Transcription
All right. All right. What's up everybody? Today is Thursday, November 6. Uh, I am working remotely today, so apologies if you hear some background or if you hear some background noise or if you uh see a strange thing flash by me or if I'm in a weird setting, whatever it is. Uh, but given the fact the market was down so much today, we didn't want to skip today's webinar. So, uh, thank you all so much for joining us on this one. If you do have any questions, pop them in the Q&A section of the Zoom chat there, and I will do my best to help you. I am also operating off my laptop today. So, I am going to disappear while we show you some background screen. So, a little bit of a different uh event to today's uh presentation, but let's get into it.
All right. So, uh, the word of the markets as we talked about in the founders today has been transient. And what is interesting about that is we started to find some stability in the market. Um, last night, you can see this morning we were trending higher over that 6,800 level. Everything seems fine. Seems fine. And then as soon as that cash market opens, you know, we just really start to break down. And then you also see this weird put spread come into the market uh which has been such a feature, you know, these giant condor trades is such a feature. So as soon as the market opens, you see hero just immediately plunge, right? And and you know, there's no one who knows when hero is just going to open and really kind of excuse the French, but the bed or rip, right? And so, you know, this is the thing with that transient market and down we go, down we go. Uh, then we hit into this 50 uh, excuse me, 6700 level, right, where this strike is 6725 and then the flows have really turned sideways. So, you know, it's interesting to me and the reason that this is a pressing point to me is because you see we hit the condor, you know, the or or at least the put spread, I should say, and then the hero flows shift. Now, there's an interesting thing here going on in the hero flows that that's important. Uh, in this case here, you know, this is steep and it's negative and then here we have the big spread I'm talking about, right? And then the market's planing around this level and now we're seeing hero flatten out. Now, this is the S&P 500 equity hero, right, not the S&P hero, but the S&P uh equities hero. And so S&P 500 hero itself kind of did the seek and destroy thing. It's huge at minus five billion. Uh, but it had a little more of a roundabout way of going about kind of the path, right, it took to to get down here. Um, whereas the thing that's really catching me today again is uh as did two days ago is the massive S&P equity signal. I mean, um, 8 billion is the biggest we've had in the last 30 days. We're at minus 5 today. And kind of like the other day, we're talking about the systematic call selling. It is that look again, the orange bar. It's a little tough to see because I have a red background for my line here, but the orange balls bar, excuse me, is call selling. Blue is put buying. So, a little bit of put buying, but again, it's this dominant theme of of call selling. Uh, which is really just just this persistent large negative pressure in the market. And so, you know, that is the thing I think that the the market is really contending with uh right here right now is is that downside single stock pressure. Um, we did get a nice bounce here, 6700-ish up to 6740 and then here we go, transient move, right? We just kind of like roll back over and so, you know, look, I I I purposely talk about things being transient and watching hero flows here because in this market, and this is the pre-market look with hero, there's no real reason for us to build a longer term um trending position, right, or or trending um market because there's no there's no positions to offer stability in the market and then further, can you have persistent and consistent volatility selling if there is no uh like like whatever is causing the drama has not really been resolved. Um, and so when you think about that, you know, like why is the market so weak here? Is it the is it the AI story? Is it the government shutdown? You know, uh, is it a combination of those things? Is it tariffs? Is it inflation? Is it the economy? You know, there's a bunch of unknowns, I suppose, at the moment you could point fingers at, but ultimately, you know, these these balls are while they're not massively high, um, they're just not contracting, you know, and and able to persistently uh contract. So, that's the state of the game right now.
Now, as as negative as today is, it wouldn't take that much for the market to just kind of push back up, right? Why? Because there's negative gamma strikes above. Um, there's just very few positions in this market to get outside of this condor. You know, condor is the or the put spread, excuse me, is the is the dominant position here. Um, and so, you know, look, um, this is ugly for sure, but who's to say this doesn't totally unwind by tomorrow? Um, now, I want to talk about kind of the worst-case scenarios of downsizing. For that, I like to look at the GEX levels here. And then I'm also going to move out uh just the zero DTE to get a really clean look. Um, so what I want to look at here is the dotted line. And so what you see with the dotted line is it goes like this, right? And it is negative across the board for as far as the eye can see. There's big puts here, you know, uh hedge fund puts here, here. So what we want to see is big positive bars like this. We want to see a node of positive gamma like that. And right now, it just doesn't exist, right? And so it's hard to say this will be the bottom because the positions that are coming in to offer some stability are shorter-dated positions. We do have predominantly blue in this zone which suggests uh dealers are uh long gamma or longer gamma in these areas which means that we shouldn't have such kind of flushability in the market. Um, so that is one good sign, but you know, you hover over this, it's not a huge percentile of gamma, right? We're not talking about uh, you know, hundreds of millions of dollars of of positive gamma down here that can offer some stability. So, um, it it is a uh it's a tricky situation for sure to say this is where I'm going to plant my flag for like an end-of-year rally. Like we're just not seeing the the reasons to get into the market. And so, you know, the the way to navigate this at the end of the day is look at the pivot. At some point, I'm going to imagine that the pivot will drop substantially, probably like a 100 handles, and that'll be the sign that, hey, look, we can get back into this market and and buy a position and then sleep at night holding that position, right? Uh, and start to look for this end-of-year rally, assuming one comes. Um, I think we all kind of assume that or at least I I sort of assume at some point the market will find its footing and uh and get some clearance, but um uh that is to be determined.
