Red Hot Inflation | Technically Speaking: Trading the Trend
[Music] hello and welcome to trading the trend weeks to months my name is james boyd we welcome you here today alongside with me got my good friend here michael fairbaum actually in the chat as well fellow coach fellow instructor you'd like to welcome len uh len you actually did have that one guess and uh pushed back on that uh dill many uh george texas jarvis seoul seattle michelle tim medina good morning good afternoon to you and just real quick as we're getting started this class really focuses on trading the trend weeks to months so we're not just looking at shorter term we really kind of want to look out into the kind of the next couple weeks to months to actually kind of see what could be the trends what type of trends are we really seeing not just on the daily charts but also the weekly charts as well now as we actually hop right in remember that the content is intended for educational informational purposes only not investment advice recommendation of any security strategy or account type options are not suitable for all investors special risk inherited trading options may expose investors to potentially rapid and substantial losses trading futures in forex involves speculation not suitable for all investors and also remember when we talk about kind of demonstrating the function of the platform we will use actual symbols remember we will be on the money platform here today for educational purposes also we will discuss technical analysis but there are other approaches like fundamental analysis that may assert some different views when we talk about options if we do remember the option greeks as well delta gamma vega and theta know what those are sensitivity to and also remember uh as we kind of talk about this we're going to actually talk about this from example purposes only now just real quick as we're getting started i want to kind of talk about the lay of the land and actually what we will discuss here so i want to talk about indexes and sectors we actually had a red hot number on cpi inflation today seven and a half percent i want to actually really kind of talk about what happened with the interest rates and how that's been affecting indexes and sectors differently which really is where we're talking about correlation and trends second i really want to actually talk about trends with a dividend perspective so i think this year we've kind of seen so far that maybe we're in a different environment than the previous year whether it's not just growth but there's maybe more consolidation maybe as maybe income may be something the investor might consider as well we're going to bring that up as agenda item number two and the third thing we're really going to talk about is relative strength last week we actually spent time talking about scripts i want to kind of focus on this the relative strength and also bring in that income component with trends as well so let's go ahead and actually hop right in and let's do that now so i'm actually gonna bring up probably the chart of the day uh i'm gonna actually take a look at the tnx first okay how many of you are actually starting to kind of on a routine basis taking a look at economic data and then actually how it's actually causing price levels to rise with that inflation number as a fixed income investor inflation really is a negative if if someone is holding bonds if someone is actually for example if they actually lock their money in for the next 10 years at one percent they actually are getting coupon payments for actually lower uh for less okay it's not making up for the interest rate the the inflation is outstripping their potential return and maybe it's even negative which has happened lately when we actually saw that cpi number here today we saw interest rates go up to 2.05 okay and we kind of talked about if you actually take a look at this and we back this off what might be the path of least resistance you know some investors might be really forecasting 2.15 as far as being that next level and then maybe even above and beyond there uh you're gonna see that if we take a look at that yeah 1.975 was our marker
2.15 and then anything above and beyond there okay probably talking about 2.5 ish area now let's kind of recapture this just real quick okay when we actually take a look at how are these interest rates really affecting the different sectors here what i'm showing you is something i posted on twitter and what you're going to notice is we have uh ixr which is stables ixb which is based materials ix on dust okay you know and i did include like the indexes as well i want you to actually focus on what's on the right hand side and what's on the right hand side we see where it says correlation okay so what i do is actually now by the way you can just add a correlation study very simple we're just looking at the t and x itself and then we're comparing the performance of the t and x and does it move parallel with the ixr if it was moving in line if ixr was moving in line with actually t and x the correlation could be as high as one if it's moving completely opposite the correlation will be negative one so if i were to ask you here what may be sectors and i want sectors first please what sectors first have a high correlation with the interest rate movement you have eight seconds eight seven six five now most people actually don't know what correlation is and when they finally figure it out those trends are deep into those rallies okay well if we actually take a look at this what you're going to notice is what sector is the highest or in other words closest to one well one area as t tn x has actually gone up we've actually seen energy which has had 0.95 okay that's really high so as rates
