Transcription
There is a term among traders that is as common as clouds in the sky, yet barely anyone truly understands it. And that is gamma.
A concept that really retail traders only know from the GameStop incident, where gamma sent GameStop into a worldwide buying frenzy and liquidating multiple massive trading firms. But what if I told you there's a way to use gamma in our favor? Beyond just these historical once-in-a-lifetime opportunities, weekly and capturing trading opportunities that are high edge in our favor based around our understanding of this Greek. Well, that is what we are going to uncover today.
As I show you how I personally use gamma within my own trading system to profit off of the market. Today, I'm not only going to show you how I find 100% accurate gamma levels in the market that I use for trading. It sounds like a gimmick, but it's not. But also, I'm going to show you exactly how I time the market better using the knowledge of how gamma affects big entities in the market and what very predictable actions it causes.
So buckle up, everyone. No matter what you trade, whether it's stocks, futures, or options, you need to know gamma. Because the fact of the matter is, you can choose to run away from it like many retail traders do, saying it's too complex. Or you can face it. But the reality of it is, whether you choose to understand it or not, gamma is still going to be there in moving price action. So it's about time you start taking advantage of it. Let's get started.
So first of all, what is gamma? Gamma is an options Greek, and what it does is measure the rate of change of the options Delta. Now, this sounds very complex. What are these terms' meanings? We're going to break that down.
First of all, when it comes to option Greeks, this is a big, scary term that a lot of people avoid. But all option Greeks are is a basket of terms that are used to describe the options pricing. All it's meant to do is, each option Greek has a role in measuring or displaying the certain price of an option.
There are two types of option Greeks. There are called what's first-order Greeks, that being like Delta and Theta. These are directly impacting the price of the option. All second-order Greeks are just measuring some sort of change in the first-order Greek. So second-order Greeks are like gamma. And what they do here on this chart is, gamma is a measurement or the acceleration, right, of the Delta's increase or decrease.
So you can see here as Delta begins to increase up into the at-the-money area, you can see how the gamma is measuring that rate of change. And how you notice it's not just linear, it's this kind of curving upward slope. And then you can see as we hit at-the-money, you can see that gamma does start to decelerate, and that the rate of change of of Delta is actually slowing down. And you can see that by how the curve flips on Delta as well.
So what gamma does is really just measures the rate of change of Delta. And to be ultra clear, all Delta is is how much an option is moving with each underlying movement of the stock. So let's say the stock goes up, you know, a dollar, how much is the Delta going up or down? And that matters a lot because, well, that's going to affect the price of the option.
And looking at another chart here, this chart demonstrates that option Greeks, all of them, change into an expiration date. And you can see gamma, which is again, just a measurement of Delta, it's a second-order Greek, it's just measuring things that's going to change too because all the first-order Greeks change their values heading into that. But you can see right here, closer to expiration, you actually see more dramatic changes and swings in things like gamma.
Of course, that measuring the acceleration of Delta. You can see for longer days out, uh, for longer-dated contracts, days till expiration, that you have a wider curve. Why is this? Well, obviously, a $1 move in the stock is not going to affect an option that expires two years out or a year out more than a stock that expires tomorrow. You can see that if we move $1 to the left, then you can see, oh, well, that's only, you know, a very small change in gamma over here. But if you move $1 to the left here, you'll notice the change from here to all the way down here is much, much greater, right?
So this is saying that into an expiration date, option Greeks typically get more sensitive. That you often see a bigger sensitivity, um, for those options that are near the money. Um, and you can see that perfect example here, they get way more sensitive into an expiration.
But why am I telling you this? Right? Why do the option Greeks in general matter? Why does gamma matter? Why do we need to know that they change into an expiration? Well, it has nothing to do with us, actually. It has to do everything with the market makers. And understanding how this affects them.
Now, this is where things get real interesting. Interesting. How should we actually interpret all these? Why is this concept even useful to begin with? Because I can tell you, most retail traders hit the brick wall right where we stand now. Where the option Greeks become useful is not by loading up our brokerage and saying, "Let me go stare at the Greeks all day and try to find a trade with it." No, no, no, no. We want to put ourselves in the shoes of the market maker. Because these people are the ones that actually move markets, and they're most affected by these option Greeks.
