The Best Season of "America, The Reality Show" — Option Ideas for July 21, 2024
Put Selling Strategy
“America, The Reality Show” is really outdoing itself this season. Check out the latest and see how you could potentially generate 18%+ with these options ideas.
The Recap
Last month’s suggested put sales expired worthless, potentially generating up to 16% annualized returns, depending on the trades you selected. As of June's month end, our model portfolio generated 12.1% — that's actual returns to date — which annualizes to a staggering 24.2%.
The Current
We live in interesting times, my friends. And that’s not a good thing. Unless, of course, you’re selling time and volatility. Here’s hoping some of that volatility seeps into the options market and drives those prices higher higher higher!
The past few weeks of "America, The Reality Show" have been nothing short of spectacular. Picture this: a convicted felon running for President, dodges a LITERAL bullet only to come back more defiant than ever, chanting "Fight! Fight! Fight!" like a madman.
Then, he follows that up with an appearance at his cult meeting the unintentional laugh riot that was the Republican Convention set in scenic Milwaukee, Wisconsin—a true carnival of lies and the absurd.
And now, on today's episode, the Walking Dead current President drops out of the race in the electoral equivalent of a jump ball. Where will this lead? Who the hell knows, but the ratings are through the roof!
Grab some popcorn and stay tuned, because the chaos is just getting started.
In the meantime, Fed actions continue to drive the market. Maybe political uncertainty will change that on Monday?
And in other news, something probably happened somewhere else in the world, but nobody's watching those networks.
The Trades
Here's what I’m considering:
Sell-to-open TQQQ 8/16 55 Puts at $0.68 for an estimated 18.05% annualized.
Sell-to-open TNA 8/16 33 Puts at $0.30 for an estimated 13.27% annualized.
Sell-to-open QQQ 8/16 440 Puts at $1.94 for an estimated 6.44% annualized.
As always, I include the QQQ ideas for those who don’t have access to trading options on triple ETFs like the TNA or TQQQ.
“May you live in interesting times.”
— Sir Austen Chamberlain (probably misquoting a Chinese insult in 1936)
What I Do in General
I typically employ a 50-50 mix of TNA and TQQQ put sales in a portion of my account and implement the Global Tactical Asset Allocation (GTAA) strategy in the remainder. You can choose the combination of put-selling, GTAA, and other portfolio strategies that works best for you.
Background
It's important to understand the nature of these ETFs in order to understand their behavior in the market.
TNA is a triple ETF that tracks the Russell 2000 index, meaning its daily movements are three times the magnitude of the Russell's daily changes. For instance, if the Russell 2000 goes up 1% in a day, TNA would experience a 3% increase. This “amplification” applies to both upward and downward market moves.
Similarly, TQQQ is a triple ETF that mirrors the NASDAQ 100 index, exhibiting comparable behavior to TNA. Its daily fluctuations are three times the NASDAQ 100's daily moves.
While TNA and TQQQ offer substantial potential returns, it's worth noting that some brokerages may not permit options trading on triple ETFs or may require a higher level of option trading authorization, due to their leveraged nature. Therefore, I include QQQ in my analysis.
QQQ is a “regular” ETF that tracks the NASDAQ 100 index without the triple leverage aspect. By incorporating QQQ, you can accommodate situations where options trading on triple ETFs is restricted or requires additional permissions.
For more information on our put-selling strategy, visit our strategy page.
Disclaimer
It's always important to conduct thorough research and analysis before engaging in any investment strategy. It's also important to know that trading options involves risks, and the profitability of a trade depends on various factors, including market conditions, individual circumstances, and the behavior of the underlying asset. While the outcome of these trades may have been favorable in the case illustrated in this newsletter, it's crucial to thoroughly understand the risks and potential rewards of options trading before engaging in such activities. Please refer to our full disclaimer and review the Characteristics and Risks of Standardized Options document.
Next Steps
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