Amazing – The Real Robinhood $510 to $38K in 90 days!
Before we get to reading the story below we only have one question for you, Robinhood, Robinhood or Robinhood? So you have a choice and it is Robinhood! What we mean by this is Robinhood has made giant strides in their acceptance of millennial trading in both Crypto, sliced stocks & even leverage for the younger crowd. Robinhood's tools, fees and options are amazingly easy to use for most. George Saber represents this new breed of Robinhood trader phenom. We expect to hear much more about Robinhood in the future!
The Story of Coin Observatory's Robinhood Adventure
Much can be said about the current market cycle, in a post-covid19 market crash world, where it took mainstream media 9 months to declare a “new bull market”. Smart money bought the dip. But buying the didn’t turn $514 into $38,345 and definitely not in 3 months. In this publication, I’ll show you what did!
I’m going to highlight some of the strategies I used, from psychological, to risk management; Adaptive position sizing for modifying exposure to keep up with the market’s volatility, while not overexposing the portfolio. The journey from $514 to $38,345+ demanded adaptive strategies and stern execution.
Origins and inspiration, 2019 was the year of “small account challenge” many traders took to twitter and youtube with ambitious goals, but for some reason, the majority conceded most of their returns. The fad came and went, yet a few still try to take on wall street and the fed.
Turning a lunch-money budget into 10s of thousands is no small feat, especially over the course of 90 days. One’s timing and execution must be in-tune with the market. A ranging market makes achieving exponential returns impossible, hence identifying the catalyst or incoming market cycle is most monumental.
I’m a fulltime trader, and I lead a market research and development firm, my team of analyst-traders was handpicked and groomed over the period of 3 years, and our trader community is second to none. So if anyone should be able to beat Wall Street, it’s me.George Saber using the Robinhood platform
The psychology of a “small account challenge” is by far the toughest especially when one is trading with an audience. It changes one’s focus from trading for profit, to trading to impress others and clout. Throughout my trading career, I’ve learned that the most detrimental trading environment one subject themselves to, is trading under pressure. So from the start, I did not announce or disclose to anyone that I was undertaking the challenge.
The polar opposite of a detrimental trading environment is trading in a state of flow, in harmony, and the main identifying factor a trader can use to measure their state of flow is by examining their equity curve.
Is it constantly rising? Is it outperforming the market on down days?
If the market had a 10% down week, did their account reflect profits, as smaller drawdown than the market, or a greater loss?
Is the trader hedged for the dip, or are they getting shaken out for a loss, only to see their options rally harder to new highs the next day?
The instrument of choice for this account challenge was strictly options. Coming from a futures intensive trading environment that offers 50x and 100x leverage, the relatively slow climb of stocks no matter how vigilant, wouldn’t provide me enough exposure to run up my initial capital into a sizeable sum. My goal was to turn $510 into $25,000 in 3 months.
And by no means am I a habitual overachiever, but trading bubbles is something I’ve obsessed over. Also due to the seemingly unpredictable and very irrational nature of markets, one has to adjust their expectations on a weekly and daily basis. Yet when one is depending on the market to do the work for them, leveraging for swings, and nailing their positioning and expiry dates, overachieving becomes the consequence of impeccable positioning.
Why options? The only way to outpace a market is by being leveraged, and the easiest way to get a leveraged exposure in the stock market is by enabling options trading.
Options provide exponential exposure, and when a position is paired with proper directional volatility, the outcome can be magnificent. Over the past 3 months, I had several trades generate between 1000% and 2500% return on capital.
Credit: Before I reflect on the past 3 months of aggressive options trading, I’d like to credit my team at Coin Observatory along with each and every trading community member that contributed to our “Bubbleonia chat”. I couldn’t have done this without the cumulative effort of everyone involved. It’s hard to beat the market being a lone wold, but when there’s a hungry and aware pack with a refined skill into reading charts, nothing is unachievable.
The precursor, December 2019 as the SPY was making new all-time highs, I published about the market structure, and wrote about Bitcoin’s correlation, with the thesis being “and incoming correction, one that was going to be savage and last several weeks.”
