Author: Andrew Packer

Stock market strategies

Tastylive: 3 Ways to Trade Options Without Picking Direction

Posted on by Andrew Packer

Traders have many ways to play the market. Most traders who expect a big directional move gravitate towards options. That’s because options allow investors to control a larger amount of shares compared to buying stock.

Directionality can mean a big move higher or lower. A trader who thinks a stock will fall after earnings can buy a put option as a directional bet. Or a call option if they think shares will move higher.

However, the market often has sideways moves. Directionality doesn’t work all the time. Or the market loses its predictable patterns and channels of trading, like in the recent selloff.

That’s where neutral options trading strategies come into play. These strategies can make investors money whether stocks go up, down, or sideways. This is known as being “directionally neutral.”

An options strangle use put and call options equally far from an at-the-money trade. These strangles can see one leg profit from a big move in one direction. However, that comes at the cost of a loss in the other leg. Varieties include price-neutral strangles, equidistant strangles, or delta-neutral strangles.

This strategy won’t lead to big swing profits, but it can provide options traders with consistent profits. That can come in handy during times of market uncertainty, when big daily swings occur.

 

 

To see a full breakdown of neutrality options trades, click here.

Income investing

Dividend Growth Investor: Two Recent Dividend Increases and Five Future Dividend Increases

Posted on by Andrew Packer

Despite a rough week for markets, stocks are just one part of the investment puzzle. That’s because stocks are a fractional ownership of a business. And many businesses continue to hold up well.

Many companies start to reward their shareholders over time. That reflects less capital needed for growth, and a steady, if not increasing, flow of cash from operations. The reward can come in dividends or buybacks.

Dividends offer investors cash, which they can decide how to reinvest or spend. A handful of companies are capable of consistently growing year-over-year, sometimes for decades at a time.

Recently, two companies increased dividends for over a decade.

One of those companies is Bank OZK (OZK), providing traditional retail and commercial banking services out of Arkansas.

Bank OZK just raised its dividends for the 29th consecutive year. Over the past 10 years, dividends have increased at an average rate of 12.9%, far above the rate of inflation.

Amid the recent market fear, shares have slid by nearly 15% in the past month. However, Bank OZK trades at less than 7 times earnings. And it trades at 0.8 times its book value. That suggests that shares are at least at a 20% discount to its book of loans.

The current market fear has sent nearly every company down. Fortunately, investors can use tools like dividend growth to screen for long-term buys.

 

To see the other companies raising their dividend payouts now, click here.

 

Economy

The Intellectual Investor: Tariffs, Debt, and a Recession by Design

Posted on by Andrew Packer

Is President Trump trying to engineer a recession? Some think so. By vastly increasing tariffs, markets have sold off at a pace last seen during the Covid-induced recession in 2020.

That seems at odds with Trump’s prior claims about focusing on a strong economy and creating American jobs. So what gives? More lies at stake, and it ties in with other initiatives the Trump team is undertaking now.

Currently, about $9 trillion of the $37 trillion national debt needs refinancing by the end of 2026. By creating fear and crashing the markets, interest rates should come down. That will lower the cost of refinancing that debt coming due. Every percentage drop can save the U.S. government billions of dollars in interest payments to bondholders.

Meanwhile, tacking the deficit with the spending cuts from DOGE, the government’s cash flow improves. The cuts aren’t enough to create a surplus, but it’s a strong shift from running massive $2 trillion annual deficits.

Plus, with government spending cuts, GDP looks likely to decline, and unemployment to rise. By leaning into things now, any economic slowdown can shift towards a more bullish outcome.

Investors don’t care for this strategy, as seen with the recent selloff. And engineering a recession runs a dangerous gambit that may simply lead to a recession.

 

To see the full analysis, click here.

 

Personal finance

Oblivious Investor: What to Do During a Stock Market Downturn

Posted on by Andrew Packer

In 2023, markets soared over 20%. In 2024, they did it again. Investors got complacent. Meanwhile, the return of President Trump to the White House was likely to lead to more market uncertainty. Investors have now had that in droves.

