BlackBox Flow Training Part 5

BlackBox Flow Training Part 5


BlackBox Flow Training (Part 5)



If you look at this, this would be a case where I like to see the white flow. Someone asked earlier, why do I not filter out or should we filter out white flow?   I like to see it because if you see the white flow on the bottom of this screen, you see that coming in back-to-back, that it hasn’t met open interest yet. But if you see it coming in that much and the buying continues, you expect open interest to be met.

When I see the flow come in like this that’s going to capture my attention, even though it’s white.  Because there’s enough of it that hasn’t met open interest. But it’s building a position. So, at some point if more buying comes in and we’re going to see it turn to purple and this is an example of exactly what we’re looking for. It’s the same strike same expiration. They’re all calls. They’re almost all asking, ‘above ask’ and they’re almost all sweeps.  So again, the lovely combination we’re looking for is above asking sweeps.

This is starting to tell us the story.  This flow started at 89 cents it continually increased in price to a 1.13 and the buyers kept coming in. So that’s a good sign.  When the buyers are stepping in to buy, even though the price is increasing, that’s what we’re looking for because they’re not taking their profits. They’re not going from 82 cents to a 1.13 and selling it. They’re buying more of it here in at 82 cents, 84 cents, 86 cents. Now, it’s a dollar, a dollar ten, a dollar twenty, and they’re not taking their $40 per contract gained. They’re adding to their position. That’s a good sign.

It means even though the contract prices increased, it hasn’t met their target.  Or they wouldn’t continue to buy more of it. So, the contract price increasing, and buyers are still stepping in to buy more of it. That’s a good sign. This is the type of flow that we want to follow, and that particular flow is on the graphic here because a lot of people in the room actually did follow that flow and made a killing on it. So that’s what we’re looking for. Same strike, same expiration.  That’s consistency.

Again, we don’t necessarily follow whites because it’s not significant compared to the open interest, but sometimes in a graphic like this, they’re sneaky whites.  We call it sneaky because it’s white so we’re not necessarily following it, but there’s enough of it that it will grab our attention eventually.  When we see one or two, we’re ignoring it.  When we see one, two, three, four, five, six, seven, at some point that’s going to exceed the open interest.  It’s building, its building, its building and at some point, just like in this graphic, it’s going to turn into purple and it’s going to exceed open interest. So, if I see the white flow in a certain way, I might follow it because I’m anticipating it going to purple.



Rapid fire one of the things we like to see.  In a very short timeframe where someone just comes in and pounds a particular contract, boom, boom, boom, boom; we say rapid-fire.  We’re talking a really quick timeframe when the flow appears on the screen. Everything in the picture to the right came in within 2 minutes.  The first-time stamp is 10:41:50 and the last is 10:43:48. Within 2 minutes, 8 trades were placed, for a total of 2455 contracts.  These are almost all sweeps, and almost all on the ask or above the ask.  This shows us consistency and urgency! This is flow we will almost surely follow.



This is what BlackBox shows you that the competition doesn’t, Buyer Exiting Positions in the flow.  This is the important part of the flow.  If we follow this flow from Friday, and we see Monday that the same contracts are being traded on the bid, we know that the person or multiple people that opened this position are now closing the position.

We don’t necessarily need to follow them if we opened it Friday with them. We don’t have to close it just because they closed it, but we want to know that they’re pulling their money out of this position. If you’re not paying attention to it and you see the same contract incoming and bid side you can go, oh something’s happening here. Let me pull up the chart and then you can decide if you want to exit the position. But, because we have the same contract coming in on the bid side that was previously coming in on the ask, we know that this is the buyer closing out of that position.


So, if we follow them into the position again, we don’t have to follow them out, but it’s nice to know when they’re pulling their money out. And the reason they pull their money out of this one, I can’t guarantee it because I wasn’t the trader that place this trade, but if you look over here, there’s a trade at 43 cents, 44 cents, and Monday they were 88 cents, 85 cents, 81 cents over the weekend. These were a 100% gain. So that is a good reason to pull your money out of that position, when you just bought it Friday and its now Monday and you’ve already made 100%.



Here’s what we’re looking for – what makes good flow.  There’s a bunch of things that make good flow.  First, the timeframe. There are two things we’re looking for timeframe. We either want a really short time frame like rapid fire; boom, boom, boom, boom, boom.  Or continuously pounded all day long. If buying starts at the opening bell an hour later and they’re still buying an hour later. They’re still buying hour and a half later. They’re still buying, it’s the closing bell and they’re still buying.  That’s a pretty good sign. It means the entire day they weren’t closing out of this position. They’re just building and building and building.

Same strike same expiration. We want that for consistency.  Contract price increasing is good, because again, if you’re up 40%-50% then you’re not selling, but you’re adding more to it. That’s an attractive situation.  A score above asking sweeps are showing us urgency to get into the trade.  So, there’s an urgency to get into it because within the spread. There’s urgency to get into that. I don’t care what I pay. I just want to get in.

If all of those boxes are checked, are you going to make money?  Maybe, maybe not. There’s no guarantee that if all those boxes are checked you’re going to make money.  There’s a much higher probability that you will with more of those boxes checked and it’s not because those are on the checklist. It’s because of what it means.

So, if you have all those boxes checked as Traders were looking for probability. You have a higher probability of that flow working out. So, when we see all those boxes checked if we take those trades more often than not, we’re going to be successful.