Samwise Quick Reference Handbook
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QQQ keeps going, what day would today be if new highs?
Also, reminder that these are not hedges, these puts are shorting the market. They are shorts, they might hedge something in the future, but for now they are straight up shorting the market.
Downvote all you want, but the position is a short position through and through until there’s actually a long position to hedge. The portfolio is cash and short.
in the context of Arryn they aren’t a short at all, that’s why it’s important to separate these post and analysis from personal portfolios. even in the literal worst case Arryn is up 50% is likely two years. that’s just what the reality of this blog is, it’s been highly successful and can take a risk on being net short. However if we were to launch a new portfolio we all know what the blog says, wait for a correction. simple as can be.
They are a short. The portfolio holds cash and puts. There’s no underlying to hedge.
It depends on context, from the perspective of going long we were forced out based on covered calls sold. If we were to go long here we are violating rules that we only enter on correction. As far as the spreads go they were always going to be risky, we all saw how that went on the long spreads. Only those spreads that waited for April 7th produced. Same attitude for these out spreads is they are a super small allocation that was expected to produce large or go to zero. A sale of the remaining hedge from getting called away is fine too which would make us basically short on the spreads and that’s it. I guess the justification is that we will see a correction sometime and that price after the correction is going to be around the 590 level or lower. That’s a thesis based on this time not being any different to other times. Hence the allocation of massive 220% profits to a short. in terms of allocation it’s basically 30% of just the profits.
I am not saying that. The rules also say hedge so you can remain long at all times. FYI, I think Sam taught a valuable lesson about why you want to remain long. Covered calls this covered calls that. He made the choice to liquidate the portfolio in addition to the covered calls for one which is contradictory to his strategy outlined.
As everyone knows and he himself said it many times calling the top is hard, which is exactly why you want to remain long.
Cash is a position so it’s not the worst thing, but buying a put with no long underlying is a short. You are shorting the market. Doesn’t matter the context of the portfolio. If the portfolio is up or down. All that matters is the composition of the holdings, in this case is cash and puts. It’s not a “future hedge” it’s a short position.
So this isn’t quite right.
Let me explain where I’d take issue with how you’ve characterized things.
(1) the rule on staying long at all times is correct.
That’s what we generally strive to do. That is our goal. It is to remain long at all times. And quite frankly, if our covered calls weren’t in the money at the time in September — like if we just happen to be closer to 560 a share — we’d still be long and we’d have sold covered calls in October and if that played out OK in November.
However, there are very slim circumstances where we could easily end up on the sidelines, and this is one such situation. It’s rare, but it happens.
We set it up so that we only end up in on the sidelines in extreme conditions. Which is fine in the end because when you have extremes, there’s a tendency to be able to get long again.
If we were in the Covid rally or if we were in the.com rally, we’d also probably be in a similar situation, though it isn’t entirely certain that we would be. Because again from a timing perspective, we could’ve easily ended up with the September calls expiring either worthless or even and then we may have sold the October calls. There’s no guarantee that those calls are ever gonna be in the money, even though the rally might’ve continued.
It would largely depend on where the QQQ closed at expiration.
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However, Selling covered calls is absolutely central to the strategy because it reduces risk and cost basis. Especially if you sell longer dated covered calls like we did for the September expiration.
We are going to sell covered calls in three standard deviation events. It would be entirely unwise not to do so.
And if you consider where we closed our QQQ long position, it was at the third standard deviation of all rallies. We closed our position with the QQQ up 40%. Why don’t you go check out the tables and note the number of times the QQQ ever goes up 40%.
What’s more, we only closed our long position precisely because the covered calls were deep in money.
Next time the QQQ goes up 40% we will do the same thing and we’ll do it every time it rallies to such an extent without a correction. And we’ll do it every time it will require the QQQ to record a new record duration in order to get called away.
Why because it will lead to one of three scenarios all of which result in a highly likely net benefit at virtually a little to no opportunity cost in the end.
Either (1) the covered calls will expire worthless, or (2) we will be able to close them out for close to even and then roll forward to the next month or (3) as is the case here, we get called away with the QQQ up 40% and we’ll simply be able to buy back during the next correction at the same place we exit f.
We gain a big net benefit without any substantial opportunity risk. that’s the reality. So why wouldn’t we sell covered calls at a three standard deviation rally return and duration?
