[00:02] very lucrative but it's also very challenging to do it right in this video our head of options trading teams up with an expert indicators Trader to create a powerful timing strategy for trading zero DT options using the macd
[00:18] indicator I'm Mike Bella Fury and we're one of the top proprietary trading firms located in New York City since 2005 and proud to developed numer 7 an even 8 fig per year trade watch take notes and learn from professional proprietary
[00:33] Traders on our desk so you can grow your trading account hi I'm Seth freudberg and I'm the head Trader of S&B capitals options trading desk here in Manhattan and one of the most frustrating challenges for a Trader is when you're
[00:46] seeing a trade unfold that has all the elements that you want to see for a potentially awesome trade an A+ trade but you're paralyzed with inaction because you don't know the exact right time to enter the trade and then before
[01:00] you know it the stock has done exactly what you expected it to do but you never trigger way too late and caught only a small part of what could have been a huge trade all because you were confused about where to enter the trade and if
[01:14] through personally then you're going to want to stick around because we're going could be absolutely invaluable to you once you've learned the simple technique for how to apply it in order to explain
[01:27] how to use the macd to trigger a zero DT options trade if you're brand new to options and you don't know you know much about options or how they work we've created a video for you to understand the basics of option strategies and if
[01:40] you click the video appearing on your screen right now it will lay the we're going to be sharing with you in today's video Then when you're finished you can come back and watch the rest of this video okay so I'm here with Garrett
[01:54] dryan who's our resident expert on trade indicators and he's going to be breaking down a few Nvidia trades that our desk was recently involved in to show you how go ahead and jump into explaining how
[02:08] the macd indicator can be used to trigger trade entry on a trade that is gain so yeah we're going to talk about the macd as an entry signal in a trade as Seth pointed out a trade that is already in our Playbook a trade that's
[02:23] A+ right everything's trigging triggering all the variables are lining up and we just need an entry right so we're going to use this in a momentum Trend trade strategy we're only using the macd for an entry signal and these
[02:39] are going to be macd settings that are custom they're not going to be the stock custom they're not going to be the stock settings right in an A+ momentum trade and so if you're looking to get more systematic if you're looking to get a
[02:53] little bit more patience on your entry and a clear trigger for an entry this and a clear trigger for an entry this might might be an answer for you so why are we even using the macd why are we even thinking about this okay you might
[03:08] be the kind of Trader that does a great job of identifying significant opportunities right and you see these opportunities right you're there you're watching the stock you know a stock is breaking out but maybe you struggle to
[03:23] execute maybe you just missed the initial break and now you're watching the stock thinking this is an awesome opportunity but now I don't know where to enter you know there's a secondary opportunity in a lot of these types of
[03:37] trades right or maybe you just want to be more systematic so you just want a more systematic approach to how you're entering the trades or you're even these cases we can use the macd to our
[03:51] advantage so here's the setup and this is really key and I want to stress this because we have significant Playbook setup here that we're going to go over and they're A+ or a setups in and of
[04:06] themselves and I just want to stress that because this is not a macd strategy we're not just taking this signal in the macd every time we see this signal on macd every time we see this signal on our charts the setup comes first so what
[04:20] is the setup we have a momentum stock in this case it's Nvidia and we're going to show two examples it breaks key support or resistance by 10 a.m. on higher than average volume preferably two to three times its average volume
[04:36] right and at that point right it's breaking out on higher than average volume it's a momentum stock and in one of these cases we even have the whole sector in our favor now we look for the macd signal so let's go over the trade
[04:52] here's what we are going to do when we look for the signal we're going to wait for the break like we talked about really key right now we're going to look for a new momentum high or low in the macd and
[05:04] I'll show what that looks like and then we're going to wait for the macd to return to zero and then we're going to enter on the macd cross after it returns to zero so here's our setup so here's Nvidia on April 19th and you can just
[05:22] see clearly there that it has a big level on the daily chart that it broke down from on this morning so if we go to the intraday chart on this example we're