The technical state of the market back then lacked a re-test, yet the crash that I had predicted took a few more months to unfold, and the catalyst happened to be COVID. Meanwhile, as I waited months for the perfect short entry, several of my team members raked in monstrous profits riding TSLA, ROKU, SPOT, AAPL, AMZN options.
I deemed that rally speculative and I didn’t participate, yet every day I would drool over my team members’ returns, as I patiently waited to fill my shorts, warned them to profit-take, sit in cash, and hedge.
On February 3d of 2020, we sent out our quarterly newsletter and boldly claimed that the VXX was going to be the trade for Q1, 2020. And while the rest of the market was still bullish, the COVID19 market crash for us was our big short.
Q2 Bear Break Vs Liquidity Grab, conundrum? or clear cut.
The above chart highlights the visual difference between a bear break (red arrows) and a liquidity grab (green arrows). Both moves look and feel like a crash in real-time, nothing but losses and savage red candles are recorded.
A Bear break signals the beginning of a bear market an extended down-trend. While a Liquidity Grab signals a new high is incoming. These happen across all markets. As a general rule, whoever recognizes the true nature of the crash the soonest, is the one that profits the most.
Q2 2020 the big questions, was the world headed into a recession with all markets forever doomed? Was “short everything to zero” the proper exposure or was the COVID-19 Crash a liquidity grab?
The majority of traders in our outer circle mistook the COVID crash for a bearish break. Even one of our now former team members, turned in his resignation because I would not entertain his analysis of a “financial markets doomed, and the greater than ever recession scenario was upon us”.
If my obsession with markets along with Bitcoin’s historical bull-runs has taught me one thing, it’s “markets can only rally to new highs after a liquidity grab.”
The above quote echoed off the top of my lungs and from my keyboard for weeks to my team and our trading community. It was initially met by much pushback and doubt. Traders that hedged long positions at the crash’s lows were the first ones to realize profits and the opportunity we had just capitalized on. And to this day, most onlookers are still in disbelief.
Hyperwave, Momentum, Bubble-on!
The Nasdaq’s CompQ, QQQ market structure in late May 2020 going into June 2020 presented the possibility of a Hyperwave (market bubble). Which if true then the QQQ was to soar to parabolic heights with $285 being the next target.
Having witnessed what my team members did during the Q1 speculative rally, as soon as the market structure was poised for momentum, I decided to fire up my old Robinhood account for a “small account challenge.”
The above chart compares the QQQ in June of 2020, compared to Bitcoin’s Hyperwave of 2016–2017. At the time the QQQ was trading for $240, It’s currently at 295. The index only rallied 20% since then trough today, yet my options trading account generated a 7400% return during the same period, going from $510 to $40,000.
One major catalyst that helped boost this technical structure was the monetary and fiscal response taken by Fed’s worldwide to the COVID19 crisis.
The illusion of a worldwide economic shutdown and the threat of a looming financial crisis turned many market participants bearish. But they didn’t factor in the worldwide response to the crash.
Nations slashed borrowing rates to zero and fired up their money printers to send their citizens free money amidst lockdowns. Not only did borrowing money become free, but too much money was printed out of thin air. Anyone that’s taken the most basic economics class can tell you, that results in inflation. It was not just one nation’s fed printed, they all fired up into high gear, every nation around the world. Behold, 2020 a new unaccountable for amount of free money introduced into the world, and that will likely never be taken out of circulation.
Now you’re questioning, “but isn’t inflation bad for the economy?”
The answer is, it depends on who you are and how you view opportunity. Currently, inflation hasn’t really affected prices as you were taught it would in school, “price of bread goes up”. No this round of inflation moved asset prices instead of the price of goods. Assets prices are got propelled to new bubbly all-time highs!
Now instead of questioning the effects of inflation on the market, you should be asking yourself “am I taking advantage of this? At what scale and rate? Is it possible to outpace inflation?”
June 2020 The Start
$514 to $2,120
In June it's fair to say I was still warming back up to the market. After not touching the stock market since the short, and not having traded options for nearly 2 months.
