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...
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Feel like one good news would help QQQ completely smash through the $460 resistance.
So in terms of the trading portfolio we just have to hope it goes to 500 instead of another leg lower?
To be fair, we didn’t even really have a rally beyond that one day the Tariffs were paused, it’s all just the same anemic action..
Yeah and that rally just brought us back to roughly where we were before Liberation Day. We’re still down a lot since the end of February
So for the may spread, yes. We do need the rally to continue and go down the explosive path. Short of that, the May spread are unrecoverable and the portfolio outcomes will be determined by Nvidia & Tesla July spreads. That’s basically where it’s at. There aren’t any actions we can really take between now and then to substantially alter that course.
Sam doesn’t seem so bullish anymore
Is anyone as bullish as they were two months ago? To be fair, he has always conveyed potential risks that come up and could affect the near-term, even if he is predominately bullish. I love the idea of easing into the put position. It would be nice to have at least one active put in each long-term portfolio given the erratic state of affairs.
No, of course not. I was just saying, we’ve seen a lot of crazy stuff.
Anyway, Sam, what’s the argument for not recouping the time value of the spreads. It would take a ton of upside to wouldn’t it? Why not just go ahead and close em and recoup?
Thank you, you said that at some point the market would just rally and not care about the same issue anymore. That it would rally and the sentiment would change and it be attributed to something positive.
Do you think that that would happen even with Trump doing what he‘s doing? I mean would the market just ignore him even if he put massive Tariffs back on or some other nonsense?
I really like the updates on the long term and less a focus on the short term challenge portfolios. When looking to hedge could we reduce the time horizon and buy a small number of puts in the 3 month expiry rather than jan 2026 due to the high cost of volatility? This is only a counter to remaining unhedged and awaiting a multi week rally. I think it’s more to do with psychology and having an unhedged portfolio although cash heavy seems risky
Good thinking. Good intuition. This was already something I’ve already been considering but ultimately I think the longer-term puts are better. We wrote an enter Chapter in investing basics comparing the two scenarios.
Our options are: (1) we can go with low cost, high maintenance short-term options or low maintenance, high cost long-term put options. We’ve generally opted for long-term puts in most cases.
The problem with short-term right now is that the $VIX is still VERY VERY elevated and volatility has its greatest impact on near-term options. So that’s the issue with buying near-term puts right now.
I think what we’ll do instead is just opt to buy half. We may just pay up for the puts. it’s not drastic difference in price anyhow. If we pay $18 or $19 for 8 contracts, we’re talking an $800 difference here on a $190,000 portfolio. So it’s not a huge difference. We may just go in and buy it and be done with it.
And then down the line, we can add to the position. As we mentioned yestday, we may buy DOUBLE the protection given the environment and given the fact that our portfolio can easily afford it.
And if the QQQ crashes while we’re holding 16 puts to 8 calls, we’ll absolutely kill it. The portfolio probably triples in value when all is said and done. So we may just do that. buy 8 now and add 8 later when the QQQ continues higher.
Sam – probabilistically seems like the May spreads are unrecoverable just from a pure timing standpoint with a potential 3rd leg down? why not just sell them and recover whatever we can?
So it’s just not impactful enough. If the QQQ rallies to $500 here shortly, we could see a recovery at that point. There’s not enough value to close them out whereas there could be if the QQQ does make a push toward $500 a share. We’d need to see that push pretty soon. If the QQQ can come within reasonable striking distance of the lower strike, it’ll carry some value.
When we choose the strike price of 400 for the puts, are we hedging against the 3rd leg outlined or a protracted and bear market? Since you outlined that the 3rd leg would only make incremental new lows.
It’s a general hedge we put on in all market conditions. So it’s based on the 4-part framework under the strategy section of the website and the material covered in investing basics.
Whether the market is experiencing volatility or rallying to all-time highs without a worry in sight, we have to hedge out the risk — however low — of a bear market happening.
Hedging is precisely what keeps us in the market. Our generally strategy is to remain long at all times and to hedge out the potential for a crash/bear market or other exogenous events.
So the $400 puts is about protecting the calls we bought. That’s all. So in Arryn, for example, we own the Dec 2026 $430 calls and the June 2027 $400 calls.
By purchasing the March 2026 $400 puts, if the market crashes down to $300 a share or something crazy like that, our march $400 puts rise to $100 and off-set the loses sustained to our Dec 2026 $430 calls and June 2027 $400 calls.
