hey welcome back to the bear trap Discord podcast my name is John Kirby my co-host is Vic all chart credits as always go out to awk this episode is actually preparation for an episode that we have coming up uh with gamma Edge and so we wanted to do a refresher on game exposure charts and the cool thing about going back and looking at these things is that when me and Vic when we sat down together we realized that there's all sorts of new things that we're always seeing in them so there's something really nice about going back to basics because more things end up coming out of it and so hopefully this podcast is a really nice contrast for um so for those of you guys who already know a lot about Gamma hopefully you'll find some useful stuff in here for those of you guys who are new to it hopefully that'll this will challenge you a little bit but also provide you with a way to get started with all these charts well um yeah without further Ado I hope you guys enjoy the episode like subscribe Etc alright okay there we go okay so we're live let's go let's do this so we're gonna uh we back once again of course uh bear trap on Discord but we're gonna talk about um these these charts here because uh you know these explanations here I don't know these are just perfect okay to to go over so um yeah where do you want to start John actually wanted to ask you so you know you were a Trader before it gets before gamma exposure uh how did it change the way you look at Price action the way that you approach trades like how big of a difference has it made it there very good question because the the one thing is uh playing the edges and knowing how far a stock can move uh that right there already is gonna be like that already there is an insane Edge for as a Trader so using gex to just know like it's very unlikely for the price to go here it's very unlikely for price to go here and you can nail it narrow it down into to the point to where you're like well the most likely scenario on the distribution is going to be here just based on everybody's betting positions and the time they have until they expire so you know you're looking at the gags you don't even need an indicator to trade options anyways like if you're gonna go trade Futures with the gecks you know you should probably have like a moving average or something I think but it's like so yeah what about you what did it do for you you were you're an indicator based Trader I think before this yeah I mean I was mostly a volatility based Trader so I would just look at you know um sort of uh implied versus realized volatility do mean reversion involve that type of thing um and this completely completely changed my understanding of how markets move so I came into the markets thinking as most people think that um that they're random right and to some extent they are and it's almost like markets are random relative to the model of markets that most people have in their head um but when you start to see gamma exposure meaning like you start to see um how people are positioned in the options Market before the price action of a given day and then you see the results of that day you start to realize that it's not as random as you thought it was that fair yeah no and and you're you're totally I mean it's still random like you're saying but the distribution isn't that hard to see the probabilities aren't that hard to play essentially um it's not like it's not super it's not super easy to put to basically call the next day's action but it's way easier using this uh yeah and all of a sudden movements that are inexplicable to a lot of people um like um I remember a while back we had an fomc conference with a surprise hike and then we rallied off it and um I had a buddy who was completely confused as to why something like that would happen and I remember I had listened to a gem podcast beforehand I was watching the gex and I could see just by way of The Way We Were positioned in terms of options that something like that had to happen so it makes the market and the moves that happen in the market actually make sense rather than feel arbitrary no and uh the other thing too is knowing the different environment that you're in based on this uh helps you as well because one you're seeing the edges you're seeing the the Tails which is uh you know that eliminates a lot of the price action already that's not going to happen uh so now you have a better window of where price can trade and then you can also uh sorry I lost my train of thought there hold on a second what was I saying well you were saying that there's uh like the edges and then what's the other part that I was trying to talk about well it tells you the edges and it also tells you how price is going to trade right like if it's gonna squeeze if it's gonna just correct the environment balance around the environment yeah the environment that you're going to be in are you going to be buying the dips or you're going to be playing you know is it going to be a choppy day which is the most important thing to me is it going to be a choppy day dude I want to eliminate that's the first thing I go into every day is like hey is this choppy garbage day or are we gonna actually get some Trend action and so right there like 80 of the time the markets are already choppy anyway so these just eliminate you just eliminate 80 of the trades you're not going to take now because of that so it's like playing and for for me for me it's the opposite I look for those setups where it's going to create a choppy day and then I try to uh color in the price right um so there you go yeah so if you if you like that kind of action you know that kind of action gets you 80 of the trading action so you know if you like to trade every single day boom there you go we got Traders you know like Doc who he literally just comes into the market every day and sells the edges credit spreads right and then just dude it's like clockwork for him I see him 100 and it's trade so if you're a day trader and that's basically all you need to do is come in here and play you know like like in this this particular charts case you know you basically come in here and you can sell the 428s 429s 430s you're probably gonna collect some good premium off of that you know what I mean so it that's it then you're done and you don't have to look at indicators you don't need it you don't need to look at anything else except for maybe having like the one the volatility trigger on your chart or something you know um so it's like you know how it changes you so the environment trading environment so now you can have multiple strategies for every environment that you want to use and and and basically what was the other thing you know I was telling you you know the probability distribution the two things right there are going to give you