How to calculate Risk by looking at the VIX and using Options

[00:00:00.07] - Speaker 1
Sa. Foreign.

[00:00:40.08] - Speaker 2
We are back. This morning we did. We wanted to do an extra session and we want to focus this session about risk management. We are back together with Dan. Welcome, Dan, as always.

[00:00:52.15] - Speaker 1
Hello, Fabio. What exciting times.

[00:00:55.04] - Speaker 2
Yes, it's a completely new world since we last spoke last week, right? I guess.

[00:01:02.22] - Speaker 1
Definitely. I, I was talking to people who I got some good sleep on the weekend. I was relaxed. But I had some people either in fear or in happiness because they made what they need to make in a year. And others who stayed awake all weekend from shock and from Sunday until now watching the markets just to see what happens. Be there. But let's dive in. You have some very great infos for us today, Fabio, about the vix and I think it's a good thing. We can start here.

[00:01:36.27] - Speaker 2
Yeah, we're going to start from the data and then we're going to go into some best practices on how to manage risk, especially maybe looking at options. So before we do that, let's go into the data. But basically, for those who have received the newsletter this week, I think it's very important to look at the Vix. So today the Vix is again, we are at 49. So again we're at almost at 50. We open really high. We open at 59 today and we now drop. But like we're still in a very, very high volatility. So of course, fear index, everybody's looking at the VIX volatility is very high. So it provides us with a lot of risk but also a lot of opportunities. And we're going to talk about that when we look at option. But I think the most important part is first to go on the dashboard and look at the score, the Q score on the vix, the option activity on the vix. And then we're going to look at some other correlated stuff. But of course, what you see here is that the option activities on the VIX is very high.

[00:02:43.01] - Speaker 2
So we see a lot of like positive positioning. Of course this is negative for the market, is positive for the Vix, for the price of the Vix and we see like a big core resistance at 50. But again, this is negative, of course, for the the stock market invest correlation of the VIX versus the spx, of course, and we see that if we look at the different expiration within the chain, we don't see any negative positioning. So everything like market position on the VIX is very bullish for the price of the vix. Again, it's against. Is bearish for the market. If we look at the option matrix. I think there's going to be a very, very interesting data. So last week on Friday we had about 44% of gamma expiring on the 16th, which is the VIX expiration. From the repositioning this morning we now have about 32% which is still a very high number. So on April 16, 32% of gamma on VIX options will expire. That's next week. So it's going to be very interesting to look at that. And then of course we're going to have OPEX for the SPX and the other, the other options contract on the same week.

[00:04:01.17] - Speaker 2
So those are really two key events worth monitoring. And then of course, let's look at the swing level. Right? So if we are a shorter term trader, we can now see that the lower band over the next five days for the Vix is at 39.79. So the model is looking to forecast where the price of the VIX could be in five days from now. We also have a 20 days. We're going to look at the 20 days in a second. But of course you can see that we are at 39.99, which is a very, very high level for the Vix. And if we look at the success rate of the model, in this case the five days, we have a 73.15% success rate over the past 108 days. If you look, this is the history, so this is the 108 days, so maybe four months of data. And basically what that's telling you, that on 73% of the cases, the model was able to forecast the next five days or if the price in five days in the future was above the lower band. Right? The model becomes more relevant when we look at the 20 days.

[00:05:15.27] - Speaker 2
So if we look at the 20 days, which is one month from now, the model is forecasting the price of the VIX to be above 34.26, which is again still a very, very high number and a very, very high volatility. In this case, the model was successful on 87.1% of the cases. So of course using cold shows, using risk now it's really very, very important because we know that most likely volatility will stay high for the next, at least for the next 30 days. And of course we don't know what could happen in the future. But let's look at now let's go back to the spx and on the spx of course we see the opposite picture, right? We are our Q score. I don't Know if you guys have used it, we is showing us very low option activity, very high volatility, very low momentum. And of course we have no seasonality and we are in negative gamma. So if we look at everything related to spx, everything is red, right? So everything is in negative positioning. Here we see the matrix, we have basically negative positioning on all, basically the, the expiration for 2025 at least.

[00:06:33.02] - Speaker 2
And of course we know that next week on the 17th, we're going to have a 19% negative gamma expiring on that week. Right. So that's going to be a very, very important expiration. If we look at the different expiration, the multi expiry chart here, we see that we are buried inputs. And I think one of the interesting part is that the hival level is at 5845. So from now, from the price we are at now until 4,5845, we don't see a lot of positive positioning here. So that's a very, very important data to look at. And of course we have a swing model, we have our skew chart. But I think what's also very, very interesting, which we shared, is if we look at the Q score, take a look at how the, both the option and the momentum score were able to show this potential drop. So when the momentum score, sorry, the option score dropped from five, which was a few weeks ago, to zero, this is when we started seeing this sell off right here and then again when the momentum score dropped from 5 to 1, this is also when we started seeing this massive drop right there.

