Net DEX (Delta Exposure)

[00:00:03.11] - Speaker 1
Welcome, everyone. Happy Monday. Today is a bank holiday in the United States, but we're still live here with Dan and Doc. Welcome, Dan. Welcome, Doc. So we're going to.

[00:00:19.16] - Speaker 2
Hi, Fabio.

[00:00:20.24] - Speaker 1
Some introduction and for those who don't know you, but before we go into that, let me just share the disclaimer for a few seconds. All right, so today's session is on advanced option strategy. So we have Dan with one of our traders in the room and we have Doc, of course, who has. They're very active. Every day we're going to talk about Net Delta. I think there's been a lot of questions in the community about what Net Delta is, how do we use it? So the first step is if you log into your account and you go through our guides under products, you have our Net Delta here and then we have a guide dedicated to that. So please go through that. We have some videos here as well, and we have a lot of information that are available to you. And we're also going to show you our Net Delta exposure chart and our Net Delta model and how Doc and Dan use it. But before we go into that, I'll pass it on to you, Dan, maybe if you want to give a short intro about yourself and then we'll go into the presentation and the demonstration.

[00:01:37.02] - Speaker 2
Yeah, thanks, Fabio. Happy to be here again. And I'm very happy to have a mentor here, which is Paul. Thanks, Paul, for joining us. It's a really pleasure to do this together. Been looking forward doing this together. And yeah, a very complex theme, but for all options traders, very helpful theme. I will take very. I will try to keep it very brief because there's some great explanation Fabio is showing here on the Academy. If you haven't read it, this is my first tip for the day. Just take some time and it's so super compromised and take a look at it. A lot of theory comprised and Net Delta. What is Net Delta? Yeah, it's already in the the name. If you have read about the Greeks, you should know what Delta is. We won't dive into that. But today we talk about the Net Delta exposure. In the end, it is what market makers are hedging. This means market makers are always on the other side of a trade. And let's say if you want to go long, then the market maker will have to go short. So if the institutions are selling long calls, let's say on Tesla they did that a lot and Paul will show something on that, then the market makers have to be short.

[00:02:57.26] - Speaker 2
So if some certain points are reached and this is what we will dive into to make from theory, practical analysis and how to use things. Then the market makers will try to keep the price there in the end or if the price breaks, well, they have to cover and this doesn't mean they don't run. They are the, say, maybe the best skilled and the best equipped players in the market. So we could really dive into this here. But just a look at what Fabio shows here. Basically a positive net delta is basically if we have more long positions than short and this is vice versa for negative delta. So I don't want to dive too much today into the, into the whole theoretical thing because you're here so to see how we do our trades, how we use mental Q data and our trades derived from that, how we check our trades and how they, how net delta can help us basically build a trade. Yes. Do we use gamma levels? Yes, for day trading and we can use them today. But for me, for example, it's basically the most, maybe the most crucial thing I will look at if I'm setting up a trade in the chat.

[00:04:16.29] - Speaker 2
You can also maybe see that if you have access to the chat. I've put some things in there and Paul. Yes, Paul is showing it here. So some explanation for you. I won't rephrase these things. You, you're better at reading. We don't want to keep ourselves waiting here. So I'm going to pass it over to you, Paul, because you want to share some insights, some ideas you have, I will tag along and I will give my own ideas how I build trades and. But you already had some great ideas how we can dive into. And then we're going to take a look at the mantle queue data and all the tools and how we can harvest data with just one look and make good trades out of it. Thanks, Fabio.

[00:05:02.10] - Speaker 3
Thanks, Dan. And let me switch my screen and my presentation. My spiel is going to probably be a little less structured than some others because that's kind of my style. So we're going to dive right into it. But just a reminder what delta is. I'm going to assume that most people here are options traders and they know that that delta is the equivalent exposure to number of shares, longer short. So an at the money call has a 50 Delta. The more positive deltas in a, in an underlying, the more bullish the sentiment is. Doesn't mean the sentiment's right, but the more bullish it is, the more puts puts have a negative delta, the more bearish it is. And then if you add subtracted the puts and calls that's going to roughly give us if the delta are positive or negative. Now of course way out of the money puts have a low delta. So that's going to factor into the equation how close to the money, how close to the price of spot some the calls and plates are, is going to influence if the net delta is positive or negative. Now I'm going to grab a couple examples.

[00:06:26.12] - Speaker 3
This is my dashboard. You guys see my screen right? Yeah. Okay. This is my other dashboard, the dashboard on the Mental Q website. This is kind of like my watch list, you know SPX5 Vix, Lam Research. I like to trade stuff that moves. I have a lot of semis. I have CCJ there on bullish uranium, Nvidia, Tesla, the usual suspects. I like XBI because it's got nice volatility to it, IWM, etc. Etc. So as I was just poking around this looking at the net decks thing I came across amd, you know one of my, one of my trades. Now amd, a former market darling of AMD was the poor man's Nvidia quote unquote. And we're going to look at gamma versus Delta for a minute. Well actually we're going to come back around to that later because I don't want to confuse you. When we look at the, at AMD net decks first thing that catches my eye is that this thing is buried in, puts a lot, a lot of negative delta above and below it. We have this little area here right where we are near the money where you know where there's some, where there's some calls.

