By Steven M. Sears
Stock and options investors are rarely reminded that they can afford to do nothing. In fact, it's just the opposite.
Investors are always told that they should buy Wall Street's latest flavor of the day or chase after this hot stock. The Street has been so successful at reinforcing this behavior that there is now a widespread belief -- and this is the stock market's Sword of Damocles -- that anyone who owns stocks and trades options should be in perpetual motion.
This issue is raised because the end of the investment year means that nary a day passes without some bank strategist, or some pundit, waxing confidently, often in significant detail, about what will happen over the next 12 months in one of the world's most complex environments: the financial markets.
Before rushing into action, or joining the cavalcade fretting about a market bubble, remember Thanksgiving. The market was seemingly hot and shaking off fears of an artificial intelligence bubble. Since then, those megacap stocks that have led the market higher for so long seem to be falling from leadership, which was the opposite of the Thanksgiving tempo.
Now, most anyone who helped themselves to an extra Thanksgiving serving of Big Tech probably feels like a useful idiot. Based on recent trading, it looks like they created a profitable exit for bigger investors who took profits from winning positions. This is how hedge funds justify fees of 2% and 20%, or even 3% and 30%.
So unless you live off O.P.M., which is to say Other People's Money, think about not making any big decisions ahead of 2026. If you feel compelled to add new positions suggested in 2026 outlooks, consider renting exposure via call options.
Calls, as everyone knows, give investors the right to buy stock at a certain time and price. Calls are less expensive than stock. Many in the O.P.M. crowd buy calls to harness stocks that they are analyzing so that they don't miss any gains.
Use any stock you like, but we will illustrate the call trade with Interactive Brokers, an electronic brokerage firm we have championed since it traded in the $20s. The stock is down more than 10% over the past month as it is viewed as a proxy for sophisticated members of the hot-stock cult.
Despite price volatility, the company is well run and well positioned once the end-of-year concerns are alleviated.
More interest-rate cuts should lift stock prices and help the financial sector. The same is true if the company or a peer reports good earnings.
With Interactive Brokers around $63, the June $65 call could be bought for about $6.50. If the stock is at $90 at expiration, the call is worth $25.
We chose a six-month expiration to provide time for the end-of-year prognostication to be overshadowed by the realities of 2026 -- whatever that might be. Interactive Brokers tends to profit from market volatility because clients are often part of the trade, trade, trade crowd that long-term investors should monitor, though not join.
To be clear, there is nothing wrong with big banks stuffing marketing channels with 2026 predictions -- it's a fun, useful exercise -- but there is little reason to do much more than read and reflect.
The reports offer insights into what bank sales forces -- financial advisors and sales traders -- are marketing. Many advisors have discretion to manage client money and so there is often movement in recommended stocks.
But beyond that, the reports are like Christmas trees, or candles on a menorah. They're pretty to look at, but they have a limited life span.
Email: editors@barrons.com
This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
December 17, 2025 02:00 ET (07:00 GMT)
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