[05:34] just going to show the macd with the price chart just so you can see what it looks like and what the macd is measuring is the distance between two moving averages that's all it's really doing and so it's giving us a feel for
[05:51] how far away the moving averages are and that happens when price gets stretched right or how close the moving averages are and that tends to happen when price are and that tends to happen when price compresses or pulls back so in this case
[06:05] compresses or pulls back so in this case with the macd you can see the macd line returns to zero and that's when the moving averages will converge and the macd line extends away from zero and that's when the moving averages are
[06:20] going to be spread out so quickly let's just go over the settings that we use so Jeff and I recently did a video where we talked about a macd setup and we use custom settings and we can link that below um these are the same exact
[06:35] settings right so we have the fast length as three the slow length as nine and the macd length is five all right so same same exact macd and if we zoom in on the price with those moving averages on the chart just to demonstrate what
[06:51] the macd is measuring you can see the zero line is that black line on zero line is that black line on top um on top of the macd there top um on top of the macd there um and then you have the macd line in
[07:04] blue and then in that pink color we have the signal line all right so you can see spread out that that Mac D line is getting
[07:17] further away from zero right it's moving down lower away from zero and then when those moving averages start to converge that macd line will come back up and looking for in the indicator we're looking for a surge in the macd away
[07:35] from zero a new momentum low which is what we're getting here right on the on this initial break and then we're going to wait for that macd to come back up and touch zero which it does on that first vertical line on the chart that we
[07:49] first vertical line on the chart that we show right before the pink circle and the pink circle is our entry that's when we get the macd cross it crosses back through the signal line after touching zero and there's our
[08:03] entry and so if we zoom out and look at the whole day we can kind of see where our entry is in the context of the chart and again just using the macd we can't expect this kind of follow through this kind of follow through is coming because
[08:17] we're in a powerful setup we're just using the macd for this entry signal and in my opinion something like this sometimes can give me some patience you want to get in and if you kind of shorten the hole sometimes like it pulls
[08:32] back and then you know you get shaken out when there was no reason to so this is sort of a way to wait for it um to spend enough time consolidating and pulling back for it to be ready again to make another
[08:45] move okay Garrett let me jump in here at this point and show everybody how we could have taken the signal that day with a very simple trade nothing exotic and this is all premised on the fact that you have told us that this was a
[09:00] potentially powerful trade this was an A+ trade well when we have a trade that's an A+ trade like that what we're going to be showing you would be a very advantageous structure uh for your trade so let's focus here with Nvidia trading
[09:16] 819 at this exact point you were just pointing out where the cross took place on the chart and um we're going to go ahead and buy four outof the- money put
[09:28] options expiring that today at the 810 strike price on nvidia's options chain the zero DTE options chain as you can see from this slide we bought the A10 strike because the A10 put was what options Traders refer to as the 30 Delta
[09:44] put you see an options Delta is a mathematically arrived at prediction of how much an options price is likely to move based upon how much the stock from which it's derived moves which in this case of course is Nvidia stock and
[09:58] Traders around here like to use the 30 Delta options because they're usually far enough away from the Stock's current price that they're not too expensive while at the same time being close enough so that it's realistic to think
[10:11] that just the stock could reach that price and Beyond by the end of the day resulting in a a potentially big win if it keeps running any broker platform that provides you with options trading capabilities by the way will have a
[10:24] Delta column that you can choose to display each options Delta on every op options chain that you trade now just to be clear uh if you had bought 4 810 puts at 1115 that day when the crossover took place they would have cost you
[10:39] place they would have cost you 263 as we saw on the options chain but remember each put option represents the rights associated with 100 shares of Nvidia stock so you multiply that price by 100 and you bought four of them and
[10:53] so the result and total cash cost to you would have been 1,52 as you can see from the calculation and so moving to the end of the day we can see as Garett just showed us that Nvidia had sold off
