Every Monday morning at 7:15 a.m. Pacific time, in my live streams, I am fully revealing my proprietary Safe Wheel Strategy for free. Using my 28 years experience, I’ve developed The Safe Wheel Strategy to cancel out the risks associated with the normal wheel strategy. I also designed the system to only need my attention once a week on Mondays, and on rare occasions Fridays. And this is what I call a Safe Wheel Strategy Strategy.
Now, what you see on the screen is The Trader Matrix. I developed this to make it easy to distinguish between trading levels. After taking over 30 online stock and options courses, I’ve found that I’m the only Level 5 trader that is not using portfolio margin. Portfolio margin is used for large accounts over $100,000.
Now after 28 years, I’ve only found one edge in trading and that is selling option premium. Safe Wheel Strategy Trade Systems are the only way to sell option premium efficiently and safely. For a better explanation of the five trading levels, see the link in the description for the video called “The Five Stages of a Trader”.
Okay, good morning. Now, first thing I want to do is a sound check. So please if you guys can hear me, somebody post yes in the chat box. I want to make sure that my sound is working. Okay, no one has… Okay, yes. Okay, good, thanks.
All right, let’s get started here. First thing, I want to make sure that you guys post all your questions. If you have any questions, make sure to post those now. That way when you get to the end of this live stream I don’t I don’t miss your question. I do see one question already here. I’ll get to that one.
Okay, next thing: Earnings Edge Alerts. Okay, I think you guys have heard about my Earnings Edge Alerts, where I come in every week and pick one stock a week. And how did I do last week? Last week we did Apple and we made a profit of $378. So we did well. That’s 11 wins out of my last 13 picks. So I’m getting good at this. I’m not going to guarantee that I’m going to win every time or anything like that, but I think it’s a really good trade and it really does have an edge.
Now, how long will that edge last? I mean, I don’t know. Maybe forever? We’ll see. But everything that I’ve looked at on my back tests, on my forward test here looks good. And so what is the… So we’re at $1660 over [what] I started [at the] the beginning of this year; up about 33% so I’m doing quite well with this system.
Okay, let’s talk about what’s going on with the Safe Wheel Strategy. So I’m going to go into that account and what happened? So last week… First of all, I started this cycle over. I bought my put hedge, then I sold the 24.50 put to collect some premium, and Macy’s went below. You can see the market was down pretty good yesterday. It’s down a little bit today and so Macy’s went down with the market and I got assigned, so I own 100 shares.
So what would be next with the wheel strategy? Well, next would be to sell a call against my 100 shares. Now, notice that when I talk about this Safe Wheel system in Macy’s… This might have been the first time I’ve ever really mentioned the price. I mean, the stock price. I mean, I talk about that the price goes up or down, but it’s really not significant. Like I’m not thinking: well, if it goes down, it’s gonna, I’m gonna do this; or if it goes up, I’m gonna do that. No, I’m not worried if the stock goes up or down. I’m just, you know, what do I do next? It’s not really about… I mean, obviously it has to do with the price of the stock, but I’m not worried about the price of the stock. It doesn’t matter to me.
So next we’re going to see if we can sell a cover call. Now, we want to sell a call at or above this 24.50 strike price and you want to get at least $0.24, $0.25 ($25). Let’s see what we can do. And we want to do it in the closest expiration cycle, and that is the one coming up expiring on this Friday. So we’re at 24.50 here, so $25. So you can see this $25 strike. It’s out of the money and I can get more than whatever the price of the stock is, $0.25 approximately. So I’m going to go ahead and sell this $25 and I’m going to do one of those based on the sizing that I’m dealing with.
I want to get as much as I can. You see the mid-price here is 39. Maybe I’ll go for 41; work my way down, that’s 38. Make sure I’m doing the right thing here; selling a call. Yeah, okay. And now let’s go to my working orders. I’ll right click here, hit cancel-replace, and I’m going to move this down until I can get it filled. Try 38. No, of course I’m chasing. It happens quite a bit. It’s just part of the deal. And when I say I’m chasing it means, you know, the mid-price went down. It was 39 when I started. Sometimes you don’t get the mid-price and I’m chasing it. Stock must be going down. Okay, so there we go we got filled.
