Transcription
Chat GPT has just changed how we trade stocks forever, and it's because of this new skill that lets it access live market data, track what Wall Street, Wales, and US politicians are buying, and use that to play the stock market automatically. And you can even text it from your phone to check on it or steer it whichever way you want.
I've actually been using this for the past couple of months, and it's completely changed how I think about trading. So, in this video, I'm going to be breaking down how you can get started in three levels.
First, we're going to get set up. I'll walk you through the basics of how AI trading works, and we'll get Chat GPT and all the tech set up.
Then, we're going to be building a copy trading bot. I'm going to be showing you how to track what your favorite traders, Wall Street, Wales, or even US politicians are buying and have GPT copy their exact moves automatically.
And in level three, we're going to be getting into options. I'll break down what they are, how they work, and then we're going to be building a bot that runs one of the most consistent income strategies in trading.
And as a bonus, I'll cover how you can take any trading strategy and backtest it so you can have confidence on any trading strategy that you use with AI. Because the worst thing you can do is hand your AI a bunch of money and say, "Go figure it out." And even if you've never bought a single stock before or have zero technical background, you'll be able to do this because all we're going to be doing is simply talking to Chat GPT. Let's get into it.
Okay, so before we get into anything, I need to give you some context on why I'm making this video and why this actually matters. Because for the first few years of my career, I worked at JP Morgan and I got to see how the best banks traded up close. And the biggest takeaway that I had is the gap between Wall Street and regular people comes down to just three things.
First, it's the data. Imagine you're taking a test. You studied as hard as you could, but the person next to you has the answer key. They have a tutor whispering in their ear, and even a grading rubric in front of them. You're both taking the same test, but you're not playing with the same information. And that's the stock market. Most people make decisions on their stock purchases based on headlines, social media, or whenever they have time to check. But Wall Street has teams watching everything, and they turn all of that into trades before most people even hear about it. That's the kind of access that used to be locked behind expensive tools and full-time teams. Now, I'll show you how to build all of that with Chat GPT.
Second, it's execution. Say you have a strategy that spots perfect trades, but you're in a meeting or just doing your job. If you hesitate for just 10 minutes, the window closes, and Wall Street doesn't deal with that. They actually have systems watching the market and placing trades around the clock automatically. And now GPT can do the same. They can make trades on its own and even text you for approval if you want a bit more control.
Third is the intelligence. Having the data and the speed really means nothing without a plan. And the big guys have teams reading all that data and information and making really good strategies that evolve over time. And to do this, you would need expensive tools. And if you couldn't afford those tools, you were locked out. But with Chat GPT now and these new tools I built for you, that barrier is gone.
All right, let's build this thing. I'm going to be explaining everything as we go, step by step. So, if you're brand new, just follow along. Our goal is to get Chat GPT to trade stocks for us. And to do that, Chat GPT needs two things. It needs somewhere to place the trades, and it needs information to decide what to trade. So, let's start with the first one.
To buy and sell stocks, you need something that's called a brokerage account. A brokerage is basically a middleman between you and the stock market. So, when you open an account like Robin Hood or Fidelity, those are examples of brokerage accounts. But here's where it gets interesting for us. Some brokerages let you skip the app entirely and connect straight through their API. And an API is simply a secure channel Chat GPT can use to interact with the brokerage account. And today, we're going to be using Alpaca. It's free to sign up and gives Chat GPT total access to connect to it and place trades on your behalf.
Now, before we get any further, quick disclaimer. This is not financial advice. I'm just showing you how to build cool stuff with AI. And everything we're doing today is in paper trading. And paper trading means you're using fake money in a real market. So, it's the same stocks, same prices, and everything moves the same way, but you're not risking a single dollar, and you can test anything you want out, right?