[00:07:52.29] - Speaker 3
So trading this any bulls positions I have and I actually have some, I have to be aware that it's got a lot of battle to go through. And we'll go to the Gamma later because Gamma is the effect of the change in delta with the effect of time how close it is to spot. So if these deltas change, if this moves up then suddenly the whole balance of power shifts. I just want to compare that to another somewhat beaten up semi, former, former market darling. And that's Micron. Wow, look at Micron. We have staggered calls all the way, all the way through the chain. This is of all expirations, this is yeah, 117 time set. This is net delta of all expirations. And now you see, okay now Dan's probably going to give you a little more structured idea of how I have, how he uses it. But first thing I see when I see this I have in the money calls at whatever, 85, 90, whatever that is. So as we go down market makers are going to be buying to support the price of the stock. So my in the money calls act as support.

[00:09:32.21] - Speaker 3
We won't get into the GAM and all that. So I feel real comfortable selling a put right down here. I feel real comfortable selling puts on my account. As a matter of fact I sold some. I also have butterfly trades on micro. We won't get into that. So I'm looking here and I say, huh, this is a bullish setup. Now I'm just going to take a quick look at Gamma for a second and we see the Gamma set up very little put, very little negative, you know, Gamma here. So market expectation is for this thing to go up we're kind of right at our resistance level right at this 105 where it's gonna kind of get hard to get through because of the way the market makers have to hedge that at the money stuff, if it gets through, can run. But we're not here to talk about Gamma per se. So. So I'm gonna get back to the net delta. So the net delta is telling us what the market expectations are. Now I was looking at spx, my favorite, that's kind of what I trade most of. I would say 80% of my trades are STX in one form or another.

[00:11:01.11] - Speaker 3
And now just a quick look at, at the Gamma structure. Oh we have you know, some short term bullish stuff. This is I guess Tuesday and you know, this week we look out to the end of the month, it's kind of more balanced. We have some in the money puts here. But now we take a look over here at March and we see, we see we have Gamma all the way up here and all the way down here. But now remember when we looked at amd, the Gamma and the Delta structure look different. So something going on with, with amd maybe in the money put sold, we're not sure. So let's go check what's going on with, with the decks. So as soon as I saw that I went down to decks to the Delta exposure. And when we look at the net Delta exposure, what do we see? Nothing. Basically what this is telling me is that market participants are long and short, puts calls all over the place and sentiment is indecisive. The market is unsure. Just like a lot of us watching this broadcaster sitting here. Where are we going next? You know there are times where things are pretty clearly bullish, times that things are pretty clearly bearish, times that were kind of in a transition and we're not surprised if we ran too much and we pulled back or we sold off kind of too much like we had done a few weeks ago.

[00:12:37.21] - Speaker 3
And whether it was short term oversold and we're going to go down more or whether it was an overreaction and we're going to the moon. We, you know, most of us traders kind of knew that that was a bit extreme. And so we see this here and now. I go back up to the, to the gamma for a second and we go back to the out of the money. You know, this is like 6200 and whatever this is, 55, 60, whatever it is, you know, all the way down there. Probably JPM collar related, but we're not gonna get into that as well. JPM sells out of the money calls and buys 5% out of the money puts to finance it. It's one of their big hedge funds. But this also coincides. I know I'm jumping around. That's what I do. This also coincides with something I saw. Scott Nations, Nations Index, which has a different way of measuring volatility, had tweeted on Friday maybe or on Thursday how even though VIX was going down, tail, tail demand for both puts and calls was oddly up. And we see, and we see this here and what one might call it colloquially or people in the biz might call it actually is right and left tail hedging.

[00:14:10.25] - Speaker 3
Maybe we'll go up a lot, maybe we go down a lot. But people expect something to happen and they're hedged for both eventualities. So that's what I see in SPX here. And again, going back to Delta, I don't see much certainty there. Whereas with. Let's just pick some of our favorite, okay, Nvidia, a few of you might have heard of this company, they do something with chips, I think Nvidia 140, that's kind of the number. Lots of calls. They're gonna be hard to get over it. But if we get over it, then we have all these positive deltas that market makers then have to start tracing if we get over. But that's kind of been acting as a ceiling. But we have all these in the money calls or we have this positive delta down here at 130, which again, I sold puts I might have closed. I sold them a while back when Nvidia was like 133. I sold like 125 or something. And so that's another way then to look at, at the net delta. So I guess doing a quick around the horn like I like to do. Let's take a look at what's going on in the queues.

