This Indicator Predicts Market Tops With Incredible Accuracy (Consistent Over Many Years)
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- เผยแพร่เมื่อ 21 ก.ย. 2024
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Thank you, this was very interesting.
I learned just how important the VIX is from SMB and it has really benefitted me as a trader ever since.
For example, newer traders may think a setup is not working or even worse, think they suck at trading. When in fact, that very setup may perform wonderfully with a much higher level of volatility in the markets.
A setup during a VIX of 30 is likely going to perform significantly different from that of a VIX of say 19. I believe in the Playbook, Mike says that many breakouts fail if the VIX is under 20.
Hopefully that helps newer traders in some way. (Especially long biased traders).
I have a question that I hope is reasonably related to indicators.
In an SMB video Garrett mentions using the "tick" as an indicator to measure market sentiment. I'm taking a wild guess here but is that perhaps data showing the total number of upticks and downticks in the market at any given moment? If so I can see why that would be a very valuable market sentiment indicator.
However I am purely guessing.
Additionally, is that proprietary software? Or is that type of information available to independent traders?
Thank you very much.
that's awesome
Thank you for the opportunity. I’m working on building my trading account and savings account.
I’m working on discerning which trades I’m aiming for before taking them. Working on overall defining my trade ideas.
I’m working on scalps. Opening drive combined with breakouts. Dip to rips. Full day trades. And hold for a couple days or overnight trades at least. Learning to determine how to spot which of these may be big dog opportunity as well.
I’m building my playbook. Recently transitioned into digital format. But have done a few with paper and printed out charts.
I’ll be working on the goals you set out for me to line up my future spot in SMB! Let’s gooooooo! Indeed!!!!!! I’m coming for SMB! I’ll be there I’ll be involved! Thank you SMB for everything! I’m getting better everyday forever!
This won't work in a bull market and will get you rekt. But they don't tell you that in this video, because they want to sell you a course or membership or whatever.
2020 may have been a problem
They actually explain in the video that it’s a bearish strategy. 🐻
Most of the time this 'indicator' DOESN'T work (only works in bear market roller-coaster). Because the long term average of VIX is 14 and that means it spends MOST of the time BELOW 20 (look what it did in 2017 for example).
They not only sell courses/membership but also want high VOLUME on the options market
Finally getting a bit more consistency in my options trading. This channels been a MASSIVE help.
Great!
Hello, thank you for this very helpful video. Many people says the VIX is “broken” due to the huge amount of 0dte options. What’s your take on this?
Shorting the market when the VIX closes below 20 would've ONLY worked during the instances mentioned in this video. I don't say this to say it's a bad lesson, but to ensure that it's not as simple as "short S&P when VIX < 20" You need to apply some logic such as overall market trend etc. to your vix strategy.
Aside from the Vic’s indicator, I have a question. I understand options but are you saying I can sell calls if I buy further out of the money as long as I have the cash to cover the difference? Meaning, I don’t need shares and also not a poor man’s covered call. Just the cash to cover the amount between what I sold and the further out of the money that I buy?
So are you guys currently in this trade? I notice that the VIX has had closes below 20 since about March 29?
VIX has been in the low teens for about two weeks ( mid to late July '23) and below 20 for about two months and the markets just keep chugging higher.🤔😒
Exactly.....
Hi Seth! Do you always hold to Expiry? Or scale out? And what max loss is acceptable as markets and do whatever it wants … VIX has been waffling at lower levels … Curious. Thanks, George
I guess we'll call you Curious George then :). George, there are so many nuances, it's hard to put in a single video. I rarely hold to expiry actually. I usually hold until the credit has shrunk to 10-20% of its original value--although there are nuances in that decision also...would take a while to explain.
@@sethfreudberg4750 Thanks, Seth … I suspected same … Thanks for the reply!
