Questions and Answers - Magic 8-Ball - Options Trading Forecasts and Predictions

hey everybody my name is Brian I am the software developer behind magic eightball um I have a list of frequently asked questions and in the Discord group there is an actual section called frequently asked questions but no one seems to read it so I thought I'd just make a video covering uh most of the questions I can't do all of them or this will be like a 5 hour video so these are the most asked questions about magic aall so first off what is Magic aall that's a loaded question is a stock market prediction engine and I hate calling it a prediction engine because it's more of a forecasting application it kind of tries to forecast the stock market based off the current metrics and we'll talk about in- depth how it does what it does um that being said it has a forecasting engine or a prediction engine and then I have slapped a trading engine onto the side of it because a you know the early versions people came in and said well I don't know how to trade this you know what do I do so so it kicks out trades every 5 minutes and those trades have been wildly successful um so if I had to put it all into like a sales pitch it is a stock market prediction engine with a trade system slapped on the side of it maybe I need to hire somebody in sales and marketing because that's just way too big what is the history behind magic eightball is the next question um during covid I tried to learn something new so I stumbled across options trading and well there's only so many episodes of Tiger King you can watch yeah so options trading I found was really fun way to lose money very quickly and I didn't like that so I started watching a bunch of YouTube videos and if you've gone out to YouTube and looked up options trading you know there's just a billion videos out there and most of them are what I call disinformation and sales pitches because you will sit through a half hour video learn nothing and then they try to sell you a service so I try to avoid making those kind of videos anyways point being I started automating uh my own specific brand of trading even though I was very very new and kind of poking holes at the market I am a software developer I also specialize in deconstructing software um so like if you have like a virus on your computer I would be the guy that would deconstruct that virus and figure out what it's doing um at least I used to in a previous life I've gone on to management but that's a different video altogether point being I love reverse engineering things I love puzzles so I started looking at the stock market specifically SPX as a piece of software and a puzzle to be deconstructed so I took the options chain started slicing it apart and looking at the different metrics well yeah it didn't work and it didn't work a lot and I ended up deleting it and rewriting it from scratch 94 times yes 94 times so the current version even though it's like 1.031 is actually what I call Magic 94 because it's the 94th iteration of me completely rewriting this from scratch so it's got a long history to it the next question is does it really predict the stock market it depends on how you define the word predict so I've had people come into the group going well does it take into account the news is it taking into account what's going on with Russia and Ukraine and Co and this and that no it doesn't have a clue about the world or what's going on outside of that options chain what this does is it deconstructs the options chain and a bit of the historical price movement to try to figure out and build a forecasting model where it's going to go so does it predict well depends on what you call predicting that's why I prefer to call it a forecasting model but yes if you look at the trades you can see it's definitely predicting because you can put a trade on at say 10: in the morning and it will expire in full profit and the trades are historically more and more accurate we'll go over the accuracy of the trades later in this video the next question is how does it work well magic I don't know I've always always wanted to do that everybody ask me how this works I've had people literally email me and call me on my personal cell and say I demand your source code I need to see it immediately and I'm like no get out of here so at a high level what does it do it takes the options chain in its totality and it looks at each individual metric of the options chain and it tries to determine based off each metric what each metric is going to do so for example uh some of the bigger ones are like volume Delta gamma and open interest so let's just take volume for example a lot of people believe in volume profile analysis so what the system would do is it would take volume and build a profile of volume in its memory and then build a linear regressed guess or prediction if you will of where it's going to go based off volume and then it does the same thing for like open interest Delta gamma and so on and so on and there's many other metrics but it all kind of combines them into one prediction now that in itself is not really true um it actually kicks out two predictions when you look at the chart and I'll try to remember to put a picture of the chart on the screen there is a dark green line which will follow the pink line the pink line is price but the dark green line is the long-term or end of day prediction you'll see it kind of like tracks it or almost mirrors it and if you watch this long enough you'll notice that the price will move more violently than the prediction will and then there is the flat bright green line that is the short-term prediction which is basically within an hour what we think's going to happen so it does kick out multiple predictions for multiple scenarios short-term and long term how accurate is it that's