Samwise Quick Reference Handbook
To streamline our daily blogs and conserve space, we’ve organized key resources into a convenient, collapsible dropdown menu below. A sort of Quick Reference Handbook if you will -- as our friends in aviation might call it. By clicking the menu below, you’ll have qu...
Please login to view this page.
Hey Sam,
How do you feel about the QQQ 500 call for Jan 2027 in the Stark portfolio? It seems like yesterday was pretty brutal to it. QQQ ended up flat but the call took a 5% hit. How will all this volatility affect it?
So as long-term positions are concerned, I wouldn’t get too bogged down on the day to day action at all. We own that position because we believe the QQQ will be north of $600 come 2027. We’re talking almost 2-years into the future here.
At $600+ that option will be worth $110-$115. That’s why we own that position. When the QQQ ultimately bottoms and then goes on a run, that option will fully revalue.
Stark positions are ultra long-term time-horizon positions hedged by the QQQ puts. If the QQQ decides to go into a bear market, those puts will perform and offset a substantial portion of the loss.
Let me illustrate. Suppose the QQQ falls to $380 a share for example in a bear market. That’s a 29.6% drop. Not atypical for a bear market. Even on the small side.
Suppose that happens.
Our January 2026 $500 puts would trade up to around $130 a contract x 2 contracts or about $26,000.00.
The January 2027 $500 calls — having tremendous time value — would likely trade at around $17 depending on the time and volatility At 7 contracts, the’d be at around $12,000 puting us at around $38k. We’d be down a bit, but not relative to the massive drop in the QQQ and the opportunity gained.
with a drop down to $380 — 30% drop — we’d be able to close out our $40k worth of positions and buy new positions in the QQQ 2028 $400 calls at a very discounted price that ultimately will probably be wroth $200 on bear market recovery.
The key is that we’re well hedged to protect stark in a bear market and we’d likely come out ahead when all is said and done on stark given the ability to buy at a huge discount.
On the flip side, if this is just a standard correction and the market makes a move back toward the highs, the QQQ calls are going to perform.
If the QQQ rallies to $600 within the next 9-12 months as expected, those calls will end up being worth $110-$115 a contract up 50% from where we bought it.
Thank you for the detailed response
Persistent negative sentiment, relatively low VIX (and high NYMO), rebounds that miss their usual criteria : this also looks like a melt-down market such as 1973-1975 don’t you think?
Nothing unusual yet about this market. The $NYMO is actually very very low compared to previous corrections. We haven’t even seen the $NYMO get anywhere near the oversold line at 80 or extremes like we normally see in a sharp sell-off.
Sentiment is very mild compared to other environments we’ve seen. That’s reflected in the $VIX. Sentiment among retail investors is always going to be ultra “the sky is falling” negative on even a 3% pull-back. But normal market sentiment is on the low end of the curve compared to all previous corrections I’ve seen.
Everything is still within norms. There’s nothing about this correction that puts it at the top or bottom of the list just yet. It’s getting close on some metrics. But it doesn’t own any records. And I’ve been in correction that own records. You can imagine the “this time is different” arguments when a record is set. 2018 was a big “this time is different” correction with records.
So far this just looks like a standard one big leg down, smaller rebound with a smaller 2nd leg down correction. I think this leg will ultimately be way way smaller than the first and it will ultimately lead to a full recovery in the market.
Tariffs alone simply isn’t enough to push the U.S. into a full blown recession or back into full blown inflation. The impact is too small. Once everyone’s comes to terms with that reality, we rally.
Hi Sam, would you be able to respond to my question yesterday when you have a chance? Relates to risk of bear market because sentiment is not only due to tariffs but also to consumer slow down in spending, slow down in hiring, etc. Thanks!
If you’re worried about a bear market coming, the truth is, no one can truly predict it. We will simply know once we’re there.
There simply is no discernable pattern in the limited amount of data that we have, and our best hedge against it is the same overbought and oversold cycles that we either buy or hedge into.
Remember, our bias is on the data, not the news.
Jesse is right on the mark across the board.
As we’ve outlined throughout the site a bear market shouldn’t keep anyone out of the market. Otherwise you’ll just miss one bull market after another. The risk is persistently to the upside.