have actually gone higher as inflation has gone higher energy has been in space in the last two months that's what this is looking at where energy has moved almost lock step with interest rates what is another area that's also moved lockstep or pretty close second area the way we actually see right here is 0.5 not as strong okay as really energy but if you look at those two spots it's really number one position is energy number two position is financials and if someone asks the question why does this person or whoever is teaching why do they talk about energy and financial so much it's because as they're looking at correlation as those interest rates actually go up certain sectors actually tend to historically perform better in a rising rate environment and this is just kind of showing how as the interest rate goes up which areas have actually kind of been performing a little stronger now the third area that we're also seeing here which will kind of come into our discussion is staples but when we actually look at this and said is there any other area anyone that is even positive no it's energy materials and staples now here's where we're gonna actually flip this we can actually see now down at the bottom we see we have state excuse me s p nasdaq and dow jones which of those three have the highest negative correlation which of the three well why is this paper money account said for the last five weeks that it's not really going to be looking at tech stocks that much outside maybe considering a potential bearish trade for the most part it's really .74 so as in other words this is showing as the interest rates has actually been going up there's actually been an opposite relationship so as we saw what the tnx was doing as tmx has gone up ndx has gone down the second worst in that is really also going back is point negative 0.57 which is the s p and the one that's kind of had still some negative correlation but not as bad has really been the dow jones itself now by the way how does someone put this on just real quick before we actually kind of do this we can go right to where it says market watch we can actually pull up a list of quotes if you have or had or made a list of let's say sectors or indexes whatever which you can have you can right click on any of the headings this is not my custom script it's already there if we right click on the heading go to customize now we could actually just say hey i want to see that correlation just type in correlation and there you're going to actually see it right there okay that's all it is now what happens is when you click on this you could actually say look i i want to maybe really even add okay or change what it's correlated to like the tnx like uh and you could also specify what's the number of days you want to see okay now uh let's come in so first off kind of recapture what we said we're in a rising rate environment we know that certain sectors energy financials have done a little bit better if we were to say is there any other maybe spot where we where a technician who's trying to look at trading the trend weeks to months also might try to look one of the the dark horses on the outside if you want to call it that is maybe trying to reverse as well is really been in base materials it rallied up today but then faded somewhat okay oh geez okay i'm gonna keep an eye on that speed of the internet there but if we actually take a look that's one that's rallied and then faded back okay so let's kind of keep that one kind of watching that okay i'm gonna i'm gonna okay good looks like we're coming back all right let me know if you actually can hear me just want to do a quick sound check here before we actually move forward yep all right let me know if you can actually hear me i just i uh i'll tell you what happened in just a moment but if you can actually hear me go ahead and actually send the chat i'm not moving forward okay good if for some reason this computer i actually run a hard wire but for some reason this computer the last two weeks has actually gone to my wi-fi and that's what it's doing i don't know why it's jumping off a hard wire line to the wi-fi that's what it's doing some anyway so just real quick so remember in answer to the question which is regarding correlation it was looking at tnx and it was looking at the last two months okay now when we actually talk about agenda item really number two we kind of want to now talk about trends okay and we want to actually talk about really looking at trends with dividends okay if i actually were to ask you a question uh the following are there any certain sectors that really have higher dividends than others what do you think they would be okay what do you think they would be now as i'm kind of getting some answers i'm going to kind of write down just some sectors out there and this doesn't mean they're they're necessarily the highest but what sectors do you actually typically think have maybe higher yields higher dividend yields real estate financials go ahead and type in what areas you think might actually have higher yields okay now if we actually take a look at this uh i'm just going to write down some sectors okay so if we actually and i did this today some of you are actually a big fan of etfs you look at the etfs and you know those basket of etfs there are certain holdings in those sectors i thought it'd be interesting to kind of see by sector okay and by the way there's not one what what is the average yield of those sectors and if we were to look at this so your comments were reits energy reads consumer staples reads real estate what i think is actually interesting is and let's kind of see where you are energy actually have okay three percent and i'm just going to write the number from now on basic materials was 1.92 the average yield real estate which many of you said was at 2.9 average yield for those holdings financials thought it would be a little higher it wasn't 1.89