the next question is how accurate is it well that's a tough question but we actually have logs this time remember this is still early software I mean this is version 1.031 so it's still a 1.0 software um these are the metrics as of today from the Discord group and this is SPX it was 93.5 1% accurate that's 93% accurate and that is 38 total trades with 288 wins 20 losses and those are spread across butterflies iron Condors verticals and something I call sonar I'll talk about it later in the video but sonar is just a fancy iron Condor and so butterflies were 80% accurate iron Condors 100% accurate 100% accurate what that means is it didn't matter what time you took the trade any single iron Condor you took from the system would have gone full profit you would have made money uh verticals 93% accurate on verticals today kicked ass by the way and sonar is 100% accurate so what does that mean roughly well it means that the system generates trades every 5 minutes and we have identified key entry points in the market which we'll talk about later but of those key entry points you can enter a trade and have a reasonable expectation of making money so for example with verticals being about 80% profitable we know that if you enter at a specific time you have an 80% likelihood of that thing expiring in full profit 80% likelihood that of course is dependent on news and world events Why are butterflies so difficult to pin okay so butterflies gosh I hate butterflies I'm I'm gonna say I just I really hate butterflies but that's the next question why are butterflies so difficult to pin they are the least accurate in the system so overall butterflies typically have about a 25% accuracy rating when we talk about accuracy in the system we're talking about from the moment you take that trade to the end of the day will it expire with money and butterflies are only about 25% overall in the system now overall is a period of months and months so the reason why butterflies are so hard to pen is because you're taking a very narrow slice of that market and saying it's going to go exactly right here that's like picking a rock off the ground looking up in the sky throwing it and hitting an airplane right on the nose it's it's hard it's really hard mathematically it has the lowest probability of success but in this system they're getting better and I'm working on a new model I think I call it butterfly bazooka yeah let that image bake in your head butterfly bazooka which hasn't even higher success rate I think right now it's testing at about a 45% success rate but it's still early early development it's still in a spreadsheet believe it or not the next question iron Condors are they guaranteed 100% no nothing is guaranteed in this system this is the stock market and this is the real world iron Condors in this system are what are called ultrawide iron Condors so they are let's see if I can get my hands on the edge of the screen here they are massive look at the screen that's the entire Market that's like they're right at the edges of that market so what happens is as the day moves on you'll see the iron Condors will start here and they start shrinking and shrinking and shrinking remember an iron Condor is being generated every 5 minutes so the first one will be here and then so on and so on and each iron Condor gets progressively smaller as it Narrows in on the target the reason why they're so successful is because they are so stinking wide and they have very low premiums so the risk to reward in this is absolutely horrible you're talking about uh getting $50 and risking almost 900 it's to in my mind they're really not worth it um I've had iron Condors go against me and one iron Condor going against you can wipe out you know an entire month worth of wins so it's not fun um Iron Condors you really have to have great stop loss is really what's Critical with them because if they go against you they're going to go bad very quickly next question is verticals um this is one of the LoveHate relationships with the system people will look at these and they'll say well why does the system say you know sell a call but yet the price is going up now remember you sell the opposite so if you're selling a call you want the price to go down but if you look at the chart in say e trade or thinker swim or whatever you're using the price is trending up and then you'll see that throughout the day it'll flip like magic eightball will say sell a call sell a put and it'll kind of flip back and forth that's because the market doesn't stay flat and the market tends to move so the way the system calculates a vertical is it looks at the beginning of the day and it looks at where we are and it tries to figure out based off the the trajectory of the market and all those underlying prediction metrics we talked about is it going to be above or below a certain spot now we look at where we are where that price is right now because that's that snapshot we have to take and remember a trade is generated every 5 minutes so if we're here and the Market's been going up it's going to say sell a put but if we're here and the Market's been going down all day it's going to say you guessed it sell a call now the system's not perfect and it does flip back and forth and you'll see this especially on neutral days where the market kind of does this kind of horizontal movement it'll say call put call put call put and it drives me absolutely Bonkers that's why I don't advise watching the trades what I do is I will take the trade at a specific time and we'll talk about entry times but you'll take the trade at a specific time and then you watch the charts especially like the magic chart and the sonar chart to determine how healthy your trade's going to be next question is sonar what's the difference between sonar and Condors um two key differences