[00:15:32.14] - Speaker 3
What's the delta exposure? How are market participants positioned with relation to Q's and attack stock bullish? Nobody's expecting a big disaster here in the queues. Contrary to what you hear about overvalued and all that. Maybe it's true, maybe it's not. I'm not evaluation guy. I used to Play 1 on TV but in my old days I'm, I know I'm not smart enough to guess what something should be valued. The value is what people are going to pay for it. That's the value. And when people change their mind and what it's worth, then so do I. So anyway, that said, we look at, we have all this positive delta in the queue. So people are long calls in the queues all the way up and down the chain. Now of course we, you know, we know that well, we don't know where the calls are sold out of the money or what the structure of these trades are. But we know that when we just take the deltas in the chain, the open interest time, the delta is a lot of calls all up and down the chain and there's not that much, not that many puts along the chain.

[00:17:01.27] - Speaker 3
Now again, we can get a more granular look while we're here if we look at the options matrix. Here's the, here's a net delta exposure at different expiry. And so you see the end of the month is positive delta. We see for the March expiry positive delta, negative gamma. We're not going to get into that today but when we see these divergences, something to think about, something to think about. And here we see the, the net decks when they change and we see a Bose change in that delta exposure. Now a lot of that let's remember as a result of spot moving as, as the underlying in this case Q. Q. Q. Went up, whatever was, you know, one and a half, you know, one and two thirds percent or whatever it was on Friday the out of the money call, let's say went from a 15 delta to 25 delta. So net delta exposure increased. So that doesn't necessarily tell us if there was more bullish exposure that came in but does tell us now that now that market maker hedging is going to be more towards, more towards mean reverting drift upwards rather than reflexive selling push downwards when, when the delta exposure is negative and when we get that kind of forced selling and just A few other examples.

[00:19:01.23] - Speaker 3
Okay, let's take a look at SMH. Now quick word about SMH and about delta exposure and market maker hedging in general. Now compared to its notional value I would say that the amount of delta and this is. I didn't do any math. This is just a guess that the delta exposure in SMH isn't enough to force a strong response unless it's really close to the money at a big expiration that's kind of, you know that's coming up in a few days but it is telling us about sentiments and it is telling us that the semi space in general is bullish and it's 150 level has been the level. This is the level I like to trade off of when we get below 150. A couple days ago we were like below we were like down around here142. I forgot what it was. I went for 275 long call and into March. I don't know if I already sold it. I might have. I have tapey hands dead green and I sell it and so so the index has got positive deltas but yet we have different deltas in AMD versus versus micron versus Nvidia different delta exposure and that's just while we're going off.

[00:20:47.23] - Speaker 3
That's called the dispersion trade where market may where market participants along the volatility are short the volatility of the index and through their magic elbows are then long the volatility of the underlying constituents which is what causes this rotation effect. I know I'm kind of bouncing around here so. Yeah, so that's just some of the ways I look at delta. Yes, go ahead.

[00:21:18.29] - Speaker 2
Okay Paul, really lovely that you started with AMD and took us the whole ride through the semis and I just looked a bit at the comments. We haven't had that many. I also also post in the pots some user wrote it's complex. It is and you saw how Paul can just play around like it's a little like little trick and like a magic trick and you don't know what happened but he's on the right side. So really love that Paul. Maybe the thing is what we can do is after we got all this info and you gave me a couple of ideas on the from there maybe we just take a dive and try to build some traits for the users and maybe using also the models Anthony Q provides. You spoke about the semis. We can stick to the semis if we don't get any other tickets from you guys, you want to look at. Maybe we can start by constructing something. I will try to share my screen for a second. Paul, feel free to add anything whenever you feel like. In the end, I learned most of my gecks and deck stuff from you and that's thing.

[00:22:43.28] - Speaker 2
That's why I'm very happy that we do this here together. I hope everyone it's been so.

[00:22:47.20] - Speaker 3
I have to say it's been fun trading with you and you've been a great protege, really. You know, you trade alongside me, not behind me anymore.

[00:22:57.08] - Speaker 2
Yeah, that's true. Let's see. I'm just. I'm just happy. Like I remember this nice quote. And this is for everyone. If you find people who are kind and willing enough to help you. This is nothing to do with X now. And they will lift you on a giant's shoulder and let you peek and you get some ideas. Stick to it. Knowledge is all. Yes, wonderful. We should construct something. An sma. Terry is writing to us. We're going to do this right away. All right, so let's start with this. Paul's already showed the way, led the way. I'm going to make it a bit bigger here. Let me see if we can do this here. We can just take a look at. Paul already showed this picture. So we see the call and put action zones here from the gags. We see the profile, which is very nicely. You can see how it swings around and you see all this positive. But the question is what to do? How long does this gags hold? For example, we had opex. We had talked about these things a week. Things look totally different the other week. Paul always writes something in his notes on spx, the whole Dex and GEX structure and how everything changes not only daily but in the end on opex.

