Three Paths to Profit from SPY

Three paths to profit from SPY reward investors from the movement of the S&P 500.

Two of the three paths to profit from SPY, the ticker for SPDR S&P 500 ETF Trust (NYSE ARCA: SPY), are bullish. The other is bearish and still lets investors cash in on downward movements in SPDR S&P 500 ETF Trust (NYSE ARCA: SPY).

SPY, which is designed to track the performance of the S&P 500, rose 20.11%, including dividends, through Monday, Nov. 20. Managed by ETF pioneer State Street Global Advisors, SPY is benchmarked to the S&P 500 Index from S&P Dow Jones Indices.

As the world’s most traded ETF, investors have access to what the fund company describes as “unmatched liquidity.” Plus, the broad-based fund provides investors with exposure to nearly every part of the U.S. economy and features the most recognized brand-name companies in a single trade.

Three Paths to Profit from SPY: Buy the Fund

Mark Skousen, PhD, who heads the Forecasts & Strategies investment newsletter, has recommended SPY to his subscribers since November 30, 2020. During that time, it has jumped 29.70%. Skousen recently described SPDR S&P 500 ETF Trust to his Forecasts & Strategies as his favorite broad-based investment fund.

Chart Courtesy of www.stockcharts.com

Skousen, who has been rated as one of the top 20 living economists, has headed Forecasts & Strategies for more than 40 years. The fund offers diversification due to its wide-ranging holding and avoids the risk that the struggles of one company will tank the entire investment as can occur when buying shares of an individual stock.

Despite fears of a global recession, the Federal Reserve Bank’s tight money policy and geo-political instability, SPY has been a stalwart performer so far this year. Among SPY’s top holdings are several technology stocks that have outperformed the rest of the market, including Apple (NASDAQ: AAPL), Microsoft (NASDAQ: MSFT), Amazon (NASDAQ: AMZN), Alphabet (NASDAQ: GOOGL), Nvidia (NASDAQ: NVDA) and Tesla (NASDAQ: TSLA).

Mark Skousen, head of Forecasts & Strategies and scion of Ben Franklin, talks to Paul Dykewicz.

Three Paths to Profit from SPY: Buy SPY Call Options

Another way to produce profits from SPY is to trade call options an advisory service called Pick of the Day, led by seasoned option traders Hugh Grossman and Ahren Stephens.

Stephens told me during a recent interview that he and Grossman produced a perfect record in January 2023 for investing in SPY options repeatedly 19 times without a loss. If an “easy win” didn’t present itself, the duo merely skipped recommending a trade on that day, Stephens said.

For their Pick of the Day subscribers who followed their guidance, they would have attained a total return of 124% for that month alone, Stephens continued. That triple-digit-percentage return in a single month grabbed my attention.

“That’s enough to turn an initial $500 into $1,115… and $5,000 into $11,150,” Stephens said. “And then imagine doing the same thing… over and over again.”

Ahren Stephens uses analytics as co-head of Pick of the Day.

Three Paths to Profit from SPY: Pick of the Day

The Pick of the Day is a trade made at or near the market’s open to lock in a quick 6% gain, often times within the first 30 minutes of each session. The trade typically is initiated within the first two minutes of the market’s open at 9:30 a.m.

This is a unique service for people who are short on time but want to earn quick profits each morning. Both fundamental and technical indicators are used with the combined 40-plus years of market participation experience of Grossman and Stephens. The latter member for the two-man team has been studying chart patterns since his teen years, serving as a precursor to him becoming a technical analyst at a multi-million-dollar commodity fund.

Stephens told me he uses his background and skills in investing the way that the movie character James Bond strategically deployed his secret weapons of choice to navigate any challenge that confronted him.

Hugh Grossman is the senior partner in Pick of the Day.

Three Paths to Profit from SPY: Six-Minute Trade

Grossman described a profitable trade that he led for his subscribers on Monday, Nov. 20. He follows a proven trading formula that he personally developed.

“We look for the propensity of the trade that day, release the option to subscribers just after 9 am, ET, and buy at the market open,” Grossman said.

On Monday, Nov. 20, the recommended trade featured the $451 calls that expire on Friday, Nov. 24. He announced the trade to his subscribers at 9:31 a.m. ET.

