Trump's Team Just Intervened in the Market (3 Trades to Make Now)

With the market at all-time highs, are there still opportunities to make some contrarian plays in the market? Joining us today is Jeff Clark [music] with Tradesmith. Jeff, so glad that you are here and I love having you on the show. It's been a while. The last time we had you on was at the very start of the summer and every time we talk, we always talk about a contrarian view at how to play the market. Uh let's start out with talking about what it looks like to be contrarian when you have a market at all-time highs like we do right now. Well, it's it's actually it's a little bit difficult because, you know, normally when I come on this show, I have some ideas to talk about that are stocks that have been beaten up. They're unloved. Uh they're at oversold levels and they're where I think we have a lowrisk opportunity to trade them from the long side. And we've, you know, we've done pretty well with most of the ideas that I presented here. The problem that exists today is there's not a whole lot of things that are unloaded right now. The market has expanded its reach. The the rally has brought more and more stocks above with it. And so now you have lots of stocks trading at all-time highs, lots of uh ETFs trading at all-time highs, the index indexes themselves trading at all-time highs. And this is all happening at a period of time where we're about to enter a seasonally weak period for the stock market. You know, September and October are normally difficult months. So all of these things trading at all-time highs with investor sentiment really off the charts bullish right now and entering a seasonally difficult period. I am rather defensive right now. I think it's time to be a little bit more protective of your capital. >> All right. That's really interesting to know that you are defensive right now when I know you're so often look at that contrarian way to look at the market. So I think that's a little bit telling for people. I I want to talk a little bit more about that historically September October is kind of a lower point for the market heading into such a bullish rally right now uh heading into fall. Do you think that we could perhaps uh change the historical trend this year or with midterms and kind of everything happening geopolitically too? Do you see some market selloff happening over the next month or so? >> Well, yeah. You know, the the issue that that exists right now is you have not only fundamental valuations are are relatively stretched. Investor sentiment is very very stretched to the upside. Everybody is is very very bullish. Um and the normal trend for the market during midterm election years tends to be that we see some weakness in o in August, September, October. Now obviously we didn't get the weakness in August. The market's up very strong this month. But what has happened though is now you have a situation where you have most sectors in overbought or extremely overbought conditions. So that that is a red flag for me. I look at things from a riskreward perspective. I like to buy when I think the risk is relatively low and the the reward is exponentially high. Right now, at best, you have a neutral riskreward situation where, you know, the S&P is trading around 7,700. Maybe there's two or 300 points on the upside, maybe there's two or 30 hund points on the downside. That is, you know, if you're a gambler, that's not a bet that you want to take. It's it's an even even money bet. I almost feel better sitting in cash rather than taking that sort of a bet. I would love the opportunity to buy the S&P 500 down around the 73 7200 level because I do think we'll end the year higher than where we are right now. I just think between now and maybe the middle of October, uh, we're in for a little bit of a a rough spell. >> I love what you said about trying not to gamble in the market because I know, uh, some people who invest, you know, they just buy stocks and they hold them long term, but you have a different approach to the market, but you say it's not risky. It's not gambling. It's a way to look at the investing that is uh, taking out some of that risk. Explain that a little bit because I think it's so unique and again, this is why I love having you on the show. We've got viewers who've seen you before and also love the way that you approach investing. >> Sure. Well, I've I'm an option trader and a lot of times when people hear the word options, they think risk, they think speculation, they think gambling, they think all that sort of stuff. And there's there's a reason people think that way because most people use options along those ways. I try to use options much more conservatively. I like to use options as a way to limit my exposure to the market. So, if I'm bullish on something, rather than going out and buying a 100 shares of stock, I'll try to figure out a way to put a lot less money at work and and buy a simple call option on it. That way, my risk is relatively limited. My upside is basically the same as I would have in the stock itself, but I'm I'm limiting my downside