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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Good to see Targaryen back to its two time a year after correction strategy. Using an out of normal portfolio like Baratheon and to some extent Targaryen could show in the long term how well or poorly it can go. I guess the point of all this is that launching a normal LEAPS or stock based portfolio during a correction is less management and quite profitable. And a normal lower risk samweiss portfolio can beat investing in small obscure stocks in the hope that there will be massive returns. Now for the lower risk portfolios does it make sense to sell covered calls say at 3 months or even leaps out of the money and then when the stock corrects down off of oversold conditions we can buy back the calls to take profit?
Yes. That is precisely what we do. We sell covered calls and other premium against our long-term positions as a way to trade short-term price movements in a long-term portfolio.
We’ve already started doing so at scale. If you look at each of the portfolios, we have short-term calls sold short against our positions.
Once the QQQ sustains a 3% pull-back and then begins its final move up, we’re going to get very aggressive with the call selling in January.
So instead of selling out of the money, he calls we might sell in the money calls and even leaps. And that’s because we feel the risk is high for correction at that point and we want to capitalize on the downsize risk.
Using Calendar/diagonal spreads is one way to significantly reduce risk and capitalize on the corrective action in an otherwise long-only portfolio.
The key is be very selective when choosing to do so. And a good guide for that is duration of the rally. Once the rally has gone for 70-80-90 days and for 25%+, the correction risk skyrockets.
There is very little upside in the market at that point. That’s when it makes sense to use Calendar spreads and or selling leaps against our position.
Do you have any thoughts on NVDA today?
Yeah shoot. I’ll post an update on NVDA shortly. It’s basically in the same general place. Once the market sustains a 3-4% pull-back, Nvidia is likely to follow suit and there should be a buying opportunity there for a trade.
And your sense is that the 3-4% pull-back will happen any moment now?
Yeah so the arguments I made above are still very much current. As I mentioned in the post, in most “normal” circumstances, it should happen right off of the $530 level. So basically any moment now.
But there have been a handful of exceptions. The most recent exception was back in September as I mentioned in the post.
Other big reasons includes the general positive seasonality in December has indicated that the QQQ doesn’t generally run counter to the current trend going into the month. The trend is higher and so we should see the QQQ move higher throughout the month. We got the Santa rally around the corner. A lot of high momentum stocks flying like Apple, Tesla, Google and others.
And also, in terms of the general size of each segmented rally, they tend to run 8-10%. We’re only at 7.11% at $530. If the QQQ follows historical trends, it should peak closer to $534 to $544.
The point is there are arguments to be made for topping right at $530 (the default case given negative divergence set-up) and arguments to be made of a top closer to $535 to $545 (historical trend of segment rallies running 8-10% + positive seasonality + strong momentum + Santa rally).
But what we do know is that there’s a very high likelihood the rally goes no further than $10-$15 points from current levels. And in fact, at $545, we start to get aggressive in the other direction.
I love how we’re returning to the roots of the Targaryen portfolio, and I’m also excited to see the moves within Baratheon portfolio.
Personally i’ll keep the Baratheon portfolio for my registered account, so i’ll only be able to trade stocks/ETFs, buy puts/calls and sell covered calls.
So we’ll make trades in between the larger core trades. We just have to stop doing so when the QQQ enters a high-risk phase for a correction or we end up losing out on the trade.
It is important that we make the most of our opportunities in-between each correction as that could drive our overall gains much much higher and allow us to reach our target sooner.
Also, it makes it easier to exit trades earlier on the main trades. For example, consider our portfolio now 10% higher. That 10% makes it possible to both hedge and buy a more conservative spread now than we might otherwise have.
So we’ll for sure make trades in the future, we just have to be careful in terms of our timing on when to stop making them.
I love the “bastard” portfolio concept – can’t wait for those trades. Question – given these are more high risk short term trades, would you consider puts in the portfolio or is it focused on being long? Thank you.