Selling Premium on Stocks

[00:00:02.29] - Speaker 1
Good afternoon, everyone. Good morning for. For those in the U.S. good afternoon for those in Europe. Welcome back, Dan. Nice to have you again. Thank you, Fabio. So today, thank you for your time and today we're gonna have a really nice session where we're gonna go back to the exercise we did last week on swing trading. And then, Dan, you're gonna share some additional insights and maybe even like how you would look at the data or you would look at the string model for your trades. So maybe like for those don't know you, maybe if you want to introduce yourself, you've been an active members of our community and people can find you also in our training room. But maybe like, yeah, if you want to give a very short introduction about yourself would be. Would be awesome.

[00:00:50.17] - Speaker 2
Yes. Hi, everyone. For those who don't know me and I'm Daniel and I've been around trading for a longer time and with Mentor Q for some time and happy to be here. I mainly trade options have nothing to do with futures. There are far more better people and with experience at Mentor Q who can do that. My focus is on options trading. I did and do SPX trades with Paul and Van Punklandia and Dog, how you call them, and from there we derive and do some options trades. And I mainly focus on theta and on volatility traits. And a lot of you have seen my trades, which I share and my own systems, systems I've built. But for all these things, I do verify and use them in the queue systems and take a look at the things before I take a decision. And this has mainly helped me. So because I get some feedback and we had a talk with Fabio. We want to revise some things and revisit from earnings. And yes, I think there are a lot of opportunities for options traders every day and that's a nice thing and that's why I'm here.

[00:02:08.22] - Speaker 2
And we'll have a nice session today looking over some interesting things which will happen and things which happened.

[00:02:16.05] - Speaker 1
Yeah, absolutely. So before we start, Dan, as always, I'm going to share our disclaimer for a few seconds. All right? And everybody please send a comment, send a message if you have questions during the session. We're going to go through a Q and A at the end, but we want to start basically. Then last week we did a session where we showed some back testing results of our swing trading model here under our guides, you can actually find everything right here. So if you click on swing trading model, we actually have two back testing results. One was during the earnings week the week when Google and Apple reported earnings. And then we did a more thorough backtest last week where we. We went over basically three baskets of companies. First, we did what we call full coverage, which was 125 companies, obviously from different sector, different market cap. We did the max seven and then we did the indices, which is really spx, spy, qqq, NDX and vix. And basically like we're going to show the file. The assumption was to use the string model in two ways. One for a long short strategy, which was mainly trading at the open on a Monday and closing the trade at the close on Friday.

[00:03:45.04] - Speaker 1
And the other one was by selling credit spread, which is also your specialty. So we're going to focus on that part today. But if we go back to our results and you guys can actually take a look at the video here. So we have a video of the old session from last week, but essentially here what we did is we took the bias from the string model over a period of four weeks, and we were able to build basically results based on our longshore strategy here. So we had an overall return for four weeks period for one month of 6.9%. And then we did our backtest on our credit spread strategy, which returned an overall win rate of 80%. And then down in a second, I'll let you know. Comment on that. We did the same exercise on our MAX 7 where our overall return was about 9.95% and our win rate was 89% on our credit spread strategy. And then if we look at the indices, actually this was even better because we had an overall return of a long short strategy of 14% and an overall win rate of our credit selling spreads of 95%.

[00:05:02.13] - Speaker 1
I'm gonna pass it to you, Dan. I think you had the chance to look at all the data and maybe like, if you want to add something to that as well.

[00:05:11.11] - Speaker 2
Yeah, definitely, Fabio. We had some talks, especially for the earnings. And I really liked the idea just to pitch your foot in and just do it on the one hand methodically, but without optimizing, because you can always optimize things and you know how it is. But this is what I really liked. You just started on a Monday and ended on a Friday with very easy selling credit spreads and without looking at other things, the Greeks, which is very difficult for most people. And this is the good thing. The model had a very robust return. So this gave an idea where the trip could go. And this is what I liked because you didn't try to optimize Everything. And still the model performed very well. And you did a further backtest on other things and the model again returned very well. So what I want to say with that, every person and individual is a different trader with their own ideas, experiences, and we learn. So what this means is wherever you start from and wherever you do it, you can use the model and implement it into your strategy or make it your main strategy.

[00:06:20.16] - Speaker 2
That's the nice thing. So if you have an idea about something, we will talk about earnings or other ideas. You just can use it and take a look or just go back in time a couple of days and see how things have developed. And yes, you can still use your own strategy and make it more delicate and look at little things. And I will say how I use it and what I would do, but in the end you have impressive results. And so the easiest thing is build a basket, because we don't put all our eggs in one basket. This is what we learned from Warren Buffett at least. And then you can just trade the model the whole week. And in the end, statistically, mathematically, you should be a winner. And even if you know how to manage risk, your life is easy, you don't need to think about the Greeks and other stuff. And you have a nice diversified portfolio outperforming the indexes. And this is something which is really, really impressive.

