Bootcamp Lesson 5 - The Hourly Trigger and the Daily Trigger transcript PaperClips Flashcards
In the context of options trading, why is selling options considered a better strategy than buying options?
Selling options is considered a better strategy than buying options because it allows for consistent passive income, while buying options carries more risk and can lead to both gains and losses.
What are the potential gains from selling options? Why is it considered a stress-free trade?
The potential gains from selling options include collecting the entire premium from the sold contracts. It is considered a stress-free trade because you only need to buy back the contracts if the price breaks back below the trigger, and the entire trade is relatively easy to manage.
According to the course notes, what happens to the value of puts that have been sold when the price eventually comes back down to the trigger?
If you sell puts and the price eventually comes back down to the trigger, the puts you sold will have lost value on theta, allowing you to profit from the decrease in value.
What does theta represent in options trading? How does it affect the value of options over time?
Theta represents the time decay of options. It causes the value of options to decrease over time, making selling options a profitable strategy, especially when the price goes sideways.
According to the course notes, why should one be cautious when looking at others’ gains on social media platforms like Twitter or discord?
One should be cautious when looking at others’ gains on social media platforms because there’s often a lack of information regarding their losses. Risky trades can lead to both significant gains and losses, so it’s important to consider the full picture.
What does the course notes suggest as a focus for consistent passive income in options trading?
The course notes suggest putting a big focus on selling contracts to achieve consistent passive income, as the triggers make it relatively easy to execute profitable trades.
What is the trigger crossing usually followed by?
The trigger crossing is usually followed by a retest
What should you look for when deciding whether to buy off the daily trigger?
Look for bearish divergences, and as long as there are none, it can be considered a buy off the daily trigger.
Which timeframe does the speaker suggest starting with when looking for bullish divergences?
The speaker suggests starting with the hourly timeframe and then working up to the higher timeframes.
How does extreme buying reflect in the hourly velocity?
Extreme buying is reflected in the hourly velocity as a rapid repair rate, indicating a reversal to the hourly trigger.
What triggers the turn of the daily velocity?
The turn of the daily velocity is triggered by the presence of daily bullish divergences.
How do the velocities work together to call bottoms and tops?
The velocities work together by starting with extreme bullish divergences at lower timeframes (hourly, daily), which then turns the weekly and monthly velocities.
What mistake does the speaker highlight regarding trade decisions based on monthly velocity?
The speaker highlights the mistake of disregarding strong bullish daily divergence just because the monthly velocity appears negative.
What is the expected movement of price when it reaches the daily trigger?
When price reaches the daily trigger, it is expected to move closer to the weekly trigger, initiating the turning of the weekly velocity.
How does the monthly velocity become less negative until it flips positive?
As price moves closer to the weekly trigger and the weekly velocity starts turning, the monthly velocity becomes less and less negative until it eventually flips positive.
According to the notes, when do we sell the position after a bearish cross?
We wait for the retest because once there’s a trigger, cross is almost always going to be a counter trend move.
What formation is formed when price moves back through the daily trigger and the hourly trigger?
An airplane formation.
What are the two ways mentioned in the notes that can result in price breaking below the daily trigger?
Bearish divergences or complete loss of velocity.
What trigger cross indicates a good short opportunity?
If the hourly trigger crosses below the daily trigger when the monthly and weekly triggers are on top of the hourly trigger.
What is the significance of the monthly and weekly trend when deciding to go short?
When the trend is bullish and the weekly is above the monthly with positive velocity, we are not looking to short, but rather to buy the dip.
What do you check every night on a trade?
Daily velocity
When do you expect price to come back down to the five minute trigger?
If there’s one, two or three bearish, five minute divergences
What should you consider if hourly velocity is very strong?
If there’s one five minute bear divergence and price breaks below the one minute trigger, don’t be scared
When might you expect price to come all the way down to the five minute trigger?
