 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. As a reminder, the focus of my presentation and the Options with Doug chatroom and Discord is options, order flow, the impact of options markets on stocks and futures, and the influence of market maker hedging flow on price action. I have a two-step process for trading and versus planning and I use positional analysis and I look at how market makers and traders are positioned in the options market and how those positions change from day to day to help develop a thesis for the day regarding expected trading range and volatility and a directional bias. And that is different from what many other traders use like technical analysis or fundamental analysis. I think positional analysis is a new way of looking in the market and provides a significant edge. And the second step of my process is execution. And I look at real-time order flow and book map and real-time market maker hedging flow and Spot Gama Hero to confirm my thesis and for setups for increase and exits. And questions and comments are welcome. Please post your questions and comments in the Options with Doug chatroom and Discord as well as chat in... excuse me, as well as chat in YouTube and I will try and answer your questions. Okay, let's get started. And what I want to talk about today, first news, economic data and events. And the second is our positional analysis and the third is setups. And before I get started, I had another presentation this morning. I did a presentation for Spot Gama that was supposed to be yesterday. So yesterday we had technical difficulties and I spent the morning troubleshooting that yesterday and then today I actually did the... repeated my preparation and did the presentation. So pardon my lack of preparation today. There's only so much that I can do in the morning. So this is my second presentation of the day. But again, I think I have some things of interest to take a look at. So first news, economic data, events. The economic data for the week is over. The primary economic data was out on Wednesday and that was the PPI and retail sales. And then this afternoon, Netflix reports earnings. So any of you that follow Netflix, you might want to take a look at that. Netflix can be a big market mover after... or big mover after it reports earnings. And then tomorrow is the January monthly expiration. And I'll talk about that a little bit more later about what might happen based on how market makers are positioned in stocks and in the S&P 500 as well as the NASDAQ and the Russell. Okay. And then finally, the next big event after that is the FOMC meeting and announcement. And that's on January 31st and the announcement and press conference is on February 1st. So that is the next FOMC meeting. All right, let's take a look at support and resistance levels. And I'm going to start with a big picture chart. And this is thinkorswim. And this is a 20-day one-hour chart showing the key SPX levels. And this is, again, a 20-day chart showing how SPX traded in a range for about three weeks and then broke out at the beginning of the year and traded up to the 4,000 level. And then that was yesterday traded up just above the 4,000 level. And that is the key gamma strike for SPX and that has remained the key gamma strike or the absolute gamma strike for some time. And then now SPX is traded down just below the 3,900 level and that is the put wall. And now appears to be trading higher. So that's the playing field for SPX. So far, 3,900 to 4,000. And we'll look at the absolute gamma levels and see why that may be the case. And then let's look at a little bit smaller time frame and then we'll get to book map in just a moment. So this is more of a zoomed-in view of today. And looking at yesterday, let me just zoom out a bit. Well, this is, we'll stick with this. So again, we saw that SPX reversed at the 4,000 level yesterday and traded down to the 3,886 level and now is moving higher. And notice that I guess somewhat of a vacuum here, not much in the way of gamma levels between 3,900 and 3,850. So that is the SPX for today. Now let's take a look at book map and the levels that are in play are shown on my chart here and this is the S&P 500 futures and I'm showing two columns of levels and the first is spot gamma cloud notes and these are provided to spot gamma subscribers in cloud notes and that are updated automatically every day and these are showing SPX levels converted to an equivalent ES number. So right now spot gamma is adding 20 points to SPX to come up with an equivalent ES number. So there's SPX 3,900 at ES 3,920 and that was noted as support this morning and then these levels are also showing combo levels and those combine SPX and SPI levels converted to an SPX number and then converted to an equivalent ES number to show on this chart. And then the second column, these are my cloud notes and I'm showing SPI key gamma levels. There's the 390 SPI put wall and then also levels that were noted as support and the spot gamma AM founders note and note this level here acted as resistance this morning and that is a combo level and SPX and SPI combo level acted as resistance and now ES and SPX has gone back up to that level. So kind of a round trip today and there's a question in discord did I say already if traders are buying calls today well I'll talk about that yet yes but traders have been buying SPI calls all day today looking for a rebound apparently. So now they're getting paid so those are the levels in play today. So yeah we will look at hero in a minute and see what traders are doing. Okay, shifts and levels and there were some shifts and levels today for SPI the volatility trigger and that is spot gamma's proprietary gamma flip level with positive gamma above or call gamma and negative gamma below and a positive gamma environment traders are short calls market makers are long calls and they have to sell futures to hedge their delta exposure's price increases and they can do the opposite as price falls and that