Speaker A
It's now going to share that information into Spread Monster. So, see all that data here on the left? There's the open states that are now showing.
Overview of Spread Monster updates on Fractal Exchange, focusing on real-time option data, win rates, and market volatility modeling.
Key Takeaways
- Real-time data integration enhances the accuracy of Spread Monster's market predictions.
- Win rate filters help traders focus on high-probability trades and avoid low-odds risks.
- Fractal data clustering provides valuable insights into market open and close price behavior.
- Understanding overnight volatility is crucial for anticipating price movements in the next session.
- Statistical and fractal models assist in identifying key price levels and market maker dynamics.
Summary
- Introduction of real-time option data integration into Spread Monster for improved market analysis.
- Explanation of open states, win rates, and their relationship to price ranges and market walls.
- Use of probability filters to mask low-odds trades and highlight high-probability opportunities.
- Visualization of market open and close price clusters using fractal data and density graphs.
- Discussion on overnight volatility and how cluster analysis predicts market opening behavior.
- Modeling of price movement from prior day close to next day close to identify trading patterns.
- Application of fractal data to anticipate market swings and volatility for strategic trading.
- Insights into break-even points, volatility pricing, and market maker behavior.
- Use of statistical models to approximate price ranges and trading probabilities over multiple days.
- Emphasis on practical use of Spread Monster tools for better decision-making in options trading.
Chapters
- 00:00Introduction to Spread Monster and open states
- 02:23Graph analysis of open states and market walls
- 04:31Filtering low probability trades with win rates
- 07:15Using paint tool to visualize price clusters
- 10:58Overnight volatility and purple X clusters explained
- 12:47Modeling market close behavior and price clustering
- 18:06Break-even points and volatility pricing insights
- 27:45Summary of fractal data applications and trading strategies
Full Transcript — Download SRT & Markdown
Speaker A
And now we have our checkboxes. The open states, there is a win rate, win rate, and account to them, but right now it's just saying not applicable. But there is a win rate to them account. It's just showing at the
Speaker A
moment to prioritize what I'm working on. So when I bring in the code, go for the core first, and then I'll come back and add, you know, more bells and whistles just so I can moving forward. Now we're bringing in our new
Speaker A
option data, which is real time. So when we go over here, it'll show the last update was at 12:45.
Speaker A
So what happens is there's a little bit of a delay in the process because it has to pre-process, but now it's taken out all the delay for the quote. So it's like whatever processing it has to do, that's
Speaker A
like right up-to-date quote real time, and our processes, if that takes 3 minutes or 5 minutes or whatever it takes, and then I know kind of expands and contracts depending upon the complexity of what it needs to do.
Speaker A
It's using the real-time data. So over here on our statistics, the open states, if I want to see where they lie against our Spread Monster data, I can right-click and I can check on all open states.
Speaker A
That's showing me the graph's idea if my open states are above a wall long, below a wall short, you know, exactly where they are in relationship.
Speaker A
So Spread Monster for tomorrow, based on the price we've got, is computing this yellow zone, and it's saying this is, you know, the range of price and most likely it's between the yellow lines. And so I know in relation to that
Speaker A
where my open states are. I know if we claim an open state up here, I've got to break a wall long. I can now anticipate state up here. I've got a wall. I know the wall is not a high
Speaker A
probability to break. So that open state could take longer in the future. Way down here, I've got open states down here. Open states a little more in the middle. So, these are more achievable because based on tomorrow, you know, and
Speaker A
as we get to 4:00 p.m., closer to 4 p.m., this will lock in where my range is at. I know that I can possibly knock these out. And again, get closer to 4 p.m. to lock. So, let me clear that.
Speaker A
Another thing we can do is we can now mask off what's not likely to happen. So you have two things in the market: what is likely to happen, what can happen mathematically or in a model? And then you have the opposite. What's most
Speaker A
likely not to happen in a model, but is. And let's say I take my win rates with the low odds less than or 20, less than or equal to 20%. What that's going to do is it's going to
Speaker A
find things that are very low odds to achieve. So, let's say we're about 4:00 and our green line is locking in, which would be the close for the day. Let's say I locked in about at four. I know tomorrow, here's my
Speaker A
sandwich because I know it's 17.65% above and 17.65% below. Those have to be the exact same numbers. So, I know my range of travel tomorrow is inside this envelope, right in here most of the time. So, I know if I'm betting outside
Speaker A
of that, like maybe I'm betting on a 2.94% odds win rate. You know, I know that that is not happening.