If the market rallies back to its highs or up to $600 a share, then we make $170 and $200 respectively on each position which more than off-sets the $18 loss sustained in the puts.
So we’re not really hedging against a third leg or any other event that we might be forecasting. Instead, we’re just hedging against the possibility of a full blown bear market. It could have nothing at all to do with tariffs and we’d be making these same actions EVEN if the market were fully in rally mode without a single concern in the world. It’s just part of routine maintenance.
Hi Sam, you have this written in Chapter 3.4 in the investing basics, which has been an amazing resource. I admire how concise your actions have been to what you have outlined in the investing basics.
I must admit, reading through Chapter 3.4 again, I am intimidated by the sheer wall of paragraphs mixed in with numbers. I understand it at a fundamental level after reading about it previously, but I wonder if each section can be summarized at the end with a table.
I’m planning to make a table for myself, with all the numbers in that chapter so I can always refer to them if I need a refresher about hedging.
Much thanks for your hard work as always, Sam!
the two puts in Lannister is a mistake, right? One of them is actually Stark?
Yes. If you go to the trades section it has the correct info. Stark gets 6 puts.
It was an error in the heading. Fixed it.
Hey Sam,
if we are expecting a leg lower, why not sell the QQQ 400 calls while they are at 35% green?
The investing basics Chapters 1-3 and the 4-part framework will give you a more exhaustive answer to that question.
It’s a very long and complex answer. Let me pitch it to you in a hypothetical:
Suppose we think the market is going lower for a third leg down. Right now, we just think there’s a risk of it moving lower. But let’s suppose we’re 65-75% sure the market is headed lower for a third leg down.
instead of purchasing a hedge to protect our position, we decide, hey we’re up 35%, let’s just sell and go to the sidelines.
Now suppose rather than pulling back on a 3rd leg down, the market closes at $467 today. Is just makes a push to $467 on strong volume. We push to overbought conditions on the hourly.
Now what do we do? Do we buy back our position now that it has risen 10% on an $8.00 push at day end with the market overbought?
Suppose we say no and this is like covid and tomorrow the market gaps up to $473. The RSI rises to 80. The market ignores it and pushes to $480 a share on a 13 up day on the back of today’s strong momentum.
Now we’re at $480 and deeply overbought. What do we do? Suppose the market pulls back to $472 — but only briefly — and not giving us enough time to pay up 15-17% to buy back our options. It just goes down there, the spread in our calls is wide making it difficult to buy back and now the market surges to $493 to resistance.
This right here outlines the problem. We can easily be wrong about our expectations of where the market is headed. Selling and going to the sidelines creates enormous opportunity risk. What’s more, there is a general huge imbalance of risk to the buy side. The market can move up to infinity but only move down to $0.00. And there is a hard theoretical floor way way above $0.00. For example, in this correction it was $402. But setting that side, there’s a hard floor somewhere. There is no ceiling.
The markets have gone up hundred and hundreds and hundreds of percentage points over just the past 15 years alone. From the 666 lows on the S&P 500, we’re up what? 9x?
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Most hedge fund managers get accused of being closet indexers for this specific reason. Think about the real risk to a fund manager or a hedge fund. It’s not the risk of loss. It’s the risk of missing out. A hedge fund that drops 15% in this crisis and outperforms the market will be fine. A hedge fund that misses a 25% rally because they went to the sidelines is catastrophic. It’s done. It’s over if that happens.
So to hedge out opportunity risk, they remain long at all times. They then hedge out downside risk.
That’s what we’re doing here. We remain LONG at all times in Arryn, Stark and Lannister and hedge out the risk of pulling back. We capitalize on the long-term end result.
If the QQQ is sitting at $600 come March 2026, our June 2027 $400 calls are wroth $215. We paid $85 for them. Our Dec $430’s go to $180-$190. We paid $75 for those. That’s around $120 in profit on 8 contracts or $96k (double the entire portfolio’s value) without considering the 45% long positions we have in Apple and Nvidia. The portfolio probably triples in value. That’s what we’re after here and why we don’t sell just because we’re up 35%>.
I’d read Chapters 1-3 of investing basics and the Samwise Strategy. It will give you a more comprehensive answer to that very question.
Very nice answer. Thank you
Hi Sam, may I suggest if you can add a feature to know when did you buy current holdings or list of transaction, open vs close, in Portfolio page accordingly?
Its already there. Underneath each portfolio is a link for trades. List the date and amount of each trade.
So the trading portfolios both display the trade history by order time/date and then we have a running tabulation of every trade. So two different trade history. Order history and trade history.