[11:06] substantially after we entered the trade um and so the puts of course the prices on those went up they get much more valuable as the stock approaches the strike price and goes beyond it which is the case uh in these with these A10 puts
[11:23] and so at the end of the day with Nvidia closing at 762 48 points below those 810 puts that we bought if we now take a look at the options chain you can see look at the options chain you can see the 810 put now has increased massively
[11:37] in value to 4720 which which makes sense right because if you decide to exercise the put at that point you could sell your shares of Invidia for $48 more than in other words you could sell them at 810 because the put seller is obligated
[11:53] to buy them from you at that price and so it makes sense that the right to sell so it makes sense that the right to sell those the option is worth about $48 at the end of the day which is exactly what happened and so calculating the final
[12:05] profit on the trade we subject the current price to the same kind of options calculation which resulted in a final value of the puts we bought of $1,880 and then subtracting out the trade's original cost results in a final
[12:20] profit of 17,8 28 which is not bad for a 5-hour trade where our trade entry was pinpointed by using the macd indicators Garrett pointed out earlier okay so Garrett I know that you
[12:34] got another example of the uh use of the macd trade on another Nvidia trade which happened to be exactly a week later on the next Friday so fire away these are actually two very different trades and I want to kind of point out the difference
[12:49] because the trade that I just covered there right this is a trade we took on the desk right the trade that Seth just broke down with the puts this is an actual trade we took on the desk and we had SMH in our favor breaking down we
[13:03] had SMH in our favor breaking down we had uh we also had smci with a big breakdown on this day high volume in all of these stocks right so there were so many things in our favor for this type of trade and it was absolutely A+ so
[13:18] this is in fact something that we would be buying those zero DTE puts in okay this next example I want to show is also a good trade it also had a clear level
[13:31] a good trade it also had a clear level but it wasn't quite as great as the we're trading we kind of have to grade our trades and and risk appropriately and stuff like that so we had a clear level but Nvidia wasn't doing
[13:44] exceptional volume we had relative strength in Nvidia right and it got above that 5day range in a strong Market on that day so we kind of saw a relative strength play right we might not have had the entire sector running might not
[13:59] have had the volume but we had a reason to look for an entry here so we're going to look for that entry but we're not necessarily going to look for the same magnitude of a result as we got on that first trade so if we go to the intraday
[14:15] chart we can see the macd there down below makes a new momentum High On That initial Drive which was pretty powerful right and at that point you higher we kind of want to look for that
[14:30] pullback and in this case and in a lot of cases that pullback will happen through time instead of through price meaning that it just goes sideways for long enough for the moving averages to catch up and that's what happened here
[14:46] so we can see that it took maybe I don't know 40 minutes 50 minutes of consolidation before that macd returned to zero right and that means that
[14:58] finally enough time has gone by and it's compressing and then we get that cross back up where that pink dot is and in this case this would be our entry and we differently because like I said before this setup is not nearly as powerful as
[15:15] the first one we showed but nevertheless it's still a trade and we can still use that macd as our entry signal if we're kind of looking for a systematic way to
[15:27] get an entry trigger all right Garrett so now that you've established that this trade is not an A+ trade it's a trade you want to take but it's not something all your chips in the middle of the table on okay so you've pinpointed for
[15:43] us the entry time based on the Mac the indicator but we're going to try are tons of different kinds of option strategies can be applied either bearishly or in this case bullishly as
[15:57] this trade is actually based Bas on a bullish premise but a slightly more mild bullish premise and so the trade we're about to show you is a trade where you're feeling pretty good about your directional buyas that day but you might
[16:10] not have quite as strong a conviction as you we had on that first trade for example when perhaps more factors were in our favor and so one of the highest probability ways of playing this might surprise you a little bit because we're
[16:22] actually going to be using puts in this case now you're probably wondering why would we use puts puts to express a bullish trade because we just showed you an example of how buying puts would have made an enormous profit when the stock