Speaker A
So I have that in my head, and then we can do our win rates with 80% or better odds. So tomorrow, those have 80% and better odds to be achieved in. We're not near four, but
Speaker A
right now it's just showing that. Now, when we go over to our density graph, got changes in there. We're now seeing purple X's show up on the left and on the right side. So, it's like, what in the heck
Speaker A
are those purple X's? Like, what do they mean? So, what they are is based on the fractal data's positioning, it figures out where the range of open and where the range of close is going to be for the next day.
Speaker A
We can see the clustering effect in this. That means if we were near 4:00 p.m. Eastern, this is Wednesday showing tomorrow's model for tomorrow's session, that if we closed on this green line right here, and this is what I'm going to
Speaker A
do. I'm going to put it in paint. I can draw on it. Then [Music]. So, here's our green close or the last sell price
Speaker A
right here, saying for Wednesday tomorrow that our opening has been from here and what I opening this is 9 a.m.
Speaker A
So, first trade price. So, that's the purple. And you're like, okay, great. I kind of get that, but how can I use that? So, what I do is I look for the clustered areas. If you see where we have this propensity to
Speaker A
open here, let me mark it in red so it's a little more visible. So that means that tomorrow this line on our close ret, so the outcome has been in that tighter range. And then from there we have from
Speaker A
here down. And then from there, you know, it's pretty iffy that we get into these right here. And it is within possibility that we get into here. It's not like super often. So, this kind of clues us in.
Speaker A
It's like, okay, it's approaching four, you know, do we want to take a swing at overnight volatility? So, this here represents overnight volatility.
Speaker A
Now the more purple cluster we see beneath us this green line right here, then the more propensity it is for it to open down for on the overnight session. So I was marking Meta the other day using the
Speaker A
same technique, and you know, you could say moved, I don't know, you know, it's like 2500% on the, I think the 600 contract or whatever, and all I did was this: I just looked at where we were relative to
Speaker A
the close of session and then where we're going to open and then the potential of the upside.
Speaker A
All I did, super simple. So again, this is overnight volatility, and the X's are marking off where we've been. And the way we can figure that out is I can simply move the curves over and it'll, you know, that's
Speaker A
4731, you know, 48036. So we can see where we're at, you know, 47218. So, you know, if you're like, "Oh, I think the market's really going to take a dive for whatever reason," you come in here and be like, okay, I've got a, you
Speaker A
know, however many X's are here. Let's say this represents a 30% of the cluster. So, I've got a 30% probability to hit that. So, out of every 10 trades, only three of them may work. I may get lucky and on the first one I hit it, and
Speaker A
then if I try it successfully, I may end up in here and not really, you know, not get beneath that set of cluster.
Speaker A
So that's kind of how that works, and see, you can hit this hide and close button. It will take them away.
Speaker A
That addresses the open. Now we've got the flip side. Okay, great. That's the open. But what's going on with our close? I mean, I want to know from the prior day to the next day, what's been relatively happening to the close in
Speaker A
relationship. So today, we want to know on Wednesday, tomorrow, where's our close been in relationship to today's close and in relationship to the opens.
Speaker A
So that's answered on the back end here. We have our close. So this represents 4:00 p.m.
Speaker A
Eastern last trade price. It's figuring all this stuff out mathematically. It's building a model of what's been happening.
Speaker A
That means let's say we did open up down here. Means our lowest hanging fruit has typically been here. Well, less one. I've noticed there's one that seems to be down here.
Speaker A
But our lowest hanging fruit has typically been here. Have a crazy outlier from there all the way up to here and see this clustering. So, we've had quite a few times that we've ended up here. So, that's just saying that
Speaker A
there's lots of the price action that's up in that area. And then we've got, you know, maybe we fold that X into that. And then we've got, you know, the white space in here.
Speaker A
And then we've got these other areas here. So when I'm on this T, let's say this is Tuesday at close, that means Wednesday at close, I've gone from here to here. A lot of the times that means if from here we dip
Speaker A
down a lot of times we've come back into here, or from here if we've, you know, gone up a lot of time back into there. And in fact, based on the fractal data we have, if we're here and we get
Speaker A
up here.
Speaker A
That means that the there's like a neural net and you know state vector machine all this stuff all this stuff out and uh that means it's figured out that we haven't under this sequence we have not yet successfully been able to have a close
Speaker A
up above which is kind of interesting because on the wave seven daily the VIX as M3 was showing is rising which then again argues that or well it's a confluence with this that the price actions kind of overall trying to go
Speaker A
short. Now, sometimes, like, what was it? Last Tuesday, I was showing this at the last minute. We had a $2 put. Um, I think like it was like 350. So, we had a $2 put.
