Introduction

In my previous article here titled "S&P500 and Bitcoin - is there a 100.000% win rate strategy?", I shared that there are 2 instruments that I believe will always make new all time highs, given enough time.

These 2 instruments are Bitcoin and the key US stock market index - S&P500.   There is actually another 2 more indices I like in the US market which is Nasdaq-100 (QQQ ETF) and Russell-2000 (IWM ETF).

The one I like the most is actually TQQQ ETF, which is the 3X leverage of QQQ / Nasdaq-100.

This is because of the dominance of Mag 7 stocks, dominance of tech and AI stocks, which I believe, over the long term, represents the future.  However, between Bitcoin and TQQQ, I obviously weight a lot more on Bitcoin, because TQQQ and the US stock market in general carries a high valuation and future returns may struggle.  In fact, Tom Lee, a respected analyst is predicting that the US stock market may peak in mid 2025 and he expects year end returns to be lower than mid 2025, which concurs with my gut feel, that I think the adage "Sell in May" has decent odds of coming true.  And markets like to "front-run" and so, I chose to trade small in TQQQ.

My base thesis on Nasdaq-100

Like S&P500 and Bitcoin, this index is one where the more it falls, the more I want to own it (during its bullish upcycle, but not during its bearish downturn), because when it is bullish, it will always eventually make new all time highs again - when is just a matter of time.  In fact, I believe in the Nasdaq-100 much more than S&P500 at this juncture.  That's just my bias.  I may be right dozens of times, except on the turning point from bull market to bear market but markets always give you clues like lower highs, lower lows and we have plenty of time to flip the other way (starting by protecting our shares and LEAPS calls first).

My base thesis on 3X TQQQ

The benefit of getting 3X leverage is that it is capital efficient.  We earn 3X the returns (and theoretically appears to take 3X the risks) for the same capital outlay.  Due to the leverage, there is decay, and so, we also trade options around it, to have a net benefit larger than the decay itself.  In other words, using Options judiciously, we further enhance our returns.

My complex positions on TQQQ

Explanation

There is basically 5 different strategies on my TQQQ positions - (a) 200 shares. (b) 1 LEAP $58 Call expiring June 2025, (c) 3 Cash Secured Puts (CSP), (d) 5 Bull Put Credit Spreads (BPS) and (e) 1 Bear Call Credit Spread (BCS).

I trade dynamically, i.e. I do not put all of them at the same time.  This is because, I respond to what I see happening in the market, and market is dynamic with its ups and downs.  Market moves first.  Then, I respond.  A bit like dancing and waltzing with Ms Market.

I also anticipate - e.g. when I think the probability favors a long position - e.g. when TQQQ dips.

I watch and as prices fall and gets to a neutral support or an oversold support, I enter using various strategies depending.

Seasoned chart traders know that a stock like TQQQ and QQQ have numerous support levels - so many it's hard to know precisely which one will hold.  Well, trading options simplifies that a lot because you can enter at every one of those support - e.g. using a Bull Put Credit Spreads first!  As long as it looks "low enough".  This ensures you don't miss much opportunities and it's not a bad way if you are active.

The thing about selling BPS is that even when we are wrong in our precise entry timing, we still end up winning most of the time because of the options structures, but the win size is naturally small, and it's not designed to give you big wins safely ... But I like it because it gives me a "feel" for the market - it lets me understand Ms Market's rhythm ... 

When I see the premiums grow fatter and we are near a stronger support bottom, I then switch strategies to CSP for fatter premiums and here, I must be willing to take assignment usually if price continues to fall.  This has so much buffer to win.  

Near the bottom (so hard to get this right, but we usually know when our buffer CSP is ITM) ... I then add with shares and LEAPS calls ... but the win rate is not as good as the first 2 theoretically.   However, when used on Nasdaq-100 - the actual practice win rate is much higher when we catch near the bottom - it's just a matter of time before they win.   This part is the part that relies on the fact that QQQ ALWAYS make a new ATH ... or at least, it wants to ...  it doesn't have to exactly make a new ATH for us to win nicely.   Here, both my shares and my LEAPS are already winning +20% and +40% respectively even though QQQ is nowhere near ATH yet, and this is why I am 100.000% confident in trading TQQQ.

