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How I Use Gamma and Gex Levels in Futures Trading — Transcript

by Christopher Creamer | Orderflow Trader · 6,126 words · 894 segments · language en · Watch on YouTube

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0:00Gamma exposure or GEX levels are one of
0:03the most important context layers in my
0:06stack when it comes to trading futures
0:08every single day. And I've had some
0:10people ask me how I use gamma, how I use
0:12these GEX levels when it comes to
0:14trading futures. And so that's the
0:15purpose of this video today. I'm going
0:17to talk about what it is, how I use it,
0:20and how you can actually understand what
0:22it is that we're looking at and why does
0:24it actually matter? What's up? It's
0:25Thrax. We are back for another video. In
0:27this video, we're going to be talking
0:29about gamma exposure for futures
0:31traders. So, we're going to talk about
0:33what it is, why it actually matters, and
0:35how I use it. And we're also going to
0:37talk about common mistakes, ways that
0:39people love to use gamma exposure or GEX
0:41that may not be the best way to actually
0:43go about it. Because we have to
0:45understand that gamma exposure and GEX,
0:49they're not it's not necessarily a a
0:52crystal ball, okay? The levels that are
0:54printed are not necessarily places where
0:57you're just looking for bounces or
0:59rejections off of them. But it is a
1:01powerful tool in the sense that it can
1:04set up proper expectations for the day
1:07and potentially adjust the way that we
1:08head into the morning and we go into the
1:10session looking for trades. So, in this
1:12video, we're going to just be going over
1:14what it is and how dealer hedging shapes
1:17compression or expansion and key
1:19intraday levels that we should be
1:20watching for. But it's not replacing
1:23structure or order flow or location or
1:26confirmation. It's just a context layer
1:29for NQ or Nasdaq futures or ES ES
1:33futures where we understand the options
1:37driven positioning of market makers and
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2:42code match. Now let's get back into the
2:44video. So first of all, let's talk about
2:46why we should even care about gamma, why
2:50we should even consider it. Now, when a
2:53lot of traders trade futures, they're
2:55never really considering options or the
2:58options book, but that is a blind spot.
3:01Not because options predict price, but
3:04because dealer hedging can matter around
3:07certain concentrations. So if you treat
3:09the listed options complex as someone
3:11else's game, you're essentially flying
3:14blind on one of the forces that
3:16routinely shapes behavior around dense
3:19strikes. So when large options interest
3:22clusters near spot, market makers may
3:25hedge in the underlying and related
3:28products, being futures. So for
3:31Nasdaq-related risk, that can show up in
3:34behavior you read on NQ futures or MNQ
3:37futures, even when the flow originated
3:40in listed options or let's just say QQQ
3:43or NDX. So we have two ways that we can
3:46watch the same session when we're
3:48trading futures. We can look at futures
3:50only, you're looking at candles,
3:52structure only, or we can also add
3:54options context to it. So, we're looking
3:56at the same tape and basically a dealer
3:58strike map. So, we're using it in terms
4:01of context for added confluence to
4:04understand what's actually happening in
4:06the broader market. Now, gamma is
4:08context. It's not a trade signal. It
4:10does not replace the rest of the system
4:12that you're trading. It just helps
4:14classify the environment and know where
4:17responses could be likely. So, when I
4:20take a look at gamma in the morning, I
4:22use gamma to ask very simple questions,
4:25right? Is today a day where two-way chop
4:28and pinning around a strike or more
4:31plausible or where expansion and cleaner
4:34directional trade is more plausible?
4:36Then, once I understand that, I still
4:39need to confirm it with structure and
4:41order flow and the rest of my system.
4:43So, let's talk about what gamma actually
4:46is. I'm going to try and put it in the
4:49most plain English version. And just so
4:51you guys know, when we go over some of
4:53this information, once we once you start
4:56understanding options, right? If you
4:59don't already understand it, it does go
5:01pretty far into depth. It's not only
5:03about gamma. It's also about the
5:05different Greeks as well, such as charm
5:07or vanna or these different things. But,
5:09for this video, we're going to try and
5:10keep it as basic as possible. I'm making
5:13this video under the assumption that
5:14you're a futures trader and you don't
5:16really understand options. And so, we're
5:18not going to go into full options full
5:21guide, okay? We're just going to talk
5:23about gamma and the basics of it and
5:25what you may need to know in order to
5:27try and use gamma data or gex levels in
5:30your intraday trading for futures.
