Buy This to Get Ahead of Election Markets
Profit-taking is coming!
And here’s why:
- People want to lock in gains before the end of the year.
- Apple and Tesla’s stock split created a “buy the rumor, sell the news” event.
- The election is right around the corner.
One thing we will always remind you … markets anticipate. That’s why we’re looking forward and investing for the future.
Today, we have a great way for you to get ahead of all this.
This one buy can bring you some great end of the year, #BOP gains!
Paul’s joining in to give you the full scoop about what’s happening in the markets.
And don’t miss: Tesla’s 1,000% rise, the 4X climb bitcoin has left to hit $50,000 and the huge rally in cannabis:
Nasdaq Volatility Index Rising
First, the VXN is an index. It’s not a stock you can buy. It measures the expected volatility of the Nasdaq, which is mostly tech stocks.
How it is measured is by the amount of demand for out of the money put options. People hedging their portfolios will buy these when they think there is a downside risk ahead.
This is, again, specifically for the Nasdaq. There is also the VIX, which is for the S&P 500. Specifically, the VNX has been going up recently.
There has been quite a surge in tech stocks. They have gone up hundreds of percent this year alone while the S&P 500 is just now making new highs. It’s been, by far, the strongest area of the market.
People are starting to put some hedges on their portfolios because any time stocks go up in a straight line for six months there’s going to be some profit-taking. I think people are anticipating that. Of course, the election is coming up. Whenever there is a big election there is uncertainty around it.
The expiration dates for the VXN in October are the highest and then it levels off after the election. That’s the two main reasons I see for this happening.
I don’t think there is going to be a crash. I just think there is going to be a flattening down in some areas and some profit-taking.
There are also additional demand and supply things going on through the Nasdaq as well. The biggest stock in the Nasdaq, Apple, has split. It changes the buy and sell dynamics of who will come to buy and sell it.
Widely transmitted developments like a split are “buy the rumor, sell the news” situations.
Many people will anticipate that. The effect on the Nasdaq is going to be significant if Apple’s demand starts to fall off significantly. Then add on to it that Tesla, which is in the Nasdaq but not the S&P 500, has gone up more than 1,000% over the last 12 months.
It is up 560% year to date. I can’t remember offhand what it is up off the bottom since March 18. I believe it’s more than 800%. I told people on the Profits Unlimited update that it’s completely normal and in the realm of what you should expect for you to see volatility in Tesla given that it’s a straight line up since March.
In addition to that, Tesla is doing sensible things. They are selling stock. It’s at $430 billion in market capitalization last time I checked. This is a company that was worth $100 billion just last year.
If you have significant gains, you can go sell your stock. The other thing you can do is hedge your portfolio by buying out-of-the-money puts on an index like the Nasdaq, which is a lot more liquid than trying to get protection on Tesla stock itself through the options market.
People who have a lot of large gains are trying to lock in their gains before yearend. It’s a very common thing to do. Yes, people will do it as early as the third quarter because their bonuses and compensation are all dictated by what that yearend number is. If you are up 100%, 200%, you will want to lock it in.
Events are coming up that people are concerned about. I am getting emails about the election. People will certainly hedge, sell, and do some things ahead of time in the stocks that have been rising.
Another point with buying a put on the Nasdaq versus individual stocks is that the Nasdaq is a bunch of stocks. You don’t need as much as a downside move there. That means the implied volatility (IV) has a lot to do with option prices. The VXN is the IV on the Nasdaq.
The IV, if it’s 30%, is essentially the annualized move between now and when the option expires. I was looking at this last Friday and it was around 25%, now it’s a little higher. The IV for Apple was 70% and Tesla was more than 100%. You are getting a way better deal by buying puts on the Nasdaq.
You don’t need nearly as much of a move in Nasdaq as you would in Apple or Tesla to make a profit.
If what is being said sounds like Greek, Ian runs two phenomenal options services: Rapid Profit Trader and Rebound Profit Trader. I would say that we caught that rising wave in March.
However, all the things we are talking about come from that.
In Rapid Profit Trader I know there was a loss recently, so we did finally take one. 30 and 1 is the streak now. Rebound Profit Trader is 29 and 0 in a 29 winning streak.
Just understand, this was into the heart of the crash. It is required to come in somewhere near the bottom. There were plenty of stocks that were not participating early on. There is a certain viewpoint of what part of the market is going to get bid up first.
We are using the options market to talk about what is going to happen in the stock market. Everyone please know, I am still bullish, optimistic, positive. I believe some of this might be far smoother than what might be implied by this.
Largely we are talking about 8 to 10 stocks that have driven the Nasdaq 100 up. The Nasdaq composite has all the stocks traded on the exchange. There are a lot of smaller stocks there where we are seeing in several our services that those stocks are rising.
For example, Zoom Media — that we’re recording this on — was up 41% yesterday. Their numbers are insane. The growth is ridiculous for them.
Their estimates for their sales revenue have tripled in the past six months. That 40% gain was after the stock was already up 1,000%.