So the value is not in just looking at the Greeks for ourselves, but rather from the shoes of a market maker in knowing how a market would react due to all of these Greeks. I've talked about this extensively on my channel before, but options move the underlying. And why is that? There's been a huge increase in options activity over the last few years, an exponential increase. And with all these options and all these market makers selling these different options to the public, they have to remain balanced. Their job is to provide liquidity, and in return, they get a little off the top. They get to consistently skim a little bit off the top, and that's their long game. That's how they make money.
However, they need to do so in a balanced manner because they're not playing a directional game like asset managers are. "Hey, I'm bullish on the market. I'm going to invest bullish." No, market makers aren't doing that. They're just out there to provide liquidity. That's their business. That's their goal. And so by being non-directional, they have to remain balanced. How do they remain balanced when they're selling options? Well, they have to buy or sell the equity, the underlying, according to what options they sell. Buying and selling equity is how they hedge or balance their own risk that they're taking by selling all these options.
So they're selling and buying shares of the underlying based off of what option they sell. Not only what option they sell, but the effects of the Greeks on those options take a toll on what their actions are. So if we can understand the option Greeks, specifically gamma, and its effect on the market maker, who's again creating an impact on the underlying because he has to buy and sell shares to hedge his own risk selling options to the public, then we can understand not only when a market maker is likely to get involved ahead of an expiration date, but also where, because we know exactly where his exposure is and where he's going to have to take action around that market maker positioning in the market.
Market maker positioning is public. We can see that information, and this gives us a where and a when to take a trade, which is incredibly powerful because those are the two components to making successful trades.
Now, one of the biggest ways we can actually take advantage of this idea that market makers are having to do certain things around certain levels is really seeing where their positioning is in the market, specifically where the highest levels of positive gamma are and where the highest levels of negative gamma are. When you look at anything in the market, a very high positive gamma reading or level, which we'll get into how to actually view these on the chart, how to, what tool to use, it means that their calls. Call calls give a positive gamma environment. When a market maker sells calls to the public, it is positive gamma. It's creating this positive gamma in the market.
When the stock increases, their Delta starts to increase as well. And when that happens, market makers, to stay balanced, are actually going to start selling shares. Okay? And so you'll notice here that it starts to turn around, and that's why you actually see large areas of calls act as resistance levels or large areas of positive gamma. Likewise, as soon as you start to drop off of that area, the stock is decreasing, and the dealer's Delta is decreasing as well. This causes them to actually start to buy up the stock again to again maintain their balanced portfolio, to maintain their balanced risk in positioning in the market.
And so what you actually get is these areas of large positive gamma actually act as magnets for the price. That when price gets there, they stay there, and they kind of stick to them a little bit, creating these choppy ranges that you can actually trade and anticipate into your trade plan, right? That maybe you took a swing trade and you want to get out of these calls because you're going into a large area of calls that's going to cause, um, you know, the dealers to start selling off shares.
Now, there is one exception to this. You guys all probably know the gamma squeeze of GameStop. That it was, uh, Raider, if you're saying that they're selling shares as they go higher, why is it that it continues to keep going higher? Right? When GameStop goes higher? Well, during a gamma squeeze, what happens is there's so many calls that get loaded up so much that the dealer keeps having to buy, buy, buy, buy shares to keep covering all the calls. It just creates this massive buying effect, and he can't unwind that position in time. And that's what blows up a lot of firms.
So short squeezes happen due to an excessive amount of positive gamma. It's very rare in today's markets. It only happens during certain conditions. But again, in the majority of cases, large areas of calls, which creates positive gamma for a market maker, is where you can actually see, um, these reactions take place.
Now, on the flip side, whenever you see a large area of negative gamma, this means there's a lot of puts. Puts create negative gamma for a dealer or a market maker. And when the stock comes down into them, it's actually more directional. Put walls are more directional. Put areas are more directional. When a market maker has a ton of puts, when it comes down into that area, the stock decreases, and their Delta increases. Like their Delta increased here, they're actually going to start shorting shares. They're going to start selling shares, and that causes even more selling pressure into this level.