5:32Technically, gamma is the rate of change
5:35of delta. It's how fast an option's
5:37sensitivity to the underlying moves as
5:40price moves. So,
5:42in trader language, this is basically
5:45the closer price gets to a meaningful
5:47near the money options concentrations,
5:50especially where short-dated exposure is
5:52heavy, the more dealer hedging
5:54adjustments can matter. So, dense open
5:58interest by itself is not gamma.
6:01You care where delta sensitivity is
6:03actually relevant, and you're not trying
6:06to necessarily like pass a quant exam,
6:09you're just tracking where the machinery
6:11of hedging is more likely to engage. We
6:13don't necessarily need to understand all
6:17of the Greeks as of right now, or that's
6:19not the purpose of this video. We just
6:20need to think about how might hedging
6:22interact with price as we approach or
6:26leave those areas. So, how does hedging
6:29actually work, and why does it matter
6:32for futures?
6:33Well, we have to think about it like
6:35this. When a customer on the stock
6:38exchange goes to buy or sell options,
6:41someone needs to take the other side.
6:43The market needs to be liquid. Now,
6:45market makers will warehouse that risk
6:48and hedge so that their book stays
6:50within limits. The purpose of market
6:54makers or dealers is they're trying to
6:56stay directionally neutral. They're not
6:58in the game necessarily of predicting
7:01direction. So, they need to stay
7:03directionally neutral. And how do they
7:05do that? Well, they do that by hedging.
7:07And when they do it by hedging, then
7:08they typically will hedge in the
7:10underlying assets, such as the futures
7:13market being one of them, but there's
7:14more of them. So, hedging can use the
7:17underlying cash index components, ETFs,
7:20and futures, among other tools, and
7:22futures being only one key avenue,
7:25right? Especially relevant if we're
7:28looking at QQQ or NDX, and then we're
7:31trading NQ. So, the idea of this is like
7:34a very simplified hedging flow is a
7:36customer or or somebody on the the
7:40market buys a call, okay? The dealer or
7:44the market maker
7:45takes the other side of that position.
7:48And now they have directional exposure
7:50that they need to manage because they're
7:52not in the game of being directionally
7:54exposed to the market. So, what do they
7:57do? Well, they hedge in the underlying.
7:59They hedge in futures. Dealers don't all
8:02hedge the same way at the same time. Net
8:05positioning is an aggregate story. So,
8:07we have to treat it as probabilistic
8:09pressure, not necessarily a guaranteed
8:11path. So, when it comes to gamma or gex,
8:15there are two main environments. We have
8:18positive gamma and we have negative
8:20gamma. Now, this matters because it
8:23changes how hedging tends to interact
8:26with movement on average, not every
8:28tick, okay? We use it to classify what
8:31kind of day that we're more likely to be
8:33in, not to necessarily cherry-pick an
8:36exact trade from a Greek label. Now,
8:38positive gamma often is where hedging
8:41can dampen moves. Think about it as
8:43suppressing momentum in a way because
8:46dealers may buy dips or they sell rips
8:49in a way that absorbs volatility and
8:51price can feel pinned and we can have
8:53mean reverting tendencies or even chop
8:56around strong strikes. Now, that doesn't
8:58mean that trends can't occur. They can
9:00still occur. Nothing is necessarily
9:03forbidden, but
9:05it's just more likely due to the way
9:07that dealers are hedging against price
9:09movement, we're leaning more towards
9:12compression or rotation rather than
9:14faster expansion. Now, in a negative
9:17gamma environment, often what happens is
9:20hedging can actually amplify moves and
9:23the adjustments may chase direction. So,
9:25expansions in this scenario can feel
9:28cleaner or more unstable where ranges
9:30can break with less stickiness. So, if
9:33we are in positive gamma environments,
9:36then oftentimes dealers are going to be
9:40hedging against price movement. So, we
9:42may see rotational behavior or
9:44compression. And in negative gamma
9:46environments,
9:48that hedging behavior can add to the
9:50impulse moves. It can make the moves
9:52faster. It can make expansion more
9:54likely. Now, we use it as expectations
9:59or how we can potentially set the
10:01expectations for the day or the session
10:03for the environment that we're actually
10:05in. It's not necessarily to predict
10:07every single candle. So, then what is
10:09compression versus expansion
10:11environments? Well, intraday, I care
10:13less about labeling the perfect regime
10:16and more about the session that I'm