Using this strategy with no other indicators someone would have entered this trade on 1/13/2023 spx@4000, probably expiring on 3/10. Is there a certain amount of move or lack of move that changes how you handle the trade? As in, close out if it moves against you, or stays flat within a certain time period? The VIX looks more like consolidation mode now, with almost as many days spent below 20 this year than all of last year. This trade doesn't seem as safe. Do you use any other indicators to catch proper market conditions? Or just reading the charts?
Most of the time this 'indicator' DOESN'T work (only works in bear market roller-coaster). Because the long term average of VIX is 14 and that means it spends MOST of the time BELOW 20 (look what it did in 2017 for example).
1:1 risk reward, is the win probability >50%? Probably. Good to see a strategy that's not a ticking time bomb for a change. :)
Thank you for sharing.
Sharing the experience and knowledge of professional traders benefits the trading community as a whole.
Lots of pearls of wisdom from SMB.
Please keep posting more of these informative and very positive videos.
Sharing your analysis of the market, market structure, and the VIX is very generous.
Thank you.
Most of the time this 'indicator' DOESN'T work (only works in bear market roller-coaster). Because the long term average of VIX is 14 and that means it spends MOST of the time BELOW 20 (look what it did in 2017 for example).
So you don't actually own the issue of stock your selling calls against? You use margin? Cash covered calls? How do you know the far otm calls will increase enough to cover the risk of the itm calls if the stock price goes up? Delta can change you know
When you sell a call credit spread, the max loss is always 100 times the length of the spread.
You guys need to help us get rid of PDT RULE
I remember that year when VIX made an U-turn and broke a ceiling. Fortunately I didn't lose too much. No more VIX trades. Only as a protective entry.
Thanks. Great content and great video. I entered a couple of days ago and moved strongly in favor. Significant move in the last days on SPY.
Thank you for sharing! I trade far out of the money credit spreads and use certain metrics to exit. What metrics do your traders rely on to mange their risk on this trade?
Interesting Seth. My favorite strategy I learned from the foundations course was calendars. I play around with credit spreads, but usually with much shorter DTE. Adding the VIX to this changes the strategy entirely.
If you are pretty sure the market is going to go down, why not just buy a put? Wouldn't you be further ahead?
then time is working against you if the market doesn't move down right away. With a call credit spread, time is your friend Nick
The spread is 50 wide and the video is representing the spread is 25 wide saying worse case is a loss of 10,300.00 tell me what I am missing or misunderstanding on this trade.
Thanks for another great video on sharing an option strategy!
Awesome thesis here, will try an implement some of this moving forward. Thanks SMB
Our pleasure Brylantek
Awesome video. This chanel really expands my mind on trading.
Great to hear it!
But what if it does not work and six closes at 4625 on expiration date, you could lose a net $35300 ($50000-$14700). How would you manage this trade if it goes against you?
I don't think you have the distance between the strikes correct. I think the max loss was around $10,000 on each one
The max you could lose is the same as the margin requirement on the trade ($10,300). Max loss = (50*100*5)-$14,700.
As the VIX will be going to daily 0DTE options, not just weekly, how does this impact using the VIX as an indicator? How might the daily option expirations impact this strategy? Or more importantly, how might daily VIX option expirations impact the VIX itself, and how long may it take once these are introduced to normalize the volatility in the VIX itself?
Most of the time this 'indicator' DOESN'T work (only works in bear market roller-coaster). Because the long term average of VIX is 14 and that means it spends MOST of the time BELOW 20 (look what it did in 2017 for example).
0dte options have an effect on the 'volatility' of VIX, in the future you gonna have less violent and much lower than before 'spikes' of the vix. It will not make it inaccurate, just less scary.
your video tutorials are very helpful
huh? ok, so let's say it closes at 4624, 49 points above 4575. then we pay 49x100x5=24500, so if we deduct 24500 from our credit of 14700 then we are short $9800. or am i wrong. if so please correct me. if am i right then the video deliberately omits this scenario.
