Futures Paycheck doesn't sell premium regardless of conditions. A trend indicator decides whether it sells puts, hedges, or stands aside — and how much of your allocation it uses.
How direction is measured
The indicator uses SPY as a proxy for the S&P 500, since it tracks the same index that /ES is based on and has clean daily price history.
It takes 200 days of closing prices, calculates the average and the standard deviation, and draws bands two standard deviations above and below that average. Where today's price sits relative to those bands determines the zone.
The zones
Zone | Where price sits | What the system does |
Bullish Overextension | Above the upper band | Sells puts at 50% allocation |
Bullish | Between average and upper band | Sells puts at full allocation |
Bearish | Between lower band and average | Buys hedges |
Bearish Overextension | Below the lower band | Sells puts at 50% allocation |
The last row surprises people. When the market has fallen far below its average, the system sells puts again rather than hedging — at half size. The reasoning is that extreme lows have historically been poor places to add downside protection and reasonable places to sell premium. It commits half the usual capital to that view.
Grace periods
Sharp reversals out of extreme zones are handled with two transition rules.
Coming out of a deep decline — for 14 days after moving from Bearish Overextension back into the Bearish zone, the system sells puts at 50% allocation instead of hedging. It treats the recovery as tentatively bullish while sizing cautiously.
Coming off a strong run — for 4 days after moving from Bullish Overextension back into the Bullish zone, the system halts all new entries. It sits out the transition entirely rather than guessing.
Why your allocation may be halved
In three of the six states, the system uses 50% of your allocation rather than all of it. This is the indicator sizing down when conditions are less favourable, and it's working as designed.
If your system is holding fewer contracts than you expected, this is a likely reason. The execution history records the zone at the time of each run.
When the indicator can't be calculated
If price data can't be retrieved, the system reuses the last known reading for up to 24 hours. Beyond that, it halts all new entries until data returns.
You'll see a skipped entry noting the indicator is unavailable. This is a safety measure — the system won't sell premium without knowing which way the market is leaning. Existing positions continue to be monitored for take profit and stop loss.
Can you change it?
No. The indicator isn't configurable. Your controls are delta, DTE, take profit, stop loss, allocation, and whether hedging is enabled.
Reading the zone
Each entry run records the zone it saw in your execution history. If you're wondering why the system did or didn't act on a given day, that's where to look.