between the two so the normal Condors in the system are generated based off Delta so they're generated I think at like a 0.05 Delta and that's why throughout the the day they kind of get smaller they're also very wide where sonars are actually calculated on a different algorithm all together so I wrote a new prediction model called sonar and put it in Magic eightball and sonar looks at a bunch of key metrics and then mathematically calculates them in a very different way from the magic prediction are you confused yes so again this is early version software so there is a magic prediction there's a long-term prediction a short-term prediction and now a sonar prediction there's like four predictions in this engine so what sonar tries to do is kind of combine all those into one package and say this is where the price is going to go and I'll put a sonar chart on the screen so you can see a visual representation of what I mean when sonar knows where that price is going to go there's zero question where it's going to go now that being said the sonar trade is simply an iron Condor but it's based off that sonar prediction so it's taking a special calculation finding the center of that calculation and building a condor around it a much narrower Condor with better premium okay next question I love this question I get this all the time why does the prediction keep changing well um open up any broker and look at the chart why is the chart changing because the world is changing around it people are buying they're selling world events happen uh news happens constantly so that's why the prediction changes every 5 minutes the system goes out grabs the market information and forms a new forecast model based off the current information and the historical data we've collected so far throughout the day remember this is all zero DTE so it's going to say okay let's say it's like 12:00 in the afternoon it's going to grab that 12:00 snapshot run calculations compare it to the previous snapshots throughout the day that have been taken every 5 minutes and then build a new forecasting model and from that it generates all brand new trades which is why Tada everything seems like it's changing you want want to understand that no software is perfect and if we were to Simply look at the market at 935 on the dot it's going to be horribly inaccurate we want to actually adapt and change as the market adapts and Chang I do this for a few critical reasons first I don't know when you want to enter a trade so it generates a new trade every 5 minutes second the market can and does change especially when you have news or world events I personally will not trade when the government is coming out and you have a I think they're called a fomo speaker when they get out there and they start talking about things and rate inflation hikes and all that nonsense I just I won't trade because the Market's too volatile but I still see the system working beautifully even on those days so maybe I should okay next question is free version versus the paid version okay the I get a lot of questions on this so the free version is well free you don't even need to feed it a credit card there's going to be a link down below to the paid and the free versions but the free version is simply a very small text wall of that current snapshot of where it thinks it's going to go within a range and then you get two charts you get What's called the magic chart and the quad chart it's vastly unhelpful for anybody who's serious about trading I only throw it out there just so people can kind of get a feel for what they're going to see before they actually put a credit card down the paid version however has a large Discord server with a lot of very active users I think at the time of this recording let me look it up we have 312 active users at this point in time and it's growing I I'm literally watching watching people subscribe at the moment um the paid server is only 25 bucks a month or $250 a year um if you're good at math you know that 250 a year is a slight discount but it's nothing special um that being said the main draw to the paid account is a you get a large community B there's an education section where I've invited other people who know how to trade these are Professionals in the stock market like for example my buddies ax option love you guys they're in there Ernie with z BTE Vance of course is in there love you Vance and there's a bunch of other people in there as well that are building their own systems and they have their own mentoring channels and they in some cases have their own businesses they have YouTube channels they have you know education that you can sign up for they have their own discords even so what I'm trying to get at is you have a giant ecosystem and then you have all of magic eightball as well so you have the five minute updates you have the three main charts which is the magic chart the quad chart and the sonar chart along with the full prediction forecast and you guessed it all of the trades that are generated next question is how much does it cost and why are you charging for it that's a great question so it costs 25 bucks a month or $250 a year because I have an entire server infrastructure in the cloud I have to pay for and a data feed which is not cheap uh data ironically it's not free and if it is free it's usually crap uh that being said I have to pay for for things sucks it's just the way the world works so I defined a price tag of $25 for one simple reason I want somebody day one to come in and take their very first trade let's just hypothetically say it's an iron Condor they place a trade they win let's say they win 50 bucks they have just paid for an entire month of magic eightball and they have a small profit to show for it I really don't want to make a fortune selling subscriptions I want to make