Strategy Discussion
Saturday February 28, 2026
I am dyslexic. So I don’t proof read. If you want to skip ahead to the section directly related to strategy and avoid stumbling through my learning-disabled stream of consciousness search for “skip.”
It’s 10pm in Atlanta and I am watching a YouTube video about gold prospecting. This video reminds me of the trips David and I used to take hiking and I found myself reminiscing. I have been quite frustrated lately about my inability to finish something I started.
(it is 2am now that I have finished this. I stopped to play guitar)
About 16 years ago, I first started posting and commenting on iHub (Investor’s Hub.) iHub and the ADVFN (Advanced Financial Networks) were two of the very early entrants into the web. Back in 2000, when I bought my first shares of Flowserve ($FLS) and Apple ($AAPL) it was like the wild wild west compared today.
Internet trading platforms were brand new. Smart cell phones didn’t exist. Blinking text on websites was peak technology. Back then I was more into cryptography having done most of my initial graduate course work in mathematics and statistics.
Back then you would join listservs and get digests emailed to you on whatever top that interested you.
That was the speed of information.
And this seemed revolutionary to the generation prior to mine who used to call their broker on the phone to trade in and out of positions. I had a penpal as a kid once too and grew up going to the library to pull stock charts from a card catalogue. And this was just the late 1980s.
I didn’t know about iHub when I first started out. I was aware of Yahoo! finance message boards but that was it. So I missed out on the burgeoning online finance social space for awhile.
David told me about it in 2009 or so. I don’t remember the reason but I am sure it had to do with some scam or another. My memory is not clear on this but this was about the time there were dozens of energy drinks popping up. The market has cycles of bullshit. Marijuana stocks in 2013-2014, solar stocks, biotechs, energy drinks, etc. This hasn’t changed since railroad stocks sprang up in the 1870s. Radio stocks were the flavor in the 1920s.
On iHub there is a great board where people just do deep dives into the most egregious penny stock and OTC scams. And it gets hilarious if you are into such things. Occasionally, insiders (even the CEO) of these scam companies would create fake accounts to defend the stock in the hopes of keeping the price up long enough to profit. I am pretty sure it was one of these posts David first sent me to laugh at.
Some people love true crime. Well, there is a lot of true crime in the public sector especially in nano caps. You may have heard about the hundred million dollar sandwich shop (google Hometown Deli in Paulsboro, N.J) as it made national headlines. Well, that is just one of hundreds and most are just comical. A few are terrifying. It you don’t want to read watch the Matthew McConaughey movie Gold (2016) for a tame version of what happened.
One particular company I remember was run by a lawyer who was squatting in an Church. Between writing diatribes on how the SEC was persecuting him he was in court fighting over ownership of a run down single-wide trailer. You can’t make up shit as surreal as what there are SEC filing records of.
When Shaun and I reconnected in 2014 our first discussion was about one of those scam pump-and-dump companies and company whose CEO had a multi-million dollar house in South Carolina and had no real revenue. No product. No basis to exist really. But, it did and people thought it would make them rich.
That scam played out for more than a decade and it didn’t matter just how many people tried to show people it was a scam. There was always more naive people that would get sucked in. It was like whack-a-mole. You finally show someone the company was a fraud and five more wide-eyed people would show believing the CEO was a genius and you’d have to start all over again.
It was Shaun who convinced me to allow him to convert my spreadsheets into something not as stupid. What I had built over the years was this complicated system that would pull data from Yahoo! finance (which at the time was easy to use) and do all the analysis and draw a line on a chart. The full EM line you see on our current charts (the blue dotted line), is that original line or pretty close to it.
About six years later, after two divorces (one mine, one Shaun’s), and in retrospect truly unbelievable and maddening life events, involving pregnancy, post-it notes, whale sharks and a mother-in-law threatening to chop me up and bury me in the back yard, we actually did convert my spreadsheets to code. Took four months in 2020… 2021? I forget.
While the rest of the world was learning about YouTube and Twitch, Shaun and I were living our own little Shakespearean tragedies.
And I took refuge in reading stock filings and investigating how a family in Detroit that used to run a nutrition supplement store front somehow started a movie studio with a dirt floor and no connection to a substation. And why thousands of investors would buy shares in that company which was obviously was worthless.