[00:08:02.14] - Speaker 2
So obviously these scores can be used for you to understand. Okay, is the market changing? Are we seeing anything and how can we use them for taking protection and of course to also build some trade ideas. Right, let us know if you have questions. I think those, this is a very good way of how to look at the data. And this is all available for you here on all the different assets. And then next I'll pass it back to you, Dan.

[00:08:35.24] - Speaker 1
Thanks, Fabio. Let me see. I think now I have something I want to show you. I put it in. Yeah, there we go. So we wanted to talk a bit about risk management. Basically we talked about the basics, how to use options, what are options, what, what is the data in Mentor Q three weeks ago, then we looked at Vega, then we looked at Theta. And today I think it's a good point as Fabio made it clear that we are in very special times. And he showed you the models all deep red, which is, everyone understands that something is going on. That's a good time to talk about risk management. And especially like a lot of people who maybe the first time or they just started trading options at some severe losses because options they are leveraging instruments in the end. So it's a good maybe to just talk about a bit about risk management and we can deep dive along when we show you more advanced strategies on the way throughout all this course. And we will always, always go back to risk management but that we need some basics. This is more of a joke.

[00:09:58.13] - Speaker 1
The options, God, it can be very punishing sometimes. But two things. I don't want to put negative thoughts into your head. Trading should be something where you are basically acting according to a plan and should never forget the truth that anything can happen if you put a trade on really anything. Like Fabio said when we talked last week, things looked a bit different everywhere. And yeah, you shouldn't expect to lose. But more think of trading more as a skill of management. So have a plan and know what to do when certain things happen. So know when you want to enter, know when you want to exit, know when, when you want to take a loss, know when you want to put would just stop. Because we are emotions and we won't talk about all these aspects today, only briefly because this is basically maybe for another longer course or to build your inner strength to act according to your plan. But before that you should understand the basic of risks. And basically and this is very true and I've also experienced this on my it's all myself so. But I have sat down and read a lot of things about risk and that's why I could contain things which did happen and you learn from anything.

[00:11:29.00] - Speaker 1
It's like tuition for going to option school if you have some severe losses. But this is very true. So if you take too much risks on the long run and I see a lot of people, they. They pose enormous wins and everything. But if you don't have the right data and you don't know what is happen then a lot of things can happen. Like I told Fabio as a joke before we met here. Were you short all day or short from last week? I know one person which is very. Has a lot of insight, skillful was short since Wednesday. Yes, this person can stop trading for a year, but it's okay. If the market had reversed very fast, especially if you trade in futures with other things and you haven't put proper stop loss or other stuff then you would have been wiped out. Even if you were deep in the green for a couple of Hours or days. So basically this is a very, very true statement. I got it from a very skilled and knowledgeable trader I'm trading around for 30 years and it's very true. So let that think deep into your subconscious.

[00:12:36.29] - Speaker 1
So basically risk management is, it's not just putting a stop loss. Yes, having a stop loss is great but I've seen this, I, when I posted more and more of trades in the SPX when I did a lot of day trading. Now I've went back to mostly swing trading due to time, lack of time. But still when I do these things I won't use a stop loss most of the times or I will think of an other plan when to put a stop loss. So that's the thing. But I've been doing this for a longer time and I know what I'm doing. So I know how to risk, how to manage my risk. A stop loss can be part of it. So basically in the end if you sit down and design a trade, basically you should see it as is there an edge? I'm going to go to the market and I'm going to try to make a deal and this can work and this can't work. So I need to prefer for both events. And that's the thing. So in the end, and you should, before you, before you open the trade you should know what, what is happening.

[00:13:46.22] - Speaker 1
And that's why I love all the data monthly Q gives us. It's not only about deltas and where to put our strikes. We know what will happen at certain levels and if some levels are breached maybe we should take off certain position we are having and if we build something we can take this data into consideration. We've shown you a lot of times how you can build successfully trades in earning or generate trades just using the levels or just using basically the model. And if you go a step further and set up a proper risk management then you can eliminate even the small percentages which we, which the model won't cover. Like Fabio showed you the Vix which is very difficult to predict, we had roughly 75% you should cover for this 25% and shouldn't be surprised if something happened. Basically options I told you, I showed you the last two times, they are non. They're not just one dimensional vehicles we trade on, they have three dimensions and that's why we should always think of them in that way. So they might be curved, this is skewed, it accelerates. And that's why if we take a look at this profit loss graph, you will See, an on call will go up, will go down.

