My Favourite Optionsflow Indicator: Beginners Guide to Net Drift transcript

In this video, I'll show you probably the best trading tool out there. And it's not one of these technical indicators such as EMA, Ballinger bands, whatever. And has nothing to do with so-called smart money concepts. It is literally showing you the money. This indicator is called net shift and it tracks the commulative premium and volume of all options traded in the US option market across multiple exchanges such as SIBO, NASDAQ, Miami International Holdings.

And if you use this tool correctly, and I'll show you how to do this, you will be able to see whether institutions are interested in a particular move. So you take their side and trade with the flow, not against it. So on the left you can see a normal candlestick chart that shows you the price regular price action. Nothing too crazy about it and you have no clue what is happening behind the scenes. That's just a simple chop, right?

Simple consolidation. On the right is the same market except now you can see the premium flowing into the options while this price action was forming. And what is a premium? Well premium is basically the upfront market price basically money that is paid by a buyer for options contract. So that is what net drift plots. Every option trade has an aggressor and the side that crosses the spread to get filled and net drift takes that premium and adds it up through the day creates this net premium flow.

So when the put line climbs that is bears paying up and vice versa right when it goes flat nobody has conviction. This is where you want to stay out of the market. Now where does this number actually come from? Well every session there are millions of individual option trades and if you open the details you can actually see them every single trade with its size its premium whether it hit the ask or the bit. All right.

So the net drift just takes all of those and sums the premium by who was aggressive. Volume and total premium for example only tell you how much was traded. Net drift signs it by the aggressor. So someone crossing the spread is spaying up to get in and that is the conviction I care about. They supported by billions worth of premium flow each session. And in my trading style it's all about trading with the flow. I trade in the direction the money is pushing.

I don't care about anything else. When the net shift is climbing with a real slope and price is going with it, I'm in that direction. You can see that on QQ chart. This is crossover. This is when it happens. And you can see price just follow it. It just kept going. And I'm not fading it. I'm not trying to call it top. It's very impressive to have tops and bottom ticks, you know, whatever it's called all over social media.

But let me tell you something. it does not really make money. I take the momentum while the flow is behind it and I add when it continues. I like to take continuation trades. It really comes down to which side is dominating. On the left for example, you can see the coal line is pulling up hard and price follows it up. That is co heavy which confirms bullish sentiment, bullish bias you can say, right? So we confirm this bullish conviction here.

Vice versa on the right the put line is the one climbing and price bleeds lower all day just drops as you can see that is put heavy is bearish that confirms our bearish sentiment when one side is steep like this that is your A+ setup right that is your A+ day right so when both of these lines are flat and tango together there is no conviction you just leave it alone you didn't take any setups you didn't take no unnecessarily stupid losses.

So, here's how I actually use it. Your first step is to build a pre-market routine and I do this on a daily in my Discord and the only asset that is available for Netrift during pre-market is S&P. So, I look at SPX so I get a solid understanding of what is going on before market even opens. So, here's a little study that I've done. I put a full year of sessions to see if that pre-market result actually means anything.

When the pre-market drift was positive, the market open up more often than not around 61% of the time. So, it open up positive. It had this uh positive opening drift. So, the bigger the pre-market net drift, the more the open tends to go with it. And of course, it is not guaranteed. It's just a probability. So treat it as a probability. So once we are open since I trade NASDAQ, I go to QQQ first. It's the ETF and it carries the cleanest flow for the tech and the biggest flow, biggest open interest, biggest everything.

So that's your number one priority. NDX index comes second to confirm what QQ is showing me. Sometimes to disprove what QQ is showing me. If QQ is not established enough, then NDX can very easily dispute. We can see some huge chunks of premium coming in on NDX sometimes. That's why it's important to keep NDX on your chart as well. One thing that matters a lot here is your filters. So for net shift you want moneyiness set to out of the money because out of the money premium is basically a pure directional bet since there is no intrinsic value.