and then if we have to take a look at another area like utilities it was 3.2 and we actually see staples which some of you said 2.6 so you're there and if we actually looked at healthcare it was like wow it wasn't that much at all 1.57 if we want to kind of get real
technical so we actually take a look let's say areas like energy finding uh no excuse me real estate and probably utilities and we'd probably throw and really hear staples those are the ones sectors wise that really stand out now when we actually kind of take a look at energy what's kind of some of the risk about let's say energy or materials well my gosh i mean it's it's at risk to oil prices right it's at risk to oil it's at risk also to let's say get natural gas prices okay now i'll just label that gas so just because it's a higher yield doesn't necessarily mean it's better because if the underlying product that they sell is volatile like oil not like natural gas it can kind of be if the investor buys the stock maybe that stock is pretty volatile to get the yield if we actually take let's say real estate or financials and we said well geez that's kind of interesting uh those are is real estate and financial what are they at risk to it's what we've been talking about they're at risk to rates rising up or down okay so i want to know when we kind of talked about let's say these these rates i don't want you to necessarily think that oh yeah it's just easy peasy because underlying these companies they're selling something that's a commodity they're also selling something which is kind of a function of time okay of the interest rates so what we're going to do here today is we're going to take a look at some of these and look at the trend of them and then we're also going to kind of talk about the the dividend yield of it we're also going to maybe bring in let's say option examples but i want to kind of lay this last final point down i want you to imagine that you're 45 years old and i want you to kind of really understand why we're even talking about this why does it even matter you're 45 years old and the investor has example given 250 000 okay 250k and they plan on working to 65 type in the chat if you're not planning on working forever and your goal is over the next 20 years by the way that's 20 years you're going to really set aside okay actually let's say you plan on working let's say someone in this case said they were gonna work i think this was the example that someone asked me to talk about but let's say they actually said james i'm gonna work to their 75 which is great good for them okay but let's say they actually said that they're going to work to 75 so for 30 years they're going to actually put in 20 000 a year okay and when they retire they want that 250 000 to grow to 2 million now here's something really important why we're talking about trend dividend yields and maybe option premiums as well if we actually set the investor at 250 000 and over the next 20 years they're going to put in 600 000 where'd you get the 600 000 the six hundred thousand dollars is 30 years of work remaining adding 20 000 a year well that means that the investor saved 850 000 but their goal is at the end they want to have 2 million so here's my question to you where's that 1.15 million coming from where's that coming from well hopefully some stock appreciation hopefully some dividend yields hopefully if the investor considered they're short 1.5 million they have a current savings of 250 000 they set money aside every year but they're going to be short about 1.15 million we're not
even talking about inflation yet okay but the investor is actually trying to get a rate of return to actually grow those funds now when we actually take a look at this i'm going to start with an example now by the way if we actually said james in this example what would be the rate of return the investor needs to get to the 2 billion that's about 8 percent okay you should be asking yourself where are you where are you what is the assumption of really how many more years of work and how much money you're setting aside and the other thing is what is the rate of return you need because anything we talk about after this means nothing unless you really have something you're trying to do with the information now some of you might say i'm just trying to learn wonderful that's what you're trying to do but he said no james i'm trying to actually kind of grab or increase the likelihood of reaching that financial goal then let's kind of talk about trend let's talk about dividend let's talk about options as well now the example first i'm actually going to give we kind of talked about example given of a stock i'm gonna bring up one that's maybe outside the parameters of what we talked about so far okay and i'm gonna show some of the differences here okay now some of you asked about the other day about a stock we've never heard of before called marriott and i want to kind of show you some of the differences here some companies or they pay very little they take all of their money or the majority of it and they sink it back in the business they're trying to grow their cash reserves and they're also maybe trying to use those funds to do r d with it or maybe buy other companies other brands of hotels that are not underneath the myriad umbrella well if we actually take a look at this if we saw like a trend that's the one-year daily chart but if we look at a three-year weekly chart you're going to see that this is what the trend looks like okay now we kind of said before there's been some pent up demand for just get me on vacation get me out of this house at least that's how some people feel okay and if we actually take a look at this we go the trade tab we're going to go down