with that. Let me put this in perspective for you. Let's say, for example, you like, I don't know, the semiconductor index. Here's a here's a good one. SMH is the symbol for that. and it's trading around $570 a share right now. Now, you can go out and buy a 100 shares at $57,000 and put that in the market and and take your risk with it. Or you can decide how much am I willing to risk in SMH. If it's 10%, when a lot of people put their stop losses at 10%, you're willing to risk about what is 10% of 57,000 5,700 bucks. So, you're willing to risk 5,700 bucks. What I would do is I would take maybe half that amount. So, I would take 2,800 already limiting my my maximum loss there. And I would go to the option market and see if I can find a strategy that allows me to make as much money on the upside or even more than I would make by owning the stock itself and yet limit my risk. So, what I do is is rather than putting $57,000 into the stock, I'll take a very small percentage of that, maybe 2,800, and I'll go to the option market and I'll work out a strategy again that allows me to make as much money as I possibly can on the upside while limiting my downside to just that 2,800, which is half of what you might have been willing to risk in the stock itself. Where this differs from most people is most people look at I could put $57,000 into the stock or I can take that entire $57,000 and put it over into the into the option and make a killing if I'm right. The problem is if you're wrong, you lose everything that you would have had in the stock to begin with. And that's where people need to differentiate the difference between gambling and using options the way they're intended. Options were intended to reduce your risk. That's the whole purpose the option market exists. It's designed to reduce your risk. Most people don't look at it that way. >> Yeah. I would say a lot of people hearing you say that would say that options are options are the riskier way to play the market. And I love the way that you're explaining this to explain that they are a way to derisk the market. And I know that that worked out really really well for you throughout your career. You've had a tremendous career since you were a teenager investing in the market exactly like this. And again, I I love how calm and simply you explain your strategy for how to invest. It's been incredibly successful for you. And if you're interested in learning more about Jeff's strategy, we're going to get into more specific names and some other examples of how to do this in this video. But if you really want to dive into options and learn from one of the best out there, you can take advantage of a free trial. It's called the Ironclad Income Challenge. This is a free 5-day course that really takes you step by step on how to trade and look at options the way that Jeff looks at options as d-risking the market. Uh he explains it so well. It also teaches his son through the process. So, it's going to be a great educational course for you and it is free to sign up today. Just scan the QR code or click the link in the description and you can take advantage of that free 5-day ironclad income challenge today. Okay, Jeeoff, I want to talk before we get into the three names you have for us, and I know you've already previewed one of them. I want to talk about how this played out the last time you were on our show. You were on in May. You talked about three names, just kind of showing an example of how that paid off for people who might have followed what you recommended at that time. >> Sure. Well, you know, the strategy I I I showed back in May was selling uncovered puts as a way to generate income on stocks that you want to own and at the prices that you want to own them. And I used three stocks in particular. I used to, which is KTOS is the symbol. That's a a drone manufacturer. I used Figma, which is a software company, and I think the other one was Soundhound. S O N is the symbol with that. Figma, by the way, is FIG. So, all three of those were unloved at the time. They had all been sold off. They were all in deeply oversold condition. They were, I thought, uh, relatively cheap comparatively to where they traded before. And I thought they represented good values. But rather than buying the stocks themselves, I introduced the idea of of selling uncovered puts, which basically obligates you to buy the stock at a certain price. And I I mentioned that I would like to buy them all just a little bit lower. And you get paid to do that. And in all of those cases, the trades would have worked out quite well. Sound is actually lower, but if you had sold uncovered puts, the premium from the uncovered puts covered pretty much the entire amount that you would have been underwater on the stock. So all of those have worked out well. And that's really not it. I'm not saying that to brag. I'm saying that to emphasize the the buy low, sell high approach of the stock market. You know, the whole contrarian thing. All of those names when I mentioned them at the time, I'm sure your viewers rolled their eyes and thought, "Oh my god, what