 Hello everyone, welcome to Options with Doug, streaming live daily on Bookmap Discord and the Bookmap YouTube channel at 1.30pm Eastern Time. Before I get started, I need to go through the Disclosures. General Disclosure. All bookmap limited materials, information, and presentations are for educational purposes only and should not be considered specific, investment advice, nor recommendations. Trading futures, equities, and options involve substantial risk of loss and is not suitable for all investors. Past performance is not necessarily indicative of future results. Here's my contact information. The best way to get in touch with me is through Discord. My name on Discord is Doug P. Also on Bookmap Discord, there's an options-dash-duck-chat channel that's a great place to post questions, comments, and content related to the topics of my presentation and the topics of the channel that I'll go through in just a moment. And note that Bookmap Discord is free and available to everyone, whether you subscribe to Bookmap or not. There's a lot of great content there on a variety of topics, asset classes, as well as languages. I'm also on X, formerly known as Twitter. My name there is at Doug Pless. The focus of my presentation today and the focus of the options-dash-duck-chat channel is options order flow, the impact of options markets on stocks and futures, and the influence of marketmaker hedging flow on price action. I have a two-step process for trading and the first is planning. And I use positional analysis. I look at how traders and market makers are positioned in the options market and how those positions changed from day to day to develop a thesis regarding the expected trading range and volatility for the day, as well as the directional bias. And the second step in my process is execution. I look at real-time motor flow and Bookmap and real-time marketmaker hedging flow and spot gamma hero to confirm my thesis and for setups for entries and exits. Questions and comments are welcome and I will be watching both the options-dash-duck-chat channel and Discord as well as the chat and YouTube for your questions and comments. Please feel free to post. I'll do my best to answer your questions. And hello, Don. Welcome. Glad you're here. All right. Here's my agenda for today, Wednesday, January 31st. First of all, I want to go over news items, economic data, events, and earnings for today as well as the rest of the week. And then I'll go through my positional analysis, then I'll review some setups from earlier today, and then we'll take a look at the live market. And of course, this is F1C Day. The announcement is at 2 p.m. I'll stop whatever I'm doing at 2 p.m. And we'll take a look at the live market. And hello, Stephen. Welcome. Glad you're here. All right. So let's start with news items, economic data, events, and earnings. And there were some data releases this morning, somewhat market-moving. First of all, the ADP Employment Report came out at 8.15 a.m. Eastern time. That came in lower than expected, lower than previous. Also the Treasury announced their quarterly refunding. And then this employment cost came in lower than forecast, lower than expected. And then finally, Chicago PMI also came in lower than forecast, lower than expected, and below 50, so still indicating contraction. All right. So some market-moving data this morning. And of course, the big event again for the week is the F1C meeting. Let me just refresh this page. All right. This is the expectations for this meeting today, January 31. Note the current target rate, 525 to 550 basis points. Right now there's an almost 96% chance that rates are unchanged and about a 4% chance of a rate cut of 25 basis points. That was at 2% yesterday. All right. So that's at 2 p.m. The press conference begins at 2.30 and that I'll wrap up my webinar at that time. But I will cover the announcement. All right. For the rest of the week, and also note that AMD, Google, Microsoft, all reported earnings after the market closes. And if we have time, we'll take a look at the results for those earnings reports. Tomorrow, 10 a.m., there's more PMI data. And then after the market closes, Apple, Amazon, and Meta, all report earnings. Then Friday at 8.30 a.m. Mr. Time is the jobs report and at 10 a.m., Michigan Consumer Sentiment. All right. Let's move on to positional analysis now. This is the S&P 500 futures. Oops. That's a NASDAQ. Let's go back to S&P 500 futures and book mount, ES futures. Before I take a closer look at this chart, I do want to take a look at the underlying index, SPX, and a larger time frame. We'll go through this quickly. This is the SPX one-day chart. That rally began October 30th last year, found some resistance at 4,800, broke out of that range on Friday, January 19th, options expiration, moved up to 4,900 above that level, and found resistance at 4,900. All right. So that's a one-day chart. Let's take a look at another chart. I'm going to go to a 30-day one-hour chart. So here's the resistance at 4,800, the break out on Friday, the 19th, options expiration. Here's the 4,900 level, acting as resistance, and then on Monday, on news, there was a break out above that level, and now SPX is trading back below that level. Primarily based on the earnings reports from yesterday afternoon. All right. Let me point out the levels on this chart. First of all, the dash purple lines are showing the lower and upper weekly expected move. That's based on the options market. I update that once a week. The dash blue lines showing the lower and upper daily expected move. Also based on the options market, SPX trading below that lower daily