The Biggest Leftover Danger in the Market.

hey everyone meet kevin here in this

video we're going to talk about the most

dangerous thing in the stock market uh

right now in my opinion and it's a

little bit different from what you've

heard in the past so yeah this is a

little bit of a change and we're going

to explain exactly why this video by the

way is brought to you by truebill go to

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truebill to learn more about truebill or

stay tuned for when we talk about

truebill in just a moment okay so first

it's very important to know that we are

in and i'm sure you already know this we

are in a very euphoric style market in

general yes there are times there are

weeks or there are days where we have

dips but the dips usually aren't

substantial intraday we had an s p

sell-off on monday of five percent on

the day we only fell about 3.6 percent

we have not had a negative 5 sell-off on

a day in the s p 500 since september of

last year it's been a year since the s p

500 has dropped 5 or more which is

again on a closing day on a closing

price which is pretty incredible

and we've also seen a lot of volatility

in the market get reduced we've seen

volatility come down this is why you

could have literally bought tesla

options while tesla was at 715

you could have bought leaps for tesla

and they could be in the money for 2023

and even though tesla is green and above

750 right now you could be

negative because of something known as

volatility crush but i've been talking

about this

since about may and june that we're

seeing volatility come down

substantially right so volatility is

coming down over the course of uh the

last year we've kind of seen the s p 500

just go chug along straight up stocks

like google have done the same thing

it's been pretty incredible uh and

overall

stock market has been pretty good yeah

there's some momentum plays that have

shot up only to come crashing down this

is normal we expect this but overall the

stock market has been very good every

time we see dips they get bought up very

quickly and that's because a lot of in

my opinion the negative catalysts that

we have

are pretty fleeting that is they're

pretty temporary i mean think about it

on monday i even said this on on monday

while the market was bloody red and

screaming red and bloody mary

we i said on this channel look the ever

grand issue it's going to be temporary

in the next two weeks we'll know what

happens with evergreen so yeah maybe

there would be a few more opportunities

for red but fear around evergrand is

really evaporating mostly because you've

got a lot of institutions and funds and

banks coming out saying look this will

probably be a localized issue we're not

expecting mass contagion so the market

has really relaxed over evergreen fears

we have a path from the federal reserve

now we're not expecting the tape well we

didn't get the taper which we did expect

that and we're now expecting the taper

in november and we expect the table to

end the middle of next year and then

we'll get a quarter percent interest

rate bump uh in the second half of next

year like we've got a pretty clear path

here we also have now verbal talk that

uh democrats are going to figure out how

to extend uh the budget and raise the

debt ceiling probably by doing the

budget reconciliation bill as part of

the three and a half trillion dollar

bill it'll get done over the next three

weeks and all these issues will be gone

like all these negative catalysts that

we've had

are going away and we expected that

but we have also expected uh that

inflation would at some point inflict

down and we still think that can happen

when we get cpi readings for september

and october i've been saying that for

like eight months now september and

october kind of tired of saying it

you're probably tired of hearing about

it which is more important

but so this really leaves the door to

this weird market that we're in

and i want to talk about what i think is

particularly dangerous and and it takes

this setup to talk about what i think is

particularly dangerous uh and it has to

do with stocks and options obviously

uh so

first what's not dangerous in my opinion

is selling a put or buying shares the

reason i say that is buying shares is a

wonderful thing don't worry about your

cost basis in my opinion somebody very

well put it this morning they said cost

basis is just like the sunk cost fallacy

you can't focus on your cost basis so

you're like oh i want to buy more but

it'll increase my cost basis what you

want to you want a vanity number take a

screenshot and then buy buy more move on

right cost basis doesn't matter so much

so don't worry about your cost basis

buying shares is great and companies who

love and you want to hold long term

there are some things that i think are

very pricey right now like i personally

think etsy is pricey uh so i'm not super

jumping up and down about buying more

etsy even though i've got over a million

dollars in etsy uh i do think that end

phase is relatively cheap

especially with its relative performance

here recently

uh and uh and so i've been increasing my

position in end phase even though that

increases my cost basis from when i

bought a lot of shares around that 120

range and i'm seeing my cost basis go up

i'm buying i'm not so worried about

buying shares i like buying shares i'll

also sell puts on companies that i'd be

okay to own but don't necessarily care

to own uh like i i won't be upset if i

don't own them and i did that for

example on sofi i've made a lot of money

selling a lot of puts on sofi uh and and

that's really because i took advantage

of a lot of volatility that we

specifically had in sofi stock uh when

we saw that volatility and as that

volatility's been crushing as a seller

of option contracts you get that

volatility benefit which makes us open

up the door to hey well then we should

also sell calls right

so let's break these two things down

here because there's some very big

differences between these two and one of

these is somewhat dangerous but we're

going to talk about that right after i

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so let's talk about what i believe is

