Profit Takers

Shroudhaven is a unique city that boasts remarkable advancements in data transmission. Thanks to their ability to move objects using energy waves, a technology they refer to as "teleportation," they have become a beacon of innovation in the world. The planet's cloudy atmosphere, however, makes it challenging to live under low light conditions, which has led to the city's inhabitants being called "Dimarians" or "Dims." The constant cloud cover results in frequent rain and a pleasant, cool climate, making Shroudhaven a delightful place to live if you're fond of wearing trench coats.

The city is built both above and below ground, with some buildings having impressive magnetic islands that appear to float in the sky. Unfortunately, building materials deteriorate rapidly in their climate, so the city is continually rebuilding areas. It's essential to stay in well-lit areas to avoid the dangerous slums that arise from a lack of funding. The city is politically divided between those who live underground and those who live above ground, as well as between those who live in the illumination and those who prefer the twilight.

The Radiant Alliance is the ruling political party in Shroudhaven, and they spare no expense in showcasing their power and control over the city. They ensure that their presence is felt everywhere, from public squares to the darkest alleys. To maintain their grip on power, the Radiant Alliance has established a strict police state. They use enforcers and truth marshals to enforce Radiant laws and ensure that dissent is swiftly silenced. They monitor all communication channels, including public speeches and private conversations, to identify any signs of rebellion or disobedience. The Radiant Alliance is a powerful force that tolerates no opposition and is willing to use any means necessary to maintain its hold on power.

The Shadow Syndicate is the minor political party in Shroudhaven and is given a separate zone outside the protected wall manned by the Enforcers to prevent civil war. The outer rings of the city interface with the rural Twilighters, who receive less energy in exchange for taxes. The Twilighters invest in underground communities for protection from the weather, while their above-ground neighborhoods struggle to avoid becoming slums. The Radiant Alliance (RA) is the federalized overseer of the city's senate system, using enforcers and truth marshals as police state instruments. However, they cannot arrest anyone in the Shadow Syndicate's territory without a grand jury's approval, which creates a system of checks and balances to prevent violence between political parties.

To spread their message of happiness and prosperity, the Radiant Alliance illuminates the nicer parts of the city with neon billboards and video screens that display uplifting messages and images. These displays aim to inspire hope and a sense of unity among the population, but the RA also uses them to broadcast information about their laws and regulations. Enforcers patrol the streets to maintain order and ensure compliance with these laws, often with the assistance of Truth Marshals who serve as judges and enforcers. While the Radiant Alliance is generally viewed as benevolent and effective, there are some who question the wisdom of placing so much power in the hands of a few individuals.

I ask ChatGPT to give me some AI recommendations. The first list wasn't much of a surprised. I like smaller companies for long term growth.

The Queen always top decks a winning card.

Been a while since I've purchased shares. Looking forward to this stock going public. Youtube's best competitor.

In 2020, my account took in $600 in dividends and distributions.

I enjoy selling options for the bulk of my income but I needed a portion of my account to deliver a return whether I sell options or not.

With that in mind, growing my dividends has become a more prominent goal.

I've been trying to 'replace' or match the cost of my smallest bill. I pay $1320 a year to AT&T ($T) for mobile services. This became my goal for 2021. I didn't quite make it so I will carry the goal over into 2022.

It takes a lot of patience and dedication. Here are some different approaches:

$SPHD. It would take $39,000 in stock to achieve $110 a month in distributions.

$CLM. It would take $13,000 in stock to achieve $110 a month in distributions.

CLM is a closed end fund so it pays really well but has more risk.

Whenever I sell stock, I "scoop" the profits and buy a dividend fund with the profits. It keeps my seed capital available and ensures I always take profits on stocks. This process has a added a lot of value to my dividends.

It's not a perfect system as some stocks grow value faster than trading but those are generally the S&P's top performers. Thanks for reading. Let me know about your dividend goals.

$CEI

Volume leader on the NYSE. Many think this is a bullish story. They ignore the fundamentals.

When you look at the volatility profile of this stock you will see a massive rise. That is all the movement up to the green line on this chart. The volatility continues to fall off because the buying is tapered. Let's walk through the candles.

1: Engulfing red candle. The run is over.
2: Closes below the preceding candle. Sign of buyer exhaustion.
3. Re-test of the sell wall. Further confirmation to run with profits.
4. This stock has 299% short interest. The liquidity is gone. There is more sellers than buyers by a mile. Sellers needed two daily candles to exit their positions.
5. Participants with borrowed shares are required to buy back their short shares to close out the position, this causes ultra high volume and a green candle. Retailers foolishly think this is bullish. It's not. Retailers climb back into this trade.
6. Participants that close out their position on #5 can re-enter bearish positions to drive price back under the EMA line.

