When certain markets are making options plays a more attractive investment. My next guest says elevated volatility is creating a premium for this strategy. Let's bring in now Mike Co, YieldMax strategist at Tiling Financial Group. the options playbook sponsored by Tastytrade. Mike, it is great to see you, especially on set. Um, start high level, Mike. You look at the options market right now. What are the important trends and themes we need to know about?

Well, I think everybody who looks at the options market, usually the first thing they look to is the VIX. And if you're looking at the VIX, it's slightly below average. Underneath the hood though, what's interesting is that single stock options remain bid. In fact, if we look at the relationship between those two, right now we're in about the 12th percentile. So that is a pretty low number. I mean, can index go lower relative to single stock? It can, but not a whole lot further from here. And so what that tells me is that this is a really good opportunity for people who are perhaps looking to hedge or something like that. You can buy a little bit of index protection, it's not overpriced. It's not incredibly cheap, but it's not overpriced. But the single stock options premium, I think there's a really nice opportunity to uh potentially sell some upside calls and call spreads, which is what we do.

Let's let's talk about a couple of specific strategies you lay out. One project you highlight looks like dividend paying companies. Why why that? Why do you like that setup?

Yeah, I mean, there's a couple of reasons. For one thing, we've seen such a tremendous run in the S&P. We've seen such a tremendous run in the hottest sectors, Mag 7, the chips, the semis, and I know we can talk a little bit about that too. But one of the areas that has been left behind is sort of the dividend aristocrat area. So, we have a portfolio that's got the Dow Jones 100 US Dividend Index stocks in it. That's your Proctor and Gambles, it's your Verizons, it's the integrated oil companies, Kimberly Clark. You know, toilet paper and diapers, people don't use less of that when things get woolly. So, we think we're pretty confident that that's a a stable bit of stocks. You get the qualified dividends, plus you collect some option income. But the most important thing about it is that the forward turn on that basket of stocks, even though they're up more than the S&P this year, is only 14.6. So the S&P up like, you know, 21 and a half times forward earnings, 14.6 times forward earnings. If anybody's worried about valuation, that's a nice place to be.

You did mention the ships, which have been a rocket ship. What's the smart option strategy there?

Yeah, I think this is the same situation. Look, I mean, I never am going to tell people bail out on a winning trade while it's still winning and this one still is winning. So you can certainly stick with it. But because there are all of these people who are enthusiastically buying those upside calls and keeping them bid, you can keep those stocks, sell some upside calls and call spreads against it. That's what our Soxy and Chippy strategies do. If you do the call spread strategy against the long stock, you're collecting a little bit less premium, but you don't have capped gains. So you can still get that participation, probably 70 to 80% of the capital appreciation of the underlying stocks and a little bit of a tailwind from a distribution as well.

These strategies you're laying out here, Mike, who are they, who are they for and who are they potentially not for?

So, the one that we were talking about with the dividends, I think that's really for anybody who wants to just have a stable platform of stocks and collect a modest distribution. We're talking about 7% distributions a year, about three, three and a half percent of that's coming from qualified dividends and the rest of it is options income and some capital appreciation. And again, those are mature stocks, Verizon, Proctor, Chevron, things like that. Uh obviously, the chippies and the Soxies, those are semiconductors. That's for people who are really looking for the more thematic trade and are trying to stick with this one. It has had a heck of a tear. I'm not telling anybody to sell it. Don't, you know, let your winners run for sure. But that's for somebody who's looking for uh a little more fast-paced environment.

How do you see, Mike, these strategies, like their their role in a portfolio? Like are they tools, like additional tools, arrows in your quiver or you know, they're here to replace stocks? How do you think through that?

If anybody has a portfolio that wants distributions, then these are the kinds of things they ought to be thinking about. Because most of the hottest stocks right now, they don't pay a dividend. But a lot of people who invest, they want a portfolio that pays them a little something because especially when you get to retirement age or maybe you're using it to supplement, you know, cash flow gaps in in your situation. You know, historically, before World War II, that's why people invested. You'd put money into into investments, they would pay you distributions and you would use those to live. I think recently people have been much more focused on capital appreciation, but I think if the population is aging and as people are looking to take more out of their portfolios, they're going to treat them more like endowments, pensions and trusts do and say, okay, we're going to look for a little bit of cash flow out of these.

Before I let you go, I just want your general, you've been a market watcher for a long time. Your kind of general take on these markets. Um, I hear some folks, Mike, they'll say this market makes no sense. We've got geopolitics and war. I got elevated oil. Others I've heard say it makes perfect sense because the earnings are so impressive. Just follow that. Um and I'm just curious to get your take. What how do you come down?

The S&P has gotten cheaper since the beginning of the year, even though the price has gotten higher, and that's because the earnings have grown faster than the price has gone up. And the difference is exactly what you're talking about, people concerned about geopolitical issues, people who are concerned about inflation, people who are concerned about the K-shaped economy affecting the lower-end consumers. But, you know, there is something that's important to remember and you know this because you've been watching the market almost as long as I have. Every bull market climbs a wall of worry. So, if as long as people are still talking about those things that should worry us, I become less worried, right? Because that means it's on everybody's radar. When people just say, oh, we're not going to worry about that, then then it's time to worry.

Mike always great, especially having John on said. Thank you, sir.

Yeah, it's great. Thanks.