Um, all right, let's see. >> All right, no cues on the Q&A so far. Guys are guys are light and quiet today. What happened? Are we getting blown out? Hope not. All right. Uh, let's take a quick look at what is driving hero in some of uh these bigger names. Um, minus 4 billion as we talked about uh in the equity bucket. So what are the big drivers of that? Right. Uh, Tesla this morning was just looking like such a beast and I almost talked about in the founders note uh because of the fact that it was just having such a big day. And when I say that, if you look at it here, it recaptured that 460 level that was the highs from last week and then it absolutely just puked with the market itself. And so, you know, it's trying to find its footing now here. Uh, but it's really been this kind of stalward or or really nice uh signal, I would say, in this market. Now, that being said, we got a hero of minus 1.5 billion today. That's obviously pretty substantial um for that stock. Also, if we just take a quick look at Nvidia here as well, you got 700 million. Biggest 30-day range is a billion. So, you know, that is quite negative for uh hero as well. Um, yeah, let's talk about the vault complex. Uh, I like that idea, MS. Um, so, generally speaking, if you're new to watching the S&P 500 uh volatility market, I'm in compare mode. I just want to flip that off. Um, the cheapest that implied balls will get is 10, maybe a nine. If you start to see a nine, and that's almost always for calls. So, if you look up upside, right, nine is going to be like the lowest, right? And if you start to look at puts, I'm talking about 25 delta puts, 13, 14, 15 uh% implied ball for like a 25 delta put. And, and if you look at the legend there, you can see where the deltas are. You know, that's that's generally pretty low. Now we're at 18. Um, you know, for one month options, uh, you know, maybe 19. That's not exactly screaming, right? Um, yeah, they're not super low balls, but but they're not they're just not crazy, right? And we talked about crazy in the 1010 when the VIX hit 30 and the S&P has only got about 2 and a half%. So, we're we're down a percent today. Yeah, VIX is at 20, but the change involved has been pretty muted. In fact, if we just go and compare uh to last night's close, the fifth, you see here, okay, we're up about one V point, you know, that's not bad. We got crushed yesterday. So, you know, there's a little bit of a move in here for sure, but this isn't like freaking out. And in some ways, you almost want the V freakout. So, you feel like, okay, we've cleansed some positions here and we can get out of this thing. So, what are the events that are driving the volatility? For that, we can look at the Ford implied V. Uh, and what Ford implied V is going to show you is what is the V? It extrapolates between the VSS between expirations, right? And that's exactly what it is. And the way that I like to explain this is to say what is the target for implied vault. So the term structure you can see is down here. And what is sort of fair value for volatility? That's the way I look at this. And if it's higher, right, that's telling us that these events carry a lot of implied V. Sometimes Ford implied V will be down here as we talked about a lot with the calculator and earnings. So in this case, we know that these events are important. This is Nvidia earnings, right? So that's uh creating a lot of forward implied ball. Uh, and then obviously there's a lot of stuff going on here around the end of the year with FOMC and uh big expirations and all that sort of stuff. So these data points next week seem to matter. The week after that is Nvidia earnings plus we have the options expiration, the FOMC minute, which I don't think are that big, but you know, there's some there's a cadray of different data points that could be coming out and that kind of relates I think to the the CE fed watch. So why does this matter? This matters because often times when you look at the Ford implied va, the Ford implied ball is lower as I just mentioned in term structure and what that sort of tells you is okay, there's this point where you could have systematic volatility selling come into the market and that should generally be profitable. It's a reasonable strategy. Now in this market, what it suggests is almost the opposite. It's like, hey, balls of anything should be increasing or stable when we look out in time. And and so that kind of crimps the idea of VANA as a as a major driver of uh of flows, right? So, you know, that's an important thing to note.
Now, what about the VIX and the VIX term structure? Uh, I don't think we've really brought this up in Q&As lately, but this is part of our new product release here just a couple weeks ago. And so what you can see here is when you get into extreme fear in the market, the VIX term structure curve goes like this, right? It backwardates. Um, and so what you're seeing now is a lift here. And what this, you know, why that matters is because if you're starting to get that bid and this term structure flattens out, then you're starting to get a reaction to the to the fear a little bit in in markets, right? So we want to watch that uh not just on a relative basis where the curve is, but also what the shape of the curve is. So, at the end of the day, what all this is is, you know, uh we're we're stirred a little bit, not shaken. When you get shaken is when you get the real extreme uh moves in the volatility space. Um, want to check uh tape today, see what the big movers are. Lot of Tesla options, you know, Palantir, AMD, Apple, nothing really too big there. Generally, you're getting a million contracts or more in the option space. uh for a single stock XT Tesla Nvidia, you know, that's significant. Honestly, that seems pretty quiet. Uh, if we go and check that out, >> the longest we've ever gone without getting questions from you guys falling asleep over there today. There we go. Yeah, the the pay package vote clears. That's interesting. Um, they didn't know that. Let's take a look at Tesla implied balls here. Yeah, look at that backwardation. Wow. So, this is interesting because the Ford implied V for Tesla is see see this is lower, right? So, this implies maybe to the point of the pay package. That is quite an elevated uh implied V for Tesla here with the 117 option. So, was it what was the deal there Black Sunshine? Like if the pay package doesn't go through then Elon quits or something like that. So, there's a lot of V because of that. Like which way do people really want to go on that? Um, I know I I'm not entirely, you know, clear on that, but the stock has done this morning it was doing really well, right? And 111% imply hall is extremely elevated for that stock. You can see normally it's around 60, right? So if anything this sort of bows well I think for the Tesla stock, the fact is quite a bit lower. I was also looking at Tesla in terms of the gamma levels this morning and you know, I wanted to see negative gamma to the upside and we just don't. This 455 strike is clearly a big one. Uh, and that seems to expire a lot of this positive gamma expires with this expiration. That's why next expiration is lower. Not a lot of negative gamma to the upside, but it does come down a little bit into this 500 level. So I I still feel like we could get, you know, like 500 is definitely achievable achievable for Tesla. Uh, you know, maybe if this market can rally, this is going to rally from a relative high so it could do a little bit better. Um, but uh, it's uh, it's a stock that seems to be doing a little bit better I would say.
