We were over-hedged for the continuing rally. 

Despite, however, taking a $6,000 hit on our SQQQ spread as the Nasdaq makes new record highs, our $700/Month Portfolio ground out net $3,004 gain, which is a bit off our normal pace but we are still on track to hit $1M by May of 2029 and the key lesson here is that it’s better to lock in our gains (+$14,615 in the last review) than risk them into uncertainty.  

We average $3,417.06/month in gains and it’s important to know these numbers so we recognize how unusual a $14,615 gain is and LOCK IT DOWN before the market corrects. That’s what we spent $6,000 doing in our SQQQ spread, which will snap right back if the market ticks back down.  

If it doesn’t – we’ll add more longs and deploy more cash and make it up on the plus side of the portfolio – THAT is the system!  

The coolest thing about this portfolio is we aren’t using margin.  We started out with $700 and, each month, we put another $700 into the portfolio – which I know seems silly but, if we didn’t keep doing that, our April 2029 total drops to $946,253 so 32 x $700 ($22,400) less contributed leads to $80,948 less money in less than 2.6 years – THAT is the importance of SAVING MONEY!!!

Wow! That video is from 11 years ago and I’m actually starting to look like my aged self – scary – you can see why I went with the beard… Everything I said in 2015 is true now – it’s never too late to start and the original goal of this portfolio was to make just 10-20% a year with no margin. I never expected it to go this well and I’d attribute it to a very strong market and, of course, our AGI Round Table – which is a game-changer for market research.   

I’ve always been a great stock-picker and analyst (he  said modestly) but now we have an army of researchers backing me up and they were all trained by me to be as good as me – only 1,000 TIMES FASTER! Our Members benefit from their analysis and wisdom every day and the AGI Team is available for hire for Consulting Work – which is building cash flow as they move towards their IPO but you get first crack at it here – while they are still humble.  

Meanwhile, here’s our last year of reviews – in case you’d like to catch up:

• • How to Become a Millionaire by Investing $700 per Month – Part 49/360
  • How to Become a Millionaire by Investing $700 per Month – Part 48/360
  • How to Become a Millionaire by Investing $700 per Month – Part 47/360
  • How to Become a Millionaire by Investing $700 per Month – Part 46/360 
  • How to Become a Millionaire by Investing $700 per Month – Part 45/360 

  • How to Become a Millionaire by Investing $700 per Month – Part 44/360

  • How to Become a Millionaire by Investing $700 per Month – Part 43/360

  • How to Become a Millionaire by Investing $700 per Month – Part 42/360

  • How to Become a Millionaire by Investing $700 per Month – Part 41/360
  • How to Become a Millionaire by Investing $700 per Month – Part 40/360
  • How to Become a Millionaire by Investing $700 per Month – Part 39/360
  • How to Become a Millionaire by Investing $700 per Month – Part 38/360

  • How to Become a Millionaire by Investing $700 per Month – Part 37/360 – Year 4 Begins!

We’re coming into Q3 Earnings Season with $65,361 (38%) in CASH!!! and, as I noted, a very large hedge so we will be looking to spend a bit more money as we are well-protected to the downside. My outlook today is the same as it was last month, when I said:

“Since last month, we’ve raised our CASH!!! position to $40,483 (24%) and we do have a nice hedge (SQQQ) but I’m VERY uncomfortable with the market and expect a 10-20% pullback in the next few months and that would suck – so I’m going to be very conservative in this review but, then again – I often say that but then our positions are so good that I can barely find anything to cut – so let’s see how it goes: “

• • HELE – Although they have pulled back, we’re still deep in the money at net $4,350 on the $7,500 spread so there’s $3,150 (72%) left to gain between now and Jan, 2028. Earnings are tomorrow so – fingers crossed!  

• • SOFI – Earnings are on the 27th and we think it should be higher so we’re not covering the 3 open calls. Net $3,074 on the $8,000 spread has a $4,926 (160%) upside potential but it’s a long way to $23 – so we stand ready to adjust if earnings disappoint.  