[00:07:21.13] - Speaker 1
Yeah, yeah. And we kept it simple. We didn't add the risk management part into it just because, for simplicity reasons. But yeah, as you said, overall for that month period, it was very solid results both on the long short strategy as well as the credit spread strategy. I think one of the very interesting part was the, the, the indices, like the indices perform really well with the, basically almost a 100 win rate on three out of four weeks. So that was very good. And obviously during that week we also had a lot of volatility with the elections. We had obviously big earnings, so obviously a lot of live volatility there as well. So it was kind of like diverse weeks in basket. So. So I think it was very interesting.

[00:08:15.09] - Speaker 2
Yeah, and this is a nice thing if you don't want to mangle around with different stocks or have everything in place, because yes, we have levels and levels are important, but as we know from an old level, new level can derive and the model will pick it up. But in the end, if you want to keep things simple, create your own basket. Take the theory of having equities and gold and all the other things. Create your basket with some ETFs and trade it with A model, just wait it and then in the end you will outperform very well. So this is really a nice start, but this is just things we can just see. We can't tell you how to do it. You have to. You are the traders, we just try to give you ideas how to trade it. And everyone uses the things in their own way. So this is. These are impressive results. And as Fabio said, yes, you can tweak things, but sometimes over tweaking things isn't helpful. So if I can say one thing, what I like about the model the most, because I also build my own systems for other things I believe in system building, is that in the end you have to keep it simple and maybe not stupid, but you have to keep it understandable and robust.

[00:09:30.20] - Speaker 2
So if you're new to options trading, which a lot of people are, just use your favorite stocks or things you believe in, or your ETFs and just backtested. Live with Mentor Q and try these things out. And if you feel. Game and if you are already a senior trader, then at least take a look at the swing ball before, before you take your next trade. This is my main tip I can give you.

[00:10:04.11] - Speaker 1
That's great.

[00:10:04.20] - Speaker 2
Dan.

[00:10:07.29] - Speaker 1
Can you hear me? Dan? Yeah.

[00:10:09.13] - Speaker 2
Yes, I can hear you. You have a lot of documentation here. And this is another last thing I would say on this one here. Not only the video which Fabio has shared you here. So just take a look at the things. And Mentor Q is growing every day. So you have a lot of things. And it's not only the swing model. The swing model derives from other things, but it makes things simple. That's the thing. You have the basis layered, all there, but the swing model puts them all together. So you don't need to look vice versa at different things. So at least take some time, read the documentation, look at the video, try it out and dip your feet in. And I believe in a mechanical, understandable, simple trading. This is something which will help you on your way not only build your mindset, but build a foundation. And this is something you can really start off or if you have a lot have had difficult trades lately, maybe this is the way to change them. That would be a thing.

[00:11:09.29] - Speaker 1
Yeah. And before we go into more like an in depth analysis, you know there's another big earning week this week. Some very important companies like Nvidia, we have Walmart before you, we do that. If you guys want to access this documentation, just create a free account. This is the link, you can access that and then you can access all our guides and all the back testing results right here. But then the next thing then is it would be very interesting. In the past session you share kind of like your routine on how you analyze companies by looking at options, especially Brics data. I don't know if we can go into maybe a very synthetic view of how you would look at, for example, the earnings week that we are facing this week and what are the things that you look for?

[00:11:59.23] - Speaker 2
Yes, I will do it. Very simple. I will try to share my screen. So let me do this for a second. Yep, I think you can see everything here. Fabio, can you see my Excel?

[00:12:17.11] - Speaker 1
No.

[00:12:18.09] - Speaker 2
Okay, give me a second in the wall. Give me a second. This will become smaller. Can you. Let me see where is the Excel I created? There it is, the earnings report summary. Yes. Okay, can everyone see this?

[00:12:37.25] - Speaker 1
Do you want to make it bigger?

[00:12:39.23] - Speaker 2
Yes. Okay, I think everyone can see it now. Is it better now? I will, I will zoom in. So let's focus on Nvidia. We what I always do, I take the most important companies I have various data I use. So if we just focus on Nvidia here we see the earnings are very due there on Wednesday. I, I do take a look what the EPS is, what the expectancy is, what the investor sentiment is, what is the expected move, what is the average move. You see these things are very close and I will take a look at historical moves. Not all of them, but I would look for the fat tails because in the end we always derive and go basically to some middle average. This is just my first direction because as you have seen here, the sentiment is bullish. And this is just for me, having some of the first glimpse on the things and just getting a first feel for what I want to do. The next thing is I will pull up a chart here. I don't know if you can see this. These are the swing levels of Nvidia. And I will just take a look at the swing levels, where we are, how the whole thing is developing.