massive Edge yeah and so let's actually break down so we I think I think we've we have a good teaser on like why this is important why people should be paying attention to this and that's something that at the end of the day you're going to have to see right you're gonna have to look at these charts understand them and then look at the price action and compare so that's not something we can do for you um but you know if you've been listening to the podcast over these last few episodes you probably have a pretty easy indication that this works but um the re I I just wanted to go into why it works and and it's pretty simple it's just um just a little bit ago Vic said you know this is telling you the distribution of bets right um and so uh right on the really simply most people listening to this will already know this but you know on the left hand side here in the yellow we have the call options or call gamma actually um and then down here we have put options or put gamma negative gamma we call it sometimes and this is a way of basically taking all of the bets that are at each of these strikes and then netting them out figuring out um like whether there's more to one side more to the other side and then what these things will end up doing is at least on the call side for instance these will act as accelerants uh to price so if we get above this one then it's likely that we're going to go to this one it's likely that we're going to go to this one like that we're going to go to the next one the reason for that is because somebody's selling these bets um and when you sell an option most people are aware that's this more significant liability than when you buy an option you buy an option for you know uh two bucks uh fine you can lose two hundred dollars if you sold that option right and it goes against you you could lose technically an infinite amount of money meaning that sellers are of options are more likely to be trying to hedge them out um and so that's why we look at this it's because we know that there's somebody on the other side that is worried about these options that's trying to hedge them to the other side and the only way that they can hedge them is by hedging Deltas in other words if we get above this wall with call options they're going to have to be buying shares and that's going to keep pushing price up and the Dynamics are similar with put options slightly more complicated but that's those are the sort of fundamentals I mean we'll Link in the description a lot of sort of that explain a little bit more why this works um but you know that's the basics that we're starting with well that was a great explanation dude um and and so that's the basics of using essentially the histogram okay so that's going to be one part of it and uh the other part is going to be able to be incorporating those lines as accelerants like you said uh you know highlight that Delta line there one way I use this and you'll see the gamma um sort of fill in this line right here yeah it's hard to see uh one thing you'll see with these lines is this is basically giving you the range for the day in my opinion and highlight the one on the put side as well oh dear oh boy well you guys got the you guys get the air trap technology here yeah okay so let's see here no no that's perfect okay they get the idea I mean if anybody's watching this uh and with me so far but you know that so essentially you're looking at he's talking about you hit one of these gamma bars and you're likely going to get some hedging pressure to the next one right and it's gonna total it's gonna sort of uh try to be attracted towards that uh the biggest one uh depending on which side of the gamma you are these lines reflect how much hedging pressure there's gonna be at each point along this and so but that's also that's the Delta curve so that's going to be giving you essentially the probability distribution right there from the option markets perspective now that line is going to shift uh in my opinion it shifts based on the IV so so now you got three parts to this where you've got the histogram um and then you've got that Delta line there and then you've got the IV which is these red lines here in the middle yeah those guys it's the red shaded area right and you can see those of you who are familiar uh with IV um and the smile or smirk of IV um we had a whole episode on skew it's right here it's right here along the line except here you can really see it um sort of mapped onto uh the gamma which is beautiful right because you can see that the lowest here right like what is the local minimum of the uh of the Vault curve um and it's right here at this these 425s you can tell hey like those are pretty popular um these are pretty expensive but they were being bought anyway the 422s on this particular day we don't even care what day it is right we're just looking at this chart for educational purposes correct yeah foreign no that's perfect and so you see this little Zone like if I'm looking at this and I'm going okay we're going to 425 like it's not even hard for me to tell at this point because you see where he's talking about this curve in the IV that's the low Point price is naturally going to be you know people are going to sell both sides of the SKU because that's what you're looking at you know in general they're going to be selling the high the higher strikes first and then buying the or the higher IV and then buying the low IV so you're naturally gonna you know gravitate towards that low of trough he's talking about here um you know that local low point on the IV so like on the call side you've got that around that 423 424 you know that's where all the people are positioning their bets because you know that's where it's cheap at least on this side only at least on this side of positive gamma and and so if you've got the you've got the low IV and then you've even got you know the trough there then you're likely seeing 425 uh in the near term at least for you know at least a tag I would say and then it's within the Delta distribution because like if you're up at 4 30 you can see people making bets there but look at the Delta the Deltas are really small there so is there going to be a lot of hedging pressure Delta hedging pressure you know until price can get up anywhere near nearby but then you've got almost like the um I mean I've I've tweeted this before because I actually think about it this way it's almost like the air gets thinner and thinner and thinner and thicker correct yeah that's a great way to put it and so Theta Theta is going to kill that stuff um early I think maybe we should add a Theta curve to these charts dude but um because that would give us an idea of charm the charm effects yeah I mean right right now the way this works right because um we're talking about