Displaying items by tag: puts

(New York)

The market and investors are in an odd juxtaposition. For the most part, the media and analysts remain pretty bearish, yet the market continues to rise. Fears of an economic slowdown are persistent. With all this in mind, what is the best way to play the market? Barron’s says you should sell puts, cashing in on investors’ fears and desire to buy puts. For instance, one could sell puts on the Financial Select SPDR (XLF), which is at a high water mark but is still quite vulnerable to a downturn because of fears over the economy and rates.

FINSUM: Granted, this is a nickel and dime strategy but it sure beats fearful money sitting in a money market account not earning much.

(San Francisco)

The whole market is worried about tech, and with good reason. Current government investigations into antitrust practices could harm Silicon Valley’s biggest tech companies. However, all the anxiety has created a potentially great way to profit from them—sell puts. Puts on tech companies are currently trading at a steep premium because of anxieties, but selling puts—a practice which profits when the share prices rise—can be a quite profitable at the moment.

FINSUM: We think this could be a good strategy for the next year. The likelihood of heavy tech regulation seems less under Republicans, so for the next year we think there is potentially smoother sailing for Silicon Valley. That said, regulating the industry is one of the few things both Trump and the Democrats agree on.

(New York)

Markets are ugly right now, but one of the important questions is whether the bottom is really going to fall out. Well, one measure suggests the market is steadier than it seems. Both the put-call ratio and the TRIN ration (ratio of advancing versus declining stocks) both suggest investors aren’t panicking. The put-call ratio is only at 1.04, or 104 puts for every 100 calls, a very modest reading. Additionally, the TRIN is only 1.27, not drastic.

FINSUM: One institutional investor made a good point about the market right now—that it might take some hard economic data to show the market that its fears are real, and thus set the stage for a recovery. In other words, the specter of a recession may be worse for investors than the downturn itself.