What Levels Conversion is and why it matters

[00:00:00.07] - Speaker 1
In this video we will show you how to use the powerful level conversion tool which is your key to translating critical option levels from one asset to another. Like for example, overlapping SPX gamma levels onto yes future charts or QQQ levels onto nq and so on. Futures and spot prices rarely match due to spread ratio or fair value differences. So without conversion your levels may be misaligned leading to missed opportunities. The levels conversion tool ensures your analysis is always accurate and aligned with real market structure.

[00:00:32.15] - Speaker 1
So now let's look at why converting levels between assets is so important for modern traders. Within Mentor Q, you can access the full option chain across futures indices and ETFs means that you can extract the most relevant levels no matter where the liquidity is and overlay them directly into your chart. This is especially powerful for futures traders, ETFs, traders or anyone trading correlated assets. Option data is very powerful and can reveal where the biggest players are positioned. But here is the challenge.

[00:01:00.22] - Speaker 1
You might analyze gamma levels on SPX option chain, but you trade ES futures. Or you might spot key zones on Q. Q. Q. But you execute on NQ. So without conversion, these levels won't line up on your chart because the spot and the future prices rarely match. Overlaying important gamma levels from one assets option chain onto another chart.

[00:01:20.03] - Speaker 1
Like for example, bringing SPX gamma levels onto your ES chart lets you see institutional flows and market makers positioning actually matter. This bridges the gap between analysis and execution so you're never trading blind. In this slide we can see the different net GAM exposure charts for the assets. Spx, the index, spy, the ETF and ES the future. So as you can see, the charts are actually not the same because we are looking at three different option chain.

[00:01:47.21] - Speaker 1
So having the levels coming from a correlated asset onto the asset that you use for trading, for example, the future can actually be very, very relevant. So with Mentor Q level conversion, you can project those SPX level onto your ES chart and this can actually align with your strategy and show you the true market structure. Understanding the different option chains of correlated assets is also very important. So let's now look at who trades what. So when we look at futures like ES or nq, we believe that the market moves in the same way for the index and etf.

[00:02:20.02] - Speaker 1
But in reality we need to understand who is buying or trading those products and what is the objective behind each product. Even if the move is in the same direction, each product has a different customer base. SPX is most active for institutional flows. Spy is traded by retail asset managers with maybe a longer term horizon 401k plans that want to get an exposure to the market. And of course ES is traded by futures market maker proform CTAs and retail investors.

[00:02:51.06] - Speaker 1
So as a result we have three different option chain and those option chain can reflect the positioning and the risk of the market. By comparing the levels across the index, the ETF and the future, we can actually spot hidden consensus zones, confirm high conviction strikes and detect unusual divergences between flows. So for example, when SPY is in negative gamma, while SPX is in positive gamma, those divergence can actually be very interesting signals for traders. So as a result we have standardized these levels so you can actually trade futures with a complete picture. Now we're going to go over a conversion and we're going to do some examples and go over how to convert the levels within the indicators.

[00:03:29.00] - Speaker 1
But before we do that, let's go over what are the typical conversion that our user would use, why should you use them? And then let's look at for example, if you're trading futures, what are the popular conversions? So in this slide you can see some typical use cases. So let's start with, for example, ES Traders. We can plot SPX intraday or end of day gamma levels onto yes.

[00:03:52.14] - Speaker 1
We can also plot SPY gamma levels onto yes. If you are an NQ trader, then you want to look at QQQ and ndx. So you can plot intraday QQQ gamma levels and intraday NDX gamma levels. You can also do the same with commodities or other indices. So for example, for those who are trading gold and GC you could convert GLD levels into gc.

[00:04:17.05] - Speaker 1
For those who are trading crude oil, then you could use USO levels into CL Level conversion can also be very important for YM traders. So if you're trading the dao then you will know that there is not really gamma levels on YM because there's no option chain, there's no futures options on ym. So what we can do is we can actually trade and convert the ETFs gamma levels DIA directly into the YM chart. We can also do more complex things like converting for example Nvidia gamma levels or max 7 levels onto NQ or QQQ. And then on the right hand side we also have other types of conversions.