to click on that little down arrow right there what you're gonna notice is in this case the yield is zero the dividend is zero so why would an investor be in a stock that for example doesn't pay squat and squat or zero but the biggest actually thing is they're trying to get something kind of on that first goal which is finding something that maybe actually has a strong trend but that trend is not guaranteed how do you know the stocks are not not going to go down and the one thing you will sometimes notice is stocks that don't pay a dividend can be more volatile up and down now in our example what you're going to notice is there's upcoming earnings and if we zoom in on this what you're now going to see is as we take a look at this we got earnings on 215. now if the investor was so close to earnings like this what type of strategy might the investor be thinking okay remember it has a potential trend no dividend but those dividends are typically only on a quarterly basis and the third part of this is what is another way to try to benefit from stock ownership if they can buy a hundred shares it might just be doing something like a covered call which is really getting premium for time and for premium because the investor is actually trying to actually agree to sell their stock from now until expiration or they might say hey james i'm going to do cash secure put and try to buy more shares could be uh those last two still if the investor wins the trade tab and they said james i am aware of these upcoming earnings and therefore i want to be a little bit protective that maybe the stock might not go straight up but maybe there kind of might be different types of trade but i want to have some downside protection some i said because if the investor sells let's say you're like a 180 call the only real protection is the premium received now someone who's trying to kind of focus on let's say some trend but maybe more income i would actually think of like another income that could potentially be more frequent could be like a covered call on a stock that's upward trending so if the investor says look i want to do the 18 march the 180 expiration with the 40 delta you're now going to see it's going to go by and then what you're going to now notice is here it's going to say covered stock i ch i'm choosing this one first because i need you to understand that sometimes when people talk about dividend investing they're typically only thinking about stock investing only but another part of that could be could the investor actually do like a basic cover call where they still have 100 shares if the company paid a dividend they could get the potential dividend but could that option premium act like a potential income source for the obligation to deliver the shares from now to expiration and or in expiration this is a hundred shares of stock selling the 180 call the debit there of 169. now guys and gals why is the paypal account doing a cover call what was the purpose again what was the purpose of the cover call why did it do that it's selling the covered call because as it's into the earnings the implied volatility is higher and when the implied volatility is higher so are the potential premiums if the premiums are higher that means the stock could go down a little further and have kind of you know a greater chance to be above break even there now what we're going to see in this case is buying 100 stocks selling now by the way could the investor said to stop yes but remember what we actually said this year it's going to be different is the payment account is going to try to find stocks that have relative strength they're going to actually try to buy stocks that may be where they can make a dividend they could also try to maybe make some income yield from selling the calls or doing cash secure puts etc and it's trying to hold those stocks over time not everyone wants to get in get out get in get out get it nope not everyone wants to do that and if they said i want to they might not do that with all of their funds but i think for most investors the goal is to find something that has a trend of some type and maybe it's something that's showing some relative strength now if the investor did this they're buying 100 shares of stock selling the call and we'll see if this goes in the ira but there's been a lot of money invested in the ira let's see if it goes i'm okay i feel better now i'm only doing 100 because we know that we went through quite a bit of capital yesterday okay now just real quick uh a question from robert says any weight to the stock moving higher prior to earnings funny we should say that right if that stock is at 175 and the upside obligation is 5 is 180 there's five dollars of stock appreciation plus the premium of about another five five plus five dollars in stock appreciation five dollars of option yield or premium i should say what you're now going to notice is that's ten dollars ten dollars of an investment about 174 correct me if i'm wrong is that six percent pretty close something like that i think we're probably pretty close to if that stock were called away okay yeah 5.7 if that stock were to go sideways it's 500 okay not not a bad premium either now james this was more of an example of trend okay and i want to kind of write this down just kind of make sure you're picking up what we're laying down i need you to understand something when we actually take a look at this let me go back create a little new sheet of paper new document okay so if we actually take a look at this number one is we're trying to actually find a trend with that trend that probably means that there's relative strength okay to the index and or sector i i bet if we looked at what the relative strength was i bet that's one of the stronger performing names okay we're going to come back