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 Level 5 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 five 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. Level 5 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, let’s get started today. First, I want to do a sound check. So if you can hear me, please put it in the comment section. Okay, maybe you cannot hear me, because I do not see you. Okay, yes, you can hear me, good.
All right, so first thing I want to say is make sure that you post your questions early. You can post your questions now. That way I don’t miss any of your questions; we get towards the end and I start winding things down, and you ask a question, this thing is on maybe a little bit of a delay, and sometimes I miss those questions.
All right, next, let’s talk about the Earnings Edge Alerts. What happened last week? Last week we did–everything went pretty normal. We went with $BABA, and you can see here the stock $BABA, and made $300. So it was [a] pretty normal trade, and I should write these stats down. I think I’m 13 wins out of my last 15 trades or something like that. So it’s doing pretty pretty well. I am seeing an edge there, and the edge is still there. The edge hasn’t gone away. And so as far as the overall account, we’re up about $1,274; started with $5,000 at the beginning of the year. So just year-to-date, the account is up 25%. So I would recommend that you subscribe to the Earnings Edge if you’re interested in something like that where we trade once a week. We trade a stock once a week, with options of course, so you have to have a little bit of options experience to get in there. And that’s what I would recommend.
All right, next, I want to show you my P5, my Premier Level 5 account. Now, one of the things about the Premier Level 5, I know that you’ve probably heard me talk about Ron Bertino’s course because it is the best course out there, there’s no doubt about it, if you want to learn about options and get to that next level. And I’m one of the original mastermind members. And a lot of the seasoned mastermind members, they’ll ask me for my trade plan. They’ve asked me for my trade plan. And they’ve asked me: how do you make adjustments? What are you doing here? What are you doing there? Because they see me sometimes making money when they’re not making money. And so, that is the advantage of the Premier Level 5. I mean, this is the highest level trading that I think is out there, period.
And because you’ve seen what I’ve done, with turning a $110,000 into over $200,000, and you saw me do it right front of you; so obviously, you know, I have an idea of what I’m doing. Also, right here, we’re just about to break even. We started about a month ago, a little over a month ago, probably five six weeks ago, with $30,000. We’re at $29,800, approximately, and let’s see here. But you can see when we got, when I got this started, we started right up right in here. And you can see that, you know, we’ve had a significant downturn. And we’ve been able to just kind of hold, break even, which is really good, actually, in a market like this. So I do highly recommend the P5, The Premier Level 5, if you have over $30,000. It’s time to get conservative.
Okay, let’s get into The Safe Wheel. See if I can get to the right spot here. So what happened last week with The Safe wheel? Now, I think that Macy’s… I’m pretty sure that they had earnings last week. I don’t even know so it doesn’t matter. Like, The Safe Wheel it doesn’t matter whether you’re coming in earnings or not. With the regular wheel, a lot of traders trade the regular wheel, they do not want to be in earnings. They don’t want to be there. So when there’s earnings, they get out if they can, right.
And a lot of times what will happen is they’ll be stuck in a stock. So for example their break even might be $100 a share, but they’re in the stock at $90, so they can’t get out. And earnings are coming up, and now they’re stuck. Because let’s say the earnings are bad, and the stock goes from $90 down to $80. They’re stuck in earnings. Okay, that’s another huge advantage to The Safe Wheel is that you don’t have to worry about earnings. I wasn’t even sure that Macy’s had earnings last week; like it doesn’t matter.
Okay, and it doesn’t matter what stock you’re trading. Now, let’s talk about the wheel. So what happened last week was–it’s either last week or the week before–I sold the $20 put and I got assign, okay. So I own 100 shares of Macy’s at $20. I also have my put hedge on, and you can see my overall position is up $100. So even though Macy’s went down from… It went down pretty good, I guess, I don’t know. Did it? Somebody mentioned that. Let me see here.