Um, if I look back at trades for this week except for the today the hero uh was opposite to the open index direction. Can I look at Monday through Wednesday and see why they're misleading at the open? Uh, I actually am going to disagree with you there. I believe trader. Uh, I don't know which you're looking at. Um, but let's uh, let's look at the S&P index stuff. There we go. Um, so I'm go five day here. I don't want him to cooperate with me. Okay. So, if we pull this back, hopefully we get that hero loading in and we can see the lines on here. What what we've been seeing, at least what I believe we've been seeing is these what I've just been calling transient moves, right? So in the morning when the stock opens up uh and the market opens up, you see here will shoot meaningfully higher and then we'll sort of roll over, right? Um, you know, for example, today, I guess the point is that we had the big market rally and then, you know, market opens and down like overnight market was up. Uh, if we look at yesterday, you know, we were lower, so you could you could argue that, but look at this trend all day is just higher, right? It's higher, it's higher, it's higher, and then all of a sudden here in the afternoon, you we just kind of give it up and the market has a big correction. I think the same thing for the day before, right? So, um, I I think I guess futures were down here and you're saying, you know, hero opened up, but hero opened up strong rally and then it just shuts off, right? So, that this is the part of trying to forecast what's going to happen, right, in this type of environment where you go like, well, look, they're buying the dip or they're selling the rip in terms of the hero seems to be what it's doing. Like, ultimately, we've just been ping-ponging between this. I mean, today we went down to 6700s, but we've been really rallying and then selling back off, right? So, we've had just this big trading range. Um, but these are big hero values, right? Like, it's one thing if the values are, you know, 50 $60 million or something like that, but you're talking, you know, as you can see here, we open and we go up $2 billion with her flow and then that just decides to roll over again. This is the fourth and we go all the way from positive 2 billion down to, you know, negative -6. So, these values are just massive. Um, you know, here we go, 0 to 8 and then we go from 6 to minus 2 in the course of about half an hour. Like that's about as big as you ever get uh in that type of an instance. So I I just feel like my general takeaway from this is that you you get a situation here where there's some people playing some games and they're just whipping the market around in these sizable flows and and you know, are those CTAs or systematics or whatever. I I honestly don't know what the what the complete source to this is. Um, but you know, they they seem to really be dominating this market action. It's not this situation where you just see people coming in, they're buying puts hand over fist because they're paranoid about this market. Like it's just not what's happening here, right? And so I I guess what I feel like what I what I'm trying the way I'm trying to say it is it seems seems like there's just some gains and ship, right? Like we're all sort of just being shoved around by, you know, one or two big players and and sort of like two days ago, we saw a giant systematic call selling in the equity space and then yesterday that was bid and then today that is back. So, it's like you just keep pushing back and forth. Um, and it and it's uh uh it's a it's odd, right?
Um, can you actually show how to search for sweeps in the SPX? Yeah. So, if you go over to uh tape here, uh Arjet, hope I pronounced your name right. Um, you can come in here and search for all sorts of uh different uh trades, premiums, etc. Right? And so, what you want to do is just hit yes for sweeps. So, if you hook up the sweep, um, then that will flag the sweep for you. And then you can save that if you have a certain thing you're looking for. Now, just know that um the sweep is a code that the exchanges send down. So, some brokers do have algos um that will put an individual order in. So, there can be orders that are technically sweeps, but the exchanges don't recognize them as a sweep. So, just be aware of that, Argite. But, um, that is how you do that. Thank you for that question. So, I guess I guess what I'm trying to tra say traders just to just to line up on the hero signal was um pre-market action is, you know, you can't take it with a grain of salt, I guess. Um, and so when you say misleading, I uh I don't think that it's not like the data is wrong, right? Um, but I I did sort of take your point. So, um, I think in this market, you got to wait. There's so much low pent up at the open a lot of times in these fast markets that you know, for example, if I'm heavily short and the cash market opens and we open up and we're down 5% like I'm going to close some of my shorts up, right? So you're going to get a short-term bounce in the S&P and then or or single stocks, right? But that's that's only going to be a short-term bounce because it's just from short covering. So, you know, you just got to kind of uh leave leave a wide birth, right? Uh, which forces should we watch closer? The closer to the zero DT forces or the longer data flows uh forces. Thanks for that question Chris. Um, the so there's it depends on what your time frame is. Okay. If you are a short-term trader, if you're a day trader, you got to watch those zero DT flows 100%. Zerodt will buy the dip on a day like today or sell a rip on a day like today and then tomorrow they'll do the opposite or they'll do nothing at all. So, you know, it's huge flow. It's 60 plus% of the flows we talk about all the time. And so you really got to watch that. If you're talking about a longer term signal right now, the holy grail of signals that I'd be looking for would be long-term call buying. So when I say long-term term, you know, you could flip put call back on, right? What is the flow today? It is predominantly put buying in the S&P 500. Call buying is flat. See that? So put buying because the purple line is going down. Orange is calls. It's very flat. Now, is that zero DT or not? Let's turn off the put call. Let's go back to total. and we turn on next expiration. Look at this right here. So right here to the end of the day, you see this this widened a little bit, right? What is that? Well, that looks like it's put buying. Non-zero DT put buying. So that is objectively a bearish signal. See that spread there? What I'm talking about? What what is that telling you? That's people are positioning for downside in the future. That puts hedging obligations on market makers in the future. But it also tells you that the people stepping up right now are worried about not what's happening today, but what's worrying what's happening over the next several weeks, days, and months, right? If I was going to find a bottom, I'd want to see people selling long-term puts, longer-dated puts, not zero DT and or buying longer-dated calls because that would tell you that these people are placing a bet on something going on, you know, weeks or months from now, not worried about today, right? So that is what I really want to see um as a more important longer-dated signal, right? Uh, also when you look at equity hub, you want to see uh calls being bought above and flow control, you want to see people buying longer-dated calls, right? You want to see that mixture of flow coming in that is not so dependent on what's happening today, right? Because that can be the false signal. The second one is going to be what's happening in the volatility space as we covered. You want to see longer-dated vs really contract. Um, you want to see that term structure go to contango. So the the near-term expiration sink kind of implied vols and you know, I think that's going to be a a nice signal. Now in terms of what's happening right now, you know, I think this area should be a a floor for the day right now. I I say that don't go all in on this. But what did we do today? Right, we know the seek and destroy ago was at 6725. That's the big strike. Hero flows moved down to that level. We also 6700 which shows some relative positive gamma below. The missing piece from this is hero just hero if it can stop going down. If we can turn and rally, then that will show that we could bounce here for today. You know, so far I would say Hero's pretty flat. Um, it's hard to say. It's hard to argue that's really breaking any kind of a of a trend higher right now. The equity side plained out here for a minute. Um, but this isn't giving me like a whole ton of confidence. So, you know, yes, we tagged that level as important. Yes, 6700 is important, but I really want to see these flows stop being so obviously negative. Um, cuz that obviously negative flow right now is telling me that people are buying puts and selling calls and like I don't you know, I don't really necessarily want to uh be be in front of that especially if it's billions of dollars worth of flow.