expected move. All right. The dark red lines are showing spot gamma levels. These are proprietary spot gamma levels provided to subscribers. They're shown on a variety of trading platforms. This is thinkorswim. I'm going to point out the key daily levels. First of all, there's the put wall at 4,500. That's a strike with the largest net negative gamma that can be expected to act as support. The next level up is the volatility trigger at 4,775. That spot gamma is proprietary gamma volatility flip level. Below that level, market makers position on the gamma curve is negative. In a negative gamma environment, they have to trade with price to hedge their delta exposure that tends to enhance or increase volatility. On the other hand, above that level, like SPX is trading now, market makers position on the gamma curve is positive. In a positive gamma environment, they have to trade against price to hedge their delta exposure. That tends to subdue or decrease volatility and know that SPX is trading well above that level. That volatility trigger did shift lower from yesterday. It was 4,865, so a pretty significant shift lower for the volatility trigger. The next level up is 5,000. That is the call wall. That's a strike with the largest net positive gamma can be expected to act as resistance. That's also the absolute gamma strike. That's a strike with large absolute positive and negative gamma. That's where most of the gamma weighted open interest is concentrated. Pretty wide range there from 4,500 potential floor to 5,000 potential ceiling. I mentioned before the volatility trigger shifted lower and all other levels remain the same from yesterday. No changes. Then finally, let's take a look at one other chart for SPX. This is a one minute chart showing three days worth of data. Here's that breakout above 4,900 on Monday, big consolidation yesterday, and then gap lower and now SPX trading above the low of the day but still below the lower daily expected move and also below 4,900. All right. Let's take a look at book map. On book map, I have my own cloud notes, so I can show SPX levels. There's the SPX 4,900 level. I can also show SPI levels. There's the SPI 487 volatility trigger, and then here's the lower daily expected move for ES. It's a little bit different than SPX. All right, note there is a difference in price between ES and SPX. But somewhere between 24 and 25, maybe 24.5 would be more accurate. I'm using 24, so when I looked this morning, when I posted this on Discord, it was closer to 24, so that's what I'm using. So I'm showing SPX 4,900 at ES 4924. So note now that price is oscillating up and down around this 487 volatility trigger, and the point of control shown by the purple line is just above that. All right, that's the SP500. I talked about shifts and levels for the SPX. For SPI, the volatility trigger also shifted slightly lower, and the put wall shifted slightly higher. But no changes to the call walls or absolute gamut strikes for both SPX and SPI. All right, let's take a look at NASDAQ. So this is the Enqueue Futures and Book Map. Before I take a closer look at this chart, I want to take a look at the underlying index products. That would be QQQ and NDX. This is QQQ, a one-minute chart, 421, more or less as resistance at the open, and then 418 support. And note that QQQ is trading below some key levels here, 423 volatility trigger, 424 absolute gamut strike, and the call wall is well above it, 430. And for QQQ, the put wall did shift higher. All right, so QQQ rallying up toward the high of the cash session. All right, let's take a look at NDX. Last time I looked, there was not much to see here. So we'll take a quick look. Here's NDX. Let's zoom in on this. So no gamma levels in play for today. There are several levels below, primarily the 17,100. That is the absolute gamma strike and the call wall, and that levels have remained there for quite some time. All right, for NDX, just like QQQ, oh, the NDX, the volatility trigger shifted lower, and the put wall shifted higher, just like QQQ. All right, back to book map, NQ futures. The reversal here, right at the lower day they expected move, just above the QQQ418. So I have my own cloud notes for NQ as well. There's the QQQ420 level. No NDX levels in play. All right, looks like I'm missing a 400 label there, need to check my spreadsheet. All right, so that's NQ. We'll talk about setups in just a moment. So I talked about shifts, minor shifts in put walls and volatility trigger for NDX. All right, let's take a look now at Gamma Notional to see how market makers were positioned on the Gamma Curve at the beginning of the day. So quickly this is Gamma Notional, market makers position on the Gamma Curve at the beginning of the day for the SMB500, NASDAQ, and Russell 2000. All these numbers shifted lower from yesterday. So the SMB500, SPX, and SPY remains mildly positive in a positive Gamma environment. This indicates for an index that traders are short calls, market makers are long calls, hence the positive Gamma, and they have to trade against price to hedge their dealt exposure. QQQ shifted negative in a negative Gamma environment for an index. Gamma assumes that traders are long puts, market makers are short puts, and they have to trade with price to hedge their dealt exposure. All right, so all numbers shifted lower. Let's take a quick look at the Vana model. It is coming into play today. This is for SPX. I'm going to look at the Vana model. What this chart is showing is market makers' delta notional, their delta exposure on the vertical axis, price on the horizontal axis, there are two curves on this chart. The white or light