Samwise Quick Reference Handbook
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Sam, no plan to hedge off after buying the puts at ATH for long term portfolios in the correction? You’re simply buying now, in advance with the plan to hold?
Also, I know a lot going on today, but how does this change the outlook for the way the correction plays out, if at all?
So far we did hit new highs, but not substantial.
There’s no difference at all. It’s all still the same. Marginally hitting new highs doesn’t change anything. Really the QQQ can push up to $587 and it’s all roughly still the same. We’d be deeply overbought on the third push and likely setting up for a consolidation top.
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For the long-term puts, we’re buying the future hedge in the $580’s. That hedge will very easily be good. Even if the QQQ continues higher from here, it will eventually peak and sustain a correction. For that hedge to be a losing proposition, the QQQ would need to rally all the way to like $630+. That’s because wherever the QQQ ultimately peak, it’s likely to fall 8-10%. If it peaks at $600, that’s $540-$560 at hte lows. If it peaks at $620, that’s $558 to $570.
Worst case, we close out the puts during the correction and then look to re-hedge later. So fore example, if we buy our hedge up here at $583 and the QQQ ultimately peaks much higher at $620 leading to the hedge being less effective on correction, we just close it out and use the capital to go long and then we’ll later purchase a new hedge at higher prices.
Does that make sense? There isn’t a lot of downside to buying our hedge up here at $583+. Ultimately it will either work and hedge out our future long positions and we’re good to go or it will act like cash as we probably unload it at even or with gains.
In a scenario where the QQQ were to rally to $620, peak and then fall to $560 or something, we’d be up a good 20% on the position. we can close it out at $560 and then go long.
In a scenario where the QQQ peaks up here around $580-$590 as sort of expected and where the QQQ then falls to $530-$540 at hte lows, we hold the $500’s as a full hedge against new leap positions.
but we aren’t going to hedge the hedge so to speak. Not up here anyway. We might sell covered puts down at the lows. But most likely not because selling covered puts defeats the purpose of putting on a hedge. So we’re not hedging the hedge.
sorry, I bought it in yesterday.
Is it worth rolling the 150 put option from October 10 to October 27?
So I can’t really answer that. Not permitted to. Here’s why.
For one, it’s an impossible inquiry for anyone to reasonable answer because we’re missing 99% of the information required to answer it.
Really all we can do is execute the trades that we do and show our process.
Front running trades that we haven’t even made creates impossible situations like this.
But setting that aside, for everything we do, allocation is a THE determinative factor. And we can only answer questions and comment on our portfolios because we have all of the information.
The amount we choose to allocate to a trade is the MOST controlling factor in all of our decisions.
For example, right now in Baratheon our decisions to roll or not roll is based on the fact that Baratheon is a 10% portfolio allocated $10k at basis relative to the $100k core portfolio. It’s $10k trading capital relative to $100k of investment capital basically.
The Nvidia trade was a $1600 position. When considering whether to roll or not roll, that question is determined in very large part by the following realities:
(1) the Nvidia trade overall represents a 1.6% position if we had made that same trade in the Arryn portfolio.
(2) we have $1900 in trading capital on the side lines.
(3) we want to cap our total further allocation to the Nvidia trade to $200 so as to leave $1700 to allocate to other QQQ trades.
Do you see how ratio makes ALL OF the difference?
Without knowing these things, it’d be impossible to answer this question.
And even if I knew all of these factors, I don’t know the investor, their risk appetite, time horizon, investment goals to comment on individual portfolios or individual decisions.
All of these things are entirely unknown which make it impossible to be able to answer.
With unlimited capital and resources, then sure. Rolling makes sense after having rolled yesterday because there are better prices than yesterday. But that only true in situations where one has unlimited resources.
If someone has a billion dollar and has allocated $2k to the trade, then sure. They can infinitely roll essentially.
If someone has $2000, allocated $1600 to the trade and now has $400 on the sidelines….
Do you see the issue? Ratios and allocation makes all of the difference.
Without those, it’s a blind answer.
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Furthermore, ratio and allocation size is THE SINGLE most important factor when it comes to whether a strategy will ultimately succeed or not.
