 Hey everybody, this is Brian and in this video we're going to talk about verticals or credit spreads with magic eight ball So first off if you don't know what magic eight ball is the link is down below It is a stock market prediction engine that I've designed just join up and I'll see you in there So what are we talking about here? Well? We're talking about credit spreads or specifically verticals It's a light switch. Basically. It is either in profit or out of profit based off a break-even point and you can construct these so you can go the markets going up the markets going down depending on which Direction you think the market's gonna go. They're fairly versatile meaning you can also really Really design these however you want so you have less loss and more profit Let's dive in and take a look All right, why would you use a vertical credit spread? Well? The answer is really directional bias you can use it when it's going up when it's going down You don't care what the market's doing. You can profit either way. You just have to pick the right direction So for example if we look at thinkorswim and we look at our chart look at this I mean you could have made money you could have made money doesn't matter which direction It's going as long as you're picking the right direction That's the critical part is picking the right direction But this is really the most versatile and most universally used trade is the credit spread the vertical Now it comes in two flavors the put credit spread meaning you think the market's going up Which sounds misleading because I said put so you're selling this is what I'm saying You're going to sell a put credit spread so you think the market's going up or you sell a call credit spread meaning you think the market's going down There's other people out on the internet that explain this way better than me But what we're talking about is how to use this with magic a ball. All right, so when do we want to use this? Well, honestly any time this is beautiful and this is why people use this so much because it doesn't matter What's the market's doing you can make money off this thing even if the market goes perfectly sideways you can still make money using this So let's go ahead and let's take a look at one. We're going to go into magic a ball We're going to go down to sbx Go down to our newest prediction And you can see here's a chart here This thing is probably the perfect time to go in chart just updated the magenta line is the price the blue line Is the prediction so we are actually below the predicted and if we look we are actually 12 dollars below the predicted So we have the current price predicted close a short term is what we want to look at for verticals and the long term is where the market's going to go So there is a difference there $10 difference between the short term and the long term if we look at that here this green dotted line That is a short term. So we're expecting the market to snap right up So let's go ahead and look at our vertical here vertical is a credit spread with directional bias. We're just going to copy this First thing you want to do is make sure you're in the right direction put remember We're selling so it's the opposite so put means we're going up And we can correlate that with this chart. We want it to go up Let's go into our trade Let's delete this And let's pop this in we're gonna paste it Unlock it to get the current price. It is 1.45 And instead of confirm and send never do that always analyze it to make sure it's what you want Sure enough. We believe this is going to go up So what we would do at this point is we would just confirm and send Now I want to really caution you on this pay close attention to the next few sections where I talk about when to take profit and when to close It is absolutely critical And I am not an expert. I want to point out who the experts are X options arian I see them in this group all day long. It's like my second home and they are making real money using what we just talked about and trading made simple with sandra or options sandra She does this in her group. She explains it very well Honestly, you can't go wrong with either group. I just tend to hang out next more because that's where My peeps are but anyways Verticals these things are so versatile, but you have to be very cautious when you use them Let's take a look at why we need to be cautious All right, verticals. Let's talk about why we need to be cautious and when to take profit now a lot of people are thinking that If you enter this trade, you should just write it to end of day And that used to be true up until when the market got super crazy In the ax option group I know I shout out to them quite a bit, but I love those guys They actually told me that previously You would just enter one of these in the morning and just write it to expiration and make full profit The market's not like that anymore. The market's crazy And you can see just talking to you this little line here. That's the price. It's moving down So if I flip over to the chart, yep, look at that Absolutely ugly So you need to be very careful not just In terms of when to take profit, but when you enter Now seems like it would be almost a good time because we see it starting to pull back up That's something I would consider is we would automatically be 71 dollars in the whole Upon entering this trade, but we have the ability for it to go up So I would probably adjust these strikes out further That way I make more money. The problem is the further away from at the money the less profit and more risk So you have to be a little bit careful Back to our main subject though, when do you take profit and see this magenta curve I would not ride this to full profit unless you're extremely lucky I would ride it to about here about 50 profit. So if we're at 135 for full I would do about 165 about 50 percent Maybe even 30 percent and just take your money and run. So You may be going now. That's horrible. I want all this money You have to understand these verticals can go very very quickly. I've seen these things go as fast as two minutes Actually, I think She's going to kill me for doing this, but I think Sophia yam Where are you? I'm pretty sure she yeah Four minute trade with magic eight ball. She did a trade made money within four minutes I mean ridiculously fast and there's a picture of the pistachios. I was eating for a snack just as an added bonus Point being She didn't hold that to full profit. She waited to see how the price is jumping back up She waited till it hit and then she collected profit and ran so word of caution If you're going to get into these be ready And take the profit when you can Now let's talk about everybody's favorite topic wind to close and what we're talking about is things just don't go your way This is a tough subject um This vertical that we've been inspecting I'm confident that would go up, but let's just say it didn't it went down You have a choice. You can either you know, there's two thought process here You can either take the max loss, which I'm looking at this little box here is negative 365 Or you look at this magenta line and you can see you would lose a certain amount depending on where it was So what I typically do is if it goes against me, I don't waste my timer money if it's going to about here I would say okay. It's at negative 141. I'm just going to cut my losses and call it a day The market just was not my friend now if you're very very confident Let me get rid of that and show you what I'm actually in here This is a trade I was doing this morning to test and you can see I just wanted to write it and see what happened And it's currently at positive 163 So this was a unique situation and this is why I point this out There's times where the market's doing this kind of crap And the market was going up here and I entered the trade about here and the market just kept going up And I was like it's so early in the day and honestly magic eight ball Is really saying These nodes are flipping around look at this blue line here up down up down So the markets go in sideways and magic eight ball is tracking this kind of serpentine motion And right now it's up and it's headed back down So what that tells me is Closing it would have been a little bit premature And I just held on to it and now it is making money. It is at 165 granted This is a paper trade because I don't record and do live trades because I just don't have the attention span If this was a real trade, I would close it right now. I mean, that's almost max profit I would just close it real traders would close it and let me take this line probably about like here where you're at about 50 percentage profit or less Just know that when you make your profit take it if it goes against you very rapidly it will often do What I like to do is look at time how much time is left in the market and how confident am I that the trade is going to go back in the direction I want it to go If you don't have a lot of time left and you're not confident the market's going to go in your direction Don't take a max loss just my personal opinion Instead look at where you are on this profit curve and just eat your loss Remember there's always other trades and there's always tomorrow Happy trading and I'll talk to you later