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 design 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 50 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. This morning we’re going to talk about The Safe Wheel amongst other things. First, I would ask that everyone start posting their questions now, because sometimes we get towards the end of the live stream and people have questions and I’m ready to stop the live stream so I miss those questions. So if you post them now I’ll be able to get to those.
Let’s see. Let’s talk about the Earnings Edge Alerts. I like to always talk about what happened last week. You can see my results of the Earnings Edge Alerts here. I do have one loss that’s significant, but all the other losses are actually less than my potential gains. I usually shoot for about 6% of the account, so I’m either trying to make 6% or I’m risking 6%. But you can see here that I lose less 6% of $5,000 is, you know, around $300. That’s what I’m shooting for. You can see a couple times here where I made less than the 6% and then when I lost, I lost less than 6% almost every time. And I’ve hit eight out of my last nine trades.
Now, last week I did not place a trade at all because there was no–there were no trades to be placed. You know, there’s not a lot of stocks coming out with earnings and sometimes you’re going to get those weeks, those rare times, where there’s no trades available.
So what I’m thinking about doing is making up for that and maybe possibly doing more than one trade during some of the weeks that’s available. Okay, so that’s the Earnings Edge Alerts.
Let’s go to the other account with The Safe Wheel. What happened with the Safe Wheel? Let’s go to positions here. Last week I sold a put, the $24.50 put. And of course I have my put hedge on here. So I got assigned. So on Friday Macy’s was below $24.50. So I own 100 shares and that’s good. Nothing out of the ordinary going on there. And what is Macy’s trading for: $24.65-$24.66.
So what I’m going to do next is I’m going to actually, you know, do what you do with the normal wheel strategy. And I’m going to sell a covered call against my 100 shares and as long as I can get at least 1% of the actual price of Macy’s. So at least I can get $24 or $24.50. You know $0.25 out of the money. I’m pretty sure I can do that.
Let’s take a look at the options chain. So I’m going to use–they’ve got some different strikes in here. They’ve got some that expire today, some that expire on Wednesday. This is new. So we’re going to do the ones that expire in four days on Friday. Usually, they’d only have the ones that expire once a week but it looks like they’ve got them expiring three times a week now, look at that. Okay, so we want to make sure we pick the right one. It expires in four days and go into this particular cycle here.
Oh, that’s because I’m looking at SPX. Maybe I should be in Macy’s. Okay, let’s take a look there. Okay, so these expire once a week so I’m in Macy’s now; make sure I’m in the right Underlying.
Okay, but it looks like SPX just increased the amount of expiration cycles which is interesting.
Okay, so we’re here. We’re gonna go to the one that expires Friday. We’re on Macy’s and the stock is trading for $24.25. We want to make at least $0.25 selling a call so we wouldn’t sell the $26. It’s not enough. At the $25.50, we can get at least $26. And then we have the $25 which is, you know, we’re getting really good premium here. I like to sell the one maybe a little further out because if I get called away that’s kind of where you make the profit in this system.
You know the difference between $24.50 and $25.50. That’s $100. So that would be nice to get called away and that’s kind of where, you know, you kind of hit the profit. So I’m gonna sell one of these–just one because I’m doing one tranche–the mid price is .30, I’m gonna try to get .31. Working orders; try to get as much premium as I can. Looks like I’m chasing this. Okay, so we got filled there.
Now, one more thing to do. We have this put hedge on. If Macy’s just pops up to like $35 or something crazy, we want to protect this. We don’t want this to really cause us to have a heavy loss so we’re gonna protect the hedge by buying a long call for around $5 or $6. If I can’t get this one right here for six, I’ll take it for seven. I won’t. Let’s see what we can do here. Buy one of these to see if I can get it for six. Yeah, okay, good. So paid six bucks for that.
So now we have everything we need to do for the week. I have my alarm set for Friday right before the market closes just in case Macy’s is above, what number, $27 so fall and collect that premium I don’t want to get assigned or I don’t want to take possession of the stock at $27. So I have an alarm set to take a look at Macy’s on Fridays at the end of the week when everything expires.
