In The Money with Fidelity Investments: QQQ, XLE, VZ, UUP

by Dan

Today shortly after the open I filmed my weekly In The Money segment with Fidelity Investments where we discussed some massive events this week including today’s Fed meeting, the expiration of expanded unemployment benefits at the end of the week and its potential impact on consumer spending, Big Tech’s Zoom date with Congress and of course A-Day tomorrow where the AGA of MAGA, all report earnings, Apple, Google, and Amazon!

After a brief macro discussion, I detail a bearish strategy in the oil patch via XLE, the etf that tracks the group and will likely move Friday after 50% of its weight (Exxon, Chevron & Phillips 66) all report q2 results.

I also detail a Buy-Write in shares of VZ, looking out a few months in an effort to create a sort of super yield on an annualized basis in a stock that has a good technical setup and could be the beneficiary of a move out of growth into more defensive groups in the coming weeks.

Lastly, I take a look back on a bearish trade idea in the U.S. Dollar from two weeks ago via the UUP. It’s time to take profits.

Watch by clicking below and see my notes fro the segment from below the video:

Macro: Gold making highs, Bitcoin broke out, U.S. dollar has gotten nailed, 10-yr treasury yield testing 3-month lows… all as congress races for another aid package but this is gonna be though one as Rs are split, and Dems want more than they are willing to give., the Fed continues to worry about another dip in the economy (they meet later today) but further monetary easing may be hard between now and election as Fed does not want to be perceived as political. Earnings might be as good as it gets for a while.

SPX hanging on for deal life… below the uptrend from March lows, next stop 3000 on the downside. On the upside, more fiscal aid, dovish fed speak, virus abates, earnings outlook ok and SPX at 3400.

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THURS AFTER THE CLOSE…Apple, Google, Amazon & Facebook All report earnings, 35% of the Nasdaq 100.
All of their CEOs are speaking in front of Congress today. I would be shocked if the company’s offer rosier outlooks than they need to.
Just a reminder that if you were looking for portfolio protection against a basket of these stocks that are all up a lot, the Aug 257 put vs stock at 257 would cost you $7.75, or 3% of the etf price.
 
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Trade Idea #1 – Short XLE (Energy Select etf)
Friday before the open 50% of the weight of the XLE, XOM, CVX & PSX will report earnings.
The pace of the economic recovery is plateauing, the dollar has gotten murdered and could reverse, crude oil barely rallies. technical set up looks horrid.
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Trade Idea: XLE $37 Buy Aug 37 put for $1.45
Break-even down at $35.55 down 4%
Losses of up to 1.45 between 35.55 and 37 with max loss above.
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Trade Idea #2 Buy Write – VZ, in a plateauing economy, investors might start to look for yield and VZ’s 4.25% is attractive. Stock breaking out above its downtrend from Dec highs. Buy stock, get a quarterly dividend, sell out of money call to add more yield… for instance…
Trade Idea: VZ Buy 100 shares at $57.35 and sell 1 Oct 60 call at 75 cents.
The stock goes ex-dividend Oct 9th, well pay 62 cents div or a little more than 1%, call sale adds 1.3%
IF VZ IS $60 or higher on Oct expiration you will have stock called away but have made $2.70 in gains, plus .62 dividend and 75 cents from the call sale.
Below $60 you have the dividend of 62 cents and proceeds from call sale of 75 cents, offering a downside buffer of $1.37 down to $56
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Lookback: UUP short (USD) from 2 weeks ago
Trade Idea: UUP ($26) Buy Sept 26 put for 32 cents,
-break-even at 25.68, down 1.23% of the etf price.
 
Now with UUP at 25.28 the Sept 26 put that cost 32 cents is now worth 83 cents… 
You could take the quick profit, or possibly sell the sept 25 put at 20 cents, then you are left long the sept 26 – 25 put spread for 12 cents, if UUP below 25 on sept expiration you make 88 cents and only risking 12 cents.
 

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