Collect Premium While NSC Recovers

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This morning we are recommending another trade on Norfolk Southern Corporation (NYSE:NSC).

The market is selling off on skepticism around trade, and as regular readers know, transportation stocks are sensitive to trade issues.

When we took a position on NSC in early November, we said the bullish case for transportation and railroad stocks would get stronger as the trade issues get resolved. But we wanted to approach the trade from an “income perspective.”

With trade uncertainty still high, NSC is in a similar situation as it was then.

The recent volatility has pushed option premiums up. That gives us a chance to collect extra income on NSC as we wait for the trade situation to resolve.

There are plenty of concerns in the market. However, selloffs before the end of the year tend to set traders up for fresh buying and so-called “window-dressing” at the end of December.

We think this justifies maintaining a relatively bullish outlook. However, hedging by selling additional premium should allow us to keep our Strategic Trader portfolio plenty profitable during the volatility.

From a technical perspective, seeing some selling as the S&P 500 approached the 2,800 range was to be expected.

This is a sharp correction, but what we know is that consumer spending is still high, earnings growth rates are very positive and commodity prices have bounced over the last week.

That should be enough to keep the transportation sector, which includes NSC, relatively defensive in the short term.

Because we are holding shares of the NSC common stock, we’re selling covered calls to earn premium.

To find out which covered calls we’re selling — and to get access to our full portfolio of income-generating trades — consider signing up for risk-free trial subscription to Strategic Trader today. 

InvestorPlace advisers John Jagerson and S. Wade Hansen, both Chartered Market Technician (CMT) designees, are co-founders of, as well as the co-editors of Strategic Trader.

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