I opened my account back in May and took up a couple of SPXL positions, and some VXX puts for long exposure. Yet I wasn’t quite enthusiastic until a few days into the month, when we spotted the QQQ Hyperwave.
Momentum hadn’t quite hit the market yet, but the structure looked promising. So I decided to focus a bit more on options trading and taking this sad and lonely account balance to new heights.
I was more focused on the SPY than the QQQ assuming that if the Nasdaq CompQ was to lead, then the S&P500 would follow. Also, I was more intimately comfortable with what was seemingly less volatile SPY, having spent more time analyzing it and trading it.
Over the course of the month, I did boost my balance slightly just to reinforce certain plays, I deposited a total of $292, and withdrew a total of $493.
Why the withdrawal?
I was growing the account with the mentality that if I was to add any funds, they would essentially act as a very short-term loan from myself to myself, which had to be repaid as soon as I profit took the position that I “borrowed” the funds for.
I wasn’t charging myself interest, but small wins are important and making sure those wins are safe from being donated back to the market is more important.
In June the QQQ recorded 6.6% growth for a buy and hold investor, and the SPY a measly 1.6%. Meanwhile, I managed to 4x my account balance, trading Several tech stocks. I closed the month with the following in Balance.
I had bought some NKLA stock as a spot position, the chart was still looking bullish and ready to bubble along the rest of the market. I had closed the month with a 400% return.
My exposure at the time was 30% stocks (NKLA), 60% options My largest position Call position was SPXL, and I had some GOLD exposure that I started averaging in at for $30 a call, which I ended up selling for $170 and $220 each over the next couple of months after averaging down a few times. I’ll make sure to talk about the wonder of a GLD position.
Due to the size of my account, I avoided trading SPY and QQQ calls, yet I traded their respective 3x EFT calls. SPY and QQQ calls tend to be expensive, $300 would only get me 1 call on the index itself, which doesn't allow for properly scaling into our out of a position. Instead, opting for trading their 3X bull and bear ETFs, made sure I was doing two things. Most importantly budget trading while having a similar direction exposure, and the second, if I wanted to short either index, I never had to buy puts. I would just buy the correlating SQQQ or SPXS calls for a hedge.
SPXL calls tend to be discounted 3x what SPY calls are, and the same goes for TQQQ and QQQ calls. More positions allow me to hold more positions, so when the index reaches my sell target, I can take profit on part of my position, and hold the rest. Scaling is very important and I’ll show you it’s power as you keep reading.
And by far my top performers that month were MSFT, ROKU, and SPOT. Not quite the indices themselves, but relevant tech stocks. and some solid top performers.
MSFT helped me get an early boost with a 4x return on one set of calls, and 6X on another. Then came the wonders of ROKU, and SPOT. All helping me turn a few hundred dollars several thousand in a matter of days.
This is what led me to diversify, into other assets like GLD, and back into the SPY.
July, Market Tuition, $2,102– $17,841
Diversification, and buying Time
Market tuition at my firm is quite simply the funds donated to the market in the name of learning.
“Learn to earn” was the motto for July. Yes, I had a stellar return %848 return but in hindsight, looking at my monthly statement, I burnt through a load of capital. Which moving forward needs to be minimized.
I’ll shed some light on what went wrong. and how I adapted in August.
By the end of the month, exposure was aggressive 89% in options, and 11% cash, my stock exposure was down to zero. As soon as NKLA triggered my stop loss, and the char turned bearish, I decided to I no longer wanted spot exposure. Also, my team and the trading community were in high gear and earnings season was upon us.
From July 1st through the 31st, the QQQ registered a net gain of 8% and the SPY 5% for buy and hold investors. Somehow my portfolio skyrocketed a whopping 848%. That’s the equivalent of leveraging QQQ futures at 100x. Which unfortunately is only available to “sophisticated” CME investors and hedge funds.
Yet with retail exposure and by using standard instruments that the average joe has access to, I was able to extract such value from the market. July was an absolute hoot and I’m starting to think it’s going to be a forever memorable month. Many market participants still held bearish beliefs, so proper positioning on down days led to magnificent swing trades.