If hourly velocity is very low, the move looks exhausted, and there’s a 15 minute bearish divergence
Why is there no fear that price will end up tapping the daily trigger?
Because there are no bullish daily divergences
What is the significance of zero weekly divergences?
As hourly
In a daily and weekly trigger
If there are zero weekly divergences, even if the hourly trigger crosses below the daily trigger, we do not expect a sell down to the weekly trigger.
What happens when hourly velocity is positive?
When hourly velocity is positive, it indicates that bulls have control and we expect the hourly trigger, daily trigger airplane to form.
What are three trigger clusters and why are they powerful?
Three trigger clusters are setups where the hourly, daily, and weekly triggers are closer together. They are powerful because they indicate triple the acceleration in price changes.
What condition is required to go long when the hourly trigger crosses above the daily trigger?
Bullish weekly divergences.
When does a trigger cross usually result in a retest of the daily trigger?
After a trigger cross, a retest of the daily trigger usually occurs.
What happens to velocity divergence when price touches the trigger?
Velocity divergence is reset when price taps the trigger.
Right. That was pretty easy to see clearly. Daily velocity was there, stepping down with each
new low, putting in new lows.
Right. Visually, it’s pretty easy to see now. Then we have the most
extreme velocity print that happened right over here, followed by a couple of consecutive lows
without daily velocity printing a new low before the return to the daily trigger, which is followed
by a bullish cross.
spot the airplanes on the hourly/daily crossings
what happened here?
hourly crossed daily trigger, healthy velocity with 3 new highs, then price went down for a retest.
would you continue going long here?
what else can you tell about this graph?
yes, still above the daily trigger.
price touched the daily trigger, and reset the divergence count.
what would you do here?
airplane set up, hourly trigger did not cross daily trigger, so I would buy more.
what would have happened if hourly crossed daily?
I would have cut my losses.
why wouldn’t you be scared of price dipping below?
no bearish divergence in the velocity chart
what happened in this crossing?
a countertrend which always happens on a crossing.
What could have indicated this move was over?
daily velocity ran out of steam
when could you short right here?
if when weekly and monthly are above the hourly
what made price go down?
daily velocity ran out of steam
in order to see if these price moves could fail, we have to be looking at?
weekly velocity
what made the price go down here?
weekly bearish divergences
price tried go up but what happened here?
monthly velocity was still moving upwards.
what happens here that makes price go up?
weekly and monthly velocity rise
what is this?
bullish divergences
what effect did this have?
what is this?
caused weekly and monthly velocity to lose steam
bullish divergences
what did you need to do to find out what happened with these bullish divergences
check hourly velocity, as you can see there was heavy buying.
what did you need to do to find out what happened with these bullish divergences on a smaller scale
check 5mt velocity, you can see a huge print
what would make relying on just the monthly velocity as a nasty trade?
So we were watching this live and we were seeing bullish daily divergences. But then you say,
Yeah, now I don’t like this trade. The monthly looks nasty. That’s a big mistake from looking from
using trigger signal and it’s a big mistake that can limit you in taking great trades. So just
because the monthly velocity is nasty, if you see really strong bullish bullish daily divergence,
then you understand the price is going to go back to the daily trigger.
Price is going to go back to the daily trigger. Then you understand that price is going to be
closer to the weekly trigger, which will help start to turn the weekly velocity and if we give us is
going to turn, then of course, and price is going to move closer to the weekly trigger. That’s in
turn going to turn the monthly velocity and make the monthly velocity Now less, less negative,
less and less negative until it flips positive.
price would be closer to the weekly velocity
did this make a bearish divergence?
why?
yes, it did not make a high velocity print
What is this a great example of?
great example of 5 min divergences causing hourly velo to start reparing
What can be expected about what happened?
because hourly velo was still on the way down, the bearplane was expected
but what those 5min bull divs helped with, is that now spy just put in an hourly bullish div
and this is essentially how all reversals develop over time
