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How to Use the ‘Rail Strike’ to Your Advantage

by | Nov 29, 2022 | Market Outlook


Zero percent probability.

No way… No how… Not happening…


There is a zero percent chance the United States will have a rail strike in a week.

Are you panicking like President Joe Biden?

Did President Biden forget that he’s… President Biden?

He’s calling on congress to vote for a deal that would give union workers more pay… everything they want. And they have the leverage.

But right now, there’s a panic that we might have a rail strike.

Maybe it will happen for a day. Maybe two days. But that’s how America works.

We wait until the last minute to strike a deal.

Then, politicians take a victory lap, acting like they’re brilliant negotiators — even though they’re using your money to prevent an economic crisis.

Don’t fall for any of this. Use this situation to your advantage.

Hello, Money

Yes, we’re barreling toward a recession. But while we do so, we also have a crisis on the Mississippi River. Ships are stuck because of drought. And all the while, our train companies are paying more and more money for expensive diesel fuel.

It sounds dire.

But it’s not. The narrative is what you need to ignore.

CSX Corp. (Nasdaq: CSX) is one of the most important rail companies in America. It’s getting incredible rates right now as it moves grain at the end of this year’s harvest. It’s the backbone of oil and natural gas transport at a time when the Biden administration is stopping pipeline construction.

At what price do I want to own this stock?

I’d say $27.50.

I can sell the May 19, 2023, $27.50 strike puts for $0.90, and buy the $25 puts for protection at $0.50. That’s a $0.40 gain on $2.10 in underlying margin.

It’s also a 19% return on an options trade on a stock I want to own for the long term.

I keep saying this… there are four things I want to own…

Rail. Food. Oil. Housing.

These are the things we need.

If I sell that spread and the stock moves higher — because the crisis is averted — the value of that spread falls, and I can make money.

If the stock trades sideways for five months — I make money.

And if the stock does pull back — if it goes to $27.50 — I’m buying it at a P/E ratio down around 14.5 times earnings!

Let’s Talk Momentum

There was a rather nasty momentum move Tuesday morning at 11 a.m. ET. But it’s important to note that the line in the sand right now for the S&P 500 is the 3,900 level…

Meanwhile, I want to draw your attention to the SPDR S&P 500 ETF Trust (NYSE: SPY). What you’re looking at below is the one-minute volume-weighted average price. That blue line is what algorithms love to track all day long…

chart showing standard deviations

But the other bands I’m showing are standard deviations. As you can see, the SPY fell to the third standard deviation area during Tuesday’s session. And what happened after this?

Well, the algorithms are programmed to buy.

They’re killing the trend in the market. So even though we had a sell-off for logical reasons, we’re seeing buying down in the third standard deviation. This matters because it’s becoming increasingly predictable in this market.

In a positive momentum market, this is very important “inside baseball” knowledge.

It might go against your logic, but it’s a way to trade the SPY in short-term moves.

I’ll explain more about these deviation bands in the coming days.

Have a great week,


WRITTEN BY<br>Garrett Baldwin

Garrett Baldwin

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