[00:14:07.21] - Speaker 2
First 15 minutes, then the one hour to get a better look. And like Patrick always says, take a look on the left. This is history, but history teaches us a lot. So you see how Nvidia has evolved, has gone up, found some resistance here, but here we know the swing models, the swing levels, which always help me to know exactly where maybe we will see some resistance and basically some support. Next thing I will do definitely is I will pull up a little bot and I will do what Fabio also did and I will look at various things of Nvidia So let's say we pretend earnings would be tomorrow. I generally try to do non directional trades for two reasons. There are companies which normally stay in the average range and the companies which break the average range. Whatever you do, you still don't know. Earnings are always, always tricky. And still everyone expects Nvidia to beat greatly to go up. Last time they were not that happy. So you go non directional. You still can have a bias in this non direction. So looking at this, there are two easy strategies you can do.

[00:15:29.29] - Speaker 2
You can do the easy buy strategy, which is very cheap. You can set up a credit spread a bit lower than that. And most probably even if Nvidia won't perform, it won't dip there because there's a lot of resistance. We will look at the gags and the decks set up, but with a simple credit spread sold maybe not in the last hour, but one or two hours before closing. Because then you have some moves and premium is the highest. Then for a weekly maybe then you are on a good slide to perform from Nvidia. Yes, you can buy calls and if Nvidia goes into the skies, you will be rich. But I don't like that much naked calls, which I have to buy because after earnings we have IV crush and I might be wrong and then the money is gone. So I prefer to use the levels. And if a call costs 500 bucks and I can, let's say make 500 bucks from some spreads, my risk and return is far greater. And this is the thing for me it's all mathematics. So another thing I look at, where are the risk triggers here?

[00:16:49.28] - Speaker 2
So yes, in the intraday, even if we don't have a bigger move, I will know when to take my play out of out from the table. Like if we have some move which will go up, maybe we will have a stop here at the 152. So if Nvidia shoots up but somehow stalls around here, then it's time, because this will be worthless, which I will have set up here. I will take it off. You don't want to go directional. Still see that Nvidia averagely moves more than then moves more than the average in the last two years. And you can go, let's say with a calendar or some long straddle. In this case, yes, you bet on a bigger move, but then you can sell something and buy something. This is more complex and we don't want to dip into that because we want to keep it simple today. So what I read from here, and this is my first Thing I read from here that you have a bullish bias on the whole thing and we can deep dive into that. But before we do that, Fabio showed some earning results and they did a very simple test and they bought on Monday credit spreads and left it even till Friday even if they, they earnings were in the middle of the week and they had a great return.

[00:18:09.20] - Speaker 2
So this is something, if you set up something, don't ignore the five day swing model. So this is first. So maybe back to you Fabio, before we do another deep dive.

[00:18:22.27] - Speaker 1
Yes, absolutely. So I'll put it back here. So yeah, I think just going back first of all, take a look at all our documentation right here because we not only have obviously the swing model, but we also have a lot of very interesting models that can help you understand what the option market is telling us. And I think then you're going to share maybe how you look at jax. We also have our SKU data, we also have our term structure information where you want to look at volatility and how is price, the further expirations. We also have our option matrix where you can actually really easily read the option chain very fast. So you can understand, okay, have people been really buying know call gamma or maybe selling put gamma and so on so you can understand where the market positioning go is going. And then maybe Dan, I don't know if you also use our option screeners, maybe we can share some of, some of that as well.

[00:19:28.16] - Speaker 2
I think that would, yeah, I would, I would even want to start with that. Let me just get out of this again, this is something I wanted to start with which I had my mind. Let me see where I have it. I read it today in the newsletter and that's why it's important to, to take a look at the newsletter. I like this one. You have the screener. I hope everyone can see it. And this was also in Mental Q's newsletter, the highest call open interest and there was a nice explanation. So basically the highest call open interest which indicates it's not an indicator. It indicates that we have a might have a bullish biases the price surprise in Nvidia. So really here it's really up here. So this is something you should take a look at. And this is another thing. If you want to have a bias on earnings you will see that the market is positioning itself bullish. So other things you can still see here and you can find in the other screener series. And that's why I love the screeners. You see, you see we're looking at Nvidia you see the spot price, you see the put support.

[00:20:41.26] - Speaker 2
We saw something like you something in the, in the. In the swing model around there. So yes, you can sell something below that because even if a dip happens you have this maybe do it on Tuesday, Wednesday evening when you have a more actual ODT input support. Then you have the overall cold resistance and overall put support levels. Yes, 100 most probably you won't get much for your money but the swing model helps you again here and those you close to the expiration. And what happened in the last five days where you could put on your break even for your spread. And that's why I like this here because with a few clicks, even if you have the bot for many things you can see and get ideas like we saw here. Vix. A spike in vix. Yes, it's not surprisingly. Let's see what happens today. Pre market is a bit flat. I don't know. I was, I was tracking the VIX here and not only through my, my charts but tracking it here and through the. The. To the curve of the WIX and the backwardation and everything. So I saw that there was something happening.