Yeah, it looks like it went down pretty good, last week. Yeah, so you can see what it was around this $20 range or what have you, and now it’s around the $17.50 range. So it did go down. I don’t really come in and look at it until Monday morning. I really don’t pay too much attention to it; so Macy’s went down pretty good. Does that bother me? I mean, no. That doesn’t matter.
So I got assigned. So what I want to do is be able to sell this $20 call for at least $0.20, or $20. So now I know that I’m behind, below, that $20 level. So in other words, I wanna be close to $30, the stock itself, or above $20, or below $40. So I know there’s a situation where if I were to get out of this position, I would change the stock that I’m using. I’d probably go to $BP. If I were starting over, I’d use $BP right now. But let’s see if I need to start over, because I may or may not get taken out of this position. If I cannot sell, get any premium, over that $20 strike, any decent premium, then it’s time to layer. So I’m not even really close, particularly, to getting out of this position. So just because I’m below $20, doesn’t mean it’s like “oh, I’m gonna get out no matter what.” No. I mean, I’m still gonna have the system play out.
Okay, so let’s see what’s going on. Remember, we’re looking at this $20 call and we want to use this cycle here, the one that expires Friday, that’s the one we’re dealing with. And so I’m looking at the calls and I’m looking at $20. Oh, I can get well more than a $0.20 to $0.25 premium here. In fact, I can go all the way to even the $21.50, but I typically like to take, you know, if I can get like $30, I typically like to do that.
So I’m going to sell this $21 call here. I’m going to do one. Make sure you have one (-1) because I’m doing 100 shares. I’m doing a $5,000 account. If I was doing a $10,000 account, I’d be trading two (-2). So you can scale this thing up. So let’s see, mid-price, $0.30. I’ll go with $0.32 and work this down. Okay, so it looks like we sold it at $031.
Now, the next thing to do is to protect our put hedge. You know, the three puts that we have. So I’m gonna buy something for $5 or $6. This one probably wouldn’t get it. I might be able to get the $25.50 for $6. I’ll try $5. See, make sure we get that right here. I have my setting to default at 10. I’m going to make a note of that: default one, okay.
Okay, got that for $5. All right, so probably a lot of you might have thought: well, it’s below $20, he’s going to get out of this position and start over. No, I’m going to wait till I let the position play out. So that’s the position playing out. And on The Safe Wheel, doing the calculations, year-to-date it’s up about 21%. So that’s good, obviously, better than the market and it’s doing better than normal, I guess. You know, my backtest, if you’ve seen anything about what I said about my backtest, it averages around 10% or 11% a year. So we’re doing quite well this year. Macy’s has been good to me, or good to us, have you been following.
Okay, also, if you want to know exactly when or how I’m trading, I do have what I call The Safe Wheel guidelines, and it’s a flow chart and some guidelines. So it’ll tell you exactly what to do, when to do it, because you might be able to follow all my live streams, but there’s probably a lot of scenarios that have not occurred yet. So if you want to see every possible scenario, then you would go ahead and get in my live chart, my flow chart, and you can see a link in the description for that flow chart. I haven’t raised the price on that yet. I may raise the price. I’ve been thinking about it, but I’m going to leave it where it’s at for a little while.
Okay, now let’s get into the questions. See if I can get this here.
Walter [Paul]: Good morning. M clobbered. And he sees the value in the long puts.
Absolutely if I didn’t have long puts, I would be down pretty good on this particular position. So it’s always nice to have those long puts there. That’s why it’s called The Safe Wheel as opposed to the regular wheel.
All right [THE UNDERGROUND SAUSAGE]: wow.
Not sure what you’re referring to but cool.
All right [Allen Essen] says: how about $BP, $MRO, $SU, $HPQ.
Well, I can look at $BP real quick, just to kind of go through why I would pick another stock. Let’s see here. So if I put $BP in here, first thing I want to do is check for liquidity. Meaning these bid-ask spreads right here are very close, very tight. That’s very good. If they’re far apart, it means there’s not good, as good liquidity. You want the most liquidity. You can get $BP is a very good stock. The price is close to $30. That’s where I want to start. I would definitely use this. And, you know, look 150 to 200 days out, can I get something? Can I buy those long puts? Yes, so $BP looks like a decent stock.
