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Opening SPX Bear Call Spread

There is a dangerous game going on in the Whitehouse. If you have been watching the news at all you would have seen.

“If Iran wants to fight, that will be the official end of Iran. Never threaten the United States again!”

Trump has no problem issuing threats to other countries.

I probably don’t have to tell you that the U.S. and Iran aren’t on the best terms. They’ve been opponents for decades.

Two weeks ago, the U.S. sent an aircraft carrier group to the Middle East…

Since then, U.S. fighter jets have been seen flying patrols in the region.

The White House took these measures due to “a number of troubling and escalatory indications and warnings.”

Now, we obviously don’t know everything the White House knows. But we do know that U.S. intelligence believes Iran loaded missiles onto boats run by Iran’s Islamic Revolutionary Guard Corps – a terrorist organization.

Four oil tankers were also attacked off the coast of the United Arab Emirates on May 12. And U.S. intelligence believes Iran was behind the attack.

Iran, of course, denies this. So it’s hard to know who to believe.

In addition, we also have the trade war heating up again in China, so the market definitely has some pressure on it.

Going to put on an SPX hedge, the market would have to return to all-time highs for this trade to get into the money. With the landscape of things now, something amazing would have to happen… I don’t see it.

Closing IP Put Spread

This market is looking worse and worse every week without many places to hide. With International Paper getting close to our short strike going to have to close this one out and search for something else.

Opening SCHW Bull Put Spread

Now is the time to buy financials, especially since they have been down in recent weeks. As a group, we expect the financial sector to go 25% higher once earnings numbers start to come out. If you remember back to the first quarter of this year, earnings were suppose to be up 24%, but they ended up 30%.

In addition, we are going to have easier regulation moving forward. President Trump just signed into law the repeal of the Volcker rule, which will allow banks to start trading in their own account. The rule introduced after the 2007-2009 financial crisis that bans banks from trading on their own account in order to make compliance easier for many firms. This means a reduction in the regulatory and compliance burden, smaller banks that are no longer considered to big to fail. The banks ability to make money is now “game on!”

Most importantly, the yield curve is flattening, which makes inexperienced investors think this is a good time to get out of banking, but that’s just not true. History shows us that after the yield curve flattens in the financial sector that it’s followed by a monster move to the upside.

When you compare this with the technical, we see RSI and PercentR are both showing these sectors to be oversold. Looking for a strong move to the upside over the next couple of months.


Opening AMGN Bull Put Spread

The biotech sector has been getting beaten up lately, and with that, an increase in implied volatility, something we like. The bar has been set pretty low for the biotech sector, which makes for a perfect time to swoop in if we find the right situation to get into.

Amgen is looking like it is a perfect fit as it has many defensive characteristics that will stop the company from trading much lower. It has $32 billion in cash on the books, $6.2 billion in terms of free cash flow in the first quarter, and the sector has a whole looks like it’s settling down at this level.

Amgen also have a lot of new products in the pipeline, there’s at least six or seven key therapeutic areas that Amgen is going after. They’re also working on acquiring other profitable drugs that fit with their portfolio. When a smart acquisition, or even possibly a merger is made, the market will react to the upside.

In the mean time they have a migraine product in Erenumab that has continued to exceed expectations by meeting all primary and secondary endpoints in the unique phase 3b study, and these are with patients who have failed multiple prior preventive treatments.

Let’s not forget about Rapatha, the drug for hyperlipidemia, which is also continuing to grow and gain momentum in the space.

The point is the company has been relatively flat recently, but with the amount of positive new products coming down the pipeline, Amgen is setting up to trade higher over the next several months. This is one we could hit over and over again throughout the summer.

Looking for Amgen to at least support the current level and start to trade higher as the media starts to cover all the positive things  happening within the company.

Interest Rates Rise… Wow

I don’t know anyone who thinks raising the interest rates right now is a good idea. Well I guess it’s a good idea if you don’t care which way the market moves. It is fine for option traders as we can make money when the market moves down as well. I got a feeling that is exactly where it is going.

For the short term make sure you hedge all your long stock positions if you wish to keep them on. At we are doing to concentrate on selling upside call options over the next few weeks unless the market shows us something different.

The right positions are going to be key to making money until things settle down.

Lots of Uncertainty in the World Right Now

Seems like a lot of bad situations happening in the world right now. On top of that European Banker Mario Draghi announced his initiatives for Europe and it did not deliver what the market expected.

Draghi’s less aggressive plan has two effects, the Europeen stock markets were flattened and the dollar plummeted verses the euro.

Lots of uncertainty in the market right now, which raises volatility and leads to higher profits for successful option trades.