What will happen next? It's all up to the retailers. They can drive the price higher but it's very difficult. They need to close this candle above the EMA. It's important to note the green daily candles closed above the previous line of resistance (green line) and all candles closing under the current line of resistance (red line). Pay attention to closing candles with the volume.

I'm on the sidelines watching for now.

This is a really good read. I would encourage everyone to take a look.

https://www.marketwatch.com/story/this-investment-mix-beats-the-sp-500-by-a-mile-2021-02-25

This investment mix beats the S&P 500 — by a mile The ultimate buy-and-hold portfolio for 2021

$BBIG

One of the leading stocks today.

Normally, low fundamental companies have the pattern shown on the weekly chart (on right). V-Shaped selling into buying then an established trend is formed. Think, support and resistance.

On the left, you see the pattern is different. Red dot on red candle. It means it will be short term bullish. Intense contractions on low volume. Market Maker is pushing price action into the sell walls. Basically, a pump and dump if I had to guess the next 6 weeks of candles.

Retailers buy the call contracts thinking there is more to this "run".
I don't think this is sustainable. We shall see.

$AEHR

This semi conductor company is leading the market today.

Green circle= buy signal/continuation of bullish trend.

2= Price action gaps above the previous price formation. I think the price action will attempt to fade back towards the black line. The price action should bounce off that line or consolidate. Otherwise, it becomes a sell signal.

This looks like a decent stock to sell options against. I would try to keep the strike price as close to the black line as possible.

$AMC

When a candle closes above the black line, it's generally bullish. As a rule of thumb the price should shoot up by the width of the 'bull flag'. I use a drawling tool to measure the distance and then move it above the bull flag to create a profit target or short target.

This formation is a great example of a fake out. Buy signal into a sell signal. The short interest on AMC is very high and continues to rise as price action rises.

I was watching this stock so I could short it from the green line down to the EMA. Unfortunately, the price didn't get high enough. I try to work from the outer edges.

Low volatility annualized stocks trend upward.
Think--Leaps on Blue Chip stocks.

High volatility annualized stocks trend downward.
Think--Short selling pump and dumps.

These fundamentals allow you to get on the winning side of the trade.

There are exceptions to every rule but these fundamentals are near-constant over 12 month period.

$NKE

I got a sell signal on one indicator and the stock has continued to rally. It's usually better to have more than one type of validation to an assumption.

I pulled up the MFI and seen that the bulls are pouring lots of money into $NKE. I placed a light green box around the area of concentrated buying.

I had already shorted the stock when volatility started to fall at a rapid pace. This resulted In losing 80% of the contract value within two days. It's pretty amazing when the bulls do that.

Ideally, when this happens I just reverse my assumption and lean into the momentum by counter trading with higher ratios 3:1, 5:2, etc. It's the best strategy for this type of market behavior for my trading style.

The cost of call contracts is very high so I declined to manage the trade using a counter trade strategy. My total trade was $150 (short) and each call is $300+. I don't personally think this will stay bullish forever so I don't want to risk losing 2-3x more money to manage the trade.

I will patiently wait for the formation to play out and short/long as appropriate or I will find another stock to make the money up.

I marked up the chart so you can see how the MFI can help identify the start and end of cycles. I read the chart left to right. The other indicators just show how they offer Buy advice at different periods using different metrics. I wish I could overlay all them onto the chart but it could confuse the viewer.

Final note. The other method to play this chart is just use the candles. I try to work from the edges of the price action but as you can see with the chart these formations take months to play out. It's why day traders are not as profitable as those holding option contracts for 20 days.

$SOS

This is not a buy recommendation.

10,000 call contracts were purchased today.
Money flow indicator has a buy signal.
Ideally, you want to see the yellow circle turn up. That's the volatility.

Historical implied volatility is 174%.
Current IV is 135%.

Call contracts are cheap, which is why someone is buying them.