Speaker A
350 sub $2 and then it we opened down here we had you know so it went to 10 uh some crazy person bought it for 12 peak so we had that and the premiums have to be priced accordingly so that can happen. Like
Speaker A
let's say here they're already offering up that put down here at $10. Well, there's virtually no upside from that day. The peak was 12.
Speaker A
So if they're offering the put up here for 10 and the peak, let's say we pull back down in this range on the open and the peak is 12, that means there's only a $2 upside. So that doesn't make any
Speaker A
sense at that time. uh the pri it was priced at two. So it let it have a you know a $10 price fairly steady state price exit and then a $12 peak price. So anyways back to the X's over here when we see no X's up
Speaker A
here above. So we don't see any X's. That means under this sequence the close has never been up here or 200 days loaded. And again, that shows that if we do get up here intraday, there's a likely move
Speaker A
down these. We don't have any other here. So, that's what the X's are about.
Speaker A
These are on the 4pm close areas. And then this is the 938 uh 9:30 open 9:30 in the east that it's computed out. And again this is so you know on a linear graph if you're trying to compute this out it won't you
Speaker A
know I'm not able to find the values because this is just using fractal data rotate positioning. So that's how it's finding the values. So, it's going through a lot of transforms in the code to find find this out. And it's another great confluence
Speaker A
that as M3 was suggesting this morning on the wave 7 daily that we're rising on the VIX. And this is suggesting that based on our relative positioning on the fractal that we're closing beneath um the prior day's close. So it's in
Speaker A
confluence. is showing. Okay, we're here a totally different model done a totally different way is in confluence with the wave 7 daily where it's trying to break the vector and climb on the VIX which is suggestive that the stock
Speaker A
market as a whole is under downside pressure because people are hedging buying puts to you know try to pos uh protect type positionings position.
Speaker A
So, this shows us a whole other thing. And then it shows us how bad it tends to get on our closings. And again, um we can look at our X's and just kind of put a line through them and be like,
Speaker A
okay, you know, here's the halfway mark. So 50% of the time we close up here and then I don't know if that's a halfway mark exactly, but 50% of the time we close down here and maybe the halfway mark is more
Speaker A
like up here. So I maybe I drew that all like crazy, but um something like that. So that means we're closing over here on Tuesday. This is Tuesday that tomorrow we have a 50% shot at closing down Here I have thought at closing up here.
Speaker A
this a zone. It's not drawing out a single number and say we're going to close it, you know, 480.10 or something like that.
Speaker A
It's just like a zone. And um so probably I don't know I'm guessing down here if this was you know this is probably like um I would say uh plus a 1,000 upside if we close in this range plus and then here it's
Speaker A
probably I would say you know at a breaky even or minus 100 probably the way price would in this area something like that. Now also we're showing our um last date and time that uh our metric. So this right now the way it's
Speaker A
set up and it shows the last closing going into the next session. So today's it's showing at 12:50. We're at 116 on the 6th, but when we get to 400 p.m.
Speaker A
it's going to show like ceiling May 6th, 4:00 p.m. or 4:05 or whatever. So it's going to show at 4:00 or after. And then in the morning when we open, it's going to show the same thing.
Speaker A
And then after the market starts and it starts collecting new ceiling for PML information then it will rise.
Speaker A
So the other thing I I'll show to on this chart when we have like let's say our open states on open state lines on we have long or let me show let me show in a different way. Let me show the low odds win.
Speaker A
Right. So this is masking off everywhere we typically don't go. If we want to get the lab so we've have the feature. Now if we want to get the labels off the screen just to see see the lines we can hide the label
Speaker A
statistics. And now we just see the lines on the screen. So we can see that running in tomorrow's session high resistance up here.
Speaker A
And then we can see these end up being supportive areas. So we can see the various supports down below. So we can see that through this the market's highly tuned bearish heading into tomorrow which is aligning with our VIX again.
Speaker A
I'm going to load um let's see contracts for the 7th for May 7th. Now, this contract data, it's not being strained. It's not being updated because it needs to remain static while working on this graph. We can't have things flying around while
Speaker A
we're working on it. And what we've got is we got more information now since we have a new feed. We're getting a lot more data we can put on. So we're able to compute be which is break even. And you'll see now
Speaker A
that has a black background and this has a black background. And what these are, it's a little asterisk and it'll say down here it's the most reactive contracts to underlying price. This is the contract that will move first on the left is called
Speaker A
contract. So if the price up, this is the one that will catch that price the first. And if the price is going down, this is the one that will catch the price going short. So it's the 493 put 55 call. And notice the price. It's
Speaker A
$27.62 62 cents on ask. It's 1141 for the um put side. So, they're pretty expensive contracts. So, now we can see the break even as we're picking various contracts. And we can see when we get up into the
Speaker A
um higher areas how much the break even needs to be. And what does break even represent? So break even represents point move off the green line which is will be the close price at 4 p.m. up. So off the green line if I pay
Speaker A
2.85 for this contract. So, I paid $2.85. I need a 4.13 move from the close up by 400 p.m.