[00:24:36.17] - Speaker 2
And the world is always different when you. When you come Mondays to the market. Except if this is a certain day, like this day. So let's go back, circle back. We see the decks here. The other thing which I like to do before constructing the trade is look at the matrix. I'm a big fan of this, said this many, many, many times that this is my reference point that I get a lot of ideas here from, not only from the screener. So what did we see here? We saw amd, we saw Nvidia. Paul showed that all that stuff. And we see a negative change in DAX here. Yes, this might have been that. So this is something which would teach us a bit of caution because this is a total exposure. But still, you see, it's it's still positive here, but it's less green than other others. Equities Paul showed AMD had more red. So this means this might be a cautious trade. This might be a trade either to go bullish. Yes, because we saw the whole deck structure. So if these things break then we're gonna flush out. But if not we might gonna stay down.

[00:25:49.26] - Speaker 2
And market makers would try to hedge though a bit different than the whole GEX game which is played. So the thing is what I like to do is also take the resistance and put supports into consideration. And if I see something like that. I'm a big fan of non directional trades. Paul knows that my last trade was on Oil. Within three days I was close to my 50% target and I'm taking things off which is always nice. So this could be something which could break on the upper and we get up. We're gonna take a look at the swing model soon. So just how people, how can we construct the trade? Easily. On the other hand, this is something if you have. You don't want to look at the swing model and just want to get an idea from the decks on the DAX here, then you know, yes, whole thing is more positive, but also you should be cautious. So maybe go on a non directional trade. But let's get concrete because we want to show you how you can work with the models and all the stuff man3q provides. So go back on that.

[00:26:59.01] - Speaker 2
So next thing is like longer data trades. What do we see here? This is just nothing to do with dax. Everything here is compromised and we'll see how DAX will help us. This gives us a first impression how things are. We have a lower band. This means we are more in a bullish environment and we're not close to the lower band. So we don't see a reaction there. But still we have a risk trigger which I talked about in one of my posts lately, what the risk trigger means and what it does. So this would be here, maybe a skewed trade if I would take it. So more skewed on the upside. So more caution on the upside. So try to think, and this is why I like deck so much. Try to think as a market maker. What happens if certain levels are reached? What do they have to do? Yes, they will hatch. But what happens if these levels are getting supportive? Like if you get above a major DAX level then this becomes really a support, especially the calls and then you go up. So what happens to your puts? If you sold them, they become worthless, which is very nice.

[00:28:10.13] - Speaker 2
So if you're not sure. You take it on directional trades and we can construct something there or is there something you would like to add? You have any idea? Maybe we start with some single leg trade and then we can evolve it to a condor or we show some naked put selling in, making a skewed strangle and talk about how we adjust that. Feel free please to chip in. So we show people that how many things you can do just by using all the stuff we have here.

[00:28:40.08] - Speaker 3
Do I have any ideas? You know me, I have more ideas. I have money. That said, let me see if I can share my screen. And I put a trade in right, right here in the chat that I was actually looking at yesterday. I'm in a group with some other traders. We meet, we meet every Sunday, some kind of professional traders and we discuss trade ideas. We have to give three trade ideas, that sort of a thing anyway, invite only kind of thing. But anyway, this was one of my trades. So let me, let me walk you through it and maybe if somebody else could show the SMA screen at the time or not, you know, we all kind of remember what it looks like. So now hold on, I'm trying to get you to see my, you see my tasty trade now?

[00:29:39.28] - Speaker 2
Yeah.

[00:29:41.02] - Speaker 3
Yes.

[00:29:42.17] - Speaker 1
Yep.

[00:29:43.11] - Speaker 3
Yeah. Okay. So here's the trade that I constructed there. Okay, so we remember, if not, you can look back, that 235 is, was kind of where the puts were, where the inflection is. And if we just do a quick look at, at a, at a chart. You know, we've been recently bottoming out, you know, down here below this 240 area. And so I don't want to get into too much trouble with this trade. So I'm gonna go below the 240 level. I don't remember what levels I put in there. So this is. You could do it as an iron condo too, or the broken wing butterfly. We'll get to that in a minute. I like to do ratio spreads. I like to sell a ratio spread. So what that is, is I'm buying this one and I'm selling two of these. I'm getting a $67 credit. I'll tell you how I play with these in a minute. Okay, so I'm, I feel pretty sanguine, pretty safe with this. You could move it up over here and get a smaller credit, less risk. And then we'll talk for a minute about how you take advantage. We'll talk for a minute about how you take advantage of when it moves down.

