Trading Calendar Spreads using MenthorQ

[00:00:03.13] - Speaker 1
Welcome back, Tim. We're here with Dan. Today, we're going to talk about option strategies, credit spreads. We're going to look at some options data. So welcome, Dan. Thank you for being here.

[00:00:17.13] - Speaker 2
Hello, Fabio. Very happy to be here and excited about all the new stuff we're going to take a look at.

[00:00:23.06] - Speaker 1
Yeah. As always, before we start, let me just run our disclaimer for a few seconds and then we can go into the data. Right, so as we said at the beginning of the week, we have some new exciting tools, a new dashboard. And today with Dan, we're going to go over some of the things he looks at when looking at options, credit spreads and all of that. So then without further ado, I'll pass it on to you and let's go into the charts and let's go and see how you put together your plan for the day.

[00:01:15.06] - Speaker 2
Yes. Thank you, Fabio. I hope everyone sees my screen. Well, if not, please let us know. So if you haven't taken the time to take a look at this amazing dashboard, please do. This would be a weekend task. So today we're going to look at the new dashboard and how to look at it, maybe not only as a day trader, but more as an options trader with longer dated strategies, which are the known stuff like the metrics and our 20 day swing model, but also at other metrics and things you might have not seen and how you can boil these things down in setting up a trade. And as a little bonus, we will revisit earnings trade. I did, I will post the results and it's a calendar spread and we haven't talked about calendars today until today here. So this is something we can start diving in because calendars, like verticals, are like the basis where you can mix and match and create the best trade ideas. But here at Mentor Q, we are all about data and not giving you a certain trade, just ideas. So we want you to learn to do your own research, to do your own due diligence, and in the end be able to set up your own trades because you're an individual trader and that's why metaq has created this amazing dashboard.

[00:02:42.02] - Speaker 2
So you're surprised today that the market is dipping once again due to some news and other stuff. Basically, yeah. Maybe yesterday you were surprised if you had looked at the dashboard that the market went up. Okay, these are the, the metrics and there are some bigger things that scale, like big value investors and they, they, they shift out, but they don't shift that big out in a way that the market would really dip 5 and more percent a day. So at some point it will revive. But how could you have prepared for yourself if you are in trades not only in the SPX day trades, but in other trades, 7 day trades, 21 day trades, 45 day. The first thing is you open the dashboard and you take a look here at these very first numbers and they just give you. And that's why I think Monthly Q team has made an extraordinary good. They work really hard on it and it's a very great result. With one look, without looking at these things down here, which will take a look very soon you can see in which environment we are because trading options and the options market and everything around, it's quite complex.

[00:04:00.18] - Speaker 2
There's so many things you have to look at and you should be aware of and that's very difficult because when we trade we want to be in our zone and we want to spend time, we want to spend time on our trade ideas, but we don't want to spend too much time because in the end time is money. If you take like an hour to set up a trade to make 100 bucks, hey, that's okay. If you make 100 bucks, then you get paid $100. But the risk reward is normally worse. So that's why I think Mentheq and the whole team behind of it have made a very, very nice approach to this. And how would I use it? The first thing is, will I open SPX even if I'm not in SPX on others? Yes, I will because I want to get a market breather. I will read the daily newsletter Matthew Q provides and I will take a look at. In which environment are we. What kind of trades do I want to set up? If you think of the Max 7, do you want to be in some bullish trade right now?

[00:05:01.19] - Speaker 2
Maybe not today, but maybe on the long run because things will bounce. So let us take a quick look. What do we see here? First of all, we have the option score which basically takes all the options and gives us a very nice insight where we are. And basically we are in a bearish environment. We see that we have high volatility, which is nice. For example, if you know there's high volatility, what could have been a trade for today? Yeah, maybe a long straddle. One side loses, the other one makes more. So in the end you make money on this. The momentum is very low, which means that we don't have an upside running momentum. You can see this, the other aspects lower at the other data. We Will take a very fast look at them too. So our daily expected move is 1%. So right now I think we're dipping 150. So maybe expect some bounce back. But as you know, reverse trading, day trading is not that easy. You should be experienced, you should know how the levels work. METHQ has done an extraordinary job there. If you have tried it out, put the new indicator there and deny the levels appear like magic there without you having to put anything there in the auto update.