I’ll just look at $MRO a little quick . Oh, this is pretty good, good liquidity. Let’s see what the price is, $27, yeah. Yeah, this would be a good one. This one was not bad. So yeah, you’re on the right track.
All right, next question here. Jerry: What was your biggest percentage loss with the Earnings Alerts?
We had a 20% loss on one trade. And even my backtest never showed that, so that was a very interesting situation. And it can happen. Okay, and it’s only happened once. And in fact, there’s a good possibility that we could make 20% on a trade too, because we don’t keep our… We don’t put GTC orders. We put limit orders. So at the end of the day, that order expires. So the next morning, if there’s a big move in that stock, we can come in and sell it and make big profits, like 20% profits. But, I haven’t done that yet, but it’s possible.
[SuchBaklava]: Question, what are their trading channels do you recommend?
Really just Tastytrade. I like David Jaffe too because he’s honest and he’s trustworthy, but I’ve done quite a bit of reviews and there’s been a couple of positive reviews. So my semi-positive reviews, mostly not positive reviews, but Tastytrade is a great place to go if you want to learn things. And you learn them for free, because their business models are set up that way, right. They’re not trying to hide anything in order to make money, so they’re telling you everything they need to know.
Most of the options educators out there, I’d say 99% of them, are selling you something that you can get for free. And you can get it for free at Tastytrade. So that’s why I recommend them, but I would not trade like them. Because I’ve made a video about the Tastytrade, you should check it out and you’ll see why. You’ll see why I would not do that.
[Walter Paul]: Three days to $M earnings.
Okay, well the earnings are coming up then. Okay, great. Maybe that’s why the premiums are so high, you know, being able to get that what three strikes away and still getting that $.050, yeah, good. It doesn’t matter to me Macy’s goes down 20%, down 50%, up 50%, I’ll be fine either way.
Okay, [ZeddyZed-Mobile Legend Marksman Main]: can we see the overall P&L for the wheel?
For the wheel. The Safe Wheel, you need? Let’s see. Am I in The Safewheel account here? Yeah, this is it here. Here’s our overall P&L. $6,044. Started with $5,000 at the beginning of the year.
Okay, [Jms 54]: hello, what about $LVS, does it go through the filters?
Let’s see . $LVS is trading at $33. Yeah, that’s close. Yeah, $LVS looks like a good candidate. $LVS does look pretty good. There’s quite a few candidates out there, and it doesn’t matter which one you pick. Oh, as long as you can get the premium of if you’re out of the money and you can get 1% or better. This one’s got a lot of premium, so this one worked quite well. I didn’t really check the premium on that… What was it, $MRO? Yeah, $MRO has a good premium too. Yeah, these are all good stocks.
Okay, next question. [ZeddyZed-Mobile Legend Marksman Main]: how much money are you up on the wheel?
Yeah, right there. It’s $1,150 or approximately 21%.
Okay, let’s see. What is this? I got lost here. All right, [Matt Hernandez]: Do you normally wait a little while after the bell on Mondays to avoid the big movements?
Yeah, I mean with a Safe Wheel [it] doesn’t matter, but I always like to let the market open. I usually look at my accounts about 7:15–around 7:00 to 7:30–and I’ll make my decision on what I’m going to do. And then even if the market, let’s say that I’m not… Let’s talk about the P5, The Premium Level 5. Let’s say that I need to make an adjustment. Well, I’ll check and see at around seven-ish, between seven and eight. Do I need to make an adjustment? And I’ll make it; if I don’t need to make an adjustment, then I won’t make one. Even if the market changes, and like at the end of the day, [I’m thinking]: oh, look, now I should make an adjustment. I don’t make it. I just wait till the next day to make the adjustment pretty much. I mean there’s rare occasions when I might do that, but for the most part I just look at my account once a day on The Premium Level 5. And then of course The Safe Wheel, I just look at my account once a week. And just quickly on Fridays, I have my alarm set for Friday afternoon, just to look at at the end of the day to make sure that my long call is not in the money. And if it is, I’ll sell it.
