My Yearly Tradition With SQQQ

Hello, VWAPians!

Wow, what a weekend. I really needed the extra time off!

Now that I took the time to rest, spend time with family, and open aaaaallllll those presents, I’m ready to get back to my winning VWAP ways.

Our good friends at Money Map Press have put together a special week of programming for you.

Usually, I start every day on Money Morning LIVE with Garrett, Voz and the gang from 8:30 to 9:30 a.m. ET before going behind the velvet rope and into my Warlock’s World.

Well THIS week, they’re apparently giving EVERYONE the week off EXCEPT ME!

(Well, me and Bababooey).

I’m just joshin’ – nearly every expert here at Money Map Press will be around this week, but of COURSE they’re putting you-know-who front and center. (Wouldn’t you? Look at me, Blanche – I’m magnificent.)

That’s right, from Monday until New Year’s Eve, I, The Warlock, will be taking my Warlock’s World to the BIG ROOM from 9:15 to 11 a.m. ET!

Let’s convert some heretics this week.

As 8-Baller would say: HOLY SMOKE.

The other folks at Money Map Press are SO lucky to be graced with MY presence, so I’m tasking my VWAPians to represent Warlock’s World in chat.

Get loud! Get proud! Let them know what that VWAPian lifestyle is ALL ABOUT.

And, of course, I’m NOT coming alone…

That’s because the Fractal Assassin, the 8-Baller, will be bringing the Daily Decode to the big room EVERY DAY this week at 12:30 PM ET!

That’s INSANE. The value from this week alone is incredible.

All I’m asking is that you HOLD. US. DOWN.

On Friday Thursday, we had some incredible trades on Allakos (ALLK) and Evgo (EVGO) in Warlock’s World.

And as the year is winding down and the Invesco QQQ Trust (QQQ) keeps ripping because the market never goes down, it reminded me of one of my favorite trades.

But ya gotta have pay-tience…

If you’re with me in my Warlock’s World, you know that sometimes I like to break my own rules and short the Qs.

It’s usually a quick trade, as it should be. If you stay short the Qs for too long, you’ll get your FACE ripped off.

The great thing about the Qs is that there are SO many ways to trade around it.

Of course, you can trade the QQQ ETF itself.

Or you could trade QQQ options.

Or trade the Proshares UltraPro QQQ (TQQQ).

You could trade the ProShares Ultra VIX ETF (UVXY).

Or you could trade the ProShares UltraPro Short QQQ ETF (SQQQ) – what I want to discuss today.

SQQQ is a triple-leveraged ETF that moves opposite of QQQ.

That means that if QQQ goes down 1%, SQQQ goes up 3%.

SQQQ might not be the best asset to trade; it requires BIG moves in QQQ to really be worth it.

BUT because the market never goes down, that means that SQQQ doesn’t really ever go up for long.

In fact, SQQQ is built to go down, similar to UVXY. Just look at the chart from 2015 to now.

SQQQ weekly chart from 2015 to 2021

Because SQQQ is all but guaranteed to go down in a bull market environment, that gives us an opportunity to get tricky with some options.

Now, I’m sure you’re all familiar with calls and puts.

Stock is going up, buy a call. Stock is going down, buy a put. Pretty simple at its core.

To get a little more complicated, let’s talk about selling options.

If I sell to open a put on a stock, I profit if the stock goes up… or at least stays above my sold put strike through options expiration.

If I sell to open a call on a stock, I profit if the stock goes down… or stays beneath the sold call strike.

That last part is what gave me my SQQQ trade idea.

SQQQ currently trades around $6 per share.

If the market pulls back, and QQQ drops 10%, SQQQ would go up to $7.30.

Let’s say that the market crashes and QQQ goes down 20%.

I think at some point this year, the QQQ could be down that much – 20% off highs. I mean it. So what’s the SQQQ going to do? It would go up 60%.

Before we do that math, let’s think about the market going down 33.3%. Why that number? Because I want to make the math easy.

If QQQ goes down 33.3%, SQQQ would be up 100%. Whoa!

That would make the share price of SQQQ a whopping $12, from current levels.

Let’s take it to the extreme. Suppose QQQ goes down 50% in 2022. Dogs and cats living together, mass hysteria, the end of civilization.

What’s SQQQ going to do? It will go up 150%. And rise to a whole $15 from current levels. Let’s use that as our guide.

Anyone that’s buying SQQQ calls with a strike over $15 have zero clue about anything involving the stock market and we should take their money.

I went over this with Mark Sebastian. I asked my smartest friend, Garrett Baldwin, about it too, and I’ve done the math with my dad, Big Al.

There’s legitimately NO CHANCE the SQQQ can go to $40.

SQQQ has call option strikes available all the way up to $40.

So what I do, and I do this every year, is sell to open SQQQ $40-strike calls that expire next January.

If you’re willing to hold deep out-of-the-money (OTM) calls until next year, THEY COULD EXPIRE WORTHLESS…

And when you’re selling options, which is what I’m doing here, THAT’S EXACTLY WHAT YOU WANT.

You are paid a premium to sell the option out of the gate. The option expires worthless, and you keep the premium.

Consider selling deep OTM SQQQ calls to your trading repertoire, but remember – there are no guarantees in trading, so make sure you understand the RISKS first, because writing “naked” calls isn’t something to be taken lightly.

That’s all for now, VWAPians! I can’t wait to see you in the BIG ROOM this week as we bring the Warlock’s World to the masses!

Kenny “The Warlock” Glick

---

Comments