[00:04:54.14] - Speaker 1
So you could actually convert IBIT levels onto Bitcoin or TLT level onto the futures, the bond futures and so on. So the flexibility is there. We're going to show you how to use the indicators and how to convert the levels. But before we do that, why is conversion needed? So here we can see the futures don't actually trade exactly at the same price of their respective index or etf.

[00:05:16.19] - Speaker 1
So for example, here we have es, SPX and SPY and nq, NDX and qqq. And as you can see, the prices are completely different. Right? So that's why we must need the conversion so that we can line up the levels coming from the asset to the future. For example, here we see that ESP is pricing at 7004.5 while SPX is pricing 600 9066.

[00:05:44.13] - Speaker 1
There's about 38 points spread between the two assets. So we can actually convert in two ways. We can convert by using a spread or a ratio. Here we have the formula. So the spread is calculated by doing the future price minus the index price.

[00:06:01.21] - Speaker 1
The ratio is calculated by dividing the future price by the index price. So as we can see on SPX and ES we have a spread of 37.94 points and the ratio is 1.005446. Now using the same prices, let's do an example on how to convert QQQ levels to nq. So the formula again is future price divided by index price. So here you can see the price of NQ divided by the price of QQQ.

[00:06:30.25] - Speaker 1
That gives us a ratio of 41.37694. So what we're going to do is we're going to take in the middle column our QQQ levels which has core resistance of 627, put support of 610, we're going to multiply it by the ratio and then that's going to give us the equivalent level on the NQ chart. So for example, our 6 to 7 core resistance of QQQ is going to be equivalent to 25,943.34 on NQ. And we can do the same with all the different levels. The indicator will do the conversion for you, but within each of the indicators we have two options.

[00:07:07.11] - Speaker 1
We can use a manual ratio auto ratio. Within the manual ratio it's the user that will calculate the spread or the ratio by looking at the prices of the future and the spot index or the ETF and then it would enter the ratio into the indicator settings. With auto ratio on the other hand, we are going to use the indicator is going to use the end of day prices. So the official closing for the future and the spot index or etf and it's going to calculate the ratio automatically. The auto Ratio is only available for some of the integrations, e.g.

[00:07:44.10] - Speaker 1
tradingView, NinjaTrader, Transpider. Some of the other integration don't allow us to use an auto ratio so we can use the manual ratio instead. It's also very important to understand that the auto ratio uses the previous day official closing price, right? So that might not account for after market volatility. So you might still want to use a manual ratio for better accuracy.

[00:08:07.08] - Speaker 1
In this example we can see how the auto ratio would be calculated. So the auto ratio on TradingView for example updates at 9:31 Eastern. At 9:31 it would take the previous official closing price of the future and the index. So we can see here that the future has a closing price of 7016.5. The index has a closing price of 6977.27 which gives us a ratio of 1.005622.

[00:08:37.01] - Speaker 1
So within the indicator this would be the ratio used to apply the conversion using the auto ratio. Now let's go into the TradingView indicator and check how to do the conversion. So the first step, let's open up our settings and within our settings we can scroll down and we will find the level conversion settings Here we have a couple of default settings already set up. So for those who are trading ES we we have our default SPX to yes. So we can tick the box here and we can convert directly right here.

[00:09:10.06] - Speaker 1
So as you can see we have the option to use an auto ratio, manual ratio and spread. We're going to start this example by using the auto ratio. So as you can see here, I'm using our ES chart and if I click OK I am plotting the ES levels together with the SPX level. So the SPX level will be available in between brackets. So you will see in brackets the ticker that you are converting from an option that the indicator has is also to be able to only plot converted levels only.

[00:09:46.18] - Speaker 1
So if you only wanted to see SPX levels on ES without seeing the ES level, you can tick this box here and this will basically remove the actual ES level and only plot the SPX levels, right? So buy and tick in the box you can actually have both. If you only want converted levels only, you can tick the box here. Okay, so here the first example is on SPX to Yes, we can also do a second example and you can always change the ticker. So we can type in QQQ and then we can convert this to ENQ and again use auto ratio and click ok. And now we are going to Go into the NQ chart.