is this guy talking about? This makes no sense at all." But truly, you know, when you have an opportunity to buy low for me, that is the preferred strategy to momentum trading, which is the opposite, which is buying high and selling higher. I'm looking to buy low and sell high. And I think when I'm able to buy low, my risk is relatively limited. And by selling uncovered puts, it gives me the opportunity to to lower that risk even more and again collect income on a stock that I want to own at a price I'm willing to to pay anyway. Right now though, with the market trading at all-time highs and all sorts of stocks trading near their highs, you don't have a lot of lowrisk situations. You don't have a lot of things that have sold off enough to be considered oversold, to be trading near their lows. Everything seems to be, you know, in that mid-range. are neither overbought nor oversold. They're sort of neutral. And for me, that's not an attractive area in which to sell uncovered puts. So, if I'm bullish on things, what I like to do at this point is now I'm now I'm talking about speculating on the call side of things. That doesn't mean I'm necessarily wildly bullish. It just means that from a riskreward perspective, there's more upside than downside. And if I can use an option the right way, a call option the right way, I can limit my risk if I'm wrong and the stocks move lower while still having even more exposure to the upside if I'm right and things move higher. >> Yeah. I think what you can learn from that, Jeff, is that you need to adjust your strategy as an investor depending on kind of what the market condition is, what the economy is like at that moment. That it's not a one-sizefits-all strategy. that the the the strategy you have at one point might not work 3 months down the road simply because of the market conditions changing and you need to be nimble and adjust as an investor. I think that that is really important advice uh for people to pay attention to. So this is the strategy for the moment when we're at a market with all-time highs and a lot of bullishness out there. What is your strategy moving forward? And I know you have three examples for us. Uh let's get to that first one, Jeff. >> Sure. I'll give you the first one. The first one is the Treasury bond market. Right now, TLT, if we go back a week, nobody liked Treasury bonds, right? Treasury bonds were were at yearly lows. The yields are at highs. Everybody's panicking. You know, we're $40 trillion in in federal debt. Ridiculous amount of debt that's out there. So, everybody's worried about the Treasury market going bonkers. Well, that creates an oversold condition. If you look at TLT, which is the Treasury bond ETF, you'll notice that it's very, very oversold. It's trading below all of its various moving averages. Uh, it's extended far away. Nobody likes it. the sentiment is horrible. Well, what happened was on Wednesday, the Treasury SE Secretary, Scott Besson, came out and said, "Well, you know, we're going to intervene in the market to help support the the price of the long-term bond." Now, I had speculated that was probably coming because two weeks ago when the yen was in trouble and the Japanese government came up and stepped up to to buy the yen, our Treasury Secretary said, "Hey, we're going to step up and help support the yen, too." And I thought, that's a little bit odd. You know, you don't typically have one country going in to help support another country's currency. And we can say, yes, it's nice because they're allies and Japan's always been good to us, except for maybe Pearl Harbor, as as the president said. But that's not the way things are done. We do things for our own benefit. And so my thought at the time was, let's look into why this is actually happening. And why it's actually happening is if you look at what happens when the yen rallies, treasury bonds tend to rally. So, President Trump's talked about lowering interest rates for the longest time. Nothing has been able to do that because the Treasury bond market doesn't really care what President Trump says. So, President Trump says, "Hey, I'd like to see long-term interest rates come down." Scott Besson says, "Hey, I have an idea. Let's buy the yen. We'll prevent them from selling the treasuries and Treasury bonds will go up." That worked briefly, but then Wednesday, he came out and said, "We're going to intervene in the bond market, and we're going to buy twice as much of the long-term bonds. We'll sell the short-term Treasury bills. use that money to finance bond purchases. And of course, on Wednesday, the Treasury bond market took off. I think that marks a low in the Treasury bond market. So, I think between here and October, Treasury bond prices probably go higher. So, I like the idea of buying TLT here. Now, TLT is trading around 828 $825 a share. So, a 100 shares of that stock is going to cost you 8250, $8,250. If you use a 10% stop loss, that means you're willing to risk $825. Well, why not take half of that? Take 400 bucks, go over to the option market, and you can buy a handful of call options with an October