• • SQQQ – It’s a 3x inverse ETF so a 20% drop in the Nasdaq would boost SQQQ 60% from $32.30 to $51.68 so we only count on $21.68 x 30 contracts = $65,040 and the spread is currently $16,950 so our net downside protection is $48,090 – about 40% of our current exposure. The 2028 spread is net $5.65 and we’re going to roll it to 30 2029 $20 calls at $15 and sell 30 2029 $55 calls for $9 – so we’re spending just a little bit to go deeper in the money and adding another year of protection.      

• • UNG – Net $1,487 on the $2,500 spread has $1,013 (68%) upside potential if UNG can hold $10 into January.  Seems like easy money to me!  

• • PR – On track with a nice profit and we’ll roll the short Jan calls along to widen the spread. The 2028 $25s are $3 so it’s at least a $5 ($5,000) spread, currently net $2,650 so we have $2,350 (88%) upside potential and we’re on track.  

• • HPQ – We’re over our goal for 2028 already and, if all goes well, we net $11,000 and it’s currently net $7,212 so there’s $3,788 (52%) upside potential but possibly not the best use of $7,212 for 15 months. We’ve got a lot of cash so it’s not an issue at the moment but it’s a big chunk of money so we’ll keep an eye on it.  

• • B – This is brand new as we cashed out the old spread. Potentially a $10,000 spread at net $7,600 has $2,400 (31%) upside potential is not terribly sexy but we also sold $2,000 worth of Dec short calls and we have 4 more quarterly sales for $8,000 (105%) in potential premium sales and THAT is sexy indeed!  

• • CAG – Right on target at net $2,250 on the $6,000 spread with $3,750 (166%) upside potential PLUS 4 more chances to sell $800 is another $3,200 (142%) in premium potential! This one is good for a new trade!

• • CLF – Net $2,862 on the $2,000 spread (because it’s only half-covered) and the 5 short 2028 $12s can be rolled to 10 2028 $20s so let’s call it a $10,000 spread with $7,138 (249%) upside potential – that one was hiding in plain sight!  While we are waiting, the Jan $13 calls are $1.40 so let’s say, if we sold, we could sell $2,800 worth next year for a potential 97% of additional premium sales. We will see how earnings go on the 19th. 

• • ET – Net $2,567 on the $4,000 spread has $1,433 (55%) upside potential PLUS 4 more sales of $460 is potentially $1,840 (71%) in premium sales.  

• • HPQ – Net $7,192 on the $8,000 spread is NOT worth keeping AND we have 2 HPQs so we’re going to kill this one.  
  • M – Net $4,314 on the $7,500 spread has $3,186 (73%) upside potential PLUS 4 more sales of $930 gives us another $3,720 (86%) in potential premium sales and we’re right on track!  Good for a new trade.  

• • NVO – Net $6,030 on the $15,000 spread has $8,970 (148%) upside potential PLUS 4 more sales of $1,000 is another potential $4,000 (66%) in premium sales! So Good for a New Trade AND let’s close out the short Jan $50 calls and sell 5 Jan $40 calls for $2 ($1,000).  This is NOT good for a new trade because the $50 target is currently iffy-looking…   
  • Since we expect to make 66% if NVO stays flat – we can afford to wait for earnings before deciding what to do with the main spread.  

• • OWL – Net $2,688 on the $6,000 spread has $3,312 (123%) upside potential and we’ll buy back the short Jan $12 calls ($75) and sell 5 Jan $10 calls for 0.50 ($250 – 9.3%) so we have $1,000 (37%) of 2028 upside premium sales potential as well.  
  • Earnings are the 29th and we’ll see what they have to say. If they pop – we’ll be happy to buy more longs and, if not – we may give up, finally…

• • PANL – New one! Net $2,212 on the $2,500 spread that’s already in the money with $288 (13%) left to gain if $7.50 holds into February.  We also have another chance to sell $240 (11%) in premium and 23% is a nice return for 6 months.  