[00:15:10.11] - Speaker 1
Basically it's very linear. But if you have a credit spread, you see at some point it won't rise. And this is why I wanted to show you this. If you know you are in a market where you need to hedge or you don't want to risk too much setting up a credit spread. We've talked a lot about credit spreads which are basically basic building blocks of everything like calendars, then you can already in the trade there is some risk management set up. And yes, maybe you shouldn't go to sleep or let these things expire worthless because maybe your broker will execute the short leg before and then you are stuck with some, some stocks. But these are things you learn on the way. But in the end you should really know what each kind of strategy brings up and brings and gives you in the way of having and taking profits. But also when to manage the risk and how to manage it. So if you buy a long call, yes, there's a risk that this debit you paid will go to nothing or you will go to the moon by being on the right side.

[00:16:23.29] - Speaker 1
The same with a short put. Like a short put, it can go basically the underlying, especially in stocks, they can go just to zero. But that's the thing, there's a big risk inside that. So if you had, let's say like two weeks ago, you had some short strangles and you didn't know what you were doing, you didn't watch the data, you would have paid a very high price. Now if you had a set up some iron condors, you would have lost but the risk would have been capped. And if you don't know what you're doing, practice, practice, practice and in the end really try things out and use the data Mantiq is giving you. I see, I see some, some question here. No, this was just some other stuff. What is the key concept? How can we cap our risk? Basically, I've talked a lot about the account size. If you follow the trades I'm posting, I use option strat. It's no advertisement. I use the free version and I always buy or sell or set up one contract. This has nothing to do with my personal sizing. And what I do has to do basically like I want to and I've repeatedly said, explained that and I will show you in a minute that the best thing you can do is really take your buying power into account and size appropriately.

[00:17:50.17] - Speaker 1
Maybe for a trade which you see, I will take and you will see an option strat. One contract maybe I've. I've set up 120 or 50. This is maybe just 2% of my buying power. Or you see Paul setting things up. He will be more precise. But can you calculate his buying power? No, you can't because he has so many trades on. He uses a different metric which is good because he's one of the most skilled and experienced traders I know around. He doesn't need this stuff. But you haven't done that for many years. And just by looking at the options chain and looking at your setup trade, you know what is going on. Then please keep basically to these percentage due to earnings trades and you've done a lot. Then maybe you can scale a bit to 5 to 6%. I've done some Cali basically modeling and some Monte Carlo things. But for Basic option trading 1 to 3% I normally use 2% is really good. But let's break it down. If we have an at the money call we are buying. So when are we doing this Repetition. Vin Vega is low. So this means when we expect IV to rise, which means in the end we will be looking for low IV percentile or low IV rank.

[00:19:12.11] - Speaker 1
And we will, we hope that this stock will move accordingly to the direction we have chosen. So if we have a call we should go, we want to go up plus we want IV to rise. So what happens? What is the max loss? We have a 10 wide then losses is this $10 we paid for basically for this contract. But it's not $10 in the end you have to multiply that with 100 always. So this is a very basic mistakes people do they. They don't know how options are calculated. Options on contract are always 100 and 100 shares. If you sell a credit spread on the other hand basically you have the max loss. What is it? It's the width you have minus the credit received. So let's break down the math. We have $5 widespread $5 and the spread costs $1.20. Our max loss is 380 which is 1, 2, 3, which is very good. It's very nice. So in the end everything goes well. We keep $1 20 minus the fees and slippage. In the Worst case we lose 380 which is we need three more trades to come back. But in the end if we have statistics and we have an edge and if we have the right data on our side, then basically on the long run we should win.

[00:20:43.08] - Speaker 1
So if you have let's say eight. If you have a strategy which wins eight of 10 times and you put this in then you can basically calculate your statistic risk of winning or losing with hundred or 1000 trades. Like you can do a Monte Carlo simulation today with AI everything is super easy. So you know, is this a valid strategy I want to use? If you have 10k in your account, a lot of people start with 5 10k which is super okay. This is a small account and this is okay, you should start somewhere. So how much size would be put in? We would put 1 to 3% which is one contract. Not more people have lost because they have over traded and oversized. If you trade the 20 wide SPX spreads and poll trades doc trades here and shows you and tasty trade shows and others which are statistically have the best efficiency. You know with ten thousand, with ten thousand dollar account this will be very hard. Even if you have a margin, this is very hard. So let's, let's take a look and look at defined and undefined risk. Undefined risk are just the basics.