[00:06:17.14] - Speaker 2
So if you want to spell day trade, this is nice but we said we're going to talk about options. So how do I use this? I use this to set up trade, longer data trades to maybe do a day trade. So if have a live level and I see the put support coming in and we must probably going to bounce from there. That's wonderful. If we go below the put support. Yeah, I'm going to switch bearish. So this is something which can really help you do it. So if you have a longer trade, I have a trade on oil which I could have closed on the 21 days. But I'm seeing some bigger things here at plan A short strangle. So looking at the manta Q data I see that it shifts but I also see on the long run that we're going to bounce almost probably going to collect the whole premium. And this is where the data helps. If we go a bit further down, you have the four other metrics which we saw here. So if you got a quick look at them, you know we are in a bearish environment. You also can hear the negative.

[00:07:18.29] - Speaker 2
But if you want to know more about it, you take a look here so you see the models which gives you a better insight. And people who have been followed me for some time or see my trades, they know what do I trade. I do trade theta, which is time decay. So if you set up a trade where you get a credit, you look in your options broker, you will see if everything is set up right, you will see a negative number which means there's a theta decay. Every day the credit you have received grows because the trade in the end comes closer to you. Because every day as time passes and you are not in the money with your trade, this means you make money. Another thing I love to trade is volatility, which is even harder because volatility is something which is not easy to grasp because we have implied volatility. Normally if we talk about implied volatility, we talk about implied volatility of one year with shorter volatility terms and what I like to do is to sell premium. If we have, if we are in a high volatility environment like we are now.

[00:08:32.27] - Speaker 2
But I would be blind if I would just sell volatility because it's high, because this means something is off and a lot of things are at stake. So you just can't go and sell volatility. That's why I try to combine time and volatility and I will go on the other side. If I see volatility is very low and I might see some upward move coming, I might go in one side, maybe a bullish side and I'm gonna buy a debit. Why is that? Because if prices for options will increase, this will help me. Yes, time works against me, but in the end this is the balance you have to find. You have a credit spread and you have time. And if you sell in high volatility environment, you have volatility normally on your side. If you know there is a peak and backwardation is coming, which means volatility goes down on the other side. If you go on a buy a naked call or a naked poet because you see a direction or better, you do a debit spread, you have a bias, then yes, you have time working against you. But if you know that volatility is going to rise, historically, normally, whether it's an event coming, it is going to rise and we're going to stay in some range.

[00:09:50.22] - Speaker 2
This means this is a good thing when you want to have volatility and the rise on your side because of the options will rise and they will make a decay of every day. This is a very simple concept, but it's hard to grasp. So here Mantiq helps you very well to tell you where are we, in which kind of volatility regime are we? For example, if we take this year I would have sold volatility after in the middle of December. Very simple. And when would I have bought volatility? Yes, here I would have bought volatility in the mid of. In the middle of February. Very simple concept, very powerful concept. This is something as an option trader you need to really put into your mind. You should never forget about these terms. And MathIQ makes it so much easier just with one look to see where are we here? Seasonality. Yes, you can say this is hocus pocus. This doesn't count. No, this does count because we have markers, market cycles and other stuff. Yes, maybe we have bit more disruptive times right now. A lot of things are happening in the world, but still seasonality plays a Big role.

[00:11:11.14] - Speaker 2
So I've been trading seasonality for a long time. I take it into account next to the expected move. So MQ again makes it easy for you to take a look at the the trade you want to take and think is the time on my side. So the good thing is this is made very simple for you. So you can decide is this a right time maybe to have a bias or maybe to go on a non directional trade. So they there are the other aspects and metrics we have seen the options metrics was, was very n a couple of weeks back is now deep. Right. But as we know there are markle circles and in the end it will turn green again. So as option traders if you buy shares or ETFs on everything, you are long as an option trader. And if you just don't buy calls or sell covered calls then do more complex things. This means you are basically on both sides. You can be on both sides either with a non directional trade or you can be on both sides selling. Selling a deep dive down or rise up. This means if you look at this year again you were to do something with this today, for example, what would you do?

[00:12:37.05] - Speaker 2
You would first of all you would take a look where are my levels and what happened the put support, did it hold today the market open? It didn't hold. So do we get into panic? No, we can make use of it. If the put support is really breached, this means we should go lower then yes, you can make a day trade there. But we are options traders here with a longer range. At least the part of this course we trying to provide you. So if you that you want to have a longer trade maybe 45 days out you would go out and try to find something which is good for you. So let's take a look. We talked a lot about earnings and earnings is something very nice. That's why we have some earnings coming up. I'm going to brush them very fast. And just to give you an insight on what to do, we have brought Broadcom tonight and we have Costco. And these are very nice trades you can set up. And as we said the most easy thing is this looks a bit better than the spx. We are in a positive gamma environment which makes trading a bit easier.

