Jeff Bishop Ultimate Beginner’s Guide to Options Trading

While we focused on the stock collapse in March, banks feared a freeze in credit markets.

That’s when the Fed stepped in to purchase everything from treasuries to junk bond ETFs.

Now the Fed is cutting purchases, and MARKETS AREN’T PREPARED!

But you will be when I explain what’s going on and which ETFs are in danger.

You see, normally investors hide money in bonds and ETFs when stocks are falling, thinking it’s a ‘safe’ place to park cash.

When the Fed said they’d buy bonds, it caused ETFs like the TLT to spike – which allowed me to cash in with some strategic option plays.

I wouldn’t be so quick to take this trade again.

But now, the Fed is stepping back from the table, and bonds could be in for a rough ride.

It’s not just TLT, but junk bond ETFs like HYG and JNK are in the crosshairs, and here’s why.

Why the Fed was the only buyer in town?

Imagine you were a banker deciding who and when to loan. Sitting in your office, you flip on CNBC and watch markets start to crash in early March. Companies from Boeing to Six Flags are shutting down operations for months, and who knows what they’ll look like when they reopen.

Suddenly, your phone rings. It’s a call from the CEO of one of a local business that does event planning. They’re desperate for a loan to keep them afloat, even though they don’t know when they’ll be up and running nor what it will look like.

Ask yourself, would you lend to this company?


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Even if they had been a customer of yours for 30 years?

That’s the dilemma banks faced in March. Delta airlines has been around longer than most of the bank executives have had jobs. Yet, how do you lend a company money when they aren’t doing…well anything?

Insert the Fed. Jerome Powel and central bankers took their unlimited buying power purse and bought up these corporate bonds to keep lending moving.

Now bankers weren’t as afraid to buy the debt, knowing the Fed had their backs.

This led to a massive increase in the Fed’s balance sheet as seen below.

Back during the Great Recession, the Fed took two years to double its balance sheet. This time they did it in a matter of months.

The big change was they began to buy corporate debt including junk bonds. And in a special twist, they stepped in to buy some of the ETFs in the sector.

So now that we’ve got a handle on what’s happened, let’s discuss what’s going on and how to trade it.

Cutting back on purchases

While the Fed took unprecedented steps, they claim they aren’t in the business of picking winners and losers – which they effectively did anyways.

Even though they said they would do what’s necessary to prop up the market, the Fed began scaling back their purchases.

Here’s their schedule from the end of last year until now.

Fed purchase plans

In March, the Fed ramped up purchases from $37 billion to $75 billion. Then, they soared to $300 billion. By mid-April, they were still buying $150 billion.

Now, you can see they’ve curtailed the purchases down to the same levels that they had back before the crisis. That leaves the debt markets at the mercy of supply and demand.

Remember, the U.S. Treasury is flooding the market with debt to cover the recent stimulus package, let alone a second one.

All this raises the interesting question – can the debt market support itself?



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Jeff Bishop Ultimate Beginner’s Guide to Options Trading

No…it cannot.

In fact, this could be a catalyst to send stocks lower. And when you have stocks and bonds heading south at the same time, that’s a problem.

As traders, we need to know what to avoid and where money can be made.

Here are some of my thoughts on some major ETFs.

  • TLT – This ETF tracks long-term bond prices. If we get a selloff in bonds, this will be one of the biggest ETFs hit. Fortunately, traders can play the TBT, which is the inverse ETF.
  • JNK & HYG – Both of these ETFs track junk bonds, which benefited heavily from the Fed involvement. Both of these are pretty liquid for stocks and options.
  • AGG – This aggregate bond ETF is one of the most liquid and recovered solidly off the lows. However, its trading range isn’t large but could be a good place to sell call credit spreads.
  • LQD – Coprorpate debt got a boost from the Fed’s actions, ramping back to its recent highs. Like AGG, it doesn’t have a wide range but may suffer when the Fed pulls back.
  • BNDX – Many international bonds are priced or tied to the U.S. dollar in some way. If U.S. bonds start to tank, an international bond ETF like BNDX won’t hold up.

Whatever trade I take in this sector, I plan to deploy a wide arsenal of option strategies.

Some of these exact strategies can be found in my Ultimate Beginner’s Guide to Options Trading.

Even if you’re a seasoned trader, THIS is the market you want to refresh your knowledge and skills.

Click here to watch my Ultimate Beginner’s Guide to Options Trading.

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Tom’s $1 Million Trade: Tom Dyson Airs Urgent New Alert

Tom Dyson is a longtime investor who isn’t afraid of making bold moves. In 2003, Tom went “all in” on gold. That was right before gold’s last historic bull run. And in 2011, he was one of the first analysts to cover bitcoin, when it was still trading for under $10.