a fortune doing options trading the problem is I am a software developer I am not a professional options Trader and I'm trying to learn options trading so I can build the software to do it for me so a great example is Axe options I love axe options I'm a member of ax options and they have some of the best strategies when it comes to verticals that I've ever seen and so I've learned from axe options the professionals and I've automated that to the best of my ability so far and it's getting about an 80 % success rate and what that means to me is that I feel confident grabbing a vertical plugging it into my trading platform and knowing with an 80% chance of certainty I'm going to make full profit on that trade that's the type of power I'm looking for in the future so the reason why I'm charging money is simply so I can run the equipment all right how do I join that's always that always boggles me how do you join there's literally a link down below click the link feed it a credit card for 25 bucks a month if you don't want to do that you can go to the free server and just watch um I'll admit the free server is kind of boring cuz nobody's really chatting in there and there's not a whole lot to see other than just the predictions come out every 15 minutes or sorry every 30 minutes um how do I cancel again that one mystifies me because when you join you are sent a link to your own customer portal and you can go in there and cancel at any time you can also open a chat with the Discord bot U I think it's called the launch pass bot it's over in the chat windows and you just type the word cancel and it'll walk you through um super easy to cancel when in doubt you can message me and I'll cancel you your account for you how do I use it well that's a very good question it depends on what you want to do as a Trader everybody has different strategies but I can give you my strategies what I do is I check around 10 or 10:30 Eastern Standard Time because that's the time frame we have identified as the best time to enter and I will take a vertical or an iron Condor I personally don't like butterflies sorry I just don't um usually I'll take a vertical and I will set my appropriate stop loss with that and then I will just let it go throughout the day and I'll check on it as I can again I have family day job all that stuff so all this on my end is fully automated and it just runs and then it'll either stop out and I just respect my stop- loss or I check back towards the end of day and it's collected full profit now if I'm super busy and I'm not feeling confident in the market I will cash out so a great example is kind of how axe options does it remember I'm a member of axe and I kind of learned verticals through them they will set their stop I think at a 2X stop don't quote me on that I'm not an expert and then they will collect profit at about 50% so as an example they'll get a premium of like a dollar and they'll set their stop for like $2 but they'll collect profit at0 50 Cent so they're either losing $2 or taking 50 Cent profit and if you watch axis videos which I highly encourage the numbers are probably different all right now the other thing that I'll do is around one :00 Eastern Standard Time I'll look at what's called a sonar which is just a specialized iron Condor and those have historically been pretty good like today sonars were 100% accurate meaning every single sonar trade was perfectly fine uh next question I get this one this one really cracks me up can you place the trades for me no that's actually legal I can't do that I'm sorry um next one is can you Mentor me or give me advice actually that is also illegal I cannot give you Financial advice and I would not mentor anybody because again I'm a software developer I'm not an options Trader I'm trying to become one but I'm better at software another question is why does this create trades every five minutes and do I have to take them okay yeah so the system does a lot of math and it's too intensive to do once a minute so F every five minutes is about the best I can do until I upgrade the server infrastructure in the background and no you absolutely should not take a trade every 5 minutes you'll just destroy your account what you should do is develop a investing plan and for me my investing plan is at 10:30 I look for a trade that I like and typically that's a vertical and then I'll place that trade and run that trade as long as I can and collect profit when I'm comfortable or let it expire that is what I would recommend another question I get constantly is which trade should I take sorry I cannot give you Financial advice it' be illegal for me to do that I would just say pick what you are most confident in and go with that um I would recommend you look at the statistics and statistically from most successful to least successful iron Condors sonars verticals than butterflies so iron condors and sonars are going to be kind of your workhorses because they are so stinking accurate but it also has higher risk lower reward verticals are kind of that sweet spot and butterflies you have well High reward but very low chances of getting that high reward uh what stop loss should I use that's another question I get constantly honestly I I couldn't even begin to tell you I'm not an expert uh we do have an education section with mentors in there you can ask them but uh what I personally do is I shoot for about a two times stop so if I say I take a premium of a dollar I'll shoot for a stop of 2.0 uh next question is are these trades guaranteed I don't know who asks these questions come on no there's nothing guaranteed and this is where I'm going to go on a rant about risk management you should follow your risk RK management strategies and the risk management strategy that I personally learned is never risk more than 5% of your account and