Samwise Quick Reference Handbook
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Hey Sam,
Did you mean to write it becomes „clear“ at 500 on the QQQ what the market does?
Also what are your thoughts on Tesla? We‘ll probably have to take quite a loss on it right? Now that the price is so much lower than our entry I can’t really see a scenario where it rallies 50%+ in the next month.., but I may be wrong of course, prisoner of the current sentiment etc.
Sam mentions that QQQ reaching the 50.0% mark (the Fibonnaci retracement shown as the red lines around ~503.62 for the QQQ in his chart today), is extremely likely because every correction after bottoming out has gone up to at least to the 50% mark between its high and low.
There is already an anticipated outcome after the 500 mark for the QQQ as pointed by Sam’s bullish read yesterday, but the article today probably says the word “unclear” to provide some sort of cautiousness and nuance anyway since a 2nd leg lower isn’t at a 100% or 0% chance.
And yeah, I understand some of that sentiment a bit too when sampling one of the Sam Weiss LT portfolios like Tyrell, I can see how frustrating it is for holders to open up their portfolio and seeing at one point in this correction that their gains hasn’t moved very much or at all that much compared to when at the recent ATH. Negative sentiment unfortunately happens every correction, but there is a light at the end of the cyclical tunnel!
Do you have a perspective on March Opex coming up and how it’ll impact markets?
Options expiration? I don’t think it will have much of an impact. Maybe near term. There’s just far too much liquidity for there to be any manipulation to that degree. We’re talking trillions of dollars here.
Thank you Sam.
Curious about this as well. Is this simply a supply/demand or sentiment aspect, as fear increases, value of calls/call spreads go down beyond theta decay?
Here I am just watching that RSI creep back up as we go sideways.
We want to see that happen. In fact, the RSI going overbought would be the first big sign that the rally has started full steam. The RSI is not contrarian when overbought. That only happens at oversold conditions.
Meaning overbought conditions doesn’t mean a reversal at all. Only when we reach extremely overbought does the chance of reversal rise and only for a near-term pull-back. It has no impact on any larger sell-offs. We want to see the RSI push up as much as possible.
Oh, that’s right. I remember reading that in one of your chapters. Thanks for the reminder. Also helps to see it in action.
So it’s not so much due to IV. IV has a partial impact. It’s more the distance over time over the market’s expectation of the likelihood of reaching the strike.
If the QQQ had simple traded around $480 instead of falling to $467, the spread’s value would be higher. But the drop to $467 lowered the spread’s likelihood of closing in the money.
If the QQQ pushes up to around $500 in the next 2-weeks, the spread should trade between $2.60-$3.00 depending on a variety of factors. If it’s up near $500 in 4-weeks, it will trade close to $2.00. So we want to see the move happen sooner rather than later.
But the huge difference between calls and spreads is the ability of spreads to recoup their value on a rebound. They have better recovery than do the open ended calls because their value is tied to the likelihood of reaching the spread’s strike prices.
At $500 with 4-5 weeks to expiration, it is only $25 or 5% out of the money. So its value will raise significantly the closer it gets to that point. If it’s trading at $520 even with 2-weeks to go, it will rise to around $4.00.
The open ended calls wouldn’t retain their value to that degree.