Good morning traders and welcome to the book map pro trader webinar series for December of 2021 So we have a great lineup of traders as you guys know as you've probably seen in the emails, etc Today we have Brent Cachuba. We've had him several times from spot gamma and You know trades futures and stocks A very unique method of trading and we're really kind of privy here to Get insight to an options expert things that you know, most of us have never had any sort of access to before So kind of kind of very very special stuff here. So let me go through the biography here Some disclosures and some other details here Brent's been in equities and derivatives for almost 20 years Yeah, he worked at B of A and credit Swiss as both an equities broker and in algorithmic sales and trading following that He was in institutional sales with Wolverine Representing their electronic derivatives trading platform currently Brent trades some proprietary strategies and runs spot gamma.com which Publishes various metrics on options data Here is Brent's contact information here. They have a website spot gamma He on the book map marketplace. They have subscription service here and their hero indicator as well as some of their levels and other Products in there. I'll show you that on the marketplace or maybe let And then you have his email here spot gamma or SG at spot gamma.com and his Twitter at spot gamma And then some special offers also from from Brent or spy gamma here So I'll put these links into the chat for you guys So you don't have to copy these down you can click on them and go directly to some of these areas here if you're interested All right, let's go through some disclosures General disclosure all book map limited materials information and presentations are for educational purposes only and should not be considered specific Investment advice nor recommendations live trading is in simulation demo paper trading mode and strictly for educational purposes Live trading executed in simulation cannot accurately represent realistic trading performance I don't think Brent's gonna be trading live, but just in case and then risk disclosure Trading futures equities and digital currencies involve substantial risk of loss and it's not suitable for all investors An investor could potentially lose all or more than the initial investment risk capital is money that can be lost without jeopardizing one's financial security nor lifestyle only risk capital should be used for trading and only those with sufficient risk capital should consider trading Past performance is not necessarily indicative of future results. All right with all of that said let's turn it over to Brent and Let him take it away Thanks Bruce, how you doing? I'm doing well. I'm doing well. So nice to have you back Thank you. I I'm excited to be back. I'm gonna try to show my whole screen here in a way that is Okay So I'm gonna take a little bit of a different tack today I think so as you can see on my screen here is book map trading platform and we have Two things that when I talk about here before I flip to my presentation One we have this hero indicator. So for those of you who have book map may have this indicator This is showing us what the real-time options deltas that have traded so far are in the S&P So if this chart goes up or this line goes up that means people are fine are Trading in a way that creates positive delta So it's buying calls and selling puts and then obviously if it goes down people are buying puts and selling calls And those are negative delts trade So we're gonna talk about that and what the impacts those are and then we have obviously aren't levels that we push out to your system every Every morning and these are tied to where the most game is in the market So L1 is a level one. That's the biggest game strike in the market So for those of you who are watching the market now We're kind of down around 4681 and 4700 is the biggest game of all or so to speak and explain what that means But this kind of a market magnet If you want to put it that way So we're looking for sort of price mean reversion back up in this level So I want to touch on that before we flip to the presentation so I can make a small prediction here before we actually Start the show so to speak So Again, thank you for having me. I run spot game.com and what we do is we analyze the options market to predict the way that the The market itself will move so which way will the S&P move which way will single stocks move and all those All of our metrics come from the way that options are positioned in our trade So as Bruce mentioned before we're integrated with spot game with a book map and then we push out of levels But we also create a daily note every morning where we analyze the option structure in the primarily in the S&P 500 And we email that to our subscribers We also have the tool called the equity hub where you can look at over 3,000 different stocks and see what the options position is there This is the sample of our daily notes. This is actually the daily note from this morning I just thought it'd be interesting to sort of post what we're seeing but basically as we head into the FOMC We think that the markets would be pretty quiet between today through Wednesday because of the FOMC And then we have the biggest or one of the biggest options expirations of the year coming up on Friday So we have this interesting set of events where Powell is gonna kind of charge the market He's either gonna make everyone really happy or really sad, right? And that's gonna play into the options Exploration and we'll explain why that options expiration could be a catalyst for a lot of market movement into the end of the year Incidentally if you head over to our sites by game.com you get a free Sunday trial and see today's note If you're interested in reading this info so enough that move on to the actual presentation here So we're gonna start with a macro view of flow So open-interest changes once every single night around midnight We pull that open interest in and we run a bunch of models against it to figure out the direction of hedging flows by Ops's dealers and also where those hedging flows the significant levels where those hedging flows may emerge So sort of support resistance line and then volatilities that we call So that we have this macro we call which is the higher lens at which you'll view your day or the last several days And then we have what we call inter-day flows Which is which is part of that hero indicator which which actually reads all the trades in real time So that's that's gonna be the second part of the talk here So I want to talk about an important part of flow. This is something that occurred Or we think was a big catalyst over the last several days and that is the idea of Vanna And then the second one is charm and these are permanent topics here Because again of the FOMC we still have a VIX up near 20 Emily 20 spot four so far and so when people talk about applied ball till you get changing in fly ball till it they talk about this This term called Vanna and we want to just walk everyone through exactly what this means and and how it affects your Or how it could affect what you're trading. So I'm gonna try to use this pen tool and hopefully this goes off of that hitch Here so in this presentation here We have three different Looks at the same option. So all these options are the 4600 put which is great And all we've done is we between these first two that is the red and blue line is we've changed implied volatility So I'm going to assume that everyone here has a decent understanding what implied volatility is or how to look at that on your In an options montage But regardless we'll explain how you can still look at this flows And then it has the same days to expiration So all we've done between the red and blue lines is we we've changed on this plot What the implied volatility is of this option? So this is down here is the spx index price, right? So we're currently around 4700. So we're going to look at this slice of the Chart here and then on the y-axis we have delta So the symbol for delta is a triangle and all delta is telling us is how much should dealers hedge Or how much would someone a buyer or seller of these options need to hedge? So if you think about one is a hundred shares per one options purchased Then you know 40 we have So 50 shares, sir And I'm making a lot of assumptions here in generalizations So obviously wouldn't hedge an actual spx option with with shares you'd hedge with futures, but stay with me here for the explanation Okay, so if I bought the put today and let's say, you know Ball is a little bit low here. So I'm going to buy this put option and it has roughly a delta of 30 So when I buy this option a put option has a negative delta So what does that mean? Well, if I buy a put and the market goes down, I make money I'm very happy an options dealer likely sold that put to me, right? So they are short a put if they're short a put and the market goes down That means they're going to lose money, right? That's not good. So what will they do? Well, in this case, they would sell 30 shares of stock again I'm making generalizations here, but just say 30 shares of stock. That's great Now let's say today that we're all sitting here and the market's pinned to 4700 But brainer or one of the other fed members comes out and says, I think we should hike tomorrow. Well Let's say for a second now that the market doesn't drop because of that But everyone gets worried and they start to raise their bid on options, right? And they think they're a little more nervous now the market thinks the market's going to move that the Future movement of the market is going to be a little bit larger, right? So in five volatility or the price to put options goes higher again We're staying at 4700 all we're doing is changing the price of the S&P price of implied volatility Well, now you can see that the volatility of that option the implied volatility despite my Junkie drawing there has gone to 40 Right. So that's good for branch who bought this put option But for dealers now The the delta of this option or the number of shares required to hedge this option has now gone from 30 to 40 Recall they are short this put option Right. So what they need to do remember before they had to sell 30 shares to hedge Now they need to be short 40 shares of the hedge So the difference between these two is negative 10, right? So to hedge my one put option they ought to sell 10 more contracts or 10 more shares to hedge themselves, right? So this little change here means they need to sell 10 shares 10 more shares of stock to remain hedged now you can imagine that as the market goes lower and imply ball And implied volatility goes up or down You can see these deltas change particularly as the market goes down as we know implied volatility tends to go higher And so the number of shares that they need to hedge with Adjusts or changes Typically, obviously the market goes down market makers need to sell more futures and that can push the market lower now conversely We're going to have this bet event right in today's time And if I own this option in the market stays pinned as soon as the implied volatility as soon as that event happens as soon as pow was done talking somewhat Most often regardless what he says implied volatility drops, right? Because he didn't say anything to really smooth the market and implied volatility drops And when you can see it happens obviously he's the reverse implied volatility goes down and the number of deltas that I needed to change to hedge goes from you know Say 40 down to 35, right? Which means that market makers who were short 40 shares as we said before can now buy back obviously 10 or 15 shares and that can pressure the market higher so you can imagine that what there's literally millions of put positions in the spy and the spx as well as single stocks that You know when you look at a whole portfolio of options this change in implied volatility here can in and of itself Make options market makers have to buy and sell a lot of shares of stock or a lot of futures And when they do that the reality is as you can all imagine that it pushes the price of the market up or down so if After the Fed implied vol is likely to come down Which means market makers can start to buy back futures And when they do that pressures the market higher, right? Which means that the delta of this specific put goes lower Which means that market makers can keep