tends to reduce volatility and then on the other hand below that line and both SPX and SPI are trading below their volatility triggers right now that's a negative gamma environment and that means that traders are long puts market makers are short puts and they have to sell futures as price drops to hedge their delta exposure and they can buy back their futures those futures as price increases and that so they're trading in the direction of price and a negative gamma environment and that tends to increase volatility so the volatility trigger for SPI drop down slightly from 398 to 396 and then more significantly now both the put wall and key gamma strike for SPI drop to 390 so now that is the most significant level of gamma both for put gamma and absolute gamma and there we can see that price is trading right at the SPI 390 put wall which is also again the key gamma strike and that's the most important strike as far as gamma levels go for SPI and let's take a look at the absolute gamma charts now and just give a that'll give a visualization a picture of what what I'm talking about so this is SPX and this is showing absolute gamma levels here's the zero line and below that line that's showing put gamma or negative gamma and that's shown by the teal bars and above that line that's called gamma or positive gamma and that's shown by the black lines so this is showing that the 4000 level is still the absolute gamma strike it's the strike with the largest absolute or net gamma or absolute gamma I'm sorry and then actually the SPX call wall shifted up to 4100 and that's you know that level is not in play that's not significant that's more just has to do I think really with the definition of the call wall which is the strike with the largest net positive gamma but 4000 really 3900 to or maybe even 3850 to 4000 is the range with the most significant levels of gamma and then 3900 there's the put wall and that's the level with the largest net negative gamma and that can act as as support although it really did not today or at least in the morning so that is SPX and again remember the dominance of the 4000 level and here's SPY and for a long time the 400 level has been the most dominant level and now that has shifted down to the 390 so 390 is the key gamma strike or the absolute gamma strike and it is also the put wall so it's the strike with the largest absolute gamma as well as the strike with the largest net negative gamma and the call wall is still 400 and again that's the strike with the largest net positive gamma alright so there's a question about 390 that used to be 400 so what this is showing is remember for an index the assumption is that traders are long puts and short calls and market makers have the opposite side of that there so market makers are short puts and long calls so that I hope that answers your question and let's see right now again it looked like SPY is trading right at that level and that could be a potential pin into expiration tomorrow alright let's take a look at data now well we were looking at 400 earlier but now that gamma has shifted down to 390 so earlier in the week I was really looking for mean reversion back to SPX 4000 and SPY 400 but that may still happen but now it looks like at least for SPY 390 is the more dominant level okay a couple of questions in YouTube you know I think these are well first of all they're proprietary there's a question about how to calculate those values in-house I assume meaning by yourself yeah you could look at open interest I think these are proprietary spot gamma levels they provide their own gamma weighting to these levels so there could be open interest way out at SPX 4200 for example the gamma is going to be pretty low at that level so it just not have as much significance as open interest at higher gamma levels which will be closer to the money and the direction dealer open interest I'm not familiar with that term alright let's take a look at gamma notional and this is from the SPY gamma AM Founders note for today and this is showing how market makers position are positioned on the gamma curve so clearly in negative territory and this is a pretty significant shift lower for both SPX which is shown in this left column and SPY which is shown in the right column so yesterday gamma notional for SPX was actually positive it was positive 161 and I compare morning to morning not this this number is from yesterday afternoon I think and I compare morning to morning so yesterday morning yesterday morning SPX gamma notional was positive 161 and now it has shifted to negative 424 and yesterday SPY gamma notional was negative it was negative minus 887 and now it has shifted to minus 1808 so a significant shift to more negative for SPY and to negative for SPX so firmly in the negative gamma territory so that's market makers gamma notional and again remember that that means in this part of the gamma curve market makers are short puts and they have to sell futures to hedge their delta exposure as price decreases and they can buy back futures as price increases or as those puts lose value for example due to changes that implied volatility and that is the VANA effect and I'll talk about that a little bit more later so with expiration coming up there's a potential now given this build up input positions for a VANA rally after expiration on Monday so Truman asked would there be any advantage or disadvantage to picking strikes with high open interest or versus low open interest I'm not sure I understand that question picking strikes for what so I'm not sure I understand that question it's important to know where and how market makers are positioned and I'll talk about how I use that in just a minute and I just alluded to it the potential for a put VANA rally assuming that this gamma notional remains this negative let's look at the VANA charts now and this is an illustration of what I was just talking about this is SPX VANA and what this is showing is how market makers delta exposure that's shown on