So good to see you with heighten expectation of volatility immediately before earnings. Why is Ford imply V adjustment typically several vault points below and not above the fixed term? Yeah. So, why is that different from earnings? Who's who's reporting today? Let's just take a look as an example. Um, we just go into the earnings chart. Uh, after the close today, we have DraftKings, Go America, and our gambling addictions. Um, okay. So, DraftKings reports tonight, right? And I don't know if there's some gremlins in my internet here today or what. So here is the term structure of the uh uh DraftKings. And what you're getting at is the Ford implied ball is looking at the ball that is between these two expiration points. That's why there's no forward implied ball for the front. So the Ford implied ball is calculating the difference between essentially these two expiration points. And what you're getting is the implied ball uh looking forward based on again what's happening between these with the idea that generally there can be uh some shenanigans I would just put it at different expirations right in terms of uh balls being marked up or marked down uh due to positions. So when you're looking at the Ford implied vault, the reason that it's lower is because the the volatility the relative volatility between these two data points between these two expirations is lower. And so uh this is not a concept that spot gamma uh invented. You can Google it and kind of get into the the math of it all if you'd like. Uh, there's actually a good CBOE lecture on it as well. Uh, but the general idea here is that what the market is pricing in going forward is the volatility contraction, which is why I see Ford implied VA lower, right? And that's again what you're getting when you extrapolate the vault between these two expirations. Um, so Clav, I think I, you know, I'm not feeling like I did a wonderful job of explaining that off the cuff here. Um, but uh, that is the general idea. Um, so you mentioned an specifically, so let me just pull them up. Yeah. So, they had the same look as DraftKings. So, like one of the funny things was um some of these names like this, right? You know, why is the Ford implied ball here higher? I don't know if there's a data point like a big earnings AVGO reports and some of those other things around um, you know, but but there's some type of event there, right? Uh, and then, you know, here you see four and five lower. So, there's this kink is interesting. There must be some type of event or data point that could be non-ET related. They may even have earnings there, right? Um, that is bringing that up. Uh, one second everybody going to go check uh connection. I will be back in one. Sorry about that. Um, on the hero charts is negative put value buying or selling negative put values in hero is is buying. So this is about delta, right? Puts, if you buy a put, it has negative delta, which means negative hero. Hero is just delta, it's notional. Um, so that's what that means. And if you uh have questions on this too, I'm always happy to answer, but sometimes you want a question answered right away. Uh, you can come down here and and search for that. And obviously, you can get some nice videos also on this point. If you go to resources and you go to syllabus, uh, we walk you through all of these dynamics as well. Uh, equity up, Hero 101, etc., etc. So, so please check those out. Also, we've done a bunch of things called sharpen your skills sessions where uh my colleague JT does hour-long deep dives on just individual tools. So, those answers are all available. I'm happy to answer now, Greg, but I know a lot of times you want that. So, what happens if hero reverses for puts, right? Well, that has to be put selling or call buying. And again, we're reading this off of the tape, which means that it's largely bid or ask dominated. So, if somebody hits a bid with a call, they bought it. Um, we have a couple of extra tweaks in our algo, so we don't get sort of tricked by uh wrong information in that space. But an individual print on hero, just like when you look at the flow flow bros on Twitter, you know, they automatically assume if a trade takes place on the offer that somebody bought those contracts, right? And that's not always true. The other thing is with hero is it's looking at all flow from all entities, right? So any trade that takes place, it's analyzing that, whereas when you look at the uh synthetic open interest that shows up in in equity hub or if you look at flow patrol, that's based on where we think hedge funds are positioned. Now, we don't get that data to understand if hedge funds are positioned a certain way until after the close. So I just want to make sure you know, hero is looking at every single flow and it's the trend in the flow that's important, right? Which way is this all going? Right? It's all going balance. Each one of these individual trades, you know, could be higher or lower, but it's the trend that matters and the size of the trend. And you can size that trend up and know if it's important by looking at the 30-day uh ranges. So, I hope that's helpful. Um, you know, the magnitude and the trend is really what we're trying to pay attention to.