Two people can make entirely identical trades, and one person can be up 769% and the other down 99%.
And that wound be determined entirely by ratios and asset allocation.
Not an exaggeration at all. It literally can play out in that exact way if one allocates in fundamentally different ways to the same exact trades.
So asking whether rolling today after having rolled yesterday makes sense is impossible to answer because I’m lacking 99% of the information required to answer that question.
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With all of that being said, if we had rolled in Baratheon or Targaryen yesterday to October 10, then it likely means we’d have paid up ~$200 in Baratheon yesterday which means we’d be done with the trade. No more rolling at that point.
But the reason we choose not to do so was due to the fact that Nvidia hadn’t rebounded off of oversold. There was a very real risk of a rebound happening.
Had we rolled at $172-$173, we’d be stuck where we are right now because we’d limit our risk. We don’t want to allocate endlessly to the trade. We’d cap it at that point.
But that’s speaking entirely to Baratheon & Targaryen and to the relevant allocations of those portfolios.
thank you sam
Hi Sam,
Question about chart patterns. Looks like NVDA is forming a head-and-shoulder pattern on the hourly chart with the left shoulder peak at 174 in mid-July and the right shoulder happening right now? There seems to be 2/3 heads in between though so maybe not. Just wanted to see if there is anything there.
Thanks!
Hi Sam,
With the QQQ making new highs today, albeit marginal, does this mean the major consolidation period we just went through is “invalidated”? Or maybe it’s only invalidated if the QQQ makes significant new highs (e.g. 600)? Do we ever see at the tail end of intermediate rallies do: market consolidation -> make significant new highs -> consolidate again -> correction?
Thanks!
Based on prior analysis, it’s not uncommon to see QQQ make ATH’s and then crash immediately after, so I doubt the consolidation is invalidated.
There are no circumstances where it becomes invalidated.
The consolidation impacts the market negatively. It’s an indication that we’re at the end of the road.
Put it this way there have been no prior cases where the consolidation lead to the market moving higher longer-term
It has either led to an immediate peak or the market will make new highs, but then immediately top right afterward.
For example, applied to today, we’ve seen consolidations play out in two distinct ways only.
In one situation, the market just tops and sustains a correction. New highs don’t matter at all. In the February top, we had new highs on the day before the market collapsed after a month with no new highs.
The highs don’t have an impact.
The second situation is sometimes we’ll see the market make one last hard push. It looks like a breakout, but it’s anything but a breakout
In a few cases, we’ve seen the market breakout to new highs — for example apply to today that would be like the QQQ running to 600 — but then it immediately tops at that point and goes right into correction.
Those are the only two ways we’ve seen consolidations unfold. Either immediate top or break out a new highest followed by immediate top.
What we don’t see is the market breaks out and then continues higher for several months.
The consolidation itself signals were at the end of the road.
Like when we look at this in hindsight, we’ll find that this consolidation occurred near the very end of this rally. Regardless of how the top actually occur occurs.
At least that’s what we’ve seen his historically. There’s nothing the market can do at this point to undo the fact that it went through a five week consolidation process.
Making new eyes doesn’t change anything. In order for this to be truly invalidated, QQQ would need to break out completely depart from the range and then continue rallying for a couple months
For example, if it were to run to 600 break above 600 and then rally till like 640 by December, then I’d say “the consolidation broke to the upside. “
But if it breaks out above 583 and runs to 600 only to the top a few days later, then the consolidation was probably the thing that broke the rally.
Hi Sam,
Wanted to better understand the goals we have for rolling our NVDA Sept $150 puts forward. If I’m understanding correctly we’d be salvaging the rest of the value in our current position to decrease the amount of capital needed to allocate to another position with the same strike but further out expiration.
Let’s consider the case where we do nothing, pretty straightforward. Assuming the market doesn’t go in our favor, we just lose the entire amount of capital allocated.
In the case where we roll the position, we take the loss on our current Sept position. But, by then opening a new position with the same strike, but later expiration we’re hoping the new position appreciates enough in value to offset the loss we took by selling our Sept position?