Okay, one thing I do want to talk about real quick, just kind of a quick announcement. I am starting a brand new alert system. So I still have my Earnings Edge Alerts, but I have my Premium Level Five Alerts. And this is for when you get your account up to about $30,000 I think it’s really time to start conserving the money and it’s time to start creating time not just money. So this system creates more time. You know, you trade maybe once every two weeks and it’s not like a rush-rush kind of thing. And you can follow my trades and the minimum account size is $30,000 which you can go up to you know million or up way up high. And I use a span margin or portfolio margin. And I’m going to actually have my first open trade on Friday where everyone can follow me.
And like I said, once you start getting to the higher levels like $30,000 or more, you want to start conserving. You want to start conserving your time and your capital so you want to start trading a certain type of system that I would do. This is what I would do and this trade system is very similar to my Synthetic Dragon. So if you like my Synthetic Dragon and how that works, this is the trade for you and I put a link in the description.
Okay, so let’s get back to–we just did The Safe Wheel. Of course, with The Safe Wheel, that I just traded, there’s a flow chart available. And I have that on a discounted price right now. I’m not sure how long I’m going to keep it at that price, but there’s a flow chart to tell you exactly how to make this Safe Wheel trade, and that’s available in the link in the description.
The Safe Wheel is up about 12.9% this year which is really good because I really only expect around a 10% return per year. That’s what the back-test did so this thing is really doing well.
Now, as far as the Earnings Edge, that’s if you want to take a, you know, I recommend you start with a $5,000 account. That’s what I would do. And you know we’re risking 6% a week so it’s a pretty volatile trade this Earnings Edge. But it’s got really a good edge to it. It’s got symmetric type returns or asymmetric potential. Which means that if the stock really blows up a high or low you really can make some good money on it. But if you’re looking to turn, you know, $5,000 into $10,000 and then $10,000 into $20,000 this is the way that I would do it, you know, if you wanna take some risk and try to double your money this is the way to go.
In fact, I think it would be a good idea if I only had $5,000. What I would do is, I’d try to do the Earnings Edge Alerts; try to turn that into $30,000 and then go into The Premium Level Five. That’s how I would create my wealth starting with a little bit of money.
Okay, so let’s get into the questions. I’ll start here with the first question.
Hayden [Hoggard]: is there a max price you’re willing to pay for the long? No, I don’t look at the price. I just look at, you know, DTE between 150 and 200. And whatever the price is
I’m willing to pay that because I’m only going to have an X amount of depreciation. And the reason why I’m buying those three long puts is obviously to cover me on the downside, but I know they’re not going to depreciate very much. I don’t have any kind of price range.
Joe [Stutzke]: template is working well, will you offer to update this as changes are made. Well, I haven’t made any changes to The Safe Wheel since I’ve created the template and I don’t think I will have to. There might be a rare occasion but I think I’ve seen every scenario or played out every scenario, because when you back-test, I mean, that’s the key. When you back-test something it’s laborious and boring, but you learn exactly every fine little detail of your trade system and I think that’s what I’ve already done.
John [Vizcarrondo]: wrong underlying! Yeah, I figured that out pretty quick. When I was trading that.
[Joe Stutzke]: you’re on SPX.
[Eduardo C]: have you considered buying just one put at the money as a hedge instead of three at 80% out of the money or [does] the out at the money hedge protect you more? Yes, it would protect more but it depreciates so fast that the near-term options that I’m selling are not going to compensate for that hedge. So we need to–when you have a level five trade system–you have a hedge on and when you have a hedge, you need to be able to finance that hedge. And you need to be able to make more money than what that hedge costs but yet have that hedge protect you at the same time. And if you use something at the money you’re not going to be able to finance that hedge properly.
Okay and let’s see. Emmanuel [C]: after assigned 100 shares and you’re unable to sell a call above 1% (which would be out of the money by the way) I would sell a put for the second hundred shares? That is correct. Could you also still sell a call for the first hundred? See that’s the thing. I wouldn’t sell the call. I would not sell the call with the first 100 shares–I’ll call that the first cycle–because if Macy’s, for example, goes up high I don’t want to be called away. That’s one way that the system makes money. It’s those little outlier things that happen when you’re long shares. Those are the kind of little things that have this system make money. So you’re holding those 100 shares but you’re not going to get called away so Macy’s moves up significantly that’s a win. It’s a good win. So you need to take those good little wins, that’s how the system comes out ahead. So I would not sell it.
[Emmanuel C]: feels like a waste of time just having a hundred shares sitting and doing nothing. Yeah, but I just explained they’re not doing nothing because when Macy’s goes up higher, I get to get all that. My profits aren’t capped.
