The market rally moves upward and onward, despite global politics becoming a double-edged sword about to cut three or four different ways, depending on whose moral code can crumble the quickest.
Heading into the new week when the stock market could add to its nine-week winning streak, I have an unsettling sense that some crucial decisions that will shape the future of the most powerful economies in the world will require the leaders of key countries to separate righteousness from self-serving political power.
I won’t try to extrapolate but here are the nuts and bolts of what’s happening. President Trump tweeted, “I am pleased to report that the U.S. has made substantial progress in our trade talks with China on important structural issues including intellectual property protection, technology transfer, agriculture, services, currency and many other issues. As a result of these very productive talks, I will be delaying the U.S. increase in tariffs now scheduled for March 1. Assuming both sides make additional progress, we will be planning a Summit for President Xi and myself, at Mar-a-Lago, to conclude an agreement. A very good weekend for U.S. & China!”
The question begs — what does substantial progress mean? What seems to be shaping up in the “memorandum of understanding,” is a deal long on soy beans and short of substance on forced technology transfer, IP piracy, cyber intrusion, recognition of international waters and dumping of subsidized goods on U.S. markets that are in violation of the World Trade Organization (WTO). This deal is way off of what Trump promised just weeks ago.
I would venture to say that, given the soft underbelly of U.S. infrastructure that now has been penetrated by both China and Russia, the March 1 extension will come and go as just another Friday at the office for all of America and China. If all this were occurring towards the end of Trump’s second term, I believe the game board would look considerably different. But true to form, re-election politics in the modern era come before God and country and this time around is no different.
Market Rally Moves Upward as U.S.-China Trade Talks Gain Reprieve
The stock market will continue to celebrate that an expanded trade war has averted, Robert Lighthizer will join his brother-in-arms Peter Navarro as a muzzled defender of what is right and good, and the U.S.-Sino geo-political can will be drop-kicked another 50 yards down field where another scrum will form at a later date. This narrative might be good for the stock market in the short term, but it is a well-defined negative development for how U.S. relations with China will be forged going forward.
Since my job is to find ways to make money in all market scenarios, I’ll refrain from any further opining about global politics and turn to using market volatility to our advantage. In markets such as the present where there is going to be ongoing uncertainty about our relationship with China, the possibility of a hard “Brexit,” an Italian debt bubble, a civil war about to break out in Venezuela and rising evidence of a global economic slowdown, it pays to sell that volatility back to the market in the form of option premium.
In my Quick Income Trader service where I put to work up to seven directional trading strategies, I employ the use of covered-calls and naked puts on breakout stocks that trade under $80 per share. Recent trades include Dell Technologies (DELL), Merck (MRK) and Micron Technologies (MU) that are highly liquid, are covered extensively by Wall Street and have option chains that trade like water.
Market Rally Moves Upward, Especially for Quick Income Trader
I pick a company and will recommend buying the stock under a specific price and then placing a limit order to sell an out-of-the-money covered call that expires within the next two months. For the call to be triggered, the stock has to make a 2%-3% move higher for a good execution. An average profit of 10%-12% is earned if the position is called away. By using that same strategy four to six times per year, the math looks fantastic.
At the same time that I recommend a covered-call trade, I also issue a naked put trade on the same stock. This strategy is a bullish one in which we look to sell the puts first at a specific price, watch the underlying stock trade higher and then buy the puts back at a lower price than where we sold them. With this bullish strategy, we sell first and then buy second.
Since options are a time-wasting asset, meaning they all have certain dates for when the option contract expires, time is on the side of the trader who “sells” put or call premium back to the market and not the other way around. It is how professional option traders typically profit from the greed of others. Those professional traders basically sell that greed and seek a defined return on a high percentage basis.
My naked put track record is sporting an annual return of better than 360%. That’s not a typo. To learn more about how to get involved in this highly successful strategy, click here and get up to speed on becoming a smart seller of option premium that can pad your portfolio income by a level that will change the way you trade options forever.