gray shows how market makers' delta notional may change with changes in price only, and the purple curve shows how market makers' delta notional may change with changes in price and implied volatility, and that change in delta with a change in implied volatility is the Vana effect, hence the name of this chart. All right, so let's take a look at some prices now. So at the low of the day, SPX was right around $48.79, so that's right about here. So this is on this portion of the Gamma curve indicating if price falls, implied volatility drops, market makers will need to sell futures to hedge their dealt exposure. They always want to remain delta neutral, so in this portion of the Vana curve, they will need to sell futures to hedge their dealt exposure, and VIX was moving higher this morning and price was falling earlier, low of the day again right around $48.79. Let's just take a look at a quick look at VIX for today. So in the morning, up until about noon, VIX was rising, price falling, market makers were selling futures to hedge their dealt exposure. On the other hand, if price increases, market makers can buy back their short futures. So that's what's happening now in the afternoon. Price increasing, implied volatility dropping, and market makers can buy back their short futures. That's a put Vana rally. So in this case, on this portion of the Vana curve here, Gamma notional has potentially shift negative, and market makers have to trade with price to hedge their dealt exposure. So that's SPX. We'll take a quick look at SPY, SPY low of the day right around $486. So also on this left skewed portion of the Vana curve, and QQQ low of the day $418. So well up on, and remember, Gamma notional at the beginning of the day for QQQ was negative. Positive for SPX and SPY and negative for QQQ. All right, so it's really difficult to have much of a thesis for FOMC day other than looking for higher volatility. Undirectional bias really depends on the market's interpretation of the announcement and also the press conference primarily. All right, so let's take a look at some setups now from earlier today. I want to start with looking at what options traders have been doing today. So this chart is from SPOT Gamma. It is showing the hero signal hedging impact real-time options, and this chart is showing options trades and market maker hedging activity for a combined signal of SPX by XSP and ES futures. So this is what I use for the SB500. The white line is price for SPX, purple line is the hero signal. Again, hedging impact real-time options. A falling hero line indicates traders are taking negative delta positions. They are buying puts and or selling calls. A rising hero line indicates traders are taking positive delta positions. They are buying calls and or selling puts. All right, let's zoom in on this chart. I'm going to zoom in on the morning here. This is what I was looking at in trading. All right, so what this is showing is the hero signal reverses lower right at $935. Price follows, hero signal reverses higher, suddenly traders start taking positive delta positions and during this time price, the drop slowed down as traders started taking positive delta positions and then they took the foot off the gas, took negative delta consolidated again and then when they started taking, aggressively taking negative delta positions again, price dropped again right around $1030. Note the flow alert here just after $1030 indicating significant options activity and then price reverses higher right around $1035, $1040 as traders started taking positive delta positions. All right, so let's go take a look at book map. I'm going to zoom in by zoom too far. All right, here's that $930 short set up right at spy 489 secondary entry at the $4900 level as traders were taking negative delta positions. Here's that area where price slows down as traders took positive delta positions and then the hero signal leveled off, shifted lower again $1030 and traders start taking negative delta positions again. All right, note the order flow and book map here, the pink line showing cumulative volume delta dropping, also the yellow line showing sell stop orders helping to fuel the move lower with a couple of sheep sharp drops. All right, I've got about two and a half minutes left. Let's zoom back out and let's talk about this turnaround now. Note that large traders were buying with iceberg orders. They really started before 10 a.m. That's shown by the rising light blue line, also the on chart indicators, large traders buying the move down by weakness with iceberg orders. All right, let's go back to hero. I did post this in discord and at the time I posted it just around 11 a.m. This is the mag seven signal. This is combining the hero signal, options trades, market maker hedging activity for the magnificent seven stocks, Apple, Amazon, Google, Microsoft, Nvidia, Tesla, aggressively taking negative delta positions and they were selling calls and buying puts. They took the foot off the gas and then price starts to move higher. Also note the hero signal for the SM500 right around 1040 shifts higher and price starts to move higher. All right, let's go back to book map now. I've got less than a minute. Give me just a moment. I'm going to pop up YouTube here, YouTube TV, watch CNBC on another screen so we can watch. So I've got about 15 seconds to the announcement. All right, so we'll watch the SM500 here and then we'll take a look at how options traders are reacting. So it looks like an initial bearish reaction. All right, so Fed leaves rates unchanged. So now the algos are parsing the statement. We'll watch this for a couple of