Can I explain how to interpret the heat map for delta pressure on trace? Let's do it. Um, okay. So, delta is pretty easy to read. Sometimes I actually think this is easy to chart to read at all. What is this telling you right now? It's blue everywhere. Blue everywhere tells you that no matter where the market goes, we should get dealer buying. Why is that? Either because of time decay with positions or uh delta changes, right? So, what do I mean by that? Time decay is one uh time decay is one uh consideration here as we get closer to expiration, those zero DTS are decaying, but also what happens at higher index prices or lower index prices, and that's what I mean by the delta, the delta difference. Um, so if the map is blue, this is inferring that dealers have to buy everywhere, right? They have to buy higher and they have to buy lower. There's one pocket of red up here which is selling. That is an interesting position, right? And infers that we should be rallying thing here, right, throughout the course of the day, and all else equal, I would believe this right now. What is the one thing that would change my mind on this? Well, if hero turns materially negative and you see really heavy single stock pressure coming in in hero, for example, if everyone's selling the crap out of Tesla, Nvidia, Apple, etc., the market can still go down. And then the second one, obviously, is this map is updating every 10 minutes. So, if a piece of news breaks or S&P hero gets worse because people are buying longer day puts, etc., then that map can obviously change. So, you know, that map is updating every 10 minutes. It right now certainly looks bullish or at least implies that there's support and Hero's flat here, which is good. I'd love to see Hero for single stocks turn up. Um, but, you know, you can see the match just got a little less blue now, right? Um, but here's how here's what my here's what my initial feeling about this is. I would I don't want to be short right now, right? [laughter] I'm not so sure I want to buy this thing with two hands. Uh, but I'd be really scared to be short. Um, and if you are going short right here, it sort of feels like you're shorting in the hole a little bit just because we're already down so much. So, it's like that's my takeaway from this map. If hero turned up, then I would probably be looking to get maybe more aggressively long or or do something like that. Um, but, you know, right now I'd be scared to be short is is the way that I would read that.
Uh, Alex is saying, is it possible to see longer data flow only without zero DTE? I love that idea, Alex. And I also want to add like tenor. So it's like show me stuff that's like 3 months out. The answer today is no. Um, but it is definitely something that is in the uh in the queue. Uh, so wonderful question. Uh, can I say uh when you say longer term volumes contract, do you mean the ATM vault? No, skew is what I'm talking about generally, Chris. I mean the whole, it's really the whole surface. Um, so there's vault. If you're looking at term structure, you're talking about at the money vault. Now, the trick with at the money v, obviously, is so we look at skew, for example, at the money v today is right here, right? Because where the S&P is trading. But what happens when the S&P drops to 6200? Well, 6200 is our new at the money level, and V is naturally higher at that strike. So that's why looking at fixed strike V is so important versus looking at just term structure. I mean, term structure has some value, obviously. Um, but if you're talking about big stock market moves, you can't really compare term structures um because it's not an apples to apples comparison, right? Uh, that's why fixed strike V is so important because you can look and see, well, what did the 6200 strike actually do? Did the V of that strike go up or did the V that strike go down, right? Because that's giving me much different information. Same with the VIX, right? The VIX is going to spike just because the market goes down, period. That doesn't really tell you anything about fixed strike ball. Um, if the market rallies, VIX is going to drop, right? That doesn't necessarily tell you that people are selling ball, for example. So uh those are important dynamics to uh to pay attention to for sure. Uh, Hollis, hello sir. Looks like SP calls is getting bid. Is that bullish? Um, yeah. So, there's a couple of different ways we can look at this. I was looking at de earlier. Uh, let's look at de now. Um, the reason I want to look at de is because end of year, you know, are we going to get the fabled Santa Claus rally or not? Let's see. So 1219 expiration. Uh, that's right now. Let's compare that to where we were on Monday. Um, now we're in the fixed track mode already, right? So that's giving me that read. Um, so what is what has happened here? I'm going to remove the stats as well. Okay. So >> Paul can get bid and I think this is what kind of I don't know if Holl is talking probably about this far out, but what do you see here? You see these deltas? You know, these are really teeny deltas over here. 74 strikes. So these balls are lifting a little bit, but I don't necessarily think that that would be a meaningful signal of call SKs going up. Um, what is funny about this is on comparing versus Monday, right? Same expiration, so it's pretty far on time. And and fix strike ball is actually a little bit lower, even the S&P is lower, which is kind of funny. Um, so you know, there is less risk in this market. It's just kind of funny. Is skew lifting? Uh, you know, maybe I mean, I guess what the argument you could say is this is lower than we were on Monday, right? And then here you start to show maybe a little bit of a bid, right? Now, is the 7,000 strike meaningful? Like, is it such a small delta? It's like a teeny delta option. Uh, one shortcut for that is we just come over here and we hover over 7,000. You know, pretty pretty tiny delta options, right? So Alice, I don't dis I don't disagree with you. There's a little shift in call SKUs there. You know, that's a 17th to, you know, 25 delta calls are are lifting a little bit in terms of all. Yeah, I don't I don't hate that idea. What's funny is I remember we were talking about this around 1017 expiration. We're talking about buying call spreads because that ball seemed cheap. I actually still think that's a pretty reasonable play way to play the end of year rally with a call spread. Uh, the implied ball is like a little bit rich, but if there's a stock up ball move out of here, then 13 ball for the December 25 delta options is really not bad. Um, yeah, very just very sluggish falls. Just it's really kind of amusing. Um, so I like I like thinking, man, kudos to you for uh for the question. It shows you're looking at the right things.