• • PFE – Net $2,416 on the $5,000 spread has $2,584 (106%) upside potential and we’re right on track. We sold the March calls in August for $800 so let’s say another $1,200 next year is 50% in potential premium sales as well.  Good for a new trade.  

• • PINS – Brand new trade!  Net $4,920 on the $5,600 spread as it’s already shot up nicely. $680 of upside potential but then we can roll and the 2029 $22s are $6 so that would make it an $8,400 spread with $3,480 (70%) upside potential over 2 years PLUS 8 more chances to sell $360 is another $2,880 (58%) in premium sales potential.  

While the returns are a bit low (compared to our average), there’s a very high expectation of success that makes this Good for a New Trade.  

• • SOFI – Earnings are on the 27th, so we shall see.  As it stands, the short Nov calls will go worthless and the Jan $17 calls are $1.25 so 10 of those is $1,250 x 4 is $5,000 in potential premium sales is 45% of the current $10,948 net and let’s say $20 is realistic and that would be $7 x 25 contracts is $17,500 so net $6,552 (60%) upside potential on the spread.  We will see how earnings go…

• • UNG – Net $2,695 on the $6,000 spread that’s $4,500 in the money has $3,305 (122%) upside potential PLUS 4 more sales of $800 is $3,200 (118%) in potential premium sales. Good for a new trade. 

Are we going to make 240% in 15 months? Probably not.  Notice we’re about even on the short calls we sold in August but EITHER they expire worthless or we stay ahead of schedule and roll up to the April $12s (now $1.50), while our spread goes in the money towards its 122% upside. That’s the great thing about these spreads – we make money if the stock is up, flat or even slightly down. The point is to design options spreads that win under most conditions – the sizes of those wins add up to very nice returns!  

We’ve taken another $7,192 off the table, which brings our CASH!!! to about $75,000 – almost 45% of the portfolio and we’re not using margin (other than PANL – so it’s all money we are free to go shopping with during earnings season. 

We have $58,225 (34%) of upside potential from our existing positions PLUS $37,080 (21.7%) in premium sales potential and that is NOT enough to keep up our 93.16% average annual return – so we MUST put more cash to work in the near future!

Our new spread gives us net $79,050 of downside protection so we are WELL-covered against a Nasdaq drop so we can afford to be patient while we hunt for bargains.  

Can we turn $170,853 into over $1M by April of 2029? Well we got here from $700/Month for 50 months = $35,000 and that’s up 388% in 4 years so why not? In a flatter market, it WILL be harder but – challenge accepted!  

Join us on our journey HERE.  

And now, a word from the head of our Education Department – Warren 2.0: 

The $700/Month Portfolio: The Machine Behind the Magic Trick

A narrative overview of the techniques, psychology, and strategy behind our no-margin compounding portfolio

There is a reason this portfolio has become one of our most important teaching tools at PSW.

• • It is not because it began with $700.
  • It is not because it has produced an absurdly good run.
  • It is not even because we are now starting year five with a portfolio that has grown far beyond what we originally expected.

The real reason is that the $700/Month Portfolio shows, in real time, how a small account can be managed like a serious portfolio — without portfolio margin, without fantasy leverage, and without needing to swing at every pitch.

That is the part most people miss.

They see the results and think the trick is finding hot stocks.

It is not.

The trick is building structures that turn good ideas into cash-flowing positions, then constantly asking whether every dollar in the portfolio is still earning its keep.

That is what we are really demonstrating here.

Not a Stock Portfolio — A Decision Machine

The average investor looks at a portfolio and sees tickers.

We look at a portfolio and see jobs:

• • HELE has one job.
  • SQQQ has another job.
  • CAG has another job.

B had one job last month, then a different job this month and now a better job after we killed the old spread and rebuilt it.

PATH did its job so well that it fired itself.

That is not a joke. That is capital allocation.