[00:31:13.03] - Speaker 3
You then have a long Debit spread to sell or go sell the naked one. Well, let's go the way I structured it and okay, 275 is clearly where people are gunning. And you see that on the next net dextrose you see volume 1.5 3000 times 34 Delta. So you can do the delta math in your head, but also remember what I said before about notional 1.5k options in SMH compared to the notional value of SMH isn't really enough to move the needle. You know, market maker is going to have to buy, you know, a thousand shares, a few thousand shares. Whatever it is. That's not going to affect SMH that much. Now granted, this is a march expiry, it's out in time. This is giving us a hint of hedging, but more an idea of sentiment and where we might be going. So the other side of this trade, since I'm looking at getting a premium, I don't really want to be too close to this steamroller here at 275. So if I remember how I structured it, if we let's say buy once now, it doesn't matter. I can redo it here. If we buy a 1 290.

[00:32:41.18] - Speaker 3
So. Two of these, we have a 340 credit. That was a trade so I could do nothing and, and let it expire worthless. And I have this buffer in case it goes up. My delta exposure, my gamma exposure is much less because I have the long, the long call and the long put in the way. What I do, being a little bit of a cowboy as this, as this let's go say goes up, I'm gonna this long call 20Delta. 20Delta is the most sensitive to changes in volatility. So as upside called upside call demand goes, these tend to go up fast. So I'm going to take this thing and sell it. I'm gonna leave my two naked, my two naked short put calls up there. If I get enough of a profit here, I might buy an out of the money something just to kind of, you know, contain my margin or if I were worried, which I'm not, I, I think I rarely have done that, but in theory I could. And the same thing happens on the bottom. On the bottom. And if we start to go down and you know, I would stairway up, elevator down, something happens and we get, you know, suddenly SMH is back down below.

[00:34:23.12] - Speaker 3
Where is it now? Now it's like 250. Whatever it is, ish. Suddenly we're back down there, 240 below the 250 number. And these puts are gonna go from whatever it is. Yeah. I'd have to look at the gamma to see how much they would change. But let's just say these go to $354. I'm gonna sell these now. You could. I could just sell the debit spread portion. Only one naked put or play with it however I want. Now of course if we wanted Iron Condor it. Because somebody mentioned an Iron Condor then I. You'd have to go a little wider. I'm still feel okay with. Let's go say 225. 210. No. 225. 215 a buck and go up here. Say 290. 300. I want a little more premium. So I go a little closer. Something like that. So I'd look to go somewhere in here and then. Then I would go back to what Dan was talking about and look at the. At the Delta and Gamma structure to figure out where it might go. Quote unquote, simple trades would be well 34 Delta. Nice Delta. If you like buying out of the money options.

[00:35:57.10] - Speaker 3
Buy a 275 call. Maybe buy a debit spread. Another trick I like is to buy. Another way to quote unquote sell premium without selling premium is to buy. See now the spreads are really wide here. Well okay, let's just say I buy a 250 call. 250 call and sell a 260 call. This is basically a covered call. I'm selling the premium here. I'm selling the volatility here. The at the money and as long as. And250. 255. 69 is my break even. Or I might look for. Okay. Oh, 240 we have. Let's look at where we have volume over here. The 240 might be a good level, a good support level. So okay, I could buy 240. 245. My break even is 243.70. So I'm making let it expire worthless. If it goes through the money, you make a $30 on your 370 is whatever it is. Almost 50%. 40% in 60 days. That's not bad for days pay. And so that's how I would look at it. Go ahead Dan. I would turn it back over to you.

[00:37:32.27] - Speaker 2
Thanks Paul. Very great explanation guys. So I'm going to share my screen now and gonna try to harvest things all set and try to wrap things up. So I'm gonna circle back to the decks. How does this help Again we see a lot of positive structure here. And what I posted some things this here above is still, is still can be seen as resistance. This is something which will could draw the price. But this is a very strong support here. This is if you take a look at this F247 5. This is very strong support calls in the money. And if we circle back to the other thing I try to show you before the metrics I won't make it bigger. Now I think you can read that we saw some positive things here. Let's say if you want to go out 45 days we have the 270 as one target which will be around 30 Deltas or something. 40 Deltas. We'll check this out soon in the 235 that for a very simple trade because as some user wrote this is very complex but we just. I just want to help you with the two.

[00:38:51.03] - Speaker 2
Three important things you should just notice before construction constructing a trade even with a simple swing model. So we're going to go back to the swing model which is maybe the reference point for all you guys which are new to trading. And we take it look at this and you say okay, all these guys talked about smh the semis and yes, we have our earnings coming up. It's gonna go. This might gonna go to the moon. Let's say if you're not sure, the first thing is what you can do is take the 20 day swing model. I'm gonna do a longer data trade so we can be a bit more aggressive. So the lower band would be 236. So you could construct a bullish position here. And just having this year in mind, you could also make a condor out of these two which is a nice huge condor. But for a start let's keep things simple and you construct something here around. So if we take circle back to the deck structure we see there's a lot of support here. Not enough puts to draw this down if nothing bad happens. That's why we can be a bit more aggressive.