[00:13:53.28] - Speaker 2
The options market is neutral. So surprise we had earnings. So what would they do? Volatility is high as this is expected. There's nothing to do with market drop. It has to do that we're going to have earnings. So volatility is is high naturally because the Price is like I explained, inflated. Why? Because no one knows what happens. Yes, we have statistic about average moves and other stuff, but we don't know what Broadcom will tell us. If you're an insider, you might know. If you're not, you don't. So momentum is low. Yes, I talked to some very experienced traders who try to position themselves and still this doesn't say anything. And we have had very great results by doing something very, very simple. First thing is we pick up our swing model, which we know from before, but this is easier. And yes, we see we had a really deep dive here and we broke a bit the lower band. And we are a bit lower, lower band. But this is history. And if you would like to set up a trade tonight and say I feel comfortable, then again, a trade would be around the lower band.

[00:15:07.00] - Speaker 2
What you can take into consideration is if Broadcom dips today another 2%, then lower your break even 2% down or if it goes up, go a bit higher. Because this is what the model most probably would show you the other day. This will be the easiest trade. We have shown this a couple of times here. You can do this. And statistically they work out very, very nicely. It's a very easy and super nice. I'm gonna switch to the channel to see if there are any comments. So we don't have any comments here. And Fabio, so I would just go on or is there something you would like me to show you? I just see someone is writing something, so if you have a specific question, let me know. Otherwise, we will take a look at Nvidia and other trades we could just take out from this, from this dashboard, giving us some insight. Please let us know.

[00:16:01.02] - Speaker 1
And then, Dan, maybe what we can do, we can spend some time talking about what calendar spreads are. Maybe for those who are not familiar.

[00:16:09.26] - Speaker 2
Yes, we gonna definitely do that. Maybe the easiest thing would be, yeah, we can do this. And then we can go back to the dashboard and show what it is. So these are here some calendar earnings I posted. So today I closed it for much more. And how did I come to the idea of selling that? Yesterday Krager was deep, deep dive. It fell 1 or more percent and before the earnings. But what did I do? The first thing is what I did is how did I set up my trade? I did a couple of trades on that. I posted one just for today. I. Let me open. Let me switch one second and then I will explain what a calendar is if we have everything here. So come on. Oops, sorry. I'm still a bit flanky here. So before I explain what a calendar is. Oh, nice and easy again. Volatility, high neutral opinion, no surprises, positive gamma environment. What did I do? The first thing I did yesterday was I went to the swing model. And yesterday the swing model was higher. It was at 62, 63. You can see it here. And this is where I thought this might be some break even on the downside.

[00:17:51.17] - Speaker 2
And I looked at the positioning and everything. So I said yes, could do a very easy bullput spread here was probably very successful. Sell 20, 30, 50 of them and. But how can I make even more money? More money you can make if you are expect a stock to stay in range. You can have an iron condor or an iron fly. But I prefer the calendars and I will show you why. But with this we know that most probably with all the data MQ provides us, the stock, even if it had a dip yesterday, will go up. What did it do? The price? The stock went up. What we see here went up 5%. Is this a surprise? No, because you have the right data. So you shouldn't be surprised. You should bring a smile to your face because you have the data. Maybe other people don't look at. So we make this a bit wider. Yesterday when we entered, I entered it was 62. And what is a calendar? And you have two ways of you have different calendars. A calendar is something very, very simple. There always consists of two options. You can mix them.

[00:19:12.21] - Speaker 2
There are two naked options. The only difference is not with the normal vertical. I will say normal vertical, like a bullput spread or something like that. They have different explorations. This is no surprise. That's why they call calendars. We will see how we can mix them, flavor them. But there are two ways. You have a long calendar, you have a short calendar. This here is just called calendar spread, which makes it easy. They have some very nice explanation here. So basically this is a mildly bearish, mildly bullish strategy. So in the end we want things to stay in. But what did I do yesterday? I picked this out on some data I had where I knew that burger was a good candidate of staying in the last two years. Below the implied move. What is the implied move? The implied move is very simple. If you take the straddle at a certain day, which means you take two at the money options like these two here and you go on the long side, both of them. This gives you roughly what the market expects the stock will move in a certain time period, which is normally you look at the weekly Move.

