Hello Investors,
Today we had a discussion on the capital hierarchy structure. Senior debt (bonds) for example may still have a small value when a corporation goes through a bankruptcy. While common stock equity will nearly always be wiped out. That brings us to some very odd risk taking in the markets over the past couple of days. It speaks to some real greed kicking into markets. While those “animal spirits” might last a bit longer, it is not a great signal over an intermediate term when looking at “value” in the markets.
While we hadn’t originally planned on it, we entered a new XLK put trade. We discussed how we might trade for a major market “cup and handle” pattern. Our overall target is 92/share. We plan to hold this put but also sell short-term puts for income to reduce our cost and max risk. The details are as follows:
Buy to open: XLK Sep 18th (monthly) 102.00 puts
Limit debit: 5.65
Have a great week!