TQQQ trade ideas
The simple way for accelerated tech index fund investingDue to it's nature, tripple leveraged products usually grind lower and lower by design, so this is anything but full proof. However, as the market likes the top companies in US collectively, the past decade, on retrospect, it's obviously worked. If things continue trending this same way, this can work for us. The red line is profit taking (not shorting!!) and the green line is regaining positions. This is swing trading. It takes a lot of patience, because you may be waiting for years between taking any actions, which can be nice at the same time. Complementary techniques to this are to use sma 50 and 200 day, waiting for death/golden cross and using large time scale RSI to identify bullish and bearish divergences.
This has worked in the past also for the tripple leveraged FAANG products such as FNGU.
Not financial advice. Educational purpose and subjective to future market conditions.
Assigned With A Wheel Trade & The Market TanksI’m Markus Heitkoetter and I’ve been an active trader for over 20 years.
I often see people who start trading and expect their accounts to explode, based on promises and hype they see in ads and e-mails.
They start trading and realize it doesn’t work this way.
The purpose of these articles is to show you the trading strategies and tools that I personally use to trade my own account so that you can grow your own account systematically. Real money…real trades.
In this article, I want to talk about what to do when you get assigned with a Wheel trade.
Previously, I have shown you the Wheel strategy.
It’s a strategy that I’ve been trading for several months and I haven’t had a single losing trade yet, knock on wood.
So I received a lot of comments on my videos asking,
“Yeah. That’s all good. But what do you do when you get assigned with a Wheel trade and the market crashes?”
And that’s exactly what we are going to talk about today.
What To Do When You Get Assigned With A Wheel Trade
I want to show you how to handle getting assigned when the market crashes by using a real trade as an example where this happened to me, and I couldn’t have timed it more perfectly because a little over a month ago, on October 28th, I was recently in such a trade.
The market was down more than 3% and it was a bloodbath.
Luckily, this scenario provides me with an opportunity to use it as a template to show you what to do when this happens.
The TQQQ trade I was in at the time works as a perfect example, so let me just show you how things panned out.
So with this TQQQ trade, had an open P&L of -$2,667.
So what does this mean? Does it mean that we do have a big loss here? No.
This is only an unrealized loss, and this is how I handled it.
I simply followed the 5 steps of The Wheel strategy, and the 5 steps are as follows:
Pick a stock that’s going sideways or slightly moving up.
Sell a Put Option , i.e. you have to buy the stock at the strike price.
Collect Premium and buy the Put back when we see 90% of the profits.
If we get assigned, i.e. have to buy the stock, we will sell Covered Calls against these shares to try and sell the shares at the strike price.
Collect premium and buy the Call back when we see 90% of the profits.
Selling Puts
The trade initially started on September 3rd, so let’s backtrack a little bit to really dissect it step by step.
TQQQ met all my criteria, and on September 3rd is when I first trading this.
September 3th, when I started trading this, I sold 150 put for $0.66, which is $66 because I traded one contract, and one contract represents 100 shares.
The next day I got assigned. I got assigned because when you’re selling puts it means that if the stock goes below the strike price at expiration, 150 in this case, I would get assigned.
This is exactly what happened a day later when the option expired.
So I made $66 by collecting premium, even though I got assigned 100 shares at $150/share, but here’s the deal.
Since I sold the put for $0.66 this means that my cost basis, since I keep that premium regardless of whether I am assigned or not, gets lower.
So this means that the $150 a share I paid minus the $0.66 I collected per share, brings my cost basis down to $149.34.
Now doesn’t sound a lot, but it basically means that the stock now does not have to go above $150 anymore.
As soon as TQQQ goes up to $149.34 I’m breaking even. Now if it goes above this, I’m making money. Simple right?
Selling Covered Calls
Now that we have been assigned, this is where we start selling Covered Calls.
When you sell Covered Calls against these shares, the goal is to try and sell them at that strike price of that Call, while collecting more premium.
Here’s the trade that I did. I sold a 155 Call for $2.10 on the 10th after realizing 90% of the profits, I bought it back for $0.37 the next day.
So $2.10 minus $0.37 means I made $173. And now my cost basis gets reduced by another $1.73.
Well, now our cost basis is going lower. Our cost basis of $149.34 drops by $1.73, so our new cost basis is now $147.61.
This means that if the stock goes back to $147.61 we break even, and if it goes above we are making money. Easy right?
Next, I sold the September 80 Call, the September 18 150 Call, for $0.45, then bought it back for $0.05.
So this means at this point we made another $40, bringing our cost basis down by another $0.40 to $147.21.
The stock kept going against us. It was going down and this is what many of you are concerned about.
“What do I do if the stock keeps going down?”
Well, you keep selling premium, and by doing so, you’re lowering the cost basis. Well, what I did next was really cool.
Selling More Puts?
So next, I sold actually two puts for $110 and $118.
So that averages out to $114. Then I bought them back at $0.06.
This means $114 minus $0.06. So we made another $108 here.
Now I’ll explain in a moment why I sold a put here even though right now since we own stocks, and we should be selling calls.
There’s a very specific reason for it, and I’ll explain it to you.
Looking back at our trade, we are lowering our cost basis to $146.13.
Next, after we sold the puts and they expired worthless I actually sold another 100 put for $2.40 and bought it back for $24. So we made another $216 here.
Bringing our cost basis down again from $146.13 minus $2.16 to now $143.97.
When To Sell Puts INSTEAD Of Calls
So if you are supposed to sell Covered Calls during this stage of The Wheel Strategy, why did I sell those Puts?
I already owned 100 shares of TQQQ that were assigned to me, so why risk getting assigned more?