A position is not something we marry. It is an employee. If it is producing excellent return on remaining capital, we keep it. If it has become safe but mediocre, we may leave it alone. If it has become a cash hog with too little remaining return, we fire it — even if we still like the company.

That is Buffett’s opportunity-cost lesson in PSW clothing.

Buffett does not ask, “Do I like this business?” and stop there. He asks what else the capital can do. Munger would invert it: “How do I waste a great portfolio?” Answer: by leaving capital tied up in positions that no longer offer the best risk-adjusted return simply because they are winners.

That is why PATH gets cashed. That is why old B gets killed and rebuilt. That is why boring positions like CAG can stay if they are doing their job. The decision is not emotional. It is economic.

Phil Davis has the CONFIDENCE and EXPERIENCE to know that the market will always offer us new opportunities – so there is never a need for us to accept anything less than the best in our portfolios.  

The Graham Foundation: Margin of Safety, But Operational

Benjamin Graham taught margin of safety. Most people reduce that to “buy cheap stocks.”

That is only the first layer.

In this portfolio, margin of safety is built mechanically.

• • We use deep-in-the-money long calls instead of tying up the full cost of stock.
  • We sell longer-term calls to reduce basis and define reasonable targets.
  • We sell shorter-term premium when the position gives us enough coverage and room.
  • We keep cash.
  • We hedge when the market risk demands it.
  • We cash mature winners when the remaining reward no longer compensates us for the time and capital tied up.

Margin of safety is not just the price you pay.

It is the structure you build around the price you pay.

That is the PSW adaptation.

A $700/month account cannot afford to be casual about risk. There is no portfolio margin safety net. There is no giant cash reservoir outside the account. The trades have to survive on their own two feet.

That is why we prefer defined-risk structures. It is why naked premium is not the default tool here. It is why we are careful about assignment risk. It is why we care so much about roll paths.

Graham would recognize the discipline. The instruments are modern, but the principle is ancient: Do not put yourself in a position where ordinary bad luck can ruin the plan!

Stock Replacement: Controlling Exposure Without Worshipping Shares

One of the most important techniques in the portfolio is stock replacement.

We do not need to buy 1,000 shares of a company to participate in the upside.

Often, we can buy long-dated, deep-in-the-money calls that behave like stock but use far less capital. Then we sell premium against them to reduce basis and create income.

That is not gambling. It is capital efficiency!

A stock investor spends the full share price and waits.

A PSW investor asks:

• • How much upside do I really need?
  • What price range do I believe is reasonable?
  • How much capital must I commit to participate?
  • Can I sell premium while I wait?
  • What is the bad branch, and can I survive it?

That is where the portfolio begins to separate itself from ordinary “buy low, sell high” investing.

The shares are not sacred. The exposure is what matters. The capital saved is what matters. The ability to redeploy cash is what matters.

• • Stock ownership is simple.
  • Capital efficiency is harder.
  • Harder is where the edge lives.

The House Edge: We Make Our Own Dividends

This portfolio is not built around waiting for companies to send us dividends.

We make our own dividends by selling premium.

That does not mean selling premium randomly. That is how people blow up accounts. It means selling premium against positions we already understand, at strikes we can manage, with roll paths we have already considered.

• • The premium is not the thesis.
  • The premium is the rent.
  • The long-term spread is the building.
  • The cash is the operating reserve.
  • The hedge is the insurance policy.
  • The roll ladder is the maintenance plan.

Look at the portfolio review. Over and over again, the decision is not merely “do we like this stock?”

It is:

• • How much upside is left?
  • How much premium can we still sell?
  • How much cash is tied up?
  • Does the short call still protect us?
  • Can the short call be rolled higher?
  • Is the spread still good for a new trade?
  • Would keeping it lower our expected portfolio return?

That is not stock picking.

That is portfolio engineering!

Time Is the Edge

Most retail traders treat time as the enemy.

At PSW, time is often the business partner.