Now, we have completed the wheel for this week, you know, you own shares you sell a call against it to collect premium. You want to collect more premium in the short term than what your hedge costs, this is the hedge, then what your hedge costs in the long term. As long as you’re collecting more premium in the short term than what your hedge is in the amount that your head is depreciating, then you’re going to come out ahead.
When you get to the point where you cannot sell any premium and you can’t outpace the hedge (the theta of that hedge) that’s when you exit. That’s one of the exit criterias.
And I still have the intro music still playing because I figured I’d throw some music in the background here and see how that worked out. You guys can still hear me clearly right over the musis. So as long as that’s good, then I just did that on purpose.
Okay, let’s go to the next step. Let’s see. How am I doing with the Safe Wheel as far as return? So up around $800 this year and that comes out to about 16%. So we’re up about 16% on the Safe Wheel for the year. I think the S&P’s, I don’t know, it’s down. I know it’s down on the year. I don’t know how much. Maybe 5% to 7%. We can take a look. So where did we end last year? Right here, approximately. And now we’re here so we’re down about 11%-11.5%. So the Safe Wheel Strategy is doing quite well, outperforming the S&P by a long shot.
Okay, so let me get into some questions here. We got our first question.
iamtheone who knocks: can you describe what makes the strategy safer than the traditional wheel strategy?
Yes, so a traditional will strategy would be, what I call, a Level 4 trade. Which means that you’re selling premium. Which you’re taking advantage of an edge, but you’re not hedged. So Level 5 is when you’re able to do a Level 4 trade, but also be hedged and overcome the cost of that hedge. But not only overcome the cost of the hedge, but the hedge needs to be able to protect you; so there’s a fine line there. I mean sometimes you can be hit by a hedge, but it doesn’t really protect you and it’s cheap. And sometimes, you can overpay for a hedge and it costs more than what you’re making on the other side– on the Level 4 portion of the trade. So it’s a Level 5 trade. It’s a premium selling system that is hedged, that is properly hedged, so that is why it’s safer than the regular wheel. The regular wheel strategy is not hedged. And it’s typically a long strategy. So if the market goes down when you’re doing the traditional wheel or your stocks that you’re playing with go down–trading I should say– you’re going to lose money.
Okay, let’s see if there’s any other questions. Yeah but it’s kind of annoying. Okay, well, how about I take a poll. Who likes the music and who does not? Put yes, if you like it. Put no, if you don’t like it, and I’ll take a little poll here and that’s what I’ll do next time.
Question here. [Vance Reklai]: do you still offer The Synthetic Dragon alert?
So it’s not The Synthetic Dragon. It’s a different trade. It’s called the Premium Level 5 Trade. It’s similar to The Synthetic Dragon, but it’s a different trade structure that I developed. It has a very similar trade plan. If you wanted to get something that was The Synthetic Dragon type-system alert, that would be The Premier Level 5 Alert. And yes, I am offering that. And I can put a link in the description for The Premium Level 5 Alert. Let me take a note of that. I’ll put a link for that. You can check out the literature on it.
Okay, next. See if I have a question. Jam: do you always close your short term puts and calls at the end of the week?
No, I don’t close them. I might… By the way, that reminds me, I got to put on a call. Forgot to add my call to protect my hedge. Let me do that right now, but I’ll answer this question first. I don’t close those out. I might close the call out, okay.
So I’m gonna… Let’s go into Macy’s. I might close the call, okay. Because if the call has any intrinsic value, I’m going to close it out. I don’t want to get assigned or carry the stock. I don’t want to deal with the stock on a call. But on the put, I get assigned. So I don’t close out the puts on the short term. I never close them out. I just let them ride. And on the call, I close those out and I do check those.
Let me go in here. I’m going to buy a call around $5 or $6, just one, and that’s to protect my hedge in case Macy’s goes up to like $35 or $40. My hedge is just gonna lose like crazy and I’ll, you know, it’ll be kind of a big loss so I gotta protect that. And I won’t pay $7. I’ll pay $6 but I won’t pay $7. Okay, good question.