So, let's connect Chat GPT to our brokerage. All right. So, first, what we're going to do to set it up is we're going to go to Chat GPT. Small trick. If you go to chat.openai.com, it'll take you to Chat GPT. Okay. So, I'm in Chat GPT right now. And right now, what you want to do is make sure you log in. And then ideally, you should want to make sure you have one of the Pro accounts because what you'll see is on the left-hand side right here, you'll see this app called Code Interpreter. Okay? And if you click that button right here, and then what I want you to do is download the app by hitting this icon right here. So, Code Interpreter is basically an application where Chat GPT lets you create AI agents that can run forever, and you can control it from your computer. All right? And it's really simple because all you have to do is just talk with it. All right.
So, after you have the app downloaded, then you'll see a screen like this. And what I want you to do first is you want to open a new chat. Then, what you want to do is we're going to be making a folder. So, everything we do is going to be organized. So, I'm hitting this button right here. And then I'm going to do "Add a new project." And then let's make a new folder. Let's call it GPT traderbot. And then let's open that. Great. So now, what's going to happen right here is everything we do is going to be enclosed inside that folder. Right. Okay. That's step number one. We have Chat GPT set up.
Now, what we need to do is make sure we open an Alpaca account. Now, if I go back to my browser and then look for Alpaca, and any link is going to be down in the description below. And then what you want to do is make sure to sign up for Alpaca. All right.
So, after you just signed up for Alpaca, what you want to do is you want to go to the top right here and then hit "New Paper Trading Account." And then let's call this GPT trader. And then let's give it some starting balance. So, let's give it $50,000 and hit save. Now, if I make that account and I go here and I hit home, you'll see I have a balance of $50,000. Okay.
Now, what we want to do is make sure we connect our Chat GPT, our Code Interpreter account, and our Alpaca paper trading account. All right. And the way we do that is let's say we scroll down right here. And in this API key endpoints, we want to hit "Generate New Keys." Great.
So, after we have these keys, what I'm going to do is show you these two side by side. So, I have my folder in Code Interpreter right here, and I have my Alpaca right here. Right. So, what I'm going to do is go down here and what I'm going to do is I'm just going to copy and paste these details right here. Okay. Endpoint. And then I'm hitting Shift Enter. Key and secret. Okay. And later, these keys are going to be exposed. So, what you want to do is just rotate it later. And I'll show you how to do that in a bit. But right now, after you give it this data, we just want to make sure we just establish the connection. And the way we do that is make sure you write, "Hey, I just gave you the keys for my Alpaca paper trading account. What I want you to do is, can you install the Alpaca CLI and then use that connection? We're going to be doing some trades using the Alpaca CLI." All right.
Okay. So, I just gave it this instruction, and what it's going to do now is set up my environment, and it's going to be downloading all the code it needs to basically talk to this Alpaca trading account. So, I'll wait until this thing is set up, and then we'll see if our connection is established.
Awesome. So, now you see it can already read some data. You can see the equity we have, which is $50,000 right here, and the buying power is $100,000. That means we are connected to the account.
Now that we have that done, let's try to execute a trade just to make sure we have a good connection. All right. So, I'm just going to go here and I'm going to ask, "Hey, can you buy one share of Google in my account, please?" So, now I'm basically testing if GPT can, without me having to place trades here, just place trades when I ask it to. It's asking me for some clarifications. Google. Great. So, now I just clarified what to buy. And now, if I scroll here, you can see it actually popped up, and now I have a share of Google. Okay.
Now, let's just test one more small thing just so you can see the buying and selling. So, we just bought something really easily, right? "Hey, can you sell all my shares, whatever I have, and then buy 10 shares of Tesla?" All right.
So, now, if you noticed when I said "sell all my shares," it needs to semantically actually figure out what "all my shares" are. And now it just asked me for some permission. I can tell it not to do anything, but like right now, it needs to figure out that, "Hey, what are all my shares?" And then sell all of that, for example. Okay.
So, this is just the beginning. What we're going to do after this is build layers on top of this to make this a lot better and a lot faster as well. All right. So, right here you can see now it just made a market sell order, and also right now I have 10 shares of Tesla. So, great. Now we can basically use GPT to control our trading account, and we can see everything happening live. And, you know, if you really wanted to, you can also just, let's say, Google, you can buy it with this UI yourself if you wanted to, right?