buying shares back, right? Because if we rallied to to 4800 Now the market makers only need 20 shares, right? So that's another 10 shares they can buy back So you can see again how these flows the Vanna flow Specifically that little change in implied volatility If you don't understand implied volatility you can think of it as like the VIX the VIX goes up market makers likely need to sell Futures to stay hedged and if the VIX goes down towards zero then market makers can that's a signal that implied volatility Is coming down and that market makers can buy futures back and that will pressure the market higher So i'm going to take some questions in a second On that, you know, actually why don't we pause on the topic of Vanna quickly Are there questions that can help me answer on that now bruce? Did any come in there? um, let me take a quick look here on them Tim has a question on a hero um in general Okay, so we'll hold on that because i'm going to talk about hero in a minute So, okay, there's no there's nothing immediately on vanna that i'm going to bring up this concept charm and hopefully Hopefully we're getting it. Yeah. Yeah, rick rick has a question on some charm already. So But maybe let you explain it first. Okay, cool. All right, so let's talk about charm quickly So for charm, let's just look at this blue line here and the gray line here. Okay And i've also posted a note on our youtube channel about this topic as well That is a little you know goes into topics just a little bit more if that's of interest every way So if you don't catch it here, you can also i know bruce plays a recording and then we also recording on our site of this lecture so With the blue line here, we have the same foot right the 15 implied ball and then the gray line i want to talk about to explain charm So all we've done here is we've changed the number of days to expiration from 30 down to 10 So the implied ball is the same the put is the same So in this with this particular put obviously if i on the put here And nothing happens, but i advanced time 20 days ahead right so Just a couple weeks ahead look what happens to the To the delta of this option just because of that time. Okay, right the delta of the option goes from about 30 down to about 15 So recall that the market maker for this single put is short roughly 30 shares here But in 20 days time They only need to have about 15 shares short So every single day Right, this isn't quite linear, but we'll explain But basically every single day the market makers if nothing happens in the market again, we stay around 4700 They're going to slowly be buying back shares To rehearse themselves right here on today They need again 30 shares short, but in 20 days time to leave 15 So again extrapolate this in your mind with millions of put options in the spx alone for the december expiration That's on friday. There are about 3.3 million put options at the end of this year They the final day of trading there's always a lot of puts as people have year and hedges So that time decay factor in general is a tail into markets as you can imagine because every single day The the net sort of adjustment that needs to take place is this right here, right is is selling a big s and p put options Uh Sorry is the buying back of deltas in the s and p put options, right that this slow bleed out This is the charm trade the change in delta due to a change in time And this is explicitly what it is right the market makers who are short 30 shares, right? We'll start to move back to 15 and the way they do that is they buy back futures or they buy back spiders, right? That pushes the market higher. So that is kind of the drift in market pushing higher Now a lot of times that these two concepts the idea of vana and charm They blend together a little bit, right because implied volatility gamma time. Those are all Related, right? You don't necessarily want to isolate all those in your in your mind So if you think about the market right now Those of you of you who are familiar with our letter with our morning note There's a ton of gamma at this strike positive gamma So what that means is that the market is likely to pin this level, right over the last few days And what does that pinning do well if those flows pin the market that means that implied volatility will drop right because The market isn't moving around traders future expectations or the implied volatility declines, right, which is the vana trade Which and not only that we don't make any movement over several days Which is the charm trade which means that basically we're pinning the market here But ball's coming down time is passing and so that puts pressure on the market to To make it drift higher over time, right? So you can see how those flows and then if you start to really want to zoom back to the macro and you talk about macro flows You know into the s and p 500 through, you know 401k plans and capital allocations and passive investing and all like you can see why You know, there's a lot of people who believe that the market just goes up over time But the the options market is a very interesting driver Some things to think about There from a bigger perspective. So I think there was a question on charm bruce I don't know if I if I could just advance ahead now if we want to take a quick question on these two two topics let's see Yeah, rick said You mentioned selling the underlying to To delta hedge, but what if the what if they decided to buy lower? strike puts At the ratio, let me put my glasses on hold on Yeah, I think a general question here So we we showed one put option here as a very raw example of how vana and charm can affect options And you are right that the reality of the situation is there's a portfolio of options, right? They have puts and they have calls now for the s and p specifically Our general model is that the market makers are likely to be short call options Uh, excuse me long call options and short put options. That's their general feeling so the delta of their options portfolio nets out and they will need to Hedge based on the net delta of their whole portfolio now. They're obviously Attending to the other Greeks as well particularly when you have situations, you know, like the uh The fed coming up and you know that implied volatility is going to change a lot There's the the time decays a big factor, right? Because a lot of options are going to roll off on friday and how's that going to affect their portfolio and the position So it's a dynamic situation and we try to write that talk about that in our notes every day But you know when you just want to zoom out and look at the basic of the Basics of the flow here in the s and p. You know, this is what applies now You can do the same thing you can use this exact chart and think about it in the same way When you're talking about calls in a single stock or You know like tesla or the light and obviously it works the same way in commodity options as well So if you have an idea of what the position is and how people are leaning It's very effective obviously to understand the way that changes in implied volatility and changes in time Can't affect, you know, the the underlying stock And how it moves around For those of you who you know implied volatility is a little bit of a new concept for you You can look at again the vix as a way to explain this. So here we have the vix futures term structure and What this is is obviously the the the dot here is basically where the vix is trading at the moment Right the first dot and then each one of these other dots is a futures contract out of time So you can see essentially how the market is pricing volatility looking forward and the black line is today And the blue line is where we were on november 16th So november 16th was kind of before that the coronavirus omnicron, you know fears came out and then There's been a change sort of in the way that people think the Fed is going to address the markets And so What i'm basically bringing this up for is there is what i'll call the f1c premium So what i would look for is the is volatility implied volatility the structure of it to Revert back to where we were in november.  So this is going to be this is part of that vana component, right? Inflate volatility after the event our expectations is that implied volatility is going to drop Right and you can if you're a quantitative trader, you can try to quantitative You can try to quantify this and and put it into your models and like but if you're just a you know futures trader Swing trading futures, you can just understand that implied volatility is likely to drop after that event And if you think about what that means for this put is we're going to go All put options are going to go from basically this implied volatility the red line down to the blue line And what does that mean? Well, that's going to be a tailwind for markets, right? Because as a whole traders are likely long Puts which means market makers are short puts and so when those short puts lose value they can Buy back futures as their head right and that that could create a real tail Now to sort of Rick's point what we do in in the s&p itself is we monitor and we model out What we call the vana flow or the hedging flows as a whole in the market And if you think about an option dealers portfolio, again, we explain this in some other videos But if you if you think about all the options in the s&p 500 This is the y-axis the notional exposure from a delta perspective So market makers have all this hedging they need to do. This is the number of futures right if if the If the delta exposure of their portfolio is here They need to sell let's say a thousand futures to hedge out this this exposure and as the market goes Up they need to start selling more futures right to remain hedged Is what this is what this is talking about when the exposure goes higher their delta is growing Because their option their their option portfolio is long delta as the market goes up That means that their their positive market exposure is growing larger Market makers don't want to have that positive market exposure, right? They want to be delta neutral So they'll sell futures as their exposure grows and then they'll buy futures back as the As the market comes back down. So this is the sort of the hedging dynamic that we covered some other other videos I just want to give some of you a little more advanced just a an eyeball and some some work on speaking on what the next steps are Kind of along the evolution of just just a quick a quick question for you For your own trading strategies. Do you um, are you directional delta neutral or every little bit of everything? yeah, so The the our trading strategies what I do is I I tend to trade Um Directionally based on these flows. So how do I believe that the market is going to move? Let's just talk about the last you know week, right? We were down around 45 50 right in the markets and the vixx was over 30 Which says that applied volatility was forget this red line like the implied volatility of the market was like up here Right, I mean it was like everyone was freaking out and the vixx if you look back historically, you know That vixx reading was extremely elevated relative to You know historical time frame where there was actually big cells in the market so We knew that that the implied volatility was very very high and we thought that With just a little bit of good news implied volatility would drop down, you know, even from 30 down to 20 right because Uh, it was the vixx told us that implied volatility was just expecting just arm it get it And so any piece of good news would bring the vixx back down to sort of you know, normal levels And that told us that there should be A big directional swing in the market because so we wrote about this in our notes that basically You know, they came out and said omni chron is not maybe as uh as deadly as originally thought. Um Little more comfort because because of a cpi number whatever it may be right Traders that concerns came down volatility drop which meant that market makers had to buy a bunch of futures because of again this this gap right The vanna flow And that led to a pretty big market rally and then we pinned right at 47 100 which is the where the most gamut in s&p's so directionally We like to trade that all the time And then the other thing that will play is the change in implied volatility based on Our gamma assumption so when we think there's a lot of game in the market We don't think the market