My Bear Call Credit Spread On ETF, IWM (Russell 2000)

Netflix reported second-quarter earnings that fell short of Wall Street estimates based on weaker subscriber growth for the upcoming quarter. The news in Netflix threatened a streak in which the Nasdaq managed to go two months without posting back-to-back declines.

The Nasdaq did manage to close in the green. And it makes sense because the US Feds are pumping money into the economy, but with bonds not paying any type of yield, that money is heading straight for the equity markets. But over the last several trading days, the pullback in the technology sector can’t be ignored and might be pointing to signs of what may happen in the future.

Many people on Wall Street and the financial outlets continue to talk about this “V” shape recovery, with few entertaining a “W” shape recovery.

Facebook Inc. Chief Executive Mark Zuckerberg expressed frustration with the Trump administration’s response to the coronavirus pandemic during a live chat Thursday with Dr. Anthony Fauci.

“But now that we’re here in July, I just think that it was avoidable and it’s really disappointing that we still don’t have adequate testing, that the credibility of the top scientists like yourself and the CDC is being undermined, and that until recently, parts of the administration were calling into question whether people should even follow basic best practices like wearing masks.”

Fauci did not criticize the Trump administration, but did take exception to the idea that containing COVID-19 and reopening the economy is a one-or-the-other predicament.

Both Fauci and Zuckerberg agreed that the country needs to “regroup” to form an effective response to the latest pandemic developments, as cases have surged to record levels in many states in the South and West.

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W-shape recovery, is when the economy begins to recover rapidly, but then falls into a second period of decline or a double-dip recession. Robert Johnson, professor of finance at Creighton University, fears that the COVID-19 crisis could turn into a W-shaped recession. Johnson believes the recovery could take years, not months, as the number of COVID-19 cases continue to skyrocket.

Kevin Smith, Crescat Capital’s chief investment officer, thinks those that are betting against the market are about to get paid. His this comes from the disconnection between Main Street and Wall Street when it comes to profit margins.

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So earlier this week, I put on a bear call spread. A bear call spread is an option strategy where you sell a lower price call and buy a higher price call sale of a call with the same expiration date. In my case, I sold 10 Aug 159 call options and bought 10 Aug 160 call options,

based on price not exceeding the daily supply at $156. On the trade, I'm risking $840 to make $160.

This post is my personal opinion. I’m not a financial advisor, this isn't financial advise. Do your own research before making investment decisions.

Posted Using LeoFinance