And an even bigger reality is that even if…even if…the QQQ managed to bottom in the next correction at a higher point and where we exited, it doesn’t even matter. We haven’t discussed this yet, but it doesn’t make one bit of difference when we’re talking about leaps at all.
Having sold at 400 to share and buying the QQ back at 700 to share makes no difference when we’re talking about leaps. The only pertinent issue is whether you bought had sustained a substantial correction resulting in deeply oversold conditions. When we’re talking about options, that’s the only pertinent issue.
Once the correction happens we’re going to be able to buy leaps and quite frankly, it doesn’t even matter where those leaps are purchased. All that matters is that we’re able to buy them at deeply over sold conditions.
And that’s the worst case scenario. We’re not even saying that that’s what’s going to occur. We’re saying that even if that did happen, it would still be a benefit in the end.
And it always makes sense to sell covered calls that force us out of the position in a three standard deviation event. We’re always going to do that and it’s always going to be very smart to do that.
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Also, in those situations where we don’t get called away, we reduced basis by nearly 25%.
We bought our leap positions at $70 and $85 and sold covered calls at $20. Sorry, but we will do that every single time the QQQ produces a near term return that is three standard deviations from the mean.
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So this whole idea that we just liquidated out of thin air isn’t correct. And we couldn’t remain long because doing so would require us to cover the calls that we sold thereby increasing our basis and indirectly increasing our risk. By increasing our basis, it means that when the correction does happen, we lose out on all of the profits we generated.
I can’t remember what we covered at, but I remember they were pretty deep in the money which means that we simply just couldn’t remain long. We’d be adding something like 20-30% to our cost.
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You keep viewing this rally like it’s a normal situation it isn’t
The current rally is literally the third largest rally after the dot-com rally and the Covid rally
And we closed out our positions a mere12% ago. If there is ever a situation where we’re fine exiting the market. It’s this one.
While, we wouldn’t have exited had our covered calls traded at $20 at expiration, we also don’t mind having closed out our positions for all of the reasons we point out above.
But I do think it’s a mischaracterization to say that we liquidated the portfolio with intentionality.
As if we just randomly thought the rally had gone too far and thought it would be best to liquidates. that’s not how it went. Not even close.
we sold covered calls that would give rise to us potentially closing it only if the QQQ rose to a three standard deviation event. And notice it’s only a potential close because the QQQ could still have been in a three standard deviation rally and the options could’ve easily not expired in the money at the same time.
For example, you could’ve easily ran a 600 before September and then pulled back to 560 giving us an exit on the covered calls which we have been able to sell the October $580 covered calls for $20.
It just so happened that in September, we actually closed in the money. There was no guarantee that we would ever liquidate at all, even in a standard deviation event.
Just to illustrate, this actually occurred in our Nvidia long position. And thats why we’re still long Nvidia in a lot of the common stock portfolios
The very reason we are long Nvidia is specifically because Nvidia options happened to expire close to the money, allowing us to keep our long positions and we just simply sold more covered calls to the later expiration. we just did this last Friday! The common stock portfolio still own Nvidia loan positions with November expiring covered calls.
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(2) On shorting — you’re right. We don’t normally consider it. But again, these are extraordinary circumstances. And even in those circumstances, it’s all very measured.
As important as the rules are; it’s even more important to know when and precisely how to break them.
And notice we would be making all of these same exact trades had we still been long. We could be both along the QQQ and still put on the spread trade and still buy the September puts.
If we weren’t called away, we would be doing this.
Just like it would’ve been smart for people to do this at the height of the dot-com rally.
It’s no different.
The rule is there to ensure we only do it under extreme and rare circumstances.
It’s all too easy to get bearish on the market under normal circumstances. The rules there to say one shouldn’t do so in a typical rally.
But this particular set of circumstances where the rally has gone 137 days Where the QQQ has reached 600 a year and is up 55% First longest rally third largest rally. Do you not see how the circumstances call for taking measured bets?
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There’s also nothing wrong with being rigid and adhering to rules in a rigid manner that’s totally fine too.
We’re just not gonna do that. we’re perfectly happy with our positions in our leap portfolios right now. totally happy. As we pointed out in the article above, I think, regardless of how things play out, we will be just fine. Either the market corrects as we expect leading to our November spreads producing or it doesn’t and it corrects later and our September puts will offset.