will move that much so maybe we'll trade some some flies and some things like that to to express our ideas there So I guess if you really want to break it down and I'll say it another way We'll trade directionally based on the way that the options market is is positioned. Okay. Thank you Okay, so that is just a quick idea of vanna and charm and we have tons of videos Uh, we've done a lot of presentations with bruce and book map You find those on on the book map channel about how gamma works So if you're new to the gamma idea you can kind of flip over to one of those previous Uh Webinars, but let's talk about the intraday hedging flows quickly in this idea of hero So as everybody knows we had the macro idea, right of okay, five volatility should come down over time We have options decay, you know happening, which is maybe put a tail end into markets, you know, etc But open interest on the updates once a day. So how do you plug sort of the gap, right? How do you know what's going on intraday? Well, that's why we built this thing called hero and as many of you know The options market trades, you know 9 30 to the close and If there's a big put trade comes in the market or a big call trade comes to the market that likely needs to be hedged instantaneously by dealers, right because they're they have their position hedged at 9 30 and then as things change Is the s and p changes as open interest? As orders trade new orders come in and out Deltas need to be adjusted. So we highlighted this example here And this is just the What we call this is our our hero signal and so when you see a positive number here What that's telling us is that positive delta options trades that place people bought calls or sold puts so At 1354 some big positive delta numbers came in. You don't need to necessarily need to Qualify what these numbers are but just understand that these are positive delta trades 30 and and these all take place right in here Right and you can see that suddenly the flow turns negative right around 345 Which is here. So What this is telling us is people came in and either bought puts or they sold calls And then once that order flow stops and once that order flows hedged you can see the market move and shift right, so these are These are all examples here that we highlighted of the times that the That big options flows coming in the market and you see the hedging The the hedging flows will actually impact or move the direction of the market itself We put this chart together here to kind of give an explanation of exactly how this works or how you could read the signal But basically what you need to know is the pods of hero reading again That means people bought calls or sold puts you can combine that with the way that implied volatility is moving And then you can figure out whether people are buying calls or selling puts in the marketplace And that can have a big impact on which way you think the market is going to move So i'll give you an example on friday We saw that implied volatility was down But there was a lot of negative delta trading and that told us that there's likely a lot of people selling calls Add up or over 4700 in the s and p and that is what led us to believe That the that the market would hold that hold that area that would hold that level So this chart, you know, some people like to cut and paste this or keep it keeping handy as a reference But basically this is sort of giving what we're trying to do is figure out how people are positioned In options so that we can then predict, you know the way that that hedging flows will influence the market So we have again this this real-time signal of options trading We have the macro flows and so i want to put just a single chart together a single dashboard You're looking at book map. How do you piece all this together to figure out exactly how the market is going to To respond to options positions so Okay, so first we start with the gamma this comes from the open interest levels in our daily note that we mentioned at the top of the the top of the presentation L1 l4 those are our levels that have the largest amount of gamma types that And you can know here if you see this white area on the screen The white area is where large areas of liquidity are posted Into e s so at around 3 am we release these levels and it's fascinating to me because you will see the white shaded areas will oftentimes overlap exactly with Where the big open interest is or the big gamma hedging areas are into e s And we think that is telling us hey these levels are on because clearly there's positions There there are people who are interested in trading right at these levels And so the liquidity is posted out loud They're trying to show there's liquidity at these lines And this happens all the time with somewhat random numbers like 46 60 where this liquidity will line up So when you start your trading day, you say, okay, these are the spot anna levels and oh, yes Look, there's liquidity posted out of these levels. So I know now some support in resistance areas That may line up with this order flow So that is sort of the again the macro idea the second is okay looking in fly volatility today You know vis-a-vis the vix or whatever my other you know my metric is where I'm comfortable I can understand okay if implied volatility starts to come down that'll keep the markets are pinned or you know me reverting Uh, let me so I'm going to fact that I didn't what I'm thinking about today And then the second piece which mentioned was the hero signal. So this signal here that we sort of map this out That's what you see on this bottom line here. So you can see that as the market opens the Hero flow the options real-time flow started negative Which means that people start of the day buying quotes or selling calls and you can see the market comes down And then the flow flattens out. So when the line just trades sideways That's telling us that there's not much directional flow that's happening in the day, right? What's interesting is the the flow stays like that. This is friday's chart, by the way The flow stays like that from an options perspective. It's very muted all day And then into the close of trading. This is around three o'clock You can see these are positive options delta trades start to come into the market And we saw that there was a lot of put options that were said to expire on friday And we think that a lot of these got closed up into the into the expiration and these these are trades again that have a positive delta Tied to them, which means that market makers may have to buy futures in order to hedge this out So you can see this is a pretty big ramp a positive delta trading We already know at the time that you know that this starts Interesting that this flow seems to coincide with this drop down here, right? And then this is like a shakeout and then all of a sudden, you know, the the future just launched 20 handles And a lot of people couldn't understand. Hey, why did that suddenly happen into the close? Well, you have the big positive gamut area up here, right? So mean reversion is the is the normal way to trade In a high gamut environment you get implied volatility was coming down You get a bunch of real-time options positive delts is coming into the market And then that sets us up for that kind of you know feed or move up into the close and You know these moves in the last 10 20 minutes We believe not always but a lot of times they are driven by market makers who need to hedge by 4 o'clock or 4 15 And you'll see these types of move oftentimes fade Pretty hard the next trading day, you know, that was certainly the case today is the As the as the market pulled right back down now, you know kind of into this general area if we look at where You know futures are trading smart So that's kind of an example and hopefully we're able to relay exactly how you can put the various pieces together You know vanna and charm and open interest in gamma combined also put real-time signal And and build or enhance your your trading plan So, you know with that i'm gonna take a bunch of questions I will just note a few things one if you're interested in any of our trading products That is the real-time levels subscribing for the daily notes Getting access to our website you can actually do all that through the book map marketplace This is the link Bruce put in there as well, but you go to book map.com And I think we're on the first vendors and the second thing is if you Felt like Maybe we started at too high of a level today in terms of you know, vanna and charm You want digging the gamut and the basics around options today? We launched a brand new options educational course If you go to academy.spotgame.com you can get that we take you all the way through What does it put in call all the way up to how you hedge, you know these vanna and charm flows how you can play gamma squeezes You know, literally everything. It's a it's a fantastic new course And we're very excited to to launch that for that. So With that I'm I'm more than happy to take some questions and See what y'all have to say Okay Let's see some some of the some of these I I know that you read some of these through as well Might be even easier if you read through them, but I'm wondering about some specific plays like revolving around Uh expiration or or rollover periods I imagine you you probably see quite a few really nice opportunities like the one you were just showing from friday. Yeah Yeah, well, I mean, let's let's talk about let's talk about that bruce. It's a good. It's a good point. So We So if you think about The vix today, right the vix is around 20. We know that they're the vix is being held high because of the The f1c right the f1c is on wednesday and pow You know I'm not here to to offer any opinion on that f1c and rates or anything like that If the market likes what he has to say implied volatility is going to come down sharply And that as we explained the vanna trade today is likely to put a tailwind in the markets, right? And if he upsets everybody and and people don't like his message the market can obviously decline pretty quickly And as implied volatility, right, right, uh rises, excuse me The vix goes and the vix goes up that means that market makers likely have the short futures, right? And that can make the market drop faster Now what's interesting about this setup is that we have options expiration as I mentioned before So right now we have a lot of what's called positive gammon that pins the market to 40 So with the options expiration a lot of that pinning flow Expires it goes away. So what we're going to have is we're going to have this big event, right the f1c on wednesday Which is going to make volatility move around a lot and then on friday We have the removal of this big positive gamma pinning force So you're going to unpin the market and then you're going to make volatility either rock it up or rock it down which means that you want to play a large directional move coming out of the F1c particularly into next week, right because of this large gamma trade Now I would note that if the market is upset by what palace is saying on on wednesday and it crashes Which I don't think is going to happen But if it crashes a lot of the puts that are holding value expire on friday So when those puts all expire that can put a bit into the market because market makers can buy back Short hedges tied to those puts so There's a lot of shifting around there's a lot of the options dynamic is very strong here Currently in the next couple days and I could really set up You know and obviously people are probably saying okay. Yeah, I know that the market's going to move outside of You know what the fed says? Well You got to put everything in in context, right when we say a move we think you know three four percent move Five percent move into the end of the week. I mean, it's it's really charged, right? I'm not talking about sort of a breakout or a small breakout, right? We're talking about a big A big shift, right? And so that is how I want to position myself I don't want to try to predict which way the market's going to go I'm going to let it show tan and then I know that volatility is going to keep going in my direction, right? If we start selling we're probably going to keep going that way So I'll try to play short and and vice versa if he makes everyone happy And we start to break out a little bit and ball comes down and I know I could ride that ride that train officers Okay, excellent. Um, let's