When a $1,700 Payday Is the Worst-Case Scenario

By Michael Salvatore

Listen to the audio version of this article (generated by AI).

 

The S&P 500 is just a tenth of a percent below its all-time high. 

But under the surface, only a quarter of S&P 500 stocks are in our Short-Term Health Green Zone, and more than half are in the Red.  

And our Options360 dashboard backs it up. Relative to the past year, options – what traders use to hedge against market declines – are rising in value.  

The index looks calm, just a notch below records.  

But the stocks inside it don’t… and traders are preparing for more pain.  

By the end of my conversation with our options and volatility expert Mike Burnick, we came up with a name for it: a euphoric depressive market. 

For investors, this split creates two openings.  

While index options stay cheap, hedging a portfolio with SPDR S&P 500 ETF Trust (SPY) puts costs less than usual. And with stock options running rich, selling them against shares you already own pays more than usual. 

Mike showed how the second one works using the Covered Call Builder on a stock you’re no doubt familiar with, Nvidia (NVDA).  

The stock has been stuck in a trading range since June. And the trade setup he pulled up last Thursday paid $44 per contract up front, with a 93% probability of profit. The worst case was having the shares called away for a roughly $1,700 gain. 

Watch my full interview with Mike here, including the indicators he checks every trading day before the opening bell. 

To building wealth beyond measure, 

Michael Salvatore signature

Michael Salvatore  

Editor, TradeSmith Daily 

P.S. The split Mike and I talked about – cheap index options, expensive stock options – is something you can check for yourself every trading day inside Options360.

Members get implied volatility rank by index, which shows at a glance whether options are cheap or expensive across the market.

They also get the Trade Builder, which lets you build an options setup out of any trade idea you can think of.

And you’ll gain access to Smart Money Edge, a new AI-powered system from TradeSmith CEO Keith Kaplan that tracks what smart money and potential insiders are doing ahead of big news.

Keith put together a special package for new Options360 members, and it’s available at the lowest price we’ll likely offer. Click here to see what’s included in the 30-Day Wealth Accelerator.