[00:21:58.11] - Speaker 2
So yes, I got long vixed and three days before it. Um, basically. So that's the thing, it paid off. So you get ideas here but you see also SBX has a lot of high call open interest which means yeah maybe that the market won't rise today. But still the market is on a bullish bias. So yes Fabio, I think it's good if we maybe go to the bot. What do you think?

[00:22:29.27] - Speaker 1
Yep.

[00:22:31.25] - Speaker 2
So yes, the bot. I said it again. My, my favorite thing here is this one here, the options matrix because it has a couple of things it shows me also the expected move. I. I'm a big fan of the expected move because there are a few things which are that much not only tested and stealthed in the options market and in trading the expected move. Yes, expected move changes daily. But you can do a lot of things with the expected move. And I've been trading on it for years. So if we look on Nvidia and we look on the 22nd, we know one thing. The market expects a move of 10 points. Is this realistic in an earnings week? Maybe not. If we have a good, good result and the market even is more surprised than it is from Nvidia, yes, we will see more. But still the expected move is something which is normally and we don't talk only about earnings is respected. So we stay in range. This doesn't mean that this always happens. That's why we also have these things here. We have the cold reaction zone, the put reaction zone and the volatility level which tells us in which gamma environment we are in a positive or a negative one.

[00:23:55.20] - Speaker 2
What else do we see from this charge? And that's why I also go back to the five day swing model. The five day swing model was, had a lower band so indicating that we are in a bullish regime. And this, yes, you see a lot of positive gags and a lot of positive decks. And you see here that yes, we had some negative change here and that's we dipped. But this isn't that crucial because if you look at the other numbers, they're really, really big. So this is still smaller than this year. If you see this turning red, I'm just talking very simple now because if you haven't used it, then take the time to read the documentation, understand it. We still here see that the market overall is very bullish on Nvidia. So this is something you can not only use for earnings because earnings is like out of space and time for the stock. But this is something you can use in your everyday trade setup because every trade, even a longer trade, a leap trade, starts as a day trade. Okay, Bobby, I don't know if there are any questions or if you want to add something.

[00:25:11.04] - Speaker 1
No, that was, that was awesome. Let me see if we have any questions. I don't see any question in the comments. Maybe let me see.

[00:25:22.07] - Speaker 2
Yes, there's no problem. We can just go on here. We look at the things people can take the time look at it. It's still early in the US and we can look at some setups later. And so I, I, I talked about the decks last time and a lot of people will just start with the gags and which is. Yes, it's okay because the gamma comes from Delta. I don't want to deep make a deep dive into the Greeks today, but it's important to know your Greeks. But MANQ makes it easy for options traders to be on the right side without making a deep dive every time. So what I like here that I have again the overall reaction zones for calls and puts that I have my volatility levels and that with just a one look I see VR in a very positive environment. And what does this tell me? This tells me yes, here we have, it's called call resistance. But what does this mean? We are on the side of the market makers. Delta. The Delta hedging here. So what does this mean? If, if, if and only if we move around here or move above that in the earnings.

[00:26:40.09] - Speaker 2
What do the market makers have to do? They have to start hedging which will push the price even higher. So this is something to look at not only in earnings, but if Nvidia has good earnings, for example, and we get over this one here, yes, it might dip. The other days it might go down again. But normally what was a resistance can and then become a support. These are terms from technical analysis. That's why I like to talk about reaction zones. But market makers will have to hedge so they will push it even higher. So if you have missed the move or are unsure, maybe this could be a situation where you also can get in and take a look at the thing. So that's why this tells me very much that we are in a very nice and bullish environment here. So if I set up even a non directional trade, I will take a bias or at least I will cover. Cover one side more than the other. And it's always good just to just to be minded about one side and try to win on both.

[00:27:43.27] - Speaker 1
And I think Dan, we have a question on how do you exactly. For example, you mentioned Dax versus Jack. So how do you specifically use decks versus Jax?

[00:27:57.28] - Speaker 2
Yes, that's. That's a good question. Basically the DAX is for me I use GEX more as, let's say the situation where I know that when we have moves that these moves that this we can talk about basically resistant and support. So I will use the GEX more in order to see trading from level to level. So setting things up so I know where at least I would meet a resistance and how long I will take the trade. The Dex is more for me in, in order to take the decision in the end to take a trade. Like if we go back and we will go to Gags. If we go above this, I know that like delta hedging will push and help me. If I am in a bullish move and I want to see a bullish move, let's say I believe Nvidia won't be able to perform again in the earnings. And I take a bearish bias and I see that we go above this, then I will start running out of time and try to save my trade because I know this happens. If we look now, we look now. Oh, I see Chester putting some things on.