see, uh Some other questions in here, um Um Tim is asking since each trade is a transaction between two parties How does the hero know if the delta transaction is delta positive or negative isn't every transaction effectively neutral? Yeah, so that's a great point. Um, there's a there's a few things that we know in the hero signal one We're told whether an option is bought or sold that that actually is a tag on the raw data for you now So we don't need to guess the second thing to note is we're building a rata statistics around the way that Around this hero flow and what we've seen is that really big trades block trades Um, they're likely hedged before they hit the tape meaning Uh, that those trades are since they're delta hedged before the trade hits that the market doesn't generally respond to those After the fact, but we can see when there's small sweeps Like for example a lot of retail buying that we can see an impact So statistically we're able to start making some inferences about the type of flow that's hitting and then And then we can kind of take that to the next step of understanding. Okay This is likely to be a lot of retail trades that won't impact the market or a hedge fund is sweeping electronically Which can't be a hedge ahead of time so that flow needs to be hedged versus kind of big chunky order flow that you know A bank desk does uh, which they would Which they would hedge first Okay, uh, Oliver is asking about the uh level one level two combo, etc Uh, how how to find more information about that? Yeah, um, so if you go to support that spot amma.com and you just type in Bookmap cloud notes. We have an explanation that tells you exactly what the levels are Combo level ball shirt, etc lays it all out for you and uh and explain what those Yeah, and Oliver I I've put those links in the in the chat there and go to a webinar here So you can click on those Let's see. Uh, Edward is asking a general options data processing question How can you reliably predict if an auction contract is bought or sold by a customer? um Kind of very very similar to uh, uh, what tim was asking here. Yeah So, uh, we're not predicting, um, again the on the raw data feed. There's a buy or sell tag that that we read Okay Ammar is defining Vana here. So, uh, I don't I'll read this out. I guess Uh, when a volume event or a vol event, uh, is non event Uh, the bot puts are put puts are pretty much worthless Our market makers are forced to buy back those futures aggressively as they have To be delta neutral for the other side bullish, uh, as new flows come through comes in Um, it is like adding fuel to fire. That's vana Is what Good hand good hand a lot of that All right, tim said we don't publish the vixfuture curve on our site vixcenter.com has it They have a really nice tool when i'm seeing any reason to kind of educate that What's a good short vol play that doesn't bleed due to the drop in vol vol? That's a good question from arian Um, when you know when vol is really high the ratio spreads are really interesting So, you know buy one put sell to, you know A little bit further down some people may go and turn that into like a put fly But the flies are probably I think, you know, the The most interesting or one of the most interesting ways the other would be counter spread So if you want to sell, you know, this week's put or this month's put and buy something further out It could be another way to To play that and then lastly, obviously trade vixfuture spreads, uh, you know Short the front month and buy the back month or buy a longer dated month Niraal asked what the numbers of the hero signal mean. So, uh, those indicate to us about how many contracts need to be bought or sold to hedge To hedge the order flow that you see coming You're open indicator. How do you determine their options? So I was answering um Paul asked about the live hero flow, uh, you know, I would show that on the screen there. So hopefully you'll be able to catch a I'm sure that Johnny asked, can we touch on the difference or similarities? There might have been between this week and the week of 1122 Johnny, I would just say, you know, um I would say that 1122 was post-op x, right, which is a more volatile period anyways uh, and so You had more yet You know, the market was lower obviously Relative to uh, to what is doing now today. We've had kind of a bounce back We're only less than 1% off all-time highs apply volatility still high But we don't have that drop in the market. We don't have that drawdown at the moment Which further charges or adds a little bit more value to puts. So um Yeah, so thanks Bruce for we're doing that Um, so that you know the difference between now and then is that number one the expiration this week is much bigger than it Was in november to you have the f1c, which is a known event that's going to cause a lot of volatility uh, and so You know, there there's not a ton of similarities other than volatility is a little bit high as it was kind of a week after 1122 uh, and In the way that volatility moves Over the next couple days will really determine. I think the direction of the market. So, you know, you could I believe predict You know, which way the market's going to go. If VIX breaks it starts going down Then you know the market's going to go up. Obviously and vice versa Um, there's joining through the marketplace. Yeah, uh chris. Good question You get the same reports. You get the same everything if you join through book map As you do if you go through spot game Rom that might be a bruce question. I think you need you don't need a special options data fee To get hero you just subscribe on book map if you and that will start plotting on your on your chart So if you can see futures prices currently in your book map system, then you should be able to get here Without additional subscriptions, but besides the hero The shows for the raw data fees for tira peter ass is the oprah options price for reporting authority Yeah, uh rom just a quick quite a quick um a note on that. Yeah the way it's set up here It's a black box. So you're going to be subscribing to the hero indicator And the connection is already included within it. So, um, uh, you know, there's there's no worry about that You just need to subscribe to something that offers Uh, uh allows you to access the hero, uh within book map And and this does work for individual equities as well, uh, there was a question on there from ken So you can look at uh, I believe it's 150 different stocks There's a list of stocks on support.spotgame.com, but all the big ones in there, you know tesla apple amazon Game stop AMC, etc Marcin Marcin asked if you watch it again, and we'll be proof posted up on your youtube channel, right, right, uh bruce. That's correct. Yeah Okay, I think we got basically all Jay is asking about the current flows, which I was just about to ask you as well, uh in the s and p 500 here Uh, and and maybe some of the things you can kind of like glean from, uh, some of this information here You see the 7k the 2k I filtered it for 2k here in the options and It's kind of interesting that, you know 12k on each side here and and what what you kind of gather from some of these, uh You know higher higher Numbers here within the hero. Sure. So the uh in our morning note We basically said that we expected that the open to close range for the day would The the market closed within 50 basis points of where where it opened So it's a pretty tight trading range. It's about as tight as it gets And the reason we said that is because there's so much positive gamma hedging flow in the market So for positive gamma hedging If the market goes up Dealers need to sell futures and if the market goes down Dealers like likely need to buy them back so that that you can imagine the stronger that flow is the the less Volatility the less movement should be in the market. So we look for a very tight trading range You don't think that in five altitudes didn't change that much the bana flow is likely gone because people are waiting for the fed Right. So that tail into the market is currently not in place and also uh, you know the 4700 being this is just the the bar with the most gamma itself There's humongous open interest at 4700. So there's a lot of short-term hedging flows also tied to that level So everything from an options perspective basically says that we shouldn't go any we're gonna have tight trading ranges The vana trade is not on right now because they're always waiting for the f1c There is time decay right tied to 12 17 But because implied volatility is held up, you know that that can affect the that time decay right options are going to decay as fast You know today and tomorrow versus post f1c. So We really expected a pretty dull market today As I said that that move into the close on friday that 2025 handles was was kind of hedging flow noise So we were we figured we'd get some mean reversion there But really at the end of the day, you know, this is about pinning that 4700 level So, you know, it's about what 10 handles lower at the moment So a little bit more I think then when we open the Open the webinar and said I think you know kind of some mean revert here But I still fully expect the the market to sort of drift back up into that 4700 level So if you look at the the hero flow itself, which is that orange excuse me that green line at the bottom Um 20,000 is a not that large of a number We'll often see that hero flow be up in the 100,000 area But what is interesting to me is that you'll see oftentimes the market will have these inflection points around big trades And what I mean by that is if you look at just before 1015 You can see the hero indicator peaked right and there was this big trade and that looks like some type of straddle Or a strangle because what the green triangle is telling us is a bunch of positive delta trades went up And the red triangle is telling us a bunch of negative delta trades went up So the fact that those went up at the same time tells me that okay, so we probably traded straddle And the 12k is telling us that that's a pretty big trade 12k is the number of deltas that need to be bought or sold based on that trade So, you know bruce filtered out for just the the biggest trades on the day You see there's only about what three or four of them, right? um, there are To be clear, I should explain this first. So there are millions of trades taking place every day in the spy and the sps Which is what all together create that line at the bottom of the chart If you were to remove the filters that bruce has on the screen be covered in triangles You couldn't see anything right But you don't want to see every one lot retail trade that may come in right But those one lot retail trades can all add up to be something meaningful So that cumulative indicator is picking up every single trade and then on screen We only kind of want idea of a really big trade because Again back to the 1015 print you can see that the the deltas were strongly positive And then you get this big straddle print and then the market fades off from that level Which I always think is really interesting. So why did the market fade there? I don't know if there was news or not, but if I couldn't find a decent explanation I go okay, you know liquidity today is probably not that great Something seems tied to that trade right some hedges likely could have been tied to that trade And that kind of you know sparked just a little bit larger of a drawdown, but Anytime the order flow or the market changes around these big prints You know, you can assume that there's hedging flows tied to those prints And that can explain a lot of a lot of market movement You know that that's not to say that we're looking at that 12k there I'm predicting that the market was just about to drift because that's a delta neutral trade But the fact that the market did make that movement after that trade is giving me a piece of information That I otherwise wouldn't have So that's that's sort of how I would look at the layout of what so far happened again What's happened today and again everything we believe is that the market should close within 50 bits of our open So, you know, if we open that Did we officially open that 46 97? So, you know, if you add or remove about 25 points from from just call it 4,700 We think the market closes within those boundaries as a very low volatility there let's see Peter yeah The hero indicator works for the the es and spx and sp y Yeah, that's right. So it's important to