Selling Out | My Big Hedge.

hey everyone we kevin here so the market

has been very euphoric lately there is

no questioning that a lot of stocks have

had some very incredible gains certainly

if you're invested in the ev sector if

you're invested in a lot of tech sectors

whether that's uh chips like nvidia or

amd or enphase or etsy you have

absolutely been killing it the last

month and a half even look at end phase

we went from 145 to over 250 you've got

roblox that went from the high 70s

you know where it's kind of been

bouncing around and rubber banding back

to now over 120 on metaverse talk

especially metaverse education oh it's

so exciting so juicy so fun

but folks

markets don't only go up and remember

when markets get stretchy with

valuations but people tend to get more

excited about investing at highs i don't

like investing at highs i don't like

investing when things are going up it

makes me nervous because i know that the

more things go up very quickly the more

kinetic energy we have which turns to

potential for a fall right without

getting into science which i love

science i'm not very good at it but i

love it um i i want to essentially say

that the last few days i've been really

thinking about what to do with my

portfolio i've been thinking about uh

selling some stocks to take some profits

and uh the reason i thought about that

was uh i really i'd rather have a little

bit more cash potentially on the side in

the event that there is some form of a

market dip i'd be able to uh have more

cash on the side that i'd be able to go

use to buy other things because i like

doing that i like buying the dip and so

i've been evaluating different ways to

potentially build cash to buy the dip

and today i decided to do one and i'm

going to talk about that stock strategy

in terms of hedging but i'm also going

to talk about

a strategy that i'm taking for

hedging potential inflation risks so

we're going to talk about both of those

in this video so you want to stay for

the stocks part watch this first part

and then we're going to talk about

hedging against inflation so first let's

just finish the thought on on hedging

the market the way things are right now

so the first thing that i'm doing is

i'm looking at my portfolio and i'm

saying what are my some of my stocks

that that i think have moved a little

bit more on momentum and hype than

potentially fundamentals when i look at

a company like enface i believe that

enphase was fundamentally oversold

because of supply chain fears batteries

are very heavy to ship end phase

inverters take a lot of microchips and

we've had a lot of a supply crisis and

problem with this this is one of the

reasons i was buying end face like crazy

and remember every single time i buy or

sell something whether it's a stupid

idea or a good idea and obviously i try

to be right more than i'm wrong that's

obviously every investor's goal and this

year has been wonderful so far killing

the s p

but here's the thing every time i send

something again whether i end up being

right or wrong the moment i do it i send

out an alert to everyone in the stocks

and psychology of money group and if

you're not part of it you may as well

join it if you watch the channel you may

as well get those alerts as well pay

once take some of the great attendees

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to a millionaire for real estate but