For the long-term portfolios, we didn’t really have many closing transactions until fairly recently. So we haven’t created a “trade history” in the long-term portofios. But we will now. Especially seeing as how we’ve closed a lot of positions in the options portofios.
I think the common stock portfolios don’t have many (if any) closing transactions beyond covered calls.
But you can find trade and transaction histories in the portfolio. Not always up to date as it is time intensive. It’s not an automated process. I have to go in and manually input it.
The total trade history is automated. That’s what the trade is always immediately up to date.
I’m assuming there’s no way to be certain whether or not we’re heading for a third let down, and won’t be able to tell until we’re already in one?
Yeah, that’s right and even if we are in a third leg now, we won’t know until far along in the process.
That’s because a minor pullback can mask as a third leg down.
For example, suppose we start to pull back from here and it’s really just a minor pull back
We might think we’re in a third leg down and the market might just bottom at $448 and then continue higher.
The good news is this. And this part has been true of every other major downturn. So now we’re not really talking corrections anymore we’re talking full blown downturns.
In every downturn, you get this long period where the market sort of ignores overbought and oversold indicators.
This usually happens at the beginning during the high volatility stage of the sell-off. During those first and second legs down.
But as things sort of progress, we do return to normal as overbought and oversold indicators are concerned.
So for example, if we reach deeply oversold conditions on the hourly now, it will precede a big rebound. We’ll be able to forecast near term a lot easier than we did during the first leg down.
In fact, we just saw that happen during the second-leg down . The QQQ reached deeply oversold conditions during that capitulation on Monday. The hourly alone forecasted a big rebound.
On a third leg lower, I think those indicators get even tighter. We’re less likely to become deeply oversold and more likely to see rebounds off of mild oversold conditions.
As I already mentioned in a post above, I don’t think that a third leg lower will carry the same volatility weight that we saw during the second leg lower
The market already went through its high volatility, fear phase
That doesn’t really continue
You generally see one big volatility spike per crash. While markets might turn lower after that, you don’t get the same searing volatility that we saw.
We don’t get 10% drops or 10% rebounds anymore. A third leg down will be measured.
And really what is most likely to happen if the market does pull back is what we saw ahead of the June low in 2022.
Back in 2022 the QQQ reached oversold conditions on the weekly. It then rebounded for two or three weeks kind of like seeing now. And then, after that, it had another leg lower, but that leg didn’t really go much lower. It was basically a double bottom.
What’s more that next leg down in June 2022 only lasted like two weeks total and it preceded a three month 25% rally.
When you look at the 2022 bear market, we really bottomed in June 2022. The market rallied 25% and then it had another major down leg in the fall where it only made an $8.00 dollar new low.
From there the market rallied for all of 2023 and 2024.
Oh Boy. Nvidia is getting cooked
Sam called it… What happened?
Sam might address it after hours
Sam, glad to see the app is back online.. Listen, the briefs are still not loading.. Everything else seems to be functioning, including push notifications
I am sooooo glad we bought the puts in the long terms today, this market is got whiplash built into it and it seems we have hedged going into the export fee rules from this evening.
What do you think of Nvda’s current situation?
Is it a trigger enough for the 3rd leg lower for the whole market
Hello Sam I’m surprised and shocked by the performance of NVIDIA and semiconductors today in pre-opening… The news of the 10% tax was already known yesterday, and the market only absorbed it afterward? Technically, I hadn’t anticipated this drop. I was counting on a rise to $120 before seeing a potential drop to the $100-$105 range… Thank you for your insights and lessons. Sincerely, Karl
I think the 10% tax is entirely different. This an updated licensing requirement basically equates to a ban on the exporting the H20 chips in the short-term. Not technically ban, they just raised the hurdle to export to China higher to the point that NVDA doesn’t think they can get approval in a reasonable amount of time.
But seems NVDA is being treated as a bargaining chip to tariff negotiations with China and indirectly the world.
Does this call into question NVIDIA’s objectives, particularly over $150 by this summer?
Many price targets were reduced from 170 to 150 zone. I personally don’t think we’ll see 150 by summer given the timeline for negotiations end around July.
BUT I AM NOT SAM, so please defer to his expertise.
I know you said that NVDA had a chance of going to 103 before going back to 120ish, but considering that it’s around 105 in pre-market now, do you think it will go even lower if we do get a third leg down?
Where? I missed this information…
My Stark’s PUT order from April 15 finally filled today.