InvestAnswers details pair trades, LEAPS and profit-taking rules to grow a bag

Building a bag through pair trades

Responding to a Patreon question from "Dr. Bitcoin," James explains that he treats every asset as part of a pair trade, including BTCUSD itself. He describes his "infamous swap box," a strategy he began in 2022-2023 to move capital from self-custody Bitcoin into options-based positions. His main example is a MicroStrategy-to-Tesla swap, where he converted LEAPS to stock, sold that stock, and bought Tesla LEAPS at low strikes, a trade he says worked out well because those LEAPS are now deep in the money.

He says he still holds more than 50% of his original MicroStrategy position and plans to swap again "when the time is right," depending on Bitcoin's performance and where he sees the best pair opportunity. He suggests he may rotate into AI names such as SpaceX or Micron, saying "if Micron was to fall to like 500 bucks and I had no cash on the side or margin left, I would definitely sell uh my Micro[Strategy] and jump into that too."

MicroStrategy's possible MSCI removal

On a question about MicroStrategy's potential exclusion from the MSCI index, James notes a meeting is scheduled around October 16th to discuss the "final MSCI rule decision," with any rebalancing occurring in November 2026 if triggered. He estimates that scenario would force about $2.8 billion of selling against a $61 billion market cap, or roughly 4.5% of net sell pressure, which he calls "a liquidity bruise, not a total disaster."

He emphasizes that MicroStrategy's price is primarily driven by its 846,000 Bitcoin holding rather than index-related selling, and that sovereign wealth funds and wealthy buyers continue to be interested in the arbitrage he says he first identified in September 2020.

Options strategies for large stock positions

Answering a subscriber who holds 1,000 SpaceX shares at roughly $20 average cost, James walks through selling out-of-the-money covered calls at various strikes. For a $150-strike call far out of the money, he estimates about 46 cents per share in premium, or $460 for 10 contracts, annualizing to $6,440 and a 4.41% return. Moving to a $175 strike raises this to about $10,000 annualized, or 6.71%. He also outlines a $165 strike scenario that could generate roughly $20,000 a year "like clockwork."

He stresses that timing matters more than routine selling, using a mean-reversion overlay on SpaceX's chart to identify overbought and oversold points—selling puts near mean-reversion lows and calls near highs, when premiums are richest.

His four house rules and profit-taking system

James lays out four personal trading rules: always rotate, always trim into strength, always hedge when possible, and sell premium (calls at tops, puts at bottoms), while never "round-tripping" gains. He admits to having round-tripped himself, citing EOS and Solana as personal examples where he failed to take profits before large pullbacks.

He describes a four-step process: build a core position via LEAPS, apply his "LILO" (Layer In, Layer Out) or profit-taking model to sell portions at rising price levels, reinvest into dips, and use options ("the turbocharge") for additional income. He recommends an 80/20 split between a core "mattress" position and a smaller trading bag for speculation.

"The money's in the selling." — James

Walking through an ALAB example, he shows buying 100 shares at $80 ($8,000 total), selling portions at levels 6, 7 and 8 as the price rose to around $500, then falling back to $250. He says this generated $23,838 in cash, which was redeployed at the mean-reversion low, growing the position by 22.7% in shares and producing a 464% ROI over six months (5.63x) versus 358% for simple buy-and-hold. A similar example using Marvel Technology shows a 3.82x return from reinvested profit-taking versus a lower buy-and-hold result.

SpaceX's Starlink and Starship economics

Responding to a detailed subscriber question, James argues that concerns about replacing Starlink satellites every five years are overstated, saying the satellites "generate full ROI... in less than a year." He describes the V3 satellite generation as offering "10x the bandwidth per bird" versus V2, and cites data attributed to guest Aaron Burnett (from a prior show with Ark Invest) that a single Starship V3 payload can replace about 4% of the current 11,000-satellite constellation, equating to 440 legacy satellites.

He notes open risks remain around reusability, including whether SpaceX can "catch the ship and the booster again and refurbish fast," but says refueling now takes about 30 minutes. He references a first commercial Starship flight carrying real V3 satellites and mentions potential launch cadences of three flights per month, eventually daily. On revenue, he claims (from his own Patreon analysis) that SpaceX's compute leasing capacity could reach "102.2 trillion" in annual revenue by year-end, and repeats a rumor that "30 to 40% of all the Vera Rubins will be purchased by Elon Musk Industries."

Why AI models underestimate Tesla's ramp

Discussing a subscriber's Grok-generated Tesla price target of $1,000 by 2031 and $2,000 by 2035, James argues that AI models fail to account for nonlinear growth curves, TAM expansion, and real-time ramp data. He says Tesla's humanoid robot business could represent a "$25 to $30 trillion" total addressable market and cybercabs a "$10 trillion" market, though he does not attribute specific probabilities to these figures beyond his own estimate.

"If AI could predict things accurately and make you a fortune, we'd all be rich." — James

He cites Texas Cybercab fleet data showing growth from 42 vehicles on May 28th to 546 by September 25th, and Cybercabs specifically growing from 0 to 126 in 35 days, calling this "an S-curve waking up." He projects, based on current growth trends, roughly 2,000 Cybercabs in Texas by the end of February, describing this as a "conservative, sandbagged" estimate.