zero DTE options here which means that Theta is actually really relevant because I mean there's relevant for all options but it's super relevant here because every half hour that passes um you're going to have an effect where uh the gamma on some of these is going to increase and the gamma on other ones is going to decrease radically and there's more gamma that's going to evaporate from the picture because think about it in terms of what the option values are doing and we all know that most option values over the course of the day go to zero right there's only about half of them or whatever that are going to be worth anything by the end of the day there's another half of them that are going to be worth nothing so net net we're losing a lot of value by the end of the day um in Theta okay so in your and like in this church uh case you've got the put gecks as well so you've got put game at the bottom there which is also you know you know basically they're diminishing the probabilities they need a Delta H against those uh as time passes I didn't expect you know accelerated rate we don't know what the rate is because we can't see it here but so that's like the fourth part of this where you've got to kind of make assumptions based on on charm or time effects on on canvas so and that I mean that's what I do like that's when I kind of have been specializing in right where I'll look at these and just to break down a thought process doesn't have to be super complicated I'm looking at this put um this put wall here right I'm saying okay by the end of the day so long is by the middle of the day price is still above you know 420. these guys are going to be radically reduced in value meaning that these these as a hedging liability are going to reduce in um so that's interesting because it's like you're taking and you're using your experience in that like you know fourth part of of this here where you know you're looking at the histogram you're looking at the Delta curve you're looking at the IV and then you're thinking about charm exactly that's I mean that's for the end of the day yeah and so I'm saying if we add a line to this if there's a way to add like a visual for that um so you can see the impact of it because I've seen where you know it it depends on how bearish people are people hold on to that gets for a while I mean as far as they won't hedge against that or release their Hedges against it until later on in the day you know what I mean so like if someone's like oh I need to get rid of these you know these short Futures here and buy them back you know they might not do that until the Theta kicks in on those those puts they sold yeah and I mean sometimes it'll take a little bit it kind of depends on the structure of that day right because not all Theta is created equal exactly so uh yeah I'm just I'm just saying it's like this is the part where you use your experience uh you know what kind of day it is and stuff like that um to make that assumption because that's not on the chart but the way the the way that that type of thing works is this it's just a series of if that and connections right where I'm saying hey like if price is above here by this time these guys are going to go away which is actually going to push price up you know a couple points at least because these have gone away and then these guys if we're close to them are actually going to increase in relevance which is going to actually increase the hedging obligation right here meaning that our most likely endpoint is actually above the 424 and not right at 424. yeah right and so you start to use your experience to start to see how if time is going to collapse the value of some of these options and expand the value of other options it's going to modify the Delta hedging and curve over the course exactly the Delta hydrogen curve is the key because that's that's where you can see if that thing starts to shrink what's it going to collapse around essentially exactly what's it going to collapse around and it's usually the peak It's usually the peak X depending on what time of day it is but if you look at this and you see 422 like this you're like this is probably closing around 422. it's not that hard or somewhere between 422 and like 424. um I could see like in a chart like this where you know they don't they try to let those 425s also you know expire but you know because the Market's like that especially with the low volt the other thing is it's going to depend on context right like um if this were an environment like we have right now or like we had last week I would say yeah we're hitting that 425 if it's in an environment like we're going to have in this coming week um I'd say yeah they're probably going to park at around 4 23. that's the IV assumption you make too because the IV you know do you have is is there enough juice really uh to get up there with the IV where it is you know you'd have to kind of just make that assumption based on what you're looking at there because um it says there's the IV in uh and historical Vol indicators so yeah that's super useful on trying to decide on you know hey is IV still elevated here and if it is why is it remaining elevated and then you can look for risk points um the reason that that's elevated to go back to our discussion on sku is because um if we're thinking about IV as a supply and demand issue if Ivy is elevated it means that there are there are more people out there that are looking to buy options right exactly what those options are meaning that if we do get up it's very likely that those people will start to purchase more options up higher which is likely to force us even higher up so it almost is like it tells you how much momentum there is right in the market or in the options Market it's it's a volume indicator volume and volatility very correlated and so like if you look at volume for futures you're looking at like uh you know a footprint chart or something you're reading the volume on the bid and the ask or whatever that's that's just basically volatility yes how much momentum so you know looking at something like this you're going hey we're still kind of elevated and that's really just because of the I the IV 30s and your hb30 uh even going out to the 90 I mean hey you're trading at the 90 day right now I mean that's kind of High um you can start making assumptions like well the market could probably expand more than I that I'm thinking you know yeah that 425 would definitely be possibility um as IV contracts yeah right because because this sorry to interrupts but this is August 12th Sigma this is basically telling us what did the option market price in at the beginning of the day um for uh the move by the end of the day and right it's basically saying hey these 425s are outside of the expected range and this is one