However, often times we think of put walls as support because, well, on any single little bounce, what happens is the dealers, you know, the stock starts to increase under or at this level. Well, guess what? The dealer, dealers' Delta is decreasing, and that causes them to buy up shares. So typically, we think of this as more of a support area because when you do get down to there, any little increase, which you typically always get, is going to cause a major reaction to the upside.
And so now you're probably wondering, Raider, okay, so we understand positive gamma levels. We know how they act. They're typically around price magnets overall. We consider a large area of positive gamma calls, um, a lot of positive gamma to be resistance areas. And we consider large areas of negative gamma to be support areas. And what's also important and worth mentioning is that this graphic right here is heavily tied to this graphic right here. I showed you that gamma versus days to expiration. Basically, this chart right here shows that as you near an expiration date, the closer you get, the more dramatic the moves in the Greeks are. And that means that you can anticipate much more urgency from a market maker to act upon that level.
So when you see this right here, the level, let's just say, you know, 10 days before on a put wall, 10 days before expiration is going to cause a much bigger reaction than if it were to come down into a put wall that is, say, two years, you know, a year out, that's going to have a different reaction. So preferably, when you do, you know, look at these levels, you not only want to find where the big dollar amount levels are, you know, where's the most money stacking, but also preferably it to be closer expiration, 10 days out or 20 days out, because this is where the most observable reactions in the market are, the most dramatic ones are closer expirations. And that's again, because as you near expiration, you have these big changes in the Greeks, which ultimately will affect how the market makers react.
When they do come into these areas of negative gamma or positive gamma, a market maker is going to be much more urgent to sell his stock into an expiration when he has all these calls here versus if it was, you know, a year out from now.
So how does that help us? How do we go and find this on a price chart? Well, you really can't. And so that's where you're going to have to use tools such as a gamma chart. Now, on my platform, the Radar Report, you can actually find these tools along with my reports, which we'll get into examples later and how I traded this concept. But right here, you'll go under open interest, and I built this tool to my specifications, how I like to view this data. I think it's really helpful this way. But right here, you'll see open interest. You want to click on gamma exposure, and this will give you the net gamma exposure of the entire market for that ticker.
Now, you might be wondering, Raider, how do we possibly know who is holding these options? Right? Is it someone else? Is it Small Joe? Is it moms and pops? How do we know that a dealer is likely involved? Well, on a ticker like SPY, 99% this goes for every ticker. 99% of option flow is going to be a buy to open from a participant and a sell, um, from the market maker. So market makers provide 90 plus percent of the liquidity in the market. Therefore, when we're looking at a chart like this, we can assume that when you see a large area of negative gamma, that means the market maker is the one who has the most responsibility tied to that level. It's not necessarily going to be, you know, Mom and Pops. They don't have enough money for that. This is most likely going to be the market maker who causes a reaction here. And when I say the market maker, it's not just one person, guys. These are all different firms who do it. But because they all do the same thing, they act in unison.
So when we're looking at this chart, there's some valuable information we can gain. Well, first of all, we can look at the positive and negative gamma areas. Large areas of negative gamma are support levels. And so you can see right here, the 605 would be a major support level. And not only is it a support level, but we can see how big of a support level that is. The bigger the negative gamma, the more responsibility of the market maker, and the more likely it is to cause a reaction.
So what a lot of technical traders get wrong is they're drawing these zones without knowing how actually strong that zone is. Right? They're drawing a support zone, they're going, "Oh, price action came from here. Great." But do you have an idea of how strong that zone is relative to other price action zones? Most of the time, people don't understand that. And this can be a better gauge to that. How many puts are on that area can determine the strength and in more importance of that area.
So right here, you have the 605 level. This is one of the biggest, uh, support zones within that standard deviation. But you can see right here as well, there's a gamma flip. We'll get to that in a second. But going back to this chart, you can notice that, well, of course, when we come up to a positive gamma area, what do we expect? Well, this is positive gamma up here, noted by the chart over here. This is a positive number, and this is a negative number. You can see that, well, of course, if you go into that kind of 610 or 615 area, you can expect some sort of major rejection. And that's where you're going to likely see price reject off of it. Again, majority of times, it is a resistance area. But you can expect if it drops further enough that it will buy back.
