How to Protect Your Portfolio from Inflation's Second Wave

**SPEAKER_1** (0:01)
This is Invest Talk from KPP Financial, helping investors make sense of the markets one day at a time. Here's your host, Justin Klein.

**Justin Klein** (0:15)
Good afternoon, fellow investors, and welcome back to Invest Talk. This is our Tuesday, July 14th, 2026 edition of Invest Talk, and a lot to unpack on today's show. Quite the move in markets. We saw the NASDAQ up nearly 1% on the day, and we kind of flipped back and forth between what's leading, what's struggling.
It's a very interesting market, I'll tell you that much. We are in OPEX week, so there's a lot of kind of short-term funkiness going on in markets. We also had some inflation data come in. We're going to look at this and a lot more throughout the show. And our job here each every weekday is to help you become a better investor by answering your finance and investment questions and bringing you data and perspective developed over 25 years of investment experience. So I don't want to hesitate to reach out with your question. Now in just a bit, we'll talk about today's market performance and run down the two topics that we'll get to throughout the hour. But first, let's tackle this caller question now.

**SPEAKER_3** (1:21)
Hello, Invest Talk. Calling to ask a question in regards to covered calls.
I heard one of the podcasts and a caller asked about covered calls. And Justin replied with saying that sometimes it's better to sell closer to in the money covered calls. I was just wondering why that's the case, if we could get a further explanation on that. Thank you.

**Justin Klein** (1:49)
Well, just in general, if you're looking for more consistency, you're going to be selling closer to in the money or at the money or near the money options.
It doesn't have to be in the money. So let's say stocks trading at $50, say $48 per share. You can sell $45 strike, that would be in the money, $35 call, you can sell $50 strike call. That would be kind of near the money or at the money. Or you can sell like a $55 strike, which would be going further out of the money. You're not going to get nearly as much premium. So when you keep it relatively close to the current price, you're getting decent premium and you're hedging in the downside. So, you know, if you have a 48, if you talk to a 48, you sell a 50 strike, you might get three or four dollars putting how far out you go in premium. And that's going to hedge you considerably in the downside. And if things go right, you're still going to make, you know, 10-ish percent plus on your overall position, but it hedges you nicely on the downside. So here's the thing with cover calls. It's never a blanket statement, it's never, it's, I say that between sectors, you know, you have to compare companies within sectors.
You have to understand the risk of their balance sheet and their business model and the cyclicality of the business model and all that. That goes down to stock selection. But then when you're layering on options trading on top of that, there are so many other factors to consider because you're going out in time. How much time should you give for that option to potentially expire if you're buying it? You want more time. If you're selling it, you want less time. Then what strike you should get? What's the current implied volatility? Which means what's the premium that you're either paying if you're buying or getting if you're selling an option? If you're doing a cover call, you're selling an option.
And these become infinitely complex and then you layer on the chart. Where is support and resistance? And that is a big factor when it comes to selecting the strike in the near term. And I would argue that's probably the most important factor. If you're selling a cover call, where is that resistance level? Is it close to resistance or is it a bit of ways away? To me, you want to sell it a little bit, a strike a little bit below resistance. A little bit below resistance, so you're still getting decent premium, but you're not going to give up too much upside if it does start to test that resistance.
That's the way we manage it. This is why we run our Equity Income Plus Strategy, our Cover Call Strategy. Not only can we pick the whole portfolio, what the portfolio looks like as opposed to just selling covered calls on an index, for example, but we can select different strikes, putting a more bullish on the market or a different name or worse, resistances, all of these things matter when you're thinking about running a covered call strategy in general. So I hope that helped, but yes, the numbers show you want to be trading closer, those strikes a little bit closer to the current price, as well as not very far into the future, talking 30 to 60 days out max. Now, in a wonderful show yesterday, we looked into the story behind this headline, simple portfolio checks could save you from costly mistakes. We looked at all the things that you should be doing now that we hit the halfway mark in the year a little past that to rebalance your portfolio, check in on your year plan, all of those things to make sure you're hitting your particular goals. We also added a listener question on Micron Technology, MU, and if you happen to miss it, go check it out. The best way to get every show is to follow InvestTalk wherever you get your podcast. Now, we have a lot of ground to cover over the next 45 minutes. Here's what I have planned. Our main focus point concerns the story, how to protect your portfolio from inflation's second wave. Oil prices are resurgent. The Fed is flagging war-driven inflation risks, and consumers are already feeling pain at the pump. So this is raising fears that a second inflation wave could undo the progress made over the past few years. So is the current macro setup truly comparable to 2022? How is it the same? How is it different? How should investors think about it? We'll dig into that and much, much more. Also, some big changes to the German auto industry because of Chinese automakers. Is this a harbinger of things to come for maybe domestic automakers? We'll look at that.