Option Selling Signals with Exits

Option Selling Signal System with Volume-Based Entry and Exit Logic

This script identifies optimal moments to sell options by combining volume distribution analysis with trend confirmation, specifically designed to capitalize on market inefficiencies in option pricing.
What it does:
Generates signals for selling call and put options with corresponding exit signals, using volume distribution as the primary filter combined with moving average trend confirmation and RSI momentum.
How it works:
The script analyzes volume distribution over a 63-day lookback period (approximately 3 months of trading data) to determine market sentiment:

• Volume Analysis: Calculates total volume above and below current price levels
  
• Trend Filter: Uses 50-period moving average to confirm market direction
  
• Momentum Check: RSI (14-period) validates entry timing
  
• Signal Spacing: Prevents overlapping signals with minimum 5-bar separation
  

Why this combination works:
Unlike standard option selling strategies that rely solely on volatility or Greeks, this approach uses volume distribution to identify when most trading activity occurred below current prices (bullish setup for call selling) or above current prices (bearish setup for put selling). The moving average filter prevents counter-trend trades, while RSI confirms momentum alignment.
Trading Logic:

• Sell Call Options: When majority of volume is below current price + price above MA + RSI below 50
  
• Sell Put Options: When majority of volume is above current price + price below MA + RSI above 50
  
• Exit Signals: Automatically generated when conditions reverse
  

How to use:

1. Apply to daily timeframe or higher (not suitable for intraday)
   
2. Red labels = Open call short positions
   
3. Orange labels = Close call short positions
   
4. Green labels = Open put short positions
   
5. Dark green labels = Close put short positions
   

Settings:

• Lookback Period: 63 days (adjust for different market memory)
  
• Moving Average Length: 50 periods (trend confirmation filter)
  

This methodology addresses the common problem of selling options without proper market structure analysis, providing both entry and exit signals based on actual trading activity rather than just price action.