Notice we could do this right now because we are at extremes and are at records. That’s the critical component here.
We wouldn’t be taking any of these actions under normal circumstances.
We’re not selling covered calls under normal circumstances we’re not buying put spreads in our normal circumstances.
QQQ uneasy right now
this insane rally broke stockcharts lol
QQQ nhod $611.17
We also have a bear flag in play
Look what Sam posted it’s textbook bear flag
Check my comment to Sam
wow!! now at almost 612. it has to drop almost 4% to go to 590. is the idea that it will continue to go down to 540? or we will have another rally back above 600
Eventually, the QQQ will top and sustain a 10% correction. At least that is what has happened 100% of the time historically. 59 out of hte 59 previous rallies we’e seen sine 1999 all lead into an 8-14% correction on average with some going much larger than14% and others going marginally smaller than 8%.
Sam, I do have one question, the question everyone should be asking: if you are as good as you say you are, confident in your ideas, then why write here? Why not just execute?
My cousin is 35 year veteran in asset management, with en exceptional track record managing a fund.
The most critical thing he suggest anyone who reads any expert research asks is: why sell your ideas and research, why not just act on it?
I am curious to see Sam’s response to your question; however, if I had to guess, Sam’s personal portfolio is likely heavily aligned with the model portfolios. It’s pretty clear he has a passion for investing and wants to share his knowledge with others. I would assume over the last 30 years of investing, he’s made more than enough money in the market, and he is not doing this blog out of necessity. I started following him back on the Nvidia subreddit by his moniker Dieselcock, and he’s usually pretty spot on. Despite his exceptional track record and thorough analysis, he does not own a crystal ball. It’s easy to get frustrated and to point fingers, but the primary driver of our decision making is the historical data. The market goes up and up until suddenly we’re down 20-30 points within 2 weeks. We are in extremes in terms of magnitude and duration of the rally, and every day that passes by increases the probability that we are at the top.
To add to this, I hope a more pertinent question people are asking themselves is whether this analysis is worth it to them or not (unlike many other services, a lot easier to compare cost vs. benefit dollar for dollar here). I get the question, but to a certain degree, does it matter? Either the information is educational and helping you make money or it’s not. Same way you can ponder the ethical and environmental issues around AI and decide whether you want to invest in Nvidia and make money or not.
I am not pointing fingers at all. This isn’t that and I don’t want it to come off that way. It’s well known in the broader investment industry that the best things are kept close. I am simply asking the motivation behind selling his research.
QQQ nhod $612.72
What is the expiry date for QQQ September 2026 $500 Puts? 9/18 or 9/30?
9/18. They are the monthly expiration puts. Third Friday or Sep 18, 2026
If I’m reading correctly, going to 40x qty of QQQ 500P?
Whats the difference, again this is a short position not a future hedge, why not just another small allocation put spread? It’s almost like we’re just bypassing the cap that was set. Not saying it’s wrong but your analysis suggests it is going to behave as a short, not a future hedge. It’s been mentioned multiple times that it’s going to offset any potential put spread losses.
Fine, but why not just do another 3% in a put spread, let it get close to max value, then go long?
It seems paradoxical to go to a lower risk higher probability short option as the top is only getting closer?
I am not suggesting anything, I’m asking why we had a hard cap on spread trades and then decide to circumvent with a different form of short under the guise of a future hedge. They aren’t hedging anything they are short position for now and that’s it.
Sorry, didn’t catch this yesterday. So as we mentioned way back when we were putting on positions, the spread trade has an independent cap from the long dated September puts we’re buying. In fact, both purchases developed out of entirely different strategies.
When we put on the spread trade at the time, the cap wasn’t arbitrary. It developed right out of a different strategy. The trade Was set before we even put on the very first trade. We set it at 3 to 4 trades way ahead of time.
The entire strategy developed out of our SW strategy of buying an 87.5% long position hedged by 12.5% put position in reverse. We wanted to see whether we could put on the same tray that we do when we go along but in reverse.
We didn’t initially start off with this entire idea of a trade thinking we’re gonna buy spreads and then just randomly tapped it at 12.5%. That’s not at all how transpired.
First, the thinking was as we were approaching a 100 can we put on a significant long-term (2027) leap position in puts ($600 strike) and could we hedge that position by using a long call position the same way we would do at the bottom of corrections.