When an investor buys one share of an ETF, they get exposure to 1,000s of stocks.
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MYTH: When you buy an ETF, you get all the "DEAD WEIGHT" and "LOSER" stocks.
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Usually when one sector drops another sector goes up so an ETF can help the investor shrug off the bearish drawdowns in one sector. The investor gets a steady gain, which compounds over time. This is the most effective long term strategy.
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Consider a vanguard fund because their fees are the lowest. Over 30 years, paying an extra 1% in fees can cost the investor over $100,000.
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Strategy:
Peter Lynch recommends splitting up an investor's money into 6 funds across different areas of the market.
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Example portfolio:
$VOO (S&P 500) is up 39% over 12 month period.
$VO (mid-caps) is up 46% over 12 month period.
$VB (small caps) is up 56% over 12 month period.
$VNQ (REIT) is up 35% over 12 month period.
$VWO (Emerging Markets) is up 40% over 12 month period.
$VYM (High Dividends) is up 37% over 12 month period.
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One of Peter Lynch's important lessons is to never sell your long term holds and to PAUSE buying whatever fund is outperforming the the other funds.
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Peter Lynch recommends buying into the weakest ETF within an investor's portfolio. This allows the investor to get more shares at a discount before the price strengthens.
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In the above example portfolio, the investor would pour their buying into $VNQ as it's lagging behind the other areas within the financial market.

The market is a data game. Some times, the data changes over night. Always practice risk management on any piece of actionable data. It's each person's responsibility to review the data and screen it.
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One of my last posts I noticed I missed highlighting one of the stocks in the image. Always double check my work because that stock payed out well. I'm human and I miss things constantly.
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Establish a system of data discrimination. For example, scrub the list and write down the ones that meet your historical IV threshold. Throw a stock ticker into TDAmeritrade and the H.IV is listed at the bottom. This is a crucial step. It's just as important as Technical analysis.
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New traders should start with IV under 50. 35 is safer. 25 is like Apple. This method allows a trader to develop a small list of stocks to examine after screening thousands of stocks based on specific criteria. otherwise, a trader will chase their tail under piles of data. Developing a system is important. This process has worked well for me.
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Risk management. I always do butterfly options when I buy options. This method protects myself against extreme tail risk. The higher the H.IV of a given stock the more price chop before a trend wins out. Keep that in mind. For traders using large call option positions, you don't need to choose high IV stocks. Retailers usually buy calls on H.IV stocks, which cost the most.
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I might only get one good pay-out per 5 stock positions. I manage all the others to as close to break even as possible then exit. Never believe all your positions will net you profit. Manage them and exit. You only need 1 good position per month, which nets 80% of your overall profit.
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The stronger position will always develop the fastest into a trend.
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Always inquire about the standing of a piece of data that is greater than 8 hours.
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As an example, if I put out a list at close yesterday then those bearish options (SPY, QQQ, IWM) would have been dump at today's opening. At 10 am, those options were dump again.
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It's crucial to understand that there is a lot of back and forth in the broader market and that puts pressure on all the individual stocks..
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The data shows a lot of bearishness in the market. Exercise care.
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Call sweep:
$VIX Going up massively.
$LOW Only bullish stock I'm seeing based on call sweeps of 50,000 contracts or more.

$AMC

The rise and fall of $AMC is a great way to examine the relationship between volatility and price. You can't employ High IV strategies without understanding the risks. This chart shows the risks well.
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I did my best to break this chart up into 3 parts.
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1. Purple phase
Price rises sharply and falls sharply. What I want you to pay attention too is the volatility. Volatility rises as prices rises. In order to keep Volatility high the buyer volume must continue. It's like a rocket ship. Gravity is always pushing downward on the rocket as it leaves the launch pad. These are the sellers.
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2. Black phase.
This Volatility is falling at a high rate.
This is where retail traders get trapped trying to short the underlying without using a higher time horizon.
Notice the divergence between the falling IV and the rising price.
This is the kill zone for retailers.
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3. Red phase.
The volatility is flat. No more money is flowing into the stock. The candles turn bearish and price begins to fall quickly.
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It's really important to see that the volatility indicator looks like a bell curve (upside down U). Most stocks with low fundamentals have these events. When you build out your strategy, you have to take into account the sharp fall at the end.

Post-Market Break down.

