The Gap-Fill Scalp: Trading SPY Back to Prior-Day Close
An overnight gap leaves an obvious target on the chart: the prior-day close. On the right kind of day, price goes and fills it, and you can trade the trip.
When SPY gaps away from yesterday's close, that close becomes a magnet: the unfilled gap is a visible target, and on a calm day price often drifts back to fill it. Fading the gap toward the prior-day close is one of the cleaner reversion scalps — when the regime cooperates.
The setup
You want a calm, positive-gamma regime (gaps fill when hedging dampens moves) and a gap that shows early signs of failing to extend — a rejection at the prior-day high/low or a stall right after the open. The prior-day close is your target; the gap is the distance price is likely to retrace.
Entry, target, stop
Entry: the rejection that signals the gap won't run — price fading back from the open extreme (buy puts on a gap up that rejects, calls on a gap down that holds). Target: the prior-day close (the fill), with VWAP a common waypoint. Stop: a new extreme in the gap's direction / acceptance beyond the prior-day level — that's a failed gap-fill turning into a runaway.
The prior-day close is the gap's magnet on a calm day. Fade the open that can't extend, target the fill, and bail if the gap decides to run.
When to skip
Skip it in negative gamma or on a trend-day gap-and-go — those gaps run rather than fill, and fading them is stepping in front of momentum. The gap-fill is a positive-gamma, reversion trade; the regime decides whether the gap is a target to fade toward or a trend to respect. NoVo's regime read tells you which kind of gap you're looking at before you fade it.
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NoVo is a software tool for market analysis, not financial advice. This article is general education, not investment advice. Options trading involves substantial risk of loss, up to and including your entire capital. NoVo makes no guarantee of profit, win rate, or performance, and past results do not predict future outcomes. You are responsible for your own broker account, configuration, and trading decisions.
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