Can we buy a short position that we can then hedge the same way that we buy a long position and hedge
In theory, one would think that this should work just fine. If we can get long and buy a hedge that would protect us on the downside, then we can do the same thing on the short side. That was the thinking before we put on any of these spreads.
The problem is the trade simply doesn’t work in reverse because there’s an inherent asymmetry in the pricing of options. And that is largely due to the asymmetry of risk in the market.
Markets can rise to infinity, but can only fall to zero. For that reason, call options are always more expensive than put options. You can always buy a put option for significantly less than the call option at the same strike.
There’s also upside bias to the market with market generally closing GREEN 66% of the time. All of this makes it difficult to buy a long dated put position and then hedge with a relatively shorter dated long call position.
Basically, after doing the math, we came to the conclusion that we could quickly incur a 20% portfolio loss very fast. Not only that, it would be difficult, psychologically to let go of the trade because the longer the market rally continues without a correction, the higher the probability of correction occurs.
Thus we would be put into a position of having to make the decision of cutting losses just as a correction got started. If the QQQ rallied to 600 as it has right now we would be sitting here thinking about cutting losses down 20-25% with a QQQ at $613 and 140-days. And if we don’t and the QQQ were to break out to 630 then we’re down 35%. Do you see the problem here yet?
So what we did next was to figure out how to produce the same return we would get by purchasing a large position in leaps through the purchase of very small positions and spreads.
In the end, if our thesis is the market is likely to top and sustain a correction, then it makes sense to buy spreads anyways because we’re confiding the trade through the time period that we are expecting things to occur.
And if you look at the math, it does track.
Because we bought these spreads at a dollar, even a 6% position could potentially produce a 30% return on the entire portfolio, which is what we would be getting anyways from the leap position after hedging.
In fact, the math showed we would do better with the spreads than we would do in a long lead position due to the loss of sustained on the call side of the trade.
On top of that by limiting the tray to 9 to 12% we have in fact limited our total potential losses to 9 to 12%
So that is one strategy and the basis upon which we set the cap. That cap is set based on us not wanting to take more than a 12% loss on the trade if the QQQ continued to run.
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The September puts were purchased based on an entirely independent goal, it developed a bit after the spread trade and it does serve multiple purposes.
When we bought the September puts the thinking was we would buy a 12.5% position on a 240 K portfolio giving us a hedge ahead of time which would allow us to go long earlier in the correction.
We could start buying at the 8% mark in a correction because we are already hedged 1:1 hedged.
We did the math and came to the conclusion that it’s about 18 total contracts that we need on an expiration that is about a year out in the future
But that doesn’t mean the September puts can’t serve a different purpose at the same time and that is to offset whatever loss we incurred if any at all in the spread trade.
But that is also going to be capped.
And before you ask and to answer the obvious question.
Isn’t buying September puts the same thing as the original trade but unhedged? Isn’t buying the September puts the same exact thing as having bought 2027 leaps as we were originally wanted to do.
No, not at all because it is not even close to the allocation sizes we were talking about. Not even remotely close.
September put position as a 12.5% position that we intend to hold from now until conceivably the end of the year. It isn’t a trade in its own right though it could be. One could conceivably just close it out. And we probably will shave some of it, but it’s not a core position.
Emulating the strategy in reverse, for example, would constitute a $170,000 put position hedged by a 30 K long psotion.
Here we have a 31K put-spread trade that we did as a substitute to a $200,000 total position. The 31K spread essentially allowed us to produce the same return on a $170,000 long put/leaps.
Our September put position is roughly $39,000. Just slightly larger than the put-spread. In total that might rise to.$57,000 but to get to that point it wouldn’t require the QQQ to do something insane like rise to 630 a share on 150 days.
And even then it’s still we’re talking about a total position size between all positions that is 1/3rd the size of the original trade thesis.
And then you have to consider the risk given the current circumstances. The risk on the large lead position that we were putting was substantially higher because the QQQ hadn’t even reached 100 days at that point.
We’re now sitting here at 137 days so we’re talking about 40 days beyond when we were thinking about putting on the leap trade
That means the overall risk today buying leaps today is much much much lower than it was back in July
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But as we also outlined yesterday, even when we look at the overall risk and the overall probabilities there still has to be a hard cap on the entire thesis.
