Hey everyone meet kevin here in this video we're going to talk about the most dangerous thing in the stock market, uh right now, in my opinion, and it's a little bit different from what you've heard in the past so yeah. This is a little bit of a change and we're going to explain exactly why this video, by the way is brought to you by truebill, go to met kevin.com truebill to learn more about truebill or stay tuned for when we talk about truebill in just a moment. Okay, so first it's very important to know that we are in, and i'm sure you already know this - we are in a very euphoric style market in general. Yes, there are times there are weeks or there are days where we have dips, but the dips usually aren't substantial intraday.

We had an s p sell-off on monday of five percent. On the day we only fell about 3.6 percent. We have not had a negative 5 sell-off on a day in the s p. 500.

Since september of last year, it's been a year since the s p, 500 has dropped 5 or more, which is again on a closing day on a closing price, which is pretty incredible, and we've also seen a lot of volatility in the market. Get reduced. We've seen volatility come down. This is why you could have literally bought tesla options.

While tesla was at 715, you could have bought leaps for tesla and they could be in the money for 2023 and even though tesla is green and above 750 right now, you could be negative because of something known as volatility crush. But i've been talking about this since about may and june that we're seeing volatility come down substantially right. So volatility is coming down over the course of uh the last year, we've kind of seen the s p 500 just go chug along straight up. Stocks, like google, have done the same thing.

It's been pretty incredible. Uh and overall stock market has been pretty good, yeah there's some momentum plays that have shot up only to come crashing down. This is normal. We expect this, but overall the stock market has been very good every time we see dips, they get bought up very quickly and that's because a lot of, in my opinion, the negative catalysts that we have are pretty fleeting.

That is they're pretty temporary. I mean think about it. On monday, i even said this on on monday, while the market was bloody, red and screaming red and bloody mary, we i said on this channel, look the ever grand issue. It's going to be temporary in the next two weeks.

We'll know what happens with evergreen so yeah, maybe there would be a few more opportunities for red, but fear around evergrand is really evaporating mostly because you've got a lot of institutions and funds and banks coming out saying look. This will probably be a localized issue. We're not expecting mass contagion, so the market has really relaxed over evergreen fears. We have a path from the federal reserve.

Now we're not expecting the tape. Well, we didn't get the taper, which we did expect that and we're now expecting the taper in november, and we expect the table to end the middle of next year and then we'll get a quarter percent interest rate bump uh in the second half of next year. Like we've got a pretty clear path here, we also have now verbal talk that uh democrats are going to figure out how to extend uh the budget and raise the debt ceiling, probably by doing the budget reconciliation bill as part of the three and a half trillion Dollar, bill it'll get done over the next three weeks and all these issues will be gone like all these negative catalysts that we've had are going away, and we expected that. But we have also expected uh that inflation would at some point inflict down, and we still think that can happen when we get cpi readings.

For september and october, i've been saying that for like eight months now, september and october kind of tired of saying it you're - probably tired of hearing about it, which is more important. But so this really leaves the door to this weird market that we're in, and i want to talk about what i think is particularly dangerous and - and it takes this setup to talk about what i think is particularly dangerous uh and it has to do with stocks And options, obviously uh so first, what's not dangerous in my opinion, is selling a put or buying shares. The reason i say that is buying shares is a wonderful thing. Don't worry about your cost basis.

In my opinion, somebody very well put it this morning. They said cost basis is just like the sunk cost fallacy. You can't focus on your cost basis, so you're like oh, i want to buy more, but it'll increase my cost basis. What you want to you want a vanity number, take a screenshot and then buy buy more move on right, cost basis.

Doesn't matter so much so don't worry about your cost basis. Buying shares is great and companies who love and you want to hold long term. There are some things that i think are very pricey right now, like i personally think etsy is pricey uh, so i'm not super jumping up and down about buying more etsy, even though i've got over a million dollars in etsy uh. I do think that end phase is relatively cheap, especially with its relative performance here recently uh and uh, and so i've been increasing my position in end phase, even though that increases my cost basis from when i bought a lot of shares around that 120 range, and I'm seeing my cost basis go up.

