SHARKWATER TRADING · STRATEGY DESK
THE RUBBER BAND TRADE: RSI EXTREMES AND CREDIT SPREADS
A trader's timeline post claims 200% a year fading RSI extremes, buying under 20, selling at 80, shorting the reverse, and running 0-5DTE credit spreads at the same levels for 1-2% three times a week. The mechanic is real and tradeable. The number is unverified. Below is a workable framework, the risk that gets people run over, and Monday's watchlist.
THE SETUP
RSI mean reversion is the trading equivalent of a stretched rubber band. Pull it far enough in one direction and the snap-back becomes the higher-probability bet, at least until the band breaks instead of snapping back. That "breaks instead of snaps back" case is a stock in a real downtrend grinding through RSI 15 for two weeks straight. That's the whole risk of this strategy in one sentence.
Track 1: Directional Reversal
- Long entry: RSI(14) crosses back above 20 from below, don't buy the falling knife, wait for the turn
- Long exit: RSI hits 80, or a trailing stop under the recent swing low, whichever comes first
- Short entry: RSI crosses back below 80 from above
- Short exit: cover near RSI 20
Track 2: Credit Spreads at the Extremes
This is the actual edge behind the claimed 200%/year, defined risk collects premium instead of betting on direction alone.
- RSI ≤ 20 → sell a put credit spread below price
- RSI ≥ 80 → sell a call credit spread above price
- 0-5 DTE, sized for 1-2% account return per trade, targeting Monday/Wednesday/Friday entries
SHARKWATER TAKE
BULL CASE
Defined-risk spreads at statistical extremes on liquid names is a legitimate, repeatable edge that professional options desks run every day. Small, frequent wins compound fast on paper.
BEAR CASE
No backtest, drawdown data, or track record accompanies the claim. RSI ignores trend context, an oversold stock in a real downtrend just stays oversold. 0DTE credit spreads carry gap risk a screenshot doesn't show.
THE TAKE
Run this as a framework, not gospel. Add a trend filter before fading RSI alone, backtest the specific tickers you trade, and size every position like the 200% claim is aspirational, not expected.
MONDAY WATCHLIST (8/31)
RSI as of Friday's close on liquid, optionable names. Confirm premarket before entering, weekend gaps move these fast.
Oversold, RSI < 27
| Ticker | RSI | Price |
|---|---|---|
| BHF | 17.3 | $52.27 |
| DVA | 24.2 | $173.82 |
| NI | 25.1 | $40.62 |
| TJX | 25.4 | $140.53 |
| CNP | 25.6 | $38.77 |
| PEG | 26.1 | $72.61 |
| CRUS | 26.1 | $115.33 |
| CPRI | 26.5 | $13.65 |
| GOLF | 26.5 | $88.82 |
| WB | 25.1 | $7.03 |
Overbought, RSI > 77
| Ticker | RSI | Price |
|---|---|---|
| MSFT | 78.1 | $499.99 |
| CACI | 78.3 | $644.43 |
| TEAM | 78.6 | $149.07 |
| ABNB | 79.1 | $178.07 |
| REGN | 80.3 | $784.36 |
| SNOW | 80.7 | $330.49 |
| IDCC | 80.7 | $344.56 |
| U | 81.3 | $43.00 |
| GRMN | 77.9 | $310.89 |
Options strikes and premiums must be pulled from a live broker chain before executing, nothing above is a real quote. RSI levels are calculated from Friday's close and will drift with the weekend and Monday's open. This is strategy research for educational purposes, not investment advice. Size positions and manage risk accordingly.
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