[00:10:38.15] - Speaker 1
Again QQ show converted levels only selected. I can untick that and I will also be able to see the NQ levels plus the converted QQQ levels right here. Another very common use case is to actually convert intraday gamma levels because of course we have the end of day futures levels and we have the intraday levels on the assets. So what I can also do, I can remove my indicator, come under invite only, select our intraday gamma levels indicator, make sure my levels are updated by doing the update levels and then I can actually go and convert our intraday levels directly into the chart. So let's do another example.

[00:11:22.03] - Speaker 1
So let's imagine that you're trading gold. I might want to use GLD intraday levels onto GC and I will tick that and click ok. And then now I can go to our gold chart and I will be able to plot our GLD intraday levels on our GC chart. Right. Very, very nice. I might also want to do the same for crude oil.

[00:11:50.27] - Speaker 1
So I can actually go here and plot our USO levels onto cl.

[00:11:59.07] - Speaker 1
Just click OK and then move myself into our CL chart. There we go. We can also do some other use cases and maybe I want to iterate crypto and I want to overlay the the levels from the etf. In this case we can use IBIT into Bitcoin.

[00:12:27.13] - Speaker 1
And then come to the Bitcoin chart and there we have our IBIT levels directly onto Bitcoin. Let's do another example and let's look at ym.

[00:12:45.10] - Speaker 1
So if you are trading ym, there is no gamma levels available on YM because there is no futures options available on the future. We do have blind spots available so you could use our blind spots levels. But let's say that you wanted to overlay gamma levels onto wam. How can you do that? Let's go into the settings and we're going to use the ETF which is diagram and then we're going to convert that into ym.

[00:13:16.19] - Speaker 1
And there you go. So as you can see, you can see how these reaction error kind of played out and you can use that into wam. You could also convert other tickers to ym. You could convert SPX level to YM and you can do a lot of other stuff. But let's now do something a little bit more advanced and more creative.

[00:13:33.08] - Speaker 1
So let's imagine that we are seeing max 7 earnings. Maybe let's take an example of Nvidia. Nvidia is reporting tomorrow and we believe that the strong Gamma levels of Nvidia would have a play on maybe NQ or qqq. So let's go and convert in this case our Nvidia gamma levels onto NQ and let's see what happens.

[00:14:07.20] - Speaker 1
Here we go. Now we are plotting Nvidia gamma levels on to enq. Right? You see how easy it is to do it on TradingView and how to use the conversion. But what if we wanted to use a manual ratio and calculate the conversion?

[00:14:20.26] - Speaker 1
How can we easily do it and why? So auto ratio is a great option for speed. But what happens if the price moves quite fast after hours? Maybe there's earnings report and there's a lot of volatility. This is why using money ratio when you want to have a more precise alignment can be very useful.

[00:14:39.22] - Speaker 1
Especially when there is a lot of things happening in the market when there's a lot of volatility. And it's always important that we understand how the market works for futures and how the market works for stocks. Right? So futures trade 24,5 while stocks and ETFs only trade during regular trading hours. Right.

[00:14:58.18] - Speaker 1
So the official close of stocks and ETFs is at 4pm Eastern Time and the ratio can shift depending on when you measure it. So auto ratio is best for speed and consistency. It uses the end of day closing price to set the day's conversion automatically, which is usually good enough for most sessions. But the key trade off is timing. And if the official close for example for the ETF and the relevant futures is a different time, sometimes you could see a misalignment or a mismatch between the prices.

[00:15:29.28] - Speaker 1
And this is especially true if we have like after market volatility that could affect that. So manual ratio can help us be more precise because it lets you calculate the ratio using prices from a time window when both instruments are actively trading. So you can actually convert levels, stay tighter to the live market and be more precise. Now let's go back to TradingView and let's see how we can convert the levels using the platform. So the first step is we can open up our watch list and we can actually align our symbols.

[00:16:02.22] - Speaker 1
So here what I see on the right hand side is my es, SPX and SPY prices. I could use this for creating the ratio between SPX and ES and SPY and es. I also do the same for NQ and the X and qqq. So I could actually use these prices calculated manually using a calculator or an Excel formula and do that. The second option is to use some advanced functionality within the watches, which is to use the custom formulas and custom securities that TradingView allows us to have by creating our ratio.

