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February 24, 2022
Buy the fear.
Sure, Russia just launched its attack on Ukraine.
“In announcing a major military operation, Russian President Vladimir Putin deflected global condemnation and cascading new sanctions — and chillingly referred to his country’s nuclear arsenal as he threatened any foreign country attempting to interfere with ‘consequences you have never seen,’” noted Reuters.
Meanwhile, NATO plans to reinforce its presence on its eastern front following the invasion.
It’s why Dow futures are down 800 points this morning. It’s why crude oil is quickly nearing $100 a barrel, which we’ll feel at the pump. It’s why gold prices are up $54 to $1,962. It’s also why the Volatility Index is up 29%.
But again, we can use that fear to our advantage, especially with options.
In fact, with stocks plunging, bearish options premiums are likely to soar.
As noted by Barron’s, “The combination of battered equities and elevated implied volatility should present long-term investors with opportunities to increase positions in stocks that they own, or to establish positions in stocks they have waited to buy as prices rallied ever higher. When options premiums are plump, as happens when volatility increases, and stocks are weak, sophisticated investors often sell bearish puts to buy stocks.”
Or, if you simply want to protect your portfolio until tensions fade, you can always pick up dividend-paying oil stocks such as:
BP PLC (BP), which carries a dividend yield of 4.21%.
Exxon Mobil (XOM), which carries a dividend yield of 4.6%.
Williams Companies Inc. (WMB), which carries a yield of 5.64%.
The last thing you want to do is flee the market, and miss out on a potential recovery rally. Markets have been through far worse, and remain resilient.
The Dow is up down 764 points to 32,302
The S&P 500 is down 103 points to 4,119.50
The NASDAQ is down 426 to 13,090.75
Gold prices are up by $55.84 to $1,964.74
Bitcoin is down 9.3% to $35,240
Oil prices are up $7.18 a barrel to $99.28
The VIX is up 28% to 36.90
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