Samwise Quick Reference Handbook
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The plan is to go unhedged and transition long if QQQ reaches $487, then buy new hedges on the snapback rally?
SPX could be a disaster waiting to happen since it fell thru 6700
VIX is also getting close to 20
No. Here’s precisely what we’re going to do in Arryn et al. In the correction, Arryn probably reaches right around $260,000 maybe higher due to the September 2026 puts rising in value.
We will reduce our September puts to be in 1-to-1 contract ratio with whatever calls we buy. probably the June 2027 $550 leaps.
We have 25 contracts in the September puts right now. We probably shave that down to 20 contracts if we don’t buy back Nvidia. We probably shave that down to 15-17 contracts if we do buy Nvidia leaps.
We then buy 15-17 contracts long the QQQ. And we plan to do this at around the 8-10% mark in the correction i.e. $560-$550 a share on the QQQ.
If the QQQ rolls over from there down to the low $500’s or $487 gap reaching a 20-RSi in the process, we’ll likely close out the September puts and use the capital toward dollar cost-averaging the long leaps. After the QQQ inevitably bounces to $550, we get long the puts again.
If the QQQ enters a bear market by subsequently going lower down to $450 or whatever, the process continues. We just do the same thing. Sell the puts, add to longs, wait for the bounce etc. This works all the way down to $0.00 on the QQQ.
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Notice we can ONLY do ANY of this because we bought the September’s ahead of time. Without buying the September’s ahead of time, we CANNOT confidently just buy at -10% on the QQQ because unless the QQQ is deeply oversold, there’s no guarantee it’s going to immediately bottom or rebound at all.
That means without the hedge, we hae to assume either existential levels of capital risk or pretty existential levels of opportunity risk. That’s the reality. Hence why the September puts are imperative to the strategy.
And FYI, if we only went long the QQQ, it’s a $220k long position which would be 25 contracts. Meaning, it’s conceivable that we don’t even shave the Sep puts. We may have just the exact number of contracts to fully hedge a full QQQ position. At MOST, roughly 85% of that Sep put is all hedge related. Meaning, we may hold that to expiration with no expectation of ever actually profiting on them at all. It’s possible..
We can get down to -10%, get long and the QQQ might rally. And just like the March 2026 puts which now trade at $2.23, that can very easily happen here. We can end up just holding these September’s all next year.
More than likely, in that scenario, we’d be holding them until the next correction and closing them out then. So QQQ drops to $550, bottoms, rallies to $700 by March/April, peaks and falls to $610, we sell them. That’s how it could easily go.
At 480 the value of the puts might exceed the calls.
They would. Just like we saw last time in April. We sold some of our hedges at $90 a contract that we had bought at $15. They went up like 400%.
They’d very likely outstrip the calls. Then we close out the puts and buy the calls.
This is why hedging ahead of time is imperative. It’s not just an advantage. It’s imperative to ensure we can comfortably go long and accept a potential roll over down to $480.
What would you say the odds are for each of the three likely outcomes? Not necessarily in terms of exact odds, but like are they all equally likely, or are some outcomes more likely than the others?
Really hard to say. If I had to guess, if the QQQ gets down to $590, I don’t think it’s going to rebound again. I think it’s going to crash.
If it goes all the way back down to $590 after having gone all the way back up to $613 again, it’s probably just going to collapse.
That would be my guess. I don’t think we get a head & shoulders. You just have to think about sentiment and momentum at that point. If the QQQ gets down to $590 against the sentiment is going to be very negative.
If the QQQ goes back under $600 again, it will be very negative. Like I don’t get how anyone could trust that the QQQ will get back up to $610 again, if it falls under $600 and closes at $597 or something like that. THat’s very very negative.
Agree 100%
will Tesla earning call impact this?
Yes. Very much so. A positive Tesla earnings report can drive an oversold bounce. A negative report can send us right into a correction immediately.
And when I say positive/negative, I mean market reaction. The way the market reacts is all that is important. The contents of the report itself doesn’t really matter at all.
Let’s see what market thinks of Tesla
TSLA earnings miss. We’ll see if it bounces back after the event.
Any thoughts on how the market is reacting to this?
Looks like we’re getting the highly anticipated oversold bounce on QQQ.
It’s muted reaction. Slghtly negative. Not enough to do anyting market-related. We’d need to see Tesla up/down 10% for the market to be impacted.
Regarding the put spread exp 10/31; at this point makes absolutely 0 sense to hold it if there is any chance of an exit at the $590 mark. Just putting this out there, the numbers are what they are the bottom line is anytime this week to $590 they are worth probably 50 cents
The argument that the QQQ could still go to $550 in short order, doesn’t stand. The Nov 21 560/550 spread will take care of that.
If at any point between now and exp the QQQ touches $550 those are worth at least $5
VIX key level 20; QQQ nlod; SPX nearing 6650 ouch, seeing a lot of risk right now
Hey, what do you mean by we are timed perfectly for Nov21? If it follows what timeline?
If we don’t make new highs we would already be 10 days into the correction, so I don’t know if we’ll have a longer one this time, but we certainly won’t have 80% drop in the first 10 trading days unfortunately
So a few different things are going on here.
The way we count “correction days” in the data sets that you see in teh NASDAQ tables is from the absolute peak to the absolute trough.
So you’re right. Unless the QQQ makes a new high at some point, this is all technical part of the next correction. For example, suppose the QQQ were to have continued selling off yesterday and we started to roll over and eventyally pushed to down -10%. The correction will have started 10-days as indicated. When we input it in the table, the rally will have ended at day 130 and we’d mark Friday before last as the top.
