I worked while I was there. I spent time and learned more than I hoped from oil traders, options traders, Big Pharma executives, energy executives, consulting and accounting types with diverse client bases. Simply put, business “ain’t good” and is getting worse at a rapid pace, globally. All of Europe, including Germany, is now contracting, according to the latest data. Chinese is probably far worse off than its “official” statistics tell us and things are obviously slowing down here.
Then why is the market up?
Traders are hoping — they are counting on — more Fed and more European Central Bank action, which I also see as inevitable. It is only a matter of how big their new programs will be. Many believe this will push the value of currencies down. Combine this with increasing negativity about events in the Middle East and we are seeing increased hedging against the euro and geopolitical issues that has pushed up the price of oil. And that gives us the opportunity for this week to generate income.
Oil names at new highs
The energy complex has led this rally and many oil and related names are making new highs with strength. One of my favorite positions that I recommend now and again in my service, Options Income Blueprint, is to sell puts against Transocean (RIG). The company is the world leader in building and servicing deep water drilling rigs. Transocean stock has behaved very well over the past few weeks. Look at strikes a buck or two below the current stock price. Sell some puts at these strikes and you can get a gain of between 0.5% and 1% in less than a week, an annualized gain of 25% to 50% depending on which put you sell.
The other way to do this is to buy an energy name and sell calls every week. I like ConocoPhillips (COP) right here and now. The stock sports a 4.7% yield and if you have the 30 seconds or so every week it takes to do this, you can sell calls against the stock every week. What does that produce in yield? Between a quarter and a half-percent return each week. Do the math and that 4.7% yield could be 18% or more if you can just find those 30 seconds each week.