Okay, Eduardo [C]: do you think there’s something special about the stocks in this range to make Safe Wheel work or may it work at any price levels?
It’ll work at any price level, but the way that I’ve sized my positions is to trade it around that $30 level. So I use about $5,000 and I use one contract and I wanna be around the $30 level. If the account or the stock is at $60, well then it kind of throws off the sizing aspect of things, right. And I can figure it out and extrapolate it and all that kind of stuff, but I did my backtest based on that type of sizing. So that’s the reason why. If you understand the sizing and how to size, you can use any stock that you want, but you’re gonna need more than $5,000 to trade a $60 stock, right? You’re gonna need $10,000, right. So that’s the reasoning behind that.
[Jerry]: what is the max drawdown on The Safe Wheel?
That’s a good question. Typically you must be talking about a certain cycle that loses money, because, you know, once the cycle’s over you start over. I haven’t seen; I don’t know, I’d have to look that up, but maybe 3%, 5%, maybe. I’d have to look it up though to verify that, but not very much.
Next question. [Ana Poff]: I like $BP so buy the October 25 put, sell the 31 put?
Yes. So $BP, what is it trading? $BP, $32.25, so take about 80% of that, so 32.25 times 80%. Yeah, total $26. I’d go around the $26 range for my strike, for my long three puts. And sell which one? Or actually I would sell a put. Let’s see which one. Well, I want to get at least $0.30 minimum, so $31.50 is cutting it close. You could do that one or the $0.32. I will probably sell this. Well, it’s right in there, either one. All right, yeah, the 31.5 that’s probably the one. Yeah, you’d probably go with that. Yes, you’re pretty close. You’re right in there. Three puts in October, right. So the three puts, you want to be between 150 and 200 [days]. The October one would work, sure.
Okay, all right, Matthew [Flaherty]: Thanks just bought the flow chart. Ran into the normal wheel problem with Nvidia.
Yeah, Nvidia, there’s… If you’re in Nvidia right now, et’s say that your cost basis is, I don’t know, $100 and you’re down to $90, or whatever it is, you’re coming in the earnings. So what are you going to do? You’re just hoping and praying that earnings look good so it goes up. So you’re directional. And whenever you’re directional, you’re adding risk to the equation.
The goal is to be non-directional, because to pick a direction and make money off of that, I haven’t seen really anybody be really successful at that. I’ve been asking people whenever they come to me and they say they make money day trading, I’m like “okay, show me that you’re… prove it to me that you’re making money day trading.” And they never do. Maybe there is somebody out there. There is someone out there making money day trading but I don’t they don’t prove it to me.
So I can afford 200 more shares. Would you do The Safe Wheel on Nvidia, if it was you or use a lower price stock?
Well if you understand sizing, you can use Nvidia, but I would stick to the $30 socks, because there’s no reason not to.
[Allen Essen]: Is [the] remaining time on the put hedge too short?
Once it gets under about a hundred days, that’s when I start thinking about how am I going to get out of this thing. I’ll roll it ,but that typically doesn’t happen. Usually you’re out of the cycle before you get to 100 days, because you want to be over 150 days when you start the cycle.
Okay, Will Mach: thanks.
You’re welcome.
Okay, let’s see here, [ZeddyZed-Mobile Legend Marksman Main]: how would you recommend for The Safe Wheel? How much would you recommend?
Well, I recommend $5,000 in order to get used to it, to understand it, to get to run it for a while to really know it well. And then after that, then you can size up.
Next, [Will Mach]: I’ve been using $DASH and it’s worked out great.
$DASH? I don’t even know what that is. Is that the delivery service that I use? Doordash, yeah. Let’s see. Wow, they’ve got some pretty well, yeah, so you’re at this higher level so you got to make sure your sizing is in check here. That’s why I wouldn’t use it. I don’t want to get confused about my sizing, but if you understand it, you’re good.
