 Good morning traders and welcome to the ProTrader webinar series. We do this once a quarter or so And today we have Brent Cachuba. He actually presented on Tuesday, so I'll show you where the recording is for that as well And this is part two. Okay, so part one Brent went through this spot gamma service and their levels here which are as you guys know that are using this product and Amazing. Okay, we've been showing it quite a bit and you can see even Scott Pulsini and yesterday's ProTrader webinar Was looking right at him. We tweeted it out as well afterwards like how it went right to the put wall that was down on the S&P E-mini Yesterday so anyway, let me go through a little bit here about Brent and spot gamma Brent has been in equities and derivatives for almost 20 years. He worked for both BAA and credit Swiss and as an equities broker in an algorithmic sales and trading following that he was an institutional sales for Wolverine Representing their electronic derivatives trading platform currently Brent trades some proprietary strategies and runs spot gamma comm which publishes various metrics on options data This is Brent's and spot Gamma's information here the website. There's the levels of Subscription service. I'm going to show you that here briefly and show you where you can get the recordings for these webinars as well But they're offering this service here. It's $29 a month up to $99 a month for the full service You can get it from the book map.com book map marketplace and Here's spot Gamma's email as well as info at spot Gamma And then their Twitter feed and then special offers for book map from Brent here Let's go through the risk disclosure and then let me show you some of those resources and then I'll give it over to Brent General disclosure all book map limited materials information and presentations are for educational purposes only and should not be considered specific Investment advice nor recommendations live trading is in simulation demo paper trading mode and strictly for educational purposes Live trading executed in simulation cannot accurately represent realistic trading performance risk disclosure trading futures equities and digital currencies Involves your stance for risk of loss and is not suitable for all investors and investor could potentially lose all or more than the initial investment Risk capital is money that can be lost without jeopardizing one's financial security nor lifestyle Only risk capital should be used for trading and only those with sufficient risk capital should consider trading past performance is not necessarily indicative of future results Good morning, David. Good morning Doug. All right. Let me just show you guys a few things here. Then that will turn it right over to the expert Just from our Marketplace here you can go to the marketplace from book map.com here click on the more button And then you can click on one of the links here in the marketplace or I right click on the marketplace and it's actually a link And that'll bring you to the book map marketplace here Scroll down a little bit and here is spot gamma. Okay, so we'll click on this here and this is the service they're offering these expert Gamma levels from twenty nine dollars a month You can this is the spot gamma pro. Okay, you can also get the spot gamma levels here And it's that's I'm sorry the spot gamma pro is ninety nine dollars spot gamma levels is twenty nine dollars and You can you can purchase it here You can read a little bit about it etc. And then I'm sure Brent will be talking about this as well the recordings okay for these webinars I go to our YouTube page scroll down a little bit here and Procharter webinar series here. You'll see them all and this is the one from Brent on on on Tuesday here. Okay? All right, so other not let me turn it over to Brent and Looking forward to this Cool. Thanks, Bruce I'll just mention quick the the difference between those levels are That the twenty nine dollar gives you just the levels and hopefully Bruce can you see my screen here? Hey, Bruce, okay. Yeah, sweet So the the twenty nine dollars a month gives you these the access to the cloud notes was which are these levels that you can see on The left of my screen here ninety nine dollars gives you access to We write two notes every day before the opening after the close Summarizing what we see a whole bunch of stuff on the website, etc. So that's what ninety nine dollars is So twenty nine dollars, you know gives you these levels piped in Which if you just worry about support or resistance lines options based support resistance lines and then that might Satisfy you or maybe you start with the getting our analysis every day So you can start to understand what we're talking about and then transitions is just the levels But I just wanted to quickly touch on that So we're gonna follow up kind of on what we talked about on Wednesday But what we really wanted to do today was dig in to a little bit more data-based Analysis sort of what it is that's driving these models and how options are affecting the market And what's great is that the market sort of is is dropping like a rock which Gives us some more interesting things to talk about so What happened yesterday and What really we think was the big driver of the market crash was this Concept of market shifting from what we call positive gamma market to a negative gamma market and what we mean by that is that When there's it when we calculate there's a positive gamma market saying that options dealers are Functioning in a way that suppresses volatility and what we mean by that is that their hedging flows dictate that when the market goes up They start to sell futures and when the market goes down they start to buy futures, right? So you can imagine that if those are big enough hedging flows that Compresses the market right it keeps the market in a range and volatility declines because of that, right and if The market shifts and dealer hedging flows shift from being in a positive gamma position to what's called a negative gamma position That means that dealers are going to start hedging in the same direction as the market So instead of buying when the mark is down, they're selling as the market goes down So we have this concept of the volatility trigger and what the volatility trigger is It's our metric of where we think Gamma flips from positive to negative or is it another way we think that dealers go from buying dips to Selling into dips selling the market and so you can imagine that if all sudden market makers start to short futures And the market starts to go down. That's kind of like dumping gasoline on a fire, right? You get this really brief quick, you know spurt lower and so You can see that that volatility level of volatility trigger level today, you know where gamma flips from positive to negative is all the way 3865 and so what that tells us just to frame today's market is that we expect a lot of volatility today, right? Because if the market starts to sell off Dealers are going to start shorting mark makers are going to start shorting And if the market suddenly catches a bid and starts to bounce the market makers going to buy that and it's going to rip So instead of getting, you know, 10 15 point moves on the day We're going to get 50 50 handle 60 75 handle swings on the day and so Conceptually when you guys are trading and you're thinking about your swing trader if you're a swing trader or Scalping or whatever it is you may want to do like whatever your strategy is We think that's an important component of understanding, right? If you're a small