[16:37] went down you were probably expecting us to show you a call option trade at this point right so let me show you how we can use put options to express a bullish trade so let's say at that macd trigger
[16:51] time which Garett just explained was 125 p.m. that day we went ahead and sold five puts right below where the stock is trading at those 8675 strike price puts and simultaneously be we bought five of the
[17:07] 87.5 puts 10 points lower down the options chain and so when we do this selling a put higher up on an options chain and buying one lower on the same options chain we are executing what options Traders refer to as a put credit
[17:22] spread now why are we calling this a credit spread and the answer lies in the fact that upon entry we're selling a put higher up on the Chain right below the stocks trading price and so those options are going to be expensive
[17:37] because they will have value at the end of the day as long as Nvidia closes below 8675 uh that strike price and so since it's trading so close to that price right now not even a point uh above it
[17:51] the right to sell your shares at 8675 when they could theoretically be is going to be really valuable and so so as you can see we sold five of them resulting in cash inflow of 1650 which because this is a margin trade your
[18:06] broker is going to require you to have at least 3350 in your account to execute and so now with, 1650 of additional cash in your account let's move to the end of the day and as you can see Nvidia had rallied over nine points from when the
[18:23] macd cross took place a move that shouldn't surprise us because we chose that 1205 trade entry time as was ideal for the move we were looking for and so how does our trade turn out exactly well
[18:35] that's going to be pretty easy to figure out because starting with the cash flow out because starting with the cash flow of 1650 that we just received at 1205 in light of the fact that Nvidia closed at 87735 which is close to 10 points higher
[18:50] than where our short puts were located then obviously those puts expire worthless there's no value to the right to sell your shares lower than the stocks trading in the market so that one just dies as due of course the long puts
[19:05] we bought 10 points lower at 8575 and so since both of the options expire with no value we just get to pocket the 1650 and cash as our trade profit and so while buying a call is no doubt a bullish trade we can also
[19:22] Express bullishness by selling a put credit spread like we did in this case the credit spread you'll realize it's a much more probable trade right because
[19:35] if the stock had never moved uh after our macd cross occurred which of course would have been the outcome and the surprising answer is the exact same
[19:47] outcome a profit of 1650 why well think about it we entered the trade with our short putut strike right below where the market was trading which if you remember was 8 8 6813 just 63 C higher than the short putut strike
[20:03] price of 8675 well let's suppose that the stock just didn't move at all and closed at that exact entry price 86 813 then even though the closing price was was only 63 cents above the short putut strike price
[20:19] the short puts and of course the long puts still expire with no value in other words at any closing stock price above the short putut strike price we make the the short putut strike price we make the same 1650 as our trade profit because at
[20:33] any price above 86750 both options expire worthless obviously and so what we would like you to take away from today's video is that assuming you have the right setup that you've established your bullishness or
[20:46] bearishness on a particular stock and the magnitude of that conviction the macd indicator helps you to pinpoint a solid entry point for the trade removing your doubts about whether you should feel comfortable with your entry price
[21:01] and time on days where you're feeling highly convicted about a trade's direction then outright buying a call or put might be your best strategy whereas on days where you might be feeling a little less convicted than normal in
[21:14] those cases then you could put on a put credit spread to express your conviction but leave yourself plenty of room for error so much so that if the stock doesn't move at all you'll still get the full reward for the trade all that
[21:28] positive cash flow professional options Traders are trained to understand the probabilities risks and rewards of each options trade and which one to use in which circumstances giving you the best possible chance for a high probability
[21:42] options trade time to coincide with the macd crosses Garrett just shared with us now if you'd like to learn three more option strategies that our Pro Traders use including the unique options trick that allows you to make money while you
[21:58] wait to buy stocks or ETFs at the price you want and the options income strategy that allows you to make consistent money whether the market goes up or down or sideways and how to make money on a stock or index trade even if you're
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