system analyzes:

**Market Conditions:**
- Bullish + High IV → Bull Put Spread (sell premium safely)
- Bullish + Low IV → Bull Call Spread (limited risk debit)
- Bearish + High IV → Bear Call Spread (collect premium)
- Neutral + High IV → Iron Condor (premium from both sides)
- High Volatility + Low IV → Long Straddle (expect big move)

**Entry Timing Signals:**
- 🟢 **IV Rank > 70%**: EXCELLENT - Sell premium now
- 🟡 **IV Rank 50-70%**: GOOD - Sell credit spreads
- 🔵 **IV Rank < 30%**: BUY TIME - Long options are cheap
- ⚪ **IV Rank 30-50%**: NEUTRAL - Wait or use spreads

**Trend Signals:**
- 🚀 **Bullish + RSI < 70**: Bullish bias OK
- ⚠️ **Bullish + RSI > 70**: Overbought, wait for pullback
- 📉 **Bearish + RSI > 30**: Bearish bias OK
- ⚠️ **Bearish + RSI < 30**: Oversold, wait for bounce

8. **Risk Metrics & Position Sizing**

**Probability of Profit (PoP)**:
Calculated based on break-even points and expected price movement
- PoP > 65%: High probability setup ✅
- PoP 50-65%: Moderate probability ⚠️
- PoP < 50%: Low probability, reconsider ⛔

**Risk/Reward Ratio**:
- Shows potential profit vs potential loss
- Helps evaluate if the trade is worth the risk

**Max Profit/Loss**:
- Clearly defined for most strategies
- "Unlimited" shown for naked positions

**Break-Even Points**:
- Up to 2 break-even prices displayed
- Critical for understanding your safety zone

9. **Unified Master Table**

All information displayed in one comprehensive table with 6 color-coded sections:

**📊 STRATEGY** (Blue header)
- Current price and selected strategy
- Market condition assessment
- IV Rank and volatility metrics

**⚙️ POSITION** (Orange header)
- Net debit/credit
- Current P&L with color coding
- Max profit/loss potential
- Break-even prices
- Probability of profit
- Risk/reward ratio

**📐 GREEKS** (Purple header)
- Portfolio Delta (directional risk)
- Theta (daily time decay)
- Vega (volatility sensitivity)

**⏰ TIMING** (Green header)
- Optimal DTE for the strategy
- Recommended short leg DTE
- Recommended long leg DTE

**📋 LEGS** (Teal header)
- Detailed breakdown of each leg
- Type (Call/Put)
- Position (Long/Short)
- Strike price
- Premium cost

**🎯 RECOMMENDATION** (Blue/Purple headers)
- Best strategy for current market
- Reasoning behind recommendation
- IV and trend entry signals
- Next action steps
- Risk check warnings

How to Use

Step 1: Installation

1. Copy the entire script code
2. Open TradingView Pine Editor
3. Create a new indicator
4. Paste the code
5. Click "Save" and "Add to Chart"

Step 2: Select Your Strategy

Use the dropdown menu to select from 30+ strategies:
- **Market Neutral**: Choose when expecting sideways movement
- **Bullish**: Select when expecting price increase
- **Bearish**: Pick when expecting price decrease
- **Volatility**: Use when expecting big moves (direction uncertain)

Step 3: Understand the Display

**On the Chart:**
- **Dotted horizontal lines**: Strike prices for each leg
- **Vertical payoff diagram**: Visual profit/loss structure (right side)
- **Color coding**: Green (long positions), Red (short positions)

**In the Master Table:**
- **Top sections**: Current market analysis
- **Middle sections**: Your position details and Greeks
- **Bottom sections**: Recommendations and action items

Step 4: Interpret the Recommendations

The indicator will tell you:
- **Best Strategy**: Based on current IV Rank and trend
- **Entry Signal**: Whether now is a good time to enter
- **Risk Check**: Warnings if position is too large or risky

Step 5: Monitor Key Metrics

**Before Entry:**
- Check IV Rank (prefer >50% for selling premium)
- Verify trend aligns with strategy
- Review PoP (prefer >60%)
- Ensure max loss fits your risk tolerance