trader today I would be looking for 50 handle, right? But late last week before options expiration when gamma was really high and positive and dealers are really suppressing volatility I would only try to maybe make 10 points on a swing, right? Hopefully that that sort of makes some sense So let's talk just I want to dig into what some of these levels mean what we're seeing But I want to talk about the market here as we're watching it. So We show a bunch of different levels on here and you notice that they're labeled L1 L2 L3 L4 Etc L stands for level with one being the biggest level and five being the smallest level So we know here we have this concept of combo Which is level one at 38 33. This is telling us that the biggest Position from a combined spider and spx options position from a hedging perspective This is the biggest level on the board meaning that there's a lot of options tied reach of the strike And anytime we have a lot of options at a strike We think that hedging flows are tied or correlated to that level So many of you are familiar with this concept of you know, wherever liquidity is the market's just going to go there, right? liquidity or price goes to liquidity and that's kind of the same same concept, right? Our levels are telling you where options market makers may have to hedge because there's big options positions related to that to those strikes So, you know in the context of today, we're looking for big swings and big moves And we're looking for big swings and big moves between these positions, right? Which are which are fairly spread out over over the over the range of trading So let's just give you some examples or show you sort of under the hood As to why and how we think that that the market will move this way So One day i'm gonna learn how to start slideshows more efficiently here. Here we go So let's just talk about what happens from a basic, you know hedging perspective. This here happens to be game stop stock Um, but it works the same way in S&P, right? If a trader goes out like if you all start to come out and buy call options The immediate thing that a market maker has to do is buy stock as a hedge And that's because they're short those calls if you buy calls and i'm the market maker I'm there for short those calls, right? And the first thing I got to do is go out and buy stock to hedge myself And then as the market goes up or if the market goes up I got to keep buying more and more and more stock as a hedge So that's the concept of gamma, right if you think about What happens when someone puts a big trade in the market, right? If I come in right now and I buy 10,000 calls a market manager needs to immediately hedge that position Right, they cannot take directional risk. So they're gonna immediately go out and buy futures And once that trade is on if the market doesn't move anymore, then their delta hedge They don't have any more trading to do But if the market goes up or goes down, they have to adjust that hedge, right that hedge amount That's a that's the gamma component of this gamma hedging is just the adjustment that they need to make for hedges And that's why we tend to talk more about gamma hedging than delta hedging because You know the market dropped 15 today. Well the adjustment to that to their through their trading is going to be You know a lot of gamma hedging gamma adjustment So in this case here when we see that the dealers have to buy more stock as the market goes up This is indicating that because people are buying calls Dealers are short calls Which means they have a short gamma position They have a negative gamma position Which means they have to buy as the market goes up Now if big traders were selling calls Dealers would then be long gamma and they would be shorting as the market goes up, right? So that's the volatility suppression piece of this Now think about puts is the same thing, right? If you come out and and you buy big Excuse me. Sorry about that a big put option dealers got a short stock. They got short futures So yesterday all of a sudden everyone started freaking out the the bond market You know had a pretty ugly auction and there's a bunch of concerns there and people start buying puts Well, what happens when they buy puts? Dealers got to come out in short futures. So you have a double whammy position Where you have negative gamma in the market, which means that as the market goes down Dealers need to start to sell futures and then on top of that people come out and start buying puts And when people start buying puts that's the delta hedge that they have to get on top of that gamma So they're selling short because they have to hedge their gamma and then new option trades are coming in Which means they got a short more futures So that can that can really add to the velocity of the move, right? When people come out and start buying puts that's going to make the market drop faster And when people say, okay, it's time to buy calls It's going to make the market go up faster because dealers are going to buy futures to hedge that call position So we look at Where the big strikes are existing right tied to the gamma piece of this There's two big zones that we see right now 3,800 and you're looking at here is call gamma on the top How much call gamma is there and then how much put game is on the bottom and you can see here It's subtle, but there's a there's a curve in here, right? This is net call positions up here north of 3850 particularly over 3,900 And then as we go lower in the market through 3,800 you can see that the amount of put gamma is larger So what this is telling us is that as the market goes down through 3,850 and particularly to 3,800 There's more put gamma hiding in there That means that there's going to be more selling more futures that have to be sold by market makers to hedge Right and you can see it's very subtle in here But it's there and this picture is obviously changing rapidly, you know as the days go on and new volume is added etc so Risk from our perspective and when we flip back to the futures bookmap system, you can hopefully kind of get this concept, right? But there's big puts here at 3850 There's a pretty neutral level when I say neutral meaning call gamma and put gamma is fairly equal at 3,800 And it's really under here where the put strikes start to pick up in terms of you know There's larger net put gamma right if you were to sort of net these two bars out Take this put gamma line and subtract the call gamma line here You come out the bigger net negative number meaning more futures to be sold down here So 3,800 is a very critical level As we view today because it sort of unlocks this put gamma right gamma is highest for at the money strikes So as we get closer to 3,700 these puts pick up in value that pick up in their hedging requirement So that is why we really know you know some of these levels that are important because in general you're talking support in resistance zones right because if 3,800 hits a lot of options probably shift around because You know the 3,800 is now at the money right and if I own a 3,800 put in the market goes down there I might sell that put and adjust and etc right so those can be that's why we see support and resistance zones there it's a big even number as well, but Conceptually outside of just the intraday sort of looking at what the immediate support and resistance zone is You have to overlay this idea of positive and negative gamma right the the deeper we go through 3,800 if we break that level the more Directional the more volatility there is the more the market is going to get