Sigma right which is what like 68 chance or something like that so it's not saying you know we can't hit that 425. yeah um it's just saying the option Market thinks this and so if you were to let's say you want to go out and see if it makes sense to buy these 425s the only case in which I would do something like that is if um you see a ton a ton of puts down here which you know are going to come off which you know are going to push us up and then you have this sort of a better a slight of a better laddering and so you can kind of hypothesize that the options Market is not pricing in the short the sort of chain reaction that's going to happen that would actually take us above this 424. otherwise buying those 425s is a waste of your money right yeah and then and if you're a seller then you're coming in if you make those assumptions and you're going yeah 425 is not in the cards today you know hey you got some decent premium on the IV for those if you're a call seller and it but you're more likely to put seller here in this case but um because you still got some you still got some IV down there uh you know much lower the other thing too is I was always wondering what this Max Payne has to do with this chart and I'm starting to get ideas based on this I want to know what you think first on Max Payne oh yeah I can I can tell you so you know what I was saying before that by the end of the day uh like half of the options have to be worthless correct yep um the reason I said half um and that's not actually accurate right it really depends on what the histogram says but by half I just mean half the strikes right um so if we're at a very particular point then half the strikes are going to be above half the strikes are going to be below assuming that every strike has an e equal oi you know half of them are going to be useless um the reality is that we have this histogram which means that we have more call options right now for instance than we have put options so it's no surprise that Max Payne is all the way down here because the most option holders would lose the most money if we were to expire down a little bit underneath all these calls because then all these calls will be worthless so the Max Payne is sort of the equilibrium point the question is at expiry what is the price at which if we were to expire uh the cumulative option holder would lose the most money and that's based on oi correct yeah so the way I was thinking of it is is similar to you and we just have different ways of saying it I think um but basically you're using that like a pivot point like for example uh right now Max Payne is 414 for everybody but it's it's like all the puts are dying basically is the way I look at it um you know that's I'm looking into sort of like a midpoint but am I wrong in thinking that as a midpoint I mean I don't I don't know that I even see any use to Max Payne because like um I'm just trying to think about how to use it in a trading context as far as an environment maybe a like a fifth confirmation of environment is if we're above Max Payne that means the Bulls are essentially in control yeah yeah that that that's right to me um because if you look at a Max painter I'm going to send you this if you look at a Max painter on unusual whales and I think everyone look at this but I'm gonna pull it up here yeah I used to look at those before when uh um over the over the summer I was using uh UW yeah yeah and they've got a good uh Greek page um right let me look at Max Payne here for yeah so it's basically saying Hey look call pain yeah call pain is um like right now right now for spy I don't know if this is real or not dude but uh yeah it's not okay anyways like you you look at the chart and it's basically um it's basically telling you where who's in control based on where price is that's one thing I always want to make sure to emphasize is nothing none of this stuff matters unless prices on your side as far as this goes because the price is what's determining everything else so never forget that and and this is something that I was listening to one of those um to a gamma Edge video and I think one of the analogies was actually really quite pertinent that um that Paul was using and it was that um price is like the flashlight in the forest of uh gamma exposure meaning that it's almost like if the price moves up um then you're all of a sudden gonna see some gamma come out of the woodwork so to speak um that you didn't really know was there um for that is really simple it has to do with the same hedging liabilities I was talking about um max gamma for an option is when that option is literally at the money that's where you have the most gamma and the reason for that is think about it from the other side if I'm selling you an at the money option then that is the point at which that option has maximum convexity convexity means that you will get more bang for your buck because it will have exponential growth from there um and so the place at which an option is the most dangerous for the seller of that option is when that option is right at the money so as the spot price moves up or down and starts to hit some of these big bars the gamma of those bars actually increases and the gamma of the bar is further away decreases that's why there's two things that are happening at the same time here one is we're causing changes in gamma by moving spot price over the course of the day and two is we're causing changes in gamma by moving time over the course of the day the second is inevitable the first is random yeah yeah and that's such a good point too I love the way he describes this the flashlight and uh that's that makes sense because uh you know the gex affects the price but the price also affects the gags so that's reflexivity right yeah that's your reflectivity that you're playing off of on top of that because we're out there and we're watching the gecks like hey like if all of a sudden we burst through 423 and we have momentum I'm like oh wow these 425s are looking juicy I start to Pile in everybody else starts to pile into those not only is the gamma of the 425s that are already there increasing but of all of a sudden people are buying more of them which is further increasing the gamma right so you have this additional layer of reflexivity because of that yep no yeah and and that's and that's the gamma squeeze right there the nutshell folks um let's see here so that that right there is what I was I was kind of thinking of it as like okay 398 Max Payne for you know say it was Friday okay um you know basically all they did was keep the price above 398 all day long yeah right Bulls are in control the whole time you know and I'm not sure if I'm reading it right but that's just the way I've been using it is like hey this is a flip point to where it's like Bears