All right, let’s see if there’s any other… Maybe lower the volume. Okay. Can you lift your website? Sure. Let me type it in here. Real-pl.com. Maybe that’ll perform a link. I don’t know. I haven’t typed in here very often. Maybe something that doesn’t repeat every minute.
Okay, well, I’ll look at the poll here.
Joe [Stutzke]: I’ve enjoyed learning this for the basis of hedging out risk. Been fun demo trading different tickers in this range, the $30 range. I’m going to test the full amount on one ticker after this month. Checklist is great.
Great. Thanks, Joe; appreciate that.
Question. Eduardo [C]: do you feel this setup is safe for serious money like $100,000?
I do. I do feel that it’s safe. But you got to really know what you’re doing if you’re going to put a lot of money in there. You got to trade this thing with a little bit of money for quite a while, a few months, to make sure you’re really comfortable with what you’re doing. Don’t just throw out the big money out there. Yeah, $200,000, sure; but like I said, trade this thing. Understand it forwards and backwards before you go out there and start putting on a whole bunch of tranches.
Okay, I don’t see any more questions but I’ll kind of go over this poll. Okay, let me do the yes’s and the no’s. So I got yes, one in the middle, one, one, one, one; no, no, no, no. One, two, three, four. All right, so we got more no’s. I can lower the volume. Let’s see here. So maybe that’s the answer; lowering the volume.
Okay, Eduardo [C]: Thanks, reading your book; enjoying it a lot.
Thanks Wduardo. I appreciate that.
Next question here. [Jam]: is The Level 5 Alerts only on $SPX?
No, it’s on $SPX but it’s also on the /ES, which are the E-minis. And the reason why I went with the E-minis is because you can use span margin, and you can use a lot less money because you are going to use either span margin or portfolio margin. And this is a very special margin that you need to qualify for. When you trade span margin with the /ES, you don’t really need to qualify. I mean, you can get that pretty easy. But when you have $SPX, it’s harder to qualify. You have to have, with InteractiveBrokers at least $100,000, with TD Ameritrade $125,000, with Tastyworks $175,000. Just to qualify for a portfolio margin with TD Ameritrade, you have to pass a test, so it’s not that easy to get portfolio margin. And that would be the preferred method to use with my alerts is by using the portfolio margin; $SPX is better to use than /ES.
There’s a couple of reasons for that. One, the commissions are lower; and two, I don’t like when I put in my GTC trade, my GTC orders with the /ES, they don’t expire. They don’t end at the end of the day and then restart at the beginning of the next day. In case the market crashes, you can make a lot more money; but with the /ES, it’s constantly on. So you’re going to hit your profit target and you’re not really going to take advantage of the crash as much. So it’s better to have $SPX with the premium Level 5 Alerts.
Another thing that I’ve learned recently is that Tastytrade does not let you put in custom orders. And the order that we’re placing with a Level 5 is custom, so Tastyworks does not really work with the system unfortunately. So if you’re going to trade, if you’re going to follow my Level 5 Alerts (Premier Level 5) you’re not going to be using TastyWorks.
Question, [Jam]: is The Level 5, Premier Level 5, better than the wheel?
I think it is because it’s more conservative. So far, it’s just a more conservative approach and, you know, the wheel’s pretty good though. I mean, you have to… We have to put them side by side. I mean, we’ll have them running side by side right now. So, you know, the back tests are pretty similar. So hey, it is possible that this wheel might be better, but time’s going to tell on that, but i wouldn’t put all… I would put more of my money into the Premier Level 5 versus the wheel because the Premium Level 5 to me just has more… A smoother equity curve, more predictability. Not the drawdowns aren’t as high, that kind of thing.
Okay. All right, if there are no more questions, I’m just going to have… I have one thing to say: if the P&L is not real, what are they trying to conceal?
LINKS MENTIONED:
Link to Safe Wheel Guidelines & Flow Chart
Link to my Earnings Edge Alert Service
Link to My Safe Wheel Back Tests GO TO
Link to The Trader Matrix Video
Creating Wealth If I Had To Start Over
Link to Premier Level 5 Trade Alerts