And eventually was worthless. But, only after the CEO bought a penthouse apartment in Dubai.
For me it was the best escapism. David, who was busy raising kids and generally being stable and well-adjusted, just liked calling people stupid in the nicest, most back-handed yet intelligent way imaginable online. He wasn’t the first internet troll. Just one of the best.
The problem with iHub is, at its heart, it is a place where for every one well intentioned person there are fifty people who just want to steal your money.
Now, I had friends in investment banking (now recovering) and working in financial management advisory roles, so I was already acquainted with Wall Street’s bullshit but iHub exposed me to a part of the market I wasn’t fully aware of.
I knew scams existed. I didn’t realize people actually believed in them - all the way to bankruptcy. This realization is like running into a person who earnest and honestly thinks Steven Seagal is the world’s greatest actor. And nothing you say or do can convince them otherwise. Elon Musk is the Steven Seagal of the car business.
This is where I developed Rule #2: Don’t short religion. Or to put more snootily, It is inadvisable to engage in speculative shorting of religious or deeply held belief systems.
I had been operating under the assumption that when someone lost money by believing in a fairy tale they learned from the experience or just gave up.
I mean Solar Roadways, Hyperloop, Mars, Fusion, these are, and always were, obvious scams. One are of research that has come out of the internet and cell phones is the expansion on the idea of the Pareto Principle into the “Whale Effect.” 99% of people don’t play to pay Candy Crush. 1% go into hock to and iHub allowed me to see just how big the population was of those people.
And how much money they could just light on fire.
Now, the model that I used back then is not free of risk. You still need to know what you were doing to use it.
So in 2018 or 2019, I started (again with a spreadsheet) to make a version that minimized risk. At this point in my life, I had watched not once, but twice, a generation’s wealth get wiped out by the market. I don’t blame Wall Street or the government. Wall Street and members of the government also got wiped out. The market is the vampire.
First in 2000 and then in 2008, I watched people’s lives disappear because someone, somewhere changed a spreadsheet and that was it. When this happened a second time I was in graduate school. I sold everything and went to cash in 2006-2007 after seeing the same mania I saw in 2000 before the tech sector I worked in at the time imploded.
In 2018, I wanted to do whatever I could to avoid watching a third generation get wiped out. Which I feared was about to happen though I didn’t know how yet. I watched money leave the market. And I knew the bid was thin and anything could collapse. Just nothing had, yet.
When I first “graduated” university and took a job I chose a pension not a 401k. Graduated there is in quotes because, well, I didn’t. I grew up very poor and paying for college, even with loans, even with both me (and mom at times) working two jobs, was growing too difficult so I walked into the career fair and got a CO-Op and just never went back to school. I was one semester short of a degree at that point but was one week short of homelessness and making $55k/year solved a lot of life’s problems. This was 2000.
But, taking a pension over a 401k and not joining in on the company’s stock buying program was apparently, a bad idea. At least that is what everyone I worked with told me. Until that company started laying people off and the stock went to zero that is. Then taking a pension looked like genius.
I don’t remember exactly at what price Nortel Networks stock traded when I was hired, but it hit $100 and then $115. Right before it hit 25 cents.
Now, it wasn’t genius that I chose a pension. But, it wasn’t luck either. It was my mom’s voice in the back of my head. My mom was a book keeper. She spent my entire childhood struggling to get anywhere financially in a world where a single mom couldn’t. When I was a kid I didn’t understand what my mom was teaching me when she would avoid the highway and took the long way home. Nothing drove me to shame like a 5 minute car ride taking 40 minutes.
Or when she would test keyboards to make sure the keys were solid and would last thousands and thousands of rapid fire clicks because a keyboard to her was vital to our survival.
But, when I got that job offer, I understood even if it wasn’t consciously that a pension was avoiding the highway.
In 2018, I pretty much had what I though was a “safe” model but my mom’s voice is always there in the back of my head. So I created a Twitter account and start recording publicly what I was doing. At this point I had 18 years of market participation under my belt and I know nothing I say mattered. When it comes to money you have to have proof. At that time I didn’t understand that “proof” means something different in regards to capital systems than it does into mathematical or physical ones.