to that in just a moment number two with that is does it actually pay a dividend if it doesn't actually really pay a dividend the investor might say could there be income from selling calls question mark or could there maybe be let's say potential income from shorting puts now this kind of brings up something really a point that i think we kind of need to connect i wonder if the investor buys a stock that only has 50 000 shares average traded well if that's the case okay then probably selling calls and income from shorting puts that's off the table okay the payment account is always looking for stocks that probably have greater than one million shares on average at least that way the the dividend potentially might be a little safer potentially and also there's that third and fourth option there as well now when we also kind of take a look at this uh let's bring up a second example i'm now going to bring up an example of a i g and we're going to kind of come back to this now by the way when we actually look at the trend here this has really been something that's been in an upward trend when we actually go back and take a look at let's say a three year weekly chart this is what the trend has been doing now i know i know as an end user sometimes or a listener someone would show you a turn like this and you're like oh my gosh this makes me sick because i could have bought here i could have bought it here i could have bought it here when the stock dipped isn't that sometimes how it feels and so don't beat yourself up but the memorial the story is if that red line is turned up there's an intermediate trend if the blue line is turned up there's a short term trend we call that the momentum line the red line we just really call that the trend line okay now when we kind of think about this i want to kind of go back to this point if the investor does not find stocks that trend the investor is going to be more on the hook for that gap between 850 000 and 2 million where's the money going to come from the reason why a lot of times investors focus on trends is they want something to grow their capital potentially quicker but it doesn't always mean it's going to happen now if the investor actually said hey james on this stock it has gotten above this area of resistance the stock is about 61 there is upcoming earnings on this 217. now we talked about the we talked about the price uh the trend on the price but there's also when we look at the price itself this price over time has really made a pattern and that pattern technicians really call maybe a cop and handle now if we actually take a look at this you know with the earnings coming up on 217 could an investor maybe let's say go long the stock on aig and can they maybe do a cover call as well well the nice and this is kind of like pros and cons if we're coming in the earnings the implied volatility is higher okay that implied volatility is higher so is the premiums and if the premium is higher that means the investor makes more above the strike but if the stock were to go down they actually have more downside protection to a point now i'm going to kind of kind of do this example wonder if someone said james i like the setup but i for example want to be a little bit more conservative okay well in this case let's say the investor said look i want to buy the stock at 62-44 but for the momentary sake i want to sell the stock at 62.50 why would they do that now by the way does this stock pay a dividend it does okay dividend is 32 cents on a quarterly basis the yield is 2.05 the ex dividend date
is actually 12 15. that means that probably the next ex-dividend date the first day of trades without the claim to the dividend is probably 215. it's probably coming up quick okay now if the investor decide to buy the stock and agree to sell the shares at 62.50 why are they doing that if they would they're doing that because they're saying james i want greater downside protection just in case the stock were going to go down okay is there a lot of upside on the stock no 6239 up to 62.50 only 11 cents where's
the majority of the upside coming from it's coming from the yield okay so that's why i'm kind of showing this if someone said james my focus is really income potential dividends it has an upcoming dividend but also it actually has something where the investors say might say hey that dividend is pretty high if you mess up james i want a greater chance to hold on to the stock okay and maybe not tap the upside as quick that she might do the 65. now there are some investors who are income investors that say james i don't even mind in having my shares called away just give me the premium okay and that's their goal their goal is to try to make that 238 or a chunk of the 238 okay now the comment from fred was earnings on 216. we know that that's why the paperMoney account is looking to sell a call at the money why is the paperMoney account looking to sell a call at the money wants a bigger premium just in case the stock were to become a little bit more volatile so what you're saying is james the investor does not always have to sell a strike with a delta 30 40. no if there's someone actually sells a higher delta they they don't mind them actually having those shares potentially called away and they want higher protection if the investment says i'm gonna sell a call strike with a lower delta they're saying they want higher upside potential appreciation it's based on your outlook for the stock if the investor said here james they're selling the at the money because they don't mind the premium they actually don't mind and actually deliver the shares of stock and they want a bigger premium for downside protection that's why the paperMoney account is selling at the money okay now if the paperMoney account says they're gonna do confirm