[00:16:42.02] - Speaker 1
So what I did here, I created within my watches the ratios for all these different and spots and I can simply open it up and as you can see, the ratio will pop up. This is the ratio that I can use in my manual input and that will take less than 30 seconds each day. I can actually open it up and I can use this value right here, for example, to put into the indicator. So first step is let's actually go over how we can calculate those ratios. So let me remove them all from here and I'm going to show you how you can quickly do it within your TradingView account.

[00:17:22.06] - Speaker 1
So the first step is to go on the plus sign and start adding a symbol. And we need to type the actual formula. So let's start with ES and SPX ratio. So I would type in ES one exclamation mark divided by spx and I can put it here. Click Enter and this will appear on my watch list.

[00:17:44.13] - Speaker 1
So this would be our ES and SPX ratio. Let's do another example and let's do ENQ1 exclamation mark divided by QQQ. This will give me my NQ1 and NQQQ ratio. Let's do another one and let's do ES1 divided by SPY.

[00:18:07.07] - Speaker 1
Let's add another one and we can do NQ1 exclamation mark divided by NDX. We can also do GC1 divided by GLD Press Enter. We can also do CL1 exclamation mark divided by USO and let's do one more and we can do NQ1 divided by Nvidia. Right. So this will give us the ratio of those two assets.

[00:18:37.11] - Speaker 1
Let's go over some best practices. So what you want to do is also allow at least 5 decimals to calculate an accurate ratio. So what TradingView allows us to do is to actually add more decimal spots. So I now have 5 decimals, but you might not see those. So how can you change?

[00:18:55.19] - Speaker 1
Simply go into your settings, click on symbol and click on precision and make sure you have 5 or 6 decimals selected. Click OK. And what this is going to allow you to do is going to allow you to visualize five decimal places in the price. It's not going to do it on the watch list. This is a trading view limitation, so you can only place 2 decimals in the watch list, but you will be able to have 5 decimals on the chart. So as you can see here, I have my 5 decimals here.

[00:19:25.06] - Speaker 1
So now let's go over a third way on how you can calculate the money ratio. And we actually created an indicator for it. You can find the indicator, this is public is available for everyone into our mentor queue research page right here. We can also give you the link. The link is also available in the video description.

[00:19:43.28] - Speaker 1
But basically this would be the indicator. Now let's go into the chart and let's look at the indicator. So the indicator is very very simple. It's giving us some default conversion. So you're converting for example spx spy to es and the x to nq is giving us three different ratio that we can use.

[00:20:01.21] - Speaker 1
We have our T1 so time one ratio, our time to ratio and our last price ratio. So first and foremost the last price ratio will only update when you add the indicator to the chart. So if you wanted to refresh this throughout the day, you will need to remove and re add the indicator. The T1 and T2 ratio, we can set them within the indicator settings. So let's go into that.

[00:20:25.08] - Speaker 1
So first of all why do we have T1 and T2? The first thing is that we want to use a ratio during market hours. So we have set up two default settings. One is a 10am Eastern so the indicator is always in eastern time. And the second one is the afternoon ratio at 3:30.

[00:20:45.10] - Speaker 1
And then of course we can actually use the last price. The indicator is totally customizable. So you can actually change the time here you could have 11, 25 or 23. You could also have 345 if you wanted to. So the T1 and T2 are completely customizable.

[00:21:02.29] - Speaker 1
Then you can have your last price if you wanted to do it real time. As again you need to refresh the indicator, remove and re add. If you want the the indicator to take on the last price, I would also suggest to use a five or one minute time frame. This will give you a better accuracy. So just make sure you use either 1 minute or 5 minute time frame.

[00:21:25.10] - Speaker 1
The indicator is going to pick up the time frame from your chart and calculate the levels based on those candles. Then we have some default pairs right here within the indicator. So we have our standard right here. But then you can also add custom pairs. So let's say that we wanted to convert again Nvidia to nq.

