Portfolio Design with TheTape

Portfolio Design with TheTape

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Portfolio Design with TheTape
Portfolio Design with TheTape
Divided Driven Bounce Backs

Divided Driven Bounce Backs

How to adjust overlays in BP and UPS

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Mark Phillips
Aug 26, 2024
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Portfolio Design with TheTape
Portfolio Design with TheTape
Divided Driven Bounce Backs
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A metaphorical financial-themed image with BP (British Petroleum) and UPS logos. The image incorporates elements of oil drilling and brown delivery trucks to represent the core operations of both companies. An oil rig is shown extracting oil that transforms into dollar signs or coins, symbolizing dividends. On the other side, brown UPS delivery trucks are shown delivering packages that also transform into financial symbols. The background includes subtle stock market graphs to indicate volatility, with a blend of BP's green and yellow and UPS's brown and gold color scheme.

Setting the Table:

  • Prices whipsawed last week, but landed up just over 1% after Powell waxed appropriately dovish. The first half of august was a decline that paralleled interest rate cut expectations. Now that summer camp in the Tetons is over, the market has adjusted to slightly lower cuts. 

  • Swaps are now pricing about 32bps for the September meeting (down from 50 at the beginning of the month) and over 100bps by the end of the year.

  • After flirting around early in the week, short term skew closed distinctly lower after the speech. The steady 10 day values at fixed deltas showed little change in shape, but dropped at full 1.5% points at the money by the close Friday. 

  • The exact same dynamic happened in QQQ also, though a bit more exaggerated moves up and back last week.

  • Liquidity throughout the week also stayed solid as traders processed a relatively surprise free week.

With rates headed back down in the next 1-3 months, there are two reasons to consider dividend focused stocks. First of all, steady dividend payers are likely to have more robust business models to weather some of the choppiness that’s likely as monetary policy adjusts. Secondly, buffering some of this volatility with hedged equity or other overlays provides premium conversion opportunities. Do you prefer it the cash or protection?


Working on a trading plan? Harvested Financial conducts bespoke trading workshops to think through a new strategy or portfolio reallocation. Topics can include stock selection, overlay implementation, and much more. 

Whether you’re a professional or individual, we’re here to identify, analyze and execute on opportunities.  


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