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What Stock Will Win With Covid?

Yo Pit Crazies,

Since I got the COVID Wednesday and it has spread through the house, some things have tripped in my brain.

I think this is my second bout with it, and this case is much less severe than the first, but lasting longer.

Everybody else in the house is pretty much asymptomatic.  

While one sample is not statistically significant, if a guy on a rock in Maine can get it, most people probably will until the immunity works.

How the US government handles that fact will make a big difference …

And that gives me these three BIG IDEAS

      • Covid is going to be with us for the foreseeable future
      • The stock and volatility market is OK with the current policy mix
      • The stock and vol market might not be ok if the current administration goes Vietnam

I believe the stock I have in mind will do well regardless, and I will explain the third bullet point.

Highs and Lows

VIX made a new low Friday and SPX made a new high.

In my mind that is confirmation about No. 1 and No. 2 above, but not #3.

What I mean is escalation a la Vietnam.

That means it is within the government’s control to double down on something not working, regardless of what the folks think. 

Lots of mandate trial balloons are flying around, so at least the Biden administration is thinking a bit before taking the next step. If the government accepts No. 1, I think overall that is more bullish, but that is still in question.

No. 3 is good for a 2-4% drop, at least, as no one I talk to wants to go back to June 2020.

Who’s Looking Good?

Now that I have pontificated in my delirium, I do like Walgreens (Ticker: WBA) a lot here.

The stock pays a 3.8% dividend and the WBA Aug. 20 50-strike calls are $.20 for a cheap shot and the 50/48 risk reversal is a slight credit.  I don’t see how demand for Covid-related services gets less in the next year or two.

I have been doing the RISK REVERSAL, long call and short put in WBA, and it has been working well.

The Lesson: Trade what is in front of you, but look around the corner.

To Your Trading Success,

AG

 

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