 Hello everyone, welcome to Options with Doug, streaming live late daily on Bookmap Discord and the Bookmap YouTube channel at 1.30pm Eastern time. Before I go any further, 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. Risk disclosure, training futures, equities and options involves substantial risk of loss and is not suitable for all investors. Past performance is not necessarily indicative of future results. And as a reminder, I have my presentation and the Options with Doug chatroom and Discord is very focused and the focus 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 the first is planning and I use positional analysis and I look at how traders and market makers are positioned in the options market and how those positions change from day to day to develop a thesis regarding expected volatility and trading range for the day as well as a directional bias. And the second step in my process is real-time order flow. I look at real-time order flow in Bookmap and real-time market maker hedging flow and spot Yamahiro. And I think this positional analysis as well as looking at order flow and hedging flow provides a significant edge. Other traders may be using technical analysis or fundamental analysis. I think this is a new way of looking at the market that again I think provides significant edge. And questions and comments are welcome and I will be watching the Options with Doug chat and Discord as well as chat and YouTube for questions and comments. So again, please post your questions and comments and I will do my best to respond. Okay, what I want to go over today is, first of all, news. Talk about economic data that came out today in the rest of the week and events and earnings and then go through our positional analysis and then finally talk about setups. So first of all, news. This morning the PMI report came out and this is the results. This was at 9.45 a.m. Eastern time and it looks like the services PMI was a little bit better than forecast and a little bit better than the previous number and the same for the composite PMI. A little bit better than forecast and the previous number. But these numbers are still below 50 so still in contraction. And the same for the manufacturing PMI. So that was today and then for the remainder of the week, tomorrow, I'm sorry, Thursday at 8.30 a.m. Eastern time, durable goods and GDP come out and then Friday at 8.30 a.m. Eastern time, PCE and then at 10 a.m. Michigan consumer sentiment. And then there are a couple of key earnings reports this week. The first is Microsoft that reports after the close today and then tomorrow, Tesla reports after the close. And then finally, the big event is next week. That's the FOMC meeting and announcement and that meeting concludes on Wednesday, February 1st. And that should affect how volatility reacts as well as how traders are positioned going into the event. So it's important to keep track of these things. Okay, the positional analysis. And let's... This is the ES, S&P 500 futures and book map. And we'll dive into that in just a moment. Before I want to take a look at a bigger, a big picture, a big picture view. This is the SPX and it is a 20-day one-hour chart and I'm showing the key gamma levels, spot gamma levels on this chart. And what I'm looking at here, what's important is the rally that started on Friday. And if you recall, that was... I attributed that to... a good bit of that to a putvenor rally. It was options expiration and spy gamma notional was quite negative at minus $21.87. And volatility dropped and price increased in those puts. Also, a large amount of gamma was expiring on Friday. And I did a review of this yesterday in case anyone's interested. So, given all that, traders were long puts, market makers were short puts and as volatility dropped and price increased, those puts quickly lost value, market makers' delta exposure decreased and they could buy back their short futures. And that started the rally on Friday that continued yesterday and then today it appears that the market is consolidating after two days of very strong gains. So this is showing the spot gamma levels for today and thanks to note, the put wall is way down here at $3,800. So that's not really not in play. It's down here at $3,800. And the absolute gamma strike or the key gamma strike remains at $4,000 and then the call wall is up at $40.50. And those are the same levels as yesterday. So this shows all the levels in play pretty much from the $3,900 level up to the $40,000, $50,000 or level, I guess a potential high end, upper end of the range. And now let's take a look at a closer view. We're going to go to a thinkorswim two day one minute chart. And one of the reasons that I'm looking at this, this is showing the correct SPX key gamma levels. We'll look at the book map chart in just a moment and it is showing those levels as well but they are translated or converted to an equivalent ES number that's a little bit off. So I'd like to look at the actual SPX chart for the exact levels and see how SPX is reacting to those levels. Okay, so here's the chart for today and again, consolidation today with a, I guess, a mildly consolidation, mildly bullish trader HE asks about sound can anybody else how's my sound can anybody else hear me okay moon Walker says discord is good sorry trader HE I was moving around a little bit trader HE if you can hear me let me know okay sound is good on YouTube okay I'm going to move on so again after two days of strong gains it appears that the S&P 500 is consolidating today so let's take a look at book map now and again this is the S&P 500 futures and a couple things to note I had some technical problems this morning and the first was with book map and it was with this DX feed data and I had to start book map so I lost all of my MBO data up until about 1020 when I restarted so that's