Okay. Right now, we can use GPT to trade, but it's trading blind. It doesn't know what to buy, when to buy, or why. And that's because it's missing the most important piece, which is a strategy. So, let's get into that.
And just to show you some proof, these are just some strategies that I've been using personally for like the past couple years. And you can see right here, uh, just showing on your my phone, this is just one of my accounts where I've been using the strategy a lot. And you can see I made a gain of 164.99%. Which is fairly a lot, and I like it. And this is one of my experimental accounts that I really like. But, you know, I'm not saying this is the average amount of gains. This is just me using these strategies that I'm teaching you. And I've just been doing the same thing over quite some time and been seeing these returns.
Okay, so with that out of the way, here's a strategy that I use a lot, and it's a fundamental technique called the trailing stop strategy. It's a proven strategy that, you know, real traders have been using for decades. Basically, what I'm doing is showing you how to take what already works and map it so Chat GPT can run it for you. And in this level, we're going to turn Chat GPT into something that basically runs on its own. Basically, a bot that watches the market and makes its own decisions based on the rules we set. And you can think of the strategy like a cruise control on a car. Once you set it to, let's say, 65 mph on the highway and you take your foot off the gas, the car holds that speed for you. So, if you're going uphill, it gives it more gas. And if you're going down, it eases off. You're not sitting there pumping the pedal for hours, right? In the same way the car checks, acts, and adjusts, the bot is going to work the exact same way.
All right. So, let me show you how the trailing stop strategy actually works. Say you buy a stock at $100, and let's say we tell Chat GPT, "If this drops to $95, then sell it." That's your floor. $5 is the most you're willing to risk on this. And if the stock starts climbing and hits, let's say $110, and it didn't go down, your floor is still set at that $95, which means you would still be exposed to a $15 fall, which makes no sense, right? So, what we want to do there is make sure Chat GPT moves our new floor up to $105. That means if the stock dips and hits a new floor, you're still up $5 in profit, and you were protected the entire time.
But what if the stock drops right out of the gate like this, right? Well, that means you would just hit the $95 floor. You would sell it and be out $5. That's your loss. But here's the important part. You're not stuck. You still got that capital. Chat GPT can now take that money and go looking for the next setup. Maybe it's the same stock a week later at a better price, or maybe it's a completely different opportunity. So, the point is, you lose a small portion that you're okay to lose and risk. Basically, you live to trade another day, and ideally, we find trades like this.
So, let's say the stock keeps climbing, and every time Chat GPT is going to drag the floor up higher and higher, and you can never fall back to where you started. It basically now goes to sell at $110 right here. So, you get $10 in profit, which is a 10% gain. That's a trailing stop. You set the rules once, and Chat GPT follows them every second of the day, which means you're always protected, and you're always locking in gains. And when a trade doesn't work out, you move on fast with the most amount of money still in your pocket.
Now, why am I still telling you all this? Because the worst thing you can do is hand your AI a pile of money and be like, "Go figure it out." And that's why these rules aren't the limitation. It's literally the whole point. We're not inventing something new here. We're taking a strategy that's already proven and we're handing it off to Chat GPT so it could run with more speed and discipline than any human could. This is how you take what you know, like your instincts, your risk tolerance, your read on the market, and you encode it. Chat GPT can execute thousands of decisions faster than any human. And that's what makes us different from letting this AI loose.
All right, to set this up, it's actually fairly simple. All we're going to be doing is just talking to Chat GPT. And also, just to make it a bit easier for you guys, if I go here, oh, actually in my Cloud Club, you'll see I have these prompts that I've made out for you, and also any trading alerts that my algorithm catches. But aside from that, if you go here inside the classroom in the Skills Vault, there is this trailing stop prompt that I'm going to be entering it right here. All right. Basically, I have a couple of different strategies that you can use that I've been using a lot, and you can get your trader to be doing these exact same things, right? But now you can just follow along with what I say, and that'll be probably a lot easier.