Since peaking in February, stock markets hit a bear market correction on Monday before bouncing higher. That’s one of the fastest moves from bull to bear on record. With stocks in a downturn, investors have a few key things to do now.

First, investors who are uncomfortable with the current market selloff should check their positions.

Some stocks are great in bull markets, but terrible in bear markets. Too many growth stocks could mean worse performance as stocks fall.

So, investors should make sure they own both growth stocks and defensive stocks.

Second, markets will recover in time. We don’t know how long that will take. Or if things will get worse before they get better.

Investors who have some cash on the side may want to move some of that in and take advantage of the selloff in stocks today. Investors also have a few days left to make contributions to retirement accounts for the 2024 tax year.

Meanwhile, in taxable accounts, it may make sense to rebalance a portfolio here. And taking a few losses, while uncomfortable, can mean having a tax-loss for 2025’s taxes.

 

To see the full checklist of what investors should do in a market downturn, click here.

 

Economy

The Compound: Former Trump Trade Official on What’s Really Happening

Posted on by Andrew Packer

Markets have now had over a week to digest President Trump’s tariff plans. It’s clear that Wall Street is highly uncertain, as evidenced by declining markets, wild swings, and high volatility.

However, as odd as it may seem, there is a plan out of Washington D.C. that suggests the tariff pain will prove short-lived. And once it’s over, better trade deals and tariff rates could expand, not reduce, global trade.

The latest tariff fears are simply a beefed-up version of the 2018 tariffs.

There’s a heavy emphasis on hitting hard against China. The country’s low-cost manufacturing has benefited Americans as consumers. But it has arguably also been the biggest beneficiary of America’s collapsing factory jobs.

The reciprocal tariffs ensure that all trading partners feel some pain. And that they can and should propose better trade deals. That could include a flat tariff rate between countries. Or it could mean a removal of trade barriers.

That’s in contrast to the current system. The U.S. has low to no tariffs on imported goods while paying much higher tariffs on average for exports. The jump in rates still leaves the U.S. charging less than what other countries charge for American goods.

For now, the tariff situation is putting Washington policy in charge of the financial markets. Until that changes, economic uncertainty and wild market swings are likely.

 

To see the full interview, click here.  

 

Stock market strategies

TastyLive: I May Have Found a Way to Stay Alive In This Market

Posted on by Andrew Packer

Daily market volatility remains high, with 1% swings both up and down likely in the weeks ahead. That’s thanks to a volatility index (VIX) of about 20 or higher. For trading this environment, a nimble mindset remains key, since stocks can swing at any time on nearly any news.

For traders, having a wider strategy for playing these swings is helpful too. Many strategies exist that can help put the current market volatility into investor’s favor.

For instance, the use of options with 45 days ‘til expiration (DTE) can offer a more consistent return. With so many investors focused on 0DTE, or zero-day options, being wrong in a given day is less painful.

A longer-dated strategy allows for an option to lose premium over time.

The use of option strangles can work well for this timeframe. However, strangles can be more expensive, in terms of requiring more capital than other trades.

Using other option tools like an iron condor can boost returns with less capital up front. However, the overall potential returns are also lower.

With the market’s bigger daily swings, investors don’t have to swing for the fences daily. Using longer-dated options can capture the increased volatility now. And tools like strangles and iron condors can be used to consistently bring in steady returns in unsteady markets.

 

To see the full analysis, click here.

Personal finance

Bigger Pockets: Housing Market Shift: Inventory Catapults Back

Posted on by Andrew Packer

The real estate market has largely been frozen for the past two years. High mortgage rates have kept first-time buyers off the market. The payments, combined with high home prices, were simply too much to bear.

Potential sellers, who likely locked in historically low rates in the pandemic era, were also unlikely to move. To do so would mean giving up a low payment for a higher one, and likely while paying more for a home.

Today, markets are starting to thaw. Mortgage rates haven’t dramatically declined, but are off their highs. And some sellers are coming onto the market, as seen by a rise in home inventory.

The market is likely shifting slightly in favor of buyers. They can potentially get a reasonable price today, and a reasonable interest rate. If rates decline, they can refinance. Today’s sellers are starting to move prices lower in most markets from recent highs.