they're not feeling as much pain anymore because they're under here just as just as a data point essentially just going like hey that's just one hey if we're really far behind under there then things are really bearish well it's honestly um actually I think I have another way to describe this basically on what you've been saying um so if our volatility trigger um is the point at which uh gamma is going to flip from net positive to net negative right then Max Payne is the point at which gamma at expiry would flip from net positive to net negative at expert I see you're saying yeah so but okay so that that's that's good to know then it's more important at xbury then it's going to make more sense uh you're gonna give it more waiting as as time goes on yeah I think I think because that's why camera is going to make much more sense so let's just run through a scenario real quick tomorrow we open up okay we've got 398 right now let's just assume it's 398 tomorrow we open up uh you know 402 spy all right Vault trigger is what 398 you know Max Payne's 398 uh you got a huge gex positive gex at 400 this is what I'm just I haven't even looked at it yet I'm assuming that's what it is yeah let's just make it up all right well I've looked at it so many times that's what I think now okay here let's look at it because it's like if I'm gonna go into it I guess I might as well here's the most recent one from Friday and that gags this is why this is why it's such a simple look um that's why I already know what it looks like but oh yeah 402 by the way Guys these uh this green and red these are the expected the options Market expected moves for the week so this coming week um I mean we're looking at a top of the range is 410 410 82 on spy bottom of the range is looks like 394.04. um yeah yeah yeah um you say 403 and 394. that sounds about right uh for 410 and 394. oh 410 holy smokes bro okay let me send this over to you I know that my description of Max Payne probably was not the most useful um you're fine no it made sense man you connected something for me so thank you uh it made sense that it's more more impactful at expiry so uh so knowing where that is you know knowing that the market is essentially in a weak way in my opinion it's trying to get to Max Payne just because you know obviously the market likes to screw the most people possible but it's kind of It kind of doesn't work all the time it's very rare but it's that's exactly how it formulated it's always trying to get to Max Payne but usually uh gamma levels get in the way first that's a good way to put it too yeah it's like you can't really get there if gamma and the Delta distributions aren't positioned for it so it's like then you can kind of already see so there you go so now you can already kind of already see you know the market is trying to screw this set of people basically anybody below Max Payne you know you can likely think is is going to be puts right what is Max Payne anyways how do you even calculate this I got to know this man because if it's if it is the way I think it is and then that's the way that you should describe it then from now on it's just it's just what I said man I think it's like how how are the most people going to lose the most money I know but how do you how is it calculated though that's what I'm gonna look up real quick but yeah I keep talking uh about this chart here so yeah we were talking about 404 um you know say we open up here uh yeah say we open up a 402 that's above a a wall a trigger and Max Payne if you were thinking of it like that if you're looking at Max Payne for uh tomorrow being 398. uh you basically would have to break all that support first now is there a case for that that's the next question um if they wanted to screw the most people possible tomorrow then you know do we see do we see it if they want to screw the most people possible then we're going to be around the 380 Zone um but but that's not going to happen anytime soon um say the 380s oh uh by tomorrow I'm just talking about tomorrow yeah you gave me a netgex right so I was looking at next right if we're talking netgex by you know whatever the next month December 16th then we're looking at 380. well that's a good that's a good um you know data point anyways if you if you're looking out at a different expiry what Inspire are you looking out at 98 days um yeah because this is but if we're just looking at um November 28th just tomorrow yeah then things change a little bit the first thing I do when I look at one of these netgex charts by the way um is that right I'll look down here and and see okay how what percent of the total gamma do we have and then also what's our what's our cumulative gamma number here so this is it looks like 88 million in notional value and uh or 88 million in positive gamma um and then it's 10 of the overall options and then put call ratio also relevant typically is 1.42 which is low for the you know the current market um or at least you know the last few months so yeah it's interesting it's 10 of all options uh over 98 days but then there's only two percent of those expiring tomorrow so um it's interesting how that plays out so there's a lot more positive gamma for a smaller amount of put call ratio is that basically what I'm understanding here because I didn't know that 10 meant of all options uh it is so so the way that um when I talk to Ark about this what he said is that um this is so like if we're looking at 98 days worth of gamma um and we sum it all up and then this just tells us What proportion is on each day oh sorry about that I know but see that number never adds up because uh if you look at December 16th it shows a 29 number but there's only 56 million of of gamma there it doesn't make sense to me if there's only 56 so it's it's total gamma it's not 56. so that's yeah that's something different right because this is total yeah this is total gamma both positive and negative expiring gotcha ten percent and this is just if you were to net out the game okay yeah that makes sense so yeah ten percent of total gamma is basically what it is then not total options yeah right okay so ten percent of total gamma on two percent of total options expiring as of the morning because that's what that next to that but call ratio is saying right that's yeah it's a little open interest expiring so it's 10 gamma total gamma on two percent of total open interest and I mean I mean that's because we have a ton of open interest that is way out of the money nowadays which you know well no if you look down look down at the other expiries you've got a 37 percenter and you've got a 23 percenter so you got 37 23 so a lot of the open interest over the next 98 days is expiring in other days but 10 of the gamma is expiring tomorrow yeah and that's normal because and that's