10:18likely going to be navigating. So, the
10:21way that I think about it is in
10:22compression, we have a tighter range, we
10:25have two-way trade, there's more chop,
10:27there's rotation, and it's balanced. In
10:30an expansion, this is where we have
10:32clear directional travel where we have
10:35trends or the impulse tends to actually
10:37move and be more usable. So, when we're
10:39looking at gamma and we're looking at
10:41the environment that we're in, we're
10:44using it to inform us what we
10:47potentially need to prepare for, but
10:50entries still have to come from our
10:52process. The way that I use gamma is
10:57I'm using it as a context layer in my
11:00full stack of my system, and it
11:02typically comes at the beginning of the
11:03day understanding what environment we're
11:06in, understanding the structure of the
11:08dealer positioning
11:10on what is friendly. Are we more leaning
11:13towards an expansion day or is the
11:16market structured in a way that's more
11:17friendly or favorable towards expansion
11:20or is it more favorable towards
11:22compression? So, gamma just helps me
11:24frame whether I should expect more range
11:26behavior and mean reversion around
11:28certain levels or key areas or if we're
11:31going to have a session with a greater
11:33potential for directional expansion, but
11:36it doesn't tell me which specific setup
11:38to run. It just sets the day class that
11:41I'm trying to prepare for. The actual
11:44trade that we're taking is not solely
11:46based off of a gamma level or or a
11:49positive node or negative node on a
11:52gamma profile. The actual trade needs
11:56location, response, and in my system
11:58order flow confirmation. Now, I do want
12:01to talk about dead gamma
12:03versus active gamma. Now, this isn't uh
12:06by the way like professional options
12:09vocabulary, but I do need to talk about
12:12this because a level on a chart or a
12:14gamma level is not automatically a live
12:17wire. Dead gamma is a strike that is on
12:21the board. We see it, but it's not
12:23backed by meaningful interest or session
12:25relevance, and price can drift through
12:27these levels with little participation.
12:29So, if we see thin open interest or
12:31volume at that node, we have to take
12:33that into account. Now, active gamma is
12:36a strike that we treat as live when
12:39we're looking at these levels because it
12:41could be a meaningful gamma node that
12:43has real interest at that strike on the
12:46table. So, we see volume there. We see
12:48open interest or however the platform
12:50actually shows it, and then we're
12:52watching for a potential reaction or
12:55two-way trade or decision as price is
12:57beginning to interact with this level.
12:59Not only after a clean reject or
13:02absorption or stall. So, those behaviors
13:06are examples of confirmation, not the
13:07full definition of what it means to be
13:10active. So, this is where many gamma
13:12failed me stories come from. You're
13:14chasing a printed line with no size
13:16behind it, or you're mistaking active
13:18for already proved itself instead of
13:20thinking in terms of this is worth
13:22monitoring closely. So, when we're
13:25looking at the gamma table, which we're
13:27going to go over later, when you're
13:29looking at it and then you identify a
13:31node with interest together, we take
13:34that into account. A strike with a gamma
13:37tag, but dead volume, can still behave
13:40like noise. And a node with real size is
13:42usually what deserves your attention
13:44first. And the map or the the gex table
13:48narrows where to look, but live reading,
13:50once we actually get to those areas, is
13:52telling us what the auction is actually
13:55doing there. Now, there are some key
13:57levels that we look at. It's not the
14:00only ones that we look at, but they are
14:02the key levels that we need to look at
14:04when considering gamma or gex. The
14:07labels that you may see might vary by
14:10the tool that you're using or the
14:11platform that you're using. These are
14:13the ideas that I actually use. Now, they
14:15always come with context and you can
14:17never just use these as an automatic
14:21support or resistance. Now, what we see
14:24on a gex chart or a gamma table is we
14:28will see typically a call wall or some
14:31places call it a call resistance. And
14:33what this is is a major upside call
14:36reference. Now, we also have the gamma
14:38flip or the HVL, depending on whatever
14:41platform you're using and what they like
14:42to call it. Now, this is basically where
14:45we are shifting from positive to
14:47negative territory in terms of gamma.
