In Today’s Issue:

• 6 up days in a row, but cracks starting to form?

• SPACs may be back

• Coming regional banking crisis?

• SMCI buy, sell, or hold?

• How to play lower rates

• Why you should care about capacity auctions

• What AI has to say about some of yesterday’s earnings

• Deeper dive on cash secured puts

• and more……..

Bottom Line: The S&P is now up 6 days in a row, even though no specific trade deals are done. Starting to see a number of charts hitting up against resistance, given how far the market has gone a pause here wouldn’t be shocking. However, we are in the teeth of earnings so anything could happen.

ETF Model Portfolio Changes

We are bringing TBIL down to 25% and adding SPCX at a 5% weighting. Things are starting to move again in the SPAC market. More information here…..

Next Webinar:

Tariffs, Inflation, and Recession: What To Do Now

5/22 2pm EST

News & Noise

🧠 News:

❌ Noise:

What Wall Street Is Saying

Mohit Kumar, Jefferies…..

Mike O’Rourke, Jones Trading…..

6 Up Days in a Row, But Cracks Starting to Show?

AI is the future…..

Seeing a bunch of names start to bump up against resistance, not a huge deal as you need to bump up before you can break through, but be cognizant this market has come a long way in a short period of time, and we still don’t have any specific trade deals.

Lots of earnings coming up and last day of a crazy month, so going to be interesting. Gold was down yesterday, and is down again today. Still too early to tell if it’s topped, or just paused.

Both GLD….

And GDX….

Sitting around key support levels.

Treasuries (more on that below) and Bitcoin, continue to be strong.

Coming Regional Bank Crisis?

We had Rebel Cole on the Podcast yesterday…..

He talked about the ticking time bomb in regional banks—-RMBS, CRE, uninsured deposits, etc.

His website has a screener that shows all sorts of regional bank exposures. You could use this is a short watch list….

Of course this whole issue was the reason we started SKRE….

SMCI is a name I own, Louis Navellier also talked about it last week on the Rebel Finance Podcast. Going to be down big it seems so I asked GPT whether it’s a buy the dip, hold, or sell……

Thesis Check
Super Micro (SMCI) was built into the AI server supply chain by virtue of its strong direct‐liquid‐cooling technology and high‐performance hardware integrations (primarily NVIDIA). That positioning drove an epic run to ~$118 in early 2024.

What Went Wrong?

1. Customer Timing: Q3 guidance of $4.5–4.6 bn revs vs. Street’s $5.4 bn and EPS $0.29–0.31 vs. $0.53. They blamed “delayed customer platform decisions”—i.e. customers are sitting on older Hopper hardware and waiting for Blackwell launches.

2. Accounting Overhang: Last year’s auditor resignation still lingers even though SMCI cleared itself via independent review. Trust isn’t yet fully restored.

3. Valuation Reset: From $118 to ~$35 today the stock has repriced for execution risk and hardware‐cycle delays.

Bull Case

• Blackwell Ramp: Once the new chips arrive, SMCI’s backlog and revenues should snap back.

• DLCT Leadership: Few peers match their liquid‐cool‐tech for AI racks.

• Improved Governance: New auditor + no‐fraud finding rebuilds confidence.

Bear Case

• Cycle Timing: If NVIDIA’s own ramp slips, SMCI stays dark.

• Competition: Established OEMs (Dell, Hewlett Packard) will pressure share gains.

• Execution Risk: Multiple delays = multiple quarterly hiccups.

Quantitative Snapshot

• Next Twelve-Month P/E: ~18× (down from 70× at peak)

• FWD Rev Growth: Street ~40% YoY → still high but slowing from 70–80% levels.

• Balance Sheet: Net cash/leverage neutral; able to weather a couple quarters of headwinds.

Recommendation

• Short-term (next 1–3 months): Hold

  • The pre-announcement 15% gap likely over-reacts to a one-quarter delay.

