What Happens If Coronavirus Gets Worse?
In George W. Bush’s memoir, “Decision Points,” the former U.S. president wrote about a private exchange with former Chinese President Hu Jintao. Bush recounts telling the Chinese leader that the thing he worried most about, and that kept him up at night, was another attack on the United States. He then asks Hu, “What keeps you up at night?”
Hu’s response: “25 million new jobs a year.”
Why do I bring this up? Well, as you know, I’ve weighed in on the coronavirus story (and how it might impact markets) a few times recently. And this anecdote is an important reminder that the economy is chief among the Chinese government’s most important priorities.
Don’t get me wrong… the loss of life caused by the coronavirus outbreak is an immense tragedy. Every day, we hear dozens of new stories documenting the human impact. This one from The New York Times, particularly struck me.
Citizens could be right to question the government. Recently, a few Chinese cities have started setting seemingly impossible rules about when businesses can reopen.
For example, two large cities, Guangzhou and Shanghai, are requiring companies to provide sufficient facemasks for their workers before they can reopen. That sounds reasonable as a precaution to prevent the spread of disease. But China only has capacity to produce 22 million masks a day. That’s not even enough to give one mask per day to the roughly 24 million people in Shanghai, let alone both cities.
What Happens If Things Get Worse
As a rule, governments should avoid issuing rules that are physically impossible to follow. This is a problem that could lead to instability in China even if the coronavirus is quickly brought under control.
As an analyst, I have to look past the heartbreak and consider the longer-term consequences. Currently, an epidemic is slowing China’s economy and leading citizens to question the government’s competency — a potential problem for authorities. One longer-term consequence from all of this will certainly be the ensuing impact on the economy, and how China deals with that fallout. And if the problem drags on any longer, a slowdown in China could affect supply chains around the globe. That could impact a number of companies, like big American retailers, for example.
There’s a two-week incubation period for the virus. So there is a chance this could move from the front page to the history books by the end of February. If it’s still in the news a month from now, China — and the world — will face an economic crisis.
3 Trades You Can Make Today
In the meantime, we remain in a bull market and my Income Trader readers and I will trade accordingly. We’ll do that by making low-risk put-selling trades to collect upfront income on stocks we wouldn’t mind owning in the unlikely event the trade goes against us.
If you’re familiar with options at all, then you know that this conservative method of options trading is just about the closest you’ll ever get to a “win-win” when it comes to investing. And thanks to my award-winning Income Trader Volatility (ITV) indicator, we can be sure we’re finding the highest-quality trades possible.
In fact, if you’re familiar with how put options work, then you’re in luck… I’m going to give you three potential trades you can make based on my ITV indicator. Keep in mind, they are not official Income Trader recommendations. As such, I will not include my usual full, detailed analysis. That’s reserved for my premium readers only. However, I’ve included the specific option, as well as some additional information in the table below.
This Week’s Top Candidates (Sell To Open) | ||||||||
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Option & Expiration Date |
Bid/Ask Mid | 20% Margin | Return (Margin) | Ann. Return | Probability Expire Worthless | Earnings Date | ||
Sell CVCO Mar 200 Puts March 20, 2020 |
$0.50 | $4,000 | 1.3% | 12.0% | 95% | N/A | ||
Sell MSTR Apr 130 Puts April 17, 2020 |
$0.75 | $2,600 | 2.9% | 16.0% | 91% | April 28 – May 4 |
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Sell IHI Mar 250 Puts March 20, 2020 |
$1.20 | $5,000 | 2.4% | 23.1% | 89% | N/A |
(Keep in mind, prices can and do change frequently. So do your own research before making the trade. I always recommend using limit orders when entering an option trade. A limit at the midpoint between the bid and ask prices will often be filled fairly quickly.)
If you’ve never used options before, you might be a little worried about trying. I understand why, but after helping thousands of folks use them—people who are probably a lot like you—I can say that they’re not nearly as difficult or risky as you might think. Most of my new subscribers had never traded options this way before… and they are now making thousands… even tens of thousands of dollars in extra income. Every month.
Since we launched Income Trader in 2013, we’ve closed 219 trades… and we made money on 199 of them. That’s a 90.9% win rate. Readers who followed my weekly trades and sold 10 contracts each time have collected nearly $2,500 every month. If you’d like to be one of them, simply go here now.