Market Movements

^{*Weekly Return is calculated as market open of the previous Wednesday, to market close this Tuesday (yesterday); Current Level is Tuesday’s (yesterday’s) close.}

Weekly Rollout

• Christmas is being kind to the market so far.

• Last week’s CPI report arguably added more fog than clarity.

• Trump and Weed, the best of friends.

• Investors are hoping for a Santa Claus Rally. What do the pros expect?

• December 26th is when a record pile of Bitcoin options gets unwrapped.

• Credit cards found something under the tree this Christmas.

• As the song goes, Silver and Gold. But mostly Silver. 

“Good-To-Know’s”

Option sellers fall into this trap all the time. Small unrealized losses feel urgent. Modest gains feel “good enough.” This imbalance very often leads to distorted decision-making.

“I’ll roll it so I don’t realize the loss.” Or “I’ll close it early and lock in the win.”

Both reactions are usually driven by discomfort, not strategy or a statistical edge.

It is important to clarify that avoiding a loss is not the same as managing risk. Risk management is proactive and rule-based. Loss aversion is reactive and emotional.

Closing, rolling, or holding a position should depend on fundamentals, valuation, and structure, not how we feel about our position at any given time.

Discomfort isn’t a “signal.”

It’s just discomfort.

Quote(s) I Like

Thought Throttle

It’s Christmas time.

According to Santa, kids are either naughty or nice. Why should stocks be any different?

This is especially true when you’re selling options. Strip away the premiums, the deltas, and the Greeks, and what you’re left with is the underlying business.

Some companies are priced reasonably, generate real cash flow, and can withstand a little volatility. Others are held together only by expectations and optimism.

In December, we can sometimes forget which is which.

But what are some of the factors/features separating naughty and nice?

Nice list:

• Reasonable valuation relative to cash flow

  The stock may not be cheap, but it’s supported by earnings or free cash flow, not just expectations.

• Durable, repeatable business model

  Revenue isn’t dependent on one product, one customer, or one macro tailwind.

• Balance sheet that can absorb stress

  Manageable debt, ample liquidity, and no obvious refinancing cliff.

• Margins that make economic sense

  Profitability isn’t propped up by temporary pricing power or cost deferrals. Health and consistency are key.

• Clear path to shareholder returns

  Buybacks, dividends, or reinvestment that actually compounds value.

• A business model that is “idiot-proof”

  The business doesn’t need everything to go right for the stock to work. See the Peter Lynch quote above for more.

• Well-known businesses, modest assumptions, recession-proof

  There are no heroic forecasts required for the stock to work. It’s here for the long haul.

Naughty List:

• Valuation anchored to future hope, not present results

  The stock price assumes years of growth that haven’t shown up yet.

• Fragile business economics

  Thin margins, high customer acquisition costs, or unproven unit economics.

• Balance sheets that magnify risk

  High leverage, negative cash flow, or constant need for external capital.

• Binary dependency

  One product, one catalyst, one regulatory decision away from trouble.

• Optimism priced in, downside ignored

  Good news is fully reflected, bad news is dismissed as “temporary.” Basically, seeing the business as flawless instead of what it is.

• Premium as the main justification

  The trade only makes sense if assignment never happens. This is essentially lack of self-control when it comes to premium.

• Stories that change every quarter

  When the narrative shifts, valuation usually follows. We generally don’t want a new business every quarter.

At the end of the day, selling options is an exercise in acceptance.

Acceptance of uncertainty. Acceptance of assignment. Acceptance of the business you’re underwriting.

The nice list reflects companies you can live with if things go sideways.

The naughty list reflects ones you can’t. The naughty list demands luck.

And luck is not a strategy.

Trade Mechanics

Let’s look at two opportunities for cash-secured puts: one in AT&T (T) and one in SoFi Technologies (SOFI). Each strike below represents roughly the ~30-delta put expiring February 20, 2026.

Let’s take a closer look:

If we wanted to buy AT&T Inc (T) at a discount, we could sell the $23 February 20 Put for about $0.45 in premium. With shares trading near $24.46, that’s roughly a 2.00% return on risk over 59 days, which is an annualized return of about 13%. This is a ~7.8% discount from the current price if assigned.

For SoFi Technologies (SOFI), selling the $25 February 20 Put yields a $1.52 premium with shares trading near $27.19. That’s a 6.47% return on risk over the same timeframe, annualizing to a much higher 47.41%. This would also leave us with a ~13.6% discount from the current price if assigned.

Two simple setups. One on a more volatile underlying, one on a more stable underlying.

Whatever your risk tolerance, this shows how steady income can be built one contract at a time. Not bad.

Keep in Mind…

Premiums fluctuate with volatility, earnings cycles, and investor sentiment. Returns assume smooth expiration and no early assignment. Wider spreads may appear on less-liquid strikes. Both positions require roughly $2,500 in collateral and reward patience over prediction.

This is for educational purposes only—not a trade recommendation. Remember to always do your own due diligence and consult a financial advisor before making investment decisions.

Throttle Q&A

Is Santa Coming To The Stock Market This Year?

The Santa Claus Rally is a tendency, not a guarantee. Late-December strength often comes from optimism and positioning, not necessarily fundamentals.

For option sellers, that distinction matters. Seasonality doesn’t make a stock cheaper, and it doesn’t fix bad valuation. If your trade only works if Santa shows up, it likely isn’t a good trade.

The goal isn’t to predict the rally.

It’s to stay afloat if it never comes.

Should I Sell Puts on a Stock I Think is Overvalued if the Premium is High?

High premium doesn’t fix overvaluation. It usually reflects it.

Selling a put means agreeing to own the stock if the price falls. When premium looks tempting, it’s easy to rationalize that risk away, but that’s just emotion talking.

Not good.

It all boils down to this: If you wouldn’t be comfortable owning the business at the strike price, the trade is not right for you.

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Disclaimer

The information provided in this newsletter is sourced from reliable channels; however, we cannot guarantee its accuracy. The opinions expressed in this newsletter are solely those of the editorial team, contributors, or third-party sources and may change without prior notice. These views do not necessarily reflect those of the firm as a whole. The content may become outdated, and there is no obligation to update it.

This newsletter is for informational purposes only and does not constitute personal investment advice. It is not intended to address your specific financial situation and should not be construed as legal, financial, tax, or accounting advice, or as a recommendation to buy, sell, or hold any securities. No recommendation is made regarding the suitability of any investment for a particular individual or group. Past performance is not indicative of future results.

Options come with inherent risks. We strongly advise you to consult with a financial advisor before making any investment decisions, including determining whether any proposed investment aligns with your personal financial needs.