[00:22:11.25] - Speaker 1
We just in the end we sell a naked put. This is undefined, which is what a lot of people do. If you start trading options, either you will have you have some shares and you sell some puts against it or you have a covered call which a lot of people do. Or if you don't have the shares, you do a poor man's covered call. This is strategy will show you next time. But in the end if you sell a put you will and everything goes well. You keep the premium if it doesn't go well, like dipping like right now. And maybe you're safer on the side. When you start by having a defined risk strategy like selling a put spread, you buy a call. I know a lot of people who buy calls and I've repeatedly said that, which is a very valid strategy. If you see there's an edge, something is happening. You see basically big moves in the options chain and you have unusual options volume. You expect something, but I don't know the market is very efficient. And most retail traders or smaller pro traders, they don't have the means, they don't have the data at the time when things are really getting real.

[00:23:21.12] - Speaker 1
So don't have the illusion that you know more than the big players. So you can follow the big players, but some most of the time we are too late. So this is something which is defined because you would only lose, you would only lose your debit, but the win rate is low. So we talked about when to enter debits and credits last time, what time does on these trades. So they work against, against a debit all in the end. But from the view of the risk, not that bad. Because in worst case you just, you. You just lose. You just lose what you paid. It's not undefined. You sell a straddle, you have high setup. A straddle is 2, 2, 2. Two options at the money. A strangle is two out of the money options. They both make it. So this means you need this unit. In the end you get a credit and this credit gives you some safety. Let's say you sell at 100 but if this moves too much and you get max pay on the upper on the lower side. So that's why a lot of people sell strangles because you can adjust them better.

[00:24:39.10] - Speaker 1
But they are for advanced traders which really monitor every day METHQ data to give you an insight and know how to take a hit and know if a hit happens to when to stay calm and when not to move. I just remind everyone who followed maybe the oil trade. I did the XPO trade. It went very well. We could have closed all the contracts were 25, 30% in the middle. We had some runners left. XPO dipped before it recovered. Really nice. So I let one runner, I'd already closed it in the discord but that one and expired at 100%. But this is just one runner. Most of them I would close at a certain time. And Even when this 20, 30% they went negative, that was still working for me. And I was looking at the data, I knew when we would bounce most probably I've been wrong and not only once, twice, many times. But in the end it worked out according to the plan. So most of them really close for 50 and more percentage. So if you have a naked put, you can basically make 100% but it can go really really down.

[00:25:52.06] - Speaker 1
If you have a put spread basically your loss is capped, but also your gains are capped. So we can adjust things and how can we exit things? We will look at some examples and then we will try to also go into the Mentor Q dashboard and also in maybe look at the options chain. But let's look at some some good examples here. So in the end what our psychological bias tells us we need to save a trade if something goes bad. If we just long stocks we will buy more because it's cheap. Yes, you might be right. Like in Covid or now this might be a great opportunity to buy the dip. Do we know when the dip ends? No. Warren Buffett knows. No. Even if you have the best data, you don't know, because besides the algos, humans also rattle the markets. But the thing is, if you have a plan and you know how to manage your risk, then nothing bad can happen. In the worst case, you take a loss and you maybe take a serious series of loss. But if you have a good strategy and you manage your risk accordingly, on the long run you will be profitable.

[00:27:06.08] - Speaker 1
And that's, that's why we're looking at these things today. So if you adjust, if you adjust and that's the first question you should put to yourself. Is this trade a trade I can save? Let's say if you are in a naked put and you opened the, you, the port, you opened like 45 days ago, the put was at $70 and at the moment you opened the trade, the Stock was at 100, $100. The, the, the money strike. Now we are at 60 and the market is really uncertain. Yes, you can look at the data, you can see where all the levels are and the new reaction levels. You should take a look at the swing level, swing levels and at the swing models. But if you don't see that this can by rolling, maybe taking a small loss and by rolling this can be written out or this is something which is part of your plan because even a plan can be adjusted. But we shouldn't adjust our plans too much because then we frankenstein it, like Doug always says, and in the end we might end up with a loss. We don't know what we're doing.

[00:28:12.18] - Speaker 1
Maybe it's time to say this is a loser. I will step back. That's okay. I will sit on my hands, take a week off. Not bad. Nothing bad happens. I've seen a lot of people over trading, a lot of people trying to chase a loss. I've done that myself. I've learned my lesson. There's a loss, yes, you can adjust it, but only if there's enough time. And this makes sense. Sometimes we were wrong or the market changed and the environment changed like we had things happened last week. Let's see what we can do. If we have a losing credit spread and we will deep dive at some other point when we are at the certain strategies again, there are so many things you can do. But let's look at the basics. Today you have a put spread, Tesla 180, 175 for $1.20. You have unrealized loss, $3. You can roll down and out. These are the two things to the next week or next month. That's the thing. You widen your time. You give the Trade more time. This is something you can do. You move your strikes lower and you collect more credit. You only do that if you can collect credit.