I should have just bought a Ferrari. But, I started documenting instead. My graduate advisors always told me to keep a lab notebook incase I ever needed to show proof. Lab notebooks are hard to search though.
If you don’t know Twitter is searchable.
I used this “lower” risk version of the mode to figure out GameStop might short squeeze. I figured this out months before Keith Gill.
At the time Gravity Analytica (which is a tongue and cheek joke in reference to Newtown and Cambridge Analytica that shorted to “GA” i.e Georiga) was free for retail traders. At the time it was just used by iHub users that knew us there.
It was just there if you wanted to run a chart. Shaun had it running on some cheap web host I can’t remember. The reason it could be free is we were charing $40k/month to an institutional firm at the time. Something not a lot of people know about. This might come as a shock to people.
There is a lot of money just sloshing around out there.
In January 2020, when there was a news report that Congress had been briefed on COVID, I knew the market was about to crash. This was a very profitable realization in terms of percentages but not in terms of life style. Sometimes, your circumstances limit what you can do and after going through a nearly six year divorce I was not really able to grab the brass ring as firmly as I wanted to.
A lot of people knew the GFC was going to happen. The Big Short makes it seem like no one knew. That’s bullshit. A lot of people knew just most of them couldn’t profit off it. When I first “applied” for options I had to get references that would attest I had a decade of experience. And the fact Burry was able to keep his short position open for three years without being liquidated is really a miracle of legal maneuvering.
No soccer mom could have done that.
So here I was thinking COVID was going to be the next generational collapse. I was never worried that COVID would end humanity. I did clinical research in a children’s hospital. I know humanity can survive. I’ve watched dying children console their parents.
I was completely wrong about COVID wiping out wealth though.
One of the most humbling experiences in my life. I rarely short and I am glad I wasn’t one of the people who jumped onto shorting the market in March.
In 25 years, I have shorted a handful of times and when the market crashed February and March I was holding PUTS and cash ready to buy. Buying a crash is the best way for most people to win.
When there is blood on the streets. Buy property.
What I didn’t understand, and really wasn’t even aware or smart enough to consider, was that there are a shitload of gamblers in the US.
I understood that the same government that bailed out Wall Street in 2008 would bail out Americans, what I didn’t see clearly was that all those gamblers weren’t going to stop gambling and there was only one “sport” still being played. Only one casino still open.
The market.
Since, COVID I have made friends with a bookie and I now grasp just how much money people are willing to light on fire at a moments notice. What Not, is Candy Crush on steroids.
And I also didn’t realize that GameStop’s CFO was a complete idiot and didn’t understand he could, no should, sell shares on behalf of the company like AMC and the others did.
Out of the meme stock craze, my favorite moment was when Hertz’ CEO told a judge he wanted to be released of bankruptcy proceedings so he could sell shares in the stock spike. An open admission he wanted to screw retail to protect his assets. That is more the greed I expected from GameStop.
I still don’t understand why the CFO of GameStop didn’t raise capital in the spike. And I doubt anyone else does.
Remember, WarnerBros raised capital that wiped out Archegos and had GameStop just done that every retail investor would have been wiped out similarly.
The most profitable strategy for making money is to find situations where everyone involved are complete idiots and just get off the roller coaster before it crashes. Theranos. GameStop. NFTs. Crypto. Recently, silver. Still, silver.
So there I was. Disgruntled over the existing social media systems with what I thought was a “safe” or at least “safer” way to price entries but growing frustrated that no matter what I did people seemed to continue to just fall into the same traps. Over and over again. And worse, a once-in-human-history wealth creation event had just occurred that made a handful of people massive amounts of money as the by-product of dumb corporate mismanagement, was being sold as a common “short squeeze.”
And everyone started looking for the next one. Everywhere. The same effect happens with lottery tickets. When a store sells the winning ticket people will drive to that same store to try get struck by a second bolt of lightning.
This is when some dipshits started scraping our website.
Every fucking night. All good things end because of assholes.
Over the last 5 years, over 500 people have joined Chat. And 428 have signed up to one of the services Shaun set up. Almost everyone disappears in less than a month. A lot sign up and never once interact. I got so tired of people canceling we set up a week trial to save me from having to remove them from the system.