Now, what's particular about this, and we'll get into current examples later on in this video, is that's exactly what SPY did over the last day and a half. So you can see right here, bigger area here, 620 as well. Now, if we come down to a negative gamma area, what would you expect? Well, you expect, you know, the market makers would possibly flush it through if it had enough momentum coming into that zone. But in majority of cases, this will end up being some sort of support zone for us in the future.
Now, if you've been a follower of me for a while now, you know that I always talk about put walls and call walls as well. And you might be wondering, how does these gamma, how do these gamma levels differ from put and call walls? The answer is, they really don't. However, going into an expiration, you're going to see closer strikes attract more gamma. They're going to have a lot more gamma because, again, going back to this chart right here, the closer you are, the at-the-money, into the closer the expiration, the larger the reading. And so you can see, although on this chart right here, the largest open interest level is not the largest gamma level, you can see over here, this is the open interest, 570. However, since that's way outside the expected range, 570 is not going to be the largest gamma value, not even close.
So you can see right here, the largest ones are are close to the price, and they're also at-the-money-ish. This will continue to change into expiration. So we can use these as support resistance zones. You can go and plot a chart and say, "Look, 6595 is a support level. You can say that, you know, 615 is a supply level." Which again, we'll get into examples how to do that later. However, there is one more level I want to point out on this chart. You can see right here at 610 is what's called the gamma flip. This is where the gamma kind of flips for the dealer from negative to positive, etc. And that can act as a major pivot level in a chart because when you have an area where it flips from negative to positive, it often creates and changes mechanically how the markets trade. And so the gamma flips can offer a great pivot level that you can chart.
For example, if we go to SPY and we were to look at the 610 level, you can see that as soon as we came into that 610 level, you saw kind of that pivot happen. And you can see right here on a smaller chart, on the one-hour, as soon as we came into that one-hour, that 110, boom, you had some sort of change in market dynamic underneath of this level. And if you look at this here, this big level is one giant positive gamma level. And if you go, remember what we said about positive gamma is that it acts more like a magnet. When it goes above, they sell. And when it goes down below, they try to buy it back up. And you can see that if we draw this kind of little dotted line at the 610 level, I know there's a on my screen, but that's from previous trades. When you come down below this level, it acts as a magnet, right? That they come down below it, boom, now you have to start buying it back up. And then tomorrow, it's very possible you see this pump back up and then just sell right back through it.
So this is what you would expect around this level. It's a pivot level. It's an area where you expect these, the dynamics of the market to change. And that's why it's a gamma flip level. These are really great places to mark on your chart for where you can expect, um, based off whether it's a massive positive imbalance or massive negative imbalance of gamma, to have a move one way or the other. But in general, just a big change in market dynamic.
So let's say you have predetermined data. Again, you always need some sort of context to the market, right? Let's say you have a great option flow trade, or you have some sort of seasonal play you're playing. You start to play the downtrend. You see a gamma flip right there, um, $2 below your price. That level is going to be somewhere that maybe you add to, maybe you expect a reversal against you. But ultimately, that's somewhere where you can get involved. Some decision making can be happening there. That's exactly what the gamma flip is. And again, remember, I can't stress this enough. Negative gamma levels are more sporadic, they're more directional. While positive gamma levels are more like magnets that they attract price and they're kind of sticky. They kind of keep a sticky tone to them.
These observable gamma levels are something that we can take advantage of. Using that tool, we can spot where exactly certain trigger points will be, as well as support and resistance levels. But not just support and resistance levels, how that price action would actually behave around them. When you come into a large area of positive gamma, you don't just expect a rejection. You expect it to act sort of like a magnet, a trapped range off of that area. And understanding that can help you position correctly, maybe not grabbing too close of an expiration because you might suffer on that bounce back up to that zone before the, you know, the intended drop that's bigger to follow. So that's really what's important about gamma. It helps you build expectations around the levels, how price action would act, but also where those trigger points are.