[00:29:12.24] - Speaker 2
Always great ideas. Always try to look up what Chester does. If I see him putting things on here because he has so much great ideas. Let me take a look at the dax. Maybe we took the other one. This easier. Okay, so we. So you can see better. Yes, we see the same column resistance. You see bit of negative gags here. But again for me this I will see this year more as a. Which is the same because gamma derives from delta. But still I will see it more as a resistance. Whereas I will see it as a proper support if we go above and below it. And I use the gags just to know where I should place my trades. And I use delta, the delta hedging and everything to know how the momentum is for trades if something certain happens and to know in the end in which regime we are. So if I'm more in a bullish or bearish bias because I do like to sell a lot of strangles. So I try not to be surprised by the one side or at least know when to roll and go to further out expiration or roll up or do something else with this trade in order to still make money.

[00:30:45.22] - Speaker 2
Although the trade runs against me.

[00:30:49.14] - Speaker 1
Yeah.

[00:30:49.27] - Speaker 2
And then I don't know if this was enough. Maybe if.

[00:30:53.21] - Speaker 1
Yeah, yeah, let's see. I think we have another question which I can answer that which is is it better to use the 5 day or 20 day swing model? So there is not like a right wrong answer. It really depends on your trading strategy, your risk profile, your time horizon. So really what the models does is provide you with two time window. First is five days, so one week in the future and the second is 20 days, so one month in the future. So if we go back to Nvidia, we can have our five days model and then we can have our 20 days model. So how can you use this in conjunction? So first you want to always understand what are the levels and what is the bias of both time zones or time horizon. And then you want to understand how the bands are moving. You can also look at the back testing results. So when we say three model success, we basically really mean like the data that you get today. Will the price of Nvidia be above our lower band in five days from now, yes or no? If that's the case, then we consider that a successful.

[00:32:06.11] - Speaker 1
And you see here, these are like the level the past levels from the lower band over the past 40 days. So if you were for example to sell credit spreads, put credit spreads using those bands over the past 40 days, you would have been right on 100% of the cases. If we go back to our 20 days, we also have the same kind of like level right here. This would be our lower band. This would be a Risk trigger. So the bands are a bit wider. But obviously we are going also further in the future of 20 days. And I don't know Dan, if you have anything to add there.

[00:32:44.23] - Speaker 2
Yeah, I would gladly like to add. So normally I like to. I have various strategies. If I trade something on a weekly basis, which I do based on expected move and other things. Yes, I will just take a look mainly on the five day swing model and on the 20 day swing model mainly to see if there is an overall overall change I might have missed or some liquidation there. But normally my trades are longer dated. So I will start with a 20 day and. But then for my setup I will look at the five day and see where the bands are so I can set up things in between of them or at least set up a longer trade which is basically given by the 20 day model that it should be a winner. I can still juice out a bit of credit if I. If I decide to sell credit and not go on the debit side. And I will do this by maybe using the level of the lower band but adjusting when looking at the 20 level. So if I see something moving against me in the 20 day level, I know yes, something bigger is coming and.

[00:33:56.12] - Speaker 2
And I will recheck the five day level on a daily basis. So maybe every three or four days the 20 day and every day the five day level if I feel I need to check the things. But most of the time I put up my. My trades. They have a buy to close most of them. They have a built in stop loss and I don't need to care about them anymore. But sometimes you want to adjust things and squeeze something out or you are just wrong and. But you still see you can do something. Then you didn't babysit them. But don't spend too much time. You should spend time for the setup and not to manage. Because we are bad managers as humans. That's why we have models like this. And we should trust not blindly in things but like you said Fabio, 100%. So if we circle back and see the first dip there we had and then the lower band was touched at the five. Yes, it was touched and you started to run, you would have lost a lot. But if you go back Fabio, to the September 39 30th of September we see Nvidia dipping.

[00:35:13.02] - Speaker 2
But if you trust it in the level and in your band and stayed in 100% and this is something I want, I want to encourage, you know your break evens build up the things which are. Which makes sense Use the levels and for the easiest thing, use the lower band. Otherwise use some expected move mixed up with a GAX levels. Set your trades there and just let time do its thing. And if you know about volatility. Yes, then definitely use volatility. But for many, it's good just to start with these simple things. Yes.

[00:35:50.08] - Speaker 1
And another question that we have is how do you use the string levers to help you with the risk management? Obviously you can't avoid risk, but those bands can potentially help you understand where things could go sideways or things could move. One of the cool things that we can also do here is we can also go back in time and always monitor the shift in bias. So whenever you see red, a green level right here or red, red level, always know that there is something shifting there. So if you see that, you know, for example, Nvidia went from bearish to bullish, then maybe something's happening or vice versa. So maybe. Dan, I'll pass it back to you. How do you use them for risk management?