@Whatsppme1302.. yeah yeah
You're right, that's close to the max loss for this trade
@@WriteWordsMakeMagic that's what i thought - in my opinion the video is misleading, and sadly many fall for it
@@tthedon2471 I don’t think the video was misleading. It mentions how much buying power is necessary for the trade. The necessary buying power is the max loss
@@WriteWordsMakeMagic hmm buying power to me is how much one has to have in the account to make the trade and not necesarely the max loss, but anyway they failed to clearly advise of the loss and this was my main point :)
I trade naked calls and puts can I become a CPT doing so? I don’t have access to margins
Fabio please define CPT.
VIX has been below 17 for months this year
Great channel! Any thoughts on vix/vvix divergences? Thanks for the alpha
VIX is below 20 today. But, you already know that. Thanks for sharing this.
Anytime
it's our pleasure
@sethfreudberg4750
Most of the time this 'indicator' DOESN'T work (only works in bear market roller-coaster). Because the long term average of VIX is 14 and that means it spends MOST of the time BELOW 20 (look what it did in 2017 for example).
The VIX my friend!
Wouldn't it make more sense to go long volatility with put credit spreads same expiration? You'd get more bang for your buck. Risk 3 to make 7 buying 40 delta $10 wide spy put spreads.
Sure, but that only works if you know it’s going to drop. If it stays flat instead you’re going to lose with the put spread
Hi Bella, would the predictability of this indicator improve if we calculate no of contracts? As more contracts, more hedging by market makers, hence more pronounced effect. This tail wagging the dog is indicated by many good traders.
Chatnraut971 not sure what you mean by counting the number of contracts. Do you mean open interest at various strike prices? Please explain
I trade the gaps for intra day movement
If I'm reading my charts correctly, the last two instances of this indicator (in 2023) would have been massive losers. I looked up the one instance the video closes with of Jan 2023 and again in March 2023 and obviously SPY has been on a tear for all of those periods - not a good time for a bearish strategy.
The vix being down doesn't seem like much to go off to place such a trade.
It's great when trades like this work out as expected. It's even more amazing when it happens on 3 trades in a row. I like your videos but it needs to be pointed out more clearly that at the money credit spreads like that are rather risky. The market could have easily gone against you in any or all of these trades. It would have been good to explain that. Just sayin....
Hi Mark, it's actually interesting, that sometimes the closer to at the money a credit spread is the better the long term profitability. That's because you are collecting so much more premium that even when you're a little wrong you can win anyway, as you probably know. In fact I find FAR out of the money options much more risky to sell in the long run because if you get hit it takes a LONG time to get back to even on those. You see what I mean?
Hi@@sethfreudberg4750, thanks for taking time to respond to my comment. I understand your thinking but of course as you said, at the money credit spreads can still work out if you're only "a little wrong". I don't have to tell you that with FAR out of the money spreads, you can be A LOT wrong but still end up being right. I have a lot of respect for your teachings. I think in this case, it's more about risk tolerance and confidence in reading the market movements. Thanks again!
You do know that you can use the chatGPt to back test this for you to find out how good/bad this strategy is and what is the win/loss percentage. I think I will do that.
Most of the time this 'indicator' DOESN'T work (only works in bear market roller-coaster). Because the long term average of VIX is 14 and that means it spends MOST of the time BELOW 20 (look what it did in 2017 for example).
I wish you would’ve walked through an example of worst-case scenarios as well.
Appocalypse we do mention many time in the video the worst case scenarios. It would be very long to go through multiple examples and people would lose interest and stop watching if it is too long.
@@sethfreudberg4750 yes I have watched other videos where you walk through worst case scenarios and I appreciate that. I know it can make a video longer, but imo risk management is the most important part of trading, so spending some time on the worst case scenario is crucial.
Most of the time this 'indicator' DOESN'T work (only works in bear market roller-coaster). Because the long term average of VIX is 14 and that means it spends MOST of the time BELOW 20 (look what it did in 2017 for example).
/VX now at 19.50 🤔
Couldn’t make heads or tails of the video, but that is a very nice looking shirt, Seth!