expiration for maybe a buck. So buck meaning $100. So you buy four call options on TLT that give you the upside for 400 shares while reducing your risk in half. So instead of risking $825, you're only risking $400. And then the balance of that money, the rather than $8,250, you're only taking 400. So you've got 7,850. Just put it in your money market, sit in the treasury bills, do whatever with it so you're not at risk. So that has lowered your risk and increased your potential return. So I like that trade just from a riskreward perspective. Plus, I think it's time for a counter trend rally in Treasury bonds. >> Yeah, this is a hot topic one. This one has been all over the headlines this week. So, also very timely. I really appreciate you finding us some names that are kind of moving exactly in the market right now that we're seeing uh all of the headlines and the biggest moves around. >> Well, I'd take credit for that, but I won't. I mean, it's really, you know, Mr. Bessant came out and made that possible, >> right? Yeah, absolutely. It's paying attention to what's happening. I think that's another really uh solid point of advice for investors is to always pay attention to what's happening and don't ignore those headline moments uh in different parts of the economy. It might not be, you know, specific to the market or even specific to your stocks, but this is a market that you can't ignore either. And it's another opportunity for investors. So, I love that. I want to talk a little bit about this is for basics for some some of our viewers. You might be already in this world and this all makes perfect sense to you. But a question for those who've not really explored options yet. Let's talk about what you stand to gain if you're only risking half the investment. And let's say Treasury bonds do go up by 20% by October, that that call option date that you were talking about. What kind of a gain do you get with the the option strategy that you just suggested? >> Well, I'm going to make this a little more reasonable because a 20% rally in the Treasury bond market would be enormous. So, I I I it's hard to imagine that happening, but TLT currently trading around 82, you can argue that it could easily be 86. And that is my upside target by October. So, it's just a 5% rally in Treasury bonds. So, if you were to buy TLT at 82 and it goes to 86, you've made four points 400 bucks on 100 shares. That's reasonable. Well, that's a that's a decent gain over the course of a couple of months, but it's nothing too exciting. Rather than doing that, what I showed you earlier was I I said, you know, you could take half the amount that you would be willing to risk and so that would be $400 and buy some call options. You could buy uh and I'm not making this a specific recommendation because it's going to depend on, you know, individuals and what's happening in the market at the time and everything else. But right now, you could buy the TLT October 83 calls. give you the right to buy TLT83 for a buck. So it gives you all the time until October 16th is the expiration date and for one or $100 you can buy the opportunity to buy TLT at 83. If TLT goes to 86 by October expiration those options are trade for $3 because you have the right to buy it at 83. TLT is at 86. That's the value of the option when there's no time left. So those options will triple in value. So your $400 becomes 1,200. This is the beauty behind using options the right way rather than making say $400 in the stock or risking $800 in the stock. You're risking $400 to possibly make $800. So the riskreward has flipped. You have much more reward versus your risk. And that's the right way to use options. I'm not in any way going to advise somebody to take the entire 8,000 they would put into TLT and put it in the option market. Yeah, if I'm right, you do really, really well, but if I'm wrong, you get crucified. So, let's be reasonable about it and use options the right way. And and by doing that, you can decrease your risk and increase your potential reward. >> Thank you so much for breaking that down. I think you explained that incredibly well about the potential gains that you can have and also how to do this without risking so much. I think that so many people avoid options because they're worried about the risk, but the way that you explain that makes a lot of sense why people should be looking at this market a little bit more. Let's move on to the second idea you have, Jeff, for investing in this all-time high market that we're in. >> Okay. One of the sectors that has not performed very well is natural gas stocks. EQT is a a good example or Antaro Resources, AR, or uh CRK is another stock. I throw the symbols out there because the names escape me, but I know the symbols. All of those have they're relatively low. They're cheap relative to their historic norms. All of them make sense from a buy low, sell high perspective. the potential behind that. But what I like about it in in particular is natural gas is notoriously difficult to trade. But there are certain times of the year where it makes sense to be a buyer of