Um, hero is, you know, so Nick's asking, is hero then dealers and traders? It's anybody, right? It could be a market maker trading the flow. It could be the a fund. It could be retail. Could be anybody. And that's an important distinction to make. >> Um, hero updates every, so we're looking at hero. Hero updates every trade. You're talking about millisecond lags. Trace updates every 10 minutes because we rely on certain exchange data to prove our models. And so that data is only currently available every 10 minutes. And trace is buy side flow only for the S&P 500. So we are able to make that distinction because there's specific exchange data that allows us to do that. We cannot um we cannot speed that up right now. Uh, it's just because of the exchanges and as far as I know, we are the only people that do this across all exchanges anyways for like equity hub and things like that. So um, you know, we're we're sort of pushing the envelope in terms of the data availability, you know, grabbing what we can. Data Dog had a big rip after earnings. What do I see on options pricing for a meaning short trade? Let's check that out. Uh, wow, nice move there for sure. Okay, so what what has ball been doing here? I'm guessing ball's gotten crushed, right? So, uh, let's go look at fixed strike v here for Data Dog. So, >> all right. What do these just look like here? Uh, we're going to compare these around earnings. Wow, smoked it. So, um, do you think, you know, if you're of the mind and and these vaults just got absolutely crushed, right? If you're of the mind that we could get some mean reversion here and you look at the fixed strike V, excuse you, you look at term structure for implied V, this suggests you're going to get another five points of V movement down maybe, right, depending on what expiration. So that two to three ballpoint move is what I would look at if I was going to play a short move here. Right? In other words, ball's probably going to be pretty sticky. So when you go into the calculator and you want to play some Data Dog uh put spread for example, right? Um, do you want to go put spread if going to contract five points? Maybe. Right? What what you're arguably playing for more here now is the mean reversion, meaning the stock goes down. Um, if that's what you want to do, right? And I don't I'm not I don't know much about Data Dog, so I'm not trying to say you should should do this, but so when I'm positioning here, then I want my I want my deltas to be pretty wide, right? Um, because price is what I'm trying to capture. So right now, this spread is 10 handles wide, 10 points wide, excuse me. Um, but the deltas of the two only leaves me with an eight delta difference. Like that's not very much. So, I want to offset the potential of a little bit of a ball crush. To be honest with you, I'd probably just um I would probably just go with a naked put here, but if you did want to try to offset a little bit of that implied ball move, uh, again, because the ball move's already happened, you know, um, I don't know how much sense that makes, but uh something [snorts] like this might make sense because again, you're you're still getting the bulk of the delta with like a little bit of a of a implied ball uh padding, right? By selling the other leg of that spread. You also could go with a put fly if you wanted to play mean reversion all the way back down to here. I mean, that's a pretty substantial move. So, you know, buy the 175, sell two of the 150s, for example. Um, but just the core question here, I think, is, you know, what about the volatility piece of it? And the volatility piece of it, um, you know, has really already come out, right? So, you don't have to worry about that so much, uh, in terms of, uh, the way people are positioned. And then we just look at the structure here. And what do you see? You see a lot of long puts around this 140 150 area. Some short calls up in this one. Uh, this is traders that were short call dealers long gamma up in this 190. So this seems like an area where the stock should hit a little bit of, you know, resistance, I would say. Uh, because there's some, you know, positive gamma. Obviously, there a lot of positions are going to shift around um due to due to the earnings and all that adjustment today. So, yeah, you know, if you want to play mean reversion, just buying puts can make some sense at this point. Selling calls and earnings, I don't know that you're going to get that much of an implied vol contraction, right? So if that's the idea where you just don't don't think the stock's going to go up anymore, um, then you're taking a that's not a volatility view, right? You're taking more of a of a price view, which is fine if that's how you if that's how you view. Um, and then you're playing time decay, right? More so than um, sorry, my internet is not show so so then you're playing time decay, right? You're you're not necessarily playing a short ball, which which is important. So, um, you know, stock is up a lot. I think what I got going on here is I have a couple extra indicators that is screwing me up. Let's see what Hero is doing today. And uh, 49 million. That's that's pretty strong. I mean, man, do you really want to get in front of that? I don't know. A lot of call buying off the open here. Um, and then it kind of leveled out over the day, but that's that's and also the put selling, you know. So, ah, yes >> yeah, so mean reversion uh number one, I don't worry about ball. Number two, you know, if you're call selling, you're making a bet on prices getting extended in this 190-ish area. I guess I could I could believe in that. Ideally, I would love to see those call balls like elevated and right now they don't look that elevated as we saw with the fixed strike ball space. So, you know, if you're if you want to play mean reversion, I would go with like a one month.
put spread. Um, so it gives you a little bit of time for that for that to play out, right? Um, and doing something like we talked about here at the calculator. Um, I think it was the one 170, 175 versus like the 140s again, just to collect a little bit of decay, a little time decay to give that trade some some time to work. Makes sense.
Um, but what it seems like to me is the stock opened and call buyers came in and that move has been stable. So, you know, tough to say, tough to see some of these names. What happens is you go into earnings and and you can just tell it's retail's piling in and then at the open you don't see that longer-dated hero signal come up and, you know, you just get this really energized reaction that seems kind of like flagrant, I guess is the way uh I would put it, or flamboyant even. Um, but uh Data Dog doesn't kind of give me, I mean, it's a weak tape as well, right? So, I'm not saying something.
Um, and Steve Pierrell, hello sir. Uh, sell crap in the bed. How often is ball skew updated? Because it looks completely wonky right now. Let's see. SK should be updated every 15 minutes. Uh, or 15 seconds rather, excuse me. So, there's your skew. Um, what is the stock doing today? Yeah, 27%. Well, um I don't know what you mean by wonky there. There's a lot of no, I guess no, like it's not a perfectly smooth curve. I don't know if that's what you're sort of meaning. Um, it does it gives the weird look that these calls are bid and a lot of times what happens when the stock drops, you'll see calls get bid of people playing mean reversion. Um, so I don't know if that's kind of what you're meaning.
