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Monday Market Recap - GDP Was Positive and No One Knows Anything!

Aren't We Supposed to be in a Recession?

Author

Ryan Burkett
July 31, 2023

Aren’t we supposed to be in a recession? If you listen to the mainstream talking heads, we have been headed into a recession “coming in the next 6 months” for about 3 years. While this panic is great for eyeballs, it has real world consequences for the average investor.

To put what they say into practice, you liquidate your positions and hold cash, which is being inflated to death. A nihilistic mentality in investing will almost surely lead to loss in any environment. Because hey, if it’s all going down the toilet, why even bother?

Last Wednesday, the GDP growth number (which is one of the leading indicators of the health of an economy) was 2.4% for the second quarter. This exceeded expectations of even the most optimistic economists. Jerome Powell, the Chair of the Federal Reserve, even pointed out in his statements that the economy is continue to hold steady and is lessening his expectations of a recession at this time.

To make things even better, the monthly inflation numbers came in on Friday, once again beating expectations. Inflation continuing to decrease with a healthy GDP suggests at the very least a recovering economy.

So what does this mean for us? Well, it confirms that even the most powerful don’t know what is coming. Does that mean we stop our strategies? Absolutely not! There’s plenty we can do!

How can we act on an opinion?

Believe that it’s all coming down? buy some puts! They are priced cheaply right now because the implied volatility is extremely low. Keep in mind, this is a low probability of profit. You are better off selling calls, which provide a defined upside and higher probability of profit.

Stocks only go up? Buy Calls, or sell puts! The same statements above, but they work inversely!

Want to play it like Switzerland? Stay neutral! This allows for profit as long as the stock stays in a range, that you define!

What I’m Doing:

My core Portfolio:

Sell At The Money Puts on the S&P500. This is a bullish move. I cap my downside by buying out of the money puts at the 25 delta range (picture below). This allows for a high upside reward as long as the stock stays the same or moves upward, while limiting how much money I can lose.

Short Put Vertical - A move upward or only slightly downward leads to us winning this trade.

My Diversification Pieces:

Neutral play on Gold and Silver - a 16 delta strangle on each

My Silver Strangle - We want to keep it in this range.

Neutral on Oil - 16 delta strangle again

My Crude Oil Strangle - We want the price to stay between about $71.50 and $91.00 over the next 45 days. We will plan on leaving the trade at 21 DTE.

Neutral play on the Australian Dollar - 16 delta strangle

Our Ausie play (/6A in futures) - another neutral strangle with a nice wide range to land in. Also expecting to be in this trade until 21DTE.

Enjoy this article? Want my take on a topic? Please reach out! I would love to hear your thoughts!

Want to help me grow? Please feel free to share this with your friends and family! It would be the greatest compliment in the world!

Have a great week, we’ll catch up Thursday!
Ryan