He just returned from the southern U.S. Trump loves to operate in chaos, but markets don't. His negotiating strategy is to throw a hand grenade into a room and walk away. Best to separate the bluster from the reality (i.e. trade tariffs which still overhang the market). Trump won't renogate NAFTA as badly as people fear. His bark isn't as bad as his bite. And this market could reach new highs. Option premiums have risen dramatically. The biggest theat is higher interest rates--and they are coming. Can consumers withstand a 4% rate on a US 10-year bond? At 3.5%, he'd sell more equities. In Canada, the debt ratio is a serious concern.
(Past Top Pick on June 15, 2017, Up 6%) He'd assumed interest rates would rise. They didn't. Rates rise and the value of TLT goes down. He sold a $126 call and he wanted it to close below that. It closed at $128 instead. He made 6% on the trade because he got more premium when he sold the option than when he would've had to buy it back on the last day of trading (last June).
(Past Top Pick on June 15, 2017, Down 0.15%) Disappointing. Active management would've helped this ETF. The advantage of put-writing in the U.S. is that you're selling option premiums that have implied in the contract the dividend in the underlying security. The capital is flowing into the fund as capital gains whereas the dividend is ordinary (taxed) income. He'd rather get the former (dividend implicit in the option premium as a capital gain).
(Past Top Pick on June 15, 2017, Up 6%) Covered call. He bought at $59 and sold at $60. Sold a December option; in December it was trading at $61. In his last show, he was throwing income ideas out there, recognizing that interest rates would rise. BCE now at $53.50 with another dividend raise looks attractive. All the telecoms have taken a hit, but he thinks that will settle now and rebound.
How does the VIX work? It meaures volatility on options implied on the S&P 500 (in Canada: the iShares TSX 60 ETF). Basically, the VIX goes up when equities go down. Short volatility--inverse volatility ETFs which happened in February--is a very dangerous game. Those investors literally went backrupt overnight.
Options strategy in current volatility? Volatility has increased, though it's not dramatic right now. Premium levels are higher than 12 months ago. He would sell that premium, because it's worth more than it was before. If you're buiying options, the tend to cost you more. If you're bullish on a stock, either buy the stock or write a covered call. He'd write options in this environment.
Bank stocks or ETFs? He prefers U.S. banks with their rising margins, while he doesn't see higher interest rates helping Europe's banks which also face tight margins. He likes both US and Canadian banks. If you trade options on banks, do the individual stocks for diversification to protect your downside.
Have you ever been assigned an option (approaching expiration) without your approval? No, they can't assign an option that you're long. You choose that. When you're short an option, the person who bought it has the right to exercise it--which means you're assigned. If you are long an option and go into expiration like the last day of trading, then the next day if your option is in the money you would want to get it assigned. If the option is in the money at any amount, it's settled automatically.