In The Money with Fidelity Investments – 3/17/20: SPX, GLD & BIDU

by Dan March 18, 2020 11:58 am • FREE ACCESS

Yesterday on my weekly In The Money Series with Fidelity Investments we discussed the dramatic 30% decline in a month in the S&P 500 (SPX), reviewed a bearish trade idea in Chinese Internet giant Baidu (BIDU) from last month and I detailed a new bullish trade idea in the GLD, the ETF that tracks gold, the shiny metal that many think is a good hedge against inflation especially in times of falling rates like we are in now, click below to watch:

 

 

New Trade Idea: Gold is viewed by many financial advisors as a hedge against inflation, specifically in a falling rate and weak U.S. dollar environment, for the moment, U.S. Treasuries have stabilized their downside move but the USD is rallying as a flight to quality, and Gold has gotten hit hard… Many I speak to suggest this is a liquidation of fund managers as they are looking to raise cash where they can, but if the market continues to be volatile and worries of a deep recession persist, I suspect you will see money flow back into gold and you could see the GLD retesting the recent highs in the coming months. Here is how I would consider playing for this move with defined risk:

Trade Idea: GLD ($140) Buy June 145 – 170 call spread for $5

-Buy to open 1 June 145 call for $8
-Sell to open 1 June 170 call at $3

Break-even on June expiration:
Profits of up to 20 between 150 and 170 with max gain of 20 above 170
Losses of up to 5 between 145 and 150 with max loss of 5 below 145

Trade risks less than 3.5% of etf price, has a break-even up 6.5% with a max gain of 15% up 20%.

 

 

Trade Review: on February 25th I detailed a bearish strategy in BIDU:

Bearish Trade Idea: BIDU ($126.50) Buy March 120 – 100 Put spread for $3
-Buy to open 1 March 120 put for $3.40
-Sell to open 1 March 100 put at 40 cents

Break-even on March expiration:
Profits of up to 17 between 117 and 100 and max gain of 17 below 100
Losses of up to 3 between 117 and 120 with max loss of 3 above 120

With the stock at $89 and two days to March expiration, it makes sense to close this position at $20 for a $17 gain