Foxchase Trading – SPY Divergence Indicator

This ThinkorSwim indicator suite analyzes option behavior directly — not SPY itself — to detect when SPY price diverges from its option premium structure.

It reveals early reversals and continuation signals driven by dealer hedging and volatility repricing.

What It Detects

• Opt/Spy Divergence — SPY Higher Low + Option Lower Low (Bullish) or SPY Higher High + Option Lower High (Bearish)
• Extrinsic Divergence (EX) — SPY Higher Low + Call Extrinsic Lower Low → signals IV compression and potential dealer unwind
• z-Score + Extrinsic Slope (New) — identifies IV compression vs expansion, showing when option premium is being repriced rather than hedged

What You’ll Learn In SPY Divergence Indicator

• Designed for slightly OTM 0DTE SPY call or put charts (apply directly to the option chart)
• Bid/Ask mid-price used for clean extrinsic calculations
• Adaptive high/low tolerance to detect near-equal pivots
• Smart timing: waits for confirmed pivots, reducing false signals
• Simple visuals: Green ↑ for Bullish Divergences, Red ↓ for Bearish Divergences
• Now includes z-Score normalization to track volatility regime and timing (compression vs expansion)

More courses from the same author: Foxchase Trading

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