something dangerous in this market and

it's been one of the few option

contracts that have really burned me

they are

selling calls

in a potentially euphoric or

negative catalyst

list

market catalyst list market that's

without catalyst for markets to go to

the downside and i want to be clear just

because i don't see negative catalysts

doesn't mean there aren't negative

catalysts or black swans or things that

i can't see you can't know right now

i'm not saying that there will not be a

market crash

but

when we're in a position where

the stock market clearly is willing to

buy up any dip that there is the stock

market clearly and the economy as a

whole have so much cash available they

were struggling to figure out where to

put that cash just look at the uh

fed repo video that i did yesterday it's

insane they're they're opening up and

expanding the limits because there's so

much cash that needs to be parked

i i believe that uh there's a potential

downside risk

uh potentially a severe downside risk in

selling

call options against your stock now

i think it makes sense in some cases

like for example i sold

covered uh i sold calls which creates a

covered call against robin hood and uh

that was when it ran up to 70 dollars it

did his euphoric run i took 99 profit on

those options that was wonderful right

i've also recently sold some covered

calls against tesla

and those have worked really well just

to show you kind of how this works

basically what you're doing when you

sell a call

is what you're saying is hey i'm willing

to sell

a hundred shares of tesla at a certain

price on a certain date and you could

see that here with four contracts i

entered into so i said for example i was

willing to sell tesla at 750 november

19th willing to sell tesla

for 800 on january 21st right just an

example here

and this negative here means that today

the price of those contracts got cheaper

but what you'll see right here the

second to the right column here those

are my gains or losses on those

contracts those call contracts

and i don't really want to sell my tesla

shares i don't want to lose my tesla

shares so what i did today is actually

close these contracts by buying them

back basically

and so on these contracts net net right

here this is up about what 84 minus four

and a half so up about eighty thousand

dollars on on these particular uh

contracts where i sold calls on the

shares that i own

basically entering into an agreement

with somebody that i would be willing to

get rid of my tesla shares in the future

for a price

and i'm closing out those contracts

meaning i don't want sold calls anymore

and that's what this video is about this

video is about me being nervous about

sold calls not wanting sold calls

because of what i think is potentially

going to be coming

and that's that euphoric rally where the

market just says there is no alternative

we must own stocks we have too much cash

the negative catalysts are gone

the dip is unlikely to come and we may

as well go into stocks

that can push our stock prices up

and really exponentially kill

sold call options

now

when a call contract is sold

you could just hold that contract

through the expiration and worst case

scenario you lose your shares right but

you still get the credit but if you

wanted to trade that contract

your call option can go negative more

than a hundred percent because for you

to get rid of that on a stock that could

just keep going up and up and up and up

you could literally have an infinite

loss

if you wanted to

buy that contract back

again you could just hold it to

expiration lose your shares

but if you want to trade the contract

you could have an infinite loss because

you'll just you'll see an exponential

loss as a stock runs

and where i really saw this happen and

where it bothered me because i've got i

got nipped twice on this i've made a

whole lot more money on the stock so i'm

not so worried about it lots of money on

the stock it's been a very very

profitable uh trade as a firm

uh in total i probably lost about

25 now i'm sorry 35 000

uncovered call contracts

and the reason i took the loss on it is

because i didn't want to lose my firm

position so a firm is a stock that a few

weeks ago i talked about going in heavy

on and i threw in options and shares and

i was exposed to this by about half a

million dollars of course anytime i make

a buy or sell transaction remember i

send those alerts to everybody in the

stocks and psychology of money group

link down below there are a bunch of

courses on building your wealth down

there you could use that coupon code

that expires on friday pricing will be

going up sure there'll be some new

coupon in the future in the future but

uh but the pricing does go up so if you

want to get the better pricing lock that

pricing in now you'll never see the

price go below it always just keeps

going up kind of like a firm stock here

recently but anyway so a firm has been a

wonderful wonderful investment it's been