anyway i just sent out an alert that i'm

issuing two hedges and these could end

up going very poorly but i see them as

an insurance policy because they could

also end up going very well see i have

two choices for for really hedging well

i've actually i mean there are many

choices for hedging but there there are

two primary choices that i've been

considering right now and the first is

just straight up selling some shares if

i straight up sell some shares like

matterport at a you know uh

60 70 gain or whatever uh then actually

yeah somewhere around there uh then i

would end up paying a substantial amount

of taxes so for example if i have two

million dollars in matterport

and let's say i have gains of uh oh i

don't know 700 thousand dollars let's

just make a quick example okay i know

the percentages don't line up perfectly

here i'm just gonna go with seven

hundred dollars say there's seven

hundred thousand dollars in gains uh if

i take uh profits i'm gonna pay probably

55 in taxes so uh

simplifying the math again every 100 000

of profits i take out of matterport i'm

only going to be putting in my pocket

about 45 000

and i've done that a lot this year with

option trades where i've done very very

well on many different option trades as

well as long hold stocks i try to keep

my long hold stocks so that way i can

get to long-term capital gains or just

never pay taxes

and i have been trading a lot with my

options so i thought to myself well

the last thing i want to do right now is

really collect more short-term profits

uh and pay more taxes because we're

getting to the end of the year and this

is where it kind of makes sense to start

being a little bit strategic again about

taxes which really you should be

strategic about taxes all year long but

there's a little more more of an

emphasis that we usually have it towards

the end of the year because we're like

oh it's the end of the year we gotta

think about taxes again

and so i thought well if i sell calls

against my position then i might re

realize premium but if i end up getting

called out of those shares i'll pay

gains on the shares because the shares

are going to be way up even if i get

called out i'll pay gains on the premium

so i'm paying double taxes here

either way which is not so ideal if the

market zooms i'd rather not pay any

taxes and the way to not pay any taxes

is just not to sell your shares just

hold on to your shares right

and if i sell puts then again i'm taking

a premium which is something that is

going to lead me to pay taxes right so i

thought okay what can i do that doesn't

involve selling shares to pay taxes

selling calls to potentially pay taxes

on the premium or uh if i get called out

the shares and the premium right what

can i do that might be beneficial for

tax purposes while at the same time

hedging my portfolio and giving me the

opportunity to have cash if there's a

dip

see this is a very very interesting kind

of niche scenario where it's like i only

want extra cash if there's a dip i don't

want extra cash if there's no dip i just

want to be fully invested so i don't

really want to sell and sit around with

cash twiddling my thumbs because i think

we're in the end of the year rally this

is this is

boom time but i also think things are

very frothy and some things have ran up

substantially so i thought to myself

well

what can i do that worst case scenario

is a tax write-off doesn't incur me

taxes

and if the market falls gives me lots of

cash potentially

and the answer to that

was actually buying puts

now usually i don't short the market but

think about this when you buy puts which

is a version of shorting the market when

you buy puts you're paying

for an insurance contract worst case

scenario you lose your premium

essentially that insurance contract for

you shorting the market right

you are forcing somebody else into a

contract

to promise you to buy shares at a

certain price

and in return for somebody agreeing to

buy shares from you at a certain price

you are paying them a premium so i am

paying money i'm paying money out this

is a tax write-off to consult your cpa

okay i'm not a tax professional talk to

your cpa i'm a dude on youtube who

drinks coffee sometimes out of a level

99 fire making cup which uh that should

raise some questions as well and then of

course also has a blue grass

glass straw to go with this diamond

hands coffee mug and

sells programs on building your wealth

with a black friday coupon code with

prices that go up because of inflation

while also suggesting that in the long

run there probably won't be inflation

we'll see deflation

it's just what you're stuck with on the

channel here okay like i i'm self-aware

okay

so

i bought some points this is method one

of my hedging because there's another

strategy for hedging that we're also

going to talk about in the second half

of this video so what did i buy puts on

well first i want to buy puts ideally on

something that when it falls is going to

maintain high volatility because there

are usually you don't want to buy

contracts like option contracts when

volatility is high unless you expect

that volatility is going to remain high

as prices potentially u-turn that would

be the only excuse for paying a high

premium during a high volatility

environment

uh and there are two stocks particularly

one that i own and one that i don't own

that i think are really good

opportunities to where if the market

crashes

these two stocks are going to absolutely

crash and burn and get obliterated if

the market does not crash

these two stocks also have the chance of

crashing and burning as momentum

evaporates see what i'm doing here like

i'm trying to put all of the odds in my

favor

not paying taxes but still want more

money if the market crashes if the

market crashes i'm gonna pick two stocks

that are going to do horribly in a

market crash even if it's like a five

percent correction for the s p 500 these

two stocks will do horrible they'll be

down like 50 60 percent if the market

does not crash these two stocks still

have the potential of being down 30 40

50 percent because

they're kind of momentum movers

[Laughter]