On July 1st, FDX announced their earnings, luckily the day prior FDX was selling off at market open. One of my team members pinged me about earnings coming up, so I decided to add to my position. I had a doctor’s appointment that morning and was in a building with real patchy service and not at my trading station. I’m lucky I got the ping and even luckier for being able to add to my position. A 600% return on the first day of the month does wonders to one’s confidence, and to our confidence in the market. We knew that if we position ourselves properly exponential gains will be plentiful as it was the beginning of earnings season.
By mid-month, a 2x return on indices was a regular thing, and momentum positions like ROKU and WMT at the time generated upwards of 8x.
Call options that cost me $266, I was selling for more than $2000 just a few weeks later. And by mid-month I was confident that I could take this portfolio to $25k, so long as the market remained impulsive.
Around mid-July, I spotted what appeared to be an incoming minor pullback on the SPY, but I didn’t want to exit my calls as I doubted that it was going to retrace back to my entry-level. I wanted to weather a minor storm if it came, so I executed a hedge. I held onto my SPXL calls and bought VXX calls at the same time.
By Friday’s close, I was hedged. If the market wanted to sell-off the following week, I was ready for it. I had a volatility bet, though my VXX position wasn’t as big as my long exposure, It’s objective was to offset some losses if they were to occur.
The following Monday the SPY sold off 2.7% which might not seem like much, but the market had a nasty down day for options traders that were purely long.
That Monday by portfolio closed the day in the green. My SPY analysis was correct, and the sell-off occurred.
Instead of selling my SPXL calls that expired 6 weeks out, I could maintain my long exposure for trend continuation, while betting on and profiting from a little volatility of a downturn at the same time.
My VXX calls kept my portfolio green for the next 2 days. As I had intended, I weathered the storm.
In hindsight, I should have taken more profits on these VXX calls during the dip.
I only took partial profit and left others to end up expiring worthless in my portfolio “just in case”.
After this mid-month sell-off, it took the market a few weeks to rally back up. When the market goes sideways, Out of the money calls start losing value, and the decay feature is somewhat exponential. during the 1–2 week sideways period, my portfolio experienced a stall and a very minor drawdown. During which I lost faith in some positions and sold them off in order to reposition elsewhere in the market.
I let go of what was relatively large MSFT and KHC positions, to reposition elsewhere. The 2 charts ended up being very profitable after I sold them for a small loss so I missed out. But in this trading environment when one decides to sell and move on, it’s important to not FOMO buy-back in if they revisit a chart. Revisiting is absolutely okay because if the trader missed a continuation rally, the trader is likely not to make the same mistake again.
Fast forward another 2 weeks, and by July 30th, the small account that started with $510 was now worth $16,000.
Much was due to diversified positioning which allowed me to capitalize on Silver’s bullish break. Then UPS beating earnings and the market’s expectations was the icing on the cake.
My UPS Started position was worth around $500, and by July 30th, it had generated me some $5,000 in realized profits on a partial profit-take.
I finished the month with a really diversified account. With the majority of my calls expiring at least another 6–8 weeks out, and the rest 2–3months out. The market was swinging to new highs, and I wanted to be able to bet on continuation. So I shopped further out calls that cost a premium upfront, knowing that when the chart breaks in favor of the option, and when the Call goes “In The Money” with plenty of time until expiry, the profits become exponential.
At this point, my exposure was mostly equities: TGT, BYND, MMM, TWTR, UPS, WMT. Followed by metals, GLD and SLV, and finally SPXL.
August, The Trend, Your Friend
Much of August was letting the chart’s play out. Patiently having faith in our technical analysis.
I had rather sizeable positions when compared to the portfolio’s size. The month was off to a flying start for me.
What FDX taught us about parcel service during lockdowns is that we couldn’t afford to me miss that trend.
Behold the behemoth of a continuation position, for %2,341 return on the remainder of my UPS contracts. I had originally started with 15 contracts valued at around $70 each or so.
It took more than betting on one sector of the economy to get the returns I did. Much free money being pumped into the economy, my next 2 bigger bets were on TGT and WMT. As the two brick and mortar stores were competing for a slice of the online sales pie. TGT ended up producing a %300 return, which was followed by a 300% return on WMT.