**During Position:**
- Monitor Delta (keep near 0 for neutral strategies)
- Track Theta decay (earning money daily?)
- Watch for trend changes
- Consider adjusting at 21 DTE

**Exit Signals:**
- Take profit at 50-75% of max profit
- Cut losses at 100-150% of credit received
- Exit if Delta becomes too directional (>50)

Best Practices

For Market Neutral Trading

1. **Entry Timing**:
- Enter when IV Rank > 50%
- Prefer 30-45 DTE
- Look for consolidating price action

2. **Strike Selection**:
- Iron Condor: Use 20Δ for short strikes
- Iron Butterfly: ATM short strikes
- Buffer at least 1 standard deviation from current price

3. **Position Management**:
- Close at 50% profit (don't be greedy)
- Roll threatened side if price approaches
- Exit at 21 DTE to avoid gamma risk

4. **Greeks Management**:
- Keep Delta between -10 and +10
- Target positive Theta (earning daily)
- Accept negative Vega (betting on IV decrease)

For Directional Trading

1. **Trend Confirmation**:
- Wait for clear trend (price above/below moving averages)
- Check RSI not overbought/oversold
- Volume confirmation

2. **Strike Selection**:
- Spreads: ATM to 1 strike OTM
- Naked: 20-30Δ for safety
- Adjust based on conviction level

3. **Risk Management**:
- Debit spreads: Risk only 2-5% of account
- Credit spreads: Ensure 3:1 or better R:R
- Set stop losses at position cost × 2

For Volatility Trading

1. **IV Environment**:
- Buy options when IV Rank < 30%
- Sell options when IV Rank > 70%
- Calendar spreads in 30-50% range

2. **Event Trading**:
- Sell before earnings (IV crush)
- Buy before expected catalysts
- Close immediately after event

Advanced Features

### Custom Position Building

While the indicator auto-configures strategies, you can visualize custom positions by:
1. Understanding how legs combine
2. Using the Lego Approach to add/remove components
3. Monitoring how Greeks change with each leg

### Adjustment Scenarios

The indicator helps you plan adjustments:
- **Roll Up/Down**: See new strikes if price moves
- **Add/Remove Legs**: Visualize strategy transformations
- **Time-based**: Understand optimal rolling windows

### Monte Carlo Scenarios (Visual)

While not running simulations, the indicator helps you mentally model:
- Best case (price at max profit point)
- Worst case (price at max loss point)
- Expected case (current P&L)

## Alerts

The indicator includes three critical alerts:

1. **High Probability Setup**: Triggers when PoP > 65% and IV Rank > 60%
2. **Poor Setup Warning**: Alerts if PoP < 40% or unsuitable conditions
3. **High Delta Warning**: Notifies when portfolio Delta exceeds ±50

Limitations & Considerations

**What the Indicator DOES:**
- ✅ Visualizes payoff structures
- ✅ Calculates theoretical Greeks
- ✅ Recommends optimal strategies
- ✅ Identifies good entry conditions
- ✅ Helps plan adjustments

**What the Indicator DOESN'T:**
- ❌ Execute trades automatically
- ❌ Guarantee profits
- ❌ Account for real broker commissions
- ❌ Include dividend adjustments
- ❌ Consider early assignment risk

**Important Notes:**
- Premiums are estimated (not real-time quotes)
- Greeks are simplified calculations
- IV Rank uses ATR as a proxy
- Results are theoretical, not guaranteed


Conclusion

The **Lego Strategy Analyzer** transforms complex options trading into a visual, intuitive process. By combining real-time market analysis, intelligent recommendations, and comprehensive risk metrics, it empowers traders to make informed decisions about strategy selection, timing, and position management.

Whether you're a beginner learning the basics of spreads or an experienced trader managing a portfolio of neutral positions, this indicator provides the tools and insights needed to trade options with confidence.

Remember: **The best strategy is the one that fits current market conditions.** Use this indicator to identify those conditions and select the appropriate Lego blocks to build your perfect trade.