short and then the more the market's going to rip back you know when we You know when and if we get sort of a bounce in the markets right and the higher we go To the other side if we get up to 3,900 this is the positive gamma area and we call positive gamma because there's so much call positions there And and so the hedging flows are likely to tighten up And suppress volatility as we get over 3,900 So again, we have the intraday levels which matter, but the levels Are sort of in the context of overall volatility and what is happening how much you know Movement potential is there So yesterday this is sort of the map of yesterday right yesterday, we opened over 3300 Excuse me over 3,900 and the market sort of held for a very brief moment at the 3,900 level Which is you know one of the big strikes as mentioned here But then it hit what we called this air pocket And what it happened was on Tuesday remember there was a pretty sharp drawdown everybody close puts on Tuesday And the market had this really big rally On Wednesday after you know the fed came out and said hey, you know Things are great and sprinkled fairy dust and everybody in the market went up You know one something percent that created this air pocket And we say it's an air pocket because all these hedges that were in this area were removed And that left sort of those strikes in here to sort of catch the fall right And so what happened is when the market woke up Thursday and was very unhappy There's no options hedging activity to support any kind of Bounce in here and then we had put Starting to be added to the market people came out and started to hedge and then all of a sudden you have Sort of no impetus for dealers to hedge in this area because volatility is very low Excuse me gamma is very low, but we do have to hedge a whole bunch of new put positions So teachers are just going to start shorting and shorting and shorting shorting And then as many of you noted, you know, we got a very strong bounce of what's called the put wall And the put wall is where we calculate the most put options in the market So this put wall is telling you where the biggest sort of hedge level is and the fact that it's around 38 25 Or it's around at where things are currently trading is telling you that there's some large entities that are Hedging this market, right? There's concern from sort of big players out there and the idea of the put wall is that When the market hits 38 25 or hits the put wall traders will roll those options will they will roll their put options And as we mentioned before gamma is highest for an at the money option And so if you own a put you're likely to want to roll or close your position When gamma hits that at the money line because that is sort of you could argue that's sort of the peak value, right? Of your of your put you maybe want to roll that down to a lower strike You know cash that put out and exchange it for something that's far out of the money You sort of adjust your hedge, right? And that's kind of the idea of why we would get a bounce here because again if You buy a put and a dealer has to short fuses the hedge When you sell that put dealers got to buy futures back, right? So so again, we hit off this big put line People cash out their puts dealers can then buy futures back And that's sort of what we think is the fuel or the impetus for the market to bounce at this You know put wall level I would note that usually what happens when we have these big drawdowns are oftentimes That we will see net put options close And maybe I should show this on our site Generally what happens is we see put options net closed if you pay for the book map Spot gamma pro version you can see this data here But usually this is what this is showing is open interest in the open interest change day over day in s&p and note here that Open interest built up overnight, right? There's no strike that had a net closure of puts yesterday In other words on net nobody closed their put hedges yesterday, even though the market was down Violent move down, right? So no i've viewed sx as an institutional Uh instrument, right? It's it's usually bigger traders people that know what they're doing trading the spx options It's more expensive as well So nobody net closed puts right in the spx and I mentioned this in the note this morning, but check out spiders People anyone that had an in the money spider yesterday anything above 385 They closed out all the put contracts in other words retail took all their hedges off They're out of the money or excuse me. They're in the muddy hedges off. They monetize their hedges, but the professionals Didn't which is really common interesting signal, right? Something to think about and again, this is net put open interest change So volume on the day is going to be bigger obviously than what the open interest change was So if we bring that back into sort of the way that the market is reacting today You can see, you know, we have these large gamma areas And 3810 here is is providing some pretty interesting support, you know, right in here And what we're looking for today is a signal that Volatility will come off And in general we will watch the vix for that and the reason that we watch the vix for that is Because the vix is telling us essentially the cost of options or the activity in options If you're volatility quant or you're trying to, you know, run a quantitative volatility fund You're you're probably going to listen to me say watch the vix and scoff at that but In general if we're trading futures and we're watching the vix and the vix is coming down That's telling us that options are being sold And put options are more sensitive to volatility, right? And you can imagine that if options are getting sold When the market's going down, those are probably put options being sold And so what does that mean when put options are getting sold? It means that dealers have to buy futures back, right? That kind of ties into the put wall and is giving us some information If dealers have to buy back futures, that's telling us that one of the biggest You know trading entities out there i.e. options market makers are going to start buying back futures And when they start to buy back futures that makes put values drop more which makes Dealers buy back more futures which makes other people close more puts Which makes dealers buy back more futures, right? It's a Flexive feedback loop that you sort of end up kicking off here, which is you know Part of the reason you get such violent, you know moves, right? Because new positions and positions adjustments are really adding into the volatility So one one thing I want to mention here many people on this topic talk about this idea of vana and It's a label that has garnered a lot of interest and I know this is a little bit more of an advanced topic But we're kind of building on what we talked about on wednesday But I just want to give you guys an idea of of what that is and how that works in the market so We had talked about what what the delta or the hedging requirement is of a market maker So if you look at let's say the market closed yesterday at 38 30 the amount of deltas that the market makers had to hedge Was roughly 1.2 billion and we measure that as a positive figure So the options position That market makers had on yesterday Gave them positive market exposure of roughly 1.2 billion notionals what we calculate So they would need to hedge this by selling futures, right because market makers don't want a directional Don't want directional risk. So their default position at the close of yesterday would have