I’m Focusing On Safe Income Trades. Are You?

Investors might feel overwhelmed trying to follow the news. There was a stock market crash… and then a partial recovery that restored the confidence of many investors. Unemployment and other economic indicators are at historically bad levels. Then oil futures prices fell below zero, something that seemed impossible as recently as last week.

Here’s a chart of the spot price of West Texas Intermediate crude (the benchmark for U.S. prices) for context…

Uncle Sam (And The Fed) Step In

Fortunately, the Federal Reserve has been keeping up with the news… and acting aggressively.

The Fed committed to purchase bonds “in the amounts needed” and followed through by buying as much as $75 billion in Treasury securities a day. If the Fed kept up that pace, they would own all $17 trillion worth of Treasuries within a year.

As the crisis eased, the Fed pared back its buying. In the past week, purchases averaged about $15 billion a day. The Fed is now on track to buy about $2 trillion in Treasuries by the end of June.

The Fed also bought about $500 billion of mortgage-backed securities and is boosting lending to states, cities, and corporations through other programs.

And we can’t forget the Fed cut short-term interest rates to zero.

At the same time, Congress has approved more than $2 trillion in aid and an additional $450 billion (or so) is on the way to approval this week.

The speed of action has been impressive. In time, we will know if the programs were effective. For now, all we know is there is a lot of money in the economy and much of it seems to be flowing into the stock market. However, all that money has done little to reduce the market’s risks. We should have more insight into risk in the next few weeks as companies report earnings.

So far, we have seen earnings from big banks. These firms more than doubled their reserves for bad loans, indicating they expect unemployment to take some time to recover. This is important since it tells us that banks could face financial stress if consumers struggle to pay their bills. The Fed is acting so aggressively because they are working to avoid stress like we saw in 2008.

How I’m Trading Right Now

If you’ve been following along, I’ve told you about how I’m trading this market. I’m not fighting against the Fed, and I’m not forcing trades — only sticking to the best short-term trades that have the highest probability for generating income for me and my subscribers.

One of those trades was with the SPDR Gold Shares ETF (NYSE: GLD). I’m happy to report we closed that one out with a gain. Another recent trade has been so successful that we’ve repeated it twice. And we’re about to go 3 for 3…

In the past month, we’ve already sold two puts on the iShares 20+ Year Treasury Bond ETF (Nasdaq: TLT). And both have resulted in gains. The first trade (TLT Apr 150 Puts) netted us $60 per contract, resulting in a 2% return on margin in only eight days, or 91.3% annualized. We closed another winning trade (TLT May 150 Puts) in this ETF yesterday, netting $57 per contract, for a 1.9% return on margin in 14 days, or 49.5% annualized.

These kind of results are all the more significant when you consider the roller coaster other traders have been riding…

All of these factors point to low interest rates for some time, and TLT remains among the safest income investments available. That’s why this week, I’ve pointed my readers to a third opportunity for a low-risk, high-income trade in TLT.

The point is, you need to be looking for safe ways to earn extra income in this market. That’s why my “bonus dividend” strategy is more important than ever…

If you’d like to safely generate extra income from stocks you already own — with the least amount of risk possible — then you need to learn more about this. Check out this report to learn more.