As for the QQQ and that Hyperwave, I was diversified in several OTM calls. Some generated upwards of %908.
At one point in mid-august, my WMT position was down some 70%. The chart had experienced a false breakout on seemingly positive earnings. Yet for some odd reason, it sold off.
Gladly, my position had plenty of time until expiry, and I just stuck to technically analyzing the chart, and adding a few positions on the most brutal down days. That strategy paid off!
Before I dive into the tactics, I’d like to emphasize the most important risk management aspect of options trading is “far out expiries”. 6 weeks out is now my current minimum. Weekly expiries are basically a gamble, and as much of a risky gamble options trading might seem to inexperienced traders, further out expiry date adds an edge to the contract holder’s odds.
Growing my account from $510 to $2,100 was fairly straight forward. I originally diversified into relatively cheap calls, ones that cost under $100. This allowed me to expose myself to 5–6 different equities at the same time, with enough time for each one to rally.
The position management strategy proved profitable, and I maintained a $100 maximum starter maximum position size until the portfolio reached $2,500+. At that point, I figured if I was to diversify in 10 positions, each worth $250 I’d be running the same risk-reward profile. The market was and currently is still providing many swing opportunities. So if 3 out of 10 positions were to generate a 6x to 8x return, which they were, I would easily double my account size regardless of how unprofitable the other 7 positions were, without being overexposed and too heavily invested in one equity over the other.
$5000-$9000 My account fluctuated there for about 2 weeks, I was able to break that through that deadbolt using the same position sizing strategy, except at that point I had further diversified into metals some bonds as TLT looked promising. Then after 2 painful weeks of watching my account balance hover as if my glory was over, UPS and GLD finally broke out.
My account rocketed from $7,600 to $15,500 overnight. That’s the power of equal-sized positions. All it takes is one breakout, 2 breakouts in one day are glorious, when one’s analysis is on point, they can ride several breakouts in one week.
Once my account got to the $15,000 mark, I started taking on larger initial positions than I previously had. Some up to $2,500. Which is what I’m still currently doing. Equal sized positions with a certain “maximum capital dedication budget”.
Knowing which strike price and expiration date to buy is the hardest part. It didn’t take my team and I too long to tune into the market cycle and find our edge. I won’t be giving away exactly how we select our targets, but I’ll give a few examples to help set you on the right track.
Before one buys their calls, they need to identify the opportunity, is it a swing trade, a scalp, a trend continuation, or a high probability combination of two of the latter.
I’ll use UPS as an example as it’s the most clear-cut. During the COVID19 pandemic, freight and parcel services did great.
Yet their market value hadn’t quite reflected yet on the chart. I’m a technical trader, and so is most of my team, hence we’re chart technicians, and not fundamental analysts. We make our trading decisions based on what the charts tell us.
At the time of trade execution in late July, we bought $145 calls, which expired on October 16th, when UPS was trading at $116. Technically speaking based on the chart, if our analysis was right, UPS was to rally to $150 at minimum, and continuation targets would be $157 and $168.
$145, 10/16 calls, were relatively inexpensive. And being below our first target of $145, once the chart got to $150 we would take some profit and allow the rest of our position to ride into continuation.
Sure enough, when the breakout occurred, $150 was cleared with much ease, and then $157 became support rather quickly. As of today, I’m still holding one-fifth of my initial position in UPS, that I purchased in late July.
I purchased 5 UPS calls purchased on July 29th for $360 total, $72 each.
On August 10th, I sold 3 of the calls for $5,055, then on August 24th, I sold another call for $1,610. And currently still have one call worth $1,863.
Now imagine being diversified in many positions like this one, instead of committing too much capital on one position.
Markets tend to be irrational, sometimes the cleanest looking technical setup fails to rally promptly.
Which I always discourage, unless I’m betting on continuation on a mega bullish chart. I dislike “scalping” why chase a tiny move when instead I can trade swings like I just showed you above? It’s too much work, and generally not enough reward.