[00:36:37.10] - Speaker 2
Yes, definitely. This is a good question. Yes. If we have a setup like I said in the day trade, but this trade runs longer and normally you want to stay in. But as Fabio said, if you see the levels moving, I wouldn't do anything until my break even comes close. Let's say we take a very simple, very simple spread and in the end my short strike is a reach. But this is not break even. Though the thing is that normally I will do nothing until break even is reached if I cease. But if I see on the, on the model that my, my strike is nearly breached or my break even is nearly breached and I see a change in the, in the level. We go from. The easiest thing would be from a lower band to an upper band on Nvidia. Yes. Then I would have to rethink and think if it's better to adjust this trade move on the other side or go out in time and lower if. Because I believe. And then I would look at Dax, I would look at Gags and see where are their supports. I would see at the open interest, see the move index and gex.

[00:37:45.09] - Speaker 2
And if the storytelling is that this is just maybe a week where things are weak and my strategy is still running and I still have time, I would stay in. So this is a good thing to manage. The other thing is, and that's why I like the risk trigger. Yes, the risk trigger won't tell you get out. But let's say we touched it here on the 30th of September and after two days we went up. And if you go out of the risk trigger at some point, that's why the risk triggers are good. It will go back under the risk trigger. So at some point if you go out of the risk triggers, you could think of, yes, maybe I'm a 25 or 50% of a win. I shouldn't take off some contracts or take the win. So I always think if you, so each, each setup you have 1 to 2% of your buying power and you sell more than one contract, then we take off some winners, let some runners and in the end it's house money and always take that risk. Or you can search for something new or wait for the model to signal again.

[00:38:53.02] - Speaker 2
It's a good time to go in like let's say and to, to. To answer and final, final this, finally answer this question. Let's say we, we saw here the lower band was touched on September and we still saw a bullish bias on the next day. We saw that the model is still bullish. Yes. And we enter a trade within. Within a couple of days. Within a week we would have made nearly 100% on this trade. And it wouldn't be bad to take this trade off after a week, although it was running supposedly for 45 or more days. Then you can wait and wait and wait and see again when the lower band is nearly touched. But if this lower band is not really touched, then you can still again use it to or next entry. This is the other thing. What else can you do if you come close to a risk trigger and because you know we will go most of the times again at some point below the risk trigger, you can even try and this is more advanced, play a turned around strategy and get bearish on that a bit, just a bit for a couple of days until you see again, yes, we're close to the lower band and go up.

[00:40:03.14] - Speaker 2
But this is advanced and I don't want to, I don't want to make things more difficult for people here.

[00:40:08.04] - Speaker 1
And then we have another question. So when you look at the spreads, right, so you obviously would use the lower band as your kind of like the, the level of the spread that you sell and then how do you manage like the second spread? So how would you define the second spread and how would you define the risk that you take?

[00:40:30.14] - Speaker 2
I, I didn't really fully. I couldn't see the question and I, I have, I let the. Which is the second spread? Let's say I try to talk in simple terms and if I have a very simple Spread. Let's say we would build, let's say we build a trade maybe or people I, or I, I can just try to explain because if someone says the lower band, let's say my break even should be close to 131. So I would maybe sell the 132 or 33 and buy the 130 or something and get this, get this, get this break even. So I would try to put my break even there if I would be a more, bit more aggressive. So which is the second spread? This is which I didn't get.

[00:41:20.29] - Speaker 1
Yeah. So the second spread is obviously the, the one that you, you, you buy. So like obviously if you are selling a credit spread, you have a leg where you sell a pool.

[00:41:32.13] - Speaker 2
Okay, okay, okay. Yes.

[00:41:34.03] - Speaker 1
Where you buy a put. So your goal as you say, you're obviously trying to close it to the money.

[00:41:38.25] - Speaker 2
The, the sold spread is always closer to the money and the other one is always further away. I have a very simple reason, very simple thing for that. I don't like naked long options. If I don't have the reasoning that volatility will pick up that much and will elevate and take out theta. So what I put on, is it a short strangle, Is it a straddle calendar? Just a simple vertical. I will take them on and off together. I won't manage these things separately. I will just close this thing. So if I see that my break even is reached, I will take out the whole thing. Yes. If you see that Nvidia is breaking down, you can take a loss on your shorts and take the long and take the whole dip of, of the put. But I wouldn't advise you on that because most of the time there are dips. Yes, but if you're wrong, just accept that you're wrong. And I wouldn't adjust so much. I, I've. Most of my trading mistakes have been by trying to babysit and adjust things. You can ask Paul in the discord and he will tell you how often he babysits and creates zombie butterflies and other stuff.

[00:43:00.20] - Speaker 2
And many times it works. But sometimes we shoot ourselves in the lag. So if you're wrong, just accept it, be wrong. So I, I wouldn't mingle with the second lag. I would just take it off. The whole, the whole thing.