[00:29:27.29] - Speaker 1
Even if credit spreads are safer and they're easier, they're harder to adjust. So a rule of thumb is if you can roll out of time and if you still believe in the bias and maybe stay at the same delta. Let's say you sold the short strike at 20 or 16 Delta. We'll show you some examples later in the options trademark. And you can roll out and stay in the same delta roughly maybe two weeks out, four weeks out. Plus all the data man the queue provides you, gives you confidence that this makes sense. We will see a stop there. We might see a bounce and you get an X for credit, then do it. If you see that like Fabio showed you in the SBX metrics and I love the matrix, everything is deep in the red and you don't know what the bottom is. Maybe it's time to take this and three dollar loss and move on. A small loss is better than a loss which grows and grows and grows. I've seen people like taking losses and losses because they try to set up the original trade. Maybe it's time to switch sides and you can make what you lost.

[00:30:45.26] - Speaker 1
So this is very simple. So before we rolled, if the stock went down, the loss grows and grows. Or we go up after, after rolling, we can adjust this and make this better. If we have a naked put or we sold a naked call, which I wouldn't advise. Calls normally get executed very fast. Or we have one of my favorites, the strangle. You can do various things with the strangle. You can always roll down the lag which is not challenged to get more credit. You make the, you close the width in between of the two strikes. Or you can roll out of time and leave the one to expire worthless. Normally I take them all, put them all together and take them off together or roll them both out of time. But sometimes if you see the data gives you confidence and you're not that deep in the loss, then you can just add. This is very legitimate. You can add a long lag. Yes. What will happen? You will lower, definitely lower the credit you received. Maybe you would just break even, but that's okay. In the end, every trade we take and if we even make $1, we're not in loss.

[00:32:05.23] - Speaker 1
This is a winner and in some certain market condition just not losing. Like I don't know, I closed all my trades. I had most of my trades except one last Wednesday and I did some ES stuff and some short SBX stuff, which is okay. Riding the momentum, taking some moments, but waiting the wave. I have a lot of strategies and they do work, but you need to scale and if I started explaining them to people and you need a lot of time to manage them. So I don't want to spend that time and I don't want to ruin my risk strategy. So we have a naked hood, for example. Yes. In this range we will make basically all the credit. We are dipping, dipping, dipping. We add a spread. At some point we can cap our loss, which is very, very nice. Delta hedging. I think Fabio would be even better in explaining this. But I would try my very best. I have a rough rule and I like to delta hedge things and I also like my risk reversals and then to hedge them. So we won't deep dive into delta today what it means.

[00:33:22.03] - Speaker 1
But basically, if you want a delta hedge something, this means you should take a look at the deltas. Where, where are the deltas? Let's take the situation. We have an apple call which has a delta of plus. It's a call has a plus 60 apple spikes which didn't happen today, very hard. And now the delta is 85. So what can you do? No, you don't buy shares. This is what you do. If you are in a put, You sell the shares and. Or on the other hand, you can buy a put to flatten the delta. Is that because a put has a negative delta? So if you put them together in the end you can take out this 25 rise in the delta. And 25 is a really nice, really nice number. You have, let's say a short strangle which is normally delta neutral. And you see a shift 25 Delta, it's time maybe to adjust. I also use mainly the levels of magic. You if I see major levels being breached, I will, I will add a layer on the delta. Why is that? Because if we rebound, then I will sell for a break.

[00:34:45.16] - Speaker 1
Even if we go on the same side, then I then I make it make the loss neutral. And I know when to take off this delta hedge. And I even make money on the delta hedge while losing on the other one. This is more advanced, I think Fabio, we can make a whole or at least half of half of a session about that because this is really advanced. But it's something which really, really helps. So before we hedge, we can go into nothing, especially with the delta, the down and on the upside. But if we hedge, at least we can stop this bleeding and this is the thing what we want. When is the time to look for the next exit door and maybe stop trading, do something else. And in the end you even if you take a hit, multiple hits, the most important thing is have a good mindset, act according to a plan and even if you take a loss but you stuck to your plan, then you are a winner because you have acted according to your plan and on the most disciplined person and only the people who come back even after a loss and refocus and rethink and will do it all again but just better this time.