I’m in markets so that the market does the work for me. And I always preach, “let the market do the work”. Well, how can one do the above, while capitalizing on a small move?
I’ll use Home Depot as an example, HD. The stock did really well during COVID, everyone was stuck at home with a bunch of free government money, so the majority decided to improve their homes. Off to Home Depot they went!
The chart was bullish, yet I had no exposure to any type of home improvement stock. And I figured a small position wouldn’t hurt, but I had to be surgical in execution.
I waited for a minor sell-off when the stock dumped from $292 to $278 in a matter of 3 days. That’s when I decided to position myself by buying, out of the money $285 calls.
If HD was to range between 278 and 292 again, I’d be able to flip the position for profit. And if the stock was to experience continuation, My option would run deep ITM, and generate me decent returns. It was a risk I was willing to take, without getting greedy at new market highs.
HD calls can get relatively expensive, and because this was a “scalp” minded trade, I opted for a 3 week out expiration instead of the minimum 6, it was also a “starter position”. Where If I like the chart further, I could add or add to my position, without risking too much initial capital.
Sure enough, 2 days after buying my OTM calls, HD rallied back to $291.95 which doubled my position’s worth. A 120% return almost overnight.
Strategies, and the 61.8
If I was to credit fundamental vs technicals for profitably navigating this rally, I’d have to mostly credit the laws of Fibonacci retracements, and the 61.8 Golden Ratio.
In the “Shopping Options” section I covered continuation above the 61.8% Fibonacci Retracement. One thing we noticed is no matter how good earnings sounded. If an asset was going to rally into a new post-COVID-19 all-time high, the 61.8% was the critical pivot.
There are other Fibonacci extensions levels that we used to navigate this cycle, some were used to pick our strike price, and others to scale out of winning positions.
As for fundamental analysis, sectors that profited off the crisis did well, others that we thought would certainly do well, such as 3M, they didn’t do hot.
When it came to picking a potential winner in industry, for example, AMD vs INTC (Intel Corp) we diversified in both. AMD launched into orbit, while INTC plunged into an abyss of red candles. When it came to FDX vs UPS, both generated us good returns and the same for WMT vs TGT.
I had a pretty big bet on BYND, which as of now is still in the red. Among a few others.
QQQ now, is the bubble over?
It’s hard to tell, the $350 extension target has been reached, and a retest of the $283 level is upon us. If price can close above $283, then we’ll likely see another test of $350.
The next extension support level below is at $260, with the chart’s current structure, it’s best to let the dust settle, and seek a formation.
Will you be a $350 Call Option buyer or a $260 Put Option Buyer? Why not go for a strangle?
Doing a small account challenge has been fun, watching the balance grow %7,460 in a matter of 90 days is no small feat for any trader. Especially while maintaining a rising equity curve.
Moving forward, the one thing I would do differently is once I profit-take a position, or even after a partial profit-take. I plan on keeping a separate ledger for realized profits, and once the funds “settle” in the Robinhood account, I will be sending half of those profits to the bank.
It’s easy to get excited when one’s portfolio is growing exponentially. Yet one must realize, that this is happening in a bubbling market. And as we say at Coin Observatory, “It’s never how much you can make, it’s how much you can keep.”
If anyone was to attempt to follow my footsteps and try to take on these market conditions, I encourage you to! Try it, options allow you to bet up or down, so you can do this during a bull or bear market. but once the market starts ranging, sideline yourself. Also find yourself a reliable squad, a team, a solid trading community.
Final thoughts on Robinhood and his merry men & a WARNING!
Wow that was one of the most detailed trading stories I have ever read! Nice job George! He used the Robinhood platform to the max! Though I kind of see Robinhood as a problem child because of just how easy it is for many degenerate gambler newbie millennials to trade, well it is no different than when the newspaper boys were giving stock tips to the public in the 1920s, meh so be it.
Robinhood has unleashed the millennial trading revolution, be it good or bad no matter. I will caution on the use of Robinhood & options trading, get training from somebody like “George of Coinobservatory” for the love of GOD! Robinhood is not a toy. So until next time, enjoy!