Eq: Large Cap

(New York)

Covered calls are an old investing methodology, but one that does not get much attention. That said, employing covered calls can be a great income strategy. So what is a covered call? Simply put, it is the process of selling call options while simultaneously holding the underlying shares. The idea is to earn income from selling the call options, while hedging risk by holding the underlying shares. The ideal outcome is that the underlying share price rises but does not hit its strike price, yielding the seller both the income from selling the option and the capital appreciation of the shares.

FINSUM: In markets with big momentum this is not a great strategy, but in back and forth ones like those at present, it can be very effective for increasing income. There are a number of funds that also employ this strategy so you don’t have to do it manually.

(New York)

Big debt investors are pouring dollars into risky debt markets and products, such as CLOs and their subprime-backed assets. Why you may ask? (as anyone might right now) The answer is that the riskiest borrowers are surviving this downturn much better than anyone expected. Spreads between subprime-backed products and US Treasuries have narrowed sharply, while new deals have seen big demand. According to an analyst at Loomis Sayles “What is surprising is how strong credit performance has been … Fiscal policy is really keeping the subprime borrower afloat”.

FINSUM: Regardless of whether or not you are involved in this market, it is good news that the demand for these securities is actually being driven by fundamentals. It is both a sign of economic resilience, and also of market rationality.

(New York)

There has been a major change in the stock market’s attitude toward the president over the last several weeks. For a long time, the market was very concerned with Trump winning. If Trump looked weak in polls, it was bad for markets. According to RBC, for the last 12 months, the S&P 500 has moved mostly in line with Trump’s odds for reelection. According to the bank, ““For the past year, expectations as to whether Trump will win again in November (as tracked by the betting markets) have been moving in sync with S&P 500 performance … But that relationship has broken down a bit in early June, with Trump’s chances (according to the betting markets) falling and the S&P 500 surging”.

FINSUM: Markets care much more about the economy than they do Trump, and everyone seems to be betting that COVID stimulus will keep going even if Trump loses.

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