[00:40:00.12] - Speaker 2
And for example we saw the 247 5. We can build something around here which looks very nice which is like 3%. And you see theta is working for you and won't be going into Z scores and other things today. But this is something a very simple trade which you could construct. If you want to listen to the swing model. You should put your move your things here so you have a $5 widespread, $500 of max loss and you get 115 credit. This is like one to five in my book. I prefer a bit more normally if you have seen my trades sometimes. So this is more a trade of. Of my liking which is like lose two make one roughly. It's not a mathematical seminar here. So this is something very simple. And you can play around with these. You can roll out of time. You can adjust these trades. It's not the most simple trades. And you still know your max loss. You say okay, they talked about that stuff. Let's say we create something. It might be wrong, but I might be right. Let's. Let's build something here. Something else. We go to the Condor.

[00:41:28.15] - Speaker 2
We remembered we were here. This is let's say the more aggressive and we saw something about the 270 here in this structure which is very strong to break. So this is something you can. You can use the call resistance is something you say. I want to be a bit more aggressive because I'm afraid this is strong support will go up. It starts to lighten up around 280. 290. So this is the point where I would try to set my camp. So this is a nice skewed condo which will take some time to bring you into the profit zone. But you can adjust that and this works very nicely. Paul, if you see something.

[00:42:13.20] - Speaker 3
And that's a. That's a. That's a. That's a nice net credit. 265 for five wise. That's. Now I find that more conservative but kind of standard mechanics is a third the width of the spread. So if you move those puts down that's one strike each. Let's see what that looks like. 240, 235 maybe. Yeah, let's see what that looks.

[00:42:40.20] - Speaker 2
Yeah, we had the two. Okay. If we go to what the structure give gave us. This is what the structure gave us and the swing model. This is more conservative. This is a bit more down. You still get 270 max loss here and then you stay in the strikes.

[00:42:57.05] - Speaker 3
Now let's look at. Now let's. Now let's look at. Since the structure is. Is net bullish. Let's move. Let's move the calls up over that 275 level because we saw a lot of action there. So 275 to 80 even something like that. And what does that give us? That still gives us half the width of the spread. There you go. There you go.

[00:43:19.23] - Speaker 1
Yeah.

[00:43:20.11] - Speaker 3
217 Nice credit. Almost half the width of this pretty Delta positive. Right. What's our dealt on this Delta positive which we want to be Delta positive because we're basically bullish on this, you know. And so it's a beautiful trade. If you want to be a little more conservative, move that away five even. Move the other one down. Five. No, yes, leave that there. Move the puts further away. If you want to be a scaredy cat, move the puts down five more. No, no. Yeah, make it 230 on the top. Yeah. And to. Yeah, something like that somewhere in there. And yeah. A third the width of the spread. There you go. Third the width of the spread. 150 for 5 wide. Nice tasty trades. Kind of Tracy trade mechanics would bless it, you know.

[00:44:23.14] - Speaker 2
And.

[00:44:24.29] - Speaker 3
And so this is how we. We would use the combination of the swing model and playing around with however you structure the trades to do something to do something like that. Now what you're seeing here Dan and I might do when he's not busy doing other things or I'm not busy doing other things kind of talking amongst ourselves or we might put it in the chat on the discord and we know he might throw something like this and I might throw something like this in. There's also a lot of other traders there that have ideas and it works as a community. But show them. I don't know, whatever. There you go.

[00:45:07.17] - Speaker 2
And we have a lot of things here going on for you guys. We're going to circle back to that. A lot of old stuff here. I have a lot of threads here. We are organizing this even more and I would like to things I love to do is building strangles. This is. They are more aggressive but they have pro thing strangles. And I will going to show you some things have a big advantage that you can always hedge from one point on a good approach. There is if 75% of the delta is still intact. But 25 has changed and you hedge the 25. This is one of the thumb rules. And the other thing is you can roll up and down and in time can do the tasty approach by selling 20 deltas. Very simple. But we are smarter than tasty. But we've learned a lot of things. This is something we worked out. This is they. They used to always advise 16 Deltas. Now they. They went for 20 which is okay. It makes sense. So if we. If we want to go with the models we have here. Like I said, sorry, too many, too many windows.

[00:46:24.23] - Speaker 2
The model advised 235. This is the swing point and 270 is the reaction which we saw perfectly. I think I closed it here. Let me circle back guys. One second. Sorry for that. Like you see here that we have the 235, the 280 here. This is something we could easily use to get some look at that credit. And this is the margin of what you should lay down, which is 1k and you lay down three. It's one to three. It's very nice in my book. And what I like to do is if I want to keep things simple, I will do this. But as I, as I saw that this is what we see from the model, but what I saw from the delta hedging and everything, that I would be even more. A bit conservative here because we are more in a bullish trade. So this is a skewed. The skewed strangle. 20 delta here and 20 delta here, but delta balanced. So the delta hedging corresponds with a. With this. And the nice thing is if this, let's say we have a run up.

