Samwise Quick Reference Handbook
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@Sam, wouldn’t it make sense to to just roll all put positions further out to Oct or at least end of Sep?
That way, we could still just play the end result, i.e. the correction bottom or at least the first 8% of the QQQ downward movement, instead of worrying about ultra short-term trading of oversold conditions, which should get ignored soon once the correction starts for good and would leave us sidelined.
It could be worth it. We might very well do this. I’m considering rolling Nviida and the Sep 30 puts forward and putting extra capital. And then using extra capital to add to the $550-$540 Oct put-spread.
So we might go down this line.
Thoughts on buying puts now for a new portfolio instead of waiting for a rebound post correction since we’re at extremes? They’d be cheaper right?
Not really shorting tge market, recall that those are long term puts and they’re sized only for major crashes.
Actually Sam pondered this idea before, for Stark, a few months ago.
I’d be buying them as a hedge in anticipation of buying calls at the lows of the correction. Just wondering because I probably could get them for a cheaper price if I buy them now. Seems like it would make sense since the rally can stop any day now.
Although I do see the market making a last big jump if the fed cuts rates on Sept 17, I don’t think it’s fully priced in yet but i’m not too sure.
Hello Sam, I think Broadcom’s potential is significant. Can you also incorporate it into your analysis and explain why you preferred NVIDIA?
At this point, we probably have to either just eat the loss with the NVDA puts or roll out. Not much time left.
We’re not going to roll because it’s not worth it. They’re too cheap to roll. If we roll, to get the same impact would require us to put up some extra money. Which might be worth it. I’ll have to take a look at the difference in values. If there’s not a huge gap between next Friday and the ensuing Friday, it may be worth rolling.
Especially because I do think Nvidia is going to sell-off really hard if the QQQ starts correcting. I think we see Nvidia easily fall under $150 very very fast.
The price differential matters. If it’s too expensive, then not worth it as that capital can be deployed elsewhere. If it’s a marginal increase in cost, it could be because that 1 extra week can end up making all the difference.
Still, in the end, I view the Nvidia trade, the Sep $530-$520 trade and the Oct $550-$540 trade as all one trade. And I think the Oct $550-$540 is going to carry the day. I think the Oct $550-$540 is going to both fully off-set the losses sustained in the Nvidia & QQQ Sep 30 put-spread trades AND it will be able still produce a huge profit on top of that.
That’s because right now sideways trading is helping the October trade big-time.If the QQQ trades sideways one more week and then unravels, then there’s a high probability the QQQ $550-$540’s go to $8.00 when fully in the money due to there being not much time left until expiration .
There’s a point where hte timing is perfect. And we’re getting close to that point for the Oct $550-$540.
The best case for us would be that spread going to $8 when fully in the money with time remaining.
Meaning, suppose there’s 3-weeks left and the QQQ is trading at $536. We want the $550-$540’s trading at $8+ at that point. Whereas if there’s 3-month left, they might only trade at $4-$5.
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So right now, the Sep 26 Nvidia $150 puts trade at $0.62. We’d have to pay up for the extra week by allocating an extra $120.00. That’s kinda marginal. We get an extra 5-days with $120. It could result in the entire trade pushing up to $5.00 or $1000. So it could be worth it to roll. The October 3 is a full $1.00 which requires a $200 investment for 10 extra days. That’s starting to get a little pricey.
Still, during a full correction, Nvidia is likely to drop $130-$140 a share. Meaning, the $150’s could easily go to $10-$20 and essentially paying $1.00 here. So it could be worth it.
We’l think about it.
Technically this (the date of the article, not the date of this comment) would be consolidation day 26. The day before was also 25
You’re right. Today is day 27 of consolidation.
“If we would have hung out $580 this morning until 10:30 AM (EST) we probably would have added to our October put-spread.”
Well, it does hang around $580 now. Did the perspective change since last Friday or why the hold-up on an additional trade?
I’m guessing it’s because $580 represented overbought on Friday more than the $580 number itself (which isn’t quite overbought today, so maybe there’s a little more room to run before the next potential pullback)
Yeah, makes sense – thank you 🙂
^This is correct. The QQQ isn’t overbought yet. It making a second push into overbought, but it hasn’t quite gotten there yet. We saw that recently as well. In fact, the recent rebound before last hit overbought three time before we saw a 4% pull-back.
So we might just be seeing that play out here. We’re just approaching it cautiously. There’s only so much we can put into this. We’re capping our trade at 12%. We’re not going to go any higher than that. So we need to be very careful where we put on those trades or the entire trade fails.
For Baratheon,/Targaryen, we only have one more allocation here. So we have to be extra careful.
With both Baratheon and Targaryen, I feel confident that the October $550-$540’s will ultimately carry the entire trade in the end, When all is said and done, I expect that the profits derived from the $550-$540 October put-spread will currently outstrip the losses sustained in the Nivdia trade and in the Sep $530-$520 put-spread.
That’s because any correction that happens from here, is likely to push the $550-$540’s up to $7-$8.00. Breakeven with both Nvidia trade and Sep trade going to $0.00 is $4.70 on the October put-spread. So we could still very easily end up with 70% gains overall across ll three trades with Nvidia and the Sep puts failing completely.
Thus, we have to be very careful where we add that last trade in Baratheon/Targaryen becuase it could mean a huge difference in the end. If we double up on the $550-$540’s we could up with massive returns. We just have to do it at the right time.