been 1.2 billion long options delta And then it would have been short enough futures to hedge that out, right and and again, you know, there's um, I'm I'm going over this at a very high level view. So Don't try to, you know, create your own options book based on what I'm saying because there's things that net out and etc But from a high level conceptual view dealer that are long options deltas meaning they make market money if the market goes up And they short futures as the way to hedge themselves. So again around 3,800 figure their their roughly delta neutral, right? Meaning that if the market opened today at 38 30 and nothing happened, they would have no hedge adjustment Obviously as the market sells off You could tell the red line moves up meaning that their portfolio of options is getting longer. They're getting More directional risk as the market drops, but that directional risk They're essentially, you know, long stock here, right in a way You can look at that way as the market is going down, which is not a good thing So the way they hedge themselves is by shorting more futures So this is what happens just off of the s&p price moving, right? Now we talked about how volatility spikes As the market goes down as all of you know Volatility spikes along with that, which means that put options, which market makers are not short Put options gain value, which means that market makers who are short puts are losing even more money, right? Or they're potentially losing more money the way that they would hedge themselves Therefore is actually shorting way more futures. So the red line is is just price movement of the s&p 500 The black line here that you can see spikes up is what happens if implied volatility also spikes And so you can see that they rather than having to sell so if we were to draw sort of a Align parallel to the x-axis You know dealers would have this much to short if vol doesn't change if implied volatility doesn't change, right? They would have to just from 38 30 they're called 1.27 billion to like 1.29 billion, right? So that's a small Additional short that they would have to they would have to sell some more futures right to hedge themselves But once vol spikes you can see how much more delta notional that they have to hedge against and hopefully that Concept is is making sense Now the other con the other idea here is that if the market starts to go up and volatility goes down What's interesting is you can see that their default position again. They're getting longer The market goes up they can Release or reduce some of their short position as the market goes up But when implied volatility comes down that means they actually have to just by also selling futures If the market goes up towards 3,900 So this is that idea of they're they have a negative gamma position here They got a short a bunch and if the market goes way up They actually start selling some futures as well to adjust their hedge, right? And this really occurs around 3,900 Which is why you know, we kind of get stuck in the mud when we get over in the 3,900 area And then the third concept, which I didn't really want to touch on here But I'll just mention this is that options decay over time, right as time goes forward options decay And as market makers are short options That means that all those puts that they're short lose value, right five days from now All those puts that they own will likely have less value all else being equal. So they have less Delta's they have less deltas to hedge less long deltas to hedge So that means they can reduce their short position, right? So in other words over time, there's a buyback drift happening Some of you probably would view that as what's called charm and those are, you know, these big names that terms they kicked around You can't look at any of the stuff in isolation because Price time volatility is all interwoven and shifting But if you're just sort of sort of take one snapshot in time This hopefully gives you a general idea of what the flows are that we've been talking about So I'm gonna pause there. That was a lot to digest. I know we kind of went from like Level one on Wednesday to like level 10 today If anyone has any questions, I can pause on that if you guys don't have questions I can start to talk about I have some interesting things to mention about game stop This 3,800 level is really critical. We think for the market Because of those put positions as we mentioned before so We really want to see that the market is is supported here and it will be You know really critical levels under this, you know, could really lock unlock some of that Put covering that that short deltas That we had talked about the the short futures hedging that that dealers need to do I mean, yeah, you can see the bid is getting pretty aggressive there. Um, so They're bidding up from those from those levels 3785 was in the book and and 90 but they're they're bidding now in front of it there Yeah, and so, you know, uh, Bruce, we had we talked about what flows matter and There's really two things that you would pick up. I think the options are in the liquidity monitors here And you're probably a little bit better verse. Well, you definitely are and explaining this but You know, when it when a real-time trade takes place, right? Dealers need to hedge immediately and they don't mess around with that meaning They're not going to like put a bid out there and see if it gets hit and you know, etc They're going to hedge immediately. It's a directional hedge to me. That's a stop run, right? So there's that immediate hedge requirement and then the second one is, you know, at these big options levels They know they have some hedging flow to readjust And their their goal is to have to to really hedge and re-edge I think as little as possible because you know, they want to avoid transaction costs and the like So I think that's, you know, you're likely to see icebergs and that type of flow, you know Post liquidity at that these big options levels. And then I think a lot of times you'll see these kind of stop runs Will take place when a big options trade comes in and takes place now Obviously not every single trade and not every flow in the market is strictly options But the options is a big constant flow, you know, we talked about this on wednesday If you're a market maker or a prop trader And you have, you know, 10 million dollars to buy a few years with or sell futures with Once you do that trade, you're done, right? There's no more trading for you unless the market moves a bunch But if you're an options market maker, you're hedging and readjusting your hedge So you have essentially unlimited flow to trade, right? You have unlimited capital in that sense because you're you're hedging your book You're not sort of making a directional bet and and going to have a margin call because that You constantly have to adjust your adjust your flow So just as in their way to get real-time data levels intraday So these big options areas don't adjust really intraday We model this off of what's called open interest open interest is released Once every day at 12 o'clock at night And so that's why our options models really only update once in the morning We do give a update at night, which is generally just a recap of what happened As far as watching what intraday options flows are happening I could tell you that we are working on something really cool and that's going to come out soon And that's all we can say about that Dave says his head always starts I'm not sure the question or Okay We don't have any interest right, so we don't have any levels below 3,800 Right, so when we model the the levels every day We show what are the biggest options levels and cut that off at a certain size of notional hedging and we do that because You know, there's options That existed every single strike in the market, right? But only the biggest levels really matter and we kind of group those together So what ends up happening is as gamma is highest for at the money options You know the the options that are within say two or three percent of where the market is trading Are where the biggest levels are right because gamma is highest for at the money If we break down below 3,700 Then there's a new set of strikes that come into play because gamma is shifting lower So we had been talking about 3,900 as a huge level with 3,800 kind of this middle area Well, the other area that's going to matter now and come into major play is 3,700 So, you know, that is what this is going to show us, right? 