  • Wait for clear signs of customer platform rollouts (i.e. incremental channel checks or NVIDIA Blackwell availability).

• Medium-term (3–12 months): Buy the Dip around $28–$30

  • At $30 your levered entry yields ~15× ’26 EPS consensus with >40% growth re-acceleration potential once Blackwell transitions.

• If SMCI recovers above $40 on confirmed hardware ramps, trim back to your core target weight (e.g. 4–6% of your AI sleeve) to lock in gains and de-risk execution.

Rating on “Buy-the-Dip” Scale (1–10)
6/10 — still bifurcated risk: high upside once the cycle turns, but execution and competitive headwinds warrant caution.

How to Play Lower Rates

Longer term readers know I am of the belief rates are going to come down and have been playing this with TLT (personally I own some calls and have sold some cash secured puts). Had a conversation yesterday with a smart analyst, David Levenson (recommend you follow him on X @levenson_david). He suggested I add in TLH and IEF as I would get most of the upside and eliminate a bunch of volatility. I ran this scenario through GPT, and it liked it (I neglected to ask about a mix of TLT, TLH, and IEF, but it gave me the answer I needed)…..

1. Key Characteristics

1. Duration measures price sensitivity to a 100 bp parallel move in yields: TLT is ~16 yrs, TLH ~12 yrs, IEF ~7 yrs.

2. Volatility (3-yr SD) tracks how “bumpy” each is—TLT is ~17%, TLH ~14.5%, IEF ~9%.

2. The Upside/Vol Trade-Off

If yields fall by 1 percentage point (100 bp):

• TLT ↑ ~15.85%

• TLH ↑ ~12.28%

• IEF ↑ ~7.02%

Combined Blend:
By weighting TLH/IEF you can dial in any intermediate duration—and thus capture a fraction of TLT’s move with proportionally lower volatility.

• Example (60/40 TLH/IEF):

  • Duration ≈ 0.6·12.28 + 0.4·7.02 = 10.18 yrs (~64% of TLT’s)

  • Volatility ≈ 0.6·14.47 + 0.4·8.84 = 12.22% (~71% of TLT’s)

  • Price gain if rates drop 100 bp ≈ 10.18% (vs. 15.85% on TLT)

You give up ~36% of the upside but also enjoy ~29% less historic volatility.

3. Option Implications

• TLT Options: Higher vega (sensitivity to implied‐vol changes) and higher theta decay (time decay) versus TLH/IEF options.

• TLH+IEF Calls:

  • Lower IV & Premiums: TLH/IEF implied vols run ~10–15% vs. TLT ~20–25%, so calls cost less.

  • Weighted Greeks: You can buy, say, 0.6 lots of TLH calls + 0.4 lots of IEF calls to approximate the delta and vega profile of 1 lot of TLT calls—at a smaller premium and smoother P/L curve.

• Risk/Reward: You smooth out the “gamma spikes” and reduce the probability of large losses if volatility collapses post‐move.

4. When It Makes Sense

• Moderate Bearish‐Rates View (25–75 bp drop): The TLH+IEF blend captures most of the move cost‐efficiently.

• High‐Convexity Views (>100 bp): Go straight TLT (or TLT convexity‐weighting via butterflies) to maximize gains from the long end’s curvature.

• Volatility‐Aware Traders: If you’re concerned IV will crater after Fed cuts, TLH/IEF options give you a smoother ride.

5. So… Should You Switch?

• TLT calls remain the purest play if you want every basis‐point of yield drop.

• TLH+IEF calls score higher on risk–reward for a modest Fed‐cut scenario, thanks to lower vega cost and smoother delta exposure.

6. Winner/Loser Score (1–10)

Bottom Line:

• If you expect a modest rate cut (<75 bp): switch to a TLH+IEF option mix to lock in 60–80% of TLT’s gains at ~30% less volatility and 20–30% cheaper premium.

• If you’re targeting a large long‐end rally (>100 bp): stick with TLT (or even levered TLT structures) to maximize convexity.