So, "Hey, I want you to run a trailing stop strategy on Tesla. I want you to be my trading bot. And here's how this thing is going to work. I want you to buy Tesla using my Alpaca paper trading account. Buy shares at the market price right now. Whatever you think is best. Let's refine the strategy. And if, let's say, our floor is 10% or 20% below, that's my stop loss. I don't want to lose more than that on this trade. And my trailing floor, if the stock goes up, let's say 10% from what I paid, move my stop loss up 5% below the current price. Every time it climbs another 5%, move up the floor again. The floor will only go up and never down. And make sure to ladder in. If the stock drops, let's say by 20% or more, and we have cash, then I want you to buy this at a better price. After you set this up, show me a summary of everything, and then we can confirm if the strategy looks good, and I want you to make sure to place those stop losses in order."
Okay, notice how this is a pretty beefy prompt. So, right now, in 3.5, I'm on low. I can probably just use high for this because it'll behave a lot better. Let me make this a bit bigger so it's easier to see and get rid of this thing. Okay. So, you see how it pulled the current stuff. It says I have placed a stop loss at 20%, and it's saying some recommendations so I can go back and forth with it. And right now, it's just asking me to confirm which one they want. Execute what you recommend.
Okay. Now, the next concept I want to show you is number one. You can see it triggered a stop loss at $396, which is 10% less than the current market price. All right. And then notice this. This is the next part I want to show you is one important detail is I placed the order, but I did not start a persistent, always-on monitoring process in the background. So, let's do that. "Can you spin up automations to make sure you have these always-on monitoring processes in the background?"
And this is the next concept that I want to teach you is the reason we're using Chat GPT Code Interpreter is because you see right here, if I open up the sidebar right here, inside this automations, what we can do is we can get our AI agent to actually build up automations and keep checking on whatever our account is doing and what's happening. So, you can see right here, it just created this "Paper Trailing Stock Stop." And if I click it right here, you can see when it's active. All right. And it even wrote the prompt that it will use for that. So, if I go back to automations and notice how it's going to run every 5 minutes. So, every 5 minutes, it's checking what is the stock price, what it needs to do, etc. And this makes it so that Chat GPT is very attentive in what it needs to do to make sure it's executing our trades properly. All right.
So, this is a pretty huge piece, and why that matters is because this enables us to essentially build an always-on agent that can execute any strategy that we can think of. So, the next thing we want to do is make sure you can see right here, it's already monitoring and alerting us what's going on. But what we want to do is make sure we refine our strategy. So, let's say this is our trailing stop strategy, which is, as an example, then we could be like, "Hey, uh, what would happen if Tesla goes up and shoots up to, let's say, $600? Can you roleplay the scenario for me? And then what kind of ladder buys or whatever you would do?" And I highly encourage you, whatever you try to do, try to roleplay with the AI. Let's say right now I'm just saying, "What would happen if this stock just randomly shoots up?" Right? I want to know what Chat GPT does is in line with what I would want to do, and what I would do myself. And you can see right here, it's also telling me the ladder logic it's going to be using to make sure it's moving up the ladder slowly and slowly. If you, and then notice this added scenario, right? "If you wanted add-on buys, I'd only do them on pullbacks, not at spikes." This is a really good piece of feedback. But here, "Okay, uh, can you also factor in in our strategy, make any automations that you need to to make sure we have the pullback logic in place as well?" And you see right now, I'm just role-playing. I'm talking to Chat GPT about different scenarios, and I'm just deciding, "Okay, this is probably what I would want to do."