Speaker A
Eastern to get my $285. If I pay $240 close move up to get my money back. That means if our ceiling so now it's 485 let's say 48 tomorrow that means anything below break even 4 anything below 64 will be worth
Speaker A
at least$164. So that means on the pullbacks before if we closed $5.92 um above the prior days close.
Speaker A
Now intraday let's say we skyrocket 592 the implied volatility kicks up then that ask price will skyrocket you know could be $3 or 320 or you know 285 what whatever it moves with the implied volatility that's calculated out and the trader desire to
Speaker A
purchase those contracts which also influences the cost price because they can overpay, you know, that will be the new process. So, it'll go up and so with that um ask now we used to show now we're able to show again more
Speaker A
stuff. So, we used to show bid in here. So, now we can click this and look you can see the differential. So, that was what we were showing before. Now we show the ass side rotate and forth. It helps us to better picture the
Speaker A
desire, the fear, basically the volatility that the market makers want to want to calculate out because he askes them saying, "Well, if you want to get this contract from me, you better pay this amount otherwise I'm not selling it to you.
Speaker A
lies now on the ass side which is very relevant. See today these are calculated like two radically different ways that our ceiling calculated out today is capturing this clustered top. So it's actually confirming that you know that's that could be the
Speaker A
top side. So um it's showing us that visually now it's also and these are done a totally different way. All this math is 100% different. And that's very important that we're not using the same math on stuff to derive the same results each
Speaker A
time. These waveforms, these S-waves right here, they're coming from the market. They're this the stock market option writers, the market makers are dictating those prices. It has nothing to do with us. We're just mapping them out visually. We're mapping out that's
Speaker A
implied volatility in a sense. Our version of implied volatility. That's our version of implied volatility we're looking at. It's not the market. And what it's doing is it's taking what they're offering up on the NAS and it's just mapping it
Speaker A
out. It's doing that on the call and the put side. So it has nothing to do with how these X's, these purple X's are calculated. absolutely zero. These X's are calculated through um our fractal geometries does play into how they set
Speaker A
pricing you know because they have to use historical information. So normally IV is calculated historically through option pricing but the option pricing is also a reflection of the volatility of the underlying market.
Speaker A
So, it's all kind of this tangled web. It's a ball of yarn. And you can see our calculated X's are in line with how pricing is because here our X's, they're not wanting to exceed where opening would be. If we're
Speaker A
at 4 p.m. right now, this is the implied opening for tomorrow. And here's the implied opening. We're on the side of 4 p.m. So the closes are suggesting again and I'll show you something else interesting that we're on
Speaker A
the short side. You know, the rising VIX overall over days. It's not like instantaneous. It takes time.
Speaker A
And the system calculates out an imbalance. See down here on the right, it's saying imbalance $799. It's saying, hey, the market is having a short side imbalance. There's more sell side than there is buy side.
Speaker A
and it's figuring that out through all these metrics that we're producing and it's saying the imbalance is short and it visually tells us that.
Speaker A
So, so we can come in here and we don't have to really know anything of what we're looking at. Like let's say I'm like not really sure Russell's telling me all this stuff. I I don't really get that. It's gonna still it's going to
Speaker A
take me a while to orbit. So you can look at the screen and be like, "Oh, my im imbalance is short." So that means that overall the market is trying to pull back. It's trying to go to the short side. It throws it to the
Speaker A
right or it throws it to the left. Now, if we had a long side imbalance, it would be over here on the left. Coming in today, we had a long side imbalance and the market's trying to climb.
Speaker A
So even though we opened up down, it's still trying to climb for tomorrow where we're at right now with the data. And that can change by 4 p.m. on a stress because we're only at 128. So we need to
Speaker A
get closer to four to get a read, a good read into the next session. But for right now, it's saying the imbalances to the short side. There's more sellers out there than there are buyers. So there's more stock coming online, more QQQ.
Speaker A
coming online for for tomorrow's session heading into tomorrow's session. So, the market is, you know, trying to roll down and we've got these X's here that are telling us where the market's trying to come out till tomorrow.
Speaker A
So depending upon how aggressive how much the volatility is depends on how deep we hit our exes. If it's let's say the volatility of the short side tomorrow let's say it was pretty bad you know like on the
Speaker A
worst side we're going to be down here on the close tomorrow if it's pretty heavy short.
