How Our Members Make Money Using “Barbell Approach” During Pandemic
July 3rd, 2020
We closed the second quarter this week, and what a quarter it was. The S&P 500 shot up nearly 20% — the best quarterly performance since the fourth quarter of 1998. But, of course, that comes on the heels of a 20% decline in the first quarter. And the rally paused in June as investors started to fear that a second wave of the coronavirus would put a big damper on the U.S. economic recovery.
The recent cooling-off period didn’t slow our pace of trading at Options Income Blueprint, though. We booked eight winning trades last month, generating hundreds in income.
But before we get to that, let’s get the bad news out of the way first. This week, I recommended Options Income Blueprint members take losses on Walt Disney (DIS).
I hate taking losses. Who doesn’t? And I only do so for one of two reasons:
- When the fundamentals of a company change; or
- When the manner in which Wall Street values a stock changes.
With Walt Disney it was the former. The company has been rocked by the coronavirus pandemic, with movies put on hold and its theme parks shut down. With cases in Florida and California spiking, it’s unlikely its parks will reopen soon. Disney+ is a bright spot, but ESPN is suffering from a lack of live sporting events.
The bottom line is that it was time to move on and put our money to better use elsewhere.
Losses hurt. There’s no getting around that. But the only other position entered in 2020 that we closed at a loss was Delta Air Lines (DAL) — another casualty of the coronavirus pandemic.
On the bright side, we booked eight more winning trades in June. If you sold just one of each of these contracts you could have earned $523 in income last month.
Here’s a quick rundown of June’s winners:
As you can see from the table above, we continue to find success with a mix of economic growth stocks and pandemic stocks. I call this a barbell approach.
On the economic growth side of the barbell, we have names like semiconductor chip maker Advanced Micro Devices and Bank of America. And on the pandemic side, we have names like Peloton Interactive, the maker of high-end fitness bikes, TV streaming platform operator Roku and, of course, Gilead Sciences, the maker of coronavirus treatment remdesivir, which I covered in depth in the space last week.
As money has shifted back and forth between the two sides of the barbell, we have been trading both groups.
With states retightening restrictions meant to slow the spread of the coronavirus, investors’ hopes for a quick recovery from the worst economic downturn since the Great Depression are being dashed. Therefore, I expect there will be a bias toward pandemic stocks with our trades going forward.
Given the great success we’ve had with them so far in 2020, I doubt there will be any shortage of money-making opportunities.
I wish you a safe and happy Fourth of July weekend!