Carl Icahn began his Wall Street career in 1961, about 57 years ago. That year, the Dow Jones Industrial Average closed at about 730… the S&P 500 was at 71… and the Nasdaq Composite Index wouldn’t even be created for another 20+ years.
Throughout his career, Icahn has been involved in a number of takeovers and survived bull and bear markets. It seems as though he would have seen everything at this point, but recently he said he had never seen a market like the one we’ve seen this month.
The problem, in his eyes, is volatility.
More specifically, volatility and leveraged ETFs have created new risks — and Icahn is concerned.
According to an interview with CNBC , Icahn described the market as “a casino on steroids” with these exchange-traded funds and exchange-traded notes, calling the instruments the “fault lines” that will eventually lead to an earthquake on Wall Street. “The market itself is way over leveraged,” said Icahn, who is concerned that, at some point, it could “implode.”
He added that, “Today, you have these triple leveraged ETFs that are crazy. He added that the market also lived on leverage in 1929.
After listening to the Wall Street veteran, I was relieved that such a highly regarded expert shares my opinion of the market.
I also know that volatility is important to options traders. It is a major factor in options pricing models, and high volatility can provide traders with more opportunities. But the volatility of volatility can make trading difficult.
What I mean by that is high volatility can boost options pricing, allowing traders to collect better than average premiums on trades. But if volatility is volatile — in other words, if the VIX is moving sharply up and down as it has recently — then the trading opportunities can be difficult to take advantage of. That’s because the options prices available to traders will change quickly.
10 Trades, 10 Winners
During times like these, it’s always valuable to go back and look at what’s worked in the past. And that’s exactly what my subscribers and I did recently in my premium newsletter, Income Trader .
(For those who are unaware, my subscribers and I use my time-tested, award-winning strategy to make low-risk, high-income options trades on stocks. To see exactly how we do this, check out this special free report .)
The great trading opportunity we looked at is in Deckers Outdoor (NYSE: DECK ) . The stock is on a “buy” signal, according to my award-winning ITV indicator.
We’ve been trading DECK for some time — nine trades (and nine winners!) since 2013. But for those who are new, Deckers is a shoemaker, best known for its UGG brand.
The company also recently reported earnings that beat analysts’ expectations.
The company reported strong sales of its UGG, Hoka One One and Teva brands. Sales of $810.5 million beat expectations of $750.2 million. For the quarter, the company reported earnings per share IEPS) of $4.97, well above expectations of $3.84.
Management also increased guidance for the full year. Sales are now expected to come in between $1.873 billion and $1.878 billion, and EPS should fall between $5.37 and $5.42. Last quarter, the company was expecting EPS of about $4.25.
This is good news for the stock, and I expect gains in DECK. Regardless, for our trading strategy, we simply need the stock to stay above our strike price for our option to expire worthless. If that happens, then we’ll generate 3.3% in instant income — and get the chance to buy DECK at a 17.8% discount.
That’s about as close as it gets to a win-win when it comes to investing.
Want To Make Trades Like This?
If you’re interested in catching some of the potential upside, you can always buy shares of DECK. But the strategy we use over at Income Trader is even better…
By utilizing the power of options, we can safely generate income from the stock instantly — no waiting around for dividends. And if we can repeat a similar trade every 36 days, we will earn about 33.8% on our capital in about 12 months. Not bad.
Contrary to what most regular investors believe, options can be as risky or as conservative as you want them to be. And my strategy is one of the safest around. In fact, I’m willing to make a big, bold guarantee for anyone willing to try this strategy:
If you follow along with my trades and don’t make money at least 90% of the time… I’ll work for you for free . That’s how confident I am.
I recently released a special report that will tell you everything you need to know, including how my readers are making about $568 a week from selling options. There’s even a list of three questions to ask yourself to help determine if you’re ready to trade. Simply follow this link to check it out .
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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