one of them i really love long term

the other one i don't

so

a little bit of mixed bag here on both

let's talk about both of these here what

contracts i just uh fulfilled or

purchased and then

let's talk about uh my second method of

hedging in the event that we end up

having very high inflation

now i'm kind of excited to talk about

this

uh but uh

here's the thing

i just wanna know that this video or i

just want to preface that this video

will either age very well or very poorly

and i'm okay with that because when you

buy puts you're buying an insurance

contract let's say these stocks and ma

the market overall continue to skyrocket

well if they continue to skyrocket

that's okay then in this case i'll have

paid 350 000 for a hedge on about a 2.1

million dollar portion of my portfolio

and i'll have lost that about 16 percent

but that's okay because if the market

continues to zoom then i'm probably

making 16 percent on two mil

uh which which would more than off

offset these puts even if they went

entirely to zero which i might trade out

of them before they ever got to that

point

so this is an insurance policy

if

this play does very poorly it's a tax

write-off it was an insurance policy

that i didn't need and it means that my

other positions are doing very very well

probably

if this video ages very well and these

positions do very well well then it's

because of one of the two things i said

either the broader market pulled back or

these two stocks or one of the stocks

lost momentum we'll see and i don't have

to hold these to expiration as well but

uh before i begin i want to just quickly

show you this screenshot from my course

member live stream this morning november

17th lex here mentioned bought your

course as an early christmas present to

myself and it has already paid for

itself a few times over couldn't

recommend it more thank you lex for

mentioning that during the course member

live stream this morning uh thank you

thank you very much here's somebody else

shout out who just bought your course

yesterday talks with psychology money

looking forward to getting rich now with

the little tongue emoji awesome but uh

always really really happy to chat with

y'all in the course member live streams

that we do every day the market is open

check those programs out down below okay

now for the contracts

the first one folks i bought

um 250 puts

on rivian

uh yeah okay rivian is down 17 today i

believe that a 17 decline on rivien

today has the potential of

starting

the trader exodus okay this this to me

is

like if this went down to a hundred

dollars i'd probably get rid of my

contract because i think i'll all have

succeeded and i i think it would be fair

if this sat around like okay there's

there's what i think would be fair for

it to sit around and then what i would

actually pay for it i would pay 50 for

the stock

which i understand is very low it's

below ipo price

i i wouldn't be surprised

if it sat around a hundred dollars

uh as as uh an overvalued ev play that's

fine 142 nuts

so what i did is i bought some uh

some puts uh and i bought the december

puts

i bought them

uh

for 150

which means they are in the money puts

in the money puts means that i'm already

in a position where i could execute

essentially and be profitable on them

right

uh i bought them for 150

i paid uh i don't remember exactly what

i paid for them i want to say i paid

like 23 for them or something like that

right now they're at about 27 it doesn't

matter so much but anyway the reason i

picked these 150s and this is the kind

of stuff by the way that i also teach in

the stocks and psychology of money group

uh we had a little more open interest

here so the spread was more narrow

you'll notice there's about between the

bid and ask there's about a 40 cent

spread right here right here you've got

an 80 cent spread here you've got a 30

cent spread but i went for the 150s

because i was really only paying three

dollars more for having five dollars of

protection so i was i was okay with that

uh in addition to obviously looking at

the historic volatility charts and all

the other good stuff this to me was an

ideal contract my breakeven's about 123

330 something if i end up holding these

to expiration

i believe that rivian has a good chance

of falling substantially if the market

slows down like if we start having two

or three red days because jerome powell

ends up getting the boot or whatever

rivien's gonna get obliterated

and if we end up having green days in

the stock market i still think rivien

has a good chance of falling so that's

why i bought 250 put contracts would

basically enable me to force somebody

to uh buy let me make sure was it was it

250 maybe that was the other one that

was 250 hold on whatever it was i paid

about

hold on i'll i'll just tell you exactly

what it was really quick because i think

maybe it was the other one that did i

did 250 on so um

which we'll talk about the other stock

as well in a moment the other stock by

the way is one that i own

okay so i did

here we go rivian

okay so rivien 150 puts and then we'll

go through the other one in just a

second ah here it is okay rivian i did a

hundred i'm sorry 100 on this and 250 on

the other sorry so a hundred puts on

this one so a hundred puts

means at 150 times 100 shares i could

essentially force somebody to buy 1.5

million dollars of rivian

at

150 a share

and i paid about what like twenty three

dollars i'm sorry i paid 26.39 for that

right

i should have looked at that first but

anyway i paid 26.39 for that right uh

which is you know about a buck off from

where it is now uh so it's already a

little profitable but big deal little

day swing like this i'm not so worried

about i'm looking for more of a larger

move over the next couple weeks

now the next one that i hedged with was

actually one i love and i have about two

million dollars in this stock

and i bought 250 250 contracts

of 30 dollar strike puts

in matterport and the reason i chose

30 puts is again they're in the money

puts because we're sitting at about

29.69

i do think there is a chance that a

momentum will start fading a little bit

from matterport and as traders

potentially exit once we you know maybe

stop talking about the metaverse as much

if it zooms that's okay i've got three

times as many long shares than i do

hedged positions basically via these

these put contracts

uh and uh for me the thirty dollar put

was the cheapest it was one that had a

very very tight spread you could see the

spreads about 10 cents which is very

very good uh you know sometimes you go

over here and you're like that's there's

a yeah actually you've got actually

pretty good spreads here on on

matterport for here's a 40 cent spread

here's a 30 cent spread so 10 cents

pretty good here's a 15 cent spread this

one's only at a five cent spread the

22.5 but anyway uh so i went for the 30

to get in the money put i did 250 of

these which protects me of about let's

do the math here i think it's 650

thousand dollars 250 times 100 shares

times

30

is

uh 750 000.