I’m having a hard time mentally reconciling why we wouldn’t just take that additional capital and allocate it towards a new position (better strike, better expiration) whose gains would offset the loss taken when the Sept 19th positions expire worthless?
Sorry for the word-y question.
Thanks!
Cost benefit analysis
We’ve gone through that exact process. We mentioned this exact thing.
I think both in the daily briefing and maybe in some comments, I mentioned this exact scenario
It does come down to cost benefit analysis. If we’re applying a small amount of capital and we believe in the thesis, then it makes some sense.
This is why we were rolling with very small amount of money.
But the thinking of just abandoning the trade is very valid.
That’s a completely valid way to approach this
What hasn’t changed is the fact that Nvidia is up 110% and that the market is about to enter a correction
Those things haven’t changed
So are we making the trades or still waiting?
Sam, can;t handle the anxiety here. I wouldn’t be able to either. My guess is he already made the trades for himself, but crafting a way to deliver to the group.
People just go rogue, bet the farm, do whatever they feel like, then have problems, it’s draining for him to have to manage the emotions of others. Someone above just pulled the trigger yesterday then wanted advice about their mess.
Interesting to see this got downvoted @Sam
I share the same sentiment. He already provided the trades well in advance as well as an in-depth analysis. I appreciate some hand holding too, but no need to wait for every confirmation from Sam along the way.
Not anxiety. Just trying to confirm if we were still waiting. I almost did it myself yesterday as the prices were in the range we were looking for.
I think Sam is fine. He’s been upfront with people from the beginning that he doesn’t have a crystal ball and not to get nuts with it.
Folks are responsible for their own decisions.
We’re not making any trades today. We are waiting. We’re just approaching things in a conservative manner for the time being.
With such a huge gap up, it’s very uncommon for Nvidia to just peak
So we’re essentially waiting for Nvidia to get up to 180 share first
And that can easily happen even if the QQQ is struggling
And today does look like a struggle in the QQQ.
We just want more clarity from the market before we start adding more positions.
It has been to our advantage to just wait.
No worries Sam. I was just wanting to confirm we were still waiting like I thought we were doing. Thanks as always for the response!
We may not get the trade in? Today feels very toppy. Peak euphoria, Oracle, market cannot be stopped, new ATH and then…
Hi Sam, if we close at ATH for QQQ, does that mean this is a rare 6th segment? Will that reset the consolidation phase from 0, which the market will go through again?
From your previous post it seems some correction had the consolidation phase while some reached ATH and just went straight into correction.
Thanks.
So there are no more segments. That sort of ended at segment number five.
The segments only occur when we’re making new highs constantly or when the market is moving up in a straight line.
Especially when we’re making substantial new highs. At the moment, we’re just more range bound. The QQQ is climbing 6 to 7 days and falling 2 to 6 days. It’s not making substantial new highs in the process.
So we’re in more of a consolidation type environment instead of a rally environment
Segments only occur in rally environments where we’re adding 8-12% and only giving back 2-4%.
The last true segment we had occurred when the QQQ went from 550 to 583.
We’ve had five true segments and the rest has just been range bound nonsense.
After reaching 583 we haven’t made any new highs. Nothing real.
So the action we’ve seen since that time isn’t really segments. It’s more volatility within a consolidation range.
Very similar to what we saw between December 2024 and Feb 2025.
It was the same thing there were no segments during that period either.
I see, thank you for the response Sam.
Exciting close we may get an opportunity to buy leap puts after all! That seems like the most convincing thing to do at extreme outlier rally events and have the ability to size down the hedge later. Sam, are we thinking of trimming hedges after a first leg down or waiting until a potential second leg down into a larger correction to trim the doubled up hedges down to normal size?
you have said before correction tends to unfold in a 1-3 legged manner.
Let’s we are in the 1st leg down,
how do you anticipate whether the correction is ending at this leg or there is another leg down? (let’s just say there is no capitulation in this one)
It always either drops 8-10% or reaches oversold on the daily/hourly. Gauging correction ends is 100x easier than rally tops. Like way easier and far more precise.
There are simply more indicators for bottoms than tops.
Looks like NVDA briefly got up to 180! Not sure if it touched 80 RSI before pulling back though