You can’t learn how to play basketball well in a week.
Or a month. Or a year really.
You certainly can’t get good enough to win a scholarship or get into the NBA.
The NBA used to draft seven footers thinking they could learn basketball. Sports history is littered with really tall horrible basketball players.
No one walks from out of a single semester of biology and into the operating room. Unless they’ve cut their arm off or something.
Yet, because of decades of penny stock scammers and GameStop people think you can.
You have to learn the game to win and that takes a lot more time than people realize. I was right about one thing.
Most people do give up and just buy indexes or entrust their money to a money manager who is happy to take 1% to do contribute nothing of value but reassurance and a yearly Christmas card.
So for a few years, I collected the answers to the questions people who joined Chat had asked into a book. It was during this time period I first started reading books on the stock market, finance and trading.
And I was shocked at how wrong they all were. At this point I have read 100s of books written over the last hundred years and I don’t think one of them has any insight at all into the public sector.
The private sector sure. If you want to start a business there are a lot of great books on running a business. But, nothing on the written on the vampire, presents reality.
I went to undergrad for math, computer engineering and statistics originally. Reading a book on stock trading is like reading a passage in a Chemistry book that tells you to put everything in your mouth to figure out if it is a salt.
Yeah… don’t do that.
After being laid off in 2001 went back to school with a bankroll this time and did graduate and then went to graduate school for Physics. I never took macro nor micro-economics. Never took a finance course. I wish I had the cute girls were in those classes but I always though economics was bullshit so I didn’t.
I grew up in credit unions and banks where my mom worked. And I knew banking and finance were not populated by intelligent people. I met the men that ran those institutions and I always felt their ties must have been way tied way too tight and restricted blood flow to their brains. So I had avoided reading anything on the topic. But, now that I had, I began to understood why everyone seemed so lost.
I wanted to write a book explaining just how the market works. And I have tried. Many, many times now. There is really just no way I am going to be able to do it. When I say many, many times, I mean I’ve written dozens of books. Here is just a short sample. (Yes, I wrote a book that uses Looney Tunes cartoons to explain markets)
There is just too much that you might need to know.
Remember, the most famous “traders” ran out of knowledge at some point and blew up their accounts. You just don’t hear about this. they live off continually talking about the time period they got lucky. Not the time period that ends with today. Because, that time period overlaps the period they lost everything, or nearly everything because they failed to understand that version of the market.
So the strategy they espoused obviously didn’t work for very long. Granted, it might have worked long enough to make them rich.
Livermore went bankrupt three times for example.
Skip.
So instead of trying to explain how the market works. I am just going to share what the strategy I have been using this year is and why. And then over the next months/years as epochs change and I have to adapt I will just update.
I am going to show you the trades I have been making in the competition account. Personally in my retirement account and the account I live off of, I am not operating a hedging strategy but that account and the office that I manage are using basically the same strategy just at different scales and with different instruments.
As I discussed at the end of last year I expected the market to turn over this year.
Ignoring, the private equity and private credit risks, which are opaque and behind paywalls from retail investors, going into 2026 here was viewable reality.
The economy was running hot.
Simple put that means the Fed is not going to cut rates.
In order to make money all you have to do is not lose money. It doesn’t matter if you fail to make money anymore. There are no trade commissions, no brokers fees. Nothing is going to slowly eat your capital.
All you have to do is not lose money.
If the Fed doesn’t cut interest rates this means small caps on average, aren’t going anywhere. I will leave it as an exercise for you to ask ChatGPT why this is.
This means that I just had to find a basket of small-cap stocks and bet they would go down. Or at least not go up. And conveniently baskets of stocks exist. They are called ETFs. Now individual stocks will go up of course. Finding one of these is probably harder than what I am going to discuss for most people.
Over all, this market segment was going to go nowhere though.
That’s it.
That is the entirety of thought behind what I have been doing.
Mechanically, it’s a bit more complicated. Everyday, I have just been buying puts on the iShares Russell 2000 ETF ($IWM) on strength. If there isn’t strength. I just don’t do anything.
Sometimes I would use the Invesco QQQ Trust ($QQQ.)
I am usually early when it comes to the market. And, to birthday parties, flights, etc. So this strategy took a little while to really kick into profit.