why these lines the yellow line the stops line and the light blue line the icebergs lines that's why those are flat up until about 1020 and trout fly asked you enter those levels and toss by hand and no I don't think of spot gamma actually provides the a text file for thinker swim now you I you do have to update that every day so it is a script and thinker swim they provide a text file every day and I just delete the the the portion I go in and edit the script delete everything that's in there post all of the new text file and it updates and it is actually they one text file for I believe it covers spy qqq ndx spx and maybe IWM so it is one text file for all those instruments so it takes a couple minutes but it you know it works well and okay so there's a question for D. D. Rover hope I'm saying that right notice the option flow in hero is completely opposite between calls and puts yeah we'll take a look at that so anyway this is the ES S&P 500 futures and book map and I have two columns of levels here the first these are the spot gamma cloud notes now these are also provided to spot gamma subscribers but they're updated automatically and these levels show SPX levels like this L2 4000 level that is the SPX 4000 as well as combo levels which are levels that combine spy and SPX into one equivalent SPX number and then converted to an equivalent ES number and these levels are a little bit off right now spot gamma is using a 20 point difference between SPX and ES and I I have the number closer to 16 or 17 points so it said these numbers should be around three points lower and that applies to the zero gamma level as well and if you recall we'll take a look at the thinkorswim chart that shows SPX and the correct levels you see that SPX reversed higher above the zero gamma level not at the zero gamma level so that is again one reason why I like to look at these thinkorswim charts as well so anyway again consolidation day mildly bullish and price has been concentrating around this spy 400 key gamma strike for quite a while and that level is close to correct and these are my these are my cloud notes and I'm showing the spy key gamma levels like the 400 key gamma strike and the 399 volatility trigger and then also support and resistance levels that were noted in the spot gamma AM founder's note now the spy levels are pretty close to correct I calculate that ratio between ES and spy just about every day and I did check it today so the 400 spy 400 level has been a key level today and now it looks like prices moving above and there's another another question on YouTube about how to get a TOS script and it's available for spot gamma subscribers so let me just show that real quickly so this is the portal for spot gamma subscribers and what you want to do is just click here and you'll get that script okay and that is available to all subscribers like standard pro and alpha okay so the levels are on the charts again you just need to shift the SPX levels down about three points but what it appears now is price has moved up above the 400 key gamma strike and then is looks like it might have found resistance at least temporarily at this this 40-20 level SPX 40-20 that was actually noted as support in the AM founder's note okay let's talk about shifts and levels now and there were a few shifts and levels remember yesterday there were some pretty significant shifts higher especially in the call wall across the board SPX, SPI, NDX, and QQQ and then the key gamma strikes for SPI, NDX, and QQQ all shifted higher and today there were some just minor shifts higher for the S&P 500 both the SPX and SPI volatility triggers shifted higher and it appears that SPX so let's take a look at SPI and for some reason I I guess with my technical difficulties I didn't get this and but 399 is the volatility trigger so SPI is trading higher than its volatility trigger as well as SPX so that is considered bullish back to ES now and the volatility trigger is SPOT Gamma's proprietary gamma flip level below the volatility trigger that would indicate that market makers are in a negative gamma position meaning that traders are long puts market makers are short puts and they have to sell futures as price decreases to hedge their delta exposure and so there will be trading with price in a negative gamma situation and then above the volatility trigger that's considered that's positive gamma where market makers will be trading against price that tends to reduce volatility but it's also a sign a bullish sign when the indices trade above their volatility triggers and then also today the SPI key gamma strike increased again from 395 to 400 so that just reinforces the importance of this 400 level and also the QQQ volatility trigger moved up put wall actually moved down again but the call wall moved up from 285 to 295 so that's bullish and SPOT Gamma was interpreting that as bullish and mentioned it in the AM Founders Note alright let's take a look at some absolute gamma levels now we'll start with the S&P 500 and I'm going to start looking at the Nasdaq too so we'll look at the S&P 500 first and there's a question Smoke227 asks do you have to update the ThinkScript everyday still yes as far as I know that's how it works so what I do I download the text file I do a select all copy and then I go into the studies for thinkorswim and I'll just show this quickly so I copy the entire ThinkScript go into studies edit studies I'm using the SPOT Gamma all just right click on it edit whatever is in there and then paste in the new ThinkScript so it takes a minute or two but you know I get this nice chart so not quite as convenient as the bookmap cloud notes but you know that is what it is so anyway the absolute gamma levels here's SPX and we'll start with the put wall and that's way down at 3800 and that is SPOT Gamma's put wall level that is the strike