With the edge towards the buyers, it’s likely that homeowners will see a slight dip in home equity.

In the meantime, home prices are likely to stay stable. However, homebuilding costs are likely to jump with increased tariffs on many key goods such as lumber. That could make existing homes a more attractive buy, and homeowner stocks could get squeezed by higher costs.

 

To listen to the full podcast on the changing real estate market, click here.

International Investing

Ben Felix: The Most Controversial Paper in Finance

Posted on by Andrew Packer

Investing includes the art of asset allocation. That means investors shouldn’t just look for a diversified portfolio of stocks. Rather, they should own a variety of assets, balancing volatile stocks with less volatile assets like bonds.

That level of asset allocation can get incredibly nuanced. That’s because today’s assets include gold, real estate, cryptocurrencies, and even cash as a holding. But some investors still consider a stock-heavy portfolio ideal for investors.

That’s thanks to the long-term track record of stocks compared to bonds over a long timeframe. That’s why one recent paper suggested that investors simply hold 100% of their wealth in globally diversified stocks.

Such an approach will carry considerable risks. That includes overall stock market volatility. If the recent selloff spooked everyday investors with a partial position in stocks, a 100% allocation requires more patience.

The other problem with a 100% allocation? It leaves investors with no cash to add to the market when stocks are down. Forget being able to ease off of stocks in a roaring bull market and buy back in during fear. Instead, it means going along for the whole ride.

While the rise of ETFs makes it easy to build a global stock portfolio, ignoring other asset classes means potentially increasing returns and lowering risk.

 

To see the full danger of being fully invested in stocks at all times, click here.

Commodities

Rebel Capitalist: Is Stagflation Back?

Posted on by Andrew Packer

Investors have seen the market take a hit in the past few weeks. Headline fears about tariffs have sparked concerns about rising inflation and the potential to slow the economy. That’s because tariffs increase the price of imported goods and reduces demand.

Those two factors could create stagflation, the condition of a slowing economy with high inflation. Last week’s PCE inflation, looking at core inflation data, looks sticky. It ticked up in March, with a 2.75% implied inflation rate.

That level may rise further depending on the impact of tariffs. The 25% proposed tariff on automobiles could raise car prices by an average of $6,000. That would make the average car price close to $50,000, a big chunk of change for the average American worker.

With new car prices jumping higher overnight on tariffs, used car prices will also soar. That will make transportation costs far higher, more than offsetting events like a decline in oil prices.

With rising prices and a slowing economy, the recent market selloff over tariff uncertainty looks reasonable. It’s a sign that the stock market may not be ready to break meaningfully higher anytime soon.

In a scenario of extreme stagflation like the 1970s, investors could have the double-whammy of high inflation and poor stock returns. That scenario led to a 70% real loss for stocks the last time it occurred. However, commodity prices boomed, offering investors some safety.

 

To see the full impact of stagflation and other economic dangers now, click here.

 

Economy

Joe Lonsdale: America’s $2 Trillion Problem No One Talks About

Posted on by Andrew Packer

Amid the recent stock market uncertainty, investors may be overlooking moves in the bond market. That would be unwise, as the bond market represents capital invested primarily for safety. Currently, bond yields have finally started to come down, despite first rising after the Federal Reserve cut interest rates.

With lower yields, investors find bonds less attractive compared to the prospective returns of “risk-on” assets such as stocks. Unless, of course, there’s a flight to safety.

However, the bond market itself may be an unsafe space for investors. Soaring yields over the past few years have caused the U.S. Treasury’s borrowing costs to soar. The interest on the federal debt topped $1 trillion last year, and is closing in on $2 trillion.

Meanwhile, foreign nations are either selling U.S. government bonds, or allowing current holdings to mature. And they’re holding their wealth in different assets instead. That’s leaving fewer big players to absorb U.S. debt.

Over the next five years, over $28 trillion of the $37 trillion of national debt will need to be rolled over. Much of it will be at a higher interest rate. That could lead to soaring debt costs, which could drag on the economy and cause America’s debt-to-GDP ratio to soar.

 

To see the full implications behind this problem, click here.