[00:36:01.13] - Speaker 1
There will be winners on the long in the long run. This is very simple. One very simple rule of thumb is like even if you have a good plan, but you can't stomach it because something happened in your private life, something else happened or you suddenly you need the money, you shouldn't have money and options which you might need tomorrow. But let's say you just risk 200 on a spread and something happens. And these 200 which is not that much, but these 200, they don't feel really now and it's now it's down to 180. Maybe it's your first trade, it's your first ever trade you have done and you don't know what's happening. And IV is rising, you've never heard of IV and you just feel uncomfortable. Although you had AI write you a very nice plan and everything. Time to exit. I know it's not a good advice to exit if we are in panic and other things and we see that data points somewhere else. But if we can't take it mentally, we will make mistakes. So it's better to exit with a smaller or medium loss than lose our minds or some people even lose their sleep over.

[00:37:09.13] - Speaker 1
So this is something which should never happen because you don't sleep properly. If you think about constantly about losses, about positions, then you're doing something wrong. Trading needs time and only if you have an edge and have done a lot of trades, then things come natural, natural to you. That's why MathIQ helps you with the levels. We try to help you by showing you the other things which you need to trade options. So when is another good point to exit when your profit target is hit. The most simple thing, it's very sweet. I know a lot of people, especially trading spreads because they say okay, I have my risk management rules set up here inside we'll let it expire. Worthless is something I don't do because I've seen that these things can go sour in the last days. But if you do that, it's okay, you're profitable on long term, that's okay. But I prefer to set up profit targets. I always try to post if I take a trade off, take a contract off. So good rule of thumb is 20, 25% for maybe the first contract, 30, 35 for the next one or 50.

[00:38:18.24] - Speaker 1
And if you are in a very safe spot, maybe go to 75, 80. And if you really, really want to take full win, maybe leave one runner. But this is then house money. You have sold four contracts. The spread with four contracts, even if the last one goes sour, it's house money which is super. Okay, so please don't wait till the last, last nickel. So many trades I've seen they go to 80 and then they become losers. So don't do that. Like if you have an iconder and you're somewhere here, 20 days are there and you maybe not a full super profit, but you are close to 50. Take it off, take it off and put your money somewhere else or take some days off. Gamma risk didn't happen only in the last day, but roughly about 20, 21 days it rises and we will talk about this maybe some other times. Javier, I think we can deep dive into this. The Gamma risk is something which you can really, really avoid if you stick to basic rules and if you read Mentor Q's data properly. But in the end this is something all new traders, they get whip sort.

[00:39:34.03] - Speaker 1
So basically if you set up a trade, don't stay in till the last day. Except if you're very safe. Let's say if you have sold, let's take the SPX you had sold 5,900 the short strike calls and maybe build a spread there and they still have two, three days running. Yeah, that's safe, that's okay. I don't think we will go to the moon anywhere soon. But basically if you have a straddle and things get wild because in the end each price movement is even, even wilder and time doesn't help you that much and volatility doesn't help you that much. So basically this is something to get out the risk of death spire. That's why I put it there, so you can see it here. It goes really, really, really high. So you see it starts rising more in 20 days, 10 days. And I have friends which are very experienced traders. They trade year round but they know what they're doing, they want to do that. A very simple checklist. First check, is this the bias I had about this trade or the setup, is it still valid? Yes. Then adjust. Otherwise just get out, get out.

[00:40:48.28] - Speaker 1
Even if the other day I've seen experienced traders closing trades, taking a loss and two days later the trace had recovered. What did they do? They just put them in it. Just put them into their basically journal and revisited them at some point just to learn something, not to ponder about them. Another question is can I reduce the risk without adding more cost? If not, as soon as you can exit, you constantly think about Nvidia when it is coming back. You look at all the machines you have at home with Nvidia chips and you're dreaming of Nvidia being back at 150. Take a week off, take a year off. I don't know, you're doing something wrong. So is the max loss about to be hit? Yes. And for naked strategies you, if you set up a trade, your broker will show you a max loss? Yes. If you sell a naked put, for example, the loss can be bigger than what you see there. But the brokers have pretty good mythologies of calculating these things. And also if you are trading margin, then basically look at these numbers and then get out of the trade or basically even before of it.

[00:42:07.10] - Speaker 1
So this is the end of it. We can take a look at some other things I've brought with me, I've brought some earning, earning stuff. But first of all we will take some, maybe some questions if they are questions and we can take a look at other things because we still got roughly 18 minutes.

[00:42:32.25] - Speaker 2
I think we can spend some time also looking at the. Yes, wonderful that we've seen today. So a very good example is Tesla and what we can see here is we have our end of day Gamma lavas and let me make them just a little bit clearer and we're going to move them a little bit to the right. Okay, so let me just adjust this. So what we see here is. All right, so in yellow we have our end of day levels, right? And what we can see is our one day minimum here, which is our end of day. And then in white or right here we have our intraday. So the intraday now updates 14 times a day, so almost every half an hour. So take a look at for example this price action here which saw like the price dropping all the way almost to the one day minimum and then shooting all the way up to the one, the max and now basically consolidating around here. This is a 30 points move, which is crazy. So the market really is really in panic mode. So we've seen a really really strong move right there.