Or $DISH? Oh, $DASH, $DISH. Okay, $DISH so you’re starting to get to that level where it’s getting a little bit low on you. And these are not as liquid. Like there’s more see how this is $0.15 and this is $0.30. So this is, you know, it’s not bad. It’ll work, but I would prefer a little more liquid stock for this, but you’re still making it work. You can make it work.
Okay, [Universal Items]: seems that it is not free? Costs $59?
Yeah, for The Safe Wheel, for the flow chart. But if you want to follow me and do exactly what I’m doing, that’s free because it’s here live.
Okay, Joel [Bambas]: On a new trade, how low do you go to buy the long puts?
Oh 80% of the current price. Whatever the price is multiplied [by] 80% and that’s the strike you want to go. That’s how low you go.
[Marktlog]: what would be the downside of closing the position taking $100 profit, [and] starting over again with another stock?
No, no downside. Dude, go [do] that. That’s not a bad idea at all. That might work fine. I’m just sticking to the strict rules, but if you want to take profits and start over, that might even work out better than what I do. Nothing wrong with that at all.
[Marktlog]: $100 would be 2% of the 10% yearly profit all on its own.
10% daily, yeah, I mean, nothing wrong with doing that; taking profits and starting over. Especially, when you’re out of that, you know, $30 range or I should say below $20 or above $40.
[Jms 54]: Is it better to enter the trade on Friday to get the full week or next Monday?
The problem with entering on Friday is that you would have an existing position open while you’re opening the other position. And then you could get into margin problems doing that. I want to have a total clean position coming in on Monday. I either got assigned or I didn’t get assigned, and there’s nothing going on and I’m not overlapping positions.
[Jerry]: the P5 what’s the maximum drawdown?
The maximum drawdown I’ve seen is probably about 4% or 5%. When the market crashes, it will go down with the market. If the market crashes 7%, it’s possible it could go down 7% that day, but it will recover very quickly. And so it has drawdowns. Now, I’m re doing some of the calculations on my backtests, but uh the calculations are difficult to see right now, but I’m almost ready. But it could be up to 5% to 10%. Let me just say that, I’ve seen the Synthetic Dragon, which is very similar, down 14% at the highest that it’s ever drawn down. But it averages around 20% and at one time it was down 14%. So those are the kind of numbers that I expect to see. But I need to redo the backtest, or not the backtest themselves, but the calculations after I did the backtest, so I’m doing those.
[Don McDonald]: Why not take the long puts profit and reposition?
Now, you can do that. There’s no doubt that is not a bad idea. It’s just not part of the rules that I have set out, and it’s not a bad idea to do that at all.
[Iraqi Trader]: Can you show us example on $AAPL?
Yeah, I mean $AAPL. Probably one of the most liquid stocks, if not the most liquid stock. You know, you’ve got good liquidity. You’ve got good premium out of the money, but you’re 140. So now, you got to size things properly. So what is that? Five, four times three is 120. Five times two… I mean you gotta be dealing with $25,000 to deal with this stock and trade one contract. So the sizing kind of is off and that’s why I like the $30 stock because it doesn’t matter which stock you choose, as long as you have those that have liquidity and the premium.
James [Grimsley]: 3-5.
Not sure what you mean by that.
James [Grimsley]: is what I drew down for a loss.
You go down. What’d you draw down? I’m not sure what you’re referring to.
[ZeddyZed-Mobile Legend Marksman Main]: can you create a video on what step you take to make a profitable strategy?
The steps I take? I backtest. I have an idea, a thought, and I backtest it. And then typically what will happen within my backtests is that I’ll realize: oh this isn’t working right away, here’s the problem. So I’ll tweak it and I’ll start my backtest over again. And then, I’ll go for a little while and I’m like: wait a minute, there’s a problem over here. Problem X. Let me solve problem X. Solve that problem. Start over. Oh, now, I have problem Y. Okay, problem Y. Let me try to solve problems Y and X at the same time. And start over, and then I just keep doing that until I don’t have any problems. Which, I think, is pretty rare; I don’t know if a lot of people can do that or not. I just have a lot of experience, basically, been doing this for almost 30 years so I can kind of identify those problems, and I can identify what I need to do to tweak those problems, and that’s what I did with The Safe Wheel, and all the systems that I’ve created.