Now Tom has gone “all in” on a new idea. He’s put his family’s entire net worth into it. It’s a radical move… but as Tom sees it, this one strategy could create lasting, generational wealth for him and his family.

And the best thing? Any investor can take part.

To find out more, be sure to read on…


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By Tom Dyson, Editor, Postcards From the Fringe

The Most Important Trend in Finance Is Back On. It’s Go Time.

The financial world is either risk-on or risk-off… It’s a world that is either expanding with win-win deals or contracting… civilizing… or decivilizing.

It is either making progress… or it has gotten too far ahead of itself and is backtracking.

– Bill Bonner

The most important trend in finance is the decline in the Dow-to-Gold ratio.

The Dow-to-Gold ratio tracks the Dow Jones stocks as priced in gold. It tells us the best times to buy gold and the best time to buy stocks.

It peaked in 1999 at 41. Then it began what I call its “long walk down the mountain” to where it always ends up. That is, below 5.

Let’s call this the “primary trend.”

But along this primary trend, it got waylaid. And it spent eight years backtracking. Eight long years… of fake money and rising stocks.

Now, finally, this most important trend in finance is “back on.”

To my mind – and for my money – it’s presenting the biggest opportunity to profit since, well… I found bitcoin in 2011.

It’s go time. This is it.


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My Gold Story: Why I Went “All In”

I left my job nearly two years ago. We sold all our things. Kate and I (we’re divorced) hit the road with our three kids. We don’t have anywhere to live. And we homeschool the kids.

We left “the matrix” in another important way, too.

When we left America, we drained our bank accounts and retirement accounts of cash, and we converted all our savings into gold and silver.

Why did we do this? We don’t want to be in the system anymore. It’s unbalanced and unstable.

So we’re going to sit on the sidelines, in precious metals, until it’s safe to return to the financial system. When it’s finally safe, we’ll sell all our gold and invest in the top dividend-raising stocks.

Our money will stay there – I hope – generating bigger and bigger dividends for the rest of our lives. (More on this in a moment.)

How will we know when it’s safe?

That’s where the Dow-to-Gold ratio comes in. It’s the ultimate barometer of systemic “health”…


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Recent Reversal

Our Dow-to-Gold trade is based on a simple premise…

You buy stocks when they are cheap relative to gold. That is, when the Dow-to-Gold ratio is below 5.

Then you sell stocks when they become expensive – when the Dow-to-Gold ratio rises above 15. At that point, you return to gold.

Over the course of the last 100 years, you would have made only six trades. But you would have also handily beaten a “buy-and-hold” approach.

The chart below shows it all. The towering peak in 1999. The countertrend rally from 2011 to 2018. And if you look carefully, a recent reversal…

I interpret this recent reversal as the Dow-to-Gold’s primary trend reasserting itself, getting back on track, and once again marching back down toward single digits.

This next chart shows the zoom-in of the last two decades or so…

The ratio topped out at 22.36 in October 2018. It’s been falling since… and I speculate it’s about to head much lower.

Of course, if I’m wrong and the Dow-to-Gold ratio isn’t ready to resume its primary trend lower, the market will let us know.

How? By making a new high, rising above 22.36, and invalidating the downtrend. (It’s why I set our “stop loss” at 22.36.)

But I’m willing to bet that’s not going to happen…


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Trend in Motion

The ratio likes to move in big, clear trends. And once it’s in motion, it tends to stay in motion.

Its drop in 2018 implied to me that gold would start outperforming the stock market… possibly for as much as the next five or 10 years.

I immediately drained my bank and retirement accounts and put everything into gold and silver. Then, I started nagging my friends and family to do the same.

Remember, the ratio peaked in October 2018 at 22.36.

My hypothesis is that the Dow-to-Gold ratio is now back on its way down… to a level somewhere below 5. Bill calls this its “rendezvous with destiny.”

I will hold my gold until then, at which point I’ll sell it all and invest the proceeds into the stock market.

Specifically, I will buy what I call “dividend aristocrats.”

These are companies like Coca-Cola, Johnson & Johnson, AT&T, etc. They have decades-long track records of relentlessly raising their dividends.

There are no better passive investments than stocks like these. You get rich twice this way. One from the rising dividends and two, from the compounding effect of reinvesting dividends.

There is no better way to grow wealth.

But until it’s time to buy these dividend aristocrats, I’m sitting on the sidelines in gold, where I will remain until stocks are ready to beat gold again. Then, I will resume my long-term “dividend aristocrat” compounding strategy.

If I’m right about this – and if I time my zigzag correctly – my family will never have to worry about money again.

Until then, I’m keeping an eye on the Dow-to-Gold ratio. It’s at 13.6 today.


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5G will really kick off on September 22. That’s when Apple is expected to release their first 5G iPhone.

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