“The highest price paid between 9:30 a.m. and 9:31 a.m. was $2.29, Grossman told me. “Traders would likely have purchased it for less.”

Add in the desired return of 6% and it sold for $2.43 just six minutes later at 9:37 a.m., Grossman said. He guides his subscribers each morning that the market is open in buying and selling SPY options.

“If you invested in the standard 10 contracts, your investment would have been $2,290 and profit would have been $140 gross, less commission of $1/contact, to net out at $130,” Grossman said.

On the occasions when the risk that day seems too high, no trades may be recommended, he added. But if the outlook for SPY is negative on a given day, the duo may recommend puts that rise in value when the fund falls.

Three Paths to Profit from SPY: Trade Put Options

Although the markets have been in a clear and pronounced uptrend, Stephens told me about a recent trading day in early November when he recommended a put trade to help his subscribers profit when SPY was falling. On Nov. 3, what had been a recent ascent for SPY turned downward.

In what Stephens described as a “scalp trade,” he recommended the $434 puts with an entry at $2.87 around 10:05 a.m. ET. He recalled advising that the put option be sold at profit when it climbed to $2.97 just five minutes later at 10:15 a.m. A subscriber who followed his guidance would have ended up ahead by $0.10, or $100 on 10 contracts.

He also described another “scalp trade” in the $433 puts for a put purchase price of $2.83 that occurred at 10:27 a.m. ET. In less than 30 minutes, he advised selling the puts at $2.93. The put trade produced a return of $0.10, or another $100 on 10 contracts, Stephens said.

Three Paths to Profit from SPY: Dodge Political Risk

Investors need to be able to withstand market headwinds of higher-for-longer interest rates, runaway federal deficits and rising political risk with Russia’s unrelenting war in Ukraine amid a sustained military response in the Middle East to the murderous Oct. 7 rampage by Hamas inside Israel that caused more than 1,200 deaths.

President Joe Biden invoked the Defense Production Act on Oct. 30 in an executive order that is reserved for the most urgent of times, such as mobilizing the nation during war or developing COVID vaccines amid a pandemic. His executive order focused on artificial intelligence (AI) and applied the same authority to make companies prove that their most powerful systems are safe before allowing their use.

In the wrong hands, AI can make it easier for hackers to “exploit vulnerabilities” in the software that makes American society run, President Biden said. For that reason, President Biden called for the Department of Defense and the Department of Homeland Security to develop “game-changing cyber protections” that will make computers and critical infrastructure more secure than today. As part of that response, President Biden said his administration would take “decisive steps” to prevent the use of cutting-edge AI chips that could undermine U.S. national security, he added.

Further political risk is occurring in many countries from widening protests that smack of antisemitism. Certain pro-Hamas protestors are calling for the destruction of Israel and the killing of its people.

A positive step was announced on Nov. 21 to suspend the fighting for four days to allow the safe return of 50 of the hostages who had been seized in Israel on Oct. 7 and taken by Hamas gunmen to Gaza. Part of the deal could be an extension of the ceasefire for an additional day for each 10 additional hostages that are freed.

The three paths to profit from SPY give investors ways to make money in up and down markets, despite rising political risk.

Paul Dykewicz, www.pauldykewicz.com, is an award-winning journalist who has written for Dow Jones, the Wall Street Journal, Investor’s Business Daily, USA Today, the Journal of Commerce, Crain Communications, Seeking Alpha, Guru Focus and other publications and websites. Paul can be followed on Twitter @PaulDykewicz, and is the editor and a columnist at StockInvestor.com and DividendInvestor.com. He also serves as editorial director of Eagle Financial Publications in Washington, D.C. In that role, he edits monthly investment newsletters, time-sensitive trading alerts, free weekly e-letters and other reports. Previously, Paul served as business editor and a columnist at Baltimore’s Daily Record newspaper and as a reporter at the Baltimore Business Journal. Plus, Paul is the author of an inspirational book, “Holy Smokes! Golden Guidance from Notre Dame’s Championship Chaplain,” with a foreword by former national championship-winning football coach Lou Holtz. The uplifting book is a great holiday gift and is endorsed by Joe Montana, Joe Theismann, Ara Parseghian, “Rocket” Ismail, Reggie Brooks, Dick Vitale and many other sports figures. To buy signed and specially dedicated copies, call 202-677-4457.