[00:44:06.20] - Speaker 2
But very interesting to see how you can combine basically both the end of day from yesterday positioning to the intraday updating at 935 on your chart right here.

[00:44:19.11] - Speaker 1
So that's an, that's a nice example. Let's say even if you were in a longer data trade, let's not look at as a day trade. Just, just for the sake of it, let's say we were a bit higher and we dipped through the call resistance. So would I take a trade? Maybe. Maybe not yet, but I would, I, I would maybe think of a bearish bias. So a nice entry here would be if you go. If you break the high volatility level from the up or from the down. And what is a good, good target to take profits? The intraday high volatility odt. So if we had a breach, it's a bit higher than one day max. I would have taken maybe this one. If I had opened the trade there, I would have closed it. Yes. I wouldn't have taken all the dip. I would have closed it at the. Yes. Either there or at the lower point. So this is exactly what you can do. If you have the levels and you set up trades, you can look at the levels and say which level makes sense. Maybe the secondary levels are good for intraday, which are very helpful.

[00:45:26.25] - Speaker 1
But if you set up a proper trade on the long run, look at the levels and like Fabio pointed out, just put some profit targets there and close the trade there. And the best thing you can do is if you want to work with a stop loss, you put, you put a max loss on the trade, like a bracket order and you take your profit level. So let's say I would have put 275.5 as, as basically as a target. I want to, I wanted to go. And at that point my trade would have been just closed. That's the thing. You put a limit there and out of mind, out of sight, and then you can move on to the next trade and you don't need to worry. So that's really basic parts for longer data, longer data rates, but also for day trading use. Yeah. Let's take a look at the QQQs and let's see what happens here now. But even if you fast and trade in the day, really helpful to know where you want to go, not like opening and just, we hit a level. It didn't, it didn't get breached and we were gonna go down.

[00:46:39.17] - Speaker 1
But where's your exit? Where's your max loss? Where's your max. What you wanna, what what are your profit taking target? So this is very important to have a, to have a plan as a day trader or basically as a longer swing trader, let's say like that or trading, let's say non directional trades. So just remember that every trade starts as a day trade. So even if you trade longer days and everything, look at the data daily, have this data in your mind and set proper managing rules.

[00:47:17.14] - Speaker 2
Yeah, yeah. And here you could see like in a matter like 10 minutes we saw these break from 420 to almost 442. So that's like a 20 point move.

[00:47:36.01] - Speaker 1
Yep. Yeah, that's, that's really crazy. So the market is destabilized. So if you want to take trades now, not that easy. You should, you should really have profit taking targets. And if you are new and new to manta Q or new to options trading, know the risk because rewards comes from risk. How simple. That's the thing. So be careful out there and if you get whipsawed, that's it. Maybe your strategy was wrong, but maybe it's just a difficult market to trade. Now you see a lot of pros making money but also a lot of people which are very experienced, they are taking it very cautious and they, they don't take too much risk because they know what the, the strategies are they have to set up. And there are a lot of courses with, with Patrick in the academy especially for day trading plans and everything. Please revisit them because these, they give you valid insight for all kinds of, of trading, not only for a day trade. As I said, every setup is a day trade. So you can look at the chart and set up your trade if you are a day trader and if you set up a longer chart you just need, you can look at the chart if this helps you visually.

[00:49:03.24] - Speaker 1
I prefer to just look at the data or in the options chain and then I cross reference with MVQ data and then I know where we might go and what we can do there.

[00:49:16.14] - Speaker 2
Yeah, and yeah, in the academy we have a lot of stuff and here we have a course which is trading with mentor queue that will allow you to see like how to trade if you basically like trading stocks, trading option, trading futures. So there's a lot of really interesting things right here for you to view.

[00:49:44.15] - Speaker 1
Yeah, yeah, there's a lot of stuff. So I don't know. Fabian, we still have 10 minutes. We can circle to some earnings if people want that and we can see what the model tells us. We have some with all These things going on. Okay, this is a bit small here. I had a. I could just make a PDF so maybe we. I don't know if we can get this bigger. So otherwise I will just share my screen. Let me do this, let me prepare. This. Is it. There it is. And we have. I made you a list of do's and don'ts which means this is something we will share and this is something you can use and we will share it in the. We will share it in the discord. So you can take a look at this. So okay, give me a second to properly share this what we want to show you.

[00:50:52.21] - Speaker 2
And if you have any question guys, feel free to put them in the. In the chat, in the comments, let us know.

