In terms of temperature it will be hot, however we believe the S&P 500 will be cold. Over the last four years we’ve seen a loss of 6.26% and a gain of 3.77% in the S&P 500 for the high and low during the month of August. We believe the volume will slow due to the Olympics and as the election gets closer we see uncertainty and the market does not like uncertainty. Now you can play several ways. For those of you who own the ETF SPY you can sell calls against your holdings. For an more aggressive approach you may buy PUTS with the CALL proceeds. You can also buy PUTS against the S&P and capitalize if the market does come down.
If you would like to be conservative on the PUT approach, you would buy a higher strike PUT and SELL a lower strike PUT to limit your exposure. Either way, consult your advisor before investing of any kind. WE have bought the August 26, $217 PUTS for $2.29 per share. Our breakeven is $214.71 per share. This implies a 1% move downward. If you see a steep decline like 6%, that would be a price of $204 from it’s current level. That would be a 10.71 gain or a 500% return. BEWARE you can lose all of your premium. WE stay abreast of the direction and can always jump ship earlier if deemed necessary.
WE are up 17.90% on the PUTS we sold. As of 9:54 August 2nd.