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Insider Trading 101 With Professor Nancy Pelosi

Posted July 20, 2022

Here we go again...

Paul Pelosi is still making a killing in the stock market.

In just the last few months, he’s made tens of millions of dollars trading in and out of stocks and options in the hottest tech companies.

Apple, Visa, Microsoft, Warner Bros. Discovery, Tesla, Disney... the list goes on.

He must be one heck of a stock picker.

Or does he have information the average investor doesn’t?

After all, when you buy million-dollar call options, you’ve got to be darn sure that stock is going to move in your favor.

And with Paul, it somehow always does.

So how does he know the direction individual stocks will go?

Well, he has access to the ultimate insider...

Speaker of the House Nancy Pelosi.

Nancy has access to private, firsthand knowledge of all Washington's secrets.

She knows what bills are going to pass and what companies will benefit from new laws.

But despite what you may hear, Nancy doesn’t trade stock.

She’s required by law to report her husband's stock transactions, however.

All these transactions are available on the Office of the Clerk's website in what’s called a political disclosure form.

Here’s the trade that has the mainstream media up in arms:

pelosi form 4

Nancy filed it on July 14.

A key component is that she must write “SP,” which stands for “spouse,” in the “Owner” column.

So while it’s true Nancy didn’t make these trades herself, it’s more than a little curious that her husband timed this multimillion-dollar Nvidia (NASDAQ: NVDA) trade conveniently close to when two tech bills are passing through Congress.

This time it’s a funding bill for the CHIPS for America Act, as well as the Facilitating American-Built Semiconductors (FABS) Act, which provide $52 billion in subsidies and tax breaks to domestic chipmakers, increasing the U.S.’s competitiveness with China.

Soon it'll arrive at the House, where Nancy is in control.

Judging by Paul’s exercise of 200 Nvidia call options, he's betting the bill will pass through the House and make its way to the president’s desk.

Once signed, these acts should give a nice boost to U.S. semiconductor companies.

So to understand Paul’s strategy, here’s an options primer so you can start dissecting these forms yourself.

Professor Paul Pelosi’s Options Primer

When you purchase call or put options, you have three choices: sell the contracts to another buyer (ideally for profit), let them expire worthless, or exercise them — which simply means purchasing the shares at the strike price.

Paul likes to buy deep in-the-money call options, meaning he pays a premium to buy the options but has the ability to purchase the stock below market value.

In the case above, he previously purchased 200 Nvidia call options that expired in mid-June with a $100 strike price (each contract represents 100 shares).

Those contracts gave him the right, but not the obligation, to purchase 20,000 shares (200 x 100) of Nvidia stock for $100.

Now, he did have to pay a hefty premium for that right, more than $1 million.

But even though the stock was trading above his strike price of $100 when he bought the calls, he had the ability to exercise the options and buy the stock at $100.

It’s a good strategy.

He exercised the options on June 17, when Nvidia stock was trading around $160.

Doing some quick math, he spent $2 million on shares when he exercised the call options (20,000 x $100).

But the market value of those shares was actually $3.2 million (20,000 x $160).

So he made a cool million just off this one trade, and the shares continue to climb — at $170 as we speak.

And this is just one of his trades.

Looking at the political disclosure forms, we can see he does this every single month.

Many view these trades as unethical.

 

Nancy Pelosi’s office responded last week to a request by Fox Business, saying, “The speaker does not own any stocks. As you can see from the required disclosures, with which the speaker fully cooperates, these transactions are marked ‘SP’ for spouse. The speaker has no prior knowledge or subsequent involvement in any transactions.”

Whatever you say...

Some retail traders are fighting back by mirroring the Pelosis’ trades. Nancy’s now a TikTok meme, being called the “queen of investing.”

pelosi

But as I mentioned above, Paul’s making tricky options trades that most of us won’t be able to afford.

Not to mention these trades aren’t disclosed in real time.

It takes about a month for our leaders to get around to disclosing them.

But what we can do is follow the trend.

And right now, thanks to the CHIPS & FABS bills, the money’s clearing flowing into domestic chip manufacturers.

What Companies Will Benefit?

The Semiconductor Industry Association recently said, “We’re encouraged that the legislation is progressing, and we continue to support enactment of $52 billion in CHIPS Act investment and a FABS Act investment tax credit for both manufacturing and design.”

But according to Reuters, “A rift is emerging within the chip industry itself, with some players concerned the final language of the legislation could provide disproportionate support to manufacturers like Intel while doing little to support other chipmakers like Advanced Micro Devices, Qualcomm, and Nvidia.”

In other words, the companies doing the research, design, and manufacturing of semiconductors solely in the U.S. will benefit the most.

Sure, the big names are slated to receive funding, but there’s only one pure-play semiconductor manufacturer in the U.S.

It's not a household name...

It’s not Intel, Nvidia, or Qualcomm...

But my colleague Christian DeHaemer said this U.S.-owned and U.S.-based company could provide close to 100x returns to investors as the U.S. brings chipmaking back home.

Stay free,

Alexander Boulden
Editor, Wealth Daily

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After Alexander’s passion for economics and investing drew him to one of the largest financial publishers in the world, where he rubbed elbows with former Chicago Board Options Exchange floor traders, Wall Street hedge fund managers, and International Monetary Fund analysts, he decided to take up the pen and guide others through this new age of investing.

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