the vertical axis changes with changes in price and that's shown on the horizontal axis and then this green line is showing how their delta exposure changes with changes in implied volatility and that's the VANA effect and that is the current expiration and the way to interpret this is just to I'm using a pen tool here but you can just draw a line mentally here that seems to make sense through this curve excuse me so what this is showing is that market makers delta notional or delta exposure increases is price decreases and that's typical of a negative gamma environment and that shows that market makers again need to sell futures as price drops to hedge their delta exposure and as price increases their delta exposure decreases or as implied volatility drops and they can buy back their short futures and then the black line shows how market makers delta exposure changes as time passes and that's the next expiration and that's the charm effect which shows how delta changes with changes as time passes so I think we can do with this chart and see how that has shifted for the last couple of days from a positive gamma environment to somewhat of a neutral environment to now back to this negative gamma environment which has been pretty typical for most of the last year let's take a look at SPI and remember the gamma notional for SPI is quite a bit larger than the gamma notional for SPX so the slurper of this line is more severe and this shows how aggressively market makers would need to hedge their delta exposure and as you can see again the line is steeper for SPI and we can see how that has changed over the last couple of days to more and more of a negative gamma environment and there's a comment in Discord when options dealers buy back their positions they are buying the lowest dips not necessarily, they're responding market makers are responding to customer options trades so all they're concerned about is making markets and hedging their delta exposure they're not necessarily looking to buy dips or sell highs that's what traders are doing and that is often the case in the S&P 500 they will again we'll look at that in just a moment hero shows that traders have been buying calls all day as price drops and I expected traders to sell puts given the higher volatility today and we'll take a look and see if they have started doing that so it is traders potentially buying lows and selling highs and market makers just responding to making markets and responding to what traders are doing okay so let's take a look at some setups now we'll take a look and see what traders have been doing in the S&P 500 so somewhat of a complex picture here today let's zoom in on the morning so the morning the after this first jump up around 940-945 traders started taking negative delta positions and price moved lower after this first move again remember up to that combo level SPX, SPY, combo level that I pointed to on the book map chart and price moved lower and let's take a closer look and see what traders were doing we can separate out put some calls and they were buying calls and buying puts at least in the morning here now one thing that I failed to point out this is the ES and it's showing combined options trades for SPX and SPY so this blue line is showing SPY and SPX put transactions and the orange line is showing SPX and SPY call trades so that is ES and that's the morning I'm going to change that back to the total signal and then zoom out so you can see about really about 10-15 traders started traders started buying calls as we can see let's separate out transactions again so actually they've been buying calls all day ever since the open let's show about the rising orange line and it looks like as traders have pretty much stopped buying puts that price started to rise again and Colin asked is some kind of gamma wall at 390 and 400 preventing price from going outside of these ends well first of all 390 was the put wall for SPY I assume you're talking about SPY and that was the put wall and the typically that acts as support it did not today but now the last time we looked at at book map at ES SPY ES and SPY were trading right at that level so remember also it is the absolute gamma strike and again the assumption the typical behavior is the put wall acts as support the call wall acts as resistance and then they're sometimes they don't and SPOT gamma actually has statistics on on that and how price reacts when it goes beyond those levels so you can look at go to SPOT gamma go to the help support center and I'll post a link to the article later after the after the webinar today and you can read that article and see what their stats say about how price reacts around those levels and just as a reminder 390 for SPY is the put wall and the key gamma strike and then 400 is the call wall let's go back to the total signal so this was confirmation not real clear but confirmation of a short setup this morning so let's go look at book map now actually let's look at SPY and SPY will look pretty similar to this chart we'll look at hero for SPY and again traders buying puts and buying calls from the open let's look at SPX remember ES is a combination of SPY and SPX and here there's a stronger much stronger correlation between price action and hedging activity in SPX definitely a strong confirmation signal for a short setup this morning and the same for long just before noon so traders were selling calls this morning actually let's I'm going to change the rolling window period so we can get a little bit more precise look at what is going on this afternoon so just around this reversal time this rising orange line shows that traders started buying calls and the rising blue line shows that traders were selling puts at this low level here and that is expected behavior that's what you would expect to see typical S&P 500 behavior and there's a question about buying buying the lows and dips and that is what traders were doing with SPX and this is how they were doing it buying calls and