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November 17th, 2022
How A Strange Question Can Transform Your Trading In 2023
I get asked a lot of trading questions. And that’s great! By asking questions we can learn from others, and gain knowledge. Studies have shown that asking questions builds emotional intelligence, lending to better soft skills, which is the key to success in business and interpersonal relationships. But sometimes you get a question that stops you in your tracks.
John and Dave, co-founders of Traders Reserve, believe they have uncovered the strangest trading question ever! They tell me the answer could lead to a very big breakthrough in a very short time. I emphatically said, ‘Great! What’s the question and what’s the answer?’
They said I need to go here Get Your “Strangest Question” Webinar Seat Here first and then meet with them this Thursday, November 17th at 4pm EST where they will reveal big news about the 9th Annual Investor’s Blueprint Live conference.
I signed up and I am ready! Are you?
In other news, retailers took a hit lately. Target (TGT) missed the mark with earnings after reporting that the discretionary spending of their customers took a hit and they expect a weak holiday quarter. After adapting stores and seeing a nearly 40% increase in sales during the pandemic, it is now time for the retailer to come back to normal.
Profits fell by 50% and they said they need to cut up to $3 billion in costs over the next three years in order to become more efficient.
This is exactly what the Fed has said they wanted – crush demand and hope the job market doesn’t go with it. We will get updated jobless claims numbers today, but so far Target is joining several others who are shedding jobs in anticipation of weakening demand.
I just don’t recall a time when the Fed was raising interest rates into a recession, but I suppose this is unlike other times.
So where can you put your money now? Knowing what the Fed is attempting to do, where can we invest for the long haul?
Interest rates will, ok – should, eventually come down. As such, bonds like the 20+ Year Treasury Bond ETF (TLT), should come roaring back once interest rates begin to lower. The bonds perform inversely to interest rates. Therefore once rates start to fall, TLT’s price will, ok – should rise.
Right now you can buy a 19 JAN 24 (that’s 2024) $100 call option for $11.15. That means a $1,150 investment now gives you the right to buy 100 shares of TLT stock for $100 between now and January 19, 2024. The ETF is currently trading at $101.40. You can also sell calls against the LEAP option, creating the “poor man’s covered call” option strategy.
The dollar continues to fall and should continue to do so as other markets prop up their currencies and as the global market recovers from the looming recession. In the short term, selling the dollar on dips could provide a profitable trade. Here’s a chart of DXY.
If the dollar falls, that means emerging markets and foreign currencies such as the Australian dollar should rise. Why mention Australia? Outside of China, they have a huge Lithium mining operation and Lithium is needed for electric vehicle batteries until a better solution is found. We should continue to see more EVs sold, and that means high demand for lithium and that’s good for Australia.
In a more general sense, Emerging Markets could gain ground with a weakening U.S. dollar. The iShares Emerging Markets ETF, EEM, could provide opportunities in 2024. I don’t like the option prices yet – the bid/ask spread is too wide and open interest isn’t quite there yet, but you could buy the dips as a stock purchase for now.
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Editor, Filthy Rich Dirt Poor
Trader, Options Testing Lab
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