Now that I've shown you how to actually draw these on your chart, I mean, it's literally as simple as seeing those levels on that tool and marking them on your chart. We also need to talk about time and how it relates to gamma. We touched on this earlier, but as you come into an expiration date, gamma and the other Greeks do change. Like you saw from this image here, the further out expiration you were, the changes in the gamma were less significant. But as you get closer and closer to an expiration, there are more significant obligations to a market maker.
So how would a market maker go about and actually manage these different changes? Well, it has to come through Opex cycles, option expiration cycles. This is an observable cycle that happens every single month that I've already made a video on that you can go watch here. But we need to touch on it here because it relates so heavily to gamma.
Now, Opex cycles are something I talk about frequently within my Radar Report and things like that, which we will review some examples later and how I actually trade around these concepts. It's one thing to talk about them, it's another to trade them. But right here, ahead of certain expirations, you can actually expect that because Greeks are always changing into an expiration, that there's periods of time that are pretty predictable and pretty accurate as far as how often they come about, to where you can expect market makers to start preparing for these Opex by either hedging more, by hedging less, causing some sort of reaction. Because remember, going back to that chart, if Greeks are always changing and getting more dramatic into an expiration, it would be not wise for a market maker to go, uh, and just do it the day of, right? To do all of his risk management the day of. No, he's always doing it. But there's certain points leading up into that expiration where you actually see these key pivots in the values of the Greeks that causes a reaction or certain behaviors from the market makers. And so that's something that I've researched and I've found to be called Opex cycles.
It's really simple. Right here is something that you can just take notes of. There's two phases ahead of a shakeout or two phases ahead of an Opex cycle. Whenever you have an options expiration date, you just want to look at the monthlies. If you actually go back to my options, um, in my gamma exposure, uh, tool, you'll notice that it says next 30 days. Okay? This is because I always want to include a monthly expiration, really. And that's going to be where you see the most money. Again, it's always about the most money, and also where those Greeks are the most dramatic, and they're typically on the monthly expirations.
So using the monthly expirations only, what you want to do is draw these different phases ahead of time. 14 days before on regular monthly expirations, so not including quad witching. If you don't know what that is, there's four months of the year where futures and options all expire on the same day, those being March, September, June, and December. Okay? So outside of those months, they're regular months. So 14 days before is a shakeout phase. This is often characterized by some sort of fake out move. And then max pain phase is around four days before, one to four days before, where you actually expect some sort of max pain, where it kind of reverses that trend and pins it in the middle. It's called a pin move. Most of the time, we're going to get to why that is in a second. But these are the two most common phases. And again, I have a video on this that I've displayed earlier that you guys can go and watch.
But how can we actually implement this into our trading? Well, one of the best examples is recent price action. In case you guys don't know, I literally release professional reports where I show my entire trading thesis for the week, including trades, entries, everything. This is the most in-depth research report you will ever see, and I release it weekly with trades, gradings, entries, everything. But one of the key concepts I talked about this week was the max pain structure. And that coming into the Opex, which is typically one to four days before, we would have that max pain structure. We already had the shakeout phase. The shakeout phase started on this day right here. Here's February 21st. This is going to be your Opex. The end of box Opex. 14 days before is when you expect the shakeout phase. So that would be around the 7th. Okay? So of course, the 21st minus 7 is 14. The shakeout phase is where you have some sort of fake out. We had that. That was to the downside. Then you had a massive move higher. And one to four days before is when you can expect a lot of pressure to be put on the market makers to start to balance their Greeks even more. Again, gamma, gamma is making things more sensitive. And it's called a pin move because here I'll explain this. The pin move, the reason it's called a pin move is because typically when the Greeks get so sensitive, if we go back to this image here, $1 move this way causes a huge drop in gamma. $1 this way, huge drop in gamma. It causes major swings either way. And remember that in an area of high intensity calls, where there's a lot of calls, what happens? Well, when you go up, market maker is going to sell. And when the market maker starts to sell in that positive gamma, it goes back down, and he's going to be forced to what? Buy up again. So because of how dramatic the swing is each direction, it's going to cause the stock to kind of almost sit there and be flat into that expiration and trap everyone. And that is max pain. That is what we traded on. We wanted to see a selloff this week to initiate that, and then we expected some sort of balanced close.