minutes so far bearish reaction. Now ES testing the lower daily expected move. Let's see what options traders are doing. Go to hero. I'm going to zoom in on this. I'm going to go to a shorter look back period to get more clarity. Let's go to 30 minutes, see if that gives more clarity. So just looking at the last 30 minutes of data instead of the entire day, this is showing that traders started taking negative delta positions just after one o'clock. And now that accelerated lower. One other thing that I wanted to take a look at today, I'm going to go back to think or swim, take a quick look. This is what's driving the market today. Based on the earnings from AMD, Google and Microsoft, large cap tech, negative. This is what's driving the market lower. These stocks were apparently a price for perfection as they say on CMBC. So the Fed said they mentioned the possibility of changing rates will assess data outlook and risk before change. So nothing new there. Fed remains data dependent. There's been a lot of speculation about cutting rates in March. I think that's too far out to look at. There's a lot of data that comes out between now and March. So options traders continue to take negative delta positions. Let's take a look at NASDAQ. All right. So initially a bearish reaction. Let's go see what options traders are doing again. Check the MAG7. Note that the MAG7, they started taking negative delta positions. Looks like around 120. Let's check the NASDAQ signal. This is combining NDX and QQQ. Pretty choppy. So for NASDAQ, I've found this signal provides a lot more clarity than MAG7. Let's go back to ESB500, go back to book mount. So for ES, support around the lower daily expected move, 486 and ES4900. So it looks like there might have been some changes to the statement that was released. Economy remains strong. Let's go back to HERO. Now traders buying the dip, starting to take positive delta positions and price moving higher. That may just be a pullback. Let's go back to book mount. One thing that I did want to take a look at is the stocks that reported earnings yesterday. Let's go to AMD. So this is two days worth of data. So this is yesterday. After the earnings reported, after the close yesterday. And then basically AMD has been working its way back higher. Let's take a look at Google. Actually before I do that, let's take a look at, let's go back to HERO. Take a look at HERO for AMD. I'm going to switch back to the one day look back period. So you can see traders were taking positive delta positions, multiple flow alerts at the low of the day, helping to move AMD higher. I'm not going to separate outputs and calls. That causes too much problems. But I looked earlier today. Traders were buying calls and selling puts. Market makers take the opposite side of that. So they have to buy stock to hedge their delta exposure. So traders definitely buying the dip in AMD. Let's take a look at Google and not so much with Google, an opposite reaction. Traders taking negative delta positions. Google moves lower. Again timely flow alerts. Let's go to book map. Take a look at Google. So here's yesterday. Big gap down after the earnings report. And then Google now trading down around 141, the low of the move down yesterday afternoon. And finally Microsoft. Yesterday regular trading hours, wrong tool. Regular trading hours up and down after reporting earnings. Now Microsoft heading back down toward the lows. Let's see what options traders are doing. Then we'll go back to the SB500. So Microsoft, they're taking negative delta positions again. Hero falling. Again timely flow alerts indicating significant options activity. All right let's go back to the SB500. And I'm going to go back to the 30 minute look back period. So I'm just looking at the last 30 minutes of data. Again right around 120, traders started taking negative delta positions. And there's been some up and down in hero. But still continuing the trend lower. Still making lower highs. But it looks like now price may be consolidating. Let's go back to book map. Go back to the ES. Let's take a look at NASDAQ. All right so NASDAQ remember low of the day was right around 286. That was the lower daily expected move. NASDAQ trading now above that. So after the announcement ES made a new low of day NASDAQ did not. Go back to NASDAQ, let's go back and see what options traders are doing. So now it looks like for the SB500 hero signal may be shifting higher. Let's take a look at this is the purple line showing all trades all expirations. Let's see what the zero DTE traders are doing. Traders with options that expire today that is shown by the green line. I'm going to go back to the one day look back period so we can see what portion of the trade has been zero DTE for the for the day and looks like a pretty large portion. So what this is showing this notional value notional value for the green line 735 versus the all expirations 918 so a pretty large portion of the options trades today have been in options that expire today zero DTE yes Caesar says no one doing a thing it looks like but also looks pretty empty empty probably waiting for 230 yeah I agree so the remember the expectation for the Fed to leave rates unchanged was about 96% today so the the outcome of was already known pretty much or expected and the Fed did what's expected now I you know they're parsing the algos and news outlets parsing the statement I you know I certainly don't have time to do that while I'm on the air but you know the big move will come depending on what Jerome Powell says at 230 since again the the outcome of the statement was already known in advance pretty much leaving