So that’s one thing going on. The other point smily is making is right too. When the selling actually gets going. Meaning, once we actually start to see the market slide, most of the selling happens within 7-10 days.
From the moment the market starts to actually slide to the lows, we generally see MOST of the correction completed within 8-10 days.
That’s why we mentioned yesterday that at the moment, it’s timed out well because of the number of days to November and the tendency for the market to complete most of hte selling within 7-10 days of acutally rolling over.
Many of the corrections you see in the table have 10-days or 15-days of consolidation built in because they may have unfolded with the market making its last high 10-15 days before actually rolling over.
Sometimes — as in the case of April — the market makes a new high on the very day the correction started.
If the market had not made a new high in February just before it started rolling over, the Feb – April corrections Ould have read 78 days or something like that. Because it would have included the entire consolidation period. instead, the consolidation period was added to the rally since the rally made new highs in February. That’s why the sep rally lasted 111-days and the April correction 36 days. It could have been September rally lasted 80-days and April correction 77 or something like that.
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Now the timing we discussed yesterday was based off of the double-top set-up we had yesterday.
Hi Sam,
Just wanted to make sure I fully understand the role of the future hedges and their importance in this specific situation and perhaps to the overall Sam Weiss strategy.
Question
How broadly can this future hedge purchasing strategy be applied?
Here is my understanding and perhaps you can correct me:
We’ve opted to purchase the future hedges ahead of time for this upcoming correction because of two reasons: 1) the outlier nature of the current rally AND 2) the expectation the upcoming correction will be significant.
However, it sounds like this would only make sense if both criteria were met. If the current rally was less extreme and more “normal”, we wouldn’t have enough confidence we’re purchasing the future hedges near the top. Additionally, if our expectation for the next correction was on the smaller side we wouldn’t feel the need to hedge out the risk of the QQQ dropping past the 10% mark. Although, I guess we could never know how big the upcoming correction will be so I’m not sure how you would make the decision to purchase the future hedges based on the second criteria.
Anyways, this is the first time we’re purchasing our hedges ahead of time so I want to internalize how applicable this is for future rallies.
Thanks again for the in-depth analysis, learning new things every day!
It’s probably very very rarely going to happen. Here’s why.
The most IMPORTANT element is that we’re in cash. That’s only going to happen in situations where we sold covered calls and the market set some type of new record in the rally. Which is an extremely rare set of circumstances. It’s very unlikely to happen again anytime in the near future. It could, but very unlikely we see it within the next decade.
So it’s not very applicable. As we mentioned in the post, the very reason we need to buy the hedge ahead of time is so we could get long again comfortably without having to worry about whether we’re firmly at a bottom.
For example, when the QQQ has dropped 8-10%, we need to get long whether the QQQ is deeply oversold or not.
Doing so unhedged opens up the possibility that our position can easily go down 30-40% very quickly — as we saw in April. And the only thing that saved the portfolios in April is that the hedge ended up skyrocketing 400% to off-set the losses on the calls. The value of hte puts eventually crossed the values of the calls making us net short the QQQ at around right $450. The portfolios went UP in value on the drop from $450 down to $400 if you remember at all.
So the hedge ahead of time ensures we can get long at -10% and not have to worry about the QQQ rolling over on us.
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We then answered the question, why not just hedge when we go long? We explained that hte price differential is too great to do so. We’d need our leaps to rise by 50% just to make a profit. So it doesn’t work. We have to hedge at a higher price than where we go long..
KEY POINT: Now here’s a point I didn’t talk about but is still worth mentioning. Here’s why buying the hedge up here is likely a very very low risk set-up.
Suppose the QQQ breaks out from here. It rallies to $640-$650 a share even. Even if that happens, it’s eventyally going to sustain a correction. At some point, it will crash as we’ve seen in the dot-com, covid and in 100% of past rallies.
The QQQ can go up to $650 and we’d still be in a position where we can close out hte September profitable or at even. Worst case, the market moves higher, tops, sustains a correction dn we can exit them anyways.
That scenario would just complicate things for us because we’d also need to go long and we may not have the protection to do so. I t would be the same as whenever we launch a new portfolio. We’d have to get back in very carefully. We might go half long and wait. Things like that.
That’s the risk of buying the hedge here between $600 and $613. If the QQQ breaks out, we’d have to wait until the next correction to then exit the position and we’d end up basically without a hedge ahead of time. That’s the main risk here. Risk of loss on Sep puts is very minimal due to the fact that the market is bound to correct 10% and soon with the rally now approaching 140-days.
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But to answer your question, in terms of applicability, it’s applicable but under extremely rare circumstances. In most cases, when we’re long, we’d be selling covered calls that are most likely to expire worthless — just as we did back ahead of the Feb-April correction — and in most cases, we’re simply adding to our hedges against our long position as the QQQ climbs.
We then hold our longs thorugh the correction with hedge off-setting. Then at the bottom of the correction, we’re dumping the hedge at least for a short period of time until the QQQ bounces at which point, we add it back on.
The situation of buying hedges ahead of time is only applicable to the current market where the QQQ decided to rally 140-days in a high vol environment. Extremely rare. Applicable but only to these types of situations which almost never occur.
does the rebound from 599.9 signify anything technically?
i remember you saying if qqq ever to head towards 630, it needs to retest 600 resistance first
It’s just another test of support that held. Also, there was Monday’s gap that needed to be filled and the QQQ was nearing overbought.
TSLA 418 -20
QQQ 605
VIX 19
boring so far
QQQ nhod
QQQ weak at 608 sliding
QQQ nhod