natural gas. And it's just like anything else. You want to buy things when they're out of favor. Natural gas in August is out of favor because nobody's talking about heating their homes, right? It's 100° just about everywhere in the country. Nobody wants natural gas right now. And the price of natural gas, if you look at it, it's hitting a a yearly low. But natural gas tends to bottom in August. You can go back the the last 3 years and you can see how it bottomed in August and in 2023, 2024, 2025. So the the rally that happens from August to October can sometimes be quite substantial. So natural gas UNNG is the the exchange trader fund for natural gas. So it mimics the price of natural gas. It's trading around $10 a share right now, which is near near its low for the year. If natural gas just has a a modest rally between now and October, UNNG could be, you know, $12 a share. So, I like the setup that you have because I don't think natural gas gets much lower than where it is today simply because it's August. Nobody's buying natural gas. The price is already depressed. Nobody likes it. But when you get into the winter months and everybody talks about it, you know, it's time to to start heating their homes. That's when natural gas prices tend to spike. And the market is a discounting mechanism. So it happens prior to that actually occurring. So I think UNNG is a probably a pretty good speculative buy right here. You can buy an option on UNNG, give you the right to buy the the stock at 10 all the way until October 16th and ride that out. And I believe the the $10 call options on UNNG right now are trading around 60. So you could buy those for 60 and if if UNG does in fact go to 12, those options will triple in value. >> Yeah. And this is a concept that we've had many people talk about and that's you should be looking at stocks when nobody is talking about them. I think seasonality is a great uh point about this is that no one is talking about natural gas in the middle of summer. >> Well, absolutely. And that's, you know, that's the basis of of a contrarian strategy. You want to buy things when they're out of favor. You know, you want to buy a bikini in October. You don't want to buy it in May, right? >> Absolutely. I buy all of my kids clothes a season ahead because they're cheaper at that point, right? It just makes sense. So, the market kind of works that way, too. I love this bargain hunting in the market and uh some really great examples of how to do that. I love the way that you break everything down, Jeff. It's so easy to understand, even a very complex uh way of investing, or at least what some people might consider complex, but Jeff makes it seem much more simple. If you want to check out that free fiveday challenge and really get his step-by-step guide on how to use options without risking, not as a gamble, but as a way to really derisk your money in the market. Make sure to scan the QR code or click the link in the description and take advantage of that free 5day ironclad income challenge today. Again, this offer won't last forever, so go out there if you want to try and really just learn a little bit more with Jeff. Okay, we've got one other strategy to talk about. The third stock recommendation you have, and this is one you've already previewed for us a little bit. >> Okay. So, if you think I'm I'm absolutely off my bonkers, and there's there's no way the market falls from here, and the market's only going to go straight up, then you have to buy the semiconductor stocks right now. The reason I say that is semiconductor stocks were that was the name. That was the only thing you had to own pretty much all year until we got to June. And then the semiconductors peaked and they've been doing nothing but falling ever since. And this rally that we've seen over the past several weeks, while everything else has participated, oddly, semiconductor stocks are trading well off their highs. And in fact, SMH is trading down about 15% from its high. SMH, by the way, is the semiconductor ETF. So, if this market is going to continue higher, then the semiconductors are going to have to play a game of catch-up. So, if you think that's possible, and maybe it is, because who knows, Nvidia is supposed to report earnings a little over a week from now, and maybe the market rallies in anticipation of, you know, big numbers out of Nvidia, then semiconductors need to play catch-up. And so, if you want it, I I think there's a reasonable, I'll say, lower risk opportunity in the semiconductor sector simply because it's trading far off of its highs where everything else has already made new highs or is approaching its highs. So, a game of catch-up would be fantastic. Now, I wouldn't go out and buy SMH though because SMH is still 500 straight around 565 right now. That's 56,500 for 100 shares and there's risk. You know, if I'm wrong in the semiconductor sector continues to fall off, it could fall 10 15 20%. So, there's a lot of potential risk in owning that. Even though I think the upside is maybe 10, 15, 20%, the downside is also equivalent. So, I'm not a big fan of that. I am