Great. So, what would happen in the other way? If let's say Tesla just keeps dropping? What are we doing there, and what should we be doing? What kind of automations should we put in place such that we're protected and we're keep buying as we go as it goes down slowly? So, now I'm playing the opposite side. Now, right now I'm just asking, "Hey, if it just keeps dropping, what are we going to do?" So, "If Tesla hits this, Alpaca will share sell the 10 shares, but the safest, clean version." It's giving me a recommendation. I can play along with it, give it some numbers. It also gives you recommendations where it says, "If we add a downside buying, use 20% emergency stop, not the 10%." And then, "Okay, can you update my uh strategy accordingly such that we action these as well?" And you see this is a bunch of things, and that you have to keep track of every day, keep checking constantly over and over. And right now, I don't have to do this anymore. I just have to make sure the numbers make sense, and if the numbers make sense, I can be like, "Hey, put this in place," and Chat GPT handles all of that for me. Right. So, it becomes a really easy way to trade stocks with a strategy that I know will work well, especially with the stock that I like. And what I could do is always change it around based on what I'm feeling.
Okay, great. So, it came up with this stuff, and then I can be really cute with, um, this as well. "Hey, can you make me an infographic so I can understand the whole strategy that you're executing right now?" So, that's the nice part about Chat GPT because you can make images, you can make it also explain it to you in this sort of fashion. Okay, great. So, this got done, and you can see how it literally made us a little graphic to see what's going on. And, you know, it makes learning trading with paper trading very interactive and easy when you can do stuff like this.
So, all this is great, but the thing is, we're still picking stocks like Tesla. We picked it based on a gut feeling. But the biggest and best traders in the world don't just trade on gut feelings. They trade on information. And then in the next level, we're going to be showing how Chat GPT can identify where the smart money is and actually make informed decisions.
But what is smart money? Well, on Wall Street, there are people who move millions of dollars in a single trade. And when someone puts, let's say, $50 million into a stock, they didn't really just do that off a gut feeling or by flipping a coin. They do it because they have a lot of research teams and a lot of private data. They know something. And these people are called whales. And when a whale makes a big move, it leaves a trail, like massive options orders, unusual volumes on the stock out of nowhere. And a group that does that this a lot, surprisingly, is US politicians. And the nice part is that members of Congress are required by law to report their stock trades. And the data shows that many of them consistently beat the market. They basically sit on committees, they regulate entire industries, and they get briefed on policy changes before the public even hears about them. And they know which companies are about to get a government contract and which ones may get investigated. And, you know, there's a lot of them, but most people have no idea this data exists, but it's there, and Chat GPT can read it. What we need to do is plug our Chat GPT into this. And Chat GPT goes from being smart but working with nothing to being smart and seeing what the big players in the market can see.
So, next, we're going to be giving our Chat GPT the power to access these services, and it's going to be super easy. So, let's get into that. And just to emphasize why I'm so excited about the strategy that I'm about to show you, all I did was gave Chat GPT a really simple prompt where I said, "Go find a politician and then make an interactive, easy-to-track dashboard so we can see what happens if we copy trade a politician." All right. And I told it to go pick it and do it itself. And because Chat GPT is so smart now, it went ahead and then found the best politicians to copy trade. And then the nice part, this is unfortunate. What happens is politicians have to report their trades. But the problem becomes, politicians only report their trades 45 days after they make their trade. Right? So, there is always going to be that time window gap. But what I've noticed is if we can do all the analysis, what we can do is right here, even with the 45-day delay applied, I made three graphs. Okay. One of them, this is 2025, and in 2025, you can see this is the S&P 500, and you can see the total gains for the S&P 500 is not that much, really, right? So, it started at something like $50,000 and ended the year at $58,000. But if you did copy trade one of these guys, like right here, Thomas Keane Jr., then you would have started with around the same amount of money. So, you would have started with, let's say, $50, and then ended up right here with $86,000. And you can see that is a 72% gain, which is pretty massive. And hopefully, this clearly illustrates that you can see how these politicians have access to all this inside information, and they can outcompete everybody. And that's what I'm going to be showing you how to do and make sure you can do this as well. All right.
And, you know, that's literally the reason why in my Cloud Club, I have these trade alerts going on where I built an algorithm to track the best ones, and you can just see the trade alerts happening whenever there is a good trade. But let me show you how to actually build this so you can see how this works, and you can backtest any strategy that you may need.
