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00:00 Josh
First, maybe, you know, maybe high level, Scott, we’re we’re wrapping up 2025. We’re heading into the new year. Just, I’m curious broadly, Scott, how do you want to be positioned here?
00:16 Scott
I think very cautiously optimistic. Volatility is cheap enough that to own some upside is great, but volatility is also cheap enough to get that protection to allow you to stay in the market right now. And and for those that, you know, maybe don’t want to sell off any of those losers or haven’t done that yet or, you know, are optimistic for next year, that’s great. But I am always extremely, extremely conservative, both the way I trade on the floor and in my other portfolios. And and I think volatility is too cheap. So it is a great opportunity to be able to hedge yourself, whether it’s with S&P options, you know, that trade right here or the VIX that trades next to me. It is a great way to hedge yourself and still remain exposed to the marketplace.
01:05 Josh
Sound advice, Scott. Let’s get some trades, my friend. So, we’ll start here with the uh, the cybersecurity sector. Walk me through what you’re seeing with Palo Alto Networks.
01:14 Scott
Sure, I really, really like cybersecurity in general and and when I go to a certain sector, I typically like to go to best in class. So, for me, cybersecurity, Palo Alto is the one. This is where I like to do what’s called a poor man’s covered call. A lot of people that own stock will write or sell call options further out just to generate some income against their long stock. As an option trader, what I like to do is buy a deeper in the money call option. So in the case of Palo Alto, it’s the 140 strike call, which is like $45 in the money. That cost me $50. So that’s what it costs me or, you know, for each contract that is, that would be 500, excuse me, $5,000, but it’s a lot cheaper than buying the stock. and then I can sell calls against that. This allows me to have a really nice upside and use the capital efficiency of using options rather than just owning the stock outright. I think Palo Alto will be an outperformer for the year, probably has upside of 25 to 30%.
02:22 Josh
All right, from cybersecurity, Scott, to apparel, walk me through the trade with TJX.
02:30 Scott
I think apparel, retail in general might be tough, might be really tough for the year. But those on, let’s call it, you know, the mid to lower tier levels like a TJX, like a Costco. I think those are the ones that are going to shine. And again, when I go to a certain sector, I like best in class. I think TJ Maxx is really well diversified and you’re going to see a lot of shoppers that are, you know, maybe at that upper level, maybe at a Macy’s or something like that, start to trade down or start to shop down a little bit. So, very similar type of trade in TJX that I just had in Palo Alto. In fact, what I’m going to do is I’m looking at the 120 strike call that I can pay about $40. I’m going out to September for that. So that’s like owning the stock, deep in the money call, and then again, I can sell uh, income generating call options against that. It allows me to stay vested, it allows me major upside. And I really think again, TJX, 30, 40% upside this year.
03:36 Josh
Last one, Scott. Let’s talk Fintech and SoFi. That that what a move for that name. I mean we’re up about 80% this year. What’s the trade, Scott?
03:47 Scott
Yeah, this one may be a little bit more riskier than the other two, but similar sort of trade. This one I’m going out over a year. I’m going a leap option, January of 2027 to buy the 20 strike call. That is right, the 20 strike call. I can do that for about $11. That’s not much above the premium or parity from where SoFi is trading right now. Again, this allows me opportunity throughout the year, 13 months to keep selling upside options against it. I think SoFi out of all of the uh let’s call it newer Fintech type stocks, even with that 80% run this year, has a lot more to go in 2026.
04:22 Josh
Scott, great to see you. Happy holidays.
04:25 Scott
You as well, Josh.