3,750 is the next level down and then 3,700 we're up at 3,800 these levels We just don't calculate and I mean we calculated and we just don't push them out to the To the traders because in general, you know, these levels don't matter So if we were to rerun the model right now, which we can do, you know You'll see these other strikes really come into play And now that we're breaking down through this 3,800 level if this is a real breakdown and not just sort of a test You know again the velocity of the move could could pick up quite a bit So Simon also asked what's your thought when the market like now goes through this level and pretty not quick So there's you know, you're going to get stop runs, right? You're going to get Initial moves through there's all sorts of different people, you know trading for different reasons, right? And this breakdown through 3,800, you know I'm not sure, you know, what would be the initial drawdown the dealer flows that I would You know pay attention to our you're going to have to say What is volatility doing? What is the VIX doing and the reason that I watch that is if the VIX continues going higher That is telling me that the price of options is staying higher and that people aren't closing their positions The default move now is going to be in the prevailing direction of the market Which is down and I would hold that conviction until the VIX turns because if the VIX turns That's telling that people are closing their hedges out and that dealer flows are going to start to turn higher because of that So that's really what I try to watch, right? Because it's just going to be a guessing game otherwise as to what's going to happen You know that the pressure is going to be lower and if the VIX doesn't correspond You know, you're not going to get the VIX going up while the market rips higher This is not going to happen in this situation So, you know, there are occasional times where those the VIX will go up and the market goes up and that's a whole another topic But in this situation here where the market's dropping and VIX is going up That's telling you that options are getting more expensive, which is telling you that dealers have more shorts the hedge And so again VIX up market down. That's That's the thing I'll watch for today So so at 3,800 this read right now would be you'd be looking at the VIX and trying to figure out like what what might be happening Yeah I don't know that I can get the VIX in here. I've never No, we I think you can with with dx feed Um, it's not the right symbol Quick show up there I'm not not sure not sure if we um Yeah, there you go Let's just try that and then let me do it. So, you know, like well, let's let's just look at I mean, this is a really sloppy way to do this, but um Let's just check out the one of these VIX ETNs So, you know, this is This is obviously an instrument for volatility and again I would I would look at the VIX and not the VXX but just to give an idea here You know, I was this low beginning to take a look at a minute But you know, this is like a hyper sense of VIX in a way This is obviously trade off the curve and so in a way This is kind of the similar thing, right? If this is going to try to hire move higher than we know that options are getting bought Hedges are being put in place And that likely means that, you know, things are going to go go Go south for markets Any more questions kind of in this in this area here When we say that we're watching VIX what time frame so, um, that that's a great question, uh, sj What I generally like to watch for is, you know, when we're watching the VIX Like let's just say this was the VIX chart, not the S&P You know, if the VIX was going to break down below sort of a recent low You know, if it's really going to trend lower I'm not sensitive to like a move this small in VIX and I know it's Really a crude kind of embarrassing way to talk about the VIX by watching S&P futures but you know a new low right in VIX and You could tell when when a trend stay over like a, you know, if you're watching sort of on a Some kind of a moving average right like a A 10 minute moving average or something like that, you know When that's really breaking down where it's real trending lower is giving you the real, you know, the real signal And it's also interesting if the market revisits a low several times You know, like the the markets now tested 3,800 several times And I'm not sure what the VIX is doing But if the VIX if we've tested 3,800 several times and we test the 3,800 Again, and the VIX actually drops down, you know, that can really signal that okay This is not just another retest of sort of a high can be actually, you know The real signal that you know this this this time the retest of 3,800 from the downside will break higher If the VIX is lower than the last time it tested these two levels if that makes sense But if you just watch it for a little bit, you'll start to get sort of the sense It's not something that you want to calibrate with, you know, a lot of detail, right? This is a which way is the VIX trending you just sort of look at it and don't think about it too much You can tell right use a moving average maybe or something like that You get a feeling for which way the thing is trending But but I guess new highs and lows are kind of in general what we'd be looking at Simon, thank you very much. Glad the service is working out What I watch VX futures VVX or UVXY SJ Honestly, I just watched the VIX there are people that watch Contango, you know What's the what's the front month? What's doing versus the front month future and the like You can certainly get much more sophisticated than watching the VIX A lot of people that I talked to or trading future and the like Aren't quite at that level of understanding the interaction of you know, the VIX curve and all the various VIX products But I think if you really want to be pure about it, you would watch at the money implied vol for SPX options What I would do if that helps you Okay, so Kendall Kendall is saying that the VIX is failing at the overnight high which may indicate that we may turn up. So Kendall, I know has been watching us for a long time. So should be all probably understands the stuff As well as I do at this point is like Helped all my knowledge out So I'll shift now. I just talk about game stop and test again quick. If people are interested on that I'll move away from from this topic Briefly. So one of the things that's really interesting and ties into into what we've been talking about Is this whole game stop saga and whole game stop phenomenon? And what's really interesting we were talking about how options market