that's um that's right like gamma has so much to do with how close those options how relevant those options are for hedging that the further away in time those options are the less gamma relevant they are um meaning that open interest is sort of this normalized thing where it's just a question of oh okay how many options are there gamma is really a question of how much of an effect are those options having and sure being struggated I agree but here's something what is the reason behind there being more gamma here tomorrow versus say on Tuesday or even on Wednesday which is uh you know shop house speaking so for the reason further being more on Monday well typically there's more on Mondays Wednesdays and Fridays just because uh historically right those were the weekly expiries um and even though we have very recently moved into expertise on Tuesdays and Thursdays first in SPX that inspire people aren't using those as much and so we're still really used to this routine so there's more liquidity on Mondays Wednesdays and more liquidity that's sort of what I was getting to in the end but you covered a lot of good stuff there too but the real thing is to know when things can happen yeah more more things can happen because like if you're if you're trying to play for Tuesday it doesn't look like it's gonna like anything's gonna happen on Tuesday which is going to be the November 29th you know yeah I mean like you said there's there's reasons behind that too as well but I was thinking more along the lines of like what about you know coming off the holiday does that have any effect on it as well or oh that's a good question and I guess also if you're just looking at this um it seems like you you mentioned jpow it seems like uh nobody cares it's on the 30th and so but you know even so it's like you're looking at okay we just came off the holiday Mondays are typically the days uh where you get higher I think higher gamma because those reasons and then but you're looking out at Wednesday and there's only six percent yeah that's not for for a j-pal talk into end of month as well I mean you get the end of month flows which you know I I don't know what the rebalancing looks like for that but uh it doesn't look like to me like anything's anything big is about to happen to the end of the month even with Jay pal if that is the case then you're likely to see some more vix destruction yeah and I mean I mean part of that has to do with seasonality and I think I may have I'm not sure if I I think I retweeted something about this but right do you see how low those vix Futures are for December versus January right yeah um and it's just because that's just a seasonal thing it's like the entire Market is used to having um this really intense backwardation yeah during this period because it's holidays nothing happens yep and it's reflecting just the market psychology so you've got the seasonality built in here where it's like you're I'm not even I'm not really seeing much action uh planned even you know given that I guess there wasn't a lot of time given because it was an unscheduled talk I think you're gonna have one of those uh I think you're gonna have Vic's Crush or you're gonna see a crater of Epic Proportions so it's like one or two I know it's hard to say but it's like it's a it's an extremely binary event in my opinion I'm gonna take I'm gonna take the other end of that and say that nothing happens nothing happens you could definitely make that case here and I would I would lean towards that okay because it's easier to lean towards the upside anyways because here's the other thing like I think they know you know we're not in a period of particularly High liquidity so um yeah the equities are getting a little over extended but this might not be the best time to um then again I don't know I no I agree um it doesn't none of that matters they're not in control of it you can't make that assumption that they're controlling it I'm saying like think about this if pal comes out and he has an unscheduled talk at the end of the month okay and uh you haven't had people people haven't had enough time to really plan for it because like if you think about most of his talks are scheduled out a year in advance almost it seems like so it's like people are hedged for it six months three months beforehand so the positioning is already there it's already accounting for that scenario in this case people didn't really have a lot of time especially with the holidays you had a shortened holiday you had a low liquidity and I think that's going to be a really interesting number going forward to see how like say Tomorrow People start playing start playing for it well what I'm going to do is tomorrow I'll start looking at the SKU and I'll start looking at how IV changes to see if it's actually going to be an event because it's also sometimes like we have these these guys that'll they'll talk um add events that are not particularly fomc relevant events and then it's only like one out of every five times that one of those events actually makes something happen because they're purposefully avoiding any terminology that has to do with you know rate hikes um but yeah we'll see we'll see in the in in the sort of uh how options start to move so this is this is another way going back to the question you first asked is how how does how has this changed the way you trade you know coming from everybody starts off as an indicator Trader and I was like well now you're you're able to look out into the future in a way right like we're looking out at at Wednesday and we're seeing that nobody's thinking about you know people are hedged because you can see four percent of the puts or four percent of the option open interest is uh mostly in puts so that's our that's a an interesting data point but given that there's no gamma not really any gamma six percent I mean it's not that's nothing anyway so now we can kind of make some assumptions based on this event um because uh you know because we're able to see the positioning yeah that's that's a really good case study and then when I think about you know positioning uh for uh the longer term I'll I'll look out at these stigmas and these Delta hedging curves and you know this is what's nice about these netgex charts right we have all the different experts on here and so you can start to look out even further of course you should probably check in every once in a while because these this landscape can change pretty dramatically um especially lately but and that's that's the thing about looking at it over time too you have to look at it and what I would do for the longest time is I would I would track it every day because uh like I would write down the changes in these boxes down here every day and certain expiries and I would just track them and see