So what someone pays reflects their view on the move which is exactly what Netrift is trying to read. In the money options for example are mostly intrinsic value and often used for other things like stock replacement or spread lags. So their premium says less about conviction. Another thing is you always want to exclude complex tied floor and cancel trades. If those are left in your drift is just chunk, right? And you will read it wrong.

You know, it's just not going to look uh clean. So I dropped my template in Discord. You can grab it. Just duplicate it and copy the filter and yours will match mine. So you don't really have to over complicate it. One more thing before we take a look at real trade examples. You need to understand that edge is coming from combining those two worlds futures and options. So net shift is the option side is coming from the options chain and cumulative delta that's the alternative to net drift is the future side.

It's the same idea aggressive buying against aggressive selling in the future state that is coming from CME. When both of them agree, when both of them align, when the option slow and the order flow are pushing the same way, that is the strongest read you get. You need to back test this and trust me, you will be surprised how it works. So options show you where the premium is going. Futures confirm the actual buying and selling underneath it.

Shift is only available on Quan data. So link in my bio will give you 7 days of free trial and 20% off and many platforms are trying to replicate it but they simply have no access to such a sophisticated and detailed data. So you should check this out. So let's go through the actual trade example that I took yesterday. As you can see I marked up this uh gamma exposure level of 745 for simplicity sakes. And let's go through my pre-market plan.

So I said that during overnight QQQ rotated back to 7:45 level where we showed major volume during yesterday PM session. So I marked this up already. So you can see that we spent some time inside of this consolidation after reclaiming this level. So let me just pull this volume profile real quick. And you can see that we've had this fight, right? So it was kind of indecisive in this moment. You see that sellers tried to step in multiple times and then buyers tried to step in multiple times.

So we don't really understand what is going on there. That's just a simple um consolidation there. And here you can see that finally when sellers step in I took this trade. Let's look at the net shift as well. So on a netrift we can see that at this moment on NDX we saw that almost 500,000 worth of codes got sold. See this S&P was kind of indecisive. You see like was kind of consolidated. QQ same thing you know whatever around yeah 200,000 but then on NDX what we see is that we sold 500,000 worth of coast.

That was my confirmation that this consolidation is going to break lower. And as soon as I saw those aggressive sellers stepping in, that was my confirmation to take this trade. Right? Was also aligned with PMI report. And we can see that same thing happened on the footprint chart. We can see a lot of buyers getting trapped. And then here you can see once the seller step in I took this trade for quick 2.5R and this way net drift confirmed my trade and then it's important to mention commodive delta here because it played out beautifully just what I told you here we see that we stayed inside of this consolidation inside of this rectangle and price was not moving nowhere but then commodity of delta was moving up.

You can see we got out of this rectangle and then you see that this was moving up aggressively. Price was staying and then as soon as we broke this I'd say cumulative average line even right you see this aggression that was my confirmation to take this trade because it was the same time when NDX co got sold. So and here's the most impressive way of how Netrift works. So this is a trade that I took on FOMC day. So we went into this 711 QQQ gamma exposure level was positive.

Then we got out of this value right here. So that was the foundation for this trade. And here you can see once we tested this 711 some of these buyers started to step in. Then we swept those buyers closed lower and I took this trade. Same thing you can see on a footprint chart. So we trapped some of these buyers there and then once aggressive sellers step in um I took this trade but what was my conviction why FOMC is going to reverse you see that I took this almost 2.5 whatever RR trade if you look at the S&P net that was accumulating throughout this session for probably five six hours we see that we accumulated so many puts before FOMC even happened.

So this way basically predicted FOMC. So you see that NDX was kind of indecisive here. You know 300,000 it is nothing. And then QQQ same thing accumulated around 1 million, right? But the main thing here is the SPX. on SPX we saw that we accumulated 12 million of um net premium flow minus 12 million right and that was my confirmation to take this trade you know we were pulling back up and I was having this conviction that we are going to provide this shorting opportunity and we saw what happened we almost dropped $10 on Q so that is only possible by using netrift