[00:43:14.18] - Speaker 1
Yeah. Makes sense. There's another question from Amit. Can the swing model be a good iron counter strategy? So I would say yes and no, Amit. And the reason that I say no is because the model is aiming to forecast the lower the volatility at 5 days and 20 days. But it's also aiming to forecast the direction. So in this case, whenever you have a lower band, you have a bullish bias. Whenever you have an upper band, you have a bearish bias. So in the case, for example, if we open up another example and we go on Boeing, for example, let's see. Right. So here we have a bearish bias also here with the back testing. So the goal is really to predict the direction. So if you are able to predict the direction, in many cases, the risk trigger could be broken, like we see here. So the success rate that you see here with the risk trigger will not be 100 in this case, but will be lower. So you might risk that by doing an iron Condor, you will be successful in one leg, but you might not be successful in the second leg.

[00:44:28.25] - Speaker 1
So I would always raise. Use this for just kind of like a directional spread strategy.

[00:44:36.17] - Speaker 2
Okay. Two things to add to that, Fabio. I know a lot of people trade iron condors, but I found them to be very difficult to trade. And most people think as iron condors as two verticals. I look at them more as two strangles with some security and buying a security or buying something which will offlift. The risk always comes with a price. And yes, they have on paper very great risk returns and other things. But I'm with Papi on that. The only thing which you can do if we take the thing mechanically, if you sell with this one here, if you sell, let's say here, the lower band is 132 and there is trigger 155, we're at 142 or something right now. This is like in delta terms, let's say you sell a 35 delta vertical on the. On the put side. And the only thing you can do really go out of this risk trigger even further out. If you look at the gamma levels and other stuff now let's say 10 to 5 Delta call spread, just in the case you are totally wrong or the model is wrong, or at least this is.

[00:45:57.15] - Speaker 2
I have people who do that. They sell it so far out that they just make a bit of money because they know it won't happen most of the times. And so they pay the spread and they pay the fees and everything. But I wouldn't do it. I'm with Fabio on this model is built for something else. And I wouldn't. I wouldn't do it. I would maybe implement it into a triangle where I have more options of rolling things out in time up and down. But the verticals gets expensive. So I would say with Fabio fully present on that, but try it out back, test it. There's. There's nothing wrong with trying it out.

[00:46:39.28] - Speaker 1
Yeah. And also, like, if we look at the back testing results, this is only taking one side. So this would, if we go back to the, to the summary here and then we have documentation about this back testing, but in this case, if the bias is bullish, we are selling a put spread. If the bias is bearish, we're selling a coil spread. So we're not doing an Iron Condor in this example. And here you see basically the win rate and the results of that strategy. So, yeah, that, that's the assumption that we took. We have another couple of questions. Yep.

[00:47:22.11] - Speaker 2
One thing. Fabian, sorry to interrupt. And then we'll go to the question. One thing. You can do what I do. If I have a bullish trade. Let's say we had Nvidia, I would try to look and because I like to be non directional, I like theta and I like volatility, what I will do, I will take a bullish Nvidia trade and I will. I read about BA being really bad off. I will put on a bearish trade. This is. There you have your iron conduit, just with different companies. I know it's, it's a different setup, but in the end, and this is where I've been very successful, I try to stay somehow delta neutral. So let's say if I take a risk of 2000 or 2K for Nvidia trades, I will try to do the same on the other side. So, yes, it won't work out most of the time, but there you have your Iron Condor using this model. And as we know and seen, the success rates of this model, that could be your. The edge playing both sides. Just. Just an idea. No, no financial advice. Just try it out. Sorry, Fabio.

[00:48:27.19] - Speaker 1
No, no. And one of the questions that we have, does the model change? Yes. The model updates once a day after the market close, when, you know, we get the new option data. And you can always go back in time and see the results and the, the levels in the past. So in this case, Boeing, here we have our backtesting. We have our levels from here a couple of days ago last week. And you can go back up to five days in the past. Let's see if we get more questions. And then, Dan, I don't know if there's anything else that you would like to cover, especially on the earnings side. You know, what are the things that I know you mentioned at the beginning. Are there any specific companies that you're monitoring?

[00:49:20.27] - Speaker 2
Yes, yes, yes, I will, I will just share again my screen for a second. I hope everyone can see that these are the, the companies I'm looking at. I like companies where there is some liquidity. So I will always trade things which are liquid. I will try to look at the sentiment and what we see here we have a couple of bullish trades still bearish trades. So this is nearly 50, 50 or 7. E6 bullish. 1, 2, 3, 4, 5, 6 and 5 bearish. Which is nice. It gives you a nice thing. You can, you can. I will create this as a file you can find in the options trades room and you can just take a look at the model and take a look at the things. And this is the companies I will be watching. I will look with my system to see what was the average move, what was the implied move. So be advised to look at this. So as you see here, for example, the options market here for this one predicts 13.6 move. But in average it only moves 4.6. This would be something like Nio, which is, it is liquid but not that liquid.