with the largest net negative gamma and that often acts as support and that's not really in play today that's pretty far down so you know there are other significant levels SPOT Gamma and potential support at 3900 like we saw on Friday when SPX reversed higher at 3900 and then 3950 after that and then 4000 remains the key gamma strike or the absolute gamma strike and that's the strike with the largest absolute gamma and just a reminder what we're looking at here's the zero line and below that that's negative gamma or put gamma and that's shown with the teal bars and above the zero line is positive gamma and that's shown by the black lines or that's call gamma and then the call wall is at 4050 and that is the strike with the largest net positive gamma and that can often act as resistance alright that's the SPX levels and their spy will start with the put wall at 390 and again that's the strike with the largest net negative gamma and also significant put gamma potential support at 3950 there's 400 and that is the absolute gamma strike or the key gamma strike and you can see the that is the strike with the largest absolute gamma and then here's the call wall and it looks like that position has built up with call gamma so again that's the strike with the largest absolute net positive gamma so those are the gamma levels for S&P 500 let's take a look at the QQQ charts now or the NASDAQ charts and in essence this is just going to be QQQ NDX is not significant so we'll just look at QQQ and especially since large cap tech stocks have really been in play this year and so here is the put wall at 260 and that's that's pretty far out of the way and then the key gamma strike that's pretty obvious at 280 and there also there's a lot of gamma at 285 290 and then 295 has the largest net positive gamma so not a lot of put gamma there net just call gamma so that makes that the call wall so those are the gamma levels for the S&P 500 and the NASDAQ alright let's take a look at some data and we'll take a look at gamma notional and I'm going to include QQQ also so first of all we'll start with SPX in the left column gamma notional shifted higher for all of these instruments first SPX gamma notional and I compare morning to morning so yesterday morning gamma notional for SPX was 117 today it's 268 and the reason I look at this is it helps you to anticipate how market makers will react especially on days where there's a big economic data announcement FOMC announcement or options expiration again I talked about that at length on Friday and Monday and how that large negative gamma for SPI especially helped contribute to the rally on Friday and yesterday but I think most on Friday so anyway when market makers position gamma notional is negative 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 those futures like we saw on Friday as price increases and in a positive gamma environment it's just the opposite spot gamma assumes that traders are short calls market makers are long calls and as price increases they have to sell futures to hedge their delta exposure so they're trading against price in a positive gamma environment and that tends to reduce volatility so now SPX gamma notional is positive SPI gamma notional is still negative but it's slightly less negative than yesterday yesterday it was minus 838 and today it's minus 708 and then for QQQ yesterday gamma notional was minus 113 and today it is shift to positive to 45 let's take a look at the Vana models now and that will be a visual representation of this information and first of all SPX and what this is showing is market makers delta notional or delta exposure that's on the vertical axis and price is on the horizontal axis and what this is showing again in a positive gamma environment for SPX that market makers delta exposure increases as price increases and they want to remain delta neutral so they have to sell futures as price increases so that's SPX SPI still negative so it's just the opposite market makers delta notional increases as price decreases and they have to sell futures as price drops to heads of your delta exposure and then finally let's take a look at QQQ which is very neutral so this is indicating that market makers delta notional assuming they were delta neutral at the beginning of the day based on this information and as price moves up and down this is showing that they don't have to do a lot of hedging to hedge their delta exposure okay one other thing that I want to take a look at and this is a list of the stocks in my watch list and I track the key gamma strike every day and I have one column that's the current key gamma strike and that's for today and then the previous key gamma strike is the key gamma strike from yesterday for all these stocks in my watch list and I color code them green indicates that the key gamma strike increased from the previous day so you can see yesterday there were quite a few quite a few increases and this was help me develop a bullish thesis for yesterday so remember yesterday my directional bias was bullish and I was looking for long increase and I highlighted a number of those in my webinar and then today there's still some increases not as many as yesterday but of note here is the spy level Tesla and then a couple of decreases here in Apple and IWM so given all this considering the strong rally on Friday and Monday and still some increases in the key gamma strikes in the stocks of my watch list as well as increases in the call wall for QQQ and key gamma strike for spy and that shifts higher in the volatility triggers for SPX spy and QQQ my thesis for the day was looking for lower volatility more of a consolidation day after this large move mildly bullish and spot gamma had a short note indicating they were looking for consolidation today as well and it just makes sense after such a large move looking for