the difference and you could gain a lot of really good Insight by by seeing the changes in each of these different data sets uh over time and if you just look at it in the morning once open interest you get the updated open interest numbers and then you look at it once that closed and you can see how it changes you're basically looking you're basically looking at the price chart of like say four or five expiries having to do with gamma and and put call and and open interest changes yeah so you're seeing the changes and the effects of everybody's positioning over time super super helpful to do that but it is time consuming so I don't do it that you said J-pop was the 30th right do you pass the 30th yeah and then you got beginning a month flows coming in which are are typically bullish and you can see the positioning there is bullish but you can you can kind of see it a little bit right I mean it's just barely there but here the sigma for November 28th is what God why do I keep clicking this button is .09 that's super interesting we have right uh um a point zero two percent increase for the 29th but then we have a point zero three percent increase into the Wednesday which is 0.14 so I mean I mean a little bit's already starting to get built in there it's going to take a little more obviously right right but there's no there's no uh there's no gamma positioning I mean relative to the amount of open interest you know you got 10 tomorrow and two percent of the open interest and then you got six percent on Wednesday end of month with Jay pal and four percent you have you have 100 more open interest expiring and half the gamma so you know and as far as IV goes I mean you're looking at a 14 you know what's the vix right now what's the nine day right now nine days like 18 or 19. yeah no so it's still extremely cheap uh just relative to just the vix and so you know looking at the skus and looking at and I bet you if you look at the ski for that day it's probably well below uh historical volatility so [Music] um it's it's extremely low that's what I'm saying as far as like if there's going to be a crater if Jay pal does this thing where he comes out and he goes yeah scree all we're not we're actually gonna you know we're actually gonna you know take this into recession no matter what you know that's basically how he talks and that you're going to see a crater dude and it doesn't matter that it craters because all the open interest that matters is way way down you're not going to see that kind of move but you know going back to third 390 would not be a surprise to me no I I agree I just I personally think that the reason that we're seeing this positioning is because nobody thinks that that's going to happen I agree too I agree with that because that is going to be the most likely scenario I'm saying that if he comes out I would I would own the Tails into the event effectively so I would look at the the gags and go okay wow the tails are rare and you know if we look at it pull it up real quick where are the tails at here let's see do you want uh because I have a I have a netgex that's that's like 100 strikes yeah just look it it doesn't yeah and I I just want tomorrow's really um I was trying to pull it up or Wednesday so Abby gets uh three but the other thing I wanted to mention is that you come in here you buy the 390s is what I'm saying or 392s or something you probably make money the the reason that everything is so skewy right or screwed right now is because people are in either of two categories um either they had bought protection and they were in this bucket of people who had 360s right um yep and they've now gotten screwed and they now no longer want to buy protection and so they're slight they're losing losing losing money or they're in the bucket of people that's buying protection for February and March um no I think they're doing that I think they are for sure 100 no doubt in my mind and I could show it to you but I'm not going to but yeah I think they are man I think they're mine yeah we don't want to we don't want to Rob ourselves of the material for the upcoming call well okay so you know you're you're totally right and why are they doing that though why are they buying it because you like you said you know all the puts that they bought earlier are all dying so it's like well brick I thought I bought those you know I thought I bought those with enough time on them you know it's another one and you want to skip over the whole seasonality issue which is why we're seeing I feel like I mean I actually I honestly it makes sense say that I have enough experience to know if this is a very intense backwardation for this particular time of the year right but I would guess that it is yeah if I have to yeah no uh you know it I mean given given what has happened uh over the course of you know the last couple of years it doesn't it actually doesn't really surprise me that much because of how many puts are gonna are dying effectively because of all the volatility we've already had so it makes sense that people are like you're saying just saying screw December I'm not touching it and I'm going to February because because they're still stuck in the same stupid pattern which is what I was texting you about last night like they're thinking oh we need more time on our hedges for the hedges to work and I'm like since when has this Market given you any indication that's how Hedges work yeah and they have not been working that way and there's there but here's the other side of the coin is that you know we're basically this little cycle here is so important because it's like ending the cycle of rate hike fear it's ending the cycle of inflation fear and it's it's starting the cycle of recession fear yeah and so but here's the thing everybody was hedged for inflation fear everybody was hedged for you know basically Ukraine Russia War everybody was hedged for you know rate hikes and so all that stuff is coming off it's like oh I'll just be in shed and you got not as many people I don't think getting positioned for recession fear you're right that is the narrative transition uh shift and the paradoxical thing is that with all these other events with the inflation and the Ukraine fears the idea was we're gonna get these massive massive moves and that's why I want to be inputs and instead we got this grind down and now with the recession fears everyone's thinking oh I have time right like this isn't one of those things that comes on all of us all of a sudden it sort of comes on in little chunks but the reality is we're probably going to sell off real hard at some point yeah and that's what people I think are thinking for February I think that's why they're buying februaries because they're going I know it's coming in first quarter you know and it's likely