never risk more money than you can afford to lose and when you place a trade make sure that you set the appropriate stop-loss and you have a good profit collection plan in place so don't get greedy you know you see profit take profit uh how do I read the charts that's the next question is how do I read the charts that's actually a really good question so I'll put the charts on the screen here the first one is the magic chart this shows you the price in pink along with the long-term or end of day prediction in dark green and you'll see that dark green line will kind of move along with the price and it readjusts every time it takes a snapshot once every five minutes that dark green line is what we're expecting end of day the bright green flat horizontal line that is shortterm that's where we expect that price to go within an hour and you'll likely see something like the price is is below both green lines that means the price is going to go up or the price is above both green lines the price is going to go down now if the price is between both of those green lines you'll see the price usually gravitate towards the soon or the bright green line and then up towards the dark green line that's just how that chart Works uh the next chart is called the quad chart that's where I take the four major pillars of this you have volume open interest uh Delta and Gamma and it kind of builds a profile file of each one and then shows you a bright pink line on each one of where each one of those analyzers thinks the price is going to go so now you have four different independent metrics and each one has a range with an up and a down directional and it just tries to tell you with a bit of confidence what each part of the analyzer is thinking within the system it's pretty pretty I want to say it's a pretty simple chart but it's also very complex to look at and the final chart is the sonar chart are love the sonar chart because it tells you exactly what's going on in the market that's why I called it sonar it's like you're in a submarine and it just pings and shows you everything in front of you so the sonar chart I love the most especially towards the end of the day where it shows just a gigantic Spike towards a specific number and you can know with a huge degree of confidence where that's going to go it'll also show you in the profile whether it's going to Trend up or down based off where that swelling in the profile is next question I get quite a bit is where do I see historical logs and how do I back test this that's a loaded question um it's very hard to back test this because as I've made improvements in the software the back testing would change so for example the version that is now did not exist two months ago it's I'm constantly making improvements in the system however I do have a log section and it publishes the logs daily and once in a while I go out there and just say you know here's all the logs to date have fun and then it's up to you to independently go back test these if you want to I do know there's a couple groups of people that are just religiously back testing these and so far the feedback has been pretty good uh another question is what is test versus production uh that's a good that's actually a really good question so when you're in Magic eightball you'll see two areas one is production or prediction and that is the actual production or current version but then you'll see another one that says test use it own risk that is the newest version that I'm working on and it says use it own risk because it's in testing I'm sitting here developing it and it's in testing and I'm just letting it run I have both of those because I don't like developing in a bubble I want everyone to see what's coming in the next version and I get a lot of feedback from that where people say hey I love this new feature or you know oh my gosh why did you remove a feature I needed that next question is what is the difference between sonar and Magic that is a great question so they're different algorithms they calculate very differently so magic will take the entire option option chain strip it apart run a bunch of math on each metric and try to form a grand calculation if you will and it's very uh very I hate saying complex but it's very complex and it gives me a royal headache to debug when it goes off the rails but that's magic now sonar is very different sonar just says what is simply happening right now and it's a modified version of gex and I actually have published sonar out in the Discord group you you can even put the script in think or Swim and watch it right on your options chain that's literally the same script that's on the live stream by the way that's another question there's no sound on the live stream it literally says it right on the screen no sound on the live stream sorry pet peeve of mine I get asked why there's no sound on live stream about five times a day that being said which is more accurate sonar versus magic well they serve two different purposes sonar is what is happening right now Magic is what is going to happen so I'm trying to combine the two into a third prediction model which is coming in the next major version U the difference being I don't like the now prediction inside of magic I prefer sonar because sonar is more accurate but I do believe that magic is more accurate for an end of day prediction all right what is the current state of development that's a question I don't get asked super often but I get asked often enough so the current state of development I'm trying to get this software on a stable broker what I mean by stable broker is originally it was on thinker swim but thinker swim is moving with Charles Schwab and there's about 2,000 some OD developers out there going TDA come on what's going on because you can't actually create a new API account and