and send do a hundred shares the the commission to buy the stock it's not there it's the commission is really from the call okay now i met that okay and so sometimes that can actually happen yep now just waiting for that uh connection to come back i saw it drop let me know when you could actually hear me again i'm gonna hold right here at aig let me know when you can actually hear me okay good now just real quick so when we actually take a look at that so that's an example of kind of more of a stock that has a yield but the other thing i want to kind of make mention to this is the yield is not necessarily all of it okay you could actually get a three percent yield but the investors probably also wanted to kind of maybe take a look at let's say the stock and say what is the risk to having the stock longer term if the investor actually buys a stock that is in the financial space what's the risk well the financial firms are against the risk of fluctuating interest rates but with a company like aig it could be against maybe earthquakes it could be against tornadoes financial calamities whatever you want to call it those are the things that it's at risk for okay now i'm going to kind of go back and kind of bring up another one and i'm going to take a look at for example like a stock example given and i'm going to look at one a b not a b and b okay now if we actually take a look at this some investors i'm going to kind of show you this look at what the trend has been and the trend has not really been kind okay now when we actually go look at the trade page and actually said well does it pay a dividend no so why on earth does someone actually buy a stock no dividend we know that not all investors are the same some investments like the income okay some investors like maybe potentially more value with some income but maybe a hybrid of potential growth as well and some investors say look forget paying me a dividend i just want the upside potential growth appreciation now if the investor were to take a look at this and they zoom in this one also has earnings upcoming as well on 2 15. now the one thing we kind of been mentioning quite a bit which is upcoming earnings could actually mean higher option higher higher implied volatility higher implied volatility could actually mean bigger premiums lower breakevens okay now if we take a look at this trend okay and we go back and look at this what you're now going to notice is we don't see if we're kind of talking about a longer term trend we don't see that but we're talking about a shorter term trend but this stock in the shorter term be going from down to maybe starting to reverse a little bit okay had a downward channel stock broke out a little bit now let's kind of go back and think about airbnb is it related to maria is it related to booking holdings is it related to hilton right etc so if we actually kind of take a look at this we actually go back to the trade tab and say okay there's no dividend but that's not the only way the investor could try to grab some potential income some investors like to do selling strategies the selling strategies does not require the stock initially so if we actually said james there's earnings up coming but i want to be very careful the investor says let's say the investor says look in a normal time perhaps they said look i would consider selling a cash secured put at maybe a delta of 30 to 40. but if they know earnings is upcoming maybe they don't want to do that and this is where investors need to kind of think if they think there's greater risk a don't do it b consider selling a different type of strike price or three they might say considering selling a put but maybe buying downside protection okay well one of the ambassadors said james i'm going to sell a strike the put side but i'm going to sell it with a lower delta the investor says well in this case if the investor let's say says they're going to sell a strike with maybe a 155 strike in the premium of 460. okay
what you're now going to notice is it has a lower delta why lesser chance to be below the strike why might that not be a bad idea well because that stock from now to expiration is forecasted to go up or down 26 now when you take a look at this if we were to uh take a look at the premium if the investor were to click on 155 that and we clicked on the bid of that option it's single cell one think about how much this would be in terms of stock ownership potentially it'll be about 15 500 worth of stock now when i i know a lot of dividend investors a lot of the dividends investors i know don't just look at dividends it seems like the ones that have been around for many years they also look at cover calls like we talked about we also talked about the dividends on stocks but the other part of this is also notice in this case that maybe the investor says they're trying to get income through an option yield which could be potentially more frequent than a dividend on a stock the other thing you kind of need to understand is the the payment of a dividend is not free it is subtracted off the stock price approximately when the dividend is paid and it's already built into the uh assumptions so that the dividend payment is not necessarily free okay now if we take a look at this and the investor says they're going to sell that the 155 what are they obligating themselves to they're obligating themselves to be a buyer of the shares at 155 from now until expiration now if you actually take a look at this the paper money account is going to go confirm and send and it's going to kind of look at the kind of the the break even max profit max loss now remember we kind of said it with option number three option number three was maybe consider selling a put and maybe buying a put below to reduce that buying power or what the max loss is and