by JDH on September 5, 2020

The word of the year is not COVID, it’s volatility.  I’m not going to even bother putting up the charts, because you know what they look like.

Apple, Tesla, whatever, they are highly volatile.  I discussed Apple last week, and the trade worked fine, cashed in and went to cash before the long weekend.  My guess is that it will be onward and upward from here, but who knows.

The crazy part is that option premiums are crazy.

If you think a stock is going to go up, and you want to hold it long term, then you can make extra “juice” by doing covered writes for out of the money options.  Sell them on Wednesday, close or let them expire on Friday, lather, rinse, repeat.

And yes, the market can move against you, but with these premiums, and some judicious management, you won’t get killed (unless you get killed on your underlying position).

When does it end?

I’m guessing in November or December, after the US election.  At this point it appears that Trump will win by an overwhelming margin, but the result will be disputed, and that uncertainty will lead to a crash.  Or not.  I have no idea.

So, keep a close eye on your positions, make sure you have some cash, and keep your seat belts fastened.

Enjoy the long weekend.