going to happen before March just like how it always happens you know just like with covid it's like the positioning is all you know rearranged for the beginning of the year that's when the crater happens everybody thought it was going to happen in the fall or into the end of the year instead you get the rally into the end of the year and it's just like it's always the perfect setup dude so and nobody's gonna be ready for it again it's I don't think it's gonna be like if there was a crash if it does happen this is what I'm planning for uh then it's probably not going to be as bad as covet unless it's like something really crazy happens but I think it'll still be a sell-off it could it could last a lot longer and we're not going to bounce back as fast so yes that's a good way to put it yeah it's not going to be like a one month Wonder type of thing it's gonna be like you know into the summer I think it would be like a three thing but what about the outside cases like what if okay like let's say that um you know jpow does come out and say something crazy all of a sudden we sell off a ton all these people have these puts that are all the way out in February or whatever yeah comes out Wednesday you mean and craters us to 390. buy it yeah I mean it doesn't make any sense not to buy it unless he says something crazy off the wall but he's likely to come in and stay Hawk and and so here's here's your risk reward there too he's likely to come out and say Hawk he's actually that's probably expected that's probably why we're seeing the positioning we're seeing because people are like well you know he does this song and dance where he comes in Hawk everybody's all bullish they can pivot and then he comes in and squashes the idea but is the third time a charm really how many times does that happen we have the minutes now we have the minutes from the last meeting we saw the meeting yeah when the Market's pricing in uh 50 basis points what if he comes in and goes yeah that's pretty much right okay I think we go to like 409. so fast so uh and then and then what happens you know say 409 clicks I mean are we really selling off no you're right the only the only case surprise is if he comes out and he says oh yeah no we're gonna do 75 at the next one in which case I I'm just I'm just interested in that puzzle of even though I don't think it's going to happen What would happen if we created sufficiently for 380 right and then all these people have these Hedges that are way far out those 360s are not the money to get monetized still buy it because uh I don't know in my opinion you still buy it one because I read something the other day about how folks haven't Panic sold yet and that their average cost basis on SPX is 4163. so if they haven't sold yet why would they still sell so if we do sell off are those those people gonna get shaken out probably not especially if they know everybody's hedged two all those Hedges have been there for a long time dude so it's like as soon as they get a chance to cash in on some volatility I think they take it so if you get spot up again no you're totally right because they're gonna know it's not getting close enough to where it needs to be and so they're going to seize that opportunity to at least recover something off of those 360 correct the fact that we have those 360s all the way down there is actually providing us with support until at least that December 16th 100 yeah that's why I keep saying you know even if we got even if we don't Spike on Wednesday which is a very good possibility we don't even see a big move um just because it's like can can we really fall crush the 360s you know I think those guys come off slowly but you know the big ball crushes usually come from the closer expiries and the closer strikes and so those have been there forever so I don't think we could rip we could because there's a gap right above us and that might be what takes us into the Gap but uh I think it's going to be a slow grind over the next couple weeks to 4 20. to [Music] to um get us up there anymore I know and it's it sucks because it's like you we already know this is gonna happen uh this is the most likely scenario and it's like I want fireworks man where's the fireworks you know what I actually I like this combination where we started off talking about you know the gex charts and and did sort of a little bit of a little bit of work unpacking them maybe maybe not as thoroughly as we should have but then moved into just talking about what we're seeing in them because I think I think part of the lesson is that at the end of the day the best way to learn about how these things work is to be watching them and to be listening to these types of conversations so that you can start to see what other people see in them and then start taking under like construct your own interpretation and pair it with the price action correct and and that's the that's the most important thing what you said pair it with the price action because again the price is the most important it's going to be the one that determines most of the positioning two it's connect connecting the options Market to why people are making those bets if you look at it more like a sport like a sports bet guy you know like a gambler a lot of people are into sports betting and they're making bets on different combinations of scenarios or whatever okay they only have one way to to do that let's just put their money in there right and so and they just have some odds you know this is basically that but people have you know a million different ways to place the bet and what are those ways I mean I don't know people use um people just use fundamentals or people are just uh you know using RSI or whatever it ends up being but all that gets combined onto one chart for you so to see the bet so it doesn't matter what the indicators they use or tools to use to place the bet that you know it's there exactly you see where everybody is and and that that that information is I'm just trying to build some depth for that information just because it's it's it's incredibly powerful if you understand it because it's taking the aggregate of the entire markets um you know thinking process and putting it into a chart and so it's like well I don't even that's what I said at the beginning it's like if you change it from indicator to gex you basically just go why would I have an indicator because it's like that's just one little tiny sliver of the distribution you've got you know you got a thousand indicators and you got a billion ways to use them and then they all get put into one little you know standard distribution chart for you it's like you know that's basically how it's changed my Trading no I think I think that's a beautiful way to put it it's the perfect way to answer the question too [Music]