I'm buying i'm not so worried about buying shares. I like buying, shares i'll, also sell, puts on companies that i'd be okay to own, but don't necessarily care to own uh like i, i won't be upset if i don't own them, and i did that, for example, on sofi, i've made a lot of money selling A lot of puts on sofi, uh and and that's really because i took advantage of a lot of volatility that we specifically had in sofi stock uh. When we saw that volatility and as that volatility's been crushing as a seller of option contracts, you get. That volatility benefit, which makes us open up the door to hey.

Well then, we should also sell calls right. So let's break these two things down here, because there's some very big differences between these two and one of these is somewhat dangerous. But we're going to talk about that right after i talk about true bill. Let's go to true bill.

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Just look at the uh fed repo video that i did yesterday. It's insane they're they're opening up and expanding the limits, because there's so much cash. That needs to be parked. I i believe that uh there's a potential downside risk uh, potentially a severe downside risk in selling call options against your stock.

Now i think it makes sense in some cases like, for example, i sold covered uh i sold calls which creates a covered call against robin hood and uh. That was when it ran up to 70 dollars. It did his euphoric run. I took 99 profit on those options that was wonderful right.

I've also recently sold some covered calls against tesla, and those have worked really well just to show you kind of how this works. Basically, what you're doing when you sell a call is what you're saying is: hey i'm willing to sell a hundred shares of tesla at a certain price on a certain date, and you could see that here with four contracts i entered into. So i said, for example, i was willing to sell tesla at 750 november 19th willing to sell tesla for 800 on january 21st right just an example here, and this negative here means that today the price of those contracts got cheaper. But what you'll see right here? The second to the right column, here, those are my gains or losses on those contracts, those call contracts, and i don't really want to sell my tesla shares.

I don't want to lose my tesla shares, so what i did today is actually close. These contracts, by buying them back basically and so on these contracts net net right here. This is up about what 84 minus four and a half so up about. Eighty thousand dollars on on these particular uh contracts, where i sold calls on the shares that i own basically entering into an agreement with somebody that i would be willing to get rid of my tesla shares in the future for a price and i'm closing out those Contracts, meaning i don't want sold, calls anymore and that's what this video is about.

This video is about me being nervous about sold, calls not wanting sold calls because of what i think is potentially going to be coming, and that's that euphoric rally where the market just says there is no alternative. We must own stocks, we have too much cash. The negative catalysts are gone, the dip is unlikely to come and we may as well go into stocks that can push our stock prices up and really exponentially, kill, sold, call options. Now, when a call contract is sold, you could just hold that contract through the expiration and worst case scenario.

You lose your shares right, but you still get the credit. But if you wanted to trade that contract, your call option can go negative more than a hundred percent, because for you to get rid of that on a stock that could just keep going up and up and up and up, you could literally have an infinite loss. If you wanted to buy that contract back again, you could just hold it to expiration, lose your shares. But if you want to trade the contract, you could have an infinite loss, because you'll just you'll see an exponential loss as a stock runs and where i really saw this happen and where it bothered me because i've got.

I got nipped twice on this. I've made a whole lot more money on the stock, so i'm not so worried about it. Lots of money on the stock. It's been a very, very profitable, uh trade as a firm uh in total, i probably lost about 25.

Now, i'm sorry, 35 000 uncovered call contracts and the reason i took the loss on it is because i didn't want to lose my firm position. So a firm is a stock that a few weeks ago i talked about going in heavy on and i threw in options and shares, and i was exposed to this by about half a million dollars. Of course, anytime i make a buy or sell transaction. Remember i send those alerts to everybody in the stocks and psychology of money group link down below.

There are a bunch of courses on building your wealth down there. You could use that coupon code that expires on friday. Pricing will be going up. Sure there'll be some new coupon in the future in the future, but uh, but the pricing does go up.