So you see max pain common structures. Most likely this week was going to be this boom, and then a close in the middle. If you look at the SPY chart, you'll notice that we talked about this as well, right here. We said, "Look, you're most likely to see some sort of pump, drop, and then some sort of close in the middle." This was kind of the estimated close. I drew two paths for that. So if we are going based off of this structure, look what's happened, right? Pump, drop, close in the middle, right here. We're getting a pump during that max pain, then we get a drop, and some sort of close in the middle. Now, this might go down, but the, the thesis is that somewhat we're going to try to close in the middle here. This is going to be a balanced close, and then post Opex, we sell off.
But this is how you can utilize this. This is using Opex cycles to help better time your trading in your thesis. And this happens all the time. I've backtested this again in a previous video. You can go back and see a bunch of those examples in how we utilize that. But this was a current trade.
Now, you might be asking, Raider, how did you actually make money on this? How did you utilize this? Well, it's all about timing, right? If we knew that there was going to be some sort of selloff related to the option Greeks, again, knowing that market makers were in this position where they forced it higher, now that they have all these shares, and you're going into these huge call walls, now you have to start selling into the expiration. You can't just hold all of these shares. Now they're going to start the selling pressure. And so we expected selling pressure off of this, uh, 613 max pain point. That's why I called it the max pain point. That was kind of the highest I was expecting before we get some sort of dramatic drop. Well, and I went, I said, "Okay, what are the weakest stocks? Right? What are the stocks that are going to benefit most from this drop, or not benefit, but suffer most from this drop?" Well, first of all, I wanted to long energy. That was a trade that I long. This was an A+ energy. It was totally unrelated trade to that, but it was a defensive. But the big one for this week was MS. Banks did not make a new high while the overall markets did. And hilariously enough, this is always a classic sign of a market top. And so I wanted to short MS. MS was a 600% return today. The biggest drop since August 5th. Massive mover. Absolutely flushed. I got in right at just above $139, about a $1 contract. They went over almost to $7. So huge trade here.
But this is what I capitalized off of. Is I used gamma. I used my idea of, "Hey, look, we're coming up into this massive area of, you know, not only just calls and positive gamma, which you saw back on the, the previous chart." If we go and look real quick, you go to tools, open interest, then you go to the, uh, gamma exposure levels, you should see that the massive gamma levels were higher above 610 and almost into 615. That was really the, the big area, right? The max pain point. You can see 610, 615 up here was where these massive, uh, positive gamma levels were. And that causes market makers to what? Start selling shares into expiration. Going back to that chart I showed you earlier, or that that graphic I drew on TradingView.
So these concepts can absolutely help you trade. Not only that, but time your trades. Know not only what direction the market's going, that's one thing that's really easy. But when is that drop going to happen? That's what we're pinpointing. That's why my reports look so accurate is because I'm always good at timing. I'm trying to find when is the best time, not just what. And that's always what a key focus of many traders should be. Although it's not, they're trying to, you know, "Oh, I just want to do direction. It looks bearish. It looks bearish." Price action lies. If you would have shorted here, you would have gotten smoked. But if you knew timing and you knew to wait toward that max pain point, that's why you're going to see that short. And that's why you can even see throughout the report, um, if you mention all throughout this report, I was talking about timing. If you see, uh, you know, "Hey, when was I going to short? When is the best opportunity to short?" I'm mentioning constantly, Thursday and Friday is going to be the best short. So if you see right here, I talk about the FOMC minutes, weakness coming Thursday and Friday. I'm talking about, "Hey, look, Thursday and Friday, Wednesday, Thursday, Friday. This is when max pain starts. That's when you can actually expect that reversal move. Market makers drop shares, um, and that's mechanically what's going to happen."