however a bigger fan of using a very small portion of the money that I would otherwise commit to the stock taking that over the option market and buying one or two or three call options that give me the same upside potential while reducing my risk a lot. So this is the the prime opportunity if you're looking at trading call options or looking at limiting your risk in the broad stock market. This is the strategy for that. You buy a call option rather than buying the stock. You don't buy 10 times as many call options as you would normally buy with the stock. You buy one or two or three if you really want to leverage your bet. But buying the options rather than buying the stock limits your risk on the downside because if if SMH pulls back all the way to 520 where it bottomed back in April, you've lost what? $40 a share in the stock. $45 a share in the stock. Over in the option market, I can lose $5 on the option and then that's my maximum risk. So the most you put into the option is the most you can possibly lose. That's the beauty behind using options. Again, the really important thing is not to overleverage a trade. You don't buy 10 times as many call options as you would otherwise own in stock. You buy two, maybe three, and you you limit your risk that way while having accentuated upside. That's the philosophy behind most of the way that I trade. I like to find contrarian ideas and then I like to use call options to speculate on the upside. And then if you can combine it with what we talked about the last time, which is selling uncovered puts to generate the income. Gosh, if you can sell an uncovered put option and take that money and buy a speculative call option, then you create a situation where I'll hesitate a little bit to say this, you're basically trading for free. You're using house money to to support your speculative activity, if you will. >> So interesting. I I like though that you explained some of that risk in there, especially in this one in particular, that there is a potential upside of maybe 15 to 20%, but that same amount of downside does exist. So know that with with all of these, like you said, with where the market is today, there's a little bit more risk out there. Looking at this contrarian approach because we are at that all-time high and there is that kind of bullishness out there on semiconductors in particular. Do you think there's more risk trading this way in the tech sector simply because of how big of moves that we can see in this market? You mentioned Nvidia. The market can swing a lot in either direction after an Nvidia earnings report. >> Well, there is. And normally, it's the tech sector that tends to be more volatile than most other sectors. But frankly, what I've seen recently, Bridget, is everything is much more volatile than it used to be. Look at what happened to Bitcoin on Wednesday. Bitcoin shot 10%. It had done nothing for 6 weeks and all of a sudden it's 10% higher. Look at what happened to the gold stocks recently. They did nothing for weeks and then all of a sudden they're up 25, 30%. you see stocks moving 20 30 40% in a day where it's becoming a normal situation. So that's also where I think using options to limit your risk is very very smart because you if you have a situation where a stock can possibly go up 40% it also means a stock can possibly go down 40%. So if you own the stock you have that amount of risk associated with it. If you own the option, yeah, you can lose 100% on the option that you buy, but you're paying so much less than what you're putting up for the stock and the rest of your money sitting there in a nice comfortable safe money market, bank account, whatever, out of the out of harm's way, if you will. So, in this particular market, there is a lot more volatility, but in this particular market, if you use volatility as your friend, you can actually do quite well trading options with it. >> Yeah, we've noticed exactly the same thing. A lot more volatility in this market. you've been investing for decades. So, for you to say that we're seeing more volatility now, I do believe that that is exactly the kind of market conditions we're in and it's not going to go away anytime soon. So, this is a great strategy for investors to consider as you want to invest in the kind of market that we are living in right now. Jeeoff, thank you again for breaking this down so well for our viewers and giving some great ideas of how to invest in the kind of market we're in. Again, don't forget if you want to learn more from Jeff to check out that free special offer to try out his Ironclad Income Challenge for the next 5 days. It'll be a great challenge and a great educational course for you, too. All for free. Thanks, Jeff, for your time today. We love having you on the show. Hopefully, come back again sooner next time. If you want to hear more teaching from Jeff, just go back and watch that interview from May. The trades he recommends might not be there, but he gives so much great information on how to use his strategy in different market conditions. You can learn more from Jeff by watching this full interview