Whats Up Tackle Traders!

Last week was a base introduction to the Environmental Hedging System and a little recap from the illustrious Marquise Johnson at Tackle’s first ever Trade Camp. Before we get into Week 2, however, I want to give a bit of a shout out to a couple of my favorite people: Emily Wangari Muiruri and Marquise who are now official members of Matt and Tim’s stock teams at Legacy. Congrats!!!! It’s been a blast watching the growth these two individuals have achieved and the consistent, humble service they provide to our students. They are fine additions to this thing called humanity and I am very proud to know them!! Smiley face.

Now, as mentioned in the prior blog I submitted 4 specific steps to this system. This week we will focus on Step One of Environmental Hedging—the taking of money from environmental and culturally destructive corporations.

First and foremost we are not owners of the list I will go over, step one does not presume ownership or any long position, whatsoever. Rather so, we will assume either a short position or, more often than not, an uncovered put position: The Naked Put.

In essence when a Trader writes a Naked Put they are partly acting as an insurance salesperson as well as telling the market that they are interested in ownership, but will only assume ownership if a series of conditions are met.

1. I would like the stock or E.T.F. at a discount—one which corresponds to the strike price sold.

2. I don’t necessarily want shares at this moment, maybe in 30 days. Although I reserve the right, I am not obligated to take assignment. You can always close the trade.

Now, 80% of the time the strike price sold is not touched, thus giving the trader unfettered cash-flow. And since you are a seller, not a buyer or an owner of the stock or E.T.F., the trader is, in effect, jacking money from said corporation(s).

The naked put profits from neutral to bullish trends and there are three rules to the naked put. There is a Theta rule, a Delta rule, and a Position Size rule. These rules are to be followed without variation. This is very important, folks. Do not break the rules. The rules are designed the achieve a certain harmony between directional probability, premium, and time-decay. The rules not only keep you safe but also place you in the sweet spot for profit.

1. Delta Rule: Sell a Put Option(s) closest to .20 Delta.

2. Theta Rule: Sell a Put Option(s) closest to 30 days out from expiration. Do not do weekly options.

3. Do not sell more than you can take ownership of. In other words, have the necessary collateral in your margin account to cover assignment if assignment takes place. (If assignment does take place, roll into the Covered Call until you are Called-Out).

This week’s list of potentials are as follows:

X—United States Steel. This puppy is setting up nicely, premium is good and I am targeting $27.80. Words of caution: X is a part of the S&P and can be subject to any fluctuations or corrections. Currently, X is swimming against the tide and submitting decent technicals.

USO—United States Oil Fund. This one is fresh from a serious beat down and is exhibiting a decent consolidation pattern and should head north, assuming OPEC agreements are maintained and tensions in the Arab Peninsula are reduced. Technically, it looks good to me.

FCX—Freeport-McMoran. Just broke back above the $12 resistance barrier and moving north. I’d be hesitant to place a trade until its above $13.15, however. From there I could see it running to $16.

GDX—Vaneck Vectors Gold Miners E.T.F.—Currently it is in a bullish-retracement. Let it settle and wait for confirmation.

AMD—Advanced Micro Dynamics. This little guy I would wait on. Had a surprise flash-crash in the tech sector late last week and I had written naked puts on Thurs. Now it has gone against me. That said, all I did was roll into a short strangle (which is merely the selling of call options against my naked puts @ .40 Delta, 30 days out.) This will either lessen the loss or could, in some cases increase profits. Let’s say, it goes down for a few more days and starts to go back up…in that case I will buy back the calls for a profit and allow the puts to gain in value. I have more than 30 days time, which should be able. If it breaks below the $11—$10.50 mark ill close the puts and let the calls run.

And, as always, selecting the naked put or shorting the stock would be appropriate in the Environmental Hedging philosophy.

Next week, I’ll show you what you do with the money cleaved from these trades in Step 2 of Environmental Hedging.

Now, the video attached is of Aricebo / Ponce municipalities in the Spanish Virgin Isles. Basically these areas are chalk full of caves and secret-stash waterfall systems and contain a United Nations World Heritage preserve. This particular preserve is the only “dry forest” in the Caribbean and the coastal portion of the preserve is an essential nursery for marine life. In very few words it was absolutely beautiful and by far one of the coolest places I have visited in my travels. It was well taken care of and a fine example of environmental stewardship.