• • A short call with premium is not automatically a problem. It is protection.
  • A short call that goes against us is not automatically a loss. It may be the hedge that protects the long spread on a pullback.
  • A short call that has run out of premium may need to be rolled. But the trigger is not emotion. The trigger is the roll ladder.

That is why PR is such a useful example in the review. We have a very tight spread, but we also have a ladder that can move the short calls higher and higher over time. The current structure is not the whole trade. The path is the trade.

• • The expiration date is one dimension.
  • The strike is another.
  • The roll path is the third.

Most people play options like checkers. They buy a call, sell a call, stare at the price and panic when the wrong leg turns red.

We are teaching our members to see the whole board!

The Munger Lesson: Invert Every Position

Munger’s great habit was inversion: ask how something fails.

For each position in this portfolio, the review is quietly doing that.

• • How does HELE fail from here?
  • How does SOFI disappoint us?
  • How does B become a capital trap if we keep the old spread?
  • How does PATH turn from a great winner into a mediocre hold?
  • How does HPQ’s short-call problem become a premium opportunity instead of a panic event?
  • How does a no-margin account get itself into trouble if it forgets that short puts are promises, not coupons?

That is why these reviews are so valuable. We are not just looking for what can go right. We are asking what can go wrong before the market asks for payment.

The irony is that this discipline is exactly what creates the big numbers. We do not get 300%+ returns by swinging harder. We get them by refusing to let winners become sloppy and refusing to let losers become religions.

Howard Marks: Risk Changes as Price Changes

Howard Marks has spent a career reminding investors that risk is not static.

A position that was a bargain in March can be a hold in September and a sale in December.

A hedge that was too large when the portfolio was conservative can become exactly right when we choose to keep large profits exposed.

A short call that looked dangerous last week can become the protection we are grateful for this week.

• • Risk changes when price changes.
  • Risk changes when profits accumulate.
  • Risk changes when the portfolio’s cash level changes.
  • Risk changes when the remaining upside shrinks.

That is why static rules are dangerous.

That is also why every review teaches more than every entry alert. The entry is only the first move. The money is made in the sequence.

The Hedge: Permission to Stay Aggressive

The SQQQ hedge is not there because we want to be bearish.

It is there because we want permission to keep our longs working.

That distinction matters.

After the adjustments, the portfolio has roughly $100,000 of active positions, significant cash and a large SQQQ hedge with about $67,650 of potential downside protection under the stated stress test (a 20% drop in the Nasdaq). We also have meaningful upside and premium-sales potential remaining in the long book.

That is the mix that lets us sleep.

Without protection, the correct answer might be to cash out more aggressively. With protection, we can keep pressing for the next leg while acknowledging that the market may easily drop 10-20% in the coming months.

This is one of the hardest lessons for newer members. They see the hedge as a cost. We see it as part of the portfolio’s operating system.

Of course, either the hedge or the longs will lose money. That is how hedging works. The goal is not for every piece to win at the same time. The goal is for the portfolio to survive multiple market paths while retaining enough upside to compound.

Cash Is Not Laziness

After the review, the portfolio is moving toward roughly $63,000 in cash.

That is not indecision.

That is ammunition!

• • Cash lets us take profits without leaving the game.
  • Cash lets us buy when other people are forced to sell.
  • Cash lets us adjust spreads without panic.
  • Cash lets us say no.

This is Buffett again. He is famous for holding cash when opportunities are not attractive. At PSW, we do the same thing inside an options portfolio: cash is the shock absorber, the reserve fund and the next trade’s down payment.

The average trader wants every dollar working every minute.

The professional wants every dollar AVAILABLE for the BEST minute!

Why We Killed Winners

PATH was a terrific trade.

That is exactly why we cashed it.

B was still likely to make money.

That is exactly why we killed the old version and built a better one.

That sounds backward until you understand the hurdle rate.

This portfolio has a job. Every position must contribute to that job. If a position has only 30%, 40%, or 60% remaining upside over 16 months and no strong premium engine, it may actually LOWER our high-performing portfolio’s future performance – even though it is profitable.