[00:20:32.14] - Speaker 2
So the applied move, at least for today was roughly 5, a bit more than 5%, 6%, something like that. So I knew the stock normally tends to stay in the range of 5%. What did it do? It stayed in 5%. Would have been even better if it had stayed at 1%. You see here, it would have made even more. How much did I pay for that stuff? I paid like I did it early. I paid like 20 or something. And if it's just move 1 or 2%, we would have doubled or even made more money. Why do I like this kinds of trade? Because volatility trades. What happens before earnings? Let's switch back really amazing dashboard here. What happens before earnings? Volatility is high. Market is neutral. Volatility high means a crisis. What happens after an earnings? After everything is released and everyone knows what Crago was hiding. Volatility drops because everyone who has sold puts, bought calls and positioned themselves with big portfolios, they unhatch. So this means the market will move according to their digestion of this earnings. But the prices of the options which are close to the expiration date of the earnings event will deflate.

[00:21:58.05] - Speaker 2
So this is called Ivy Crush. What happens before an earnings report? We have an IV rush, so this is something you can play. We will deep dive at some other point about how you can make conservative 5 to 10% without risking too much before the day of earnings. And you can make even more longer before when you take it, make advantage of that. And now you can use MATAQ data. So very easy if you find a stock and you can follow me on these things. I try to post them early. I will even start writing about some of these things I have in mind in the beginning of the week. So you have two, three, four, five days maybe to prepare yourself and be ready to take a trade if you see fit. But let's switch back. We saw that we are in a neutral environment. Volatility is high. So this brings us back here. So the thing is the short lag, the 63 call I sold was elevated. It had very high volatility numbers. And this thing drops not right away after the market open. This is one of the big mistakes. People think all the, all the, all the options lose the IV as, as fast as the market opens.

[00:23:16.08] - Speaker 2
No, it takes some time, some faster, some slower. You get to know your stocks, but the short lag. This will be more impacted by the IV crush than a bit further out. You could go even further out, let's say a month, which would be a 4th of April why didn't I choose that? Why did I try to make things easy? Because I believe in liquidity. And the problem was with the month out, which is a bit safer, it's a bit more expensive. A bit safer is liquidity wasn't there. So I chose most liquid options. Plus I had a benefit. I saw other very experienced traders setting the same trade up. They set it at the money at 62 or a bit lower and they didn't make money today. Why? Because it didn't have monthly Q data showing them that we expect the stock at least to rise a bit. And this is what it did. And I looked at the data and I knew at least at $66 today, in the first two, three hours, the stock should stop. What did it do? It did exactly that. So I was sure I'm gonna. And with all these ones, I closed them right before we started here.

[00:24:26.14] - Speaker 2
I would, I would be able to at least buy a good cup of coffee. And these are a lot of good cups. So back to what a calendar spread is. You have one option and one expiration circle and you have another option, another expiration circle. Normally, and this is when we talk about a calendar. You have only one side. You have the call side or the put side. Yes, you can put them together and then yes, this means they are. You can mix them with puts, but then you need four lags. We will deep dive into that another time. But a simple calendar spread is just auction at the same strike price, just with different expirations. No matter if it's a call, no matter if it's a put. And the big difference between them is that they both have a different IV which if you would go a bit lower, you see the implied volatility. And this is very simple here because it calculates a mixed IV better. If you go into your broker and look at it and for example, I can have numbers somehow roughly in my head. The expiration for this Friday had an IV of roughly 110, 120 and the 21st had like half of it.

[00:25:44.17] - Speaker 2
So this is something you can remember and you know it's a good trade. You go into the dashboard, if you have picked out some earnings, you see is the market neutral? Then volatility elevated? How is it reacted? Where are the put and the call support for this week? Where are some other expected moves? So will we stay most probably in range? Then you take the five day swing model to see where we will go. We know we will go up. Yes, we will choose calls. Why? Because if we Go higher. What happened today? This call here, I could have left it open. Wouldn't care because. But because. Because it would go worthless most probably in the end of the week and collect the whole premium. Why didn't I do that? Because we have a very flaky. And I wanted to be on the safe side. And I have no problem. I made, I don't know, have to look up at least, at least I think 100 because I had some, some nice orders there and they filled very fast because I was at a very liquid spot and it was very nice. So this is the very, very simple thing.

