Samwise Model Portfolios
The portfolios below are separated by launch dates. Each portfolio is entirely independent and has no bearing on any other model portfolio. We launch entirely new portfolios during each market correction as an illustrative tool for new subscribers who weren't present during...
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Hi Sam, I don’t think I’ve got the put trade alert yesterday, luckily I just bought the put to hedge. Do I need to sign up for trade alerts specifically even though I’m a Pro member ?
At the bottom of every blog post, there’s a sign up link/banner to “get trade alerts.” When you put in your info in that link, you have to confirm you want to receive emails by clicking on the email confirmation link. It’s called double opt-in for compliance with anti-spam legislation. So it’s possible the email confirmation link went to your spam inbox or you may have overlooked it. Just make sure to click the link in the email to confirm.
Trade alerts are currently limited to email. But we’ll soon be offering text alerts.
Can you explain how you came about the strike prices of 85 and 450 for your hedges?
I too would be interested to know this. I appreciate you breaking down the double benefit of offsetting a sudden unexpected loss, but also taking that preserved capital and then investing it at such a favorable price. It makes one wonder why everyone doesn’t use options this way.
This is the main way professional traders and hedge funds hedge their equity positions. It’s a very common strategy.
That process is complicated. First you need to figure out how much capital you’ll want to allocate toward insuring your position. Then you need to look at your share count. Each contract protects against 100 shares. After that you need to think about whether you want to over or under hedge. If you have 330 shares, you’ll need to buy either 3 or 4 contracts.
If you have only $2,000 to use on hedging, that means the contract price can’t cost more than $5-6.50 per contract.
Then you need to ask how much downside you want to protect against and run various hypotheticals.
What happens if the stock drops 50% sometime between now and next October. What happens to your options, what happens to the puts you want to buy.
We picked December expiration because we want protection for the entire year. December 2025 options do that.
There’s not really a single formula that works here. For Nvidia we picked $85 because those were the most reasonably priced options. Also, it allows us to protect the portfolio against more than 20% downside. Being long at $100 means if Nvidia falls to $80, we’re down 20%. If it falls under $80, we start to make money for every point Nvidia falls thereafter.
With the QQQ we arrived at the $450 puts because those puts begin to protect downside beginning at $427. Having averaged in at $463, it limits the portfolios losses to 10% or the average amount of a correction.
So I guess the big thing we want to look at when considering options is how much downside loss is acceptable and then consider different options from there.
So you want to start there.
Hi Sam: for Nvidia, how much deep into the overbought territory do you foresee a short-term 7-10 points pullback? Or does the current pattern indicate straight up to your expected $150-160 range? Thank you very much.
Hi. We’ll for sure see a pull-back sometime soon. It won’t go straight up to $150-$160. That’s the multi-month goal. So I expect $150-$160 as we head into January. Between now and then, we should see some volatility.
It’s possible we could see a big move going into earnings and then after earnings. It’s possible we could see $150-$160 in December (after earnings). But our expectation is run to $150-$160 by January.
Between now and January, there will be a lot of pullbacks and rallies. We expect $7-$10 very soon. Nvidia has pushed into overbought three times now in the last few weeks.
Thank you for the kind reply!