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SUMMARY
TJ, host of TJ The Wheel Deal, provides a detailed breakdown of his options trading strategies and current portfolio positions during a pivotal earnings week. The discussion covers naked calls, portfolio margin, risk management, and the impact of market volatility on positions in Palantir, MSTR, BMR, SoFi, and Amazon.
MAIN POINTS
- TJ outlines the importance of the upcoming earnings week and reviews portfolio buying power usage, noting increased volatility.
- The Palantir position is dissected, including large-scale naked calls and puts, premium collected, and capital requirements.
- TJ discusses his MSTR trades, focusing on balancing naked calls and puts, delta and vega management, and the influence of Bitcoin price movements.
- A comprehensive review of SoFi positions is provided, detailing covered calls, naked calls, short puts, leaps, and the interplay of deltas and thetas.
- Amazon's short puts are explained, with plans to initiate naked calls at higher strike prices as the stock approaches all-time highs.
- TJ answers viewer questions about trade structure, book progress, and provides brief market commentary before ending the stream.
DETAILED ANALYSIS
The session opens with TJ noting the significance of the current week, as several major companies, including SoFi and members of the 'Mag Seven,' are set to report earnings. He emphasizes that this period is not a make-or-break moment for his portfolio but rather a confirmation quarter to validate his current positions. TJ highlights the importance of monitoring buying power usage, which has risen from 58% to 66%, indicating increased volatility and the need for careful capital management.
His target is to reduce this figure to around 54.8% to better withstand further volatility expansion.
A detailed walkthrough of the Palantir (referred to as 'Palunteer') positions reveals substantial exposure through both naked calls and puts. TJ has written naked calls at $180 and $220 strikes, collecting significant premiums—$92,000 and $711,000, respectively. Additionally, he has sold puts at an $80 strike, netting over $3.4 million in premium for an expiration more than a year out.
The capital requirement for these trades is $1.8 million, made efficient through portfolio margining. TJ explains the mechanics of rolling options to manage risk, especially if Palantir's price moves sharply. The wide range between strikes and expiration dates provides flexibility, but the sheer size of the position introduces risk, particularly if volatility expands or the stock price moves dramatically.
He acknowledges that the position is oversized relative to the portfolio's ideal sizing, justified by available sidelined capital.
The discussion then shifts to MSTR, where TJ has structured trades to benefit from both upward and downward movements in the stock, closely tied to Bitcoin's performance. He has sold puts at $100 and naked calls at $250, both with substantial notional exposure. The naked calls have a low delta, indicating a low probability of assignment, and TJ plans to trim or adjust these positions as profit targets are met.
He tracks Bitcoin's price closely, noting that a move above $83,000 would necessitate a reassessment of the MSTR calls. The strategy is designed so that only one side of the trade can be under pressure at a time, with vega risk managed by staggering expiration dates. This approach, which TJ refers to as the 'rich man's covered call,' aims to neutralize the impact of implied volatility changes, particularly on longer-dated options.
In the BMR segment, TJ describes a bullish stance achieved by holding leaps and running a poor man's covered call strategy. He has rolled short calls to higher strikes to capture more premium and maintain flexibility, with a portion of the leaps left unencumbered to benefit from potential rallies, particularly if Ethereum rises.
The SoFi position is multifaceted, involving ownership of 250,000 shares, covered and naked calls, short puts, and leaps. The calls are partially covered by shares and leaps, with the remainder offset by short puts, creating a complex but balanced exposure. TJ explains the delta and theta implications of each leg, noting that the position is extremely bullish overall.
If SoFi's price rises, the shares, puts, and leaps generate profits, while the short calls incur losses. Conversely, a price decline benefits the short calls but hurts the other legs. The interplay of these positions is designed to maximize premium collection while managing directional risk.
For Amazon, TJ has sold short puts at a $190 strike, collecting $2.1 million in premium. He is considering selling naked calls at higher strikes (around $325–$335) if the stock continues to rally, aiming to implement a skewed strangle with more puts than calls to avoid betting against the stock's upward momentum. This mirrors his approach in other positions, prioritizing premium collection while maintaining a bullish bias.
The stream concludes with TJ addressing viewer questions about trade structuring and his forthcoming book, which he plans to release upon reaching a $20 million portfolio milestone. He reiterates the importance of understanding position sizing, risk management, and the nuances of advanced options strategies, particularly in volatile markets and around major earnings events.