Well, I sold these Puts, instead of Calls for a specific reason.
At this stage of The Wheel Strategy is where you normally would sell Calls, however, if you are on this part of this strategy, and the market is tanking, you have to make an adjustment to this strategy if the price keeps dropping, to help keep your cost basis as low as possible.
These were 100 Puts, meaning if the price would have dropped below $100 at expiration for either of them, and I would have been assigned the shares.
If that were to happen, I would now own 100 shares at $100 each, on top of the 100 shares I already own at $150 each.
So now I own 200 shares, I paid a total of $250 for, bringing the average price per share to $125.
Getting assigned these shares would have lowered my cost basis tremendously.
If you subtract the total Premium I received on all of these trades, which was $12.05 a share ($1,205 overall) from the average price per share, which in this case is now $125, this comes to a cost basis of $112.95.
This is what the cost basis would have been IF I was assigned these additional 100 shares at $100 each.
I wasn’t assigned these shares, however, and my final cost basis was $137.95.
Do you see why getting assigned is a good thing?
People are afraid of getting assigned, but as long as you have adequate buying power, and are following my methods for picking good stocks, assignment should be looked at as a good thing.
Selling Premium
You see, this is what the Wheel does. You can sell premium while you own the stocks.
So I then sold a $150 call for $1.57, bought it back at 15. So this means that I made another $142 bringing down my cost basis again to $142.55.
Now, I don’t want to bore you and make this article too long here, but long story short, as you can see, I sold a few more of the calls and I bought them back.
So overall, by just selling premium, even though I still owned the stock, I was continuing to lower my cost basis.
At this point, the stock was down $2,770.
However, by doing this, by selling more calls and puts here, I was able to make $1,748 in premium.
So this means I made $17.48 per share on these 100 shares.
So if you take the $150 minus $17.48 right now, right now my cost basis to break even on this trade is $132.52.
So as soon as TQQQ goes back to $132. Now, what happens if TQQQ keeps going down?
I will keep doing what I’ve been doing, following The Wheel Strategy.
I’ll keep collecting premium until at some point, I can sell these shares for a profit.
Recap
So now you know what to do when you get assigned with a Wheel trade, and hopefully, it becomes less scary for you.
I look forward to getting assigned with a Wheel trade because that allows me to sell calls and make even more money.
If the stock keeps going down, I’ll just keep selling, and I will continue to lower my break even more and more.
So, right now, TQQQ does no longer have to go all the way up to 150. It only needs to go up to $132.52.
I just wanted to address this process because I know that many people who are trading this strategy are concerned saying,
"Oh my gosh, what if I get assigned with a Wheel trade?”
It’s a good thing. It’s a good thing and now you know why.
TQQQ Life Has Been a Logarithmic LineIt seems like quite a coincidence that NASDAQ:TQQQ has been so linear on a logarithmic scale. You'd expect more randomness.
Why is it so straight?
Is this a result of some fundamental underlying economic laws?
Or is the Federal Reverse using its powers to maintain a very specific level of long term economic growth?
TQQQ target 172 for wave 3 Continued push today, but as long as we stay under 160, we could still have our 128 drop. Copyright Rohan Karunaratne 2020
TQQQ, The beginning of something good?Will price break higher from this consolidation? Got me, although I do have a position with a tight stop. Traditionally this is a bullish time of the year. We will see.
TQQQ target still 128Same as QQQ chart, if you want to trade this, short at top of trend channel with stop at the high, and get long at the bottom with a stop under the lows. Still waiting on more action. Copyright Rohan Karunaratne 2020
TQQQ slightly adjusted levels, support to break at 140Same verdict as the Qs chart, we need to take out the lower supports at 142, and 140 (Volume distribution support) in order to continue wave 3. Copyright Rohan Karunaratne 2020
TQQQ target 127.5 for wave C retracement, deeper wave unlikelySlightly adjusted the levels, based how late the decline was into the close today, I am now projecting that the correction will not be as deep as originally anticipated, now setting the low at around 127. Of course, we can continue to fall through this level, but I will probably begin a position if we can get under 130, just my gameplan. Copyright Rohan Karunaratne 2020
TQQQ updated levels, target still remains at 127.5Same as QQQ chart, all targets still same, slightly adjusted wave 2 to the high made in the morning. Copyright Rohan Karunaratne 2020
TQQQ target 130 or 100 for C wave retracementStill waiting for either a 1-2 structure off the lows which would confirm a bullish trend, target for that retracement around 130, or another option is a deeper C wave to around 100 for the bearish option. We still haven't reached the ending of our target B wave yet, which would end around 150, any push farther would be bullish. Side note, I am also posting a QQQ chart daily now, which is more accurate and precise for projections, as it is not leveraged, but I will still post daily TQQQ levels. Copyright Rohan Karunaratne 2020
TQQQ bearish target 100, bullish target 180Sorry for the slightly late upload, the TQQQ chart is a confusing one. I color coded the elliott counts to make it simpler to read: Blue = Completed Bullish Targets, Red = Completed Bearish Targets, Pink = Projected Bullish targets, Yellow = projected Bearish Targets. The key levels will be the top of the micro B wave around 151, if we break through that level (sustained, not just a slight spike), then the levels to watch will be the 12345 pink count. Alternatively, we can get rejected off the 151 level, find a support at the wave 2 low around 130, and then still follow the pink count target to 180. If we do break below the 130 level, and begin to fall down, then all the remaining yellow targets down to 100 are the key levels to watch, with buys for me around 120 and 100. This chart is kinda messy, feel free to comment any questions and I will clarify as needed. Enjoy your weekend! Copyright Rohan Karunaratne 2020
