Samwise Quick Reference Handbook
To streamline our daily blogs and conserve space, we’ve organized key resources into a convenient, collapsible dropdown menu below. A sort of Quick Reference Handbook if you will -- as our friends in aviation might call it. By clicking the menu below, you’ll have qu...
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Hi Sam,
If $520 ends up being the point where the next correction starts wouldn’t waiting until $540 cause us to miss the hedging opportunity? Or, are we viewing the $540 covered calls we sold as a mini-hedge in that case?
Thanks!
Not quite. So let’s play it out. Suppose the QQQ sustains a correction here and now with $526 being the highs.
A correction of 10-13% from $526 puts us at a bottom of $470 to $455 a share. If that were to happen, well then our march 2026 puts will kick in and we’ll be protected from any sort of major crash.
If the QQQ recovers, then great. NO big deal. When the QQQ begins its new rally to all-time highs, we’ll just buy our new hedges then near $540-$560+ range on the next intermediate-term rally.
If the QQQ continues lower into a much larger 20-25-30% correction, well then our March puts come right back into effect to protect us from that very crash. They’ll absolutely skyrocket at that point.
Fore example, suppose the QQQ returns back to its lows of $400 (20%+ correction). In that case, teh March 2026 $400 puts would rise to $35-$38 minimum. Maybe even up to $40 depending on the $VIX. The $VIX would probably be right back up to $60. At $40.00 per contract, our 16 contract produce $64,000 in cash. Add to that the $29,000 we have on the sidelines right now and we’re at $90-$95k in cash just from the hedge + cash at the lows. We only paid $26k for the march puts right. Everything else would still have a lot of value. Especially the June 2027 calls we bought near the lows.
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When hedging, we have to be careful not too eat too much into our profit. We just purchased our hedges near $470 a share. At $520, the QQQ has only really rallied about 10-12% above where we bought our initial hedges. We need to be very selective about when to purchase “new” hedges. We need to buy them at point where the old hedges are no longer as effective.
For me, that’s probably closer to $540. At $540, we reach a point where the QQQ has to drop $140 or 25% just to get back to the lows. Really $560 would be ideal for new hedges. But we probably realistically buy them at $540.
Then if there was a major correction, we’d use it as an opportunity to close out the March 2026 $400 puts and use the new June 2026 $500 puts as the vehicle to protect the portfolio.
With this strategy, corrections would be used to close out old protection and rallies would be used to buy new hedges. That’s how we sort of do it.
We could take a more hybrid approach by simply adding slowly. That might mean buy 1-2 contracts at $525-$528 and then buy more near $540 and again at $560. That’s definitely one way to do it.
But I think we’ve done enough by selling covered calls. That’s going to go a long ways when taken together with the March puts at this point ($520). $28.5k cash in Arryn is going to go a long ways. I mean consider this, the June 2027 $400 calls we bought near the lows was a mere $34k position. $28k cash allows us to buy a new leap position at almost he same size. and that’s exactly what we’d do if there is a correction here.
We’d wait for capitulation and then use the $28k to buy a new 2027 or 2028 QQQ leap. during the rally, we’d then look into purchasing new hedges. Maybe take some off again like we did last time or use a good portion of the gains on a differnet position to buy puts to protect.
If the QQQ hits 560 and say the options in Stark are all closed, would we also then have to buy to close all of the calls we sold? That seems like it would be expensive and negate the cost-basis reduction argument for selling them in the first place.
It wouldn’t. Remember, the leaps are going up in value at the same time as are the calls we sold. What we gain at $560 is the knowledge that we’ll be able to buy everything back at a MASSIVE discount during the correction. It will skyrocket stark. Do the math on each position at $560. At $560, the portfolio probably gains $15k from where we are right now. $135-$140k. If you close out all positions and buy them back with teh QQq at $500, it’s huge reduction.
Given the current configuration and the strength of the rally, it seems likely to me that we’ll see a correction of more than 30 points for NVIDIA, so this is consistent over 20% to 25% and will revisit the 105-112 zone. Moreover, the end of today’s session for QQQ and NVIDIA suggests these resistances will move higher. It seems likely to me that we’ll see a correction before July or August. A catalyst or accelerator will surely surface, as it did last August or April… To be continued, but it certainly seems very risky to get in today and bet on a continued rally to $160-$170 for NVIDIA. When the euphoria is there and small investors are speculating, that’s when you should get out… The Reddit queue has been full of speculators recently, and that’s also a sign to watch.
Outstanding job. Could you flip the month-year to year-month notation so that the column will sort properly?
Hi Sam,
Talking about $X20,$X60, and $X00 logic for QQQ resistance and gravity levels, how does it align with SPY? What I mean is, if QQQ is resisting at $X20, do we have similar logic for SPY too, as both work in Sync and SPY might be at different level(maybe $590 resistance now) of resistance or support?
This applies to ALL stocks and assets really. There’s always extra support, resistance and gravity at key psychological levels like $100, $120, $140, $160, $180 and $200.
Each of those numbers signify something different and results in something different
For example, anytime a stock breaks above the X00 level, it will very often explode through that resistance level and surge to X20.
X20 will often represent both gravity and resistance. If the momentum is very strong in the stock, then often X40 will mark the top. It will bust through become extremely overbought and peak at X40.
You see this whole thing over and over and over again
For example, the first time Tesla broke out above 1000. It peaked at 1400. The first time Nvidia broke out above 1000. It ran to 1400.
If you look at where the NASDAQ 100 topped it topped at 540. It had enough momentum to drive past the 520 level but didn’t have the momentum to drive to the next 100 level.. An indication of that would’ve been a run to 560
So often psychological peak is at $X40.
Once you get past $X40, the final dividing line between the stock going to the next hundred level is $X60, the gravity pull towards the next hundred level it becomes very high if the stock manages to get past that X60 level.
Once you get to X70, the pull is strong and everyone gets hypertonic on X00, choosing to hold until that price level is reached.
The stock or market will make an attempt at the next hundred level once it gets past X60.
Now all of this is going on at the same time as we have other support resistance levels. This is built into all stocks.
So yes, this all applies to the S&P 500. And right now the SPY is battling 600. At $588, it’s all a battle for $600 for the SPY.
And if the SPY manages to conclusively take $600, $620 is where it will go first.
It seems to me thatQQQ would reach RSI 30 at around 511. Does this make sense?
Hard to say at this point. The QQQ is at $514.67 and a 43-RSI. So $511 at 30-RSI is certainly possible.