Week 35 - Aug 26 Investment Moves
- Today's US market condition @ 11:41 am (EST)
- Aug 26 option trades.
- Why spend cash to roll the covered call?
- BTC/ETH price moves
- FED cuts in SEPT Vs everything BUBBLE?
Today's US market condition @ 11:41 am (EST)
Aug 26 option trades.
Here are my options trades for Aug 26:
Quick Summary:
- Added more risk into the ONON put credit spread for $8 each.
- Rolled SQ put credit spread out 2 weeks for $12 each.
- Added more risk into the LFUS put credit spread for $32.
- Rolled ONON covered call for $19 DEBIT (cost me money to adjust).
- Rolled GILD covered call for $169 DEBIT each (cost me money to adjust).
- Rolled GILD Put credit spread for $47 credit (to help offset the cost of the covered call).
Why spend cash to roll the covered call?
When doing so, have to look at the cost of doing NOTHING and the cost of adjusting the risk. If the end risk puts me in a better position, then ROLLING the covered call even if it takes money to do so is the right move.
For Example:
Let's use GILD trades and see what happened:
The current market price is ~$76
The existing Covered call was for $72.50 (limits the upside) since that is ITM.
Rolling the covered call costs $169 x 2 (or $340).
The strike price is moved from $72.50 to $75.00 (or $250 x 2) or $500 (potential gain).
If GILD stays above the $75 price, it's $500 - $340 or $160 of value gain for spending the $340 today. The math shows the "Fixed return" if the price stays above the strike price.
BTC/ETH price moves
The price of Bitcoin and Ether has increased but has not been discussed in the news.
The movement is normal as the price of digital assets can swing 20%-30% in either direction without any real reason. If you are DCA (Dollar Cost Averaging) into Bitcoin of Ether, you don't care what going on as you are always adding more into your bag regardless of the price.
FED cuts in SEPT Vs everything BUBBLE?
Last week's news was around the FED meeting in Jackson Hole! We know the FED will cut in September of 2024!
That is right. This was written in 2021.
https://seekingalpha.com/article/4695443-fed-warns-about-everything-bubble
Other studies have been done to suggest that when the FED cuts, the recession follows (more than 50% of the time). In this current cycle, with Housing issues (high price of homes, high mortgage rate, high property tax, high home insurance), the Auto Industry slowing down, Auto repo increasing, larger credit card debt, more consumers with more than 60 days on their credit card payment, looks to be a challenge to escape the "recession-like" signs that we see. This makes the soft landing much harder to achieve without toppling over the other house of cards.
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