In more ways than one. Everyone but Donald Trump decided Joe Biden will be our next President and you would have thought they killed the Wicked Witch of the West the way American cities were partying this weekend as swing state after swing state swung against President Trump.
Better late than never and just as I predicted back on September 28th, Pfizer (PFE) has come up with a 90% effective vaccine for Covid! That's about as good as it gets with a vaccine and it's more than enough to get things under control in the coming year so, if all goes well – this Christmas is still cancelled but, by next summer, things could be back to more or less normal and that is certainly worth celebrating.
The markets are celebrarting with a 5% jump in the Dow, up 1,400 points to 29,683 and the S&P has flown up to 3,635 – up 133 (4%) points from Friday's close. The already pumped up Nasdaq is red as people getting out of the house is not actually good for Amazon (AMZN), Alphabet (GOOGL), Netflix (NFLX) and all those other stocks that were benfitting from our long imprisonment.
The small-cap Russell index is so happy that it's blasted up 7% (and got halted) this morning, breaking an all-time high as it looks like the shoppers will return to Main Street to eat, drink and be merry once again. Ding-dong indeed! Airlines are up 20% this morning – that's crazy! Of course, I predicted that too, on October 8th, when we put the Airline ETF (JETS) in our Future is Now Portfolio, saying:
JETS is the US Global Jets ETF and it's got LUV, DAL, UAL, AAL, ALGT, CJT, AC, ALK, JBLU and ATSG as it's top holdings. As we discussed in the Webinar yesterday, we're about a year away from herd immunity, vaccine or no vaccine and the airline industry is vital to our national security and JETS includes cargo carriers, who are actually doing OK at the moment, with all the shipping we're doing.
So that makes a 2023 spread on JETS kind of interesting with Trump promising to save the airlines and the Democrats trying to save the airlines. Eventually, hopefully, SOMEONE will actually save the airlines. For a trade in our Future is Now Portfolo, I'd go for:
- Sell 10 JETS 2023 $15 puts for $4.40 ($4,400)
- Buy 15 JETS 2023 $15 calls for $6.50 ($9,750)
- Sell 15 JETS 2023 $25 calls for $3.65 ($5,475)
That's a net $125 credit on the $15,000 spread so, if all goes well, it will make $15,125 (12,100%) if JETS is back over $25 in 2023. Worst case is owning 1,000 shares at $15 (less the $125 credit) and we can always sell calls to lower that risk if we lose confidence but it's a nice, optimistic bet on things getting back to normal – one day. Ordinary margin requirements on ETFs are pretty low, just $841 for this one so it's a very margin-efficient trade as well!
Today's action should take the ETF well over $20 and we'll be well on our way to our expected 12,100% gain – aren't options fun? Our two PFE trades were very conservative but should make 51% on the stock trade and 483% on the margin play for Pfizer, which only had a $37 target and selling a few billion doses of vaccine should put them well over the top on that one.
As I keep telling you, you don't have to swing for the fences to hit grand-slam home runs when trading options. Even in a bear market, we can set up nice, conservative trades like this based on sound, Fundamental logic and make as much or more money as the people who run after all the momentum and fad stocks.
Fortunately, we did get more bearish in the last downturn and, on October 28th, we cashed in the Short-Term Portfolio (STP) as the market plunged, expecting a combination of more stimulus and less Trump and, at some point, an end to this nightmare – this morning we have 2 out of 3 and Biden is clearly interested in stimulating the economy so we'll be taking advantage of this rally to cash in some longs – stay tuned!
We did press our hedges on Friday in case things went the other way this weekend and we'll get burned there but our Long-Term Portfolio (LTP) will more than make up for it with gains on most of our 31 long positions – and we haven't played much tech so the underperforming Nasdaq isn't going to be a problem either….
Oil and Gasoline are blasting 10% higher this morning as well but gold and silver are taking a 3% hit – who needs safe havens anymore? That's not likely to be good for Bitcoin either.
We are fantastically positioned for this rally so there's no real need for our Members to do anything but reflect on what a rough year 2020 has been and be glad we are putting it all behind us – a deadly disease that has ravaged our society and came close to wiping out our country – as well as the Covid virus….
Happy Re-birth Day, America – we survived Trump together – we can get through anything!