The risk on the September puts resulting in a loss is very very low. That’s because the September puts will quickly recover a full value. Time of correction occurs in the next four months five months six months.
The overall odds that the market will sustain a much larger than 10% correction skyrocket the longer this goes on Chances are between now, and September, the September puts will be far north of whatever value we purchase them at today at some point in the future.
Even in a scenario where the market blasted higher, we would very likely be able to get out of those positions at even.
And even in the absolute irrational, worst case scenario, our portfolio would largely be fine even if the market somehow figured out a way to rally from now until the end of the year, causing the September puts to expire worthless.
We would have to see something that we’ve never seen before or even imagined and would have to be like five times worse than that Like we just don’t have an analog in history where the market decides not to have a correction. The risk we’re talking about here is on the level of zombie apocalypse type risk totally inconceivable black Swan events not black Swan events that one can even foresee. Even in that scenario, we would still largely be up 40%.
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So to answer your question the cap that we have on the spreads developed independently from a separate trade. It was put on the way it was put on in order to limit the potential losses that we would incur, putting on a leap trade hedged. That’s where we got our 9 to 12 cap. It was from the potential downside risk to the leap position. And the spread trades capped our losses to half of what we would have incurred by now in leaps.
The September puts our based on an entirely separate thesis. They are a much smaller position and the risk to the September puts as we’re sitting here above 600 is substantially lower than if we had put on the trade back in August and substantially lower than any spreads we can conceivable you put on right now
That’s why we’re not gonna buy spreads
The September puts skyrocket the probability that we come out of this trade completely unscathed even in a conceivable worst case scenario where the rally goes on to 170 days
Even in that situation, we come out totally whole. The trade is measured and it makes sense straight up.
It makes sense because it can connect as a future hedge, and it makes sense because it can offset losses to a trade that we have on right now.
And quite frankly, it does this without posing any sort of existential risk of the portfolios.
But what we’re not gonna do is add on more spreads when this particular rally has just shown, it’s a willingness to blow through previous records
At 137 days we are 23 days past Covid now and way past what we would normally see in a typical long rally
That information figures into the analysis now.
For example, how do we known this rally as a data point beforehand we probably wouldn’t have put on the spread until much later because we would have a data point telling us 137 day rally has occurred.
And since we don’t have an end point to that yet, it doesn’t make any sense for us to put on any short-term trades at this point.
That is why we’re not gonna sit there and put on another 3% position when we can take a long dated put position and produce a full offset, even if the rally goes on another 60 days.
From the perspective of everything we’ve done in Arryn and Lannister and in Stark, from the perspective of those portfolios, buying the put spreads made sense and buying the September puts right now makes even more sense.
Like overall, when you look at where we’ve come from and what we’ve done in the portfolios the specific caps that we have for the September put and the price points at which we want to enter those trades make sense
For example, we’re not gonna buy 15 more contracts if the QQQ never gets up till 630
There’s no point for us to do that because if the QQQ tops right here and starts to slide well then the November put will do their job and we’re good
It only makes sense for us to increase our exposure if the QQQ decides to go full blown outlier.
It’s also why we waited and then waited and then waited until the QQQ finally got up to 611 to pull the trigger on those September 500 puts.
We’ve made both trades north of 600.
why I do agree with the thesis for a 10% correction and everything to do with the timing, I am not seeing a reasoning behind selling longs and holding shorts. I feel we could do either just go to cash and stay out until a correction or stay in the longs and maybe double up on hedges. Unfortunately I do think the current trades only work in the context of Arryn as it’s basically performed flawlessly and has cash to burn in the worst case scenarios and still be overwhelmingly successful.
@Mercury — this is a good question and a very sound one. Going along and staying along is perfectly valid and it’s one that we normally stick to. But here’s the reasoning. It’s a very good question.
So here is the reasoning. You have to consider what we knew at the time, not what we know now.
You have to look at our decision-making process and the reasoning behind those decisions at the time that we made them with the information we had at the time
Now that we have a rally that lasted as long as this one has it will impact future decision-making based on this data point and it will extend the effect of ceiling on certain parameters or the timing for when we start to take similar measures in the future.
But before this rally, you have to consider the fact that going back to before the financial crisis, no rally has ever lasted more than 114 days when it produced an average return of 0.4% a day.