if the investor was kind of thinking about that that's that's options uh three we chose the example just selling the put here it is doing it in the bigger dollar account where it can handle a higher buying power now what i want to kind of do is go to questions just real quick okay are there any questions with what we just talked about okay what i try to really kind of show is dividends but also kind of talking about maybe other ways for potential income like a cover call like cash security plot the cash secure put is the stock ownership the cash secure the cover call is this has the stock ownership the cash secured put is the potential stock ownership where the investor might not only get the option premium but also eventually if it does pay a dividend they eventually might try to get the dividend as well now the question from roy is in this type of market a b and b could whistle right past 155 like it was a 75 delta well if we kind of come back and actually take a look at this 155 let's say the paper money accounts gets about five dollars it's going to be a break even of 150 okay so a break even of 150. stock is at 175 and the break-even expiration is at 150. now the forecast is the stock could go up or down 25 if that forecast is right it's gonna put it right at the break even and expiration now roy let's say it does okay let's let's say it closes on expiration day at 146 how much is it down it's down four dollars down four bucks could the stock never go back up again that could right could it go down for yes but again that's kind of a pretty negative scenario it could but that is a pretty low break even okay now that's kind of also something different if someone buys a stock that pays a dividend let's say the stock goes down three dollars for the year and the company pays a two dollar dividend net net they're down okay overall they feel good with the dividend but the stock net net is down the interest to think of why i'm bringing up the cash secured put and the cover call with this discussion is the stock could actually go down 25 not this year but in the next 36 days and still be above break even a stock a stock investor with dividend can't say that okay so this is where they're trying to have at least the probabilities on their size now the co the comment also came in what happens in a towel ringer just asked the recent netflix guys well that if someone says hey james i'm kind of concerned about that they they would probably pick for them if if that's what that investor is thinking they might say hey i'm not going to do any trade over learnings or they might say james i'm gonna pick a strategy that really caps the downside loss so if someone said james i was in a trade maybe like uh netflix or or facebook if we want to throw that in there that really went down a lot someone who has a max loss built in is saying yeah it went to a max loss but it's not life shattering if this was done in a margin account let's say 150 000 bucks and the stock goes down on one contract the max loss is 792.
if the investor is uncomfortable with the potential obligation and by the way before facebook when it earns before netflix went into earnings i don't think anyone would say that trend was amazing okay it wasn't to say the least i think both of them were sideways at best on a good day so if the investor that kind of goes back to picking stocks that might be a little bit more bullish the other thing is that the investor says i don't like that potential risk okay both of those companies get very negative outlooks going forward as well so that didn't help and so you know it doesn't happen all the time but that's that could happen okay if someone was concerned about that potential that happening the investor could just buy a put attach that sole put and just make a max loss built in okay now what that will do is it still leaves a net credit but there is a max loss built in learn from those situations okay learn from the investor says well i've seen more than it's gone down and up what type of strategy would you do how have you adapted over time okay now the paper money account is gonna send this order note the dollar thirty it's gonna send it and it's gonna see if it can actually fill okay so today i kind of want to focus a little bit more on dividend stocks maybe also throwing in covered calls but also cash secured puts the other thing i want you to kind of pay attention to is be mindful of if these interest rates go up which it looks like they potentially could which sectors which indexes are showing a higher positive correlation to those trends okay now also remember with what we discussed here today we demonstrated the functionality of the platform the the content was intended for information educational purposes only we demonstrated that functionality of using the platform we did talk about options and when we actually talk about those options we know that options are not suitable for all investors stay tuned for our next webcast coming up right at the top of the hour thank you so much for your comments and appreciation as a takeaway go out and practice looking for those dividend stocks that maybe have a little higher yield but also a trend go out and also take a look at let's say some stocks that maybe also have stocks that have higher volume that maybe might be covered call candidates and or cash secured plus dividends are not the only way to try to gen generate a potential income okay the reason why we focus on that income is member as investors we're trying to actually grow capital uh well actually save save capital to invest but also with that is actually have use that capital to get a rate of return on to hit a financial goal and that's why people consider investing but there's not just one tool to do it and that's why we talked about these
2022-02-14 20:18