selling puts and again all market makers are doing is making markets filling those orders and hedging their delta exposure alright that's the S&P 500 alright let's take a look there are some other not many great setups nothing like yesterday remember yesterday I talked about the great setup in SPI with the reversal at the 400 call wall as traders were buying puts and the trade of the day was just to buy a put at that level just a zero DTE SPI put and I didn't have time to post that trade yesterday mark it up and post it but that was a great trade that I talked about yesterday so today there are a couple of trades I want to highlight and then I want to look at some potential setups for expiration and then if there's more time I'll look at a few more stocks so this Moderna and if you recall Moderna two days ago there was a big announcement about one of their vaccines after the market closed and price jumped up and then it looks like it has been selling off since then so here Moderna is showing a very strong correlation between options trades and market maker hedging activity and price action and traders are selling calls and they're also somewhat buying puts but at least for most of the session it looks like calls have been driving price action in Moderna and let's go take a look at book map now so it looks like these just looking here at the ES looks like this 3913 combo L4 level has held its resistance again and then price reversed lower at the SPI 390 level let's just confirm that in SPI to make sure I've got the right levels yeah just about it looks like I might need to move my SPI levels on the ES down just a little bit so let's take a look at Moderna now so here's the setup in Moderna so a quick drop this morning and Moderna is not the most liquid stock you can see by kind of the wide bid-ass lines here there's the quick drop and the target at the 192 put wall notice all the liquidity at that level and that's not even a 0 or a 5 number but it's interesting that the liquidity lines up with that put wall and that's the highest liquidity on the board and those are passive buy orders and that attracts price alright let's go back and look at Hero again so there's Moderna nice short setup in the morning alright the next stop stock is Microsoft I'm going to zoom in on the on the morning session so there was a short setup here with Hero falling alright let's go take a look at book map look at Microsoft nice short setup the target was the 230 level the key delta strike and all the liquidity there price didn't make it nice trend lower price reversed at the 235 put wall level just a few minutes after the open alright the next stock is Netflix remember Netflix reports earnings it's kind of a choppy day so reports earnings after the close today let's take a look at Hero and as usual there's a pretty strong correlation between options trades, hedging activity and price action and showing if you're following Hero following what traders options traders and market makers doing pretty good setups both long and short this morning alright now there's some some better setups here first with Nvidia and I saw two Divergent setups and the first was just right at the open Hero's making lower highs as price was making higher highs and here's your first short setup right at the 172 level here's the second Divergent setup again close to that level Hero starts falling price makes one final move up to that level and then responds lower alright let's go take a look at book map now and Nvidia there's a question in discord if traders are buying calls on spy is the trend up or is the trend down and you really have to just look at that and confirm it so there may or may not be a correspondence especially in spy a direct confirmation correlation with options trades, hedging activity and price action sometimes spy responds later and I think that is that's a nice thing because it gives you a often a very good Divergent setup so remember we looked at traders buying calls all day and spy, spy calls all day and it took a while for price to turn around and reverse higher we'll just take a quick look at spy then get back to Nvidia so now remember again the Hebrew line traders were buying calls since the open and then spy has finally returned turned around and moved higher so if you're watching that waiting for waiting for a setup based on what hero is doing you have to be pretty patient in the S&P 500 sometimes it responds more quickly than other times and again if you have a level to lean against like yesterday a level that you can expect to act as support and resistance then that in my mind that makes it easier the setup easier much easier to confirm that like that again like the trade that I talked about yesterday that happened pretty quickly in the morning traders were buying puts and price moved up exactly to the 400 call wall and reverse lower so the leading indicator was the hero showing that traders were buying puts and spy responded pretty quickly in that case again reversing at the expected resistance level the 400 call wall so let's get back to Nvidia now and here's the I'm going to zoom in the first divergence setup right here let's go back and look at hero and again remember traders were taking negative delta positions as price was increasing and price reversed lower and that is around somewhere between 940 and 945 so just a few minutes after the open and then here's the second divergence and price reverses lower just around 1020 let's go back to book map and take a look at that now so again here's the first setup short and the second and liquidity targets at 168 and 167 the next is QQQ let's go take a look at hero so I'm looking at this this divergence here in the morning price made an equal high as hero is dropping let's go take a look at book map and so there's the morning setup and the price continues down to the 274 C1 that's a combination combo level QQQ and NDX and C1 one indicates that it is an important level let's take a look at Tesla now and if all else