Ronald | Income from Stocks

June 2024. A bar in Taipei. A woman tells a tech executive she can get $NVDA CEO Jensen Huang to come over. He actually shows up. They have drinks. Someone takes a photo. It gets posted on LinkedIn. Her name? Alice Huang, a senior executive linked to an NVIDIA customer. At the time, just another night out with tech executives. Two years later, US intelligence reportedly suspects her of spying for China, and she's at the center of an affair scandal involving Jensen Huang. That LinkedIn photo has aged VERY differently. And something tells me we've only scratched the surface of this story.

Memory stocks lost over $700 billion in value this week. I’m heavily exposed, so I spent my whole day reading everything about it. So you don’t have to. Here’s what happened, in plain English. At a conference in Singapore, Broadcom’s CEO said a lot of AI investors “have no clue what they are investing in.” Funny thing. Intel’s CEO was on the same stage and said he expects AI demand to stay strong for the next 2 to 3 years. That part didn’t make the headlines. People also got nervous about how all this AI spending is being paid for. A lot of it is borrowed money. Then a Chinese memory maker called CXMT said it will have a denser memory chip by the end of the year. Denser just means more memory packed into the same tiny space. That makes memory cheaper to produce. And it may let them do it without the advanced machines China is banned from buying. That’s what scared people. The big memory names fell 11% to 26%. Here’s the fear. CXMT is already about 10% of global DRAM sales. If China floods the market with cheap memory, prices fall and Samsung, SK hynix and Micron make less money. Here’s what the panic missed. Memory prices are still going up. TrendForce, the research firm the industry uses to track memory prices, expects another 10 to 15% increase this quarter. Higher prices mean higher profits. Most of next year’s memory is already sold. Micron alone has about $150 billion in signed contracts and $32 billion in deposits and commitments from customers. Nobody pays a deposit for something they think is about to get cheaper. CXMT hasn’t shared the speed, size, yield or customers for this new chip. Analysts don’t expect real volume until 2028. The debt worry is mostly about some of the buyers. The chip makers are sitting on cash. Micron has $73 billion in cash and only $5 billion in debt. SK hynix has about $50 billion more cash than debt. And the biggest buyers are Nvidia, Google and Amazon. Not exactly companies that miss payments. One thing surprised me. $DRAM, the memory ETF, owns CXMT. About 5% of the fund. CXMT’s own stock fell this week too. Is there a real risk? Yes, but it’s further out. Memory has always been a boom and bust business. When prices are this high, everyone builds. Micron spent a record $27 billion on new factories last year. Samsung, SK hynix and CXMT are all expanding too. Most of that new supply starts coming online in 2027 and 2028. If AI demand keeps growing like it is today, that supply gets used up. Micron says it can’t even see when supply will catch up. But if AI spending ever pauses, memory prices can fall fast. In 2019 and 2023, they fell by roughly half. So the one number that matters is memory prices. This week the stocks crashed. The prices kept going up.

Hock Tan says some AI investors are betting like they are in a casino and many AI stocks are down today. Worth remembering what he said in March 2022. Chip growth would go back to its historical rate of about 5%. “If anyone tells you otherwise, don’t believe it, because it has never happened.” The chip market is now on pace to nearly triple its 2022 size. He might be right about the gamblers. He’s been right about many things. But even one of the most successful CEOs in semis didn’t see how fast this industry could change in four years. The moment you mistake expertise for certainty, you are the gambler.

If you bought $NVDA at $215 and held, you would be up about 7% today. I bought at the same price and sold options on it. I made 18.8%. In May, I got paid to buy 500 shares at $215. While I held them, I collected dividends. Then I kept getting paid everytime I tried to sell them. I will be selling them today at $225. $20,160 in under 5 months.

Selling options, in plain English. - Put: a promise to buy 100 shares at a set price. - Call: a promise to sell 100 shares at a set price. - Strike: that price. - Premium: your pay for the promise. - Expiration: when the promise ends. - Assigned: the promise got called in. That's it.

If selling options feels complicated, start here. Pick a stock you would actually buy. Have the cash for 100 shares. Sell a put below today's price. If it stays up, you keep the money. If it drops, you own it at a lower price and still keep the money. You just have to start.