more of a range day mildly bullish so let's take a look now at some setups let's start with ES so again remember I had technical difficulties this morning first of all with book map lost discord data and we'll see that in a minute I lost about 30 minutes of data and then also there was a problem with Hero and it was most likely related to the the problem with New York Stock Exchange listed stocks being halted due to a problem with the exchange that's my guess so once that once the New York Stock Exchange came back online Hero seemed to recover but it was out for a while this morning but anyway they have recovered all the data so here's ES here is the S&P 500 futures and note that this is combining the signal of SPX and SPY into one signal for ES futures so let's take a look put and call transactions so what this does is separates out call buying or selling versus put buying or selling so calls are shown with the orange line shown with the blue line and so what I saw this morning was what I think is a call divergence so traders are buying calls and this is early in the morning up until about $9.55 price moved lower and then moved higher so there's a for just the morning this divergence signal that's set up along and let's go take a look at let's take a look at book map now we'll take a look at ES I'm going to zoom in let me try that again so here's that first long setup right there about $9.45 and no particular level let's go back to Hero, switch back and I've got in my notes to look at the 30 minute signal so there's a little bit more of a correlation here when I change the rolling window down to 30 minutes so it looks like in this case there's a strong correlation between options trade, hedging flow and price action both up and down let's go back and take a look so overall though the hedging flow has been been bearish, negative delta and again remember this is combining SPX and SPY and let's see what traders are doing again we'll take a look at puts and calls and they're buying puts today so this is totally understandable again given the strong rally the last two days that traders would see price trading up above and around $4,000 and SPY 400 and consider buying calls puts I'm sorry so that is what appears to be driving price action following blue line traders are buying puts again totally understandable given the strong rally and this is pretty typical behavior for the S&P 500 traders like to fade these moves let's take a look at SPX and SPY SPX paints a different story but the number is pretty small so in this case traders are actually selling volatility so they're selling puts and selling calls that's shown by the rising blue line and the falling orange line then finally let's take a look at SPY SPY looks a lot like ES so overall traders are taking negative delta positions alright so that's ES and then I've got a few other setups let me check for questions and there's a comment about Friday with SPY moving with VIX not the inverse yeah sometimes that happens we can see what VIX is doing today VIX continues to fall today looks like it's down I know this is very difficult to see looks like VIX is down about 3.4% something like that 0.67 down to the lower end of the recent range okay some other setups that I saw today and first is IWM let's just start following this and there's a question do I look for correlations between SPY and ES on hero not necessarily but SPY the gamma notional and the influence of SPY seems to be a lot larger than SPX and it seems like SPY options trades excuse me SPY options trades are what are more important or more important of a driver in ES than SPX but I look at you know just like I did now I look at ES and I look at SPY and SPX and I concentrate mainly on SPY and Brent Kuchuba the founder of SPOT Gamma has noted that as well that he looks at SPY and SPY is electronically traded and SPX I think maybe not that still may be pit traded or at least some of it or traded differently but SPY I think is what I look at so here's IWM here's there's a strong correlation between price action and options trades and again I've just started looking at this so I don't have a real good feel for it yet but I did notice a divergence here and it's first of all we'll just look at the total signal and I'm just going to kind of go with the highs of the hero line the purple line that's the total signal and notice here the this large block trade price drops even as hero is this large block trade comes in price drops and then reverses higher as hero continues higher let's take a look at the puts and calls separately and we can see that put so traders are selling puts and IWM and this block trade was a large one large trade large trader selling puts and the divergence here is a little bit more clear just showing this put line rising put line price drops and let's go take a look at book map now so here's IWM and notice around here this is where I had had an issue with with DXV data from about 10 to 1030 something like that but here's that reversal at the 186 level as hero is rising and the target at the 188 call wall and that still may be in play let's go back and take a look at hero and see what traders are doing we can change the look back period which is usually a good idea in the afternoon to get a better feel so in this case traders have started taking negative delta positions so I would not look for at this time anyway look for IWM to head up to that call wall alright the next Nvidia and the stock has been very strong let's zoom in on the morning notice again the large block trade here and that was called so a large large trader large institution came in and bought calls and that helped to push price higher let's take a look at book map now and there's a question to you too what are the important levels you compare from spot gamma founders note do you compare the AM and PM or