if you have an API account they're not really giving you a whole lot of information about what's going on in the future of their API I don't want to build something and then just have it one day magically stop working because TDA just decided not to do anything yeah that sucks so I went out and I looked at I mean literally dozens and dozens of Brokers and data Brokers and apis for example I looked at interactive brokers I I hate them that they I don't even want to call it an API that's just horrible um interactive brokers if you're watching people want to make a web request a single request and get the options chain back they don't want some Gateway they don't want to jump through all these hoops they don't want to deal with Java simple it's 202 3 make it happen guys um TDM a trade I love you guys but you got to be more transparent what's going on with your API E Trade same thing ER trad's documentation is absolutely horrible their data is amazing but they're their their documentation sucks and they're emerging with someone else too which makes their API in complete question and then of course there's tasty someone's going to go what about tasty works I did check that out they have a new API and I think it's called NQ feed or something like that again tasty same thing I'm going to say about interactive brok Brokers is 2023 I want to make a simple web request and get the data back I don't want to mess around with multiple tokens or jump to some live stream or no I want to make a web request tradier I wish I had better things to say about tradier tradier was one of the best apis I've ever seen and it's extremely well documented the problem Trader has is that their options chain is in real time but the spot price for the underlying especially in an index is 15 minutes delayed and I've actually talked to Trader on the phone and said guys if you fix this you're going to have a flood of developers coming to you and they just came back and said sorry it's too expensive we don't want to do it uh I what what can you do they have the best API they have some of the best data but they want to give you a 15-minute delayed spot price it's just not not something I can work with so that's the situation is I've jumped from broker to broker to broker to broker literally dozens of them trying to find one and I finally found one that I think is stable um it's currently in testing and I do plan on moving that to full production the problem of course is that it's a little pricey um some of these data feeds can get super super pricey we're talking from you know 50 bucks a month but the data is crap up to 500 a month and the data is okay to I think CBOE quoted me almost $30,000 a month just to run magic a ball yeah 30 grand a month come on guys data is not that expensive so sorry to go on a rant but this has been the bulk of my year is just jumping from one broker to the next instead of actually developing magic eightball I'm just trying to find a safe and stable data broker with reliable data that doesn't cost me a fortune every month um if you know of one put it in the comments down below chances are I probably looked at it um there have been a couple that I wanted to try but they're too cost prohibitive so the final question is what's next for magic aall that's a really good question what is is next I want to get the system stabilized on a data broker and then I want to focus on what I call version two software so version two is going to be a radical redesign of the system using all of the lessons learned that I've gained from building the current system there's a reason why I want to start from scratch a I want to get rid of a lot of the Clutter and crap and shrink the CPU usage and the memory footprint of this thing and I want to split it up into multiple modules or if you will or multiple processes so instead of having one giant ecosystem I want to segmented off and each one have independent functions or as what I like to call design it the way it should be the way I should have done it to begin with um again this is version one software so it was pretty much just write it does it work hey throw it out in production where version two is going to be a redesign of everything uh some key features of version two will be uh more frequent updates I want to get it down to the minute um I also want to build almost like a real-time chart off a website don't know if I'll ever get it there and I want the trades to actually track a stop loss so I want it to say you know here's the recommended trade here's the recommend I shouldn't say recommended but here's the example trade here's the example stop loss and then track it in the system so that if the price movement goes and hits the stop the trade in the system stops out and it'll actually notify people hey this trade stopped you know really what I'm looking for is really really accurate logs because once I have those extremely accurate logs I can start pinpointing better entry times and better entry situations so for example um the current system is not smart enough to do this but this is what I want to do in version two let's say the Market's doing this kind of serpentine thing but it's trending up right instead of entering verticals going up when it's up here and then potentially stopping and then enter stop enter stop it would wait and say up wait for it wait for it enter and then profit and then enter and profit and the current system's just not smart enough to do that so maybe it'll get there maybe it won't this is a lot of development and like I said I have a day job and family and all that so it consumes a lot of my time but uh anyways if you have any questions or comments drop them below I'll try to check the video comments I'm not on YouTube a whole lot definitely throw them out in one of the Discord servers and I hope to see you there