September recap. Account up 16.15%. Another good month. Net premium: +$4,214. That number is low for a reason. I collected about $37k in premium but spent $32k of it rolling two deep ITM $AMD covered calls. What makes me feel good about it is that the roll was paid for by premiums. Nothing came out of pocket and I still got to keep the shares. Not a bad deal. Most active names: $CIFR $IOT $DRAM $VST

Something happened yesterday that most people missed. The US government launched its own AI product. 29,000 federal websites behind one chat box. It runs on Gemini and Grok. Not ChatGPT. Not Claude. Every federal agency now has orders to plug into it. People keep writing $GOOGL off in AI. Yesterday the biggest customer in the country picked it.

I started buying the companies that take my money every month. Utility bill. I bought the utility company. Bank fees. I bought the bank. Phone bill. I bought the phone company. Life insurance. I bought the insurance company. Groceries. I bought the grocery store. Gas for the car. I bought the gas company. Not fully covered yet. But every dividend that lands knocks a bit off the bill. If you're going to take my money every month, send some back.

I went to bed thinking I would wake up owning 2,000 shares of $IOT. It closed at $37.96. My strike was 38. Four cents in the money, which is enough for the put to get exercised automatically. Then after hours it drifted back above $38. So somewhere out there, someone holding that put had to decide whether four cents was worth exercising. They decided it wasn't. Expired worthless. I keep the $1,300.

I've paid for life insurance every month for years. This week the insurance company paid me $329.80. I own $MFC.TO stock. If a company takes your money every month, own a piece of it.

Be honest. If your fund lost $35 billion, would you be buying calls five weeks later? Leopold Aschenbrenner was. He went back into $AMD calls when AMD was around $500. AMD today: $615. All-time high.

Want a $20,400 options profit this week? Easy. I'll show you how. Then I'll show you why it's fake. 1. Find a stock trading at $50 2. Sell 10 puts at the $70 strike 3. Collect about $20.40 a share. That's $20,400 4. Let it get assigned. It will 5. Screenshot the $20,400 and post it The replies will call you a genius. Now look at the rest of your account. You just bought 1,000 shares at $70. They're worth $50. You're down $20,000 on day one. Real profit: $400. And the deeper in the money you go, the bigger the win looks. The real number barely moves. That's why realized options profit is the worst number to judge an options seller by. The number I actually judge myself on is simple. Is my account bigger than it was, minus what I deposited? It's the one number I can't make look better than it is.

The shoes held their value. $NKE didn't. Should have bought the Jordans.

Nobody knows a company like the people who work there. 88% of $NBIS employees say the business is headed up. 76% would tell a friend to work there.

The stock closed above my strike on expiration day. I still got assigned. Thought it was a broker error. Turns out it's a rule most put sellers only learn the hard way: Expiration day doesn't end at the closing bell. The buyer still has a short window after the close to exercise, and the stock keeps trading after hours the whole time. Out of the money just means no automatic exercise. The buyer can still do it manually. $BMNR dipped under my strike for a few minutes after hours, then bounced right back. Didn't matter. 3 of my 10 contracts got assigned. The other 7 expired worthless. Me? I was fine with it. I only sell puts on stocks I'd happily own. Would've taken all 10. But if you can't afford to take the shares, close before the bell. Even when it looks like it'll expire worthless anyway.

The best hire Steve Jobs ever made. Tim Cook. Tomorrow is his last day running $AAPL. Here's what you need to know: - Shipyard worker's son from a small town in Alabama. - Joined Apple in 1998. It had just lost $1 billion. - Offered Jobs part of his liver in 2009. Jobs said no. - Took over in 2011. Everyone said Apple was done. - $350B when he started. $4T today. - Up at 3:45am. Reads customer emails first. - Never married. No kids. Giving it all away. Jobs told him one thing before he died: don't ask what I would have done. Just do what's right. Steve Jobs built Apple. Tim Cook made it ten times bigger.

Hit 1,000 followers today. A year ago I had nobody to talk to about stocks. My wife tried her best. It's just not her thing. Now I get to talk about it every day. That's really all this is. Thank you.