Furthermore, there is no definitive way to be able to forecast a bear market and when they occur, you don’t even realize you’re in one until the NASDAQ 100 is down more than 20%
And even then, Bear markets look exactly the same as corrections and follow all of the same indicators
So the way to address a bear market is to purchase a hedge as we’ve done in all of our long-term portfolios
The hedge remains in place until the NASDAQ 100 has fallen 30%.
At that point, we would close all of our positions and reposition into all new long positions.
During a bear market rally, we would then buy new hedges and hold those new positions long-term
With that being said, the potential of a bear market happening should be viewed as risk.
At any given moment in time, the risk of a bear market happening could be very high or very low.
A bear market is at the lowest risk of happening during the year after the market has bottomed.
That is because bear markets occur only once every seven years on average
The time between the last two bear markets was nearly 14 years
The 2008 financial crisis and the 2022 bear market.
Overall, at the current moment, the risk of a bear market is actually quite low because we only just came out of a bear market only two years ago
However, since the stock market has gone up pretty dramatically in that time, we are at risk of a substantial correction. At this point, we already have had a quite substantial correction at 15%.
In fact, we’ve had two back-to-back major corrections now that have exceeded 15% each
When looking at fundamental factors, it is very difficult if not nearly impossible to forecast a bear market.
Looking at things like consumer spending, employment, consumer confidence can be extremely deceiving
The best indicator is the business cycle or the general bull bear cycle.
Generally, speaking once the stock market has rallied about 50% above it’s previous bull market highs that’s when the risk of a bear market really takes off
Notice the QQQ has only risen about 30% above its previous highs.
The last bull market peak was at $408 a share on the QQQ.
The QQQ only reached 540 at the peak of ahead of this correction.
It’s simply too early in terms of both time and scope.
The biggest overall risk right now in my opinion is the huge complex topping pattern we see on the NASDAQ 100.
That top looks very similar to the top we had in 2022. The second largest piece of evidence is valuations. The S&P 500 P/E ratio is too high and has been for a very long time.
Yet that second piece of evidence doesn’t really have a timing element attached to it.
All it really says is that the market is due to be revalued at some point in the next 10 years.
There’s no consistent time horizon for the stock market to undergo PE contraction. And some might argue that a persistently high PE ratio is warranted given the current growth environment.
I can tell you that there’s nothing about this particular correction thus far that tells us we were in a bear market.
And in fact, I would even venture to say that every previous bear market started a lot more aggressively.
We’re talking way more aggressive. This actually makes for a pretty good study.
I’ll go back and look and apply it to today and you could see what I mean.
But I can’t remember a single bar market that didn’t start with a huge first leg down with massive volatility, and $NYMO going deeply oversold.
I’ll come back around and post about it
What do you mean by risk because of topping pattern? Risk of a larger corrective period or lower lows in the next months or so?
Sam: If just getting setup for options trading should I try to match the prices you have bought at in the past, or just start buying options going forward from here? As an example Nvdl is down to 37.80 as we speak which is lower than I think all the buy in points currently in the portfolios?
2nd: do you have a preferred brokerage for options trading? vanguard, fidelity, robinhood, tastytrade etc?
So these are the precise types of question that I’m not permitted to answer. All we can do is run our model portfolios and outline our expectations for the market.
Are we waiting to get through tomorrow to address our NVDA $140 4/17/2025 sold calls, as the date approaches? Looks like they are fully valued?
So those calls are unlikely to recover. We’re not going to cover those calls. We’ll let them expire. The $125’s we could potentially still get value from those depending on timing. If the market starts to rally here soon, we could easily see Nvidia pushing past $120 with time reaming which will create value in the $125’s. The $140’s are not going to recover so no need to cover them or pay transaction costs to do so. We’re not going to cover them.
Sam do you still see $118 coming back or is $115 the new exit range with the drop yesterday to $103?
So we’re not going to exit those July contracts unless Nvidia rebounds to $115 in the very near-term. That’s because I believe the market is trading near its ultimate lows right now.
So on an intermediate-term basis, Nvidia is also probably trading at the extreme low end of its ultimate range. As the overall correction is concerned, I think what we saw this week will ultimately prove to be the lows or close to it.
Hi Sam, briefing it’s not working on android platform. Bests
Working on a solution.
Excited for this liberation day to be over with