[00:26:53.12] - Speaker 2
We could do the same thing with puts. When would I do that? If the five day swing model would signal me, we have an upper band, then I would expect the stock to drop this. If the stock doesn't drop and it still goes up, we still in range. The important thing is that we are in range. And you can do a lot of things with calendars. Another thing you can do with calendars is I will show you now is you can just switch to that and you can just switch to that. Now we see this wouldn't work because we would have a vertical with an aspect which is a diagonal. But okay, we are a bit far out. So let's go. Give me a second. So give us some fantasy on the 20s and let's go on the 7th. So if we expect the market to go up, we could sell. We could sell debits, we could sell a credit spread in our head but make it easier for you to understand. So that will be a very simple credit spread here. If we had the 20th on the 17th, so the expiration would be April 17th.

[00:28:11.20] - Speaker 2
But if we want to be more advanced and we said yes, gonna be ready to take some money into my hand. And I believe that we're gonna go up, but we will stay in some range because the market is flaky. Then we could do idea right. We could also do it on the other side. We would get a small credit if we believe the market would still. Still stay in some range. But we have no risk on the downside, we still get a credit. And because this option decays faster than this one, we can make use of volatility. So there are different aspects of using that. I will say we can make a proper, a proper course on this or to not only set calendar, we will do calendars again. So you feel safe with simple calendars and when to use them. But how we can use the manta Q models of especially of the 20 day and higher and all the expected moves and all the things we see in the metrics, how we can use them if we have a bias and use the calendar. Because in that, in this moment we make, make use of two things.

[00:29:26.10] - Speaker 2
We make use of theta and volatility. If we just have a very simple credit spread, mainly a theta trade, not that much a volatility trade, but if we add the calendar aspect, then we go into the volatility regime and we can make even more money and be safer. But first of all, and that's the thing which I learned, you should be feeling really, really safe with this normal calendar spread. Understand how it works because it's a bit different than a normal spread. But we will take an aspect and look at these things again. So let's go back to the studio and see all these questions I see here. Okay, Fabio, shall I take a look at the. I will take a look at the, at the, at the questions here and then we can start answering. Oh, lucky Dao, I like your name. So suggest straight on Broadcom for earnings.

[00:30:35.15] - Speaker 1
Yeah, we can.

[00:30:36.02] - Speaker 2
That's basically, we don't give. Yes, we can look at the data, but we don't give certain advice. What I can, what I can provide you is if I take a trade, something which I think is notable, noteworthy, I will post it there right now. The simplest thing would be we showed you a lot of data. If you miss this, please pick it up. But let's go back, we can go to Broad Call and I would, the first thing is I would be we're again neutral, high volatility. Yes. And I think we could do is again, a very simple thing would be to see the five day swing model and see if we can put a trade up here with a break even here. That will be the most simple trade and most probably the trade which will benefit you the most. A couple of things I can say now without needing to post them and this is no advice, this is just things I've seen. We have a lot of dark pools, like dark pool activity which are a bit higher, which means I see a range in between 200 and 170. If you want to be on the safe side, maybe put your break even at the 170 and another trade could be put up an iron Condor if you believe we stay in range 170 to 200.

[00:32:04.08] - Speaker 2
Would I take, would I take a calendar here? No, because Avgo Broadcom, if you have looked at the latest earning events, it used to be a stock which didn't move much normally implied was bigger than it had a couple of crazy moves. So I would be concerned that maybe we have another crazy move and then everything blows to pieces. And you had asked me one and a half years before, I would have said yes. This is a trade we can do a calendar on or maybe an iron Condor or a skewed one if we take the MathIQ data. So this is something you can take into consideration. And one last thing here which is very, very helpful. You can see how today brought moves. You should take a look at the, at the charts and everything Mantaq provides and you can see the daily changes. So another thing here, you see it's not deep red, it's not deep green. But another thing if you want to set it up, I talked about the 170. So the general is 150 most probably you don't get enough credit here. The 170 is something very nice. 165 and on the upper side the 205 or the 225 somewhere there if you want to have a wide range.

[00:33:24.08] - Speaker 2
But you should always remember we talked about this a lot of times. Risk three to make one. In the worst case five. I try to risk one to three with calendars. It's easier. You risk far more. You risk more, let's say $20 maybe to make 40 or 60, which is very nice. It's a very nice trade. But you need to be able to handle calendars, right? And I will talk about calendars in the next few weeks so you guys feel safer. And I will provide you with where to look at MathIQ data to filter out the, the earnings which matter because earnings season is practically over. So it's a good time for us to take this in between time to prepare you to give you more tools to be able to beside the very simple and effective five day swing model, have other ideas how you can scale your trading by using LQ data. I think this is in line. Fabio. This is something we can do here.

