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SUMMARY
TJ The Wheel Deal discusses his current portfolio strategies amid a market sell-off, emphasizing the importance of buying power management and premium collection through options. The episode explores historical data on midterm elections' impact on markets, the psychology of trading, and upcoming changes to the show's format.
MAIN POINTS
- Market sell-off attributed to poor earnings from Intel, Amazon, and Google, with midterm elections looming.
- Portfolio review reveals significant losses year-to-date except for two strong-performing accounts, with buying power as the key metric for action.
- Discussion of using tax loss harvesting on Riot and CleanSpark positions, and the strategy of transitioning from short puts to long shares.
- Initiation of new positions in AST and ongoing management of large SoFi and CleanSpark holdings, applying the rule of 1% from real estate to stock investments.
- Analysis of a large strangle on Palantir, with calls offsetting losses on puts, and review of recent trades in Micron and other core holdings.
- Covered calls sold during suboptimal conditions are the only trades showing gains during the drawdown, highlighting the value of consistent premium collection.
- Emphasis on minimizing overtrading to avoid excessive fees and maintaining a mechanical approach to portfolio management.
- Consideration of dip buying opportunities in ASST and MSTR, balanced against buying power constraints and sector concentration.
- Execution of a small MSTR share purchase to participate in the dip, with contingency plans for forced position adjustments if buying power tightens.
- Teaching segment presents 76 years of midterm election data, showing the S&P 500 has risen in the 12 months after every midterm since 1950.
- Historical analysis reveals midterm years typically see deep drawdowns before the vote and strong recoveries afterward, regardless of which party wins.
- Markets favor policy clarity and gridlock over party outcomes, with post-midterm rallies driven by reduced uncertainty rather than political results.
- Announcement of a new show segment focused on Series 65 exam preparation and a shift from 'fix my trade' to collaborative trade idea discussions.
- Ongoing portfolio reviews across multiple accounts, evaluating drawdowns, covered call strategies, and opportunities for averaging down or adding shares.
- Reflection on the impact of a major Binance hack on crypto holdings, distinguishing between exchange-specific and broader market risks.
- Final thoughts stress the importance of proactive risk management, emotional discipline, and positioning for post-election market recovery.
DETAILED ANALYSIS
The episode opens with TJ addressing technical issues at home and the fatigue of travel, setting a candid tone for a session focused on navigating a challenging market environment. The day is marked by a broad sell-off, with disappointing earnings from major tech companies like Intel, Amazon, and Google compounding market anxiety ahead of the U.S. midterm elections. TJ frames the discussion around the practical impacts of these events on his portfolios, emphasizing that buying power is the primary determinant for any trading action.
He reviews multiple accounts, noting widespread year-to-date losses except for two standout performers, and highlights the importance of monitoring buying power usage to avoid forced liquidations.
A significant portion of the analysis is devoted to tax loss harvesting strategies, particularly with positions in Riot and CleanSpark. TJ explains the mechanics of realizing losses on short puts and transitioning to long shares, a tactic previously employed with CleanSpark that allowed for both tax benefits and potential recovery through covered call premiums and capital appreciation. He details the average costs and target exit prices needed to turn these trades profitable within the year, underscoring the importance of patience and methodical execution.
The review continues with a breakdown of positions in Micron, AST, and SoFi. Micron is managed through a series of short strangles and covered calls, with TJ aiming to recover recent losses by selling shares at predetermined price targets. The approach is described as a 'goal post game,' where strike prices are adjusted over time to optimize outcomes.
New positions, such as AST, are acknowledged as inherently risky, with TJ embracing the challenge of catching 'falling knives' as part of his trading style. The SoFi position is managed with reference to the 'rule of 1%' from real estate investing, aiming to generate monthly premiums equivalent to 1% of the capital invested, thereby ensuring a baseline cash flow.
TJ also discusses the use of large strangles on Palantir, where simultaneous agreements to buy and sell shares at various strikes create a range-bound strategy. He notes that while puts are underperforming, the calls are providing a valuable hedge, illustrating the importance of balancing directional bets with premium collection. This theme recurs throughout the episode, as TJ emphasizes the value of selling covered calls and puts consistently, regardless of market conditions, to average into positions and create a steady income stream.
A key insight is provided during the review of covered call performance. Trades executed during less-than-ideal conditions—when the market was not 'sunny and 75'—are the only ones showing gains during the current drawdown. This observation challenges conventional wisdom that calls should only be sold during market rallies, reinforcing TJ's belief in systematic premium selling over market timing.
He cautions against overtrading, noting that frequent adjustments primarily benefit brokers through increased fees, and advocates for a mechanical, methodical approach to portfolio management.
As the episode progresses, TJ evaluates potential dip-buying opportunities in ASST and MSTR, weighing the benefits against the risks of sector concentration and the impact on overall buying power. He executes a small purchase of MSTR shares to 'wet the beak,' maintaining flexibility in case further adjustments are required. The discussion includes contingency planning for forced position closures, with a focus on knowing which 'levers' can be pulled to restore buying power and avoid margin calls.
The teaching segment shifts to a data-driven analysis of midterm election effects on the stock market. Drawing on 76 years of historical data, TJ presents the finding that the S&P 500 has risen in the 12 months following every midterm election since 1950, with an average gain of 15.1%. The pattern is attributed not to the outcome of the elections, but to the resolution of policy uncertainty.
Markets, he explains, are less concerned with which party wins than with the restoration of clarity and the reduction of headline-driven volatility. This post-midterm rally has occurred under Republican, Democratic, and split governments alike, with gridlock often viewed favorably by investors due to the reduced likelihood of sweeping legislative changes.
TJ interprets this historical trend as a tailwind rather than a guarantee, cautioning that not all post-midterm years deliver strong gains and that position sizing should account for the possibility of modest returns. He advises premium sellers to capitalize on pre-election volatility by selling options into elevated premiums, then allowing clarity to reduce volatility and support portfolio recovery. The segment concludes with a reminder to avoid excessive directional bets and to maintain discipline in trade sizing.
A new wrinkle is introduced to the show's format, as TJ announces plans to incorporate Series 65 exam preparation into future episodes, replacing the 'fix my trade' segment with a collaborative trade idea discussion. This change is intended to foster a more interactive and educational environment, encouraging viewers to share and vet trade ideas collectively.
The latter part of the episode is devoted to a granular review of multiple portfolios, examining the status of positions across accounts. TJ evaluates covered call strategies, opportunities for averaging down, and the relative merits of adding shares to various holdings. He distinguishes between 'real' risks—such as large, in-the-money positions that threaten buying power—and 'feels,' or emotional reactions to temporary drawdowns.
This distinction is used to reinforce the importance of emotional discipline and mechanical decision-making in trading.
The episode also touches on external events, such as a major Binance hack, and their impact on crypto holdings. TJ clarifies that such incidents are exchange-specific rather than indicative of systemic issues with underlying assets like Bitcoin. He reiterates the need to manage risk and avoid overreacting to headline-driven volatility.
In closing, TJ offers final thoughts on proactive risk management, urging viewers to do the uncomfortable work of adjusting positions before being forced into more drastic actions. He emphasizes that consistent premium collection, emotional resilience, and careful management of buying power are essential for long-term success. The episode ends with a reminder to stay disciplined, manage expectations, and position portfolios for potential recovery following the elections, regardless of the political outcome.