Many of the bullish stocks last week are being covered. Price might still ride up but look for headwinds.
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$DIS
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$XLF (financial sector as a whole. I see a lot people selling options on banks. EEK)
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$CLOV
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$IWM (Russell 2,000 mid/small cap stocks)
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$WBA (I had a call on this. I let it go)
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$SQQQ (This is an interesting one because it's 3xshort of Nasdaq. We could see a bump up in the larger cap tech stocks stocks)
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Expect many different small to midcap stocks to face bearish sell pressure. If you read my post from yesterday, I covered this in broader detail.
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What's BULLISH??
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W**D STOCKS. haha.
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$SNDL (I still have a 100. The shares outstanding is VERY high. My opinion is $SNDL may do a Reverse split at some point in the future to get share price over a dollar to avoid the possibility of being delisted)
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$TLRY
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$NOK (WSB fan favorite. Hard pass for me)
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$GDX (Gold) Volatility and uncertainty could temporarily drive money into gold.
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$VIX (Volatility Index). The VIX has been going up and down for last few weeks. The higher VIX becomes the more likely to see some extreme market conditions. I've sold some positions to keep cash on hand. Not a recommendation. Just my opinion. Take care.

Wheel option traders decision making process:
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"how much return will I make on this trade"?
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instead of "How do I exit this trade with a net-profit"?
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It's a deeper set of thinking, which requires mechanical rules.
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Example:
$SPCE has a annualized IV of around 100%.
$SPCE current IV is 300%.
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That means the stock price moved greatly, which is an outlier event.
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If the price moves up another 100%, you will feel like a genius.
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If the price drops back to it's base of support (around $35), you will feel like a sucker for paying $49 per share.
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Most often, price will revert back to it's mean (base of support).
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The options are priced accordingly. If you take the money then you need to consider the outcome and plan for it.
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Once you understand how to apply IV to your trading strategy, it's an opportunity to make money twice on all trades.
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Once for selling the option and once for buying options to hedge for the anticipated price drop.

$AAPL
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Retailers are buying the contracts while the institutions are unloading. Within 30 mins of the market opening, 1,000s are being sold.

$PTRA

My call sweep scanner picked this one up.
I'm in with (5) call contracts. Total risk: $300.
Not an endorsement.
Do your own DD.

Question:

What would be the advice you wish you heard when you were going full-time?
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One must spend 100’s of hours paying attention to:
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1. price action. Understanding how pre-market and closing price affect the next 24-48 hours of price action.
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2. Squeezing action on candles and EMA
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3. Option chain analysis
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4. Mean reversion.
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5. Volatility implications and strategies.
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6. VIX implications and strategies
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7. Broader market implications on their respective sectors.
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8. Stock screening.
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9. Forcing yourself to profit from both sides of the price action.
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Most of this learning is completely free. A trader’s greatest asset is their judgment and decision making process. Opportunities are lost from lack of courage or ignorance. It’s a learning process so be kind to yourself.
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lastly, none of this is required for buying and holding a diversified fund, which is the easiest and most successful method for investors.

Some days it's hard to find the motivation.
I would like to point out a few observations.

Chinese and Emerging markets continue to slide deeper into the red. Back in Jan, Nasdaq money flowed into overseas markets. My guess is the money exodus will continue until we get some guidance regarding the China-US trade disputes.

Russell 2,000 index that holds the smaller cap stocks continues to take a beating but looks most attractive for dip buying compared to other indexes. SPY is facing a lot of resistance. Nasdaq continues to soar off the backs of the larger tech stocks (AAPL and MSFT).

$BSQR basting off to the moon. I called it out last week. If the institutions are paying $2.50 a share then they will want to sell for $5-$10 range. The float on the stock is so small. I sold my position last week.

$WISH continues to hold price. My prediction is the price will hit $13-$14 range by Friday. If this prediction plays out, I will sell some calls and hedge downside by buying some OTM calls.

$NIO is holding strong against the sell pressure. I exited my position but I think it will hit $52-$53 range by Friday. If I wasn't in a position, I think this is the only stock I would consider jump on because of the premium.

Overall, unless you're selling options on $AAPL and $NIO, I don't see many opportunities. One of my biggest concerns for "wheeling stocks" is lack of opportunities in good premium, week-to-week.

Take care.

I personally would not sell covered calls on indexes unless the market is bearish (breaks support). Cash secured puts are OK.

Covered calls on an Index is a parachute maneuver for when the market has lost it’s bullish structure and is falling like an airplane without an engine. Covered calls are an easy way to pay for buying puts to recover a % of lost value.

Investors can sell all the options they want on individual stocks and ETFs for income but indexes take months to deflate so losing their position early in an uptrend can cost the investor 10’s of thousands of dollars on larger accounts.

Some sell CC on indexes and if the price stays above the strike then they will stratch the loss and buy back. This method requires strict discipline and mirrors the methods used by SPY’s covered call ETF $QYLD.