• In either case, use the duration/volatility stats above to size your option deltas and vega exposures rationally—and avoid the all‐or‐nothing payoff that pure TLT puts you at risk of if volatility collapses post‐move.

What’s a Capacity Auction—and Why You Should Care

Jefferies wrote a report about AI power generation yesterday that caught my eye. We did a deep dive on VST yesterday, had GPT do a deep dive on this report……

Electric grids need not just energy, but reliable standby power for the hottest, coldest, or most data-hungry hours. To guarantee that reliability, grid operators run capacity auctions each year: power plants and other resources bid for the right to be paid simply to exist and be ready to generate if called upon.

• Independent Power Producers (IPPs): Think of IPPs as merchant power plants. They don’t sell electricity directly to your home, but instead bid into these capacity auctions (and energy markets) to earn revenue for being “on call.”

• Utilities vs. IPPs: Traditional utilities own the entire customer relationship and routinely pass through capacity costs. IPPs, by contrast, are pure sellers of generation and capacity—so when auction prices spike, IPP profits jump directly.

Who Runs These Auctions?

• PJM covers the mid-Atlantic and parts of the Midwest.

• MISO (Midcontinent Independent System Operator) covers 15 states from Louisiana/Mississippi up into Minnesota and Manitoba.

Both are nonprofit grid managers that ensure enough power—and enough standby capacity—exists at all times.

The Big News

1. PJM’s 2026/27 Auction Looks Set to Clear at the New Cap (~$325/MW-day).

   • FERC approved raising the auction ceiling to ~$325/MW-day.

   • PJM’s demand forecast is up ~3.5% (largely from new data centers).

   • With limited new plants coming online, it’s very likely the auction will clear right at that cap—meaning every cleared generator (especially IPPs) earns top‐tier capacity payments.

2. MISO’s Capacity Prices Are Also Jumping—From ~$20 Last Year to $212–219/MW-day Next Year.

   • Retirements and tighter accreditation rules mean utilities and IPPs alike must pay far more to secure standby capacity.

Winners & Losers

Winners

• Talen Energy (TLN) – A pure‐play merchant generator. Higher capacity prices flow straight to the bottom line. Rating: 9/10

• Vistra (VST) & Constellation (CEG) – Large IPPs with fleets in both PJM and MISO. Expect a windfall in capacity revenue. Rating: 8/10

• Calpine (CPX) – PJM‐focused merchant generator. Gains directly from cap pricing. Rating: 7/10

• Ameren (AEE), CMS Energy (CMS), WEC Energy (WEC) – Utilities in MISO that can develop or contract new capacity. Their regulated models allow them to recover higher capacity costs. Each Rating: 7/10

Losers

• NiSource (NI) – MISO utility facing retirements in Indiana. Must pay steep new capacity rates or scramble for replacements. Rating: 3/10

• American Electric Power (AEP) – Similar Indiana exposure in MISO; higher capacity spend will compress margins. Rating: 4/10

Bottom Line

• Load up on IPPs like TLN, VST, CEG and CPX to capture the surge in capacity‐auction revenues.

• Favor MISO utilities (AEE, CMS, WEC) that can both build and pass through higher capacity costs.

• Steer clear of NI and AEP until they secure new capacity at reasonable rates or until retirement risks abate.

• Watch July 22 for the actual PJM auction clearing price—and the MISO PRA results—to confirm this story in real time.

Using AI to Parse Earnings Releases

I put yesterday’s mornings earnings releases into GPT to see if there are any “must” buy or “must” short or avoid names…..

🔑 High-Level Themes & Trades

1. China Exposure Is a Two-Edged Sword

   • Weakness: UCTT’s subcomponent pull-backs and SANM’s tariff caution.

   • Opportunity: NXPI and CDNS have less direct China risk and better guide discipline.

2. Volatility Skews Premiums on Put Sales

   • Elevated IV in semis (NXPI, UCTT) and EMS names means juicy premiums for cash-secured puts—just pick strikes at levels you’d be happy to own.

