Hello Tackle Traders! The dog days of summer are slowly inching away from us and I feel like I have not taken full advantage of the sunny days that we had been praying for when the temps were in negative digits not that long ago. Then again, it has been raining like every other day so that might have something to do with it as well. There has been a clear indicator popping up lately to remind us that summer is indeed almost over and yes you guessed it…..The back to school commercials. Some school districts are already back with others starting this week and by the time labor day week gets here almost all the kids will be back in school. My kids go back the day after labor yet but and I’m already dreading the back to school shopping for school supplies, clothes and everything else in between. I wait until the last minute, only to find the stores running out of supplies and after driving to several stores and finally find whatever it was I was looking for, I get home and as the kids start to compile their items they discover that they already had that item left over from last years’ back to school shopping. So this year I’m starting a new rule. We’re going to pull out the list and shop at the house first to see if we have any left over from previous years then we’ll go to the stores and buy whatever else is needed. Naturally, whatever brilliant idea I generate in my head the next thing on my mind is can I monetize it? And of course in my Dr. Evil voice, I always think my ideas will make one million dollars every time! LOL
Join along with me and let’s see if and how we can make that million dollars while doing back to school shopping. I am a creature of habit so even though I’ll wait until the last week of back to school to do our shopping, I’ve already planned it in my head which stores we a likely to buy the supplies, clothes, shoes, etc. My daughter has her favorite stores and my son will go where his sister decides she’ll go. I also have a budget in mind what the items will cost so based on where she suggests we go shopping I’ll either approve or veto the stores. Our typical run will include the major retail and big box stores which is where the majority of the consumers shop. So how exactly are we going to make or save money from back to school shopping? Well, the first logical thing as a mom is to look for deals! There are plenty of websites, apps, and ads floating around that you can easily find a good bargain on supplies. To take it a step further, you could take advantage of the plastic in our purses and use our cash back and mileage point credit cards to purchase items. By the way, if you take family trips make sure you are enrolled in all hotel and airline point programs. With some hotels like Hilton Honors, you can link your points to Amazon and use a gift card to buy items from Amazon. So even without trading the markets, we’ve identified a few ways we can save on supplies. Now let us push the pedal to the medal and see how trading can pay for some of these products. Ok, first think big picture. If everyone in the entire country is flocking to stores to buy clothes, shoes and school supplies who is likely to benefit or make a profit from all of this CONSUMER spending? If you answered the retail sector companies, you are correct! Someone get me the staples “that way easy” button. If that is the case, are there certain ETFs we can trade that create an opportunity to make some money? Well yes! Ok what would those ETFs be and where can you and I get such information. Hmmmmm there seems to be a report called the Market Scoreboard that is posted by the awesome coach Hector every weekend that lists and ranks the sectors so maybe looking into that may not be such a bad idea. My, my, my look at that! I have found exactly what was I looking for! If you are not sure which ETF has the retail sectors look for the one that starts with CONSUMER!!! Lol. That gives me XLP – Consumer Staples and XLY- Consumer Discretionary. If you are new to trading here’s a brief description of both ETFs along with the chart and a link to see which companies are in the ETF.
The Consumer Staples Select Sector SPDR invests in companies that are primarily involved in the development and production of consumer products that cover food and drug retailing, beverages, food products, tobacco, household products, and personal products. There are 33 companies in the Consumer Staples Select Sector SPDR.
The Consumer Discretionary Select Sector SPDR invests in industries such as automobiles and components, consumer durables, apparel, hotels, restaurants, leisure, media, and retailing. There are 80 companies in the Consumer Discretionary Select Sector SPDR
So now what? Well, first I need to identify if they bullish, bearish or neutral and then from there determine what strategy to use. Both ETFs have a bullish trend and both have retraced back down and seem to have found support at the 20-day moving average. If they stay above the 20 the most likely scenario is they will attempt to make another run to the upside. So if my posture is bullish, just how bullish am I? Well, there just so happens to be a show called the Cash Flow Club that another awesome Coach Tyler does every Thursday. What are the chances, he discussed this very topic! Watch it HERE.
If I agree with coach Hector that XLP and XLY are at a 2, moderately bullish provided they stay above their 20-day moving averages, and using my little cheat sheet from Coach Tyler I can now determine what strategies work best for a moderately bullish chart.
BULL – Divide into 3 categories
Mildly Bullish (1): Covered Call, Short Put, Bull Put
Moderately Bullish (2): Bull Call
Aggressively Bullish (3): Long Call
With XLP we could look at a bull call with the October or December options, leaning more toward December. XLY December bid and ask spreads are too wide and the September options are too close to expiration so I’m not too excited about this one quite yet. We are not tied to just trading the ETF. What if we could find out which companies are in the ETF and trade the companies instead of the ETFs? XLP holdings include companies like PG, WMT, COST, CLX, MNST just to name a few and XLY holdings include NKE, TGT, ROST, DG, DLTR again to name a few. Clearly, there are enough companies to trade in the retail sector so why not see if we can trade them. Everyone has their own personal preference as to whether to trade the ETF or the stock itself. Remember to think big picture! It is not just our young kids going back to school. College students are also gearing up to start their semesters. There will be a lot of late night studying with coffee or an energy drink at hand or both! We are heading into the holiday season. Black Friday and Cyber Monday isn’t that far away so there is a lot opportunity to find other good candidates that are in line with this season. Remember position sizing is key and of course make sure your portfolio is well balanced. Don’t go buying everything in retail and forget your other cash flow strategies. How you enter, manage and exit out of the trade might be different based on trading experience. One might leg in and buy a call then add the short call afterward or one might start with a bull call and once the stock/ETF increases momentum you might buy back the short call and end up with just a long call. Tighten up your stops and watch out for earnings if the stock you are trading hasn’t posted yet. Until next time Tackle Traders!
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- Emily Muiruri, an Entrepreneur, Real Estate Agent and Business owner. Born and raised in Nairobi, Kenya before her family moved and settled in Maryland. She began her trading journey in January 2015 after 17 years of Property Management in the Self-Storage Industry. Emily uses different strategies to trades stocks, options and forex. Although still a student learning and enhancing her trading skills, she has strong desire to teach women to take control of their finances and become traders. Writing blogs is one of the ways she’s is looking to spread the word and get more women involved. Emily knows that with the right education and trading system women can be successful traders
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