really good i made a very detailed

public video about them as well you

could look that up just type into

youtube meet kevin a firm i think the

title might have been like

my million dollar investment or

something like that uh anyway so i have

a lot of information on the firm in that

video

and the the problem i had with a firm is

when it ran the first time i sold a

covered call or i sold a call which is

known as having a covered call and i saw

that

a contract go substantially

negative like

way way way way negative it wasn't a

very large contract uh but the thing

went to like negative 120 or something

like that it was really ugly it was down

like 80 000 at some point uh and and the

contract

like the amount of money that i put on

the contract wasn't even that much again

it was literally upside down on trading

the contract now fortunately a firm has

had these these sort of

moments where it like runs and then it

kind of comes back so i was able to bail

out of of that and uh and get out

essentially with a nip rather than an

epic large loss uh but but i didn't want

to lose my shares and that's good that i

didn't lose my shares here because look

at this it ran to 126 the other day it's

sitting at 122 now it's it's just it's

becoming almost like an upstart where

it's just this unstoppable

stock uh and in my opinion the valuation

is kind of crazy on now i don't think

the valuation on a firm is crazy i think

it's high but i think upstarts valuation

is crazy but hey look i i can't disagree

with its performance its performance has

been phenomenal i mean this the stock is

is a triple since i traded it in the

summer i did some short-term trading on

it like between 120 around 120 and so i

mean look it's literally

essentially a triple here it's crazy

you know this would have been a buy and

hold or should have been a blind hold

but i i thought it was overvalued then

so i think it's overvalued now too

uh but that's okay you know that that

happens

so but anyway where i want to go with

this is saying covered calls in this

kind of market can can be very dangerous

and so i would avoid those this is

different from what i've previously said

remember previously i said i like

because volatility is declining selling

contracts selling calls selling puts

i'm making a change and that's because

of the negative catalysts evaporating in

the market so as the market is changing

i'm changing with it and i am no longer

doing covered calls in fact i have

closed every single

sold call contract that i have i

currently own zero

covered calls

close them out on tesla closing them out

on robinhood net net they've been very

profitable

even though i've gotten my butt nipped

on a firm ones net net they've been very

profitable so the only two option

contracts that i'm willing to play in

this market right now are sold

puts and

short-term call options

short-term call options are more

speculative obviously you can make a lot

of money you can lose a lot of money

one that for example i have a short-term

call option on now is win resorts i have

a short term call on this one it's an

october 15th call i bought it in the

money at like 80 bucks or whatever and

uh it gives me a little bit of

insulation i really want to trade that

one as we see recovery stocks kind of

rally back but also i want to make sure

that i get out of that before we get

potentially more negative uh

bad news from china on regulatory action

although i think china's got their hands

full right now with

evergren i i never put it past china to

to do some crazy things so uh that is a

it's a that's a risky one

that's a little bit more of a trade kind

of yolo esque uh style trade i'm okay

with that

uh in in this kind of market

uh but again

it's you know when you go into trades

it's important to know

are you doing a trade to buy and hold

something are you doing it as a you know

short term swing trade

you could be in and out within a day or

two is it a yolo what is it right

so just be honest with yourself about

what you're doing

but yeah look i think uh

selling calls right now potentially

risky i generally

i mean look i would still say if you're

willing to hold your contracts through

to expiration it's not that big of a

deal if you want to hold your contracts

through expiration

then and you're willing to lose those

shares that you have

that you're selling calls against fine

but certainly don't do naked which is

where you don't have the underlying

shares but uh but yeah otherwise

very interested right now in uh and

staying away from those

either selling puts or just buying

shares

and uh specifically of companies that

that are still somewhat depressed we're

probably not going to see those may

prices again and so that's okay i

realize that i'm over that

but in terms of negative catalysts if

you know any please let me know in the

comments down below and folks thanks for

watching this video hopefully this was

helpful we'll see the next one bye

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