that's 650. so uh but anyway that is my

second hedge and it is a put on

matterport again this is one that i

think if the market crashes it'll fall

hard if the market doesn't crash it

could still fall but if it doesn't i'll

make money on the long position now i

don't have a long position on rivian but

i think if rivian keeps zooming and it

goes to like 170 180 again and then

zooms over 200 i think at the same time

we'll probably also see tesla which is

my primary ev play skyrocket because if

or vice versa maybe tesla will go to 14

1500 and rivien goes to 250 in which

case that put contract will get utterly

burned but i'll be making money on the

ev sector having euphoria so really

again the whole purpose of these puts is

to create money

when and if momentum fades in companies

or sectors that i'm invested in or the

market has some sort of substantial

pullback and sudden pullback now

my second hedge and this is this is a

very different style

this is a little bit of a longer run

hedge and this is

in the event i am wrong about inflation

which i believe that at some point

within the next year or two before we

start substantially raising rates i

believe that inflation will inflict down

that doesn't mean i'm a chill for the

fed that doesn't mean i believe

everything the fed

says i don't

i just believe

that uh commodity prices are in a 200

year down cycle that down cycle will

continue lumber prices will come down

input costs will come down

i believe as a business owner that when

businesses go through stress and issues

they

become very innovative at making sure

that in the future they never have those

problems again because companies don't

like stress or problems they like

efficiency and so i think we are going

to be greasing the wheels of corporate

america so strongly through this this

test through this disaster through the

supply and labor and shipping crisis

that we will end up having extremely

well greased and well-oiled corporations

come 2022 holiday season and i do

believe that inflation has a very high

likelihood of falling however i'm not

stupid and i know that i don't have a

crystal ball and that i could be wrong

and so i am hedging myself by making

sure that i maintain a very strong

interest in buying

real estate now i know that doesn't

sound very sexy to everyone but i am

open to multi-family apartments probably

multi-family apartments i would follow

what i talk about in my

zero-to-millionaire real estate

investing course i'd be looking for

ideally below market rent but newer

units

alternatively i will look for

fixer-upper single families i generally

don't want fixer-upper multi-family

they're very different market

inefficiencies and you're dealing with

very different classes of investors and

so you have to

understand

the opportunities in different real

estate markets and they're very

different between single-family

multi-family this is why single-family

multifamily investors don't tend to get

along because they have totally

different mindsets and that's okay i

just realized they're different forms of

investing which by the way if you ever

potentially want to invest with me

go to medkevin.com cash flow and fill in

your info medkevin.com cashflow

and invest with me

so anyway uh

real estate uh ideally if you can buy

multi-family or some sort of investment

property before the end of the year talk

to your tax professional but you might

be able to take advantage of some

special cost segregation benefits to

reduce some of your tax exposure as well

prior to the end of the year now how is

real estate a hedge well consider this

let's say you have a million dollars in

real estate and eight hundred thousand

dollars of debt and the rent that you're

getting is six thousand dollars per

month or about seventy two thousand

dollars seventy two thousand dollars

divided by eight hundred thousand

dollars is about nine percent so you're

getting about uh nine percent in rent

every single year gross numbers here

versus the debt that you have right well

if we have inflation first of all we

expect that interest rates are going to

go up that is going to hurt resale

values quickly so you cannot short term

use real estate to hedge against

inflation you'll get screwed short term

do not use real estate as an inflation

hedge because if rates go up prices will

fall quickly but i invest in real estate

for the very long term like i do not

trade real estate because real estate is

very expensive to trade and because it's

so expensive to trade and so hard to

trade i don't really trade real estate i

keep my real estate so i don't really

care what happens with values but i

still want to use it as an inflation

hedge tool which i can because here's

what happens let's say we have

substantial inflation and i'm wrong

about inflation we get substantial

inflation now all of a sudden that 72

000 of rent goes up by let's say

uh 30 over the next three years or 10

percent a year-ish should be a little

more because of compounding or whatever

well now my expected uh rent for the

property would probably be somewhere

around at least 20 000 more so somewhere

around uh 92 93 000

93 000

versus the 800 000 i have means i'm now

getting about 11.6 percent of my total

debt and gross rent which i just boosted

how much money i'm now able to use every

single year to pay my debt off and

because my expenses are mostly fixed

because principal and interest stay

constant and property taxes move very

slowly and so does insurance they move

very very slowly i'm going to be able to

use that extra money and pay that debt

off much much faster so i basically

inflated away the debt and the tenants

who are getting screwed by inflation are

now paying that property off for me

faster so this is how inflation can

actually help you pay off your real

estate debt as a real estate investor

faster now if you're a tenant you want

to become a real estate investor or your

real estate investor and you want to

expand

real estate programs link down below

don't be a tenant forever

keep in mind i do have about 42 of my

total around 50 million portfolio

invested in real estate these are my two

large hedges

for the next really 30 45 days of the

year that we have left uh this is uh

this is my thought

i'm still very bullish on the market so

i don't want anybody to just well i mean

it's going to happen people read the

title and they're like yeah like i

missed your fud it's like i'm pretty

sure i'm pretty bullish on this market

uh you know we're just talking about

like the fringe here but

whatever uh sucks for them they never

gain insights when they just jump around

videos it's their loss so anyway thank

you for making it to the end of this

video if you found this helpful consider

sharing this video we will see you in

the next one thanks again and goodbye

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you