Samwise Quick Reference Handbook
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Sam, hypothetically say that mighty Stark didn’t sold covered call over all it’s 400 and 500 calls. Could you discuss what Stark would do this week with his long calls and put hedges?
To be honest, selling covered in these situations is so critically important. 95% of the time, the QQQ would have already peaked weeks ago and be on its way down to the low $500’s. In almost all previous cases, that’s what we see.
So selling them is critical. We would never wait until this point to sell them. If Stark/Lannister/Arryn didn’t have the ability to sell covered calls, we’d close our positions. That’s what we’d do because there’s just too much risk at this point.
We don’t need to claw every single point in the market. We want to capitalize on the high probability stuff.
If we take the action of selling covered calls when the market goes up 30% as it did — remember our covered calls exit us at 39% returns on the QQQ — do this every time we’d get it nearly perfect 90% of the time.
Go back and look at every rally that reaches 30%. It very seldom goes beyond that point. And not selling covered calls results I a massive lost opportunity.
Think bout why. We sold the September $540’s for $19.55. We bought our leaps at $75 and $85 a contractor ight? That’s a 26% reduction in cost against hte Dec 2026 calls and a 23% reduction in coast against the June 2027 $400 calls.
We have to take that every time. Covered calls are critical important. But if we can’t do that, then we’d significantly reduce our positions and or close them out.
But that’s less optimal way to do it. Covered calls is better specifically because we still profit on the upside.
So for example, we sold those covered calls when the QQq was trading in the $520’s!! Think about that. $520’s!
That means we were able to profit all the way up to $560 while simultaneously reducing our basis by 23 and 26%. we got to continue to profit on an additional $40 in upside.
That’s far preferable than closing out positions at $520. Covered calls is preference.
How about the two hedges?
What do you mean exactly? The hedges, we’re holding until the bottom of the correction minimum. We currently have March 2026 and June 2026 hedges. Both will be closed out in the upcoming correction. We should be able to get significant value out of both positions.
Hi Sam,
Are we planning on purchasing our future hedges tomorrow? If we anticipate the markets to sell off after the Fed meeting then we really only have tomorrow to get those future hedges in, right?
Thanks!
So for tomorrow, our plan is to raise capital in Lannister to buy the September 2026 $500 puts and we’ll do the same in Stark and Arryn.
QQQ NLOD; NVDA NLOD
Risk of rolling over, risk is high now pullback could just turn into correction
I don’t know it’s all in limbo until Jpow speaks today for me… anything more than a 0.25% cut or hinting at multiple cuts in the future might delay things a bit.
True; however, more than a 0.25% cut could signal more trouble with the economy and trigger a sell off too. I think it will ultimately come down to the Fed’s forward guidance. Hopefully Sam is right, and regardless of the news, positive or negative, we see a massive sell off.
I hope you’re right. We’ve been fooled a few times now.
Hi Sam,
Looks like an oversight, but Rally 43, 45, and 51 on the updated tables don’t have a leading 0 in the “Correction Duration” column so if you sort by “Correction Duration” in descending order they end up at the top even though the duration is small.
Looks like this is an issue if you sort in either direction really (e.g. Rally 52 has a correction duration of 128 and doesn’t end up in the right place when sorted in ascending order). Probably it’s sorting based on the actual string value vs. the numeric value. Not sure if that’s an easy adjustment on the WordPress side of things.
jeez QQQ setting up for another run
It’s going to go on forever. Expect it at this point. As you can see in the rally table, there are rallies that have reached 151 days. 151-days is the end of October. We’re in an extreme outlier situation now similar to the dot-com rally and covid rally.
But unlike Covid and the dot-com rally, this one can last a lot longer. There’s no rule that says a high volatility rally can’t somehow convert into a melt-up. While it hasn’t happened before, while there’s no evidence in support of that conclusion and while we haven’t seen any high vol rallies go beyond 114-days, it doesn’t mean it can’t happen now. Anything is possible.
Note we’ve seen four rallies go from 141-151 days. Another four go from 114 to 128 days.
The market likes making records these days.
And for the QQQ to see a full blown 26-year record rally eclipsing all previous rallies of all types, it needs to rally until the end of October. That’s another 6-weeks. If it doesn’t do that, then no record.
It’s better to just go in expecting that records can happen. Or if it does occur, it shouldn’t have a major impact on things. Position like a record can easily happen is the key.