Okay. Now, since we're going to be trying a completely new strategy, what we're going to do is to make sure we're organized. I'm going to go back to Alpaca. And in Alpaca, what I'm going to do is I'm going to make a new paper trading account. So, let's call this copy trader. And the reason we're doing this is because we can stay organized with whatever strategy we're trying to test and see how it tracks long-term. All right. And it's the same thing. We're going to go to the bottom, and then we're going to hit "Generate." "Generate New Keys." And then I'm just going to be a little faster, and I'm gonna take a little screenshot here, and you can do the same thing, and then go back to my Code Interpreter app.
Now, what I'm going to do is I'm going to hit "New Chat." All right. So, I'm making a new chat for different strategies that I'm running so I can be more organized, but it can stay inside that folder. And I'm going to paste this here. And I'm going to be like, "Hey, this is a new Alpaca paper trading account. I want you to use these credentials to set up the CLI. And with this, what I want you to do now is set up a copy trading bot. Alpaca. And now what I'm going to do is Capital Trades." And here, Capital Trades is free. And what you can do is you can get all the politician data by getting Chat GPT to scrape this. All right.
So, I'm going to copy this and then I'm going to paste it here. Then, what I'm going to say is like, "All right, so now I want you to go over the copy trade Capital Traders and find some good traders for me that we can roleplay and model. What I want you to do is number one, I want you to find a good politician we can be modeling and copy trading for the year on end. So, until the end of the year. All right. Then, what I want you to do is make sure you set up the automations such that you are checking every day to see if they've made a trade or a sell or anything like that. Make sure to know and use the best politicians who you see is if we trade and backtest that we would have the best amount of gains for." All right.
So, this is a very easy one. And right now, because I'm making it do so much more thinking, I'm going to change this to "Extra High" and then "Speed Go Fast," and then let's go. So, I'll wait for this and then see how this works. All right. So, what it should do now is make sure it selects a politician. It's going to analyze all their trades, make sure it knows who for this year would be the best, and then finally set up the automations so it's always going to be checking and making sure it's doing the right thing by copying that person's trades. All right. So, let me get back to you after this is done.
All right, so this got done, and it seems like it chose John Federman for the year 2026. And the reason it did that is, you can see, is even if we make the trades 45 days after the politician makes the trades, we would still be ahead of the S&P 500 by a lot. Cool. So, you can see we would actually beat it by almost double. That's very interesting. And you can see inside automations right here, we can see the "Capital Trades Alpaca Copy Trading Bot." And it was honestly that simple to make, right? I'll also package this up and put it inside the Cloud Club if you guys really want to just copy and paste.
Now, this is just one way of copy trading some politicians. But what if you have some traders that you really like? Maybe you're subscribed to and you want to follow and copy their trades. So, let me show you how to do that because I've been doing that as well for quite some time. And let me show you who I follow and what I do. And for the past few years, I've been following this uh creator. His name is Invest Answers, and I'm subscribed to his channel and I get a lot of his trading alerts, right? And let's say I want to create a bot that looks at his trading alerts and trades on an account based on the amount of money my account has, right? How do you do that? Well, let me show you.
So, first, let me go to Code Interpreter and then I'm going to open a new chat. Right now, what I want to show you is there's this thing called plugins. And inside plugins, you'll see a lot of different things. So, just to go back, I get these are emails that I get whenever he places a trade, right? And I want to be able to read all his emails and get my bot to really understand that and develop a strategy based on what he's doing. So, what I'm going to do is inside plugins, I'm going to look for Gmail because I know all the alerts are coming to my Gmail. And you can do this for other things as well, whether it be Discord, Telegram, wherever you're getting these kind of alerts. But I'm going to add this and install this Gmail app.
