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Thanks Sam I flew solo yesterday based price target for the rally you set and sold all my positions right before bell close and I’m so glad I did! Waiting for the right time to get back in today again.
Well done. Make sure you’re balanced though. We’re holding something long because this could all turn higher at any moment and we want to be able to capitalize on the next rally. Hence, why we’re still holding a lot of short-term calls. We trimmed a bunch but are still holding some.
Hopefully, we get another oversold set-up so we can buy new positions.
Always on the point ! I don’t know how you do this but thank you so much Sam.
Thanks Bill! Appreciate the kind words.
I wouldn’t download any Chinese apps. Odysseus and his buddies are inside.
Sam for some reason I haven’t taken the AAPL 220 call in one of my account. Would this still be an opportunity to enter with a 220-250 or 230-250 spread now? The breakeven would be around @ AAPL 240$.
way too late for that. So we’re able to create the spread for $6.00. we’d never ever be able to do that had we not gone long at $220 and then short at $240. that’s what gives us the $6.00 cost for a $30 spread. 500% yielding spread essentially. We’re mostly focused on hedging the long play we’ve already made.
On Head&Shoulder theory, we should be seeing -3% change in upcoming days to complete the pattern and then 8-10% run before any pullback, ideally. If we didn’t get near -3%, would there be any sharper fall afoot? And at what confidence level?
First time selling a call anywhere near 103% profit!????. Couldn’t short it in my tax free account so I sold it. That is a GREAT profit and i can’t complain, i can’t help but feel like doing all my trading in a margin account would be give me more potential for profit. Only thing is with a margin account all my gains end up being taxed around 15%. In Canada 50% of gains count as income when you do your taxes, and depending on tax brackets you then get taxed ~30% on profits. So my 103% profit would turn into 88%. Anybody else also considering just switching to a margin account?
Btw Sam I know you can’t give tax advice. Hope it’s ok that I ask this in the chat to other people who are also possibly thinking about this.
Totally fine with me.
Last December I moved 25% of my TFSA to my margin account for this reason. Our contribution margins are permanent in a TFSA, so on January 1st I alreadt recovered all this contribution space, if I ever want to move some back (I might in a few years).
Let me explain the workaround that I’ve found.
I actually use my RRSP and TFSA, along with my margin account, to trade Stark-type accounts. My RRSP and TFSA hold each 83% of a Stark each, and my margin, the two 17% remaining. I do all the short selling in the margin account, and the rest in the RRSP and TFSA, including the “real” covered calls (we are allowed to sell covered call if we really own 100 shares in the registered accounts.
I also have some allocation for one Targaryan and one Baratheon in my margin account.
Now if you are only considering moving TFSA money to margin for the sake of using full options potential, I have also considered the following question:
From what percentage of additional gains does it start to be advantageous in a Margin account, considering the fiscal impact in Canada ?
Answer:
At 40% return in a TFSA, 49.0% gains in Margin are needed to break even.At 35% return in a TFSA, 42.8% gains in Margin are needed to break even.At 30% return in a TFSA, 36.8% gains in Margin are needed to break even.At 25% return in a TFSA, 30.5% gains in Margin are needed to break even.At 20% return in a TFSA, 24.5% gains in Margin are needed to break even.At 15% return in a TFSA, 18.3% gains in Margin are needed to break even.At 10% return in a TFSA, 12.2% gains in Margin are needed to break even.At 5% return in a TFSA, 6.1% gains in Margin are needed to break even.
I did the calculations for my own financial situation, which should be similar to an average earning Canadian.
I figured that it was a no-brainer, it should be easy to outperform by 2-5% the overall performance.
Interesting. Yeah I am considering moving my money to a margin account to not be limited in my options trading. It seems Sam likes to sell weekly calls after initially only buying a call (with Baratheon portfolio). So i’ll have to compare how much more profit he makes when he does that versus just buying the call option. I also like that being able to do a vertical spread reduces the cost of the call. So being able to short calls would also reduce risk.
Are you ever worried about being flagged by the CRA for all the trades we do????? I think thats mostly for day traders tho
Very risky and unwise to trade Targaryen/Baratheon style in any registered account. I am not doing this. It’s not if one get cought, it’s when. I keep all my Targaryen/Baratheon trading in the margin account, where it belongs.
Stark-style in registered account is perfectly fine with the workaround that I’ve explained. There are very few transactions (LONG positions are type Cally held for months/years) and we do our short positions in the portion of the portfolio that’s in the margin account. 17% allocated in the margin should be plenty.
Besides, it may actually be even more tax-efficient to have our hedges in the margin account where they can be claimed as capital losses, offsetting some of the gains of Targ/Baratheon.
To be opportunistic is it possible to sell some puts against a cash position and capitalize if there is a downturn. Say we sell a 110 put and get assigned i woudnt mind owning nvda at that lower cost if there is a downturn on fed or tarrif or whatever else
I’d be curious to hear what Sam says, but I did this on Monday. I sold a 115 put and bought it back yesterday for about 80% profit.
