I hope the following is helpful:
I don't know if we are at the bottom of the covid crises, but there are some positive signs on the horizon. This video gave me a lot of reasons to believe we are almost through the worst of the crisis:
"NYC FRONT LINES DOCTOR EXPLAINS HOW EASY IT IS TO NOT GET INFECTED AND STOP THE SPREAD OF COVID-19":
https://bit.ly/39m188U
This is a must watch video if you want to protect yourself from the virus. It's from a doctor who is treating covid patients in a NYC hospital.
But this thread is about the stock market and this video makes me think the market will be rebounding sooner than later.
I wrote software that scans all the listed options and the underlying common and then makes a list of good covered call candidates where you buy 100 shares of stock and sell 1 option. The minimum annualized return on investment of trades on the list is 40%.
On a typical day last year there might 30 to 50 candidates and most of those are not tradeable becuase they are too risky -- pending lawsuits or risky biotechs. But last week there were over 1,000 potential trades! That's because there is so much volatility which causes high option premiums. The last time I saw this was March of 2009. That was the bottom of the financial crisis.
I maintain a market timing model that was created by Martin Zweig. It has served me well. I sold everything back on February 26. I thought I would be out of the market for 18 months like I was when I sold everything in July of 2007 and didn't buy until March 2009.
So based on what the NYC doctor said, based on my Zweig timing model, and based on the number of stocks with high option premiums, I'm betting we are close to the bottom. (BUT I COULD BE WRONG!)
I figured it was time to get back in the market today so I looked at the ten stock recommendations yesterday from "The Motley Fool Stock Advisor" service. I noticed that of their ten recommendations four of them appeared on my list of covered call trades -- Zoom, Slack, The Trade Desk, and Luckin Coffee.
Luckin has dozens of class action lawsuits filed against it. So I won't touch that one.
Zoom and The Trade Desk are priced too high. I don't want to spend a lot of money on this market in case the market drops further. I want to be mostly in cash.
So today I bought shares of Slack @ $28.01 and sold April 17 calls with a strike price of $24 for $5.10. After fees, this trade should have an annualized rate of return of 64% if the stock trades at or above $24 on the expiration date. It can fall to $23.11 (18%) before the downside break-even point is reached.
If the stock falls below $23.11 I keep all the option premium, but lose on the stock. However, it's a stock I want to own long-term anyway so I don't mind if it falls below $23. I still have a cash on the sideline to make more trades if good ones appear.
I'll post a list of potential trades in the next hour or so for anyone who is interested.
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