[Jms 54]: what is the losing scenario?
I’m assuming with Safe Wheel? We haven’t lost money, yet. Usually, when the stock goes up, right, and it’s typically not when we get called away, not when we’re long stock, but maybe when we first sell a put. Maybe we sell it, we make $30. Then we’ve got the put hedge on and the stock goes up and the put hedge can lose more money than that $30 that you made because you go up significantly and the put hedge is losing money. And then you’re already at a loss but you’re in the system, right, and you’ve got to roll that put hedge up. And then you go through the cycle and you maybe break even in the cycle, or what have you. So overall the position could lose like that. I hope that makes sense.
Jerry: Instead of diversifying a $100,000 account, I think this is a better strategy with one stock?
Absolutely, you don’t need to use multiple stocks with this system. Yeah, just use the one stock. That’s one way that I create my systems. I make sure that they are simple. I don’t want to get complicated here. Like with a traditional wheel, you might have five positions. It just makes it more complicated, you know. It’s not that complicated, but still it’s easier to just use one stock.
Eduardo [C]: thank you very much for The Safe Wheel playlist. Watching all and learned a lot.
You are welcome, Eduardo.
Chanan [Siegel]: is the 80% based on the stock price, or is it based on your sold put price?
It is based on the stock price.
Sharon [Narbona]: thank you Karl. I also bought your flow chart.
You’re welcome.
[Iraqi Trader]: cool thanks.
You’re welcome.
James [Grimsley]: someone was asking what the drawdowns were if you had a losing cycle on Macy’s. That was the loss, about $200-ish on the first contract cycle.
Okay, so $200 on a $5,000 account, you know, what is that 4% or something; not even that. So yeah, pretty low drawdowns. And that’s the key to a lot of these trading systems, or a lot of trading systems. Keep your drawdowns low because that’s how you preserve capital. And if you can preserve capital, that is the key and that’s why we talk about Level 5 trades, or I talk about Level 5 trades all the time. Because you’ve got to preserve your capital, low drawdowns, that’s the key.
James [Girmsley]: the put hedge was where I lost money. I bought them on a day the price was down in on the range, probably the lowest point.
Yeah, so again, that’s what I talked about, how can you take a loss. Well, you get into a position where you’re selling a put and then you buy the put hedge, and then the put makes you $30 but the put hedge loses $90 or whatever, that kind of thing.
Okay, are there any other questions?
Yes, okay, [Universal Items]: why do you need three put hedges? Would one do the job?
No, because there’s a possibility to be long 200 shares if you go into your second tier, and you want to have more puts than you do… You want to have a higher amount of puts and the reason is because they’re further out in time, so their delta is lower. And if you’re long 200 shares, you know, that’s. you know, your Deltas are fully allocated to where your put hedge is further out in time. So it doesn’t increase in price as fast as something that’s at the money, or if you just are holding the shares. So you need to have more of them and I found that the optimal amount is three.
Okay, Guy [Redares]: [You are a genius and very handsome too.]
All right, guy. You’re my favorite guy, guy. Always have something interesting to say.
Okay, Jerry: on the loss would you sell the whole position?
Okay, on the loss? Yeah, I mean, you’re gonna sell the whole position over you can because you’re gonna have to roll the put hedge up anyways. So in essence, you are starting over. You know, you’re not long any shares. You’ve got to roll that put hedge. You have to keep it at 80%. If it goes down below 70%, you wanna push it back up to 80%. So it is like starting over.
All right, thanks. Okay, thank you guys. I’m gonna wrap this thing up. I don’t see any more comments. One thing I’d like to say: if the P&L is not real, what else 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