[00:47:36.26] - Speaker 3
You know what that tells me? That tells me that there's a little bit of call skew. Those 290 calls. I would have guessed, well, less than. I would have guessed, would it be less than a 20 Delta. So that tells us that there's a little more demand for the calls, which kind of goes with the whole thesis that we're developing.

[00:47:56.16] - Speaker 2
Yep. So. And what happens in the end? In the end, you won't hold this stuff till the end. Even if that is ticking. You want to do this in a nice 50 IV rank plus environment. If not, do something else or ETFs. This doesn't happen that often. And these things can rally. SMH can rally, but still it's an etf. It won't move as much as Nvidia, AMD and the other things. This is something you should always remember how you can calculate if you have a strangle.

[00:48:28.08] - Speaker 1
Yes.

[00:48:28.18] - Speaker 2
If you have margin, then you calculate your return on margin or what you using as buying power. And this gives you a nice insight. I'm going to do something like that with Fabio another time to help you calculate your risk and see how profitable things can be. But here is, this is a trade. Time is ticking for you. And if you have. You see where the magnets are, you can. You shouldn't adjust all the time. As I remember this one day I watched on YouTube Tom Sosno from Tastytrade and he said he adjusts all the time. Yes, he does it for free. You should always remember this is no free lunch. Choose strikes which have a lot of volume, a lot of open interest, maybe had some volume in the Last days. So you. The slippage is very low. Plus in the. If you want to adjust, then adjust when the delta changes more than 75, try to get the delta or keep it even easier. Take a look every day at the swing model, 20 day swing model or the five day spring model. And this is something I will show here. For all of you which haven't done that, you can go back in time.

[00:49:38.13] - Speaker 2
Here you can see how things have evolved. So you can see how things are changing. And just by looking at this, you see from 222 we went to 235. This is a bullish move. That's why we had an upper band. And if you see here we switched to a lower band. We are in a positive move. Even if the whole, even if the whole structure is not overall. The matrix wasn't overall green for the simple eye. But still we're skewed to the bullish sides. That's why if you take a simple trade, better take it on the side, which is bullish. If you want to have a bias, you still want to have a bias. Do what Paul and I do. Sell either some skewed butterflies or iron condors or just go with strangle. If you know you can, you can take that because strangles. This is a good thing. It's just. This is just one lag and you can adjust and you shouldn't be afraid. But one last warning. And if you're new to this, too much risk has wiped out all the people who took too much risk. So start small, learn the strategies, use it and most of all use the data which is provided to you by mentor.

[00:50:53.26] - Speaker 2
Queue to just a date, just your trades. You can make every trade very complex or keep it simple. And this data helps you to keep your trades clean. Understandable. You can look at your trades and adjust them. You just don't need to look at the deltas and everything every day. You just have with one look you can see that the model change did something in the structure change. So what I do, and this is the last and then I will swing over to Paul and Fabio is make a screenshot of these two, three things. I put them in to my trade and this is something I look at. So I know where I started and this is very easy. So I know there's, there's a change and then I will do something to the trade. If nothing happens, I will do what best traders do, do nothing. This is the thing which is very hard and we've talked a lot about this with Paul. He Loves to Frankenstein things, sometimes the work to perfection, sometimes they come alive and try to bite him. But he can, this is his own story. He can tell more about that.

[00:51:53.17] - Speaker 2
And yeah, this is what I learned. And I also like to fiddle around but learn to sit more in my hands. So I don't know, we can take a look at the chart. I don't know if you want to add something, Paul or Fabio, if you have something there.

[00:52:09.10] - Speaker 1
Yeah, I, I want to add then. First of all, thank you Dan and thank you Paul, AKA Doc, because this was very actionable and was very good explanation. Now to use the data, one thing I want to add is that if you go into the dashboard, you can actually go back in time up to six months. So you could actually, for example, go back to the earnings season is going to start now. So a good example of this data would be around earnings, see our market position changing. So you could actually go back in time and look at the. The previous season we also had a lot of video also with you, Dan, I think about back testing. So if you guys want to use the swing model, we have some back testing right here. We have videos. We have, we did like a back testing exercise during the latest earning season in October. So you can find everything here. And also we have a lot of video tutorials available to you with within the academy if you want to look for specifically the string training model that Dan showed you or the net delta, we have that as well.