14:50And it's where regime or behavior may
14:53actually shift. And then to the downside
14:55we have put wall or put support,
14:57depending on what platform you're using.
14:59And this is a major downside put
15:01reference. Now, the labels may change,
15:06but this is the logic to it. A call wall
15:09is often a major upside options
15:13concentration. It may act as a magnet or
15:16friction for continuation or a place
15:18where upside costs more and hedging
15:21terms. And we watch in this area for
15:24failed continuation versus acceptance
15:27through this level. Now, a put wall, it
15:30may attract tests or dip flows or
15:33hedging activity there, but again,
15:36response confirms. We're not just
15:37blindly taking trades or trying to take
15:40a bounce off of a label that's called a
15:43call resistance or a put support or a
15:45call wall or a put wall. And then the
15:47gamma flip or the high volume line or
15:49the HVL, it's a line where the
15:51volatility regime may shift and behavior
15:54can change character, for example, from
15:57stickier to more unstable or hedging
15:59against the flow with the flow or vice
16:02versa, and we treat it as a probable
16:04regime boundary. It's not a single
16:05switch that decides the day alone. And
16:09so, we use these walls as reference
16:12zones. The market can punch through, it
16:14can backtest, or it can ignore them if
16:16other forces dominate, and your job is
16:19to trade what happens, not using them as
16:23a crystal ball or a fairy tale of a
16:26level. And so, we look at them in terms
16:29of decision zones versus reaction zones.
16:32Reaction versus decision is not a pair
16:36of predefined zone types you stamp on
16:39the chart. It's behavior that we observe
16:42as price begins to actually interact
16:44with these levels. So, a clean, fast
16:47interaction versus an auction that has
16:49to work that area before we actually
16:52resolve. You can't necessarily know in
16:56advance whether the next test will be a
16:59reaction style or decision style. How
17:02price trades the level in real time,
17:06participation, pace, follow-through,
17:09that is what actually sorts it. Now,
17:11execution stays order flow and footprint
17:15first in my system. This frame only
17:17tells me what kind of read we may be
17:20managing. Now, there are things that can
17:22stack or context that can actually stack
17:25at a level. Price side context and
17:28option side loading both matter. And the
17:30more that overlap, the higher odds of
17:32auction style work. It's still not a
17:33guarantee though. A stacked level can
17:36still resolve as a clean reaction if the
17:38tape is going to allow for it. So, the
17:40platform that you're using, it may have
17:43several derivative metrics that are
17:46lining up at one strike or zone. So, for
17:48example, you may see a call wall that
17:51also has the highest absolute gamma or
17:53the heaviest call open interest or the
17:55heaviest put volume or the largest net
17:57put or call flow. And the words or the
18:01labels may vary by the vendor that
18:03you're using or the platform that you're
18:05using, but when those stack together,
18:08they become stacked levels and that is
18:11heavier option side context and it
18:13raises the likelihood of decision style
18:16behavior the same way as the diagram. It
18:19doesn't dictate the outcome. We still
18:22have to confirm it with order flow. Now,
18:24reaction zones or reaction behaviors is
18:27where we're looking at clean response at
18:29the test, a quick rejection,
18:31straightforward continuation, or
18:32acceptance without the market needing a
18:34long auction to decide. The read is
18:37often faster and you still confirm it
18:40with order flow. A decision zone is
18:43where we have decision behavior in
18:45auction style work where we may have
18:47two-way trade, chop, multiple test,
18:50absorption before the market commits to
18:53continuation or failure at that level.