TCrum84: I purchased the flow chart for the safe wheel. I was recently assigned my second 100 shares. So now you’re long 200 shares. You’ve sold a covered call on the t2. But where do you go after that? I’m still the cover calling the T2 so you hold your T1 and you just treat the T2, you just continue to sell covered calls on the T2. Now, hopefully Macy’s goes up and you’re able to get called away on your T2 plus your T1 now doesn’t have any cap so you get all that money back and you get to a level to where you’re in profit and you sell everything and start over. Or your T2 gets to a point where you can’t sell anything against it and that’s when you get out and you might even take a loss at that time and you start over; but your hedge will most likely cover your losses; but you still get out when you can’t sell any premium anymore. That’s when you get out of this. You get out of that cycle and you start over.
[Eduardo C]: Do you think the three puts 80% hedge will offer a good protection in case of a market crash? It will. It’ll be awesome. You’ll make a lot of money, you know, if the market crashes. That’s what we want. Okay.
David [Issac]: what is the average ROC of all your strategies? Well, which, okay. We’re talking about The Safe Wheel that’s around 10%. Earnings Edge, I can’t say. I haven’t ran enough back-tests on that. I believe I’m going to be able to double my numbers if I win three out of every four trades. I should be making 10% a month. That’s crazy talk but it’s, you know, it’s a lot of risk so that’s the Earnings Edge.
And why do I need to develop several strategies? So the reason why I do, first of all, I do The Safe Wheel to help people because there’s a lot of people running that Wheel Strategy out there and people are getting annihilated. Their accounts are getting annihilated with this stupid wheel strategy that doesn’t work. People are getting killed so I put The Safe Wheel out there for free. That also helps me because it creates content for my Youtube, you know, for Youtube and it brings in people that can see that I can provide value for them and bring them into the Earnings Edge. So why do I have several strategies? Earnings Edge is a nice little strategy for people that want to risk a little and make a little, you know. So that’s why I created that. I didn’t really create it. I mean, I found it and then I tweaked it and I’m like wow here’s an edge so I’m just gonna, you know, share it with people and sell it and help people with it and make money with it too, you know.
As a capitalist, that’s what I am. I’m a business guy. And then I have my other strategy which is my Five Step and I think of the Five Step more of a training, because it’s been pretty flat over the last year. I haven’t lost money, you know, significantly, you know; but people aren’t losing money with it; but they’re learning a lot by trading that five steps. So it’s more of a training. How do professionals or how can you learn how to trade options properly which you won’t get anywhere else.
And then I have I just launched my Premium Level Five which is, you know, when you get to a certain level it’s time to start preserving your capital. It’s time to start diversifying and it’s time to start creating time, not just money with your investments. And so those are my products there, of my four products. And they all kind of fit together when you think about it.
Okay. [Guy Redares]: @tTCrum84 you actually paid this idiot? So I must be an idiot. According to this guy, ‘guy’, I guess you’re referring to me. So if you have some type of trade that you’d like to show me that works I’ll be open to look at it.
Okay, [TCrum84]: how many DTE would you roll your put hedge to a strike further out? So if I rolled my put hedge, I would stay within the same cycle unless I was… I really don’t have that on the rules so maybe that’s something that I can look at, but you can roll that out too also to 150 to 200 DTE. So I probably would want to do that too, right. So you’re just basically starting over when you roll it.
[Guy Redares]: five step disaster. Okay, so I would say a disaster is when you lose money trading but I wouldn’t say a disaster is when you maybe break-even; maybe make a little bit of money, but you learn something important of how to trade properly. I wouldn’t call that a disaster. And guy, I’m probably not going to refer to your comments anymore because you’re wasting everyone’s time.
Okay. James [Grimsley]: appreciate you going over this week. Down $100 this year on mine, but can see how it makes sense. Yeah, it just depends. You can get into different cycles and each cycle is going to make or lose money. Most cycles make money so you maybe just happen to get into a bad cycle and that happens.
Okay, let’s see here. I’m getting close to shutting this down so if you guys have any questions be sure to put them up there.
[The Shovel]: hey, you guys be nice to kool Karl. we’re all learning. Yeah, thanks. Thanks, Shovel. Appreciate that.
Okay, we’re gonna shut this down unless there’s any other questions. All right, we’ll see you guys next week.