[00:50:41.14] - Speaker 2
It's something I would maybe look at and see if the options market is right. And I would put on some interesting trade like some, some, some long calendar straddle or something like getting some money in front and making, getting some security but not getting blown out and so on. But yes. Nvidia Snowflake, Walmart Palo Alto. We had a lot of interesting trades, but these are the things. And maybe just for fun I will put this in. You just add another column and then just trade it with a, with a, with a five day swing model. This would be just a nice exercise for. Till we see each other on the next time and see how you did like build a trade or build an Iron Condor, build a vertical or something and just see how this thing has worked for you.

[00:51:34.19] - Speaker 1
Yeah. And I think what we, we're gonna try and do maybe do some other back testing this week. We have some really interesting earnings so we'll do a similar back test like we did last week. We're probably running the next event that we do maybe next week at the same time. We're gonna have some major releases next week. So everybody be ready. There's gonna be a lot of nice things coming. So everybody's excited. We're gonna have our intraday gamma levels coming up. We're gonna have more integrations and we're gonna have a new app that's gonna be released on our website. So lots of really cool stuff. Yeah, yeah.

[00:52:18.06] - Speaker 2
Things to look forward and you can be part of. And this is like a mentally growing story, Fabio. It's, it's so much fun.

[00:52:26.11] - Speaker 1
Yeah, yeah. Next week is going to be probably one of our biggest release of the, of the year. So wonderful on the 27th. So we are very excited. We'll keep you posted. So if you guys want to be, want to stay with us and want to learn about some of these tools that are coming, just create an account, sign up for our mailing list and we'll keep you posted on the new releases. It's going to be done on the 27th. We're gonna have a lot of live events next week and a lot of really case studies. We're gonna have some special guests, gonna have a lot of stuff. So very excited for that. And it's also Black Friday so we're gonna have some good promotion as well. So yeah. Please sign up. Create a free account. You can access the spreadsheet, all the data, all our courses, the free courses that we have. And then obviously you can also join our free Discord community here.

[00:53:25.15] - Speaker 2
Wonderful. It's like an early Christmas.

[00:53:28.16] - Speaker 1
Yes, yes, yes, yes. That's great. Let's see if we've got more question. Thank you, Wayne. Yes, we're very excited. Lots of, of things coming. You guys would be very happy with what's coming. And then we have Monday. So we have two backtesting. One is the, this one that you see here which is the earnings. This was taken before the earnings. So this was taken the Friday after the close before the earnings. And then we did another back test which is the one that we shared in a spreadsheet which is really taking the whole month of October. So here you have companies that did have earnings during that month. So we have about 127 companies. So this was Google, Apple. There was a lot of companies that did have earnings. This is looking at the performance over a four weeks period. So not just the week of the earnings. So yeah. All right, let's see if we get more. And again Dan, really appreciate your time today. I know you've been very busy lately and yeah, I mean this was great. Thank you for sharing and I think we're going to have you very soon on another session.

[00:54:48.19] - Speaker 1
Maybe we'll look at some more backtesting and we'll look at some more use cases. But guys, if you want to stay up to date with what's coming next week, please join us Create a free account, join our mailing list and we'll be back this week. We're going to have a session on Wednesday to go over the Nvidia earnings report and then we're going to have some more coming up next week. Don't know if you have anything to add, Dan.

[00:55:21.06] - Speaker 2
Basically, I'm looking forward to these things. Thank you, Fabio, again for having me and hopefully it was helpful for one or the other. I get a lot of dms and that in the channel I try to answer as thoroughly as I can and in the, in the, in the. I'm trying to. In the channels I try to post as much and has been a challenging time, as Abio has said, so I have been bit low on that, but hope to pick up again and some of you wrote me back they made some money, so yes, I'm happy for that and hope to keep up and that you can just have fun with it and enjoy it and get into the mindset and this makes it easy for you to take some decisions and dip your feet in. Can do this as an exercise till we see each other next time and just report back how it went, how you felt it, which, which strategies you traded and how you use the model. So I would be very interested for you to know.

[00:56:18.18] - Speaker 1
Yeah. And just where people can find you within our premium membership, within the option trading room, you can find Dan and all the other guys that are active every day. We have documented, we have Chester, we have Patrick, we have Steve, we have all the other guys that are active all day long. So yeah, you can find them right here within our training rooms. So thank you, Dan, as always and it's a pleasure.

[00:56:43.22] - Speaker 2
Thank you for having you and I.

[00:56:45.02] - Speaker 1
Look forward to the next time. Yes, thank you, guys.

[00:56:49.15] - Speaker 2
Happy trading, everyone. See you soon.