Condition: Overnight Gap

Updated: May 7, 20253 min read

The "Overnight Gap" feature in OptionsApp allows you to design strategies based on price gaps between the previous day's closing price and the current trading day's opening price. This condition can be flexibly used in the Entry or Exit Conditions of a configuration.

1. How it works in OptionsApp

In the Configurations section, you can create a new Entry or Exit Condition using the plus icon. Configuration is always done from left to right.

First, select the Underlying to be checked (e.g. SPX or SPY, depending on the active tab).
Next, the Overnight Gap condition can be selected and configured.

2. Selecting the Underlying

It's possible to choose a different Underlying for the condition, for example, a VIX reference can be used in an SPX setup. This allows you to define Entry and Exit Conditions that use a gap in the VIX as a condition for an SPX trade.

3. Calculation basis

For SPX, SPY or comparable values: The gap is calculated as the difference between the previous day's closing price (e.g. 4:00 PM US Eastern Time) and the first available price of the current day.
For VIX: A special logic applies here: The previous day's closing price (4:15 PM US Eastern Time) is compared with the first VIX value after SPX market opening (from 9:30 AM US Eastern Time). The background is that VIX itself is already traded before market hours starting around 9:15 AM. For the Overnight Gap feature in OptionsApp, we deliberately wait until the SPX market opens to measure a reliable gap. If no VIX price is available at the time of Entry or Exit, the condition cannot be reliably checked, the trade will not be opened or closed.

Important note for VIX values:
The VIX price at US market opening is delayed in most cases. The first value is typically set at 9:31 or 9:32 AM US Eastern, but sometimes later. If you want to open a trade based on the VIX level (via Overnight Gap or other conditions) at 9:31 or 9:32 AM US Eastern, it may happen that these trades cannot be executed due to the missing VIX value.

4. Configuration

The following values can be set for the gap condition:

Minimum size of the gap in percent or points
Operator
Size of the gap (negative gaps are entered as negative values)

5. Use case example

A setup should only be executed if SPX starts trading with a positive gap of at least 1.0%. In this case, the Entry Condition is configured so that the trade only starts when this condition is met. The configuration for an Exit Condition would be identical.

6. Gap Down min/max & Gap Up min/max

There is no explicit selection of gap direction. This is not necessary due to the ability to enter a sign.

In general, all 4 cases of possible Gap Down and Gap Up logic can be covered:

O/N Gap Down Max. 0.5%: >= -0.50% (gap must be greater than or equal to -0.50%)
O/N Gap Down Min. 0.5%: <= -0.50% (gap must be less than or equal to -0.50%)
O/N Gap Up Max. 0.5%: <= +0.50% (gap must be less than or equal to +0.50%)
O/N Gap Up Min. 0.5%: >= +0.50% (gap must be greater than or equal to +0.50%)

7. Notes on data availability

OptionsApp deliberately waits for the first available price value to perform the calculation correctly. If no price is available at a scheduled Entry or Exit time, the trade will not be opened or closed.