After all that, the stock is a $60 billion stock market valuation stock. It is still young. I remember in the early days of the pandemic that they first reported their user base went from something like 14 million to 200 million. That happened in the space of six weeks essentially.
It’s insane. It was a complete binary event where one day everything was open and the next day everything was closed. A bunch of people had to have web conferences. So overnight Zoom got all these new customers and their stock price has been reflecting that ever since.
My point in bringing this up is that if Apple, Tesla, and four stocks can carry the Nasdaq, you might see any number of other stocks pick up the pace. There is a rising utility of any number of companies. There are new ways of business that have become the norm.
Those are the ones that have been getting bid up. The big ones like Apple, Microsoft, Google, and Amazon have benefitted from the indices getting bought because they make up so much of the index.
Many of them are representative of that digital shift the pandemic accelerated. We have been telling people that there is nothing that says markets need to rise every single day, week, minute, or second. There are natural ups and downs.
Any time you have a big rise, big sellers who have time constraints because hedge funds and money managers have incentives based on 12/31 numbers, there’s an artificial ending point that can drive selling. These people are large sellers. If they come to sell the stock, they are going to cause volatility.
Therefore, we tell people to follow the Rules of the Game. That way you have a portfolio and you can sit through anything that’s going to happen. However, when we look out even a few months past all this and certainly one, three, or five years out, everything is still very young in its development.
A lot of these companies that have been going up this much haven’t even been public for two years yet. They are extremely new and this is just the beginning.
We have seen this distinct difference between America 1.0 companies and America 2.0 companies where America 2.0 companies are filing the new 52-week high list. Some of the other companies are getting a bid here and there. We are still bullish, optimistic, positive on America 2.0 companies.
However, there is and always will be volatility. We are not expecting a crash. It’s just that these indices that people base some of their buying and selling decisions on are stuffed with a few companies that have risen a great deal. It’s completely normal that people who have these large gains, especially in hedge funds, are likely to come with their big positions.
When they come, they will push prices down. That’s completely normal. My guess is it will also push off some of the crazier traders out there.
Speaking of how young this opportunity is, we have had a lot of chats about crypto. This area is just flowering. It’s a little under the radar. You’ve been active using Compound. Another friend of mine showed me another platform.
I know there’s Uniswap, Yearn Finance, Curve.
Compound has been emerging from this world.
All of these new Decentralized finance also known as defi platforms — defi is a broad term, but right now it’s mostly referring to borrowing and lending on a decentralized network where banks aren’t involved at all. You don’t have to apply to get approved for a loan. You don’t have to sign a lot of paperwork and wait to hear back.
You can do it whenever you want. It also gives you a much higher interest rate than what you get in a savings account. What I did was, using Compound, which is a basic website that tells you what coins you can lend out and what coins you can borrow. It has right on the site the rates at which you can lend and borrow.
I put a stable coin tied to the USD called Tether in there. There is a 3% or 4% interest rate. I wanted to see how it worked, I was curious. Whenever you use something you gain a lot more knowledge than just looking at it. I did that and it was incredibly easy. It has gone under the radar.
I borrowed some Ethereum using the network as well. I took out a loan that I bypassed the banks with. You can borrow Ethereum and sell it for USD Tether or USD Coin, which are the dollar version of crypto. It’s a good way to get a little bit of extra money.
Of course, you must deposit more money than you take out. It’s called an over-collateralized loan. Not to get too technical. I just thought it was a cool thing to do. A lot of people are using it now because it’s easier than the traditional borrowing market. You can make a way higher rate.
You get an interest rate, unlike most banks at this point. Looking at the amount of money that has been deposited onto these platforms is ridiculous. It’s gone from $1 billion to $9 billion in the span of a couple of months. It’s picked up fast.
Another thing about Compound is when you deposit money on there, over time, you get Compound tokens, which is their cryptocurrency. It’s an investment in itself. So that’s another benefit. Of course, that crypto has been going up. All in all, I think it’s a great idea. I think adoption is going to get boosted.
People are putting $9 billion into this stuff. It’s not just a fad. I think it’s here to stay and it’s going to continue to grow.
BOP on Crypto
Just so people understand, many people will probably lack the depth of understanding you have of crypto. What we are seeing is that it started with Bitcoin and then Ethereum came. Ethereum is the cause of the flowering of all this. The Ethereum currency probably has more than 2,000 projects on it.
Now each of those projects are becoming sizable, which is putting pressure on the Ethereum currency to keep rising. That, in turn, is going to cause more money to push into crypto in general. Then several people looking to store that value will buy Bitcoin, Litecoin, or Litecoin Cash.
Any rise in activity across the board is very bullish, optimistic, positive for the continued rise of crypto, whether it be Bitcoin, Ethereum and so many of these new currencies that have come about. The other thing you mentioned that Compound is a platform, a website, a service, and a currency.
This is a new feature of the crypto world. There is any number of currencies that represent a network, a service, and a currency. You are some mix of the owner, user, and supplier. This is a new way of doing business and being in business. One of the critical things is you can have your own coin to represent you.