Nordan00 watch it again and it may be easier a second time. We do have an introduction to options course if you would ever be interested.
@@sethfreudberg4750 I watched it again and it still doesn’t make sense, but that shirt looks even sharper this time around! Where’d you get, if you don’t mind me asking?
I learned a lot about collecting premium from Seth, that's basically all I do is sell bear call spreads and bull put spreads. Eventually you'll
understand , it just takes time, I was enrolled in the "weekly options income machine program". I learned a lot ;-))
This is sweet If I can get my account up a lot I'm going to try this
What do you you use for a stop in case it goes wrong? 3x initial credit?
Dave, you'd have to study that for probably a ten year period and come up with a "sweet spot" stop that doesn't take you out of too many trades early, yet protects against a very large loss. That's a nuanced question that would take alot of time to respond to...perhaps we'll do a video on stops.
In above video, credit is more than Required capital. Anyway we should never take a max loss on credit spread
The max loss on this trade is actually lower than the credit received. So the market is predicting that this trade will lose more than 50% of the time.
Vol dampening is in season.
Dumb question, but what exactly are you trading? It looks like your trading the SPX Index, which doesn't make any sense
There are options on the SPX index. You could also use SPY options
Yes we are trading SPX index options. They don't pay off in shares, they pay off in cash. Rewatch the video, we explain how index call options work :)
Not sure your risk manager will be too happy with your position like this in a 20K acc
tldr: buy lots of out of the money long term calls
Sean this is a bearish indicator, so that wouldn't work at all
Great video
thx!
thank you!
@@sethfreudberg4750 Seth, I am planning on taking your class, but was not sure what the class entails. Is it live. In Person?, Schedule? Does SMB have other course offerings?
why not buy in the money puts in this scenario?
Significantly more risk buying puts vs creating a spread trade. The calls in the spread act as protection. If you didn’t have the calls you’re exposed to significant risk.
Time works against you using puts. with a credit spread, time is your friend.
So a similar trade on the spy would be late Monday when spy hits resistance at 410 and selling 50 contracts 410/415 April exp(46) collecting just over 13k. At risk is just about 12k. Break even $418ish. Spy 410 resistance, it'll probably hit Monday before Powell testifies Tuesday.
lol except the vix is in the 12's now
VIX is now at $13. People would've lost a lot of money on this strategy.
If you have such an indicator, why are you selling it? You could just make billions with it. For that reason, I am out.
DON'T WORRY, NO ONE EVER ANSWERS YOU !!!!!!!! AhAhAhAhAhAhAhAh
Spot on bruv
You clueless fuck
We are looking for a Crystal Ball to answer our prayers
it's literally available to everyone and as far as I could tell - there was not a sales pitch in the video!!?? Seems like you live a very happy life lol
bump original comment 1 day ago
This happened during a bear market
VIX closed below 20 today...just sayin!!
indeed it did
There's more upside to come before it's time to sell
@@kkmart43 - I sure hope so! Looking to get a good price on positioning going into FOMC...
Bump
I think it should say "My wallet Tripled" selling you my indicator. That would be more honest.
anyone try this?
This is genius. 💡
LOL Billy we aren't geniuses, we just stare at our screens all day seeking patterns....
Vix like 12.60 now lol
Annnnnnnnnnnnnnnnnnnnddddddd, it no longer works.
What if I told you I've created/discovered the best trading strategy humanly possible? And I'll only share it for a reasonably large sum of money, and the signing of an NDA? Day trade, swing trade, any asset, doesn't really matter. I have it, you want it.
Various timeframes, as well. Although some are easier than others. That's where the nuance comes in.
that is not truth!!!
Guys, it's getting pathetic. Just stream thr trading floor and pick a guy every day. These insicator videos are bs click bait as if you want to make money off of content...
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First reply! 🎉
first time ever? seems like you were the first as well (of your parents) ;-)
moon phase indicator^^
Congratulations on your huge achievement!
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