18:55And you recognize it while it unfolds,
18:58not by declaring the level necessarily
19:01in advance. So, we keep a simple mental
19:04model when we start approaching these
19:06levels, right? We are looking at
19:09reaction. It's lighter, faster read or
19:12decision. It's stacked and there's
19:14slower resolution, but then we're always
19:16looking at what the outcome is and what
19:19price is actually doing once it gets to
19:21this level. Now, when gamma structure
19:24and liquidity overlap, the odds of
19:27decision style auction behavior go up.
19:30They do not go to certainty. So, we
19:33trade the response that we actually get,
19:36not necessarily the stack that you hoped
19:39for. So, then how do I actually use
19:41gamma in my trading? Before we go look
19:43at an actual gamma table or gamma levels
19:46on the chart and how I would read that,
19:48let's talk about how I actually use it.
19:49Now, I use gamma as an environmental
19:53filter and a location map. So, it does
19:57not trigger entries for me. Just because
20:00we touch into a gamma level, it does not
20:02trigger an entry, but it narrows where
20:04the auction may matter and what regime
20:07I'm potentially preparing for. So, the
20:09first thing that I do is I classify the
20:11session. Are we in positive environment
20:14or are we in a negative environment and
20:16do we have more compression or pinning
20:18risk or do we have more expansion
20:20potential? And then I'm marking where
20:23dealer dynamics are more likely to
20:25matter at the walls, at the flip lines
20:27or dense strikes. And then we frame
20:30behavior. So, are we looking at mean
20:33reversion tendencies or breakout
20:35tendencies and what is more likely
20:37probabilistically? And then we decide
20:39where to pay attention. So, I'm not
20:41flat-footed at obvious interaction
20:43zones. So, the footprint and the tape
20:46confirm or veto that map. And if gamma
20:49says one thing and order flow says
20:51another, well, then order flow wins. I
20:53don't argue with the tape to try and
20:55save a level or a line on the chart.
20:58Execution stays the same. Location and
21:01response first. Gamma tells me what
21:03response is more likely to count. So,
21:05gamma is going to suggest but order flow
21:08in my system always is the one that
21:10decides. So, we look at the dealer map,
21:13we see price at location, then we look
21:15at footprint. In my stack, gamma sits
21:18above execution and confirmation. It's
21:21context. So, the way that I typically
21:23view the market in the morning is I'm
21:25first looking at higher time frame
21:26structure. I'm building my bias, I'm
21:28building my road map, and I'm looking at
21:30session context and location. And then
21:33I'm looking at gamma. I'm understanding
21:35the environment that we're in. I'm using
21:36it as context, and then only as we
21:38approach levels
21:41and areas where I was already looking to
21:44sit up in my chair and start paying
21:45attention to footprint, do I start
21:48looking at order flow and footprint
21:49confirmation. Order flow is the final
21:52confirmation layer in my system. Gamma
21:55tells me where the conversation is more
21:57likely to get interesting, where I
22:00should start paying attention more. The
22:02tape tells me whether the market agrees.
22:04Now, there are a lot of common mistakes
22:06that actually happen when people are
22:08using gamma, and one of the biggest ones
22:12that I see is that a lot of traders like
22:15to trade gamma levels like automatic
22:17support or resistance.
22:19But, that's not necessarily the way that
22:21we should be viewing this, and you can't
22:23necessarily be treating every strike
22:25cluster equally without a session read.
22:28And then you have to understand dead
22:31prints because if you're just looking at
22:34big gamma nodes, and we just run right
22:37through it, well, the auction never
22:39engaged there, and you need to take that
22:41into account, and you can't have gamma
22:44override the rest of your system,
22:47override price action, location, and
22:50footprint. So, the bottom line to this
22:52is that the way that I use gamma is I
22:55use it as a lens. When the lens and the
22:57tape disagree, then I trade the tape.
23:00But, we're using gamma as context, and
23:02what am I likely to be preparing for for
23:06the morning heading into a New York
23:07session for regular trading hours. So,
23:09I'm going to show you guys what I use.