makers hedge and how they adjust their hedges is that Um in game stop, everyone's been buying calls, right? And the call game of squeeze which all of you are familiar with which just harkens back to this idea of You know when when the market goes up and dealers are short calls. They got to keep buying stock this form This is the form the foundation. Excuse me of gamma squeeze, right? Because more people come by cautions, which means as the stock goes higher Options market makers got to buy more stock. That's the game squeeze So a market maker Has to you know, if you're what's called the dpm or the primary market maker You have to be out there making markets all the time, right? That's your requirement by the exchange so You can imagine that if everyone comes out and starts buying calls your inventory of long calls can get very full Right and you could say I don't really want to buy any more calls, but you still have to make your market So what do you do? You raise the cost of those options you make it more expensive for people to buy options And by also raising the cost of those call options you and send more people to want to sell options or sell calls So what's interesting about that is that if we look at The I haven't the site here. Sorry about that If you look at this chart here, this chart is showing you the cost of what we call an at the money option Based on the percent of the stock price. So in other words In december and january it cost you roughly five percent of the price of a share of stock to buy a call option You know and at what we call an at the money call option when the Capital blew up and everyone got the game of squeeze going the first time that cost shot all the way up 35 or 40 percent Right the same option that you would have paid only five percent of a share went up to 40 percent of a share So that cost went Through the roof What's interesting is and what we thought would happen after this game of squeeze is the best way to cap a game of squeeze Is to make calls just prohibitively expensive You make them so expensive that no one wants to buy those calls Then guess what the game of squeeze dies, right? And so if you look at here We actually had an 80 percent move in stock where i'm sort of circling here You can see that call gamma or excuse me call options. They got expensive for sure, right? But they only moved up from like 10 percent to like say 15 percent Well, look what happened on the stock move of 80 or 90 percent this week Call options went all the way immediately to 20 percent And and I can tell you I didn't update this chart from last night that that this cost did not drop overnight So in other words now market makers are not messing around It's like if you're going to try this sort of we call it weaponized gamble But if you're going to try to like jam us with a gamma squeeze We're going to make calls so expensive that it clips your Clips your ability to squeeze because because options in a way are just leverage, right? If if bruce buys a call option for a dollar Uh a hundred bucks, right one dollar or a hundred dollar notional cost as a market maker I have to immediately go out and spend several thousand dollars to buy stock as a hedge And if the stock goes up, I got to buy more stock, right? So bruce's home bucks has made me buy thousands of dollars with the stock and then thousands of dollar more stock if he keeps going up, right? bruce has used the leverage to make me buy stock It's just a leverage mechanism And so, you know, I would also say that when we have record long call options You could read that as record leverage in the market And so, you know, one of our themes this year is what was called volatility of volatility If you have record leverage in a market as everybody knows it doesn't have to be options or anything else Record leverage in a market means volatility and and you know, things are going to move a lot Because leverage is high and that's just you know, the function of of markets in general. So Anyways, I know I'm kind of being long-winded here, but as we've made the cost of options very expensive We'll show you kind of what we just did in my game stop But they've made the the price of options very expensive and consequently the big gamma strike has has moved up slightly This was 95 bucks. And if we look at historical record here You can see that people are buying Call options, right huge volumes yesterday But mostly puts right the the call versus put volume switch. So we went from a huge day when the stock went up 80% this was on This was two days ago when the stock really moved much higher You can see that there was a big slant to call volumes You know puts have obviously come in a big way, but there were still huge call volumes But these call volumes are happening at prices that are just really kind of absurd, right? And so that is really, you know capping this move We're thinking a major way and so if we look at the price of game stop It's having a hard time maintaining, you know higher prices now The additional thing is that the market overall is very weak obviously So that is not a good tailwind if you're trying to create a stock pump But these really high call prices are clipping that leverage And if you think, you know, if you're a Wall Street bets guy and you're going to go out buy a single share of stock Well, once you bought your single share of stock, your demand is done, right? But when you buy a call option, you're forcing market makers to keep hedging, right? They're going to keep buying as the stock goes up. So you're, you know If you're just going to try to create this bubble by buying stock, you know, it's much harder to do than than if you if you leverage so So with that, I'll take one kind of final round of questions here Kendall called the market bottom and it looks like she at least for a short term did a good job with that If there's any more questions, I'll take those Yeah, Arnold asks, are these calculated off of SPX or ES futures? So these levels are calculated off of SPX index and SPY So if it says combo that is a combined SPX and S&P sorry, SPX and SPY Combination level and then if it just says L3 or put wall, that's strictly SPX Denominated I've looked at ES futures. Um, it's a whole lot more It's a much more complicated calculation for me to work for a variety of reasons And I found that the impact actually was In material to the levels in other words the S&P SPX and SPY are so big that the S futures don't really seem to affect much of the calculation Hey Alex, we do not sell a course But if you go to spotgamma.com and you click on the fact FAQ page We have a four-part video series that walks you through, you know options 101 up into sort of this advanced modeling A lot of stuff we talked about today So maybe try to start there And then we've done a series of talks with bookmap on youtube as well as our youtube channel, which is a spotgamer on youtube Okay, I think I got pretty much everybody's questions Brent, I'm wondering if you have the metric for um, what you're talking about the cost of the options versus the The spike in volatility Yeah, so we can um, I think I understand what you're asking. So we can measure this We can measure this chart here You know kind of in any stock and we we can show this as an applied volatility metric instead of you know percentage of how much an option costs What you know If you wanted to sort of measure what the impact of those flows are it's watching kind of this This I guess sort of day to day right because this is telling you what the hedge impact is of that delta shift So if you were to