know that the spider options flow count Even though it's a smart contract There's so much volume it can be larger flows in the spx not always but especially in days where there's not much activity Uh, there's where the market's more quiet. Uh, the spider flow will be bigger than the spx So it's important to watch both the es indicator you see here is total s and p. So let's spiders and spx come on Um, and then the spot game and levels only apply during market open regular trading hours I would say that they're strongest when the market is open. However, uh, we have many traders that are Based overseas and they use the levels throughout the evening Well, my evening there at daytime, uh, for instance, a lot of guys sitting over in london. We'll trade those. They'll trade the The es futures Throughout the day and they say the levels work great. We released the data at 3 a.m And you know to that I would just note that market makers have exposure, right 24 7 most of them have desks over the world So that they can continuously be hedging. Um, they can't afford to have they're basically, you know A full risk position on and just sleep through the night, you know, something major happens overnight They need to be able to react to that so Most of those desks I was some sit down and like have, you know, 24 hedging 24 hour hedging operations And so that's why I believe the level should work just as well Overnight as they do during the during the day session Okay, so I put the link in there for the recording In the chat as well along with the spot gamma Links for the website, etc. So you guys can find all the information there Um, I think we've gone through all the questions. Is there anything else that you wanted to cover, uh, brent? Uh, no, I think I I think I got I hope everyone sort of gets something out of that too technical um, I started to give them a little too technical. I think when I after after launching at that I mean, it's just it's really yeah, please feel free to reach out to us again We have a bunch of videos on our website to help explain the stuff and then the new Educational series that we launched at academy.spotgaming.com will baby step everybody from, you know, what it is an option to You know, exactly how you can trade some of these uh vanity and charm flow. So Please feel free to check out that as well All right. Well, I think that that wraps it up then. Um, so, you know, excellent stuff Uh, as as always brent, uh, and just uh fascinating stuff. I mean, like uh, really starting to understand you know, um Bigger players behind the markets here, uh, and uh, and their activities A level of transparency we've never really seen before And I know that hero indicator when it first came out. It was new to you as well You hadn't had access to this kind of information So, um, uh, you know now now here it is, uh, right on the chart Yeah, and it's it's fascinating to watch. I mean, you can see that, you know, when the market's really moving On big volatile days, you can see options flow change, you know And that's telling us that people are done buying puts or they're starting to sell their puts or they're starting to Sell their calls on rallies or whatever it may be You can see that flow change and and it changes the market and I think It's a really interesting supplement to You know, however it is that people like to trade, right? Um, whether you're a swing trader or or a scalper or you know Use Fibonacci or whatever else, you know, it may You may use This is a great supplement, right because the options market is just we're just we're Translating data for people here, right? And and I think there flows that that anyone can have fun about Yeah, that's right.  There are stops in icebergs You know with the iceberg transactions we can see in the s&p or in the cme products You know, you you'll see like maybe some massive iceberg order Transactions and you know and a reaction in the market It might be short-lived And then it might blow through that area later But and maybe they add more later as well What i'm getting at here is the larger player activity Yeah, you you'll see some sort of reaction But the overall market still continues And and rather, you know dominates the the price action Do you see a lot of times where the hedging Starts to maybe maybe it's not just one event and and and then the market reverses or something But you'll start to see it happen multiple times And then that gives you more insight to a potential reversal or a potential move or Etc Yeah, I think so. I mean, I think a lot of times that you know people have A feeling you know that maybe this is a bottom for the market or You know our top or you know are looking for an explanation or they're looking for an explanation What just happened like okay market just dropped 10 handles I don't understand why and a lot of times it is because of the options market So, you know, if you know for example that The market just dropped 10 hands because someone just put up a big put trade and in the futures And mark mirrors that hedge that we'll feel much comfortable playing that buying that dip right or playing that mean reversion If you know, that's the reason why as opposed to oh, I didn't just miss some piece of news, right? um Or you'll see in in an example like with tesla Which was really useful where you know the stock was trading up, you know, five six seven eight nine ten percent a day, right? And how did you know when to take your long off or how did you know? You know when to try to short that stock or or whatever it may be and you could see the options Well changed in that name around particularly on big strikes like 1100 1200, right? But that gave a lot of people confirmation Of feelings or thoughts, right? Or if you think hey, I want to short this thing But the deltas keep going positive that hero soon it keeps going positive That's telling me that people are buying calls and I don't want to step in front of that, right? You know, so I want to I want to let or or you know, let my let my trading run Unfortunately, you know the hero indicator at the moment It's not showing us really anything at this moment. It's a quiet market. I will just I will call this drift really, right? What's taking place? Yes, not necessarily mean reverting at the moment But the option as well is is really like I mean 6000 on the hero indicator very small And so, you know, there's just this kind of drift taking place ahead of the next really two days Yeah, I mean, that's another fascinating read Is the the drift that you you've mentioned this on on past webinars as well Of not reading some sort of direction, but understanding like When there's no direction And and what the significance of this might be In the analysis because They're finished with their work. They've already done it in the past potentially here Yeah, and I mean you can look over the last just, you know, what is that about? 10 minutes, right and the hero indicator is gone, you know Fairly steadily down, right? I mean, that's not a big hero indicator change But you know, you can see the that maps the price action, you know The price action maps directly to the way the s&p is moving, but Yeah, and some people I think have a hard time understanding this that The the price of the s&p basically has no influence at all on what the hero indicator is is putting out The the price movement of the s&p does not matter whatsoever, right? This is purely based on What options trades are coming into the market? Are they are they calls or the quits are they bought or they sold and what is the hedge ratio of that? And so, you know, I think a lot of people look at this and they'll say well All you're doing is basically like mapping out how the s&p price is changing and that's kind of what it looks like now But I think what this is telling me is this is drift. There's light options flow But the market is moving what seems like almost sort of in a way lockstep with You know the way that that the options are traded I mean you can see here that obviously after that straddle the full term negative And then bottomed and the s&p kind of went down and bottom and you know here again in the last 10 minutes the hero indicator showed that There's some negative deltas that had to be hedged in the market drifted lower And now that that hero indicator bounced a little bit. It's very subtle and has moved up You can see the market now Not moving lower, you know that much lower. So this is just again, this is real trick these aren't strong flows that are in the market and I mean I look at this like this right Options market majors have to trade every single day day in and day out no matter what right? And I think their flow over that long term dominates the market Now when you have news event like the Fed or quarter end flows from pension funds or you know credit Funds start hedging using s&p puts whatever it may be that flow is going to override at least You know particularly in the short term, you know the market making hedging flows But you know at the end of the day, you know the most the biggest most consistent entity Trading in any I think in in the s&p is is these market makers Because they always have exposure and the exposure is always changing and Because they're hedging volatility, you know, they constantly need to adjust those types It's not that hey, they can afford to sell, you know 50 000 futures and be done No, if the market goes up, you know 20 handles They got to make another adjustment and and as people keep trading right as those 12 000 lots for men, etc you know things need to change but There's another, you know, Bruce adjusted the settings on the chart So you can see the big triangles are are fairly large trades 12k is not I mean 12k is the decent size You'll see stuff in the 20s 20k But you can see over the last what is that 45 minutes nothing has happened, right? No big trades at all taken place. So that that kind of Telled you again. It's just sort of drift, right? No one's really putting on big trades ahead of that phone Yeah, yeah, excellent excellent. So um, if there's any more questions here um A few more a few more have trickled in I I don't know if we have any more time with you or not Brent has been an hour so far Yeah, I unfortunately have to have to kind of cut it there as we bump Excuse me bumping up against our our time limit here Um, if you have questions, though, you know, please feel free you can email me uh at sg Excuse me at info at spotgamer.com You can always get me on twitter As well or at spotgamer. Those are the two best places to Get in touch with us Excellent excellent. Um, well, thank you very much Brent. Uh, as always, you know, a pleasure having you here And uh, and we'll do it again Awesome, man. There's a there's our last sort of good example. It looks like a little option trade went up and there You gotta get a little movement in the s&p All right Bruce, I appreciate the opportunity and thank you everybody for taking the time to to listen to our webinar here and And look forward to speaking with you all again in the future Okay, thanks, Brent


So how many steps do I get in one day as a full-time doctor? I usually get to the hospital right around seven o'clock where I usually have four to 500 steps just from walking around and getting ready in the morning. Once I'm done reading about all my patients, the bulk of my steps for the day are gonna come actually seeing everybody in the morning. And as we can see, just by nine o'clock, I'm already at 3,000 steps. By the time that I'm done finishing seeing all the patients, having a meeting with the social workers, and seeing some new admins for the day, it's already 12 and I'm right at 5,000 steps. And today's shift goes from 7 a.m. to 7 p.m. So to avoid sitting at a chair, writing notes all day, I usually try to do one to two 20-minute walks around the hospital just to get some steps and exercise in. And we can see after the first 20-minute walk around the hospital, around 3 o'clock, we're right under 7,000 steps. And today happens to be a busy afternoon where we're walking back and forth to see new patients in the emergency rooms, around 5.30, we're already at 8,500 steps. But by the time that I'm done seeing all my admissions, as well as taking that second afternoon 10 to 20-minute walk, we finish the day right around 10,000 steps. And if you enjoyed that behind the scenes of my life as a full-time doctor, make sure you hit that like, subscribe, and follow for more content just like this one.