[00:34:31.11] - Speaker 1
Yeah, okay. Maybe like Dan, do you use the skew chart at all?

[00:34:36.10] - Speaker 2
Yes, yes, yes. Ah, thank you Fabio for reminding me. I was, I was, I was hooking, hooking up myself. Now on all these, on all these questions here, which we should answer. I definitely use a skew chart and I even wrote a Python script and prepared something in my, in my, in my chat GPTs with certain specific question I've been working on with some, some friends and one acquaintance former market maker which gives, gives me great insights. So he pointed me to which questions to ask and Use the AI knowledge to read sku because let's go down, let's first take a look at this queue. So this is a very good question. So if we were in the exam now, Fabio, which we are not, luckily. I just put, I put people just to law exams and ask them legal questions, something I do my daily other life. But this is very nice. Here you see a put bias and this basically reflects how the price has come down. But how this does this Q help us and give us an insight. The market is very neutral right now, which is good we because maybe I know there were some monster moves, but most probably we won't have one.

[00:36:00.20] - Speaker 2
I might be very wrong. That's why I'm very reluctant in giving you any advice. I will look at the data later. But the data and everything I see, especially this queue here I see is that the market is hesitant to take a side. So most probability and what they have done here, the put bias has come down. So we are perfectly here in the middle, which shows us this is a trade where we can be comfortable to go to one side or the other, but not with extremes which we can harvest by basically putting up some iron condors and maybe if we advance some calendars. But if you want to look at this queue, we can also look at some other non earning trades and then I would go on and try to answer some questions. So let's take everyone's favorite stock, Nvidia anything. I never owned that one. His father did a lot of that stuff. So what do we see here? The same thing which happened in the broader market and Nvidia is somehow the market. We see a put bias, but what do we see here? The put bias is going down.

[00:37:11.29] - Speaker 2
So what does this tell me? This tells me that I should look further at the data and prepare myself even if we might have some difficulties in the next couple of days. And on the long run, especially the SPX beta and other stuff points to at some point not a relief rally, but we won't most probably if nothing really bad happens, which we don't expect something like, like Spawn event or something out of it or most probably the big players are preparing themselves for quantitative easing and other stuff and they're buying up Nvidia shares. So it will be good, a good time maybe to prepare yourself for some upside on the long run, maybe not now. So this gives me a very fast view. Where are we? What is my trade doing? So if I would be in an Nvidia trade, let's say I had gotten in at Some previous lows and I saw that the put bias is diving. Yes, it can go up, but it's diving. Would most probably have looked at the data the 20 day model provides me. Give me a second to there it is. And I would have start selling credit spreads down there or setting up some skewed short strangle or encounters there in order to harvest that.

[00:38:47.11] - Speaker 2
Most probably we're going to see some upside on Nvidia and it would be a good time because this, the swing model helps me if I'm not experienced. If I'm experienced I can look at the skew and this view points me into the right direction. It gives me basically an idea what the market thinks of and where the market is going. I don't know. Fabio, you have something to add here?

[00:39:11.20] - Speaker 1
Yeah, let me share also my screen because yes, please look at seasonality. So for those who have not. So our product release, we now release our Q score which is what you see up here. But at the same time every score has actually some historical data. So the volatility, seasonality option, momentum score, they also have their own charts. So if you scroll down and if we look at seasonality, for example, like take a look here at the peak when we had a four seasonality score which coincided with the upward move on Nvidia and then suddenly the seasonality score started going lower and we saw basically kind of like the drop. Now we are at the lowest, we are seeing kind of like a rebound. So maybe monitor what could happen if the seasonality change and the seasonality looks at the next five days. So the model is looking at historical 20 years of data to potentially predict the next five days. So take a look at our seasonality change over time. You can also go back in time if you wanted to see how seasonality was a few days ago. But yeah, I think using that in conjunction with what you explained, Dan, could be, could be very interesting.

[00:40:34.13] - Speaker 2
Okay, yeah, that's very helpful. So let me switch back. So this is something which always helps me. I, I know seasonality is something you should take in consideration. I have said I will talk about something more advanced which is a very, the idea, very simple strategy, a short strangle. But we will talk about that at some point. I do that a lot. But this, you should be advanced, you should know how to, how to play with the risk, how to if you want, if things go sour, how to roll. But MTQ data helps you majorly and this has elevated my short strangle. Things plus AI on the other hand. But this is for some Other day we will help you also manage these things because I do believe if you choose the right box or write and you have a good bit ask liquidity and everything and you know all. And you know how to use this data and then you can make money on both sides. Very experienced friend.

