EP Options Execution Checklist

1SCREEN — Identify EP CandidatesPre-Market / After Hours

Run gap scanner — filter for stocks gapping ≥8% on ≥3× ADV volume

TC2000: c/c1 > 1.08 AND v > 3*avgv50.1 AND v >= 300000Alternatives: Finviz screener (gap up >5%), ChartMill EP screener

Check catalyst — is the gap driven by a real fundamental event?

Earnings beat (EPS + revenue + guidance raise) ← strongestNew contract / product / FDA approval / sector catalystDisqualify: analyst upgrades only, sector sympathy, meme/social media

Verify neglect — was this stock not expected to gap? No anticipatory run-up, low analyst coverage, months of consolidation or base-building prior

Check market cap — sweet spot $100M–$10B. Sub-$10B produces 36% more EPs than >$10B (per @flow study)

Verify no overhead resistance — stock is gapping into clear air, not into a prior ceiling or congestion zone

✓ All 5 items checked → proceed to Phase 2

✗ Catalyst is narrative-only or gap is into resistance → PASS, do not trade

2QUALIFY — MAGNA53 FrameworkDay 0 (during session)

M — Massive EPS acceleration — triple-digit growth or major inflection. Minimum $0.05 EPS

A — Accelerating sales — 39%+ revenue growth, preferably consecutive quarter acceleration

G — Gap ≥10% — 8-10% is the floor; 20-100%+ is ideal for highest-conviction setups

N — Neglect period — months or years of sideways/declining action. No recent analyst coverage bump

5 — Short interest ≥5 days to cover — adds fuel to the move (short squeeze component)

3 — ≥3 analysts raising targets post-catalyst — institutional validation of the fundamental shift

CAP10×10 — market cap <$10B, ideally IPO within 10 years

✓ ≥5 of 7 items met → high-quality EP. Proceed to Phase 3

✗ <4 items met → weak setup. Reduce size or pass entirely

3CLASSIFY — Chicken / Duck / Swan SignalsDay 0 → Day 9

Day 0 close location — did the stock close in the upper 50% of the day's range?

Upper third = strongest signalClose near low of day = chicken warning

Day 1 opening test — does the stock hold above Day 0 opening price?

YES — never tests open → 65% of swans show this signalNO — drops below Day 0 open → swan probability drops significantly

Day 1 low-of-day test — does the stock hold above Day 0's low?

YES — never tests low → 89% of swans show this signalNO — breaks below Day 0 low → likely chicken. Exit or tighten stop

Days 2-6 price action — is the stock building a tight consolidation above the 10MA?

Tight range, declining volume, orderly = bullishWide swings, erratic candles = duck/chicken warning

Days 7-9 — the 10MA inflection test (CRITICAL) — does the stock hold above the 10MA?

Bounces off 10MA → swan confirmed. 53% of all EPs cross below here — survivors are disproportionately swansCloses below 10MA → duck or chicken. Exit shares or do not initiate options

✓ Day 1 holds + 10MA bounce at Days 7-9 → SWAN CONFIRMED. Proceed to Phase 4

✗ Breaks Day 0 low or closes below 10MA → do not enter options. Exit shares at stop

Record classification:

Chicken (exit) Duck (put spread only) Swan (full strategy)

4IV CHECK — Confirm Post-Crush EnvironmentDay 2-5 (before options entry)

Verify IV crush has occurred — IV should have dropped 30-50% from pre-earnings levels

Check IV Rank or IV Percentile on your broker platformPre-earnings IV for most stocks: 50-80%. Post-crush target: 30-45%

IV Rank <50% — confirms you're not overpaying for options post-event

If IV Rank still >60% → wait another 1-2 days or use spreads to reduce vega exposure

Verify options liquidity — the stock must have tradeable options

Open Interest ≥500 per strike (ideally ≥1,000)Daily volume ≥100 contracts per strikeBid-ask spread <10% of option mid-priceSub-$100M cap = usually insufficient liquidity → shares only

Select expiration — target 30-45 DTE (standard monthly preferred for liquidity)

✓ IV crushed, Rank <50%, liquidity sufficient → proceed to Phase 5

✗ IV still elevated or illiquid options → wait, use shares only, or use spreads

5SELECT — Choose Options StrategyBased on Phase 3 classification + timing

Match strategy to classification and day count:

Timing	Classification	Strategy	Structure
Day 2-5	Any (gap holding)	Bull Put Credit Spread	Sell put below Day 0 low, buy protective put $2.50-$5 lower
Day 3-5	Likely Swan	Call Debit Spread	Buy ATM call (δ 0.50-0.60), sell OTM call 5-8% above (δ 0.25-0.35)
Day 7-9	Confirmed Swan	Long Calls	Buy slightly OTM (δ 0.40-0.50), 30-45 DTE
Day 20+	Late Swan	PMCC	Buy deep ITM LEAPS (δ 0.70-0.80, 6+ mo), sell monthly OTM calls (δ 0.20-0.30)
Day 2-5	Compound (optimal)	Put spread → add calls at Day 9	Layer 1: put spread on Day 2. Layer 2: long calls on 10MA confirm

Record chosen strategy: ___________________________________

Confirm strike selection

Long calls: δ 0.40-0.50 (slightly OTM)Debit spread long leg: δ 0.50-0.60 (ATM), short leg: δ 0.25-0.35Put spread short leg: δ 0.20-0.30 (below Day 0 low), long leg: δ 0.10-0.15

Define exit rules BEFORE entry

Long calls: exit at +50% (sell half), +100% (sell half again), trail remainderCall debit spread: exit at 80% of max profitPut credit spread: exit at 75% of max credit receivedAll strategies: exit if stock closes below Day 0 low (EP invalidated)

6SIZE — Calculate Position & RiskBefore placing order

Set maximum risk per trade — 1% of account standard, 2% for highest conviction only

Account Size: $_____________ × 1% = Max Risk: $_____________

Calculate contracts for chosen strategy:

Long Calls:
Contracts = Max Risk ÷ (Premium per contract × 100)
$_________ ÷ ($_______ × 100) = _______ contracts

Debit Spread:
Spreads = Max Risk ÷ (Net Debit × 100)
$_________ ÷ ($_______ × 100) = _______ spreads

Credit Spread:
Spreads = Max Risk ÷ ((Width - Credit) × 100)
$_________ ÷ (($_______ - $_______) × 100) = _______ spreads

Check portfolio heat — total open risk across all positions ≤10% of account

Current open risk: $_______ + this trade risk: $_______ = $_______As % of account: _______% (must be ≤10%)

Check sector concentration — not adding to an existing same-sector position

Check market regime — is SPY above its 50MA? Broad market weakness = correlated risk factor for EPs

SPY above 50MA → full sizeSPY below 50MA → half size or pass

✓ Risk ≤1%, heat ≤10%, no sector overlap, SPY healthy → proceed to Phase 7

✗ Exceeds limits → reduce contracts or wait for existing positions to close

7ORDER — Place the TradeExecute

Final bid-ask check — is the spread reasonable? (<10% of mid-price for single legs, <15% for multi-leg)

Use limit orders only — enter at mid-price, then walk toward the natural side if not filled within 30 seconds

Never use market orders on optionsFor spreads: submit as a single multi-leg order, not individual legs

Confirm order details match plan:

Ticker: _________ Expiry: _________Strike(s): _________ # Contracts: _________Order type: _________ Limit price: $_________Buy/Sell: _________ Total debit/credit: $_________

Set alerts immediately after fill:

Price alert at Day 0 low (EP invalidation → emergency exit)Price alert at 10MA (trailing stop trigger for shares component)P&L alert at +50% (first profit-taking level for long calls)P&L alert at 75-80% of max profit (exit level for spreads)

Log the trade — record in trading journal:

Date, ticker, strategy, entry price, stop level, target, contracts, total riskEP classification (chicken/duck/swan), MAGNA53 score, IV at entryThesis in one sentence: _________________________________________________

✓ Order filled. Alerts set. Trade logged. Now manage — do not modify the plan.

Quick Reference — Key Numbers

Gap minimum: ≥8% (ideal ≥10%) Volume: ≥3× ADV IV Rank at entry: <50% DTE: 30-45 days Risk per trade: 1% (max 2%) Portfolio heat: ≤10% Swan rate: 30% of EPs 10MA cross: Days 7-9 (53% fail here) Opening never tested: 65% of swans Low never tested: 89% of swans HPD: 83% peak within first 10 days Avg EPs/month: 14 (4 swans)