Dear Student,
We had a short week this week, thanks to the Labor Day holiday on Monday. But we were still able to cover a lot of ground…
On Tuesday, we took a deep dive into footwear stocks – and multiple ways you can profit.
On Wednesday, the list of stocks most likely to break out beyond their 52-week highs.
And yesterday, I showed you how to read an option chain.
You can catch up on all of these articles – and more – on the Patterns & Profits website.
So, before we take off for the weekend, I want to go through the following questions I pulled from the mailbag over the last few days.
Remember, you can send me a message at any time, too. Just keep in mind that I can’t give you any personalized advice or guidance – so save those questions for your broker.
Q: Hi Tom, can you please give us an example of a SPY Call spread and a SPY Put spread using recent data. Or make a trade recommendation. You usually use a $5 spread. Would you use the same or something smaller for the weekend trade? Thanks,
A: I can, but this is for educational purposes only… If I am trading over a short period of time, I would use weekly options or less and keep the buy strike as close as possible to the market price.
In the example above, these options have four days to expiration, and I have them colored green for the buy side and red for the sell side. Obviously, we would need the SPY to move higher… But we’d only need it to move by 1% within the next four days for this trade to theoretically double in value. I provided details on the risk, reward, and breakeven in the image above.
Q: Hey Tom, can you elaborate on why it’s better to hold through September instead of preserving capital until we get another all green Money Calendar month?
A: I actually think that while September is a volatile month, it’s one to lean into on the back half based on the data. One could also look at “things” instead of stocks, like gold and silver… perhaps even stocks that don’t correlate with the overall markets (like shoes for instance). I did a video on this subject Tuesday – check it out here.
Q: Hi Tom, I need more info on how to get 200% on a 10 wide if you buy for $5. Thanks!
A: Well, that’s up for debate… It’s either 100% of the risk or 200% including the risk. But I hear what you’re saying. If you really want 200%, you have to buy a 10-point spread for $3.33. Great catch!
Q: How do I get the details/companies at the Money calendar?
The Money Calendar is my proprietary software, but the list is comprised of stocks that are both penny pilot stocksand of those that trade weekly options. The penny pilot lists can be found here, and stocks that trade weekly options can be found here. Happy Hunting!
Q: Hi Tom, Nvidia has been in the news a lot recently… How are you feeling about the stock? I followed your suggestion to purchase and your thoughts were to sell tomorrow. Are you still feeling this? I’m still trying to see how your theories work. I’ve always been a long-term investor, and this is all new to me. I just recently subscribed to a couple of your programs and hoping it all works out and I get to learn a different approach to investing. Thank you and will watch for your response.
A: I think we are in the early innings of the AI revolution. That will come with swings, both up and down. NVDA is hitting it out of the park right now with earnings, but the markets are toppy and volatile heading into September. I own NVDA as an investor, so I have a 10-year time frame. And, as a trader, you know that I focus on seasonal patterns, so I’ll stick to my systems and the buy/sell dates of these patterns – win, lose, or draw. I do think that once we get past this election, the focus will turn back to companies. Thanks for your question!
Q: Questions on your Money Calendar graphic… What is the “Power Meter” and how do I interpret it? Is there an ROI or Net Profit % number available? Thanks much!
A: The Power Meter is how we judge how well the pattern has done lately versus the overall lookback. If the pattern is making more now than it did over the 10-year average, it’s positive. I have programmers working right now to put a target projection on this to further advance its use as a trader. Be on the lookout for this at the beginning of 2025.
These were excellent questions, and I’d like to thank everyone who sent these in.
Have a fantastic weekend!
We’ll talk again soon,
Tom Gentile
America’s Pattern Trader