Now that I installed this Gmail app, what I can do is right here, I can try it in chat. And you can see right here, "Summarize inbox." But that's not what I'm going to do. I'm going to say, "Hey, I want you to go through my email, find all the Invest Answers emails, and then try to develop a strategy and think like the creator. Map out all his trades, look at what he shares, and then develop that strategy. Then, what I want you to do, if we had followed his trades, build me a dashboard to see how it would perform." Notice I'm doing a couple of different things right here. First, I'm making it go through my email, find everything else, and then develop a strategy. And I'm also telling it to make sure to backtest what he's doing is good so I can visually see it and be like, "Okay, maybe let's try this strategy out." And this backtesting is really important because you can determine who's winning and who's not. All right? So, I really want me to make sure you learn this skill and you always backtest any strategies or anyone you follow. All right.
So, let me develop the strategy, and then we'll come back and see how he actually did. And with the same process, you see I just built a backtest to see how the strategy would actually perform over time to judge whether I would actually try it out, right? And these are just two very simple copy trading strategies.
And if you just wanted to, you know, use your phone to control Chat GPT. So, all you need to do is go to the Chat GPT app. And inside the Chat GPT app, you want to hit the top left, and you'll see Code Interpreter as the button right here. And, you know, you can connect your Code Interpreter to your phone really easily. And you can see it's loading everything from my MacBook. And right here, if I look into this "Test Phone Connection," it's the same thing I'm having here. And if I say something like, uh, "Place an order for Monday for buying, I don't know, three Tesla shares." Then I can just hit enter. And then after I hit enter here, you'll see right here it pops up. So, it's kind of a connected session, and it makes it really easy for you to do whatever you need to from your phone or your computer, and you can be mobile as you go and keep trading or working or wherever you need to. And you can see it says "Done." I placed a trading order for three uh shares. If I go scroll down and I will see, yeah, quantity three, it's not filled yet because it's Saturday, but it will come out soon. Awesome. And that's about it. That's how you connect your phone to do and place any trades from where you are.
But the key takeaway is this. Any strategy that you want to build can fit into this one simple framework, and I call it Signal. So, first, you identify the source, like what are you watching? Is it politicians' trades? Is it news from all over? Is it somebody's emails? Anything. And then, what we want to do, we want to ingest that. So, how are we getting this data? And then we use all of that to make sure we set up some guardrails, as in things we want to ignore, what we want the AI to follow. And then we want to make sure this is very important, and that's why we've been doing it like, "Does this strategy even work, or is it better to just buy the S&P 500?" Right? And then after we have that inkling, then what we want to do is automate and set that in place. And how we do that is just by asking Chat GPT to build these automations and turn this into a system like we just did. And this part is the most important one where, as it learns, it gets better, and it knows what to do and gets and keeps improving. Right? So, the Signal: first, we get the source, then we ingest all of that, we set up the guardrails, we make sure we backtest the numbers, then we automate, and then we learn. And that's how you can take any idea and really turn it into a strategy an AI can understand, test, and monitor.
Now, everything we've built so far makes money when the stock goes up. Where if you buy it and it rises, then you profit. But the wheel strategy is different. In the wheel strategy, you get paid no matter which direction the stock moves. And to understand how, I need to explain options.
So, what are options? Well, an option is basically a contract. Two people agree to do a deal, and one of them pays the other for the right to do something by a certain date. Think of it like insurance. You pay a car insurance company $100 a month in exchange. If you get in an accident, you have the right to file a claim, and then they cover the cost. If nothing happens, the insurance company keeps that $100. You paid for the protection. They got paid for taking on the risk. Options work the same way. Someone pays a fee called the premium. This is for the right to buy or sell a stock at a specific price before a specific date. And there are two types.
First, it's a call. A call option gives you the right to buy a stock at a locked-in price. Say Apple is at $200, and you buy a call option with a strike price of $210. If Apple goes to $230 before the contract expires, you can buy it at $210 and pocket the $20 difference. And if Apple stays below $210, your contract would expire, and you lose the premium you paid. That's your max loss. So, think of it like putting a deposit on an apartment. You pay $500 to lock in the rent at $2,000 for 30 days. If the rent price jumps to $2,500, you got a deal. If they don't, you lose the $500 deposit.
