Samwise Quick Reference Handbook
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Thanks for the analysis, Sam! More of a rhetorical statement than anything but with QQQ finally sitting at 597 range, is the heavy sell off finally happening or will we get faked out by QQQ again? QQQ is definitely looking weak, and I hope we make see 590 and below soon.
I think it is I actually. I think we are starting right now
The option prices have absolutely skyrocketed. That’s a big sign.
The market is only gonna make so many attempts to take out 600 before it just says enough and goes in the other direction.
At some point, it’s just going to roll over.
The big lessons that I have learned from this dumb rally is that the market will always go to its intended target regardless of whatever else is happening. Nothing is going to get in the way of the target.
And equally certain the century mark is always going to top the market nothing’s gonna keep the rally moving through it. $600 was always going to be the hard top.
$600 was both inevitable ahead of time and inevitably the top
The next rally target for the market is $670. That doesn’t mean we will get to 670 on the next rally.
Instead, it means the next time the market decide it wants to set a new all-time highs. It’s going to 660-670 for sure
It will go to 670 with as much certainty as anyone can have in the stock market.
And this persists through bear markets.
For example, the QQQ topped at 400 a share ahead of the 2022 bear market.
Suppose we didn’t have a beer market at all
The next all-time high rally target is 440. This means the next time the market reaches all-time highs after the correction or bear market ends, 440 is the next top mark.
The QQQ went from its $400 century mark peak down to 250 at the lows of the bear market.
Then initially rallied to 313 sustained a correction, rallied to 388 sustained correction.
But guess what? when it finally made its new ATHs after it finally pushed past 400 a share it peaked at 446 a share. That was the mid-century mark peak and precisely what the data suggested it would peak. It went a mere six dollars beyond what the data indicated before the bear market even happened in 2022.
Then it sustained a regular correction and then rallied to 500 which was the next century Mark target
At 446 when the QQQ sustained a correction everyone should’ve known that 500 is the next target
Well, the QQQ went up to 503 exactly peaked and fell 16%.
What was the next target after that? $550? And where did the QQQ go after that to 540 a share. With the QQQ was trading at a low of $423 in August 2024 the market already told us ahead of time that it would rally until it reached 540-550 or in that zone. The QQQ spent nearly 2 1/2 months battling 540 before finally succumbing and falling to 400 a share. And despite being a full 50% below, it’s next $600 target that is exactly where it went.
The QQQ didn’t care that the rally lasted 130 days to get there or that it needed to go up 52% which is way north of its normal rally capacity
Like the typical rally even when it’s overextended is 36%. Virtually every previous rally going back to 2010 ended at 36% mark unless it was an immediate bear market recovery rally. Every other normal rally 36% was the extreme high end of the range and this one went 52%.
Anyway, the point is that the QQQ has topped at 600. And while we can’t say with certainty right now what we’re seeing at the moment looks very much like the start of the selling.
We have another nine point reversal from $508 down to $497. If that looks really bad.
Option price is skyrocketing looks equally bad. The Erin portfolio is currently trading at a higher value at today’s lows than it did on Friday.
The QQQ is six dollars higher than it was on Friday. And yet the prices have been increasing in value all week.
The September 600s were trading at $19 on Friday. It’s trading at $19 now.
What about 487$ gap? Is it short term goal or more ?
????????
What if there is no next opportunity on the puts?
So that’s kind of a good news-Good news type situation.
If the market starts to unravel before we have an opportunity to buy the Sep puts, well then it means that our November spread is gonna be deep in the money and it means we’ll be able to exit our October spread at pretty significant value. Right now our plan is to exit the October spread at around two dollars and then try to exit this November spread it at north of five. That gives us a total seven dollar exit on a four dollar total purchase. 60 to 70% return overall. That’s the current goal at the moment.
A big reason for buying the September put is to offset the loss sustained in the spread trade if it doesn’t end up working. But if the trade works well, then we have what we wanted. If the put spread trade ends up producing a net return, then we’ve already accomplished our end result and we don’t really need to add to our September puts. Adding to the Septembers was largely about trying to offset whatever loss we sustained on the entire spread trade as a whole.
