Financial Freedom Friday

TURNING KNOWLEDGE INTO WEALTH BY $MAXWELL

For years I tried to guess direction. I thought I could outsmart the market.

You might think you can do the exact same thing. Trying to hit home runs, and depending on your age and your income, maybe you should... Let me tell you a quick story, and more importantly lets talk about how you can make money now!!

Back in 2022 I sold puts on META at 280. I wanted to own shares lower, at least that's what I thought! Seemed smart. Little did I know Mark Zuckerberg was about to go all in on the metaverse and spend SOOOO much money on it. He didn't care what anyone thought. I guess when you're a billionaire you can do whatever you want.

META dropped to 120. Here's the chart, I keep the lines on the chart still...
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I remember walking across the Brooklyn Bridge. I was staring at a $50k loss on my phone on my way to a bad traders conference put on by Tom Sosnoff. I felt like the definition of a bad trader. Listening to Tom talk about his bad trades made me feel a little better.

I related to the image of Tom crying into his pillow.... The losses got worse for a while. I was down $80k on paper at the bottom.

But I'd been through drawdowns before. It didn't feel great... Blocking out the feeling of "this time is different." Looking at stories like this didn't help...

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I stuck to the math. After I got put shares, I sold calls, I sold call spreads.. I managed the position and turned that $80k paper loss into a $75k winner.

Here's the thing though. I never want to ride that rollercoaster again. Maybe you probably don't either? I don't need the stress of huge account swings. The reward isn't really worth the risk to me anymore... Not when I have another way to still generate some theta with some limited risk...

At this point I just want income. I want freedom and I got it.

Which brings me to earnings season. It kicks off next week.

Selling puts is my favorite strategy. It's also my most profitable. For the longest time my only play was to wait until after a company reported and hope for a gap down. I still do that.

A stock that gaps down on earnings often hands you inflated premium on shares you wanted to own anyway.
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We did it on PEP this week, hopefully your in the inner circle!

But I don't just sit on the sidelines before earnings anymore. On stocks I want to own I sell put spreads. Let's look at NVDA!

Here's the difference using NVDA as an example. It's trading around $203 this week.

Sell the August 180 put by itself and you collect about $300.

If NVDA craters you're obligated to buy 100 shares at 180 all the way down. That's the exact trade that had me staring at a massive loss on META.

Now try this instead. Sell the 180 put AND buy the 170 put.

You collect about $140. It's less money upfront. But you now have the right to sell at 170 the shares you're obligated to buy at 180. Your max risk is strictly defined as a spread. It's about $860 instead of $18,000.

If earnings go your way you only got half the premium... BUT if the stock tanks on earnings??? You get a credit to sell the long put. If you get assigned shares that's great. Start selling calls against them.

The math is simple. The single put pays more up front because you're carrying more risk. The spread pays less because the market isn't stupid. You pick the trade that matches the risk you actually want. Don't pick the one that feels exciting. Leave the excitement to the gamblers on Twitter.

You want a system that works in the background so you can actually enjoy your life. The stock market is the most passive way I know to build that exit ramp. It's the path to your freedom while you're still working. It buys you the time to be at the lake or the beach.

That's where I'll be.

If you're tired of guessing direction and want to start trading math instead of emotion its what I do every day!! See you in the Inner Circle!

Turning knowledge into wealth,

$Maxwell

📖 This weeks trade Tuesday blog:

​Why Selling Premium Beats Guessing Direction​

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