Hey, it’s Blake.
The markets opened strong this morning. Tech was flying. Everyone started talking about how maybe we'd finally found some stability.
Then reality hit. Complete reversal. Dow gave up everything. Tech got crushed. Another day of whipsaw action that left most traders dizzy.
While everyone's scrambling to figure out what just happened, I'm focused on finding systematic ways to generate returns that don't depend on predicting whether we gap up or gap down tomorrow.
The 30% Annual Math That Actually Works
Here's my approach: I target 2.5% monthly returns by selling puts on dividend-paying stocks with massive downside protection.
2.5% per month, done consistently, equals roughly 30% annually. I'm not hitting that target every single month, but I'm hitting it often enough that the strategy works over time.
The key is doing this with stocks built to survive exactly the kind of chaos we saw today.
IBM: 5% Downside Protection
IBM was trading around $293 today. I can sell the December $285 put and collect about $7 - that's 2.4% for 30 days.
But here's what matters: IBM would have to fall below $277 before I lose anything. That's more than 5% downside protection.
Look at IBM's chart. To hit $277, we'd need to break through multiple support levels and reach areas where the stock has historically found buyers.
So I collect 2.4% upfront, and IBM has to crater 5% in 30 days before I'm in trouble.
Dollar General: When Volatility Pays You
This gets interesting when volatility spikes. Dollar General is trading around $100 with 65% implied volatility.
High IV means higher option premiums. I can sell the $95 put and collect 3.85% - nearly $4 for the month.
Dollar General would need to fall 8.6% before I lose a penny. Think about that - a stock people actually shop at MORE when they're worried about money would have to drop 8.6% in 30 days to hurt me.
Meanwhile, I'm collecting premium from people betting against exactly the kind of defensive stock that tends to hold up during market stress.
Why Defensive Businesses Win During Uncertainty
Some businesses actually benefit from market chaos:
Dollar General? Their customer base grows when people need to stretch budgets.
Kraft Heinz? People still eat, but they buy cheaper food when times get tough.
IBM? Boring, steady technology that generates cash flow regardless of market sentiment.
These aren't momentum plays. They're businesses built for uncertainty.
Kraft Heinz: Multiple Paths to Profit
Kraft Heinz triggered a buy signal last week around $24. Stock's at $25 now with a 6.4% dividend yield.
I can either buy the stock outright and collect the 40-cent dividend coming next week, or sell the at-the-money put for 3.63% premium.
If I get assigned on the put, my effective cost basis drops to about $24.13 - basically the same as if I'd bought on the original signal.
What Today's Reversal Teaches Us
The reversal from this morning's gap-up to afternoon selloff happened in hours. Even the best momentum traders got whipsawed.
But systematic approaches work because they're not dependent on predicting the next move. High volatility actually helps - when everyone's nervous, option premiums expand.
The Strategy That Works in Any Environment
Whether markets gap up tomorrow or gap down - this approach keeps working.
If stocks hold up, I keep the premium and move on to next month.
If they fall and I get assigned, I now own dividend-paying companies at discounted prices.
Then I start selling calls against them while collecting dividends.
The Bottom Line
I don't know what markets will do tomorrow. Nobody does.
But systematic strategies with mathematical edges tend to work over time, regardless of whether individual days are chaotic or calm.
Collecting 30% annually for being willing to own quality dividend stocks at discounted prices isn't the flashiest approach. But it works when everything else is falling apart.
Sometimes the best trade is the boring trade that pays you while everyone else is trying to figure out which way is up.
But here’s something you don’t have to think about, and that’s TheoTrade’s Black Friday Special. For every $1 you spend, we’ll give you $2 back.
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Stay Sharp,
Blake Young