And if you want to apply this to your chart as far as how to time these kind of changes in the market every single month, what you can do is go and chart your monthly expiration, draw a vertical line, and you can do this for the future as well. This isn't just a lagging concept. This is a future-looking concept that you can do this in the future. Put out, you know, "Hey, next month is going to be quad witching." So we would do the monthly expiration and then we would do 14 days or seven or nine days before, and then the 30 days before based off of this rule set right here. So you would do it based off this rule set, quad witching, and then do it, you know, seven to nine days before, 14 days before for max pain. Um, but this right here is what you would do, and you would go and say, "Hey, look, around this date is when I would expect some sort of pivot." And you can go back in time and see these different things like the last expiration was, of course, let's just do February, or excuse me, December. December 20th here. Then you can do one to four days before. This is a quad witching, so we can instead, we'll have to do the other parameters, which is seven to nine days before is a start, a max pain, and then around, let's say, 30 days before, we can use our tool right here, um, and you can do this for every single month in the future. Doesn't have to be lagging.
Right here is four days before, or seven to nine days before, excuse me, since we're doing max pain. This is this. And then around 30 days before, 30 calendar days is when, um, you can, oh, that's 11 days. So right around here. And then 30 calendar days, which is that second number right there, you can expect the start of the shakeout phase. And what do you notice? Literally around these dates. So 30 days before, and then seven to nine days before. This is the expiration. Here's max pain. Here is the shakeout phase. What do you notice? Well, all of a sudden, instantly, almost instantly, we had a pivot. That we had a move down, and then all of a sudden, shakeout phase starts. Boom, huge move higher. Is that a coincidence? No. This is why gamma and the Greeks matter. Because as you near an expiration, those are changing, and it changes how much the market makers need to hedge. They're going to be buying shares, they're going to be selling shares. And based off your reading of the option market, which in this case, there was a lot of puts, this is going to drive the markets higher. As time passes, puts lose more value. They were short to hedge the puts they sold to the public. So now they have to exit those hedges. How do they do it? They start buying back shares. And then as you near max pain, look what happened. Look what happened. Boom, right here. We balanced it. We had this corrective move. Of course, very dramatic case, but that is exactly how you can use this.
So the gamma exposure, all these different things, it's going to come into play not just in developing ideas with Opex cycles, also finding levels that, "Hey, we're in this massive positive gamma environment." That means as we close into that expiration, market makers have all these shares because they're hedging their calls by buying equity. And so in order to get back to neutral, get back to balanced, how do you get back to balanced? You sell those shares. So it creates selling pressure off the top. That's exactly what we experienced. Now, as I'm speaking, as of 2/19, um, um, that's what we're doing, or excuse me, it's 2/20. But this is exactly how you want to use these levels moving forward. You know, you can just simply chart them. You can also do what I do and use Opex cycles to help better time yourself. But also the general concept of knowing that market makers are the ones moving the markets. I don't think many people, many traders today know that market makers and options are moving the markets. They will go trade stocks and they'll just, "I don't need to know options." Yes, you do. Options directly impact the underlying. And so many retail traders are just trading blind because they're trading things with huge put imbalances and they're trying to short them, or they're trading things with huge call imbalances and they're trying to long them. That's not how they work. That's not how you best position into the market.
So if you want to get connected, if you want to see more of this, what I would recommend is number one, you sign up for the Radar Report. So you do get access to my professional research. Again, I cannot stress enough, a lot of the trades we hit this week were very good. XLE, this was a banger. An A setup for me. I even rank how I position them, things like that. UNH, this one didn't really hit entry for us, but HM was a great trade. Alternative to this, uh, PG, of course, this one's, uh, on the fence to still be working out. It had a gap down. Didn't take an entry on this, but it could certainly still turn over tomorrow. We had MS, this was the 600% one. And then Cisco is another one. Um, but as far as what you want to do, get connected with that. If you guys also want to join the Discord, we have a Discord as well. This is where you can get access to hundreds of hours of PDS from my mentors and I. I am not self-taught. I have never claimed to be. But this is something that you guys can get involved with to learn more. Other than that, guys, thank you so much for your attention. I appreciate you being here. If you have any questions, drop them down below related to Greeks, related to options, related to how the market makers impact stocks, I would love to break it down for you. Have a great day, guys. Bye-bye.