[00:21:52.10] - Speaker 1
Say that we want to convert Tesla to qqq and let's say we want to convert AMD to spx, right? So these are very very simple Examples I can click on that and then let's click ok. And again what you see, the new tickets will be added at the bottom. Let's go back into the settings so we can change any of those and if we go at the bottom we can actually choose the position, we can choose the size. So if you want to make it larger or smaller and then again here you have your ratio. So very, very simple.

[00:22:34.23] - Speaker 1
I typically use my T1 if the market, if I want to do it pre market and the market is not at 10am yet, I can use the T2 or I could use last price. But it's very, very important that you use the last price ratio when both assets are trading. So let's go over some example in a second. Let's open up our ES and SPX ratio, right? So as you can see here, right when the market is open, so that means in this area here and in this area here, the ratio do not change much, right, because both assets are trading at the same time.

[00:23:18.06] - Speaker 1
So that means that yes, the ratio can be higher or lower, so it can differ. But again we're going to show you some mathematical example on how to do that and why that doesn't really matter and you shouldn't really over complicate things. The same things happens between NDX and qqq. So as long as we take the manual ratio during trading hours between 9:31 and 4:00pm Then you will see that the ratio does not really change much. What changes is if there is intermarket or aftermarket volatility.

[00:23:52.07] - Speaker 1
So if you are taking a ratio before the market opens, like in this case of today, we saw this big spike because we have an economic event and the price of the future move very fast. But the spot did didn't move because the market was not open yet. So this ratio will not be accurate and at the same time this ratio after market close will not be accurate. So what are the common issues and mistakes that user have? Right.

[00:24:19.15] - Speaker 1
One of the biggest one that we see is over complication. The ratio calculation needs to be updated once per day is very, very easy to do. It takes less than 30 seconds and of course, yeah, you do it once in the morning and then you're set for the all day. The second step that if you want consistency and you're using multiple platform, for example, you use NinjaTrader, TrendSpider, you use ATAS, right? And you calculate the ratio once, just make sure you use the same ratio on all of them.

[00:24:50.23] - Speaker 1
Because for example, if you use an auto ratio on tradingview and a manual ratio on ATAs. Those will not match because of the way and the time that is used to calculate those ratios. So a lot of the question that we get is my levels are different from TradingView and ATAS, my converted level. The issue is the ratio. So if you calculate the ratio manually, make sure that you use the same ratio on all platforms.

[00:25:14.29] - Speaker 1
Now let's do a simple example and let's take the chart of a ratio of spx. And yes, again just to repeat that as best practice, we should calculate the ratio during regular trading hours from 9:31 to 4:00pm Eastern Time. The ratio during the session is consistent. If we take the ratio outside the session, you will see it very far as the future contract trades 24,5 while the ETF or the index does not. So let's do the same exact.

[00:25:41.28] - Speaker 1
We did that and let's take the same SPX to ES ratio. So what we've done here is this is the ratio from one of the sessions and we calculated the high, the average and the low of the day. So the average ratio was 1.00556, the high was 1.00598 and the low was 1.00519. Now let's go and convert the levels. So here what you see is we have our SPX levels in the second column and we want to see the difference by converting using a different ratio.

[00:26:16.09] - Speaker 1
So again we have the low, the average and the high of the day. So by converting those levels, as you can see, if we take the low of the 7,000 core resistance. So if we multiply the 7,000 by 1.00519 we get 7,036.33. If we use the average we get 7,038.92. So from the low to the average we see a difference of about 2 points.

[00:26:43.16] - Speaker 1
From the average to the high we see a difference of about again 2 to 3 points. And from the high to the low that you see on the right hand side, the difference is really 5.53 points. So really the difference is not gonna affect your trading 1 or 2 points difference on yes is not really gonna affect where the price reacts on the chart. So really doesn't really matter if you take the low, the average or the high. If you want you can just use the average of the day and that will be sufficient.

[00:27:15.17] - Speaker 1
And that's why you shouldn't really overcomplicate it because as you can see the difference is very very low. Now let's go over some example and Calculate this manually. So what we have here is we're going to start with es. So we are taking the ES and SPX ratio for today. We look at it during the trading session and we draw our high, our low, and our average for the day.