23:11What I use is a platform called Tanuki
23:13Trade. But before we do that, I do just
23:16want to mention that gamma exposure
23:18helps futures traders understand where
23:21dealer hedging may matter and whether
23:23the day is more likely to compress or
23:26expand, but it only works as a context
23:30layer alongside the rest of the stuff.
23:33Structure, session location, and order
23:35flow, at least for my system. And this
23:38deck is built to match that reality.
23:40Practical, probabilistic, and
23:43subordinate to how price actually
23:45trades. So, here we are on Tanuki Trade.
23:49Now, Tanuki Trade, the way that I look
23:51at this is I'm looking at it on two
23:53visual representations. The first one is
23:55the table or the GEX live table. And
23:58this is showing us the profile of where
24:00positive gamma is sitting, where
24:02negative gamma is sitting, and there are
24:04labels here that are showing us the
24:06absolute GEX, the net volume per level.
24:10And these are important to note. And
24:12then you're also seeing when we zoom in
24:15that we have C1, which is the call wall,
24:18P1, which is the put wall, and then
24:20there's the HVL or the gamma flip level.
24:23Now, why is that the gamma flip level?
24:24Because we're going from positive
24:26environment to negative environment,
24:28right? And so, this is where that's
24:30technically happening. Now, the other
24:32view that I look at is I look at it on
24:34the actual chart. Now, gamma is changing
24:38throughout the day. Dealer positioning
24:40is changing throughout the day. So, it's
24:43hard for me to show this to you without
24:45having some type of backtesting, but the
24:48good thing is is that in the Discord, I
24:51send out basically like the daily
24:55outlooks for gamma. And I'm about to
24:56show it to you and I'm going to explain
24:58the reasoning behind why I'm sending
25:00these things and how I'm actually
25:01reading it. Now, before I do that, I
25:03just want to explain something, okay?
25:05So, I have this pulled up
25:09throughout the day, and I'm watching
25:10these levels, and you can see when
25:13levels have stacked confluences on them.
25:16So, if we have C2, which is the second
25:19biggest call side gamma wall, and we
25:22also have the most absolute gex here,
25:25the highest call open interest, the
25:28highest put volume, and the highest
25:31positive net deck strike, well, this
25:33becomes a stacked level. Now, with
25:36Tanuki Trade, you can actually click on
25:38these, and it'll read this to you on the
25:40side. Now, it's hard for you guys to
25:42kind of see this right now, but
25:43basically what this saying what this is
25:45saying is that there's confluence here
25:47at this level. Five levels are
25:49converging, and so this strike is
25:51reflecting heavy exposure concentration,
25:54and it may function as a reaction zone
25:56within the current option structure, and
25:58it's showing us what we have here. And
26:00this is important, and I think this is a
26:02great way to view these levels, and
26:05that's why this is why I love this
26:07platform so much and why I pay for it,
26:09because it makes it easy. It makes it
26:12easy for me, right? So, let me go and
26:14show you guys how I'm actually viewing
26:17this on the day. Now, let's take Let's
26:20take yesterday or Friday as an example.
26:24Now, this is market open, okay? So, what
26:27did we do during market open? We
26:29compressed.
26:30Now, if you didn't know what was
26:33happening and what the environment that
26:36we are potentially in, you could have
26:38made the assumption that we were going
26:40to make an expansion this day, that we
26:42could have ran up to maybe a 4-hour draw
26:47to that to the to the upside, right?
26:48Maybe this was your draw for the day, or
26:50maybe you wanted to see us come down and
26:52rebalance this area, or even target
26:54these lows. And once market opens and we
26:58start pinning back and forth, you're
27:00wondering why. Like, why are we doing
27:02this and not actually making a move? Why
27:04are we going back and forth? Well, let
27:06me show you something, and let me show
27:08you how I approached this day and how I
27:10was actually anticipating this type of
27:12behavior before the market ever even
27:15opened. And if you can understand that,
27:17then you can frame your decisions during
27:20the day
27:21ahead of time to understand what is more
27:24likely and what is less likely to
27:25actually happen. So, in the outlook for
27:29Friday, this is what I said for QQQ and
27:32NQ. I said we're currently trading in a
27:35positive gamma environment.