Speaker A
If not, we're going to be up in Siri tomorrow on close. Still be short, just not as hardcore short. Now, underneath it's showing our averages and the columns. So, on the ass slide, and this is a gauge, so it's just averaging the ass.
Speaker A
It's coming up with a simple average and saying the average ask on the call side for the volatility we're measuring out is $8.55. On the put side, it's saying the average ask is 627.
Speaker A
So the put side is actually cheaper right now cuz it's 627 than the call side. So that means right now we have the market is to our benefit at this point in time for the put side because it's cheaper than the call side.
Speaker A
kind of flies in the face of initially it changes over time but it kind of flies in the face like you'll hear on the internet reading books oh the most expensive side is expensive because that's the direction the market wants to
Speaker A
go we're seeing beforehand what is the reality of the situation So the put side is less expensive at this moment in time even though it shows our imbalance is to the short side. Premium on the short side on the
Speaker A
put side is a little cheaper right now. So there's a little benefit in there for us. It's not like they've overpriced the options yet.
Speaker A
Now, on this QQQ, I've seen this thing go like, I don't know, $30 on the ask on average.
Speaker A
$28 on severe moves, you know, where we really um get pulled around. Now, the IV, it does the same thing. It's averaging IV. It's at 33 3661 33 3647. So right now the IV is showing a little bit more
Speaker A
um elevated on the uh put side which flies in the face of the cost of the side.
Speaker A
So, the BE is something I like to look at. The average ask is something I like to look at. Um, again, the average ask I've seen up to 20 $30 plus. If there's a huge move, there's a lot of fear. It can
Speaker A
really have a pendulum swing. um the IVs, you know, there's this blanket thing where oh, if it's in the 50s, good trade to put on, you know, or 70s and we can see that here. So, notice how IV and every stock has a different
Speaker A
reference point in their chain. So, what may be 50 to QQQ, maybe 70 or 120 or 1.2 to something else. But here it's showing a 50, you know, 56. If we look across at our volatility, the center historical volatility. So a 56 does
Speaker A
support that you know buying long down here or selling the um premium down here can be beneficial because it can decay because it's not like we're down here um on the pullbacks or the extensions for long periods of time. So, it's like
Speaker A
the IV spikes and then it starts to retract. So, capturing premium has upside because it's been elevated. And so, when you're selling premium, you want you want to sell and collect on the decay. So, that's kind of what this is
Speaker A
showing. Now, one point I want to make is going back to our X's, we pick others The x's represent that time. So the x's in this case represent Wednesday open and Thursday close. So it's not accounting for Wednesday close. It's just from
Speaker A
Wednesday open to Thursday's closed. And then if we pick three days that will be from Wednesday to day. So Wednesday's open and then Fridays and again these are just mathematically approximated.
Speaker A
So there guide helps give a idea of a range and here we show that from Wednesday to our Friday the bulk of the closings have been below us because we're down here and note our floor today.
Speaker A
This implies that our our floor moving in front of us needs to adjust down. So moving into Friday, our floor is suggesting that we need to move down because our closings have been lower.
Speaker A
So I think and so this is what day is this? What's Friday the 9th? Okay. So we're going to see what it looks like for Friday. Okay. So, I can already tell by that pattern that the downside, the short
Speaker A
side there's a little more fear here because of the way that's carved out and this imbalance. Again, we're in, you know, kind of like, you know, we're in the early afternoon session, so it's not as critical right now. what it's
Speaker A
saying the long side the balance is the imbalances on the long side see as we get closer and see what it thinks the imbalance is atm today into Friday that um the changes that we brought in. We can
Speaker A
also add [Music] um and the ass these are the most contracts that are put up here.
Speaker A
Bible. Uh cuz they're kind of around the money. So making them the most reactive. People like being able to go in here and do this 20% odds. This will assist trying to find IV levels because it's always a challenge
Speaker A
kind of looking at these. So you can now click on and help mask off the uh IV lines applying percentage levels to them. And then we still have our coloration you know.
Speaker A
So, we still see the um color areas back here, of course, that kind of guide where historical volatility's been. And the darker the coloring here, the more times price action has ripped in that zone. So, I can have this zone here
Speaker A
where the price action is um gone into it, high, low. So I think I think that's it for this right now. There's more to Spread Monster um updates that I need to in but for now is the other ones I've
Speaker A
brought in. So, yes, that's it.
Topics:Spread MonsterFractal Exchangeoptions tradingreal-time datawin ratesmarket volatilityfractal dataprice clusteringovernight volatilitytrading strategies
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