Trade Alert: Kick Off the New Year with 4 Instant Income Trades!
We've had some volatile market swings around the new year – and today we'll take full advantage of that for Ultimate Income. With the four trades below, we'll target quality blue-chip stocks to buy at a discount while earning instant income from our options along the way.
The S&P 500 Index inched ahead 0.3% last week, but it was good enough for a ninth straight weekly gain: its best winning streak since 2004.
For full-year 2023, the blue-chip S&P surged 24.2% higher while the Nasdaq 100 soared 43.4%. What a difference a year makes, considering last year's bullish turn of events following a dismal 2022 bear market.
As shown in the chart below, the S&P 500 is now quite extended to the upside after its recent run:
In fact, the index is trading at a sizeable spread of nearly 6% above its 50-day moving average (red line), which is near 4,500 – nearly 270 points below. So, as I previously warned, a pullback early in the new year would not be a surprise.
What's interesting when digging deeper into recent stock-market performance is the stark reversal of fortune among stocks and sectors.
Last year was all about tech, communications, and consumer discretionary, led by the Magnificent 7. But since the October low for stocks, there has been a glaring shift in market leadership.
Over the final two months of 2023, the leading S&P 500 sectors were Real Estate (+22.9%), Consumer Discretionary (+21.1%) and Financials (+18.7%). Two of those three, Real Estate and Financials, were among the worst performing sectors last year… until the October low that is.
I believe this shift in leadership should have staying power in 2024, along with other out-of-favor sectors and stocks that were totally eclipsed last year by the Mag-7.
On that note, I have four covered call trades for you today to start the new year with some quick cash in your pocket.
Cisco Systems (CSCO), VanEck Vectors Gold Miners ETF (GDX) and Pfizer (PFE) all look ripe for new covered-call option trades. Plus, you have an opportunity to roll your Archer-Daniels (ADM) covered call early to earn more income sooner than expected.
On a quick housekeeping note, your Tyson Foods (TSN) 29 Dec 23 $50 Call was assigned as expected, so our shares were called away. Also, I've read several emails from members about being assigned on Medtronic (MDT) prior to rolling the option recently.
If your MDT shares were called away, stand by – we may have another chance to buy into this quality stock at a discount soon. Meanwhile, here's what to do now.
Actions to Take...
1. Sell to open the Cisco Systems (CSCO) Jan. 26, 2024, $52 call option (CSCO240126C00052000) at a limit price of $0.20 or more, good 'til canceled.
2. Sell to open the VanEck Vectors Gold Miners ETF (GDX) Jan. 19, 2024, $33.50 call option (GDX240119C00033500) at a limit price of $0.25 or more, good 'til canceled.
3. Sell to open the Pfizer (PFE) Jan. 19, 2024, $31.50 call option (PFE240119C00031500) at a limit price of $0.20 or more, good 'til canceled.
4. Buy to close the Archer-Daniels (ADM) Jan. 19, 2024, $77.50 call (ADM240119C00077500) and at the same time sell to open the ADM Jan. 26, 2024, $77 call (ADM240126C00077000) for a net credit of $0.20 or more, good 'til canceled.
Note: Aim to buy back your existing call option for about $0.20 or less and sell the new option for $0.40 or more, resulting in a $20 net credit.
Combined, you should earn about $85 of instant income on these trades, assuming you sell only one contract apiece. That's a nice cash grab to kick off the new year. And I'll be back with more Ultimate Income updates and trade alerts soon.
Good investing,
Mike Burnick Senior Analyst, Ultimate Income
P.S. If you have any questions or concerns, please reach out to me at emailmikeburnick@tradesmith.com and include "Ultimate Income" in the subject line.
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