[00:41:43.20] - Speaker 1
Yeah, maybe then we. There's a good question from Drew. Can you tell a rookie how to interpret.

[00:41:50.24] - Speaker 2
Yes.

[00:41:51.15] - Speaker 1
Volatility. 30 days versus historical volatility.

[00:41:55.18] - Speaker 2
Yes. This is something I wanted to come back before we switched that I think. I don't know if everyone can see that. Now Fabio is seeing it. I don't know if this looks good. It looks a bit flanking to me. Okay. The question from Drew was a rookie. If we all start not as rookies but as potential great traders, this is the first thing. Thank you for the question. So we have implied volatility 30 day in historical with having a. So this is very easy. Basically, historical volatility just takes volatility, which has happened in the same time period over all the time. And it gives you, let's say, a roadmap where volatility is. And the volatility, the actual volatility just shows the regime. Where are we? So this is. I think it's simpler to explain it on. To explain it a stock like if we are here on. We are on Nvidia. Take this for example. You see the volatility score, it is a bit higher than normal, but it's somewhere close to the middle. Yeah. Which is very nice. And if you go back, volatility is neutral. What does that mean? That our 30 days of historical volatility and the actual volatility, they're overlapping.

[00:43:30.14] - Speaker 2
They're very close. Which means there's no benefit on the. On credit or a benefit on buying a debit. So what is this important? This is important. Or what kind of trades do you want to set up? You can look how they interact. That's one thing. Or you can use another metric, which is don't use IV rank. Straightforward. IV rank is great to get a first side, but I would tell you maybe use either IV percentile if you have longer going trade. If you have short going straights, you can go to IV rank. And if you are above 50, which is very simple and MATLQ provides this very nicely here, then you can take a trade and. Which gives you credit. If you are below that you should go on a debit. This is just a very simple method. You don't want to use IV rank, IV percentage and you really want to go to the 30 days HV and IV. Then if IV is above HV, this is something good. Then you would sell credit because you expect volatility to drop to its historic values. Why is that? I don't know if you have had the bell curve in school or at college or a university, but everything tends to go in the middle.

[00:44:50.25] - Speaker 2
And this is what the whole concept is, that in the end an elevated IV or a very lowered IV will go back to its middle. So we talked about earnings. What happens IV goes beyond the historical values and will drop down close to their historical values. This is a very simple concept, but it's. If you put these questions then you're not a rookie anymore. Does this answer your question? If not, please tag me in the in the discord and I will elaborate even longer and I will post something in this chat here which you can see during this, this call. So maybe you can get more of it.

[00:45:32.29] - Speaker 1
And the other thing, then we also have one of the models which is our main chart which basically will show you the historical price of an asset. And then at the bottom you have implied volatility versus historical volatility. So H in white you see historicality and red you see the implied volatility. And then obviously you see the IV rank. I think the IV rank and we have a lesson on our academy is key when you want to decide on when to sell or buy options. When you are in an IV Rank maybe below 50, then you are in a low volatility environment. When you are between 50 to 100, you are in a high volatility environment. So it's probably safer to sell option than to buy just because you are gonna get more premium. And also Dan talked about volatility crash. So if you buy option when volatility is high, most likely you're gonna lose money because the volatility will drop to its kind of like average. So from the chart you can see basically where we are now. So we are implied volatility is much lower than historical volatility and our IVR is 39.

[00:46:45.18] - Speaker 2
So oh, this is very, very accurate what Fabio said. So and if we take these two aspects, we have a five day or 20 day swing model which is like has a lower band. Plus we see that we have an IV rank which is around 40 and historical volatility is high. What will happen volatility rise? It's not due to some earnings which are due in three months, but it's just the facts which we see here. So what kind of trades would we like to take here? In this kind of environment, most probably, most probably a debit trade would be better than a credit track because if prices rise due to rising volatility, it's hard theta to beat this volatility driven price rise. I hope this answers you. I, I posted some other stuff here. I have, I have a lot of documentation on that so it was easy for me to pick that up and.

[00:47:45.23] - Speaker 1
To add to that. Dan, in about an hour and a half we're gonna be live again and please guys come join us. So we're going to actually if you are interested in looking at volatility we are going to be live with Ryan at 12:30 today Eastern. Ryan is an ex market maker so we're going to go over some of our new models in particular our volatility smile. We're also going to talk about skew and we're also going to talk about term structure. So for those who are interested in learning more about volatility, please don't, don't miss that. We're going to be live there in about an hour and a half so follow us on YouTube on x we're going to be, we're going to be there.