The other thing to note about this though is that with these names, especially when they're moving a lot and why do you get sort of that bumpy skew curve? Um, you get a spreading out or spacing out of uh expiration values, right? So if I zoom out and I just show 20% here, you know, you see, right? You're getting basically two and a half, you know, uh strike differences between, you know, some of these strikes down here because they're so far out of the money. And so that's giving you noise. Whereas up above here, 50, 51, 52, etc., right, the strikes are closer together. So that strike spacing is giving, I think, some of the noise to the ball skew curve uh that you're seeing. But this should be updated every 15 minutes. And so like you see in here, right? Like the wavy the winess of it. Um, plus the name's moving so much, you know, that those positions are shooting shooting around real fast. But this should be updated every 15 minutes. The statistical cone is obviously based off the last 90 days. It doesn't include today. So, um, every every 15 seconds you should be getting an update on that. Those balls should be pretty good. Oh, uh, glad I helped you out there, Steve.
Is there a tool on the site, uh, to track market liquidity? No, Greg, we don't look at anything in terms of the bidden offer space. Um, Bombi says, "Puts it 6275. We're going to close." Uh, >> the support pop up. I didn't see it up there. Sorry if I did. Um, all right.
Steve H. I did analyzation yesterday, so some of the metrics may have changed, but for TTD1 expiration was positive 290% implied V and the 125 expiration was 84 IV. You were wondering uh and you were wanting to harvest the uh you sell the sorry if you want to harvest 280% implied vault, could you sell the 80 delta put and call for 115 and then buy the 80 delta put and call for 125? Uh, would that be the correct stance to harvest earnings vault? So Steve, that's a good question and uh it's one that we can we can end on here. Um, so if we look at TTD, they're obviously reporting earnings. So, the question is, how do you harvest the implied ball? There's a bunch of different ways to do this. Um, you could do a founder spread. So, you would sell the expensive implied ball, right? And then you would buy the longer, supposedly cheaper implied ball. You could trade straddles, obviously, strangles, call spreads, put spreads, those those types of things. So, what would your expectation be or or should it be around earnings, right? So, that's where Ford and Ply comes in. So I would think that the front month or this month right would move down to this line and then this would also move over towards these lines. Right now you could go you could sell one of these and buy one of these or you could sell, you know, this one and buy one of these. Right? So it's like that's the game and the point here is that you're trying to capture, you say, okay, look, 1114 expiration for example, it's going to drop 100 ball points almost, right? 90 vault points really, whereas if we go out to 12, uh, 1128 or 125, that's only a 40 ball point correction. So you're talking about a giant space between those things. So in theory, on the face of it, if I sold the at the money call for 114 expiration and I bought bought the 125 at the money uh call or put or straddle or strangle or straddle, excuse me. You know, you could offset that, right? So, when the V gets crushed in these options uh asymmetrically, because we lose 90 vault points there, I'm offsetting it with thinking only a 40 vol point loss for those longer-dated options. Now, if all that mattered in this situation was V, then something like that could work, right? If you sold the shorter dated call and bought the longer dated call, then that should work. The thing you have to contend with is the fact that the stock is going to move. So you have the delta risk there, right? Stock could be up 20%, stock could be down 20%. So that's why just selling the call or just trading the put side can be challenging where you can get some better information from that and that may be why the straddle matters. But you know, that is how you would quote unquote extract that extra ball, right? The counter spread would be I think the obvious way to do that. Um, and what's cool about the calculator is what you can do is you can go into those expirations, right, and just shift the balls around. So, you can come into settings and you can just play with this now yourself where you go, here's the current applied wall. It's like way off the screen up here. And we're projecting a, you know, 40 uh 60 was a 90 ball point, I guess it was. Let's just make it 70, right? And then and and then now you can run calculations with that, right? And then you can come in here and say, "Okay, um I need to add another option." So I'll just pop this in, add another call. Um so this one I want to sell. And then I want to buy the 125 as we just mentioned for implied ball settings. Okay, it's going to be down 40 points, not 70. Right? So now what I'm able to do is compare those two SKs, right? If I'm if I'm correct on those. Uh and that's how I can set that trade up.
The only other thing I would say here is whether you want to target the put side or the call side. This is a very weird somewhat sloppy looking term structure, right? Um, normally what you would get is you would see something is is particularly overbought, right? Like call call SKs would be really high or maybe the foot skew would be really high. The chart like that, but overall what we're seeing here is it just looks like VSS overall should just come down, right? It should be a parallel shift, which means to me that I can't really I don't want to overtarget the the call side or the put side. I want to do something that's neutral. Um um so, you know, that's the that's the part that I really matter. So, what's the takeaway here, Steve? Um I like the idea of possibly strangle uh short-term strangle versus a longer-dated strangle, something like that. Um, I wouldn't even hate uh short selling this straddle and buying the long one or doing a a counter a a diagonal trade. So, what the diagonal is is I could buy or I could sell a uh I could sell a call right in TTD uh sell this 25 delta call right for next expiration and then buy a longer day 25 delta call. I even think that what you could do is you could buy very wingy uh calls and puts for today's exp or for Friday's expiration, right? I'm talking about, you know, stuff that's worth like 25 cents just to hedge yourself and then sell next week's straddle, right? Um or or put on a strangle for for next week. Uh and the reason I would buy those really wingy ones is just because you don't want to be sitting there and the stock's up or down 50%, right? And you know, and and then you just take that in the face like that doesn't feel good. So, um, this is what I did with AMD actually. Uh, and that worked out pretty well. I sold the straddle and then I bought I think it was a 300 call and like the 225 put just because I didn't want to have a blood bath. And when those next day those options open up, I lost I think 50 cents in total on the front month or weekly expiration. Uh, and then I I think I made 10 bucks on the on the straddle itself. So, that's the way that I would kind of look at that. Uh, and Steve, I hope that was helpful. Um, or or made some sense. Um, and these earnings trades are something we're going to start looking at a little bit more and just playing the balls here. Uh, because we have the nice calculator.
