Friday Update Hello Smart Option Sellers! Obviously the markets are still reeling from Trump's new tariff plans. Stocks are down again this morning, making this whole week, a red week. The U.S. & China are still negotiating even as the new tariff rates are set to begin. They won't take effect right away, so there still is time to hash out a deal. One thing I'm trying to fully comprehend is how & why Trump keeps saying that China is personally paying all these tariffs, and that the money is going straight to the Treasury's coffers. As far as I know, and from thinking back to my basic college economics classes, tariffs are not directly paid for by the exporting country (China). They are mostly paid for by the importing country (the U.S.). The U.S. companies that pay for the tariffs will either absorb them or pass them onto us - the consumer. If anyone has concrete information on this, please send my way. For Trump to keep saying that China is paying us billions of dollars for all the tariffs - is just plain wrong. Regardless, us as Smart Option Sellers have to deal with the situation at hand. Having a pull-back like this is good for any new put-sell trades that we initiate. This is because we can collect higher premiums due to the increased volatility in the market. We just need to be smart on the timing, as we don't want to jump in too early, as more stock selling could occur. On the flip-side, positions that we already have in place will be underwater temporarily until the tide turns higher. Don't be too alarmed about this scenario. Our positions are always taken on high quality companies with lots of downside cushion built in. Although the put option prices are rising above our original entry sell prices (giving a paper loss), the real thing to key in on is the fact that none of our strike prices have been breached. Every stock price remains above the put option's strike price. That's important to remember. We will continue to hold and wait out this temporary blip. I'm not going to issue any new trades today only because the selling may not be over and who knows what Trump may tweet over the weekend. The stock market is very important to Trump, and I know he doesn't want to see it go down. Let's hope Monday will be a big mover - to the upside! Quick Q&A Let's hit the lone question. Q: Lee, In a possible down turn in the market and the signs showing a coming down turn in the market, i.e. inverted yield curve. Additionally, several experts like Scott Minerd, Robert Shiller and Jeremy Grantham spouting a long down turn in the market. What would that look like for those, like us, that enjoy selling put options? A: This is a question I get repeatedly, especially when we start to see some selling enter the market. It's a valid concern, for sure. But it's one that I usually answer the same way: We want stock market exposure for the long haul. That's how to build long-term wealth. One of the ways to do that is to buy quality stocks on the cheap, and ride them higher. Selling put options allows us the opportunity to potentially do that. And even if there's a larger sell-off, who knows where the bottom will be? No one rings a bell to let you know that the bottom is in. So, you have to dip your toes and get in along the way. My advice if you feel a bigger sell-off is coming is to take smaller position sizes for now. Also, I will always use defensive tactics if I feel adjustments are necessary. "Rolling" is one of the best ways to do that, and we have employed it a handful of times in the past. Good? Ok, that all for today. Sit tight and continue to hold all other open positions as-is. Contact us here with fills, comments, questions or concerns. Have a great weekend! Regards,
Lee Let's Grab That Cash!