[00:00] Hi, I'm Jack Sloum with Option Alpha. Today we're going to be going over one of my favorite strategies to trade these days. It's based entirely on gamma exposure. And if you look here, today is one of the days that I love when this
[00:12] happens where all of the gamma exposure is on one strike. If we look here and we switch this to the absolute gamma view, you'll see this 6650 strike is very platform over all of the other strikes. gamma exposure. So, switching back over
[00:31] here to the call and put view, you can see that also on this view, the call and the put gamma exposure are both pretty balanced, which means that as the price oscillates above or below that particular strike, there's going to be a
[00:46] lot of action from market makers having to hedge, which ultimately makes that price act as a pin and keeps it there throughout the day. So if we look here at this chart for S&P for today, we can see that's exactly what's been
[00:59] happening. The blue line here is the 6650 price point. And as the price falls below, it comes back up, falls below, comes back up. And basically, it's doing this oscillating pattern. So one of the things that I'm looking for is the open
[01:12] interest as well at one of these particular strikes. So if we look here, this call open interest is 9.4K and the put open interest is 8.2K. These are actually large numbers. This is a quarterly expiration. So there's a lot
[01:26] of volume that's been traded on these particular strikes. So there's a lot of hedging required in order to maintain a delta neutral portfolio for market makers. So if we take a look real quick at the trades that I've actually made
[01:38] today as part of this strategy, you'll see early in the morning I got into my first trade when the price fell to 6647. So it was down here somewhere. it fell down below this this 6650 price point that I had set for the day. And then I
[01:57] actually $3 in the money. And then approximately one minute later, I went ahead and closed the position for $70 worth of profit. So I did this process
[02:10] several times during the day. This was actually a trade for longer term trade by one of my other bots. This one right here is what happened is the price then shot up above that 6650 and I went ahead and traded a short call spread the other
[02:25] it fell back down to 6651. I was actually in this position for 9 minutes and took down a quick $100 profit. And then once again I same thing happened.
[02:39] It fell down to 6646 later in the day as part of these oscillations going back and forth. And I opened this one and quickly closed it. This one was open for 2 minutes and took down $80.
[02:53] Uh, and this one was similar as well. It fell down below to 6644. Quickly took $100 profit. This one was 5 minutes. This is actually my Wi-Fi trade show you. Wifi is a bot that I share in the option alpha community. I've been
[03:11] running it for a little over a year. I started with $2500. It has made a total of $12,13 over the past year, which is $484%.
[03:23] It trades an iron butterfly every day at 1:30 and holds it until the next morning or whenever it can take 15% profit. And the whole strategy is based on the fact that every night, overnight, the volatility that market makers are
[03:37] pricing into options prices is overstated. And there's an opportunity for us as traders to then sell this iron butterfly at the current price and hold it to the next day and capitalize over time on that volatility. Now, even
[03:50] definitely want to be transparent from November all the way until May of this pretty solid performer for me for my bots. And this morning, this is what I
[04:05] want to share with you is I actually it was actually going to take profit on this for about $300. But if you look, the short strike for this iron butterfly is 6650. And because it's 6650, which is the same exact strike of this massive
[04:21] gamma exposure strike right here, I decided I was going to let it run for a little bit. And so I went ahead and set profit taking to $800 instead of the usual 15% which would have been around $300. And then I checked it manually and
[04:36] saw that I could take down $700 profit and went ahead and closed it for a nice little win. So this is a good little profit on Wi-Fi that basically where I was using that same gamma exposure chart over here which is located in the
[04:50] option alpha platform in order to determine that the price may actually stick there longer today. So I would go ahead and hold on to that iron butterfly a bit longer than I usually would and it turned out to be a good decision. Um and
[05:03] then just a little while ago I also traded another one of these. I was in this one for a little bit longer. 26 minutes it took me to take down profit on this one. But again, it took down another $100. So overall throughout the
[05:16] day, it's been a good trading day. I'm trading specifically on this gamma exposure strike right here. So typically when this strike here comes about, it holds. It's not necessarily going to hold all the way until the end of the
[05:29] cause the price to change. Like where might uh market makers be adjusting their hedging for the following day? Like for example, if we look at this one
[05:41] makers, is going to come off the books at the end of the day. And how will market makers then have to adjust their positions to maintain a delta neutral
[05:53] portfolio going into the next day? And what I found is if you look here, so yesterday for example, the price opened up high. But because of this 6650
[06:05] strike here having so much open interest for the next day, as the day progressed, the price gradually moved towards that 6650 strike until towards the end of the opened right back around that strike as well. So using these gamma exposure
[06:23] tools has really been a gamecher for my personal trading. Very grateful to have this tool and I just wanted to share that with all of you. So that's it for today's video. Thank you for watching and I'll see you again next time.
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