It'll improve services and provide much more opportunity for our lawmen youth. All these new government jobs will create new opportunity for many of our people and the economic development that will happen will also create new employment as some of these new business ventures get underway. I think of it as much like when you move out of your parents home. We're out on our own, we're a little bit afraid, we're a little bit nervous but I think it's what we're supposed to be doing. We need to stand on our own, we need to be responsible for our own destiny and I think we are very well prepared to do that. All this past couple hundred years we've been looked after by the Indian Union first. So now we're on our own and we decide what to put our future to ourselves with our land and resources. As we were driving in tonight I thought you know how many times I've driven this highway out to London and different places and what a different feeling it was to cross that imaginary line and think no it's it isn't about Indian reservations and all that sort of thing anymore so what about that what it's about is a new nation that has come here with a with a wonderful outlook as to where and how they're going to go and the culture that is so important to us. In the past in my growing up years we never had friends with people from Paul River or anywhere else. We're not allowed to have visitors and we were not allowed to mingle in town with white people so all that is changing. It's gradual but it's changing it's like opening the door a little and it's more welcoming now on both sides we're building relationships. I think it I think you can see that everybody's looking for a brighter future for their current and future generations but very important that we don't forget to pay respect to the to the elders the people of the past they've they've taught us a lot and done a lot of great work for us so we're we're we're always reminding ourselves of that.


Welcome guys to another 360 video from, again, Iguacu Falls, but this time we are in Argentina. So I don't know if you guys can see over there on the opposite side of the bank, that is the Brazilian side, that's where we were a couple of days ago in the rain, getting wet, getting really wet on the Brazilian side of the falls, but now it's a beautiful sunny day and we're here right on the edge of the Argentinian side. It's absolutely beautiful today, you can see down here a really nice rainbow. It's unbelievable, it's just epic and the river at the moment is actually in flood, it's super super powerful at the moment, look at the color of the water, the brown color and look at the flow, it's just a monster at the moment, in fact a couple of weeks ago they had to close the falls because there was too much rain and even today they've closed some sections. So oh we better move so people can take some photos, let's make our way. Yes so I think today it's really even on the border of closing the whole park again just because the flow is so big, but it's okay because not every section of the Argentinian side was closed today, we can still head out on some epic, epic viewpoints. The park as well is just massive, you have one waterfall after the next, after the next, it's really really impressive and I'm really glad that we have chosen to visit both sides. Yeah a really different experience, they say that Brazil has the views but Argentina has the falls and in fact 80% of Iguáce falls is in Argentina, so Brazil really just has like a little view point, a couple of view points but in Argentina I mean look we're like in the Iguáce river right now. Yeah it's really cool because they built this walkway here over the river that you have just a better experience. Yeah and it's really immersive. To be fair the Brazilian side was really really cool as well. It was because you could get up close and personal, oh look a blue butterfly because you could get up close and personal to the falls on the Brazilian side and get right in there but here we're like sitting on top of the falls, so it's a really different experience. It is, it is. So we're just taking you guys from that epic viewpoint up to the end of this walkway section in which there's another epic viewpoint right out on top of the main falls and look at this walkway that they've built across the river, look at that. I mean the scale of this river and the scale of these falls is absolutely mind-blowing. I mean there are waterfalls and we've seen a lot of waterfalls but this is like, there's actually 280 separate waterfalls that make up this waterfall system and I mean that's like 280 of the most impressive waterfalls you've ever seen in your life, all in one place. I mean the scale of the place is just epic. I think you can't get better. Of old walkways littered in the river around here you can see here on the left there's a couple of concrete hillars and here on the right there's a bit of an old walkway so they've obviously changed the walkway quite a few times over the years. I guess this has been a tourist attraction probably for for as long as tourism exists and there's some epic wildlife around here as well.  Yeah a small monitor I think it was. Small monitor or big lizard? Small monitor, big lizard. So we're coming up now to the final platform right on top of the falls. Let's go check it out in full 360. This is called Salto San Martín, the San Martin Waterfall.  Let's just have a quick look on this side so let's wait for the picture opportunities. It was actually much busier earlier on when we were here in the morning but we've come back in the afternoon to do the 360 and it was a really good decision because it's really really nice and not too busy. Oh sorry. It's epic, what a place. But anyway guys I think that concludes our 360 video from here in Aguasio Falls in Argentina. I hope you liked the Brazilian one and I hope you liked this one. Yes I hope you liked the views and that's it from us today we hope you enjoyed the video if so please give us a thumbs up, subscribe to the channel, share the video with your friends and family, comment below and we will see you next time.