3. Differentiation Matters

   • Leaders (CDNS, TER, INTA) are tightening guide ranges—signaling execution confidence. Those are spots to add or write covered calls.

4. Data-Center & AI Kickers

   • AMKR, FFIV and OKTA benefit from secular tech upgrades. Look for cross-sector pairs trades: e.g., long AMKR vs. short UCTT on China risk.

Bottom Line:
This batch of reports paints a clear schism: execution-confident leaders (CDNS, TER, INTA) versus cyclical laggards with China or tariff overhang (UCTT, SANM, KFRC). For HEAT readers, that means focusing capital (or selling puts) on the former, while steering clear of the latter until visibility returns

Must-Buy Names

• Cadence Design Systems (CDNS) – 8/10 conviction. Guide discipline, no tariff headwinds, and AI/EV design tailwinds make it a best-in-class EDA play you want on day-one.

• INTA (Intapp) – 8/10 conviction. Leading niche in financial-services SaaS, strong AI-driven new ACV, and high-20s% revenue growth with durable enterprise spend.

Must-Sell / Avoid

• UCTT (Ultra Clean) – 4/10 conviction. China weakness, guide cuts, and customer push-outs leave little room for upside.

• KFRC (Kforce) – 4/10 conviction. Staffing attrition and early-cycle headwinds argue for steering clear until the end-market proves steadier.

Other Names
The rest fall into “Buy on weakness” (TER, AMKR, CAP-FR, QTWO, OKTA) or “Hold / watch for technical setups” (NXPI, FFIV, SANM), but aren’t urgent “musts” on either end.

Deep Dive on Cash Secured Puts

As I’ve mentioned I am writing more cash secured puts than I normally do. It’s not an asymmetrical trade, but I like it better than buying outright calls in many cases with vol this high. I had GPT take a deeper dive on the strategy than we did the other day….

Executive Summary

Selling cash-secured puts is a high-probability, income-generating strategy that empowers investors to (a) collect premium up front and (b) potentially acquire high-quality stocks at a discount. When executed with discipline—choosing stocks you want to own, sizing positions conservatively, and respecting downside risk—this approach can deliver double-digit annualized returns with defined risk. This paper walks through the what, when, why, and how of cash-secured puts, plus best practices for risk management.

1. What Is a Cash-Secured Put?

A cash-secured put is an options contract in which you sell (write) a put option on 100 shares of an underlying stock while simultaneously setting aside enough cash to purchase those shares if assigned.

• Strike Price: The agreed price at which you’ll buy the stock if it falls below this level by expiration.

• Premium: The up-front cash you receive for taking on that obligation (and risk).

• Secured by Cash: You earmark cash equal to (Strike × 100 shares) so you’re always able to fulfill assignment without using margin.

2. Why Sell Cash-Secured Puts?

1. Income Generation: Premiums are yours to keep immediately. In elevated volatility regimes, option prices swell—boosting yield.

2. Discounted Entry: If the stock falls below the strike, you acquire it at an effective price of (Strike − Premium). Often far below current levels.

3. Defined Risk: Maximum loss is known upfront: you pay the strike for shares but keep the premium.

4. Asymmetric Payoff: Small probability of large capital deployment (assignment) versus high-probability of collecting premium with no assignment.

3. When to Use Cash-Secured Puts

• Neutral-to-Bullish Outlook: You believe the stock will stay flat or rise modestly over the option’s life.

• High Implied Volatility (IV): IV rank > 60% suggests option premiums are rich. You’re paid more for assuming risk.

• Quality Underlying: Only write puts on businesses you’d be comfortable holding for years—blue-chip names, strong cash flow, and moat characteristics.

• Attractive Valuation: Strike price should represent a valuation you’d happily own at. Avoid strikes above fair value.