Believe it or not nearly every rally falls in one of two categories. You can actually put this in a chart and the date points all pool.
Every rally we’ve seen over the past 26 years is either a melt up rally producing 0.2% return per day on average; or it has been a high volatility, rally producing double that at 0.4% per day on average
For every single high volatility rally going back 26 years now, the longest lasting rally was 114 days.
And up until we put on this trade, only a handful of rallies have ever even gone past 100 days
Now let me also add that when looking at every rally going back 25 years, most rallies average about 22% returns
The truly big rallies get to around 30%.
And we’ve had multiple rallies cap at 36%. That’s generally where the extreme outlier rallies end. 36% returns.
In fact, once you get to 36% the odds that you’re gonna see a correction absolutely skyrockets. You can easily see that on the table.
Because the only rallies that have gone past 36% are bear market recovery rallies. The rallies that come right off the lows in a big crash of bear market. Only those rallies really go beyond 36%.
For example, some of the bear market recovery rallies of the early 2000s where the QQQ fell 90% and the SPY fell 60%. Some of those rallies were 40% off the lows.
We had a double dip recession back then and thus we had multiple versions of bear market recovery rallies in the early 2000s.
We had a bear market recovery rally in 2009.
The point is that in a regular bull market rally, 36% returns on the QQQ is generally the cap. One outlier in Covid and this rally is the other outlier
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So that is the information we knew at the time This rally was extraordinary because it pushed into the 40-50% range. That’s way way north of what we normally see in a regular bull market rally.
On top of that, this rally has pushed to the 100 day mark, which again generally results in a correction.
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So to answer your question:
If every time we reach 100 days, we take the same actions that we took here, we are generally going to add several magnitudes of higher return rates then if we do nothing or add hedges.
We did add hedges by the way, and it took the market getting to extremes before we were forced to close positions due to our covered call sales.
And notice we didn’t close positions we sold covered calls that if the market reached crazy extremes would result in us having to close those positions.
Noticed that the QQQ had to make a new record. The rally had to last longer than any previous rally like it in order for us to get called out of the position.
And we should definitely do that every single time we are confronted with such scenarios because in most cases those covered calls expired worthless. We don’t get extreme market conditions like this every time there’s a rally. these are rare conditions.
But getting back to answering your question. In 80 to 90% of rallies, we don’t ever get to this point where we’re removing positions and then adding these small short positions and things like that. This almost never happens.
In most cases we’re gonna be long the entire rally we will have hedges. We may add a little bit to the hedges, and then we’ll sustain a correction holding our long positions through the correction Just as we did back in April we were holding our long positions through that entire correction
But when the market gives an incredibly high probability set up, we have to take the set up, even if it means that we might end up not producing on the set up. It doesn’t change the way we should do things every time we’re confronted with a 100 day rally.
And here’s why. here’s the reason why.
If things played out the way, they normally play out in 90% of cases like this, we end up pushing Arrny from 240 up till like 340k at the bottom of the correction.
And if we go along at 340 K at the bottom of the correction we’re setting up to reach 680 to 700 K by your end. That’s 700% returns in two years. That’s what was at stake.
We would have made insane amounts of money which we would’ve been able to take and go long with at the bottom of a correction.
And not only that, let’s consider the downside to all of this. Because even right now it’s a minimal.
The most likely outcome here is that we don’t gain the benefit and we lose nothing. If the market peaks today, if it peaks next week, the peaks the week after that even we will end up at worst flat on the entire transaction. Meaning we were called out of our positions effectively at 560 and we will simply be able to buy back at 5:60. We will have gained nothing. We have lost nothing.
That’s gonna be the most likely outcome, even after all of these extreme situations play out.
Even with the rally going to 137 days, there’s still a very very high chance that in the end we’re going to close out positions and our portfolio will be north of 240 or even higher than that
So we will just be in the same position we were in when we closed out positions
Essentially, in the end, didn’t really take on any risk because we lost nothing but we gained nothing either.
