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Buy-Writes vs. Naked Puts

Last week, while the major indexes had another solid week, we did see some wobbles among individual stocks—nothing abnormal, but a possible sign that sellers were finally showing up after a heady run.

Onto the market, it’s been another relatively tame week for the major indexes—the Nasdaq is leading the way (though only up 1% or so) while the S&P 500 is near flats-ville. However, there’s little question that the near-term correction/consolidation has continued under the surface.

As the market was falling apart and the VIX was exploding to multi-year highs, Cabot Options Trader Pro subscribers executed a short volatility trade, selling an Iron Condor. Here are the details of the trade and some of my commentary.

The Central Bank is coming out with its December announcement this afternoon. The market has been anxiously anticipating this meeting. And it’s a little nervous, as well it should be.

Options education is one of my main goals for Cabot Options Trader subscribers. And here are three important lessons I’ve been telling people lately.

One of the many market aphorisms that float around in my head says, “Never sell a dull market short.” It reminds us that in theory, low volume and calm trading ranges such as we’ve seen in the cannabis sector recently tend to signify a balance of buying and selling pressures, and thus a likelihood, particularly after the previous one-year decline, that the dullness will soon be replaced by a new uptrend.

Earnings have been terrific again. Rising corporate profits have so far kept stocks out of correction territory. But earnings season is ending. And problems are growing.

After a half-hearted mid-week bounce, the stock market had another rough day yesterday. The S&P 500 fell almost 4%, and is now 10% off its all-time high. That means we’re now officially in a correction, although we didn’t really need yesterday to tell us that.

The market is down on the day, though individual stocks aren’t doing too badly. As of 2 pm EST, the Dow is off 280 points while the Nasdaq is off 165 points.

Cummins, which makes engines for trucks, heavy machinery and other industrial and transport applications, fell 4.6% on Friday after Tesla unveiled its new electric semi-truck, increasing competition in the long-haul trucking market. Cummins also held an analyst day on Friday, but apparently failed to impress.

Yesterday brought widespread carnage to the markets, which has carried on to today, but some tech stocks have found support. For now we are going to be watching and waiting, but I want to comment on three current holdings.

The first month of 2022 is in the books. And it wasn’t good. It was the worst month since March of 2020.

UPS (UPS) opened 5.5% lower this morning after earnings missed expectations and the company issued disappointing 2017 guidance.

Today we’re providing special updates on four stocks that have made significant moves since our last update.

Verizon (VZ) reported earnings that missed estimates this morning. U.S. Bancorp (USB), on the other hand, reported estimate-beating earnings.

The UK has voted to leave the European Union, and while the details of the separation will take years to figure out, markets are responding in typical knee-jerk fashion this morning.