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April 14, 2022
Weddings Are The Worst
Ok, I know this is an investing newsletter, but bear with me for a sec. Ok, love is in the air and your friends decide to get married and that feeling of dread comes over you. You have to dress up and compete with a bunch of random people over who has the best-looking socks or pocket square.
Next is the dancing… Do we need more chicken dances? Don’t get me started on the travel and the time commitment. I remember being invited to a wedding that was about two hours away, the wedding itself was three hours long, and then a two-hour pre-reception, and then the evening reception. My day, and it felt like my weekend, was shot.
After the wedding, you get hit up with the, “do you want to see my professional wedding pictures?” Urgh.
Ok, I’m not really against weddings. But isn’t there a better way?
If you happened to attend this year’s Investor Blueprint Live, you heard me talk about the Metaverse. And if you weren’t at IB, physically or virtually, I have to ask, WHY NOT? It’s a great conference brought to you by Traders Reserve. Anyway, the Metaverse…
The Metaverse is now bringing us virtual weddings and I’m excited because anything is possible in the Metaverse. In a touching moment, there was a couple in India who even resurrected the bride’s late father as a digital avatar. The same couple hosted a virtual concert for their guests and created their own collection of NFTs to mark the occasion. Guests were allowed to virtually interact with one another and refreshments were real, being delivered to the physical homes of the guests.
I understand that digital weddings may not excite you as much as it does me, but what I am interested in is new, emerging trends and technologies that will impact how we operate within the physical world. I want to invest in companies that have the potential to be the next Amazon, Microsoft, or Google.
Wealthy Investor Society picks a sector or a trend each month that deserves your attention. The inaugural issue that covered the Metaverse listed 30 stocks that are collectively up about 5% since mid-march. Not too bad considering the tech sector has been a mess lately. The Inflation Beaters issue also came out in mid-March and those stocks are up over 7.5%.
Our next issue of the Wealthy Investor Society is about to drop. You don’t want to miss the companies we outlined.
TRADE IDEA
Well, why not continue with our theme on the Metaverse? Did you know that McDonald’s filed over 10 Metaverse-related patents that allow consumers to order in the Metaverse and then McDonald’s will deliver the order to your home address? While it may be a long-term play with the Metaverse, McDonald’s currently offers a 2.22% dividend and their weekly chart is in an uptrend.
If you don’t want to buy-and-hold, you could certainly add them to your bullpen of stocks to get a premium from cash-secured puts.
MARKETS
Once again we’ve been hit with volatility and whipsaws in the market. Dow is up 200 one minute only to be down by 80 the next. Stick to your bullpen of stocks and trade in those strong sectors.
Energy and Basic Materials are still performing the best in a 1-week and 1-month relative performance chart.
TRADING EDUCATION
If you want exposure to the Basic Materials sector, you can look at the ticker, XLB, the Materials Select Sector ETF.
Have you ever tried trading a calendar spread? This is done by buying a longer-term contract and shorting (selling) a nearer-term option at the same strike price. It’s a way to reduce your cost-basis on the longer-term contract by selling the short-term contract. You can even roll the short-term contract week-over-week to further reduce your cost basis.
Let’s say you believe the XLB will continue to rise over time, You can go out to the long-dated call option, let’s say the Jun 22. If you believe the XLB will continue to rise, you can buy the 17 Jun 22 $89 call and simultaneously sell the 22 APR $89 call.
As long as XLB stays within $86.70 (BE) and $91.42 (BE) by the near-term expiration date of 4/22, you will be profitable. The current price (CP) is $88.10. Your max profit comes if XLB trades at closes $89 on 4/22. This trade has an initial debit of $2.13 per contract with a max profit of $200/contract. I wouldn’t count on pegging that $89 price through. My usual rule of thumb is to get out of a calendar at 10-15% of the max profit.
If you have any questions, comments, or anything we can help with, reach us at any time.
Jeff
Editor, Wealthy Investor Society