[00:48:28.17] - Speaker 2
I'm trying to answer a question of XH options trading. I use Interact Interactive Brokers and Schwabs but this is, everyone can use what they want, have the things that I'm in Europe and I need to do some things for taxes. So that's the thing. So I will have another question here. Fabio, from Andre. What would you suggest to add to that swing model to make my thesis more compelling not just depending on the swing model like add the momentum or would you do that? Basically what would I add? Basically the swing model as its own is a mixture of the quantitative data man, the Q provides you every day and technical analysis. So if you believe in these two and you have everything there, if you want to enhance that and go more advanced and say yes, this is just my entry point, my simple entry point. The next thing I would do is look at the matrix. How do things evolve there? What is the expected move? Yeah, or you're showing it right here. What is the expected move? Where are my levels and not the levels? Only for the exploration you are looking at.

[00:49:44.29] - Speaker 2
But how do the levels change? Let's say if you have a non directional trade it's very important to look at the higher and lower levels to be able to just see where most probably the trade will stay in. If you don't want to set it up by delta, let's say you Have a short strangle and a lot of people take the 20 and 16 delta and so on. I prefer to mix and flavor that with the, with the data I get from monthly queue. We looked at the, we looked at the skew. So if you look at the sku, the thing is like you get an idea of what the market is, where it is going. So we see here that in, in this environment the put bias is retracing so we can expect maybe some move on the up and this is something nice. And the other thing which I talk a lot and which is very hard to grasp for most people is the dax. So what does the DAX show us? The deck shows us love here. Very simple to understand basically how the market makers hedging, what do they have to do?

[00:50:49.03] - Speaker 2
If we have a move there and we have a move there and basically very simple for you. If we have the call side and we have a lot of calls below the actual strike price, this means this is a supportive environment. And if we have a lot of calls on the upper side, this upon potential targets on the other side. If we have puts above the ST strike price this means these are resistance and. Or if we have puts below this means. Yeah this means that in the end the problem is that the market makers might need to take it down. So this is the three things I would use in.

[00:51:31.26] - Speaker 1
Yeah, and I think we have a few minutes left. So before we go, I just want to remind everyone that we are running our promo until March 16th. So if you guys want to join us and access all the tools that Don showed you, please come to our website. You will see all the information. You can also join our free newsletter and our free academy right here just by typing mentoki.com free. And also we have a bonus for you guys. So for those who are joining this week, you'll be able to take part of our two live trading sessions next week. And if you missed one, we did a very nice live with Patrick yesterday. So just look at YouTube here and check it out. It's available under trading with mentor Q. So yeah, just please take a look at that. We're gonna be live trading next week so you'll be able to take part. So thank you again. Dan. I don't know if you can still hear.

[00:52:36.27] - Speaker 2
Yeah, I can still hear you. I have some. Someone said camera is not working. Trying to fix that. But yeah, I can hear you. And yeah, I don't know what it is technical stuff but no worries, we did what we had to do. And yeah, great prices for Basically a lot of stuff you get and basically just a reminder for you all, I just also started as a very simple options trader here with some experience and other background in quantitative data. But I got hooked our mental queue and Appio invited me to share my knowledge and I promised I will do that. And in the next couple of weeks, if things calm down, we're going to do more trades. You can just take us an idea. It's nothing like Paul and I. What we post is nothing you should strictly follow. This is just to give you ideas. What we think is interesting. And on the other hand, we will focus on how you can use MathIQ data for your tradings. Love our earnings, which is why do we do earnings? Maybe this is lasting before we close here. And that's why you should stick to Mentor Q and use its data because it's one of the few things retail traders still have an edge in, earnings, because the big players, they need to hatch, need to do other things and earnings is just like something they can't really control.

[00:53:59.20] - Speaker 2
And that's the thing. That's why I still do earnings and there's an edge. And with Mentor Q you have a real edge. So thank you, Fabio and we will be back very soon with more stuff.

[00:54:10.14] - Speaker 1
We'll be back next week. Thank you, Dan. Have a great day.

[00:54:12.28] - Speaker 2
Thank you very much. Yes, enjoy and good luck, everyone. And don't get afraid. Use the data. And happy and I'm very successful trading.

[00:54:23.08] - Speaker 1
Bye.

[00:54:24.09] - Speaker 2
Bye.