AM to AM well first of all I compare AM to AM and the things that I'm looking at AM to AM is primarily the gamma notional and I also look at there some other numbers that are closely related to gamma like the spot gamma gamma index and also their spot gamma call put ratio but I only talk about gamma notional in my webinars and that is the most important information that I talk about but I compare AM to AM definitely and then the levels that I look at are the key gamma strike absolute gamma strike call wall put wall and then the volatility trigger and that's for indices SPX by NDX QQQ IWM they all have volatility triggers and that is spot gamma's proprietary gamma level and then stocks have a hedge wall which is similar but a little bit different because spot gamma makes a different assumption about how traders and market makers are positioned in stocks versus indices and for stocks spot gamma always assumes that traders are long puts and or long calls and market makers are short puts and short calls and if you want the exact definitions those are available on for all those levels available for free on the spot gamma website ok here's Nvidia nice sharp rally right after the open this morning and let's go back and take a look at hero now and here's that first rally up to about nine fifty five reversal lower let's go back take a look at the total signal as those trades options trades taper off and then pretty much top ever since then right so there's another question to you too room by ask when you say they are short puts do you mean they are shorting puts or long puts than they meet than they need so I assume you mean what I just talked about with market makers position so market makers are when traders let's say when traders buy puts market makers sell puts and so they're making markets again traders are buying puts market makers sell puts and they have to sell stock or sell futures to hedge their delta exposure so they have again they're just making markets they don't have more or less puts than they need that's again they're just making markets so they're responding to traders and what traders are buying and selling but this information is based on open interest and there's no no way of knowing whether that open interest is long or short so I think that's why spot gamma makes these assumptions again assuming that traders are for equity single equities buying puts and or buying calls and the market makers are taking the opposite side of those trades and buying or selling stock to hedge their delta exposure alright so that's Nvidia and let's take a look at QQQ now alright so Roomba asks so when they are short put they have to hedge with buying futures well it depends on price action so let's talk about the S&P 500 now if you're talking about futures so when in a negative gamma environment when traders on that part of the gamma curve when traders are long puts market makers are short puts and they want to remain delta neutral so as price drops they are no longer delta neutral and they have to sell futures to hedge their delta exposure to remain delta neutral and then like we saw again on Friday as price increases they can their delta notional delta exposure decreases and they can buy back their short futures so in the put dominated negative gamma environment market makers have to trade with price to hedge their delta exposure so I hope that makes sense so here's QQQ and here I saw a stronger correlation with calls at least in the morning so both long and short traders will buy in calls shown by the rising orange line and then they started selling calls and price drops meanwhile they were not doing much with put showing by the fairly flat blue line so here it looks like calls are driving both up and down let's go take a look at book map now and Rumba, yeah write it down, after a while it will sink in and make sense but this, all my webinars are recorded and archived on YouTube so you can go back and watch it later so here's QQQ, sharp move up then a sharp move down just after 10 am and let's go take a look at hero again so here's the sharp move up and the sharp move down just after 10, looks like again both both led by call buyers and sellers and once you get a little bit closer you can read this in order flow see the buy sweep up then the pink dots, the aggressive sellers coming in price drops quickly to the 287 level then the big green dots coming in and the small green dots showing a buy sweep and price reverse is higher so order flow confirming what what hedging flow is showing alright then let's wrap it up with Tesla pretty similar pattern to QQQ sharp move down let's take a look at hero for QQQ I mean, I'm sorry, Tesla separate it out, calls and puts and again calls driving here zoom in a little bit more on the morning session and this is a bit of a divergence here traders buying calls actually I'm going to zoom in on this just a little bit more traders buying calls price drops around a bit as traders buying calls and then responds higher meanwhile traders not doing much with puts and then as traders start selling those calls price follows let's go back to book map zoom in on this so it doesn't quite look so sharp so here's the here's the issue with DX feed made it hard to trade this morning along with the issues with hero but again I think a lot of that may be related to the New York Stock Exchange so anyway there's the here's the chop and reversal higher right above the 142 level liquidity at 145-146 a lot of pink dots coming in aggressive sellers and price moves back down then reverses higher again okay that's all I had for today again somewhat of a consolidation day after large moves on Friday and Monday and I don't see any additional questions so I'm going to wrap it up thanks everyone for watching thanks for your questions and comments and I will see you tomorrow thanks again, bye