Just to check - my 200 shares now has a paper gain of nearly 20% ($2,840 for an outlay of $14,650), and my LEAPS have a paper gain of nearly 40% ($906 for an outlay of $2.4k).  Note these positions are less than 3-4 weeks, so they are swing trading.  

When I compare with KLCI, many times I find it hard to believe this is possible - it's amazing comparing this INDEX vs KLCI.  

And we can do flexibly other strategies and make more monies.  E.g. today, as it rises strongly, I started to short using a small BCS (Bear Call Credit spreads).  I am still bullish, but BCS has such a huge tolerance that as price keeps rising and my short loses, it lose in a smaller size and my account still grows - so, even when I am wrong, my account keeps making new all time highs ....

If I am really wrong, it doesn't permanently hurt me, because I can roll and do trade "repairs" (e.g. roll to future calendar periods), and eventually still come out ahead and win because nothing rises forever, and I can split, make it back elsewhere, etc. ... you can think of this like having a "cheat code" in trading - it improves my win rate tremendously!

Summary of paper gains so far

In the past, I would diligently compute these but these days, I no longer feel that it is important, and no longer feel to wish to do so.  I just let IBKR does all the summation for me.   However, I encourage you to monitor at the start of your career ... these days, I prefer to know if I am trading correctly or not by looking at my final account growth.

Summary and Conclusion

The purpose here is just to share and explain better what I do and how I utilize the fact that Nasdaq-100 - I know - will always make new all time highs.  It gives me 100.000% confidence to buy the dip.   Coupled with Options trading, I just know that I am going to win against the market.  It's not boasting .. just that confidence.  

This is because Options gives you additional "methods" to be a profitable trader, if you really understand options.  It's like having a cheat code in this trading game.  if you truly understand Options, understand how to size properly, it improves your winning chances tremendously, reduces your risk as long as you trade sensibly with strong control on size.  

You will still have losses, that is 100.000% certainty, but you also know with 100.000% certainty, eventually it will make new all time highs too.  Actually, I never need to rely on this fact to win, but it's good to have that belief at the back of your mind, to take the worry off so that you can look at the situation objectively and make the appropriate decisions.   With Options, sometimes, you can protect your shares and leaps by selling ITM or deep ITM Calls, and as long as there's "juice" in the Option ("juice" = time value), your final account will keep trending up over time. It's not about losing smaller (when you get smaller in stocks), it's about sacrificing big wins for small wins even when we are wrong - this is an option that Option traders have, that pure stock traders don't have.

Hence, I no longer trade stocks without a deep Option Chain.

Especially when I realize my limitation - when it comes to timing precise entries and exits, I am really just an average trader.  My timing accuracy in entry and exit is just "average".   I know many who are more accurate than me, however, I usually find my trading results beats them, because of my Options trading and having that "cheat code".

And what I do, unfortunately is hard to write in books, because of its dynamic nature.  There is an infinite number of possible market responses that cannot be fully covered, especially the fickled part where market just whipsaw in huge manner that cannot be fully explained on paper and what appears in the Option Chain is different than can be captured at a single point in time.  How the Option chain looks in the first 30 mins of market open, how it changes during the day, how it changes as we approach market close and how it responds to market price fluctuations, changes in Implied Volatility, changes in Theta decay ... all this phenomena requires strong attention to detail, and has to be experienced thousands of time to be embedded in the subconscious.   

And because it is dynamic, the position I have next week, next month can look extremely different (or the same) ... that depends on Ms Market ... LOL. 

All the best!

Disclaimer:  Not financial advise.  Just a random guy on the Internet.  As usual, you are fully responsible for your own trading and investing positions.

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