watch this in a time series or like a flip chart, which is what we're actually trying to build Then you could see how much that hedging adjustment would change, you know day to day um, I think is that is that sort of answering your question or Yeah, I think so. I mean, I guess the hedging would would um I just I'm wondering at what point will the calls become too Expensive that you'll start to see like, you know the Oh Yeah, I mean you you can you can sort of in a way just almost sort of mentally do the math I mean, you know, so what this is telling us that with the stock at 150 bucks, you know It costs roughly 20 to to to buy and add the money co-option which meant that For an option in this case that expired in two days, which is what the dark purple dot is telling you It's a two days to expiration somebody was going to pay roughly $30 for a call that expires in two days That's a very expensive option, right? $30. It's 100 multipliers. That's three grand. No retail trader is going to pay I mean not a smart retail trader is not going to pay three grand to buy a an option that expires in two days on on game Stop, right? So you really What happens is that the only people that can trade this then are volatility funds, right? Really guys that are hedging that know what they're doing, right? That that can be very active trading that have automated trading systems You know, this is a different when volatility spikes as much as it's a different Level of trader that's taking place, right? So you could say that these are these are retail traders down here getting this thing started again And then the professional traders step in and market makers raise that raise that cost And the other thing about it too is is when When people are buying options for this much, right? They're spending this much That's a whole lot more sort of options premium that a market maker could make right because they're short If someone's going to buy 30 spend $30 on this call That means the dealers, you know collecting $30 on this call and has a lot more time decay on their side, right? They suddenly have a whole bunch more padding That gives them a lot more wiggle room, right? So so they're probably happy to sell calls up here at that price Because you know it's extra people are paying extra insurance almost in a way if that makes sense So I mean the the the big volatility spike that you saw earlier like they just kind of thought that it would this is the Price of the of the call options. It shouldn't go higher than that and they just I think what happened if you're talking about over here was a variety of things One, I think everyone like at the time this was unbelievably high volatility, right? Like people are going I've never seen this before And then it went even higher and that was part of of you know a variety of reasons Elon Musk came out and said buy the stock and all this but there was also a lot of force short covering, right? There was a lot of hedge funds that were in trouble and having to and had margin calls, you know Which jacked this thing, you know the stock itself even higher. So I think that you know Really nobody thought that the that stock could really go up more than this, right? And then there was that sort of second wave That that pushed the stock up. I mean let's be clear like Options of volatility here is is very expensive, right? But if everyone goes out and starts buying the stock immediately here Market makers still have to hedge themselves, right? Even though the cost of options is very high in the short term the dealer still got to buy hedges, right? They still have to buy stock to hedge themselves So like when melvin capital goes out of business or has a huge margin call and the stock jumps up 40 You know five 50 bucks in five minutes Dealers got to hedge that right they they have to be out there buying so that exacerbates the move You know, they still have that directional hedge that they have to do It's just that they can try to limit the amount of new positions that come on and and send people to sell their calls, right? If they make the call expensive enough, you know If you're long a call here at 50 bucks and suddenly you could sell it the next day You know the stock at 150 and market makers are really raised the price of that call more You're getting a double whammy like you made money on the fact that the stock went up And you made money on the fact that options market makers raised the value of those calls, right? There is the cost of those calls. So you're able to sell at a much higher price Um Is there a cheat sheet? Nicholas, uh, we need to send a cheat sheet out a bunch of people have been asking for that If you just email us at info at spotgamer.com. We can send you that we can send you that cheat sheet over The level of today's date shan. Good question. Um, that is simply a reference. That's simply a reference for when we Uh, it's two things one is the date that we struck the file So you want to make sure that's today's date because if it's not today, then that means you're on a stale file And two, this is the price at which we ran the Our models, right? So basically the the reference price for our models is Is is struck to this level So there's not a a hedging Requirement around there. Although sometimes the market seems to want to respect this level, which is I have a theory about But no one can We say to say that dealers want the market to be in a positive gamma state. If so Yes, so when when it's a positive gamma state, um, the market makers can collect their Options decay, which is what they want. They can transact and collect, you know, more bids and offers I think what when dealers don't want something is they don't want the first round of game stop, right? Because let's think about this for a minute, right options are convex instrument and what that means is that That that the price of an option Uh has a curve to it when because of gamma So like in other words, if I buy a call option for a dollar and the stock goes up 10 bucks, you know My call option value might spike up, you know, 10 times that 10 bucks, right? If I want to share stock, I know I'm going to make 10 bucks on the stock, right? But my option might go up a thousand percent, right? It might go up an exponential amount um, and so What I mean by this is if you're a dealer You can hedge small moves by buying and selling some shares of stock, right? But if volatility really spikes and the market drops a bunch, you know, put options as everybody knows, you know, um Have a convex payoff and if you're a dealer, you're on the other side of that convex payoff So when volatility really spikes and the market really drops, um The dealers are taking or at the risk of taking sort of convex losses that can't be hedged by just using futures as a hedge, right? At some point the only way to hedge yourself against a convex loss Uh is to own options and so at a certain point and that kind of almost harkens back to this, you know, um This chart here at a certain point, right? You can't buy enough stock to hedge yourself really from this move if you're if you're short call options at 100 here Or at $50 here and the market spikes up like you can't really buy enough stock to keep your hedge up, right? You really need to own options out of the money options to hedge yourself and to protect protect yourself So i'm hoping i'm sort of giving you guys a general idea here is that On the tail, right when you talk about tail risk The only way to hedge yourself from tail risk of a move higher or lower is really by owning options So dealers are likely sort of