September inflation data just dropped.
In case you couldn’t tell by your recent trip to the gas pump/grocer … goods are getting more expensive.
I have a plan to beat this inflation.
Make no mistake, the war with Iran is to blame for rising prices.
We’re in the seventh month of an oil-choking conflict overseas. Nobody expected it to last this long. Least of all, Trump. But here we are…
Every day that goes by without a permanent peace deal, the timeline for elevated price hikes extends further, and further, and further.
On Wednesday, October 14, the International Energy Agency (IEA) said the diesel squeeze is already set to last well into 2027.
Diesel prices are one of the most consequential factors in global inflation because diesel powers the trucks and heavy machinery that transport goods around the globe.
Every time you buy a gallon of milk, diesel prices are factored into the cost.
You’ve probably already noticed higher prices. And it’s horrible timing as we near the holiday season…
I have a strategy to sidestep this inflation.
The CPI
The Fed’s target inflation is 2%.
The main measurement for inflation is the Personal Consumption Expenditure (PCE), but the CPI is also closely monitored and affects us more immediately.
The U.S. hasn’t seen 2% CPI since late 2020.
On the chart below, you can see the year-over-year change in the CPI since May 2020. It got close in the last few years, but it’s rising again.
The inflation that came after COVID is a bit of a stimulus outlier, but I included it to give a good history lesson of where we’ve been and where we are now.
Climbing inflation means more than just higher prices…
The Fed monitors and promotes stable inflation in the U.S. by adjusting interest rates (the cost of borrowing). When prices rise too quickly, the Fed raises interest rates to discourage borrowing. That dampens economic activity and stops people from shelling out cash.
If people stop buying, price increases have to slow down to meet weaker demand.
Still with me?
Higher inflation and higher interest rates also impact the U.S. government’s ability to borrow. Making it more expensive.
That’s part of the reason the bond market is so disrupted…
Remember we’ve been watching the iShares 20+ Year Treasury Bond ETF (NASDAQ: TLT) selloff this year.
- Global governments are strained, paying higher rates while borrowing increases.
- Inflation and general economic woes contribute to less confidence in U.S. bonds.
- Climbing inflation continues to exacerbate the issue.
That’s the big picture.
When everyone’s talking about the state of the economy at Thanksgiving, you can rest easy. You’re “in the know”.
But for our day-to-day worries, all that matters is higher prices at the pump.
Here’s my solution…
My #1 Stock To Watch
Annual inflation in 2025 measured 2.7%. Which means you paid (on average) 2.7% more for your goods last year.
Our goal: build our yearly income by at least 2 – 3% to negate the effects of inflation.
How do we do that?
By trading short-dated options.
Short-dated options contracts move exponentially compared to their underlying assets.
For example, the top stock I’m watching right now is CCC Intelligent Solutions Holdings Inc. (NASDAQ: CCC).
It just spiked 20% to make new 6-month highs after the company announced that private equity firm GTCR and Elliott Investment Management are in advanced discussions to purchase the company.
A 20% spike is pretty good… but why buy shares of the actual stock when the options contracts spiked +400% over the same time frame?
We can trade the same move, with the same catalyst, and there’s so much more meat on the table.
Here’s a chart of the recent spike to new 6-month highs:
Here’s a chart of the $7.50 call contracts that expire October 16:
I’m still watching CCC this week.
The price is consolidating around the $7.68 resistance from August. That level could act as support to push the price higher.
Here’s a look at the recent intraday price action:
At these levels, we’ve got a well-defined risk level (in case the trade fails) and upward momentum with a credible catalyst to push the stock higher.
These contracts gained +400% within the week. There are multiple setups like this all over the market, every week, for the rest of the year and into 2027.
Don’t let inflation dip into your wallet.
Trade the hottest setups to protect against an economic backdrop we can’t control.
Stay Street Smart,
Jeff Zananiri
