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. First let’s do a sound check. Can you guys make a comment? Put in the comment box that you can hear me or cannot hear me let me know. Yes? Okay, good. All right let’s get started. So first, if you guys have any questions it’s good to post those questions now to make sure that I’m able to get to those questions. You don’t want to be trying to ask me questions at the end and sometimes I don’t get them. Because there’s a slight delay, so sometimes I don’t get those questions, and then I end the broadcast and I don’t answer your questions so let’s do those now.
All right, let’s talk about the Earnings Edge. What happened last week? Last week was a loss. Let’s see. I think I’m–my stats are 11 wins out of the last 14 trades, but we did $OXY and we had a pretty significant loss, a 2x loss, so I was trying to make around $400, just over $400, and I actually lost $800. So rather than risking, you know, how I talk about risking $300, we actually lost $600, so we’ve lost on a 2x basis, so that can happen.
This is a risky way to go. There are some risks involved and I’m going to be totally upfront and clear about that, but if we look at the account overall year to date we’re up around $750 so we’re still up over 15%.
Okay, let’s get to our Safe Wheel. What’s going on with The Safe Wheel? Well, we could take a look at the market–down another 2% today. You can see here $SPX, and so the market’s going down pretty good. It’s a grind down market not a crash market. Let’s go into this account here. And we can see that I’m holding 100 shares. So I had sold a put a couple weeks ago. I sold the 24.50 put to collect some premium and Macy’s went below 24.50 and I was assigned. And then I have my put hedge here. One thing I’ve noticed about the put hedge is it’s around 100 days.
So if I’m still in this position next week, I’m going to have to roll these put hedges out further in time because they’re getting to a point where they’re depreciating too fast. I don’t want to be under 100 days with these.
Okay, so what shall we do? We have this hundred shares we’re gonna see can we sell a call, because we own these hundred shares, against these shares at the 24.50 strike or higher? That’s the question today.
So we go to the trade tab. Now, of course we’re talking about… we’re talking about this particular expiration cycle. The one that expires this week. That’s the expiration cycle where we ask our question. So we go in here and at 24.50, we can get over that $24, or 24 cents, and at the 25 strike we’re just below it so we wouldn’t sell the 25 strike. There’s not enough premium there, but we can sell the 24.50 strike.
Now, what if I could not sell it? What if this 24.50 strike was not at 30 cents it was at 20 cents, and that was too low? Well what I could do is at that point I would determine whether my overall position is profitable (my hedges plus everything I’ve sold against those hedges), so probably over the last three or four or five weeks. And I would determine whether I was profitable in this particular cycle or not.
If I was profitable, which I am because I did do the calculations. I’m up about $230 because I’ve sold one, two, three, four, five, six about eight times. I’ve sold premium against this position and so I’ve lowered my cost basis down to about 22.48. So even if I were to sell, I would still make a profit. Plus my hedge is up around $1.50 or so, so I would–or $150 or so somewhere in that range. so I could get out of this position with a profit right now if I wanted to.
But if I could not get out at a profit, then I would add a second layer. I would sell another put. So I would have in essence 200 shares that I would be dealing with. But all that stuff being said, I’m able to sell this 24.50 call for greater than 24 cents or 25 cents so I’m going to go ahead and do that.
So let’s sell here, mid-price 32, so you can get 33 for it. Okay, we’ve got 33. Now, I need to protect my hedge. So I’m gonna buy something around $5 or $6. A long call will protect my hedge. So this 27 here maybe I can get this for $0.05 ($5). Okay, I might have to pay $6. $6 is the most I’ll pay. I won’t pay $7.
Okay, so now we have our position on. We sold some premium against our 100 shares. And we have our position on. And I’m gonna come in on–I have my alarm set for Friday at like 15 minutes before the market closes just to make sure that Macy’s is not above… What strike did I just sell? $27? Yeah? So Macy’s is not above 27. If it is, I will sell this call; if not, you know, I spent three minutes looking at the market on Friday; then I come in on Monday mornings. I do not look at Macy’s during the week. I don’t even pay attention to this account until right at the end of the day on Friday and then on Monday mornings. I don’t even really know what’s going on until then. And that’s the way I like my systems set up. That’s what I would call a level 5 trading system.
Also, if you want to see The Safe Wheel guidelines, it’s a flow chart and I still have that available. I’m thinking about raising the price. In fact, I might raise that price later today. I’m not sure yet, but right now I have it at a really good price and it’s just a flow chart. Basically, gets you to understand exactly what to do next. Because in my live streams, I have not gone through every scenario yet. And in that particular flowchart, does pertain every scenario possible with The Safe Wheel.
Okay, and then on The Safe Wheel, what kind of percent? So The Earnings Edge I’m up over 15%. And then on The Safe Wheel, that’s this account here, I’m up $879; starting with $5,000 so, I’m up over 17% year-to-date. And that’s better than normal, because this system averages around 10% a year.