If we’re getting along again with 240,000 in cash at 560 a share on the QQQ well that’s exactly where we were at to begin with when we closed out of our positions
So we will have been able to potentially create a ton of value and the downside, risk or loss will have been zero
And if you take two portfolios, one that never takes these actions and one that always takes these actions, the portfolio that always takes these actions at 100 days is gonna come out way way way ahead
We’re probably talking about hundreds and hundreds of percentage points higher than the other portfolio. Because in one of these corrections, we’re going to close at the top have a small short position that skyrocket the portfolio and then we will be able to get long at the lows.
The key here is that we’re only making these adjustments are truly outlier situations
Like we’re not doing any of this early we’re talking about 100 day rallies here
Sure if someone started taking these measures at day 50 then of course they’re gonna get screwed in the future because they’re gonna miss out on so many other rallies.
For this rally, we are out at 40% which is north of extreme parameters of 36%.
When you look at our exit on the QQ, it’s at 560 a share which is 40% higher from its lows. 160/400=40%
Now take a look at the NASDAQ-100 tables and note the number of times the QQQ has ever produced a 40% return. And more specifically consider the number of times the QQQ has produced a 40% return when it wasn’t a bear market recovery rally. There are two events in 26 years and this is one of them.
The APEC Summit is coming up in two weeks, and the Q3 earnings season is right around the corner. After earnings, we’ll head into Thanksgiving and the usual Santa rally. The market still has plenty of excuses to push even higher. I think we could possibly see QQQ reaching $670 or even touching $715 by the end of December. This is AI super cycle is just unbelievable.
They said 4 was the max segments, 5 was super rare… Here we are 7 segments
I know
conclusion : i dont disagree we are at top, but this consolidation/slow grind up has potential to go for a while.
AGREE
https://www.reddit.com/r/investing/comments/1o9oqqn/if_everyones_expecting_a_correction_doesnt_that/
Curious what you think about the point this redditor made:
“If everyone’s expecting a correction, doesn’t that mean it’s not coming soon?
There’s a lot of talk right now about markets being overvalued and a correction being “inevitable.” But if that’s the general sentiment, doesn’t that actually reduce the odds of it happening soon?
Think about it, if investors, portfolio managers, and allocators are all expecting a correction, wouldn’t they already be positioned defensively?
That would mean less aggressive buying, maybe more cash on the sidelines, and generally lower risk exposure. If that’s the case, it feels like the correction might already be “priced in” to some extent.“
QQQ crashing 0.05% right now. Correction priced in, Fear and greed index at the 30, is this the “Buy the dip” signal??
If you knew a correction was coming would you hold your assets or take (what are at this point) massive profits knowing you can reenter at a lower price?
I don’t know how much I buy into that idea because that’s always true at every top and every bottom.
Like it’s not gonna stop the inevitable
If a whole bunch of people expect something to occur at a very specific moment in time, then sure
For example, if we go going into an earnings report with everyone expecting the market to go higher on the earnings report, maybe they pull the rug out
But when we’re talking about things like the market topping or the market bottoming, the market could fool people by delaying things a little bit, but it’s not going to just completely avoid having a correction or completely avoid bottoming in a correction just because everyone expects it
Otherwise, we would never have corrections and we would never have bottoms when corrections occurred
And that’s especially the case in corrections because when market sell off, they only sell off for a very short period of time and everyone starts to think we’re close to a bottom.
But you have to consider the fact that every time or really runs to 100 days everyone paying close attention is probably thinking that we’re nearing the top and they’re generally right a good 97% of the time.
The idea that the market tries to do the opposite of when everyone expects is totally true. That idea has been around forever, but it’s just not tenable to think that the market is not going to sustain a correction because everybody thinks one is coming.
Also, there’s a very good reason that corrections happen.
Without a correction, you don’t get opportunity and people on the sidelines with cash don’t step in and buy when things are expensive
Some people do this but a lot of cash that is sitting on the sidelines isn’t gonna step in and buy Nvidia $180 when the stock hasn’t pulled back in over 100 points of upside now
Corrections create opportunity and that’s what brings cashing off the sidelines and get a rallies going
Furthermore, you have a lot of built-in profits in the market that at some point need to be taken.
For everyone who bought back in April and are still holding positions when they start to see the market slide, they’re gonna be more inclined to wanna preserve some of those profits
And the more the market slides, the more the urgency to take profits takes over
That’s why we always have corrections within a certain time as we’ve outlined in our tables.
26 years of a trend is in a coincidence. When looking at the 59 times the market has risen in value all 59 of those rallies ended by 151 days at the latest.