For example, in the Arryn portfolio, we invested some 28 to 30 K in the spread trades. Just about 12%.
If we buy 20 contracts in the September puts and those rise by $15, then we end up making around $30,000 that’s a full offset against the entire spread trade, and the remaining original 10 contracts we bought produces us a 15 K return
So we end up with a $15,000 total return. So that was the idea behind adding 20 contracts to the September puts.
Really we should’ve just added at $15 near 610 when we had the chance but there was just way too much anxiety going on around here for me to come out there and say listen, “We’re buying September put as the QQQ’s railing through 610.”
Regardless, in the end, if the November spread goes to $6-7, then we will have our end result anyway. We don’t really need our September puts to accomplish any goal at that point.
We have enough of the September puts right now to make money on top of all of the other previous hedges and puts that we are having in the portfolio just hanging around.
For example, we used the March 2026 and the June 2026 to further hedge our long trade. Both of those positions are gonna go up substantially in this next, correction.
The arryn portfolio will skyrocket to like 280k+ and below our exit price on the long trade. So end result it would be extremely positive for the portfolio’s end goals.
Anyway, to answer your question, if the QQQ slides before we have an opportunity to buy them well then we have our end result that we want.
If the QQQ doesn’t end up sliding right away and goes back to the 600s causing our put spread trade to be at risk of being a full loss, that’s when adding September’s aggressively becomes very important.
The September puts are kind of a cheat. We don’t normally get this big of a heads up or a warning from the market.
Like it’s not normal for us to be in a situation where we know with a high degree of confidence that we’re about to have a correction
Tops are usually really hard to nail down but at 135 days, the risk of taking any loss on any reasonable long date put is really really low If bought above $600 on the QqQ.
Even if the QQQ somehow managed to rally to 650 they’d still likely to produce a profit in the end because volatility will cause them to go up in value when the QQQ has it’s a eventual correction
The reason we’re not buying them in size is simply because of the potential existential risk.
But that doesn’t mean that the probability of the trade working out is any lower it just means we’re not going to take any existential risks under any circumstances no matter how certain.
Short of being Biff Tannen with the sports traders almanac, we ain’t gonna do that.
Anyway, the point is if the market rolls over here, we’re good with that.
If it continues to do this nonsense next week, it hasn’t started all over then we really do need to lean on the $600 puts.
At the current moment, we have 27 trading days until November expiration. To break even on the trade we need the November put spread to go up to $4.41. That would break even the entire trade all positions.
If we can exit the October 31 put spread at $2.20 and can close the November put at 4:41 that gives us a total 50% profit.
This is why it’s important that we roll over very soon and if we don’t, we need to figure out how to get into the September 600’s.
Buying the 600s means if November just happens to go to four dollars we offset all of the spreads and the September 600s produces us the profit that we want
In fact, the September 600s on 20 contract contracts potentially produces us with the equivalent of a 100% return on the entire spread trade if the November end up going to $4.41.
There are a lot of really strong potential ways for our short thesis to produce a return or at least breakeven from here
VIX 25+ closed near the high, marking the highest level since March
VIX spiking, big intraday swings in both directions, the almighty “sentiment” turning more and more negative by the day. It certainly feels like it’s truly about to give way at any moment. This would be correction day 6 tomorrow I believe so I wouldn’t be surprised if we see low $580s tomorrow and low $560s next week. I forgot what the expected day range was for a correction, but if the bottom is $550 as Sam alluded to it possibly being, I’m guessing roughly 20 days? Can’t easily check the tables on mobile unfortunately.
Sam, do you use Bloomberg?
QQQ as low as $591 overnight, bounced back
This rally really is on steroids. No news or events or selloffs seem to bother it. So it wanted to get to 600, well it’s been there for a month, and everytime it drops below it just goes right back up again..unreal!