And, um, saying if we add the puts, the P&L gets wider. Sure what that means exactly, but um so if you go uh this is the so I let's say I want to trade the 1114 straddle so at the money and I think implied wall is going to drop, you know, 80 ball points right and obviously we're selling this so that's what the P&L, you know, that's what the PO and and you want to see what the P&L is immediately after expiration. So, you just shorten that way up, right? Make sure you got the days expiration range. So, that's what the P&L is, right? That's what I think I would make in the short straddle. And $40 to 57 is where I would potentially start to lose money. So, what does that mean for me? That means like maybe I buy the 35 put and the 60 call, right? As my 125 expiration hedge in this case. A lot of times what happens too is stock will open up, it'll be down 20% and then it bounces right after earnings or something like that, right? So you give yourself just a little bit of time uh for that to work out. But you know, I think in this case what you what you really want to do is is you want to extract the ball, sell that, buy the wingy protection, and then you know, you could do the math on trying to add add that extra protection. So let me just do that real quick. Uh, so see what that would look like. Oh. So 35 35 strikes put. Really small put. Oh, sorry. I meant to do that the other way. So teeny little call. Anyways, you get the picture. Um, this is probably a little too much. That call seems really expensive. So that's how that starts to line up, right? Um, and then you you see I I want to clip that panel like I don't want these unlimited losses on the wings, right? And that's that's the D. So you can play with the strikes. I think you get the general idea. Um, and you know, you have to be willing to give up the the P&L on these because hopefully this goes to zero and then you're getting, you know, maximum P&L on this. Like this does seem a little bit expensive. Um, this front month these weekly options are just really expensive. It's pretty crazy. You know, if that's the case, then maybe just selling a call spread or a call for this week expiration or in a in a put spread maybe is the way to go because those are just really absurdly priced relative to to next week's. Uh, but those are the kinds of things I'd be looking at. Uh, Stephen, again, the problem is is that you just don't want a situation where like there's not an obvious lean one way or the other. Like into some of these earnings, you see people just bid bid up calls to such dumb levels that you know that's the wing you can exploit here. I think just the overall ball contraction is is what makes sense. Uh, and you just don't want to have that unlimited exposure, right, to to P&L. So something like that uh would would be what I would look at. Um, so I hope that idea was helpful. Um, yeah. And and Steve, if you're like, "Hey, that made no sense." Uh, I didn't like it. Um, let me know. You can email me directly, sgdsspodcast.com. I want to make sure this stuff is clear. I know I'm doing it from my laptop here, and I'm not in the perfect spot, but hopefully I'm making sense.
All right, let's just round this out. Check out the markets one last time. Looks like we've rallied pretty good. Uh, 6730. I mean, that's not huge, obviously, but working that way. So with trace, we're on the delta map. You can see we infer buying pressure and then if we stay here, we we hit selling a pocket of selling pressure, right? Which should line up with what charm more or less tells us. You can see that overlap, right? So um, you know, we're we're we're supported in here. This is what I was saying like it's not an obvious buy because you're not seeing hero turn up into the end of day. I think the possibility for hero to turn up, particularly with zero DTS, is possible. And if you start to see that bid and this could be one of those spots where you get that sneaky big rally into the end of the day if hero can turn around. Right now it's neutral um off of this big strike. You know, we're supported. We feel good. If I had to bet on a wing, I would bet on an upside wing here, not downside. Um, meaning I think this will probably serve as a floor. But um, you know, it's not it's it's just it's not super clear. Again, if hero gets bid, then that's where maybe we want to start looking at some of those teeny calls for like a zero DT type trade. You know, overall, you walk away from this thing saying we could easily be back to where we are tomorrow. It's not obvious that people are freaking out at this point. And so, my takeaway from this is that puts seem kind of expensive. Uh, I'm not long, so I don't really feel like I have anything to hedge. I don't really love playing the downside here. Um, I'm still leaning more to the long side at the point now that that ball is expensive. So, that is a feature that could be exploited, meaning we could short V a little bit here and that could help the market rally. Uh, but we're not seeing that situation where it looks like people are about to start freaking out and and a capitulation event is near. Um, you know, particularly like flows are very negative. We just plan to strike. It's just call selling. So you know, ultimately this is the chopping ping pong kind of noise that we've been expecting and I would love to say, hey, this is the direction and this is the trade right now. Um, but I just think we're going to still, you know, maintain this kind of sloppy directional movement. Um, that's the way it's looking from here.
Uh, I'm going to be back and see on Monday. Uh, and so we will have a little bit of a better screen setup for everybody. Uh, any questions, please email us inflexgame.com. Uh, we have the syllabus, we have the webinar replays. Uh, please check out JT's sharpen your skills sessions. Those are all available. We'll be doing a lot more calendar, excuse me, calculator type uh, webinars coming up here in the next couple of weeks. And so, uh, some great events as well. We have Nvidia coming up. We have Fed meetings. Obviously, there's just a lot of excellent stuff going on that we'll be able to trade. So, uh, any feedback, please. Infosgame.com. Thank you all for showing up today. Again, apologies for the weird background and stuff here. Uh, but, uh, I'm off the desk today, but given the market being down so much, we did want to show up and give you the extra webinar. So, forgive all of this. Uh, but we got the webinar in. So, Chris, YJ, Steve, everybody, I hope this was helpful. And I'll see you on Monday. I'll be in my normal office. Uh, we'll be ready to rock. All right. Thanks everybody. See you soon.