That is the part most outsiders never see.

They see “buy” and “sell.”

Members see the reasoning: the position’s remaining return, premium potential, hedge impact, cash impact, and opportunity cost.

That is where the education is.

Why We Keep Boring Positions

Not everything has to be exciting.

CAG is not going to make anyone leap out of a chair.

ET may not be exciting either.

But boring positions can have very useful jobs if they are on track, properly covered and not consuming capital that could be used better elsewhere.

The portfolio is not a highlight reel.

It is a baseball team!

You need power hitters, base hitters, defensive specialists and a bullpen.

Ty Cobb matters. Babe Ruth matters. The mistake is thinking every position has to be Ruth.

A portfolio full of home-run swings eventually discovers strikeouts.

A portfolio full of high-probability, well-sized, premium-supported structures can compound quietly until the results stop looking quiet.

The Actual Scorecard

The post-review framework is powerful because it gives us a scorecard instead of a feeling.

Using the review’s own summary numbers, the portfolio now has roughly:

That is the portfolio temperature.

Not vibes.

Not “I like the market.”

Not “this chart looks good.”

Numbers.

Now, of course, the hedge and the longs do not both max out. That is why we do not simply add every number and declare victory. The point is not that every branch pays at once. The point is that the portfolio has multiple ways to survive and multiple ways to keep working.

The Promotional Part, Because It Is True and Important

There are plenty of services that will give you trades.

That is not what this is.

This is the part of investing that most people never learn because nobody teaches it in real time: how to manage a position after it works, after it goes against you, after the short call scares you, after the spread matures, after the hedge gets expensive, after the cash starts piling up, after the market changes character.

The entries are interesting.

The adjustments are the education!

The portfolio review is where the method becomes visible.

That is why the $700/Month Portfolio matters. It proves that a small account can be managed with professional discipline. It also proves that the discipline is not mysterious. It is work. It is math. It is repetition. It is the willingness to kill a winner, keep a boring spread, roll a short call, hold cash, and hedge when the market demands it.

That is what non-members should feel FOMO about — not the last trade, but the skill set…

Because once you learn the skill set, you are not waiting for someone to hand you a fish. You are learning how to build the fishing boat, run the nets, hedge the fuel cost and sell premium on the weather.

Closing Commentary

Let me translate the review into one sentence:

That is what makes this portfolio so annoying to skeptics.

A skeptic wants the explanation to be one thing: lucky stock picks, a hot market, too much risk, AI magic, whatever makes the result easier to dismiss.

But then you open the review and it is annoyingly mechanical:

• • PATH worked, so we took the money.
  • B was still good, but not good enough in the old structure, so we killed it and rebuilt it.
  • CAG is boring, but properly covered, so it stays.
  • CLF is messy but productive, so we roll the short calls and keep collecting.
  • SQQQ is not a bearish bet; it is the seatbelt that lets us keep driving.

Cash is not fear; it is optionality!

Premium is not a bonus if you need it to survive; it is a bonus when the structure is already sound.

That is the quiet brilliance of the thing.

The average trader is constantly asking, “What do I buy?”

This portfolio asks better questions:

• • What is already working too hard?
  • What is not working hard enough?
  • Where is time paying us?
  • Where is time trapping us?
  • Where has a short call become a hedge?
  • Where has a winner become dead money?
  • Where can we free cash without losing the upside branch?
  • Where do we need protection so we can sleep?

That is not a newsletter trick.

That is a craft!

And if you are watching from the outside, this is the part you are missing. You might see the alert when a new trade goes in but the real value is watching the portfolio breathe month after month — cut, roll, harvest, hedge, rebuild, wait, repeat.

That is how $700 becomes a serious portfolio.

Not in one heroic trade.

Not by guessing the next hot stock.

But by showing up every month and asking every position the same ruthless question:

Most investors never ask that question.

PSW asks it out loud, with the math on the table.

That is the edge!

And that, frankly, is a pretty good reason to be a Member.

— Warren 2.0