The next item of business is a statement by Derek Mackay on the 2018-19 Scottish Government provisional outturn. The cabinet secretary will take questions at the end of his statement so that there should be no interventions or interruptions. I call on Derek Mackay for up to 10 minutes, please, cabinet secretary. Presiding Officer, I welcome the opportunity to update Parliament on the provisional budget outturn for the 2018-19 financial year. The provisional outturn results show that, once again, this Government has prudently and competently managed Scotland's finances. The results are in spite of the on-going uncertainty created by the disastrous decision to leave the EU, the needless continuation of UK austerity and Tory mismanagement of the economy. The provisional figures—I thought that it would start off in a consensual note—are set against an extended period of economic turbulence. The global economy is going through a sustained period of weakness and, for Scotland, that is compounded by the continuing uncertainty around the UK's exit from the EU. Whilst leaving the EU without a deal is the worst possible outcome, even a Brexit with an exit deal will result in significant economic loss compared to remaining within the EU. The UK Government's decision to take us out of the EU single market in Customs Union, the largest market in the world, presents a risk to economic growth, which in turn has an impact on forecast revenues to support our public services for investment to fund our programmes, migration or population. Hence, the Scottish Fiscal Commission has downgraded their growth forecast for 2019, citing continued Brexit uncertainty as the cause. The Scottish Government is using the limited powers at our disposal to mitigate as best we can the economic and employment impacts and to prepare for Brexit measures such as committing over £1 billion to support our cities and regions through the city region deals, increasing capital investment by £1.5 billion per year by the end of the next Parliament and a wide range of other economic and social initiatives. Despite the exceptional political uncertainty, Scotland's economy enjoyed a positive year in 2018. GDP growth was 1.3 per cent surpassing earlier lower SFC forecasts, continuing a pattern of stronger growth compared to both 2016 and 2017. For 2019, the SFC predicted that our economy will grow by 0.8 per cent as it explicitly points to Brexit uncertainty as the reason for their more pessimistic outlook. I am sure that all members will welcome the 0.5 per cent growth in quarter one of this year. Scotland's labour market has continued to perform well in the first quarter of 2019, with unemployment falling to a record low of 3.2 per cent. Outperforming the UK unemployment rate of 3.8 per cent alongside this, labour productivity grew by 3.8 per cent. In 2018, it is at its fastest pace since 2010. Despite the challenging environment, we are taking positive action to transform Scotland's future through the economic action plan. Transformational projects include delivering the National Manufacturing Institute and the Scottish National Investment Bank. Scotland's future budgets will, of course, be determined by a combination of Scottish and UK Government fiscal decisions, and our funding outlook for the medium term continues to be dominated by austerity at a UK level. The UK Government's macroeconomic policy stance since 2010 has been characterised by austerity. In Scotland, we have protected key services despite austerity causing a real-terms reduction of £2 billion in the resource block grant between 2010-11 and 2019-20, even Murdo Fraser now concedes that point. The Scottish Government's second medium term financial strategy, MTFS, published on 30 May, explains the fiscal framework and funding arrangements that the Scottish Government operates within. It outlines its approach to the financial management and the fiscal rules. It sets out a range of possible funding scenarios for the Scottish budget over the next five years. It sets out a responsible approach to financial planning and the fiscal rules, which will allow us to invest in the economy and protect our essential public services. Turning specifically to the provisional outturn, under the current devolution settlement, the Scottish Parliament, of course, is not permitted to overspend its budget. As a consequence, we have consistently controlled public expenditure to ensure that we live within the budget control limits that apply. I can report that the provisional fiscal outturn for 2018-19 is £32 billion against a fiscal budget of £32.5 billion, resulting in an overall cash variance of £449 million. That variance includes £148 million of Barnett consequentials. That funding was provided very late in the financial year, so Treasury has confirmed that the Scottish Government is not required to carry that funding forward through the Scotland reserve. Rather, that funding will be held within UK reserves and reallocated to the Scottish Government in the current financial year, 2019-20. The remaining cash variance of £301 million includes £5 million of additional income for devolved taxis secured over and above initial budget forecasts. I can inform Parliament today that the total provisional income from land and building transaction tax and the Scottish landfill tax is £699 million, and a surplus of £5 million will now be added to the Scotland reserve. The variance also includes £3 million relating to the fees and respect of the financial guarantee, which we will also add to the reserve. Of the £293 million variance remaining, £171 million is resource funding, all of which has already been committed in the 2019-20 budget. £1 million in respect of capital and £121 million of financial transactions. Of course, financial transactions funding can only be used for loans and equity investments and entities outside the public sector. Overall, the cash variance of £293 million represents less than 1 per cent of the total fiscal cash budget. All of that funding is carried forward and full through the Scotland reserve. None of it is handed back to the UK Government, so there is no loss of spending power to the Scottish Government. The £1 million fiscal capital underspend has been achieved, while prudently borrowing less than originally planned, the 2018-19 drawdown of £250 million is lower than the £450 million initially planned within the published 2018-19 budget. It has followed a full assessment of a range of influencing factors, including additional capital funding, confirmed and year, and only making funding available to match the actual demand from the projects confirmed in the original 2018-19 budget. In finalising arrangements, it also gave very careful consideration to building a staggered debt maturity profile. The borrowing in 2018-19 has been undertaken over 10 years in contrast with the 25 years in 2017-18, while the shorter repayment period pushes up the annual repayment. That is balanced by the lower amount that was borrowed at a lower interest rate, a lower cost of borrowing overall, and is affordable in the context of the sum set aside for repayment in the 2019-20 Scottish budget. It also ensures greater borrowing capacity will be available when it is needed to support the national infrastructure mission. 2018-19 was the first year of the Social Security Scotland Agency operation, which provided more than £185 million of support to the people of Scotland. That included more than £35 million of additional support, as the first payments of the carers allowance supplement and the best start grant pregnancy and baby payments were made. This year, four new benefits will be implemented to help young carers and low-income families. Finally, and in addition to the above, there is a provisional non-cash underspend of £142 million, the non-cash budget is used for technical accounting adjustments such as depreciation and payments and cannot be used to fund public services. That represents no loss of spending power to the Government. In conclusion, the cash underspend is entirely retained by the Scottish Government, is less than 1 per cent of the budget, makes a contribution that was planned for the 2019-20 budget and contributes to the reserve, which is prudent, particularly in light of the SFC income tax reconciliation forecast that is detailed in the MTFS. The figures that I am reporting to you today remain provisional, as they are subject to change pending completion of the 2018-19 audits. Finalised figures will of course be reported as usual in the annual Scottish Government consolidated accounts and a statement of total outturn for the financial year 2018-19 later this year, and I commend today's figures to Parliament. The cabinet secretary will now take questions on the issues raised in the statement, and I will allow up to 20 minutes for that. Will those members who wish to ask a question please press their request-to-speak buttons? I call Murdo Fraser. I thank the finance secretary for advance sight of his statement, although we had the customary five minutes of blaming everybody else for the state of the Scottish economy and the public finances, before he got to the substance of the matter. The finance secretary is always complaining about not having enough money to spend, but today we learn that there is an underspend from last year's budget of nearly half a billion pounds. A very substantial proportion of the overall sum. In the meantime, the finance secretary has been hiking taxes on Scottish families. Today we learned from the Fraser of Allander Institute that the £500 million extra taxes that he has taken from Scottish families has been completely offset by the relatively weaker performance in the Scottish tax base, so there has been no net benefit to the Scottish public services from the extra taxes that everybody is having to pay. I am surprised that, in the statement that we have just heard, there was only passing mention of the Scottish Fiscal Commission's income tax recognitions, the projected £1 billion black hole in the public finances, which will hit over the next three years. In light of that, can the finance secretary clarify, firstly, how much of the underspend is in total being put into the Scotland reserve, and secondly, at what level will the Scotland reserve now stand up? Derek Mackay. The answer to the one question and that statement, I suppose, was what is the level of resource reserve, the fiscal resource reserve, which is what could be deployed to address income tax reconciliation, albeit at £135 million. That is the figure that is published. Essentially, what happened there is that Murdo Fraser, of course, said that I was bemoaning about the state of the Scottish economy and blaming others. I was actually trying to take the credit for the very positive state of the Scottish economy, which is enjoying growth, record high exports, record low unemployment, record high employment. That is all because of the actions of this Government, why we are enjoying those strong economic indicators. However, I sound this alarm and this warning. I am sure that all members will look forward to the state of the economy report of the chief economist tomorrow about the threat that Brexit poses to this country and our public finances. The resource figure is £135 million. In terms of income tax reconciliation, Murdo Fraser said that it is not terrible that the finance secretary has an underspend and then goes on to say that why does not the finance secretary put more money aside to address the medium-term financial strategy, the income tax reconciliation? It is totally inconsistent, even in the questions that are posed. In truth, we cannot overspend our budget. Actually, if we discount the last minute Barnett consequentials, the variance is less than 1 per cent. It is actually 0.6 per cent of an underspend, which has been deployed for this year's budget, with a modest amount set aside to address the very issues that were raised at the finance committee, which is the responsible thing to do. James Kelly I thank the cabinet secretary for advance sight of the statement. Three hours ago, in exactly the same spot where Derek Mackay is now, the First Minister in response to a reasonable request from Richard Leonard for proper funding for the Scottish welfare fund told us that every penny in the Scottish budget was accounted for. What the First Minister did not tell us was that £449 million was held back in a Scottish Government slush fund. The public will find it absolutely astonishing when we find trail poverty rising to scandalous levels, NHS patients in pain, languishing on waiting lists and rail passengers stuck on platforms suffering multiple cancellations and delays of train services. That money has been kept back in the Scottish Government bank account. Can I ask the cabinet secretary specifically when faced with the prospect of the hideous Tory 2 child cap, why did he not use the powers in the finance city's disposal to use £69 million to alleviate that policy and bring much relief to many families across Scotland? Derek Mackay I appreciate that James Kelly does not need to be consistent. He is in the Opposition, not the Government, and that is probably going to be the case for some time, I suspect. I think that the