So here’s the issue with selling puts as a way to buy shares. I have done this before as a way to buy a position.
The problems I find with this strategy, however, are thus:
(1) Suppose you want to buy Nvidia and are waiting for it to reach oversold conditions. Often times, it’s not obvious where the stock is going to bottom UNTIL we get to those oversold conditions. Like right now, Nvidia is sitting at a 37-RSI on the hourly. We have a general sense of where it’s likely to reach oversold territory and that’s at around the $115 area.
The problem with selling puts is that once it does start to move lower, you might want to buy at $116 or $117. It’s not often clear until it’s time to actually pull the trigger. So there’s that issue there. And if it drops down there, the puts go up and now you’re covering the puts at a loss for nothing.
(2) you have to wait until ACTUAL expiration for the exercise to happen. WE could easily see Nvidia drop to $115, bottom and then rally to $125 by expiration. Nviida reached the price-target but then you never had the opportunity to buy in.
(3) The profits for selling the puts themselves versus the margin requirements to do so are totally imbalanced. It’s not worth giving up the massive amount of margin required to sell a naked put for such a small p profit. For example, suppose we sold the Nvidia $115 puts expiring next Friday x 10 contracts. Suppose you had the cash to buy 1000 shares of Nviida at $115 ($115,000.00). 10 contracts at $2.76 gives you $2,760. That’s what we get. a mere $2,760 on an investment that requires insane amounts of margin.
This is versus just buying the damn shares when it gets down there. Suppose it gets down to $115 and you buy it with the $115,000. nvidia rises $10 to $125, you’ll have made $10,000.
The best you get from the sale of the puts is $2,760. Just not worth it at all. You don’t get enough profit for the amount of margin you have to put up.
That’s why I’ve personally disliked the strategy. I like it in theory. But in practice, there are far better ways to make a profit.
It’s sort of like taking $1 million and buying an apartment building all cash versus splitting that up into $250k increments to buy 4 buildings with $750k loans.
Obviously, the latter is much better. You get significantly more leverage out of buying 4 buildings that can produce a higher monthly income + asset appreciation + loan pay-off. You own 4 buildings after 15 years versus 1 building.
It’s a far better strategy to use that leverage. It’s the same idea here. You get almost no leverage out of selling a put versus buying calls or buying the position outright.
Sam how are you feeling about the market after the fed today? It sounded neutral to me and NVDA now rests on Meta and MSFT saying that CAPEX is continuing/increasing.
Please see the end of day update on Nvidia and our expectations going forward.
Hey Sam, does the trading action for the QQQ post fed decision still point towards the center of gravity for the QQQ pulling back to the $505 to $512 gap? With still some major earnings yet to be released and with inflation data coming later this week, do you still think that $505 to $512 gap is going to draw the QQQ in?
So the $504-$512 gap is going to be an issue that ALL professional traders are going to have their eye on just like we saw with the $470-$477 gap — which never got filled by the time.
Most big gaps like that do get filled. But it doesn’t have to get filled right now. It can happen later on in a bigger correction.
My guess? We’re not far from one of those 2018, 2019 and 2020 style corrections where the QQQ is going to drop like 16-17%. If the QQQ ends up running to $600 before filling this gap, it’s going to fill it on the next major correction. In fact, it could potential fill both on the next correction.
So that’s how I kind of view it. It’s an issue that will draw the QQQ in the close the market gets to that gap-line.
But in terms of where the QQQ can go from here, it’s really unclear at the moment. it did reach extremely oversold conditions which generally leads to a very strong rally. We did have a big bounce, but not compared to what we usually see after oversold conditions like we just had.
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As we sort of posted earlier today. When the QQQ pushed oversold, what we knew would happen is (1) a sharp rebound; (2) a retest of the lows. Both conditions have been met. Now we’re sort of in a transitional space.
Hey Sam, what do you think about MSFT as a near-term trade. Seems to be oversold on the hourly now due to earnings. Do you think it could potentially be a solid entry at 410?
I do think it would make for a really strong entry at 410. I posted more extensively about it today given your question.
Yes, I just saw your post. Thank you!
Sam, what do you think of NOW? It dropped about $120-140 after its earnings last night, and it’s oversold on the hourly chart. I was looking at 300%-400% spreads for $1100-1150~ for March or April
Hi Josh. So I don’t know anything about NOW as a company, but I can just say that the daily chart looks really bad. From a risk standpoint, it looks like a full double-top type setup with negative divergence and earnings leading to a confirmed breakdown.
That’s just what the daily chart is suggesting. It is oversold on the hourly, but it’s important to understand that the hourly chart is a near-term thing. When looking at the NOW hourly trading chart, you can see the hourly oversold does lead to fairly consistent short-term rally. but it is important to keep in mind that this is a short-term phenomenon. If the stock is taking a bearish tilt, then the rebound will quickly end ahead of further downside. Take a look:
That makes sense. I might try a smaller, short-term play for just the rebound. Thank you!