[00:50:59.25] - Speaker 1
Oh, I think everybody can see this now. Can you see the Fabio? My earnings?

[00:51:07.14] - Speaker 2
Yeah.

[00:51:09.12] - Speaker 1
Okay, so let's take a look here. So we have. We. We start with Levi's today. Then we have. We have basically the. Well the most important ones. We have JPM as kicking off the bank the banking season. So if we look at these ones here, this JPM is normally a stock which tends to stay in its average move. But this time. Look at this, look at this. This is like. It's like crazy implied movements. But basically the at the money straddle roughly gives you. And normally we have an average move of this anomaly. What would we have done here? We would have sold basically. We would have sold basically some credit and believe that it would stay in range maybe with. With Iron Condor, short strangle or even a butterfly or what I like are the calendars. What we do with Manta Q is we also gives you the easy choice to trade with with a swing model. We will take a look at this and I would advise you to stay there. But that's the problem today. If we. If we take jpm, we take a look at jpm a couple of. A couple of seconds is we have an applied move of 10.

[00:52:37.11] - Speaker 1
So even if we set up a spread trade on this one according to the model and the market. I don't know Whiplaws jpm. Let's say we would be in a bullish setup because we have a lower level and it's really hard to make to get enough credit even if you trade with a model because the market is so crazy right now. So that's the thing. That's why I wanted to show you basically this. This little thingy I have here because it's at the average moves. These are what happened last time. Yes. Sometimes they blow through that. But this is just one of many. This is the average move of 10 years. So there's a lot of data in there. And this is what we see here. Like the implied move is like crazy if you look at this one. So I wanted to show you this because things can get really crazy. So let's circle back and let's take a look at some things in the dashboard of Mentor Cube. So go to jpm. So seasonality is positive, which is nice. But we have an upper band here. So you see we broke through the lower band so we went to the upper band.

[00:54:08.14] - Speaker 1
So this is history, this is now. So how will we trade this? If we want to revisit this and we're confident because the model has been right so many times, we would trade with credit spreads and we would try to set up break even points here. But if we do this, if we do this, let's say earnings were tomorrow and let's go here, let's build ourselves bear call spread. 24, then we are going to wrap this up here. Now we would maybe go somewhere here. 66 for 250. Yeah, we could do a bit better. But let's say this is the trade we think. But what happens here? It's a nice revisiting things. A drop of volatility because volatility has risen and it will drop. But still this is like we're safe. Like make this a bit smaller here we're safe to 7%. It's a 7% move. If I revisit what I showed you, an average JPM moves about 3 to 4%. A super safe trade. That's why you can even take four, lose four to make one. This is a super safe trade. Normally if we are on the right side, which the model is most of the times, but with a crazy implied move, you have high premiums.

[00:55:47.16] - Speaker 1
Yes. But on the other hand, the market is crazy. So if you go further out, you don't get enough premium and if the implied is even breached. So that's the thing. If you trade with the model this week, it's not the model's fault, it's that the market is crazy. So this is something I just wanted to point you at, that you have the average moves which are always good to know. You take the model and choose a break even to know what happened in the last 10 years, two years. So you know, where could the move go? Am I still safe by just trading simply the model? And in this case, for example, yes, our loss would be a max loss here. So for the last day but we said we pretend it would be tomorrow. So we had the implied at 11. So that would be the loss we would. We would sustain. We would sustain a 200 loss. So still not that bad. Still not that bad. It's still a risk we can take. But I just wanted to point you that earning season kicks off. Earning season takes normally stocks out of the market, has them in a certain and special place.

[00:57:03.24] - Speaker 1
But the thing is, be careful this week, even if you trade this stuff, and we have been very successful, very successful in the past. This doesn't mean we can do this now, but I will definitely do that. And this is definitely not an advice, but I think it's an exciting market and I want to see how we do with the model and I want to see with some other strategies. I do. So stay tuned. Let's see what happens. Let's see if we can, if we can even in a difficult market, use data. And data is worth what we believe it is worth. And I really believe that because like Fabio showed you, the data works very accurately for day trading and for longer trades. Just be cautious and don't, don't let too much risk wipe you out too fast. Stay tuned and hope to see you next time with some more exciting setups for trading options and advanced strategies.

[00:58:01.26] - Speaker 2
Yeah. Thank you, Dan, and thank you guys. And see you guys again tomorrow and then on Wednesday. Stay, stay safe out there. And obviously risk management is key this week, so please, you know, be alerted to what's going on and, and try to manage the risk because the market is, as you saw, very crazy. It can really swing very fast. So it's not important to look at data, look at risk. So thank you, Dan, and see you again next week.

[00:58:30.28] - Speaker 1
Again next week, guys. Bye. Bye.