 What's up trade hackers welcome to today's video update today's Monday March 30th starting with the trade hacker question of the day How do I choose the correct deltas for my option trades? So I got a variation of this question in the community today So I thought I'd take this moment to explain in a little bit more detail When it comes to choosing your deltas and let's go to the platform and look at an example when it comes to choosing your deltas There's no right or wrong way to do it in our courses We set specific criteria that we like to do based on a starting point But by no means should the deltas you choose for specific strategies be a this is absolutely the right way That's not how it works. There's no right. There's no wrong. It's more of a preference and what your Anticipation or what your assumption is or what your preference is for that specific trade and this can change I mean if you're you know, we like to enter some of these strategies between 30 and 60 days to expiration So at this point we're looking at a 46 day option cycle But if you're choosing a shorter duration or a longer duration your deltas can change with that as well remember Delta's represent probabilities, so the probabilities for example on the call side and we're looking at SPY The lower the Delta that basically is just a theoretical Probability of success that that specific option will get in the money by expiration So in this case look at this one of 30 Delta That's the 283 strike So that basically has a 30% chance that that option will get to do the money at expiration Okay, so that's what that that's what that represents. So the question today was specifically around vertical spread So let's say I was gonna put on a short call vertical spread I wanted to get bearish and so what you can do is is we like to choose out of the money strikes and You know, it could be anywhere from here all the way down depending on how Large of a probability of success that you want on the trade Remember if you want a higher probability success you would choose a lower Delta if you want a higher max profit But a little bit lower probability of success you would choose a higher Delta. So let's just set one of these up Let's just choose the 48 randomly sell Vertical that's 265. Let's do it five points wide. So let's choose the 270 again There's no right or wrong here. You could do three points wide. You could do 10 points wide There's no Specific width that you have to use it just depends on what you are trying to accomplish with that trade So if you take this over to the analyze trade like for example the one we set up today Wasn't on SPY but in another symbol we set one up a similar to this and all we were doing is we were setting up the strikes to Give us a 60% Probability of profit. So if we set our calendar to the expiration date You can see in this case the strikes that we chose the 265 270 on the cost of that gives us about a 60% probability of profit now if we wanted to move these strikes up and say we move this one to 280 and this one to 285 So we're just moving those further away Now look what happens when we move our price slice over here It makes sure we unlock our little box here now We have a probability is of success of 70% okay, but guess what our max profit is not quite as high and You know it's gonna and it's gonna take more more buying power So it's just a preference and that goes for vertical spreads that goes for iron condors that goes for short strangles It goes for every option strategy that you trade It's really just a preference in in the case of what we were doing today and getting short We just wanted hey we want it we want a little bit of edge to our probabilities, right? We wanted a higher than 50-50 chance of probability, but this is a directional trade. We are looking we're bearish We are looking to get more short the market We're looking to add short delta to our portfolio and so we squeezed these deltas a little bit closer So we had about a 60% probability success, but it's all about going down. That's what that's what we're looking for So hopefully that helps clarify some of that question. Let's jump into what's going on in the markets today Looking at the let's start with the S&P futures up 3% up 78 points dows up over 500 NASDAQ up over 274 rustle up over 20 We've got about a little over an hour left in the trading session for today So what's driving the market? Well, we talked about last week how we don't trade based on news And you know if you look at what's going on today, you know, we had you know Trump came out last night and gave us you know new distancing social distancing guidelines moving that all the way back to April 30th now and so You know, that was one major headline coming out. Obviously the stimulus package 2.2 trillion dollar stimulus package got signed on Friday and In anticipation of that You know, we saw the market go up But as soon as it signed the market tanked and then the market opened up last night and this morning It was down, but it's just grinded higher all day long on top of that. We're seeing headlines such as the St. Louis Federal Reserve is predicting unemployment to get to be over 30% I mean, there's no way to look at that. That's not good news, but yet the market is just climbing higher So what did we do today based on just the price action not on the news? Well, we added some shorts to our position. I mentioned earlier one of which was a Vertical spread. We also did a bunker trade just like we teach in our bunker strategy course So looking for a potential Rollover at some point now will that happen tomorrow? Will it happen next week? Will it ever happen? Nobody knows, but that's what we are positioning to do is get you know If this market continues to grind a little bit higher We're gonna continue to add in more short Delta and look for a potential rollover Because I just don't think we have seen the bottom yet other big movers oil down another six percent got under 20 Got down to 1927 so another another down move in oil obviously bonds up about a percent Gold down about a percent Natty gas up a percent and a half So an actually pretty mute today compared to some other Massive moves that we've seen over the last few weeks some of the stocks. What's going on in some of the stocks Well, some of the travel companies Expedia still getting crushed you look at casinos win is down another five percent We've got some of our short Delta in win. So that's working well for us, but pretty mixed bag I mean, we've got we've got a lot of green and a lot of red on the screen So even though the markets are up there's still a lot of stocks that are down as well You look at a stock like Netflix continues to do well now It's up 13 percent on the year obviously a lot of people staying home Netflix is benefiting from that another another stock that's benefiting is zoom so Everybody's doing zoom conference calls instead of in-person meetings and you know look at zoom up a hundred and eighteen percent today It was actually up quite a bit more earlier And it's it's coming down and it's starting to get a little bit of an inverse reaction to the rest of the market So if the market is up zoom is down if the market's down zoom is skyrocketing So interesting interesting price action there So remember we've got a lot of data points coming out for take a look at the market watch tab You can see on April 1st on Wednesday We've got the unemployment rate coming out We've got the 80 ADP employment report. So that's going to shed a little bit more light on what's going on You know today later today. We've got retail sales report that that's at 6 30 this evening So we've got some things that could be reported that could move the market overnight And then of course, you know tomorrow is March 31st, which ends the end of the first quarter So in the first few weeks of April usually a couple weeks after the end of the quarter is When a lot of the big companies will start reporting earnings announcements. So we will see what happens my friends stay small Stay mechanical live to trade another day. We'll talk to you tomorrow