[00:27:42.19] - Speaker 1
We take the values that you see right here and we can bring them onto our Excel file here. So what we have is our three levels for spx. So here you see our levels and we want to convert that into yes. And we can use our low, our average and our high ratio. Simply calculate the formula, very, very simple.

[00:28:06.08] - Speaker 1
You multiply the level by the ratio and then here we have the difference. So as you can see, high to low ratio, the Difference is only 5.46 points. If you use the average, the difference is probably a couple of points. And then let's go back into the chart and we can do the same thing by looking at NQ and qqq. So let's expand this a little bit.

[00:28:31.17] - Speaker 1
So as you can see, we are taking the ratio from the session. We take these values, we can go back to our Excel file and we can have our low ratio, our average ratio and our high ratio. We use our three levels right here. We calculate the levels by simply multiplying the level for the ratio and then we simply calculate the difference from high to low. So as you can see, the difference from the high ratio and the low ratio is only 7.9 point on NQ, which is really irrelevant for the calculation.

[00:29:07.25] - Speaker 1
So really, it doesn't really make a lot of difference if you use the high, the low, or the average throughout the day. Now let's go over some other examples by using our additional integration. So let's go, let's do an example on our NinjaTrader platform. So within NinjaTrader, what I can do, I can go into the indicator settings right here and I can scroll all the way to the bottom. So we have a separate video on NinjaTrader.

[00:29:37.19] - Speaker 1
But what you can do first. So let's go over actually what we're going to have here. So let's scroll to the top. And the first thing that you want to do is you want to select your gamma model. So for example, if I'm looking at converting end of day levels, then I can use my gamma levels.

[00:29:59.10] - Speaker 1
But if I want to use intraday levels, so let's say that I want to convert SPX intraday levels onto yes, I can select my gamma models and I can select my gamma levels intraday, and I can scroll all the way to the bottom right here. And here we have our conversion. So what I need to do, I need to tick on the box to activate the conversion conversion. I can click on SPX and then I have the option to use auto ratio or manual ratio. So let's try with auto ratio first.

[00:30:34.25] - Speaker 1
So if I click on apply, what you can see is that I am getting an error message. So that means that I do not have any prices available for spx. So in order to do the auto ratio calculation you would need to have a data feed that will provide you with the SPX prices and and if you don't have that then again the indicator cannot calculate automatically the level the ratio and you will get an error. But I can still use my manual ratio. So where can I find my manual ratio?

[00:31:07.17] - Speaker 1
We can then go back to our trading view and we can use the indicator so we can take our T1 ratio 1.005396 we can go back to NinjaTrader, paste the ratio there, click on apply and as you can see basically now I will be able to convert my levels directly here. So as you can see this would be my intraday SPX gamma levels converted onto. Yes, we can also convert for example our swing trading levels. So what I simply need to do right here is to go all the way at the top and and then here where I have my string levels, just simply select all click on apply and as you can see now I will also convert my swing levels. So if I click OK I will also have access to my SPX string levels.

[00:32:08.00] - Speaker 1
They will be here we have a lower band, a risk trigger right there. So you can also convert directly string levels onto the chart by using the NinjaTrader conversion and indicator settings. Now let's do another example using trendspider. So we can find the indicators here in the indicator settings we have our blind spots conversion and gamma levels. Within our conversion we can select the ticker that we want to convert so we can have SPX to.

[00:32:36.06] - Speaker 1
Yes, we can choose the different colors, we can select which level type we want to convert. So we can actually convert our intraday or end of day indicator. We can select our ratio mode so we can flip from auto ratio to manual. Remember the auto ratio will use previous end of day prices to calculate the ratio and then we can also show the conversion ratio and we can also hide certain levels. So if we don't want to convert all the levels we can hide those simply by clicking the visible unticking the box here and then click on apply.

[00:33:09.15] - Speaker 1
If you're using auto ratio this will show you what ratio is used at the top here. And then we can also flip that to manual ratio. So let's try using manual ratio and let's use in the same ratio which we were using before which is 1.005396. Let's hit on apply and as you can see, the ratio will change here. The levels will also change.

[00:33:35.12] - Speaker 1
And we are now using our money ratio right there.