[00:53:18.11] - Speaker 1
So if you just type string, this is available for you guys for free. So just create an account, you get access to all of these videos as well. The second thing I want to add is that within the dashboard we also have our screeners. And for example, the goal of the screener is really to give you a list of stocks that you can look for by simplifying the data for you. So if we go on our Gamma screener and I don't know Dan, if you use it, I believe you do. We have a lot of different screeners right here we have our highest change in Gamma and highest change in delta. So what you want to see is on any given day you want to see a list of companies or assets that have seen an increase in Delta exposure. So you can see this here. But you also have our highest negative change in Gamma and delta, right? So here you can see for example asset, I have seen a big decrease in Delta compared to the previous day. And basically you can see for example here we have Tesla Meta, Nvidia and so on.

[00:54:23.14] - Speaker 1
But then you can also Screen for gamma levels and other variables right here. So always have a list of assets that then you can use. And go back to the dashboard and look at the net delta, look at the netcam exposure and so on. There you go. I don't know if Paul, you want to add anything. Let's see if we have any questions from the group. We have about five minutes left.

[00:55:03.19] - Speaker 3
I just wanted to point something out real quick. Can you guys see my screen?

[00:55:09.19] - Speaker 1
Yep. Yeah.

[00:55:10.20] - Speaker 3
Okay. See the one month skew on smh? Yeah. Okay. So when we saw the thing with the SMH and I said those calls seem like they're maybe kind of a little expensive. There's call demand. So we look at the, and this is on the discord or on the website, we look at the 25 delta risk reversal, the difference between the price of puts and calls. 25 Delta. We know, quote unquote, that puts tend to be more expensive than calls. And so we see, yeah, demand for calls, relative supports, the price is going up. And I guess we look at the pattern here. We see when puts are this cheap and calls are this expensive relative to each other. We're at a top. We see when everybody's buying puts and put skewers, when skew is so it's so high at a bottom. And so this is just another tool, you know, that, that you can use within that context in terms of framing your trades. Now you. So we kind of know, quote unquote, that calls are a little overpriced or maybe historically, you know, kind of fairly priced. But we know that when we're over here, calls are overpriced.

[00:56:36.25] - Speaker 3
That's a nice time to sell some calls. Even though we're kind of up at the top of the range and you go back and look at the swing model, etc. Etc. So that's good. Kind of. I, I tend to think in multi dimensions that's just kind of the way it is because trading is a multi dimensional thing. It's a probabilistic thing. And so. Yeah.

[00:56:59.28] - Speaker 1
All right, awesome. I think we got a few minutes left. So first of all, if you guys want to access our free resources, you can simply create an account here, mentor.com free. If we go to the website also, you can find all our models. So all the things that Dan and Paul discussed today were basically part of our product offerings. So we look at delta, we look at Gamma Stream trading. You can find all the information right here. And basically, yeah, so this week we are also going to have some very interesting live sessions so we have our daily plan with Paul tomorrow morning at 8am and Thursday. So those are bi weekly. We have our macro update on Wednesday with Tim. We're gonna go through trading integrations. We have some really exciting updates on our indicators and I'm gonna go through them on, on Thursday or Wednesday and then we're gonna have a session with Scott on Bookmap on Friday. So very exciting. So yeah, I mean, thank you guys as always. Let's see if we have. There's a few questions about strategies. Please guys, join us in our product session this week and then we'll go over it maybe and then Dan, I look forward to our next session together.

[00:58:24.02] - Speaker 1
We're gonna go on some more advanced strategies again.

[00:58:28.02] - Speaker 2
Yes, definitely. I, I've read something about calendars. This is something I like on earnings and we're going to talk about that. Going to show some other things on decks and just how you can build from simple to more complex strategies. And the most important thing is keep your risk at bay and keep your winners close, your losers and yeah, that's the thing. This is something we learned too, Paul. Keep our emotions at bay and look at the data and try to be successful. This is what we wish for you guys. That's why we do this here. Have a lot of fun with it and we're always. Thank you Fabio for having us and thanks Paul for joining today. It was much fun again and we're gonna catch up like always. In our multiple universes we have and everything, we never lose ourselves. So yeah, we do that all day guys.

[00:59:26.08] - Speaker 1
For those who want to join us, you can also find our channel with Dan and Paul directly here on Discord. So this is our option channel. Paul also manages our zero dt spx. So every morning we would post like review for the day and our trade structuring. So the market view for the day and how to look at SPX and what kind of data points are important for the day. So a lot of good information available via Discord as well and together with the all the stuff that we, we offer on the live sessions as well. Awesome.

[01:00:02.06] - Speaker 3
Thanks. Thanks a lot. Happy inauguration every day everybody.

[01:00:06.04] - Speaker 2
Yes, yes everybody. And if you have questions, please tag us in the discourse. We're happy to help you and we think we've helped a lot of people so this is just a lot of it. So thanks again for joining for your time. Enjoy your day off and have a successful and green week. Thanks Fabio and see you later, Paul.

[01:00:25.18] - Speaker 1
Have a good day.

[01:00:26.03] - Speaker 3
Thanks everybody. Happy trading.

[01:00:28.20] - Speaker 2
Yes.