Okay, so next I’m going to get into answering some questions. Let’s see here. We have Francois: How do you roll a position like this? [Do] you explain how to do that in one of your courses? No, not in one of my courses. I don’t explain how to roll a position, so when I talk about rolling a position… let’s see… Let’s say I have this position right here and I want to roll it. Let’s see if I can do it from here. So I’ll just right click here, create a rolling order, and now here’s what I’m going to sell. And then let’s say I want to buy the 21 put but I want to do it in the January cycle, or let’s call it the–that’s not traded–so we can try something else.
So here, so I could roll. This is a rolling order, this is closing this order, and opening a new order just doing them simultaneously. I mean you could technically just close this order out individually and then buy this order out individually, but rolling is doing them both at the same time. I hope that that explains or answers your question.
Oh, so you’re talking about the Macy’s position. I don’t, I don’t roll. I’m not I can try to think about when I would roll Macy’s. I don’t roll Macy’s. I only roll the hedge. I wouldn’t, I don’t, I can’t remember a time when I would roll anything else. So I hope that explained what rolling Is. It is just exchanging one position for another, and I don’t really do that with the shares, and I don’t do that with the Macy’s near-term calls or puts, but I might roll the put hedge.
Okay, John [Macdonald]: Do you expect to continue to make approximately 4% per month on The Safe Wheel Strategy?
No, I do not. Like I said, it’s about a 10% annualized back-tested. I know I’ve been doing quite well. I don’t expect it to continue but, you know, if these markets stay the way they are, look at Macy’s. I mean, it’s just, look at the chart here. Look at how sideways that thing’s going. I mean, that’s just perfect. I can’t predict that the market–that the stock’s going to go perfectly sideways like that. I mean, that’s just if I knew that was going to happen. Yeah, I could make 4% a month, but I just don’t know if that’s going to continue.
Okay, [Guy Redares]: I remember Guy okay. [Guy]: Raise the price, maybe a few more fools would buy it. I know. Maybe these fools would do better if they were just in the market or trading some other type of trading system and they would be down this year. I guess they would be fools if they did that. Or they could have followed this and they’d be up 15%. What do you think about that Guy?
Okay, VFX [Traders]: How many trades per week on average for The Earnings Edge? Just one. So however many weeks there have been this year, I have not traded in two of those weeks. So on average one a week or maybe a little bit less than that with The Earnings Edge.
[L L]: New here, what do you do when your average cost is way above the current price, where you only get one cent for selling a call, do you still do it? Okay so right now, my average price is well above. So this particular cycle… So when I say a cycle when I opened the put hedges about five or six weeks ago, I’ve been selling premium against that lowering my cost basis all the way down to $22.48. And right now, Macy’s is trading at $22.92, so I would make a profit if I were to sell my 100 shares and also my put hedge… What’s that worth? P&L on the put hedge is $190, so I could get out of this position right now and make about $200, $230. So that’s what I would do if I could not sell a call at $24, $24.50, strike or higher. If I couldn’t do that, I would exit out of this position because I’ve made a profit on it. If I had not made a profit on it, I would sell another put and add to my position and I would only do that once. So at the maximum I’d ever have would be 200 shares of Macy’s.
Okay, Ben [Mullins]: What was the year-by-year performance of your back-test? I’d have to look that up. I just know it averages out around 10%. That’s something that would take me a while to kind of go get.
Kevin [Hawthorne]: Good morning.
[Billion Dollar Algorithms]: Can you automate any of this work? It seems like a lot to do. I’m sure it could be automated. I’m not, I don’t write algorithms. I don’t know code. I’m sure it could be coded but it doesn’t seem like a lot of work. It’s actually pretty easy, you know, 3 minutes on Fridays and literally takes me, you know, if I didn’t do the live stream, this thing would take me 5 minutes on Monday. So what is that, 8 minutes, 10 minutes a month. I could, yeah, I would spend on this. I mean, I’m sorry 10 minutes a week.
[Fiat’s Folly]: Re; Level 5 Trade Alerts. Like I’m not sure what you’re referring to there.
Ben [Mullins]: What is the average delta of the put you sell? I’m not sure. I don’t look at the deltas. I just look at something that I can get greater than, you know, if I’m doing a $25 stock, I want to get at least 25 cents, or 25 dollars, when I sell. So I don’t really look at the deltas from that point of view.
David Isaac: Yikes, all my short positions are in the money. My hedge is slowly making money, but not enough to cover the losses incurred so far. That’s interesting. I’d be interested to see what position you have if you’re following the rules, because typically your hedge should cover, because you’re only dealing with 100 shares. But your hedge is hedging 300 shares, so your hedge should be more than making up for any downside that you’re seeing with a position.
Fiat Folly: Do you have a similar live stream for your subscribers in The Level 5 Trade Alerts? No, I don’t have any other live streams, but I do answer all questions in the Discord chat. So you can ask me anything there and I’ll answer.
Okay, are there any other questions? I’m getting ready to end the live stream here. I don’t see anything else. Okay, I just have one thing to say before I part: If the P&L is not real, what else are they trying to conceal?