In contrast, a put option gives you the right to sell a stock at a locked-in price. Say you own Apple at $200. You buy a put option with a strike price of $190. If Apple drops to $170, you can sell at $190 instead of $170. The put option protected you from that drop. And that's the insurance side. You paid a premium to protect yourself against a price drop.
Now, on the other side, you can actually sell options too, where you become the insurance company. You're the ones that are collecting the premiums. So, what happens if someone pays you for a contract? Most of the time, that contract expires without anything happening. You keep the money. Insurance companies make billions doing this, and maybe sometimes pay out a small percentage of the claims. The math works in their favor over time. And selling options works the same way. You collect a premium upfront, and if the stock doesn't hit a strike price by the expiration, the contract dies, and you keep everything you were paid. And the wheel strategy is built on selling options. You will be the insurance company, and you collect premiums on every stage.
Now, let's walk through how the wheel strategy works with an example. Let's say you like a stock trading at $100, and you're fine owning it, but you'd rather buy it at $90. So, you sell a put option at a $90 strike price. That means someone pays you a $2 premium per share for that contract. You're telling them, "If this stock drops to $90, I'll buy it from you at that price." In exchange for making that promise, you collect $2 per share right now. And with this scenario, two things can happen. The stock can stay above $90, and nobody makes you buy anything. You keep the $2 and you walk away. What you can do is you can sell another put and collect another premium. But if the stock drops below $90, and you buy it at $90, you collect the $2 in premium. So, your real cost becomes $88. And you said you were fine owning it at $90, and you got it even cheaper. In both outcomes, you still get paid.
Stage two. Now that you own the stock for $88 after the premium, it's still sitting in your account. And time for stage two. If you sell a call option at a $100 strike price, and someone pays you a $2 premium for the right to buy your shares at $100 if the stock gets there. Again, two things can happen. If the stock stays below $100, and the contract expires, you keep the shares and the $2 premium, and then you sell another call the next week. And if the stock goes above $100, your shares get sold. But you bought it at $88, and you sold at $100. That's a $12 profit per share plus the premiums you collect along the way. And once your shares get sold, you basically go back to stage one. You sell another put, you collect a premium, and you wait for your assignment or expiration. If you get assigned, then you sell calls. If your shares get called away, then you sell puts again. Every rotation of the wheel, you collect a premium, and that's your income. The stock can go up, down, sideways. You're getting paid at every stage. And most people who learn about the wheel give up in a few weeks because the management buries them. But now, Chat GPT handles it all. You tell it which stock to run the wheel on, your risk tolerance, your preferred strike prices. Chat GPT monitors the positions, picks expirations, and rolls the contract when needed, and even collects the premiums on a schedule. And if you're worried about any capital gains, you can also input that data into Chat GPT, and it'll handle the same.
So, with that being said, let me show you how to set this up, and it's fairly simple. So, to set this up, what we need to do, the easiest way is in my Cloud Club. By the way, if you guys like the way I teach and you want to, you know, work on these with me, uh, I'll be in there helping people. But, you know, all you have to do is honestly just take this. You can also just screenshot it and paste it here and then say, "Hey, can you make me a dashboard for this wheel strategy? I want to run it on Tesla and do a simulation so I can see how it would be performing." Okay.
So, that's about it. We're going to be going through the same motions. Like I made a dashboard a while back on testing some different scenarios, and you can see there's a substantial gain over the S&P. So, it's as simple as that. So, we test the strategy, and then if we like it, we see if we want to try and move on. But, you know, we shouldn't really let AI loose with any strategies, especially if you want to use this with real money. Sometimes we actually just want to control it and see what AI wants to do and only approve some trades. All right? Because it's much easier to approve and direct rather than actually placing all these trades, stop losses, whatnot. But how do you do that? Well, watch this video next where I show you how I set up my Chat GPT subscription with my OpenClaw so that I can control it with my phone, and it's a 24/7 trading bot.