4. Key Risks & Mitigations

5. Step-By-Step Trade Setup

1. Stock Selection: Screen for high-quality, liquid names trading at or below your target valuation.

2. Expiration (DTE): 30–90 days is typical—balances premium size with time decay.

3. Strike Selection: Choose an out-of-the-money strike at a level you’re comfortable owning. For example, 10% below current price.

4. Premium Calculation:

   • Option price per share × 100 = total premium per contract.

   • Check IV rank: higher is better during volatile periods.

5. Position Sizing:

   • Risk only 1–5% of portfolio per trade.

   • Example: $100 K portfolio, 5% risk → $5 K max notional exposure → one contract at a $50 strike (= $5 K).

6. Place the Trade:

   • Sell to Open (STO) the put.

   • Ensure cash equal to strike × 100 shares is reserved.

7. Monitor & Manage:

   • If stock stays > strike at expiry → premium = profit, capital released.

   • If assignment → purchase shares; adjust cost basis by subtracting premium.

   • Roll strikes or expirations if you wish to adjust the trade before expiry.

6. Best Practices & Advanced Tips

• “Think Like an Underwriter”: Only underwrite (sell) puts when “insurance” is most expensive—i.e., when IV is high (VIX elevated for indices).

• Avoid Binary Events: Skip selling puts into earnings, FDA decisions, or regulatory catalysts unless playing specifically for that event.

• Use a Trade Journal: Track every put sold—strike, expiration, premium, outcome—to refine your strike and rollover decisions over time.

• Scale into Positions: Rather than one large contract, layer multiple strikes/expirations to average risk and capture varying premiums.

• Combine with Covered Calls: Convert to a synthetic covered call (risk reversal) if you want upside participation—sell puts and buy calls simultaneously.

7. Conclusion

When deployed judiciously, cash-secured puts transform a simple options strategy into a powerful income engine and discount-entry mechanism for beloved stocks. By focusing on:

1. High-quality underlyings you’re happy to own,

2. Rich volatility regimes, and

3. Prudent risk management,

you engineer a strategy that mirrors the profitability of insurance underwriters—collecting premium day in, day out—and only ever buying shares at prices you deem attractive.

Next Steps for The H.E.A.T. Formula Readers:

• Review current IV ranks for your watchlist names.

• Identify 2–3 securities where you’d happily own shares at strikes 5–10% below today’s price.

• Practice a small-scale cash-secured put sale (one contract) to experience premium collection and assignment mechanics firsthand.

Before you go: Here are ways I can help

‍

1. ETFs: We offer innovative ETFs that cover all aspects of The H.E.A.T. Formula, Hedges, Edges, and Themes.

2. Consulting: I'm happy to jump on the phone with financial advisors at no charge. I've built a wealth management firm and helped other advisors grow their practices through the use of substantially differentiated investment strategies. If you want to talk just send me an email at [email protected]

3. Monthly investing webinars

4. Rebel Finance Podcast https://www.youtube.com/@TuttleCap

5. Wealth Management-Coming Soon

6. Paid Newsletter Service-Coming Soon

   The views and opinions expressed herein are those of the Chief Executive Officer and Portfolio Manager for Tuttle Capital Management (TCM) and are subject to change without notice. The data and information provided is derived from sources deemed to be reliable but we cannot guarantee its accuracy. Investing in securities is subject to risk including the possible loss of principal. Trade notifications are for informational purposes only. TCM offers fully transparent ETFs and provides trade information for all actively managed ETFs. TCM's statements are not an endorsement of any company or a recommendation to buy, sell or hold any security. Trade notification files are not provided until full trade execution at the end of a trading day. The time stamp of the email is the time of file upload and not necessarily the exact time of the trades. TCM is not a commodity trading advisor and content provided regarding commodity interests is for informational purposes only and should not be construed as a recommendation. Investment recommendations for any securities or product may be made only after a comprehensive suitability review of the investor’s financial situation.© 2025 Tuttle Capital Management, LLC (TCM). TCM is a SEC-Registered Investment Adviser. All rights reserved.