My Covered-Call Strategy Paid Off, Now I'm Going for the Gold (Miners)

Out of Favor Gold Is Poised to Stage an Upside Reversal

The stock market continues to hang in there, probably better than it should given the litany of negative headlines in March and early in April. The conviction by most investors, provided these circumstances, has been most impressive. Equities barely moved even after the POTUS stated over the holidays that U.S. and Israeli armed forces would bomb Iran back to the Stone Ages if no agreement was hammered out by Tuesday night. And these intrepid investors will be rewarded today with a massive relief rally after a two-week ceasefire was announced after the bell yesterday. Whether this temporary peace holds is another matter altogether.

Somehow, despite the sharp uptick in volatility in equities over the past five to six weeks, my portfolio is just over 1% away from its all-time high-water mark. Given where futures are Wednesday morning, I should be sitting at new portfolio highs by market close today. This contrasts to the S&P 500, which entered trading today 5.5% away from its highs.

I was fortunate enough to have a good chunk of my portfolio in covered-call holdings within the energy sector months prior to the breakout of hostilities. Most of those positions are set to expire throughout the spring and early summer, even if energy stocks sell off sharply this week, which I expect them to do. My portfolio has also benefited from buying both Humana (HUM) and United Healthcare (UNH) near the tail end of their recent big dips on worries around reimbursement in 2026. These fears turned out worse than reality this week when a better-than-expected reimbursement rate for Medicaid Advantage plans was disclosed.

I continue to put a little ammo back in the market incrementally during days that equities pull back. Mostly in blue chip names like AbbVie (ABBV) and Salesforce Inc. (CRM) , which are selling at reasonable valuations after recent declines. Tuesday, I opened a new covered-call holding in the VanEck Gold Miners ETF (GDX) , using call strikes significantly below the current trading prices of this ETF. Gold miners are off more than a collective 20% from their highs late in February, thanks to the fall in the price of the yellow metal. Western governments are still printing fiat currency and not addressing their large federal debts and yawning annual fiscal deficits. The sector should get a boost once the Strait of Hormuz is opened and energy prices fall substantially.

This incremental and opportunistic buying will continue to be my game plan for as long as this conflict drags on without a permanent resolution. I will not be chasing today’s bounce in equities but using it to roll forward my options on the few covered call laggards I am carrying in my portfolio.

The bombs have stopped falling, but significant damage has already been done to the global economy thanks to this regional flare-up. The International Energy Agency executive director said this week that the ramifications from the closure of the Strait of Hormuz on the global economy amounts to more than the 1973 oil embargo, 1979 Iranian revolution and the 2022 invasion of Ukraine combined. It will take time for critical supply chains to repair themselves. Some 75 energy facilities, chemical plants, and refineries in the Gulf region have been hit by missiles and drones. Approximately one third have sustained significant damage that will take months or years in some cases to fully repair.

In addition, once the Middle East conflict fades from the headlines, investors will start to focus more on some of the other major issues throughout the economy. These include the private credit market that seems to be deteriorating further by the week, a moribund housing sector and increasing challenges in key parts of commercial real estate. The huge rise in energy and commodity prices due to this regional war will show up as higher inflation in the coming months and quarters as well.

I am staying cautious but opportunistic and my portfolio is prepared for either direction the conflict with Iran takes in the weeks ahead. My hope is hostilities in the Middle East are heading to a close, but I plan to remain positioned if this turns out to be just a temporary truce.

At the time of publication, Jensen was long ABBV, CRM, GDX, HUM, UNH