Like with Stark/Lannister and Arryn, we just sit 80% in cash during that period of time. Then we get a correction in November and buy in December. We limit our short-term trades other than 9%.
That way if the worst case scenario occurs, it has minimal impact.
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For the near-term the QQQ is overbought. But if the market likes the news, it can go extremely overbought. Easily rise 8-9 points in a day. The QQQ could easily see $602-$603 tomorrow no problem. It’ll reach deeply overbought at that point and then sustain a small pull-back of $5-6 to $596.75 or $597.30. We see that type of thing all the time with century marks.
Then from there, it can easily make a push to $610-$613 where it often fails to get penetration. It’s not uncommon for century market rallies to end right at around that $613 level. we saw the QQQ peak at $313 in early 2023 after it rallied 25% from $250 up to $300 a share. It tested the century mark and ultimately pushed through peaking at $313 before correcting to $284.
In 2021 ahead of the bear market, the QQQ got as high as $408 before peaking. It didn’t just stop at $400. It spent a lot of time trying to get through $400 before ultimately failing and going into the 40% bear market. But before that happened, it made multiple efforts to take out $400 getting as high as $408.
In July 2024, it reached as high $503.50 before peaking.
We can see the same exact thing happen here. Multiple attempts to take out $600 that lead to all sort of $600-relate prints all over the spectrum — $603 or $608 or even $612-$613.
The market looks like it wasn’t to breakout as it consolidates at $591.60. If I had to guess, we’re at $595 in the AM tomorrow and pushing toward $600 as we approach the fed meeting.
thank you for the detailed analysis. and that’s what exactly I meant as all these situations as outliers and extremes in the Rally day 76 post and previous comments. To your point in earlier comments, It was so obvious from rally days 70-80 that this time “may”be different.
And sure. Every time you get to rally day 76, that is always a the case. With 100% of all past cases ending by day 114.
Meaning if at day 76, we made the same conclusions over the past 26+ years, the rally ended by day 114 a full 100% of the time.
And in all past day 76 cases; there was always the possibility of it going 150 days.
So how do you address that? If the possibility always exists and yet if it has occurred 0% the time, what’s the course of action?
Wait was this a typo? Because it seems like the opposite of what you’ve said in the past since a correction is imminent
yea lol perplexed. perhaps he’s talking about after a correction? I have no idea how this fits in and it’s getting confusing to follow
I think what Sam is trying to say is that anything is possible with a rally that’s already proven itself to be an outlier. However, I think based on the most recent analysis he outlined today, he expects for the market to sell the news on the Fed. Given the historical data, QQQ should roll over any day now and can peak any moment. I think Sam just wants everyone to have reasonable expectations and not follow his forecast as gospel. Sure, the QQQ could continue on to rally for 150 days but it’s extremely unlikely and would defy the historical trends.
^this is correct. And to add that in the event an outlier does occur, you want the negative impact to be minimal.
Here’s why. As you can see from the data, if you put on short-term spread trades on the basis of the rally not going beyond 100-days, you’re going to be right 90% of the time.
So the point is to limit the one time it might work out that way. Hence the limit on 10% short-term trades.
The long-term is going to work. Whether the correction happens now, in October or November, our long-trades and returns will be the same.
Whether we go to cash and get long in October or get long in November, it’s the same exact end result.
Our long-term puts will be profitable as well in both scenarios.
So the key to take measured short-term bets.
If the QQQ peaks here this week, our short-term spread trades can make a big chunk of change.
But if it doesn’t work out, it shouldn’t be that impactful is the key.
He;s half trolling this guy who said QQQ is setting up for another run. No it’s not. Not now at least. It might run to moon, but so increasingly likely.
Sam always points out the opportunity is very small at these prices for further gains. Ask yourself if you’d want to go long at $590 QQQ this late in the rally. That should make you squirm. Long NVDA at $170? Absolutely not.
Well… going back to your comment on 9/17, where are we standing now?
I assume this /s is a response to “jeez QQQ setting up for another run,” rather than Sam?
Hi Sam,
If the QQQ shoots for $600 does this change the strike for the future hedges we’re planning on purchasing? When the QQQ was at 585 we would need a ~14% correction to get down to $500. This still feels reasonable and falls within a standard / above average correction %. With the QQQ ATH being at 600 we would need a ~16% correction to retrace down to 500. This feels like it’s a more major correction. Or are they similar enough to be the same thing?
Thanks!