So if you want to get the better pricing lock that pricing in now you'll never see the price go below, it always just keeps going up kind of like a firm stock here recently but anyway, so a firm has been a wonderful, wonderful investment. It's been really good. I made a very detailed public video about them as well. You could look that up just type into youtube: meet kevin, a firm.

I think the title might have been like my million dollar investment or something like that uh anyway. So i have a lot of information on the firm in that video and the the problem i had with a firm is when it ran the first time i sold a covered call or i sold a call, which is known as having a covered call, and i Saw that a contract go substantially negative like way way way way negative. It wasn't a very large contract uh, but the thing went to like negative 120 or something like that. It was really ugly.

It was down like 80 000 at some point, uh and and the contract, like the amount of money that i put on the contract, wasn't even that much again, it was literally upside down on trading the contract. Now, fortunately, a firm has had these these sort of moments where it like runs, and then it kind of comes back. So i was able to bail out of of that and uh and get out essentially with a nip rather than an epic large loss uh. But but i didn't want to lose my shares and that's good that i didn't lose my shares here because look at this, it ran to 126 the other day it's sitting at 122.

Now it's it's just it's becoming almost like an upstart where it's just this unstoppable stock uh and in my opinion the valuation is kind of crazy on now. I don't think the valuation on a firm is crazy. I think it's high, but i think upstarts valuation is crazy, but hey look. I i can't disagree with its performance.

Its performance has been phenomenal. I mean this. The stock is, is a triple since i traded it in the summer. I did some short-term trading on it.

Like between 120 around 120 - and so i mean look, it's literally essentially a triple here, it's crazy. You know this would have been a buy and hold or should have been a blind hold, but i i thought it was overvalued then, so i think it's overvalued. Now too uh, but that's okay! You know that that happens so, but anyway, where i want to go with this is saying covered calls in this kind of market can can be very dangerous, and so i would avoid those. This is different from what i've previously said.

Remember previously, i said i like, because volatility is declining selling contracts, selling calls selling, puts i'm making a change and that's because of the negative catalysts evaporating in the market. So as the market is changing, i'm changing with it and i am no longer doing covered calls. In fact, i have closed every single sold call contract that i have i currently own. Zero covered calls close them out on tesla, closing them out on robinhood net net they've been very profitable, even though i've gotten my butt nipped on a firm ones.

Net net they've been very profitable, so the only two option - contracts that i'm willing to play in this market right now are sold, puts and short-term call options. Short-Term call options are more speculative. Obviously you can make a lot of money. You can lose a lot of money, one that, for example, i have a short-term call option on now is win resorts.

I have a short term call on this one. It's an october 15th call. I bought it in the money at like 80 bucks or whatever and uh. It gives me a little bit of insulation.

I really want to trade that one as we see recovery stocks kind of rally back, but also i want to make sure that i get out of that before we get potentially more negative uh bad news from china on regulatory action, although i think china's got their Hands full right now with evergren. I i never put it past china to to do some crazy things. So uh that is a it's a that's a risky one. That's a little bit more of a trade kind of yolo esque, uh style trade, i'm okay! With that uh in in this kind of market uh, but again it's you know when you go into trades, it's important to know.

Are you doing a trade to buy and hold something? Are you doing it? As a you know, short term swing trade. You could be in and out within a day or two. Is it a yolo? What is it right? So just be honest with yourself about what you're doing but yeah look, i think uh selling calls right now potentially risky. I generally i mean look.

I would still say, if you're willing to hold your contracts through to expiration. It's not that big of a deal. If you want to hold your contracts through expiration, then and you're willing to lose those shares that you have that you're selling calls against fine, but certainly don't do naked, which is where you don't have the underlying shares, but uh, but yeah otherwise, very interested right now. In uh and staying away from those, either selling puts or just buying shares and uh, specifically of companies that that are still somewhat depressed, we're probably not going to see those may prices again, and so that's okay.

I realize that i'm over that, but in terms of negative catalysts, if you know any, please let me know in the comments down below and folks thanks for watching this video. Hopefully this was helpful. We'll see the next one bye.