fails it moves well and corresponds very well with options trades and market maker hedging activity so a nice short setup here in Tesla today and order flow is easy to read in Tesla as well let's take a look at hero Tesla let's zoom in on the morning so initially initially traders were buying calls and maybe selling a few puts and they stopped buying calls started selling puts and price reversed lower and that's looks like just after 10 o'clock let's take a look at hero oops I'm sorry look at book map and I'm going to zoom in on this and notice the trend break here and especially right here some of these pink dots coming in these are market buy minus sell each dot shows market buy minus sell and a green dot means there are more market buy orders than sell orders and a pink dot means there are more market sell orders than buy orders and notice all the aggressive sellers coming in here at this test of the 128 hedge wall level and then price reverses lower so if you didn't catch this first trend break you didn't catch this first trend break then here was your secondary entry confirmed by order flow the reversal at the 128 level with the 125 liquidity being the target then it looks like after that after the first hire let's just take one final look at hero zoom out so it looks like traders have started taking positive delta positions again and prices rising question in youtube since they started buying stopped stopped buying calls they weren't buying puts the market came down jc is that for tesla while he while jc responds to that one thing that i want to take a look at is equity hub here and remember tomorrow is the big monthly expiration for january and this can give additional clues as to potential price action around expiration so let's look at this i've sorted this list this is my watch list and i've sorted this list by the next expiration gamma percentage so this shows the amount of gamma that is expiring and notice that this is all tomorrow the january 20th expiration and what i'm going to do is just go through i've already gone through this list and notice i'm looking for either strong call dominance or strong put dominance and that could set up price action on either friday or monday so let's look at maderna first and we can see that gamma position where maderna is dominated by calls above 200 and puts below 200 so what this means let's go back to book map and see where maderna is trading now so a little bit below that level so that indicates there are a lot of out of the money calls that could that will expire tomorrow for stocks spot gamma assumes that traders are long puts and long calls that means that market makers are short calls and to hedge those short calls they have to buy stock and as those calls expire they market makers no longer need their long stock hedges and they can sell stock and that could potentially lead to a move lower so let's go back and take a look at equity hub now so in this case this note is not necessarily noting that indicating they're actually looking for support at 192 but there's that potential potential reversal for maderna next one I'm just going to shift in alphabetical order now let's go to meta same situation call dominance above 135 there that's shown by the lower call gamma line versus the put gamma line let's go see where meta is trading so something to keep in mind potential reversal lower as those calls expire tomorrow and market makers no longer need their long stock hedges and then more importantly we'll go back and look at equity hub one last time let's start with spy you can see the clear put dominance so spot gamma was talking about this several weeks ago and it looks like this environment has returned again remember the gamma notional for spy now is quite negative and this is showing the put dominance and let's go back now this is showing not a lot of this gamma expires I'm not sure that is necessarily correct so there are definitely in a negative gamma environment there's a potential for a put banner rally after expiration so remember again for an index that market makers are short puts their short spy short futures to hedge their delta exposure as those puts expire they no longer need their short hedges and they can buy back their short futures and price increases and that has happened quite a bit last year on Monday after expiration especially in a strongly negative gamma environment and so there's the same potential for QQQ and IWM so in this case the note indicates looking for 34.10% gamma expiring on Friday see a reversal and the stock looking for resistance at 185 let's just see what the note says for spy and now noting a small amount of gamma expiring I'm not sure that may be the case and looking for support at 390 also QQQ so again something to keep in mind a potential put banner rally for the indices on Monday and let me just see if I can answer the question about Tesla and then I'll wrap it up let's go back to hero look at Tesla separate up put some calls so in this case trader stop buying puts by the flat line let's actually let's see if looking changing the look back period to 30 minutes helps any gives us more clarity and so actually this is showing that around 1145 traders start start buying calls and start selling puts and price increases ok so hope that answers this question ok so not as much overall not as much interesting to look at as yesterday but it is what it is so there were a few good setups in NVIDIA and Tesla primarily and again we'll talk about expiration more tomorrow and see how market makers are positioned how their gamma notional is positioned going into the expiration tomorrow and remember there are two expirations for SBX one is the AM settlement and that is at the open and then also the PM settlement Friday the PM settlement only the Friday afternoon expiration for SPI so that's all I have for today and we'll talk about that more tomorrow so thanks for watching and thanks for your questions and comments and I will see you tomorrow thanks again, bye