rates unchanged all right so a good bit of the trade today has been in in zero DTE all still positive positive delta notional for the day all right let's zoom back in turn that off go back to 30 day a 30 minute look back period all right what what does everyone want to see let me know you want to look at more stocks continue looking at the S&P 500 is anyone trading this so mag 7 signal now starting to move higher well when we zoom out a little bit it still looks like it's making lower highs and triathlon trader asked me if I review hangs hang sing no I don't is that the Hong Kong index right so if no not I do not all right so mag 7 hero signal continues to move lower yeah I just I'm focused on the US market the the futures I I trade I look at our ES and NASDAQ and then these are the stocks that I focus on primarily large cap tech mag 7 stocks plus AMD and Netflix and thank you uncle says a great job reviewing everything today all right so the hero signal continues lower for for the mag 7 turning lower for the NASDAQ that combines in DX and and QQ Q now back to the SB 500 overall options traders still taking negative delta positions starting around just after 1 p.m. Easter time about an hour before the announcement let's go back to book map NASDAQ finding resistance at QQ Q4 20 also VWAP just above that that's the light blue line Caesar asked how long have I been a day trader I started using book map in 2019 and that was really my my beginning of day trading I I've always used book map for for day trading let's go back to ES now spy 487 volatility trigger resistance then again maybe finding supported the lower day the expected move so overall ES trading in a pretty narrow range here all right uncle wants to zoom out to see the liquidity around 5k all right so this I'm gonna have to zoom pretty far all right is this what you're so there you go uncle I that's that's pretty far out of range out of play let's zoom back in now I consider the consider the underlying index products all right triathlon trader says that is actually 4890 also says doesn't look there look like much support until 4877 so we can go take a look at that all right so the way I look at support and resistance is based on the underlying index products SPX and spy so note there if you're looking at liquidity for ES there is a band of liquidity right around spy 485 note that this level 4868 was noted as support in the spot gamma am founders note and the next level below that at 4850 also at this level and that's where those are levels where the market makers may be expected to act as they may be changing their hedging causing these levels to act as support right so I'm looking more at the underlying index products for longer-term support and resistance all right so stepping back a little bit initially ES making kind of a series of higher lows now that reversed making a series of lower highs let's go back to heroes see what options traders are doing and hero whoops wrong tool moving slightly higher price moving lower press conference in about four minutes one thing that I like to take a look at is on this indices chart let's see where it is I look at this combo chart so what that's just showing is call gamma positive gamma above the zero line the zero line right here note all the positive gamma above around 4900 that's a strike right here then not much below not much put gamma below so if price starts to move lower there could be a if price starts to move below there could be a scramble for puts all right triathlon trader says oh why do you use spy and spx for resistance as opposed to ES well you you don't need to have a subscription to for data for for spy for example but the gamma weighted open interest that well the basic reason why I'm doing this looking at the underlying index products is because I believe that when traders buy and sell puts and calls in SPX and spy market makers will hedge their delta exposure with ES futures so options trades and market maker hedging activity for those index products are a key driver of price for the ES futures and the same for NASDAQ especially for QQQ and to a lesser extent in DX so again that's a key driver of price action for the for ES ES is a derivative of SPX and spies just another form of SPX but SPX is the primary underlying index and the gamma weighted open interest at those levels is where market makers may have to react the levels of higher gamma weighted open interest that's where market makers may have to react and change their change their hedging so I'm always looking at ES as a derivative of SPX and those underlying levels as key support and resistance levels of course on a shorter term you and this is the advantage of book map you're looking at the the heat map and book map for these levels of higher liquidity that may may or may not act as support and resistance I look at them as magnets of price until price reacts there but longer term it's the underlying index products that I'm looking at spy and SPX for for yes and QQQ and NDX for NQ and this is why watching the hero signal is so important you know I've shown hundreds examples of traders buying calls buying and selling calls and puts and how that changes price for both stocks and futures alright it looks like the press conference is beginning starting to begin or will begin shortly I'm gonna go ahead and wrap it up I want to thank you very much for for watching thank you for your questions and comments and it should be an interesting afternoon and I'll see you tomorrow we'll talk about it tomorrow afternoon all right thanks again everyone and have a great afternoon good trading I will see you tomorrow bye