And I didn’t start it on January 2 because of the risk of carry-over from Christmas. This is a bit inside baseball.
Since I am not day-trading I could wait for my first plays to come into the money, which they did on day three.
I have been buying strikes just out-of-the-money because I expect the market to rollover and I am buying strikes 4-6 weeks out usually. I don’t buy everyday. I wait for the Russell to go up and then buy. My thesis is not that the market will crash or even that the market will go down, but that it won’t go up.
Of the four ordinal directions, up, down, left and right (the latter two being sideways) a stock’s price can’t go left. Ever.
The Fed is making going up unlikely which leaves sideways (right) and down. Which means even if you just flip a coin your odds are very good to make money.
By buying puts near the money and more than 4 weeks out I minimize time decay risk which further increases the chances of profiting. the shorter the duration and the farther out of the money the cheaper the play is but also the risk of loss is much, much higher. Remember, don’t lose money. That is really the only thing you need to have learned from Buffet.
This is not a dumb agent strategy nor a blind one. I know every day what may cause the market to momentarily rebound. Find a good economic calendar and spend a few minutes every night reading it and you can get a good idea of what can happen the next day or over the next few days.
Since, I am risk adverse by nature (thanks mom) I hedge puts with ODTE calls on occasion. And on occasion I will have to double down on the strategy. I do not expect to be right in the moment.
Just over time.
The competition account started the year with $1.7M. I thought about reseting it to $1M to compete on equal footing this year but decided not to. Getting returns on $2M is just as easy as $1M.
I have been allocating $25k-40k for this strategy and on at least one occasion was running ~$80k in puts. So that return is essentially the return on the same $40k being turned over, again and again.
I am fairly certain that return will beat any strategy written in any book.
A lot of people will read this and say something like “I have a job. I can’t spend time every day doing this.”
Well, if your job hasn’t made $360k in two months you might want to rethink that sentiment.
Now, can you do this?
Probably not. At least not initially. My intent here is not to convince you that this is a new career path for you. It’s just to try and start building up a basic understanding of markets and how to think.
The reason people fail in regards to the stock market is not for logical nor intellectual reasons. It’s because of emotions. Every one of the trades you will see below, at some point, was down. Most people panic.
Shit, I panic still after now 25 years. Stanley Druckenmiller has talked about days were draw-downs were so bad he’d throw up in his office. It’s not that the market is complicated it’s that the risks are very visceral.
Being down $10 or $10 million can keep you up at night.
I don’t know how long this strategy will work. This is the troubling nature of the stock market. What works now won’t work tomorrow. But, I know whatever comes next I will figure it out.
You have to adjust as the market changes. Not to be sexists here but if you have ever dated a woman you understand this already. Being a market participant is just like being in a relationship.
You have to adjust to the conditions at the time. The market will bankrupt you just as easily as a divorce.
And just like relationships, people often try too hard to make something that isn’t working, work. The reason Twitter is full of people talking about Nvidia and AI being a bubble isn’t because they are warning people.
It’s because they are stuck in a relationship they want to work out instead of just finding a new one.
I am sure Burry is making money on his Palantir and Nvidia shorts but from the outside it really looks like work for him.
Doesn’t it?
First lesson. Don’t over think it. There is always something that is obvious. Even if what is obvious is to do absolutely nothing at that moment.
In the trade log below you can see every trade in the competition account related to this strategy. The ones marked in green were profitable. The ones in red.
Weren’t.
Losses are to be expected no matter what you do in life.
Now, I am running this to hedge the main strategy which is just to buy cheap biotechs and wait.
But, anyone could have just done this for income or as a primary strategy. I just find do one thing at a time is boring.
This strategy will likely fail when interest rate do.
But, luckily, interest rate policy changes are data dependent and that data is public information. I will just stop holding trades if data is due and just react if the market misinterprets the data when released and then stop this strategy when the risk of rate cuts is too high and move on to the next strategy.
Whatever that is. If the next strategy is… buy Pokemon cards. I will do that. If it’s short the bank stocks. I will do that.
Dunno yet.
As always, if you think there are spelling errors update your dictionary to the latest version. Happy speculation!
— AJ