You can put Bitcoin, Ethereum, or Tether into Compound as your starting currency. There are a couple of other small ones, but those are the main ones.
You cannot bring money in from a bank account.
Our point with this is the world of crypto is expanding like crazy. For most folks, Bitcoin is probably the only coin they have ever heard of. Maybe they have vaguely heard of Ethereum. Bitcoin’s price is around $11,300 today. We believe it is going to hit a high of as much as $50,000 this year.
I got a tweet from someone who said that was unrealistic. I went and did the math. From $3,800, which was the low, to $12,400 is already a 4x move. If we have that one more time Bitcoin is at $50,000.
If you look at late 2017 it went from $6,000 to $20,000 in five weeks. That’s more than triple in five weeks.
We are very bullish, optimistic, positive on crypto. Yes, this is definitely a volatile area. We have two of the Grayscale trackers in Profits Unlimited. There’s so much going on in this world and it’s just going to lift the prices of all the cryptos that have a purpose and feed into this new business model driven by crypto.
It’s amazing the progress the entire crypto space has made in the past few months.
We’re still bullish, optimistic, positive on Bitcoin.
We believe it can get to $50,000 then $100,000, then I believe the next peak will be $250,000 or somewhere in that range. There’s a lot of smart folks who are on board.
Tesla’s Stock Future
There is still Tesla fever going on out there with the stock having done what it has done. I was on with an ex-colleague and asked how he was doing. He said, “I’d be doing better if I owned Tesla.”
It’s become a meme at this point with a 1,200% rise from when it was $180 last May. Now we’re starting to see that “buy the rumor, sell the news” after the split. Long term, I don’t think Tesla will go much lower. I think it will be a great investment for years to come. They are doing so many things.
They are unlike any company in the world right now. They are only going to grow from here. We saw a time when the market went from getting them wrong, thinking they were going to go bankrupt and criticizing them for spending money, which ended up benefitting them because that money was spent on new factories and adding capacity because they knew the business was there.
It’s gone from that incorrect notion to seeing them as the future of everything electric, which is more like what they are. Their EV business is dominating. They are coming out with a solar roof. Not only their vehicles but they are also the most advanced self-driving technology on the road today.
Their energy storage business with their batteries is incredible. It’s incredible what they’ve done.
In terms of news, they are raising $5 billion through the stock market, which I believe is right. It funds their growth, it’s cheap equity. It allows them to put up more factories, develop their battery business, develop their solar business, bring out the Cybertruck, bring out the Tesla Semi, increase the production of the Model Y.
All of that will increase growth, which is good for Tesla as a company. Just like with the stock market, if there is volatility no one should be surprised. As we mentioned earlier, this is a stock that’s up 1,000% in the space of one year. Many people have gone through their entire lives never having made money in the market by a factor of 1,000%.
People just be prepared for Tesla’s stock to go up and down rather than just think it can only go up in a straight-line day after day after day. Other than that, I think Battery Day is coming on September 22.
There will be stories that come out that will make you believe Tesla is once again slated for zero. The shorts will come out. If you own it, especially if you are in our service where we tell you to equal weight it, just hold on to it. Just chill. There will be some volatility. I’m sure more advanced traders might know how to take advantage of it.
Going out one year, three years, or five years we see Tesla as being significantly higher. We are still bullish, optimistic, positive on Tesla.
Federal Cannabis Legislation?
There’s a piece of federal legislation that is going to be voted on.
It’s a big event that seemed to come out of nowhere even though everyone has been expecting for a long time that it would be dealt with on a federal level. There’s a vote to deschedule it, which would take it out of the Schedule One category completely.
I think that would be a great thing for the marijuana industry. It’s the first big step they have taken to legalize it on a federal level.
If that went through and got approved by the Senate and President Trump signed it, stocks are not pricing this in any way, shape, or form.
They are not. A lot of these do business in Canada and they have expanded into, not only the United States but worldwide. It has way surpassed their Canadian sales. The market for these companies is way bigger than what is being priced in.
With U.S. legalization, it’s only a matter of time before it’s legalized everywhere else. I think the road ahead has not been priced into these stocks at all.
If federal legalization comes, you are going to see a wave of money come to bid these stocks higher. These stocks have received a small bid, but if a large wave of money came in you would see the same effect you saw in Tesla. The money will come out of wine, spirits, and beer and get poured into the cannabis sector.
We know this has been a bit of a struggling trade for a bit. Nonetheless, if Tesla can go up 1,000% in a year, people can make money and it would take very little money to push these stocks higher.
And they still have sales growth too. A lot of them had to cut back their business, but their sales have hardly had a dent put in them. Despite all the negative press about having to postpone the production of factories and facilities, they are still growing. Remarkably, they’ve been able to get through this period without seeing negative sales growth, much less bankruptcy.
The industry is very strong. It has strong underlying fundamentals. I think a huge rally is in the works for this sector.
I saw some amazing numbers of the amount of sales in Oregon. It was a mind-blowing number throughout this year. This is going to be a big sector in the future.
Editor, Rebound Profit Trader