27:38This is where we were opening up for the
27:40day. Here we are in a positive gamma
27:43environment. Now, we have the gamma flip
27:45level here, we have the put wall down
27:48here, and we have the call wall up here.
27:50Now, the call wall up here is stacked,
27:53meaning that we have multiple
27:55confluences here. We have the net call
27:57open interest, we have call open
27:59interest, we have absolute GEX, too. And
28:02it's stacked here at the call wall, or
28:04where you have the largest positive
28:06gamma node. Now, the idea was is that my
28:10baseline expectation for Friday morning.
28:13Now, I understand it's not a guarantee,
28:14but the baseline expectation for Friday
28:17morning was that we were either going to
28:18see that it was likely that we were
28:21going to see compression or controlled
28:23price reaction rather than a clean
28:24expansion for the morning. Now, I did
28:27note that price is pushing higher into a
28:29stack decision zone, right? That's that
28:3224 450 area, or the call wall. Now, this
28:37area is just where I'm going to be
28:40watching, right? I'm watching this area
28:42to see if we're going to have acceptance
28:44past it or above it, or if we're going
28:47to have absorption there. Now, if buyers
28:49start pushing into this area and they
28:52don't have any type of result for their
28:54effort, then we can see a potential
28:56rejection. If we end up actually getting
28:58acceptance above it, then that opens the
29:00door for delayed expansion. So, let's go
29:04and mark out that level on the chart, 25
29:06450, right? So, here's where that level
29:09actually was on the chart for the
29:11morning. Now, it wasn't the only level
29:13because we also had another level. We
29:15had the second call wall, which
29:18actually adjusted later to being the
29:20call wall as the day progressed because
29:23dealer positioning is changing
29:25throughout the day, and where is that
29:26sitting? Well, it's sitting right here
29:28at 25 360. So, let's go mark that out.
29:32So, as the day began to progress, okay,
29:35we had CPI on Friday. We push up. We
29:38come back down. We begin to compress
29:40towards market open. Now, am I surprised
29:43that we are compressing in a positive
29:44gamma environment? No. That was the
29:47baseline expectation for this day. So,
29:50I'm watching this level as it later
29:52changes to becoming the call wall, and I
29:55understand that being in a positive
29:57environment, that dealers are hedging
29:59against price movement. Every time price
30:01moves up, dealers are selling. Every
30:03time price moves down, dealers are
30:05buying, and it's causing this
30:07suppression for momentum and volatility,
30:10and I understand that we're in that
30:11environment. So, understanding that I'm
30:14in that environment, does that
30:15necessarily mean that I'm going to just
30:19be taking bounces off of this level? No.
30:22Now, if you did, you can make the
30:24argument that you would have made some
30:26good trades, right? Because this level
30:28existed here. You could have taken the
30:29bounce off of it here, the bounce off of
30:31it here, but that's not necessarily how
30:34I use these levels. I just understand
30:36that if we are in a situation like this
30:38and the environment is telling me that
30:41we're likely to compress or rotate for
30:44this day, then I'm going to be less
30:47likely to try and take breakout trades.
30:49I'm going to be more suspicious
30:52of
30:53false moves, of false breakouts. And
30:57that idea is coming from understanding
31:01the environment. And that's why it's
31:03being used as a context layer in my
31:05system. And so I can go into the day
31:08today with the idea that we have the
31:10baseline expectation before price ever
31:12started doing this, before we ever
31:14started compressing like this.
31:16You probably had a lot of traders this
31:19day that were trading
31:21and trying to take breakouts. They saw
31:23effort, they tried to go long here,
31:25maybe they tried to go short here, maybe
31:26they tried to go long here.