Parliament needs to be more mature and responsible when it comes to those finance debates. Only last week at the finance committee I was rightly asked what the plan was to address the potential income tax reconciliations. One of the ways of addressing that is to put a modest amount aside to be able to address those income tax reconciliations. To ask me that question last week and then criticise me for doing so this week is absurd. Non-cash depreciation or financial adjustments cannot be deployed to front-line services. That is clear to anyone who reads the briefing, the paperwork and understands how Scotland's public finances are funded. Financial transactions, part of the £0.5 billion figure that James Kelly has referenced, cannot be deployed to front-line public services. It is only the fiscal resource and the capital resource that can be deployed. In that regard, I have explained that the variance is 0.6 per cent if you exclude the last minute, burning consequentials. Largely, the underspend is being deployed from last financial year into this financial year to protect our public services and deliver the policy commitments for Scotland. Finally, James Kelly said that there was a reasonable request from the Labour Party today on a yet another fiscal ask. The Labour Party changes their fiscal ask as often as they change their socks. I cannot keep up with their fiscal demands, but I can deliver a balanced budget for Scotland. I will move to the open questions. There are a lot of them and the front-bench questions and answers have taken far too long, so if we could be a bit more concise. Patrick Harvie followed by Willie Rennie. I do not think that phrases like black hole or slush fund elevate the debate at all, but there are serious questions that the cabinet secretary is going to have to answer, such as if the Scotland reserve is depleted down to £135 million, it is clearly inadequate, even with the previous year's underspend, to meet the fiscal commission's projections. If they are accurate, can he tell us, and when will he tell us, what is his plan for dealing with those? Is it through borrowing, taxation, spending, what are the mechanisms? Here is the nature of Scottish politics. James Kelly says that I have put too much in the reserve, Patrick Harvie says that I have put too little in the reserve, but it is also Patrick Harvie that fairly and quite rightly at budget negotiations demands that we spend more to secure those concessions and then complains about the level of resources that are being deployed to deliver commitments that the Green Party and the SNP have happened to share. I will of course set out my proposition as to how we deal with the income tax reconciliations as part of the budget process that I went over in detail, and over two hours, if I remember correctly, at finance committee, and I am happy to return to finance committee. However, as I explained at that point in time, there is a range of moving parts, a complex system, a range of factors and not least what the UK's fiscal position is on spending, on austerity and on taxation that then impacts the decision that this Parliament and this Government takes. Willie Rennie, followed by John Mason. Given the poor daily performance on ScotRail and the abandonment of the target for cycling last week, does the cabinet secretary understand how frustrated people will be that it is the transport department that has left its resources underspent by the most? Does he understand people's frustration with that? Well, in terms of the areas that were cited, ScotRail and Rail is not an area where there has been that, but I am just for awareness. Willie Rennie has quite rightly raised issues around rail, but for completeness that is not around expenditure on railways or the rail franchise. Clearly there has been issues around financial penalties that have been carved because of performance issues that should be addressed by Ibello. Some of the matters within the transport underspend, particularly—I think that it is right to focus on that—is due to the delivery of some projects, some of which will be regulatory, some of which will be the nature of contracts, particularly around some of those road infrastructure projects. However, overall, as I say, the variance on capital overall is £1 million. That is a pretty substantial achievement in terms of the variance at outturn. I am correct in saying that the only two taxes that we have complete control over are land and buildings transaction tax and Scottish landfill tax, which are the devolved taxes. Can the cabinet secretary just spell out exactly how they did in comparison to budget? We raised £5 million more than was forecast for the budget. The cabinet secretary refers to Tory mismanagement of the economy. Can he therefore explain why economic growth in Scotland was 1.4 per cent year-to-date compared to 1.8 per cent for the UK economy as a whole, and why Scotland has underperformed the UK economy for the full 12 years of his government? Does he take responsibility for that? I take responsibility for record high employment in Scotland right now, GDP growth at 0.5 per cent in the first quarter. In many quarters, the GDP growth in Scotland outperformed the rest of the United Kingdom. Export is outperforming the rest of the United Kingdom. Unemployment is lower than the rest of the United Kingdom. Productivity is going faster than the rest of the United Kingdom. Investment in research and development is doing better proportionately than the rest of the United Kingdom. On form direct investment, we are second only to London and the southeast of England. There are two key reasons why Scotland's economy in some measures could be seen as underperforming. One is that the UK Government puts all the economic attention that it used to into London and the southeast of England, but Brexit will destroy the Conservatives' economic credibility. The second reason is migration. Migration is an issue in Scotland's working-age population. In terms of the economic growth overall, who controls that? The UK Government, who is trying to end the freedom of movement, who is trying to create a hostile environment for migrants is having an impact on our economy. When it comes to GDP growth, per head, we are reaching convergence and, in fact, we are raising more per head, which is the success story that Scotland is. The cabinet secretary will be well aware that many of our constituents and people across Scotland are struggling with the cost of living. Increasing the welfare fund, freezing rail fares and giving young people free bus travel are just free policies that could help. Does the minister agree that the Government shouldn't be sitting on significant sums of money when people are struggling? Will he commit to looking at ways to using available money to help people with the cost of living crisis? In the last budget, we committed £42.5 billion. The Labour Party voted against all that record investment in education, the economy, the environment, the national health service, extending policies, including social security payments and many other things. Therefore, the Labour Party has failed to put across competent alternative budgets. It has a list of demands but not a clue as to how they fund them. Despite all the predictable doom and gloom being perled by the opposition, would the cabinet secretary confirm that income tax take in Scotland is increasing, that Scotland's economy has strong growth, that unemployment is at a record low, that we have record high employment and, in many other areas, the Scottish economy is outperforming the rest of the UK? I would like to hear Derek Mackay repeat some of the excellent things that he told us about earlier. For brevity, Presiding Officer, I won't repeat them, but I confirm every word that Bruce Crawford has said is true. Bill Bowman followed by Tom Arthur. Given Derek Mackay's income tax changes raised £500 million and the underspend is £449 million, why is it necessary for my hardworking constituents in Dundee in the north-east to have their income tax increased at all? I don't know what accountancy courses some members have been on, but income tax is resource. Well, he should know that resource is different from capital and he should know that depreciation, for example, cannot be deployed on front-line services, whereas what he raised on income tax is absolutely resource, which he absolutely spends on day-to-day services. Murdoff Fraser asked in an earlier question, and Bill Bowman has just followed up. What is the point in Scotland having income tax powers? We wanted to have those powers to make our own decisions and make decisions that are right for Scotland. That includes a fairer, more progressive income tax system that helps those at the bottom rather than giving constant tax cuts to the rich, which is the trend of the right-wing Tory party about to be compounded with the election of Boris Johnson as the Brexit-crazy potential new Prime Minister. In the interests of context, can the cabinet secretary set out for the chamber how this stated underspend compares with previous years? Derek Mackay compares well, which is an achievement when you consider how the Scottish Government's budget is growing. There is increased complexity as well, so if you exclude the last-minute Barnett consequentials that came from the UK Government, an underspend of about 0.6 per cent, where every penny is retained, and of course it is part funding the 2020 budget as well, I think shows competence prudence and forward thinking on the part of this Government, if I do say so myself. Alex Rowley, followed by David Torbs. The Cabinet Secretary for Finance will be aware that across councils in Scotland the reserves are fast running out, because they are using them to offset some of the worst of Tory austerity and cuts passed on from himself. Will he look at services such as education, health and social care, where we are heading towards crisis unless we get more resources into those services? When will he start to engage other parties in the budget preparations for next year? I think that that is a strange question coming from Alex Rowley, who was actually the only Labour member who approached me with a budget proposition, which was to cut everything else by 3 per cent to give money to local government, which was a fair proposition, but it was not when it was supported by the rest of the Labour Party, never mind the Parliament. Mr Rowley also complained that local government is having to use the reserves, but the front-bench finance spokesperson just said moments ago that we should not hold any reserves and we should spend it all immediately. What is strange contrast from the Labour Party? For completeness, I have outlined those figures, and it is also in the MSP briefing that is being published. The reserves in terms of the Scotland reserve are £233 million, which is £135 million in resource and £98 million in financial transactions. Local government reserves are far greater than that figure, but when it comes to setting budgets, of course, it is only this Government that has been delivering real-term increases to local government because of the decisions that we have taken against the Opposition from the Labour Party, who has failed to give any sort of credible alternative. If David Torrance has concise, I will manage to get the last question in. Could the cabinet secretary set out to a chamber why he borrowed less in capital and was originally envisaged? Derek Mackay. Essentially, we were able to see through the capital projects that we had committed to. There were last-minute Barnett consequentials on capital that was able to be deployed, and I took decisions around interest payments and other factors to ensure that we can get on with our capital programme, but do so in a prudent way. That gives us further financial flexibility for future years, and I am sure that the whole chamber will welcome that. The last question is from Gil Paterson. Thank you very much, Presiding Officer. Cabinet Secretary, you will not be quite surprised just how many members of the changes think that we can just increase the budget at a stroke. Therefore, could the cabinet secretary confirm that, under the current devolution settlement in the Scottish Parliament, it is not permitted to overspend its budget and that his statement today demonstrated a consequence of that being a position of controlling budget expenditure to ensure that we live within the budget control limits that apply? Derek Mackay. Yes, I can confirm that. The reason that it is important is that previous Labour Liberal executives handed money back to the Treasury—that is something that I am not proposing ever to do. We will fully allocate the resources, we will carry forward any underspend to fund current year's budgets and prepare for the income tax reconciliation. We will stay within the parameters that have been set out and we will engage with the UK Government on further flexibility on the fiscal framework, because I have already recognised that it is not absolutely adequate for the financial complexity that we face. That concludes questions from the cabinet secretary's statement, and we will move on to the next item of business. Once everyone is in their place on the front benches.