When looking at those rallies from the perspective of periods of time where the market has risen rapidly at a pace of nearly half a percent a day those have ended by 114 days with the current rally being the sole exception at 137 days now.
Can the market delay things for a while, sure. But just consider that we don’t have any exceptions going back to the 1990s. These are the time periods.
And it’s important to point out that the market has made at least five attempts to go further than 140 days
Those all ended between 140 and 151 days
And these attempts all occurred at different periods of time. For example, the longest rally took place between July 2006 and when Apple introduced the iPhone in 2007. That 151 day rally ended in a correction and then later on in the 2000 tens we had multiple 140 day attempts.
The point is that this rally is already unique in the sense that it’s a high volatility rally that has lasted almost as long as melt up rallies have lasted, but every rally before it came to an end within the next 2 1/2 weeks.
Here’s another way to think about this. The general idea of “ everyone is expecting a correction therefore it is not gonna happen,” has probably been expressed or uttered multiple times ahead of every correction in the past, and that didn’t stop any of those corrections from occurring
very helpful thx ????
QQQ wants to run!
QQQ wants to run near yhod
oil up!
I have no idea what’s going on but it almost seems like we’re back to the market creeping upwards.
We had a selloff and a week of volatility and now it seems to just move on…,
Add to the list of oddities. I even went back and looked and it has happened an extremely rare circumstance. I think we’ve only seen one or two instances where the QQQ has ever dropped heavily in one day and then just brushed it off. One time was during the Covid rally in the middle of the rally.
And almost every time it occurred, we saw a at least a slightly lower low. At some point, the market went lower than that crazy down day.
Here the QQQ closed at its lows the Friday before last and then went on to make no new lows. Very very strange.
Especially with the big reversal off of fresh all-time highs.
You don’t get any better evidence than that that’s as high as it gets.
The feeling I get is this rally isn’t going to end without a fight that’s the sense. I’m getting seeing what the markets doing right now it’s not going to end on a big reversal and then just slide.
A big reason for the rebound to all-time highs again is probably because we’re going into earning season. And it’s not a typical for the market to make new highs in a rally or new Lowe’s in a correction when we’re about to enter earning season.
Just like earnings season can end the correction it can also start one
It’s really hard to know what to make of this with the rally sitting here at 130 days officially and 137 days unofficially
All I know is if it makes new highs it’s officially a full-blown outlier in every sense of the term
I thought you called the correction starting a week ago? QQQ no new highs, did SPX?
I need one!!!
:BLUE BALL:
QQQ nlod
QQQ bounced off low
QQQ nlod
SPX also defended critical 6700
QQQ wow!
Is this phase we had for the last 3 months where the QQQ basically crept up at a snails pace/ meltup pace unusual? I mean it almost feels like a huge consolidation period..
Also has the QQQ ever been overbought for this long on the daily/weekly? Or not corrected for so long after it was overbought?
Another day another blue balls like smiley says, the rally has silenced Sam
NVDA Puts are cooked
The balls are bursting! Blown spreads! Blown puts!
This is annoying and starting to to feel disrespectful
You’re missing the point, exit ramp has been missed so many times. There is nothing wrong with a small loss or breakeven to get out of a trade, take a breather and reset. Keep time on your side absolutely no reason to be taking these options up to exp like this.
We did it in NVDA spreads, I am not mad just pointing a lot of inconsistencies. If nothing is challenged, no one learns. These things should be challenged, parameters set and only deviated from on rare occasions. I don’t disagree with any of the ways the portfolio has deviated, just pointing this out there.
Smiley started the blue balls, btw. Just riding his train.
Agreed. I can appreciate the blue ball humor since we’re all anxiously waiting for QQQ to finally roll over despite us having been faked out 3 times now. I can also appreciate the clown reference related to holding these put positions when the market is showing insane strength and resilience. However, the “clown suit at wise-clown.com” is a bit much and perhaps insulting to Sam. I think we’re all in the same boat here and it is frustrating but jabbing at Sam won’t help the situation.
I am not directing anything toward Sam, I really appreciate his analysis, like I said just riding the Smiley train and to be fair, Sam was DieselCock so I think Blue Balls is fair game. A Diesel Cock should be able to handle that, and Joey doesn’t need to be so soft.
new name I love it!