31:28And they're trying to trade the breakout
31:30of this compression, but if you were
31:33using gamma and understanding the
31:35environment that were we were in and
31:37understanding that we weren't really in
31:39a friendly environment for breakouts or
31:42expansion in the first place,
31:44then you can filter those
31:47subpar decisions out of your trading
31:49day. I understood that we're in this
31:52type of environment. I understood that
31:55because of that environment, well, we
31:57need to be careful about taking
31:58breakouts and rather we may lean more
32:01towards trades that we can have
32:03rotational behavior. And so what was the
32:06trade that I actually took on Friday?
32:08It wasn't a breakout. It wasn't this
32:10breakout. It wasn't this breakout
32:12attempt.
32:13Once we popped up above this area and I
32:16was looking to see whether or not we
32:18were going to accept prices higher and
32:21then continue our way up here,
32:24and the first thing that happened after
32:25we got above this area is we slammed
32:27back down.
32:28Well, what is that telling me? When I'm
32:30watching the footprint, what is that
32:31telling me? It's telling me that we
32:34failed to accept higher prices above
32:36this level. And knowing that we're in a
32:38positive gamma environment and that we
32:41are likely to have mean reversion
32:42behavior,
32:43and that's the baseline expectation, not
32:45a guarantee, but the baseline
32:46expectation, well then I go short. Why?
32:49Because that's the environment that
32:50we're in. It's likely that we're going
32:52to rotate. So, instead of taking the the
32:55long and trying to chase a breakout in
32:57an environment that's not friendly
32:59towards breakouts in the first place, we
33:00go for the mean reversion. We go for the
33:02rotation. We go for the rejection or the
33:04fake breakout
33:05and the slam back down into this area.
33:08And so, I took short here after I saw
33:09this candle come down, and I got out
33:11pretty quickly. Now, why did I get out
33:13quickly? Why didn't I hold this trade
33:15and take it all the way down here?
33:17Well, because I understand that if we
33:21are in a compression environment, we're
33:24in a positive gamma environment, that
33:27I'm more inclined to take profits
33:29quicker. I'm more inclined to be
33:31prepared to trail my stop. Now, we can
33:35run. Now, we made a pretty good move,
33:36right? We made a pretty good move. We
33:38went all the way down for like 150
33:39points.
33:40I didn't catch the whole thing. I'm sure
33:42a lot of people did, but the reason why
33:44I took profits quickly is because when
33:46we're in this type of environment, I'm
33:48more inclined to take profits quickly if
33:50I know that dealers are hedging against
33:52price movement. If we're in a negative
33:53gamma environment where dealers are
33:55hedging with that movement, then I may
33:57be more inclined to actually hold that
33:58trade, let it breathe, and let it run
34:01just because of the environment being
34:05structured in a way that's more
34:07favorable towards expansion, so you can
34:09let those run. There are a lot of gamma
34:11platforms and, you know, things that you
34:13can use out there on the internet. I
34:15chose to use this one. Why? Because I
34:18love the interface of it. I think it's
34:19super useful. I love to see this
34:22information and see where the stack
34:23levels are, and it makes it easy for me.
34:27Now, there are other platforms, but this
34:29is is personally the one that I use. You
34:32can go and do your own research. You can
34:34use the ones that you want to use, but
34:35if you do want to use Tanuki Trade, then
34:38click the link in the description below,
34:40use code never flat, and then you can
34:44get a free trial and you can test it out
34:45and see how it works for you and your
34:47trading. Just don't view this as
34:50automatic levels where you're just going
34:52to take rejections just blindly. That's
34:56not really how you should be using this.
34:58Although it may work that way sometimes,
35:01that's not really how you should be
35:02viewing this. We should just be using
35:03this mainly to understand what type of
35:06environment that we're in, understand
35:07key levels when it comes to options
35:09data, and how dealers may actually be
35:12behaving once price is moving around at
35:15market open, regular trading hours, and
35:17what that type of behavior might be. Is
35:19it against price? Is it with price? And
35:20what is that allowing price to actually
35:22do? And then we use our system or
35:24whatever strategy you trade
35:26to actually make normal decisions, but
35:28we're using this as an environmental
35:30filter and a location map, okay? If you
35:34guys have any questions, you can drop a
35:36comment in the comment section below.
35:37I'll try and answer them, and I'll catch
35:40you guys next time. Peace.

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