Tuesday marked the first day of semi-annual testimony in front of Congress from Fed Chair Powell, along with additional Fed speakers to follow. With mounting pressure from President Trump and even a couple of Fed Presidents noting that recent inflation prints could set groundwork for a rate cut at the next July meeting, the fixed income market isn’t for a lack of things to watch in the coming weeks.

Following Monday’s action though, notable technical developments occurred on the charts of the US Treasury 10-Year Yield Index (TNX) and iShares Barclays 7-10 Year Treasury Bond ETF (IEF). The TNX chart fell below 43.00 (4.3%) to return to a sell signal after having been on a buy signal since the latter part of May. This action brings the TNX down to test the bullish support line, setting up a potential trend change– possibly the eighth in a 24-month span. The shifting trend changes in recent years highlight the consolidation of interest rates with recent action appearing to bring rates to an inflection point in the mid to low 4% range.

Meanwhile, the IEF chart shifted back into a positive trend following Monday’s action – marking the eighth trend change in 24 months on the default chart - after having been in a negative trend since mid-April. This follows the fund giving consecutive buy signals after a retest of the April chart lows in the latter part of May.

Along with the trend change on the default chart of IEF, the trend flip coupled with the fund moving above the 200-day moving average during Monday’s trading brought the ETF’s fund score back above 1. While only slight, it does give the ETF a positive score direction based on trending improvement, but like the TNX chart above, the long-term picture for the fund has shown consolidation within the lower to upper $90s.  

The relative strength picture continues to be negative relative to the market, equity-related assets, and commodities, and what leadership there is within the broader Fixed Income asset class remains narrow. Given the bevy of Fed speakers this week though, investors will closely watch for additional signs of near-term improvement or a negation of the recent positive developments.

Over the last year, the average volatility of stocks in the S&P 500 Index (SPX) has steadily increased. There has been pops in volatility, most notably in April this year and August 2024, but even when broad market volatility stabilizes, average stock volatility has steadily headed higher. Whatever the reason for higher individual stock volatility, 2020 seems to mark a turning point as for most of the 2010s average stock implied volatility remained below 30. Since 2020, average stock implied volatility has been around 30.

One way to take advantage of higher implied volatility on individual equities is to implement a covered call strategy at opportune times. “Opportune” is somewhat vague, but there are some general ideas like when a stock is trading at resistance or is in heavily overbought territory. Secondly, the premium of the call needs to be high enough to justify giving up some potential upside. A starting point would be that the call needs to provide at least 4% downside protection. For example, if a stock was trading at $100, then the minimum a call should be sold for is $4 with more being even better. Also, the annualized static return, the annualized return of selling the call if the stock were to trade sideways, should be above 10%. The annualized static return is an important metric because it ensures that the covered call strategy is worth the time of having the underlying position covered by the call being sold. In the watchlist tool, users can select the “Covered Call” tab to distill holdings to meet specific criteria, as shown below.

There is a great setup for a covered call strategy on Meta (META) as it’s a highly rated stock with four out of five technical attributes, trading near the top of its ten-week trading band, and has resistance nearby. Remember, a covered call strategy is a bullish strategy, so it’s important to choose stocks that are technically sound. The October 17th, $720 calls are trading just below $50 each which gives investors downside protection of 5.93% and an annualized static return of 20%. With the top of the trading band at $728 and resistance at $736, META may slow down on its recent move to the upside and the covered call strategy allows investors to bring in income while META consolidates or pulls back from these levels. While it’s by no means a guarantee that META doesn’t continue to push higher, the weight of the evidence shows that a covered call strategy is viable today.

Daily Option Ideas for June 24, 2025