to be Wanting to also sell options in here because if someone sells them calls that means they're getting long calls And that sort of helps their hedging profile and and protects them against tail risk Hopefully all that sort of made clear Andrea Andrea, hopefully I pronounced your name right. I was asking for the special offer link I can risk and hopefully help with that one. Yep. I've been putting it in the it's in the chat box guys I put it in there several times already. Um here it is again Okay, so just take take a quick look there. Cool So with that, I know it's a very big trading idea. So it looks like the questions have been pretty much calmed down. So I think we'll we'll end it there. Um Okay, um, let's see. Well, nice nice, uh, uh, look at that, uh, vicks there, uh, kendall Look at the nice move up almost 28 28 or like 30 point move basically. Yeah the um Oh specials now guys just just to be a a bit clear clear on, uh, the product, uh, the Yes spot gamut is now offering it was 99 dollars, uh, a month Um for the for the options levels, uh in that book map marketplace It is now they're offering it for 29 dollars a month just the levels though Just these levels like like Brent is showing there on that left column the the cloud notes column there So you're just getting the levels. You're not getting his insights, uh and His emails, uh, etc So now this is all sold separately. Okay, this is an add-on. It's from the book map marketplace The book map marketplace is for third-party vendors like spot gamma to, um, sell their services and their products You'll see other indicators educational products in there, etc. So that's what the book map marketplace is all about, uh, and, um In spot gamma gamma is is offering something in there as well. All right, so it does not come with the book map subscription You got to have book map first Um, let's see here any other questions. Um the cloud notes, um, well, uh Yeah, Todd there whenever, um, the way it works with the cloud notes, uh, whenever Brent, uh updates, uh, his notes They will update in book map Um, you know, so, uh, that's generally 3 a.m. And then, um at 4 p.m Are those two update times? And then if the market really moves a lot, you know, intraday will we'll give an intraday update Okay, uh, let's see. Um, let me uh, let me share my screen for a moment here Uh, and just go through a few more things guys just to just to clarify on some of these things before we Call it a day here Hold on just a minute Okay, I just want to um since this is the last day, uh, and and thank you so much, uh, Brent This stuff is is amazing. I mean the the insight and the transparency Into What these bigger players are doing is is just amazing. Uh, so Yeah, thank you. Um, can't thank you enough like there's so many people many people and we the daily webinars that we we host um, many are using it and um, I'm showing it as well. Uh, and You know, you can see it right here Looking at some of these levels in book map and look at look at all this liquidity in here Okay, and we know this level is important. Uh, and then Kendall had a very nice read on that on the way out here. This is quite typical All right, so, uh, anyway, and where did it go the combo level? Okay Right right up to the combo level. I mean look at this. It's just you know, you can't get much better than that And uh, you know top to bottom there. Well, let's say you even got in here just above 3,800 Well, you just you just made 30 points Uh, that's that's pretty pretty amazing. Um, the uh, what I wanted to show you here You can also start to put this together with Stops and icebergs, you know other insights other Transparencies into what's going on in the market here. So kind of a nice cache of tools here Uh, just wanted to go through um, the youtube channel where you'll find the recording Okay, go to our youtube channel and then here under pro trader webinar a series. Um, I need to update the title sorry Brent, um, but uh, this is their previous one from tuesday, uh, and um Uh, let's see. Oh back to the book map marketplace. If you guys are interested, okay Let me show you how you get to the marketplace. Uh, first from book map dot com Click on the more button here, and then you can go to the marketplace here I go to the add-ons Uh, and uh, well, I'll just I have it here quickly Uh, it'll bring you into a page like this find spot gamma or do a search for spot gamma here Okay, uh, and then uh, you'll see their products here click on the image Uh, and then you'll get the details here. So right now the offer is spot gamma pro, which is $99 a month Spot gamma levels click here, and you can see now it's $29 a month Right, so that's how you can get this if you're interested Uh, let's see. I think I've answered all the questions. This is sold separately guys It's not a part of book map. It is sold on the book map marketplace uh, and Just just lots of thank yous coming in absolutely Um, so, uh, yeah, thank you. Thank you guys for all the nice comments here Uh, how long is a special offer for? Um, well, this is moving forward Uh, and I don't know if you wanted to comment on that, uh, Brent Uh, yeah, I mean, we're uh, we've never offered to let just the levels before that's a that's a new thing for us to do And and because you guys have been such great partners with us, you know, we're we're going we're going to try that out um We are we do get a lot of questions on what the levels mean. So, um You know You could always try out the pro for month Like I said to get used to what we're talking about and and then maybe you kind of get the The gist of what we're saying and all you want is the levels. Um, so so that could be one piece of advice You can always switch my ships in other words Okay, uh, all right. Um, yeah other than that, um, I think that wraps it up Thanks again, Brent very unique, uh, interesting and insightful stuff. Um on a level that We've we've never really seen before. Uh, just uh, fantastic stuff Yeah, well, thank you. Thanks for the opportunity to talk and and I hope that that uh, didn't go People's heads and then my explanations of stuff was all right Well, like like you said, you've got I tend to gab a lot and then go oh no, what did I just say? Yeah Well, you have those those four videos. Uh, let me let me show you guys. Um, where those are, uh Oh, thanks for that Bruce appreciate it. Yeah, these videos guys will explain this in a very nice way and then, you know Then you've also got these, um These webinars here where he's going into a lot of detail, right? Uh, so um, Brent, maybe you can guide me from here. Click, um, click fact there at the FAQ on the top bar Okay These are some of the worst, uh Images of me that I've ever had captured and I think someone's goofing on me, but um, but the content is good Yeah, the content is excellent. I've watched all of them, uh guys and they start off from beginner, uh into intermediate and advanced It gives a very good overview here And then obviously Brent's gone into detail in all of these webinars here, uh on what's, uh, uh behind These levels here, uh, you should find very very helpful. I'll put this link into the chat as well For you guys so you can you can watch these if you're interested And then uh and then take it from there. Um Yeah, yeah, you can subscribe from the uh bookmark marketplace. Uh, you can also get it here from uh from swathgamma.com Okay All right, guys. Well, uh, let's that wraps it up. Uh, thank you very much, uh, Brent again, uh, and Oh, we'll do it again for sure All right. Have a good weekend everybody. All right. Enjoy weekend. Bye. Bye