Wealth and Health Podcast: Tom Lee—"STRUCTURAL LOW IS IN!"

Host: David Jaffee
Episode Date: May 6, 2025

Episode Overview

In this episode, David Jaffee analyzes market insights discussed by Tom Lee and “Invest with Henry,” focusing on whether the market has already hit a structural low following a period of extreme volatility. The episode emphasizes tactical options strategies for investors in the current sideways or range-bound market environment, while highlighting mentality, key technical indicators (especially the VIX), and evaluating specific stocks and sectors for options trading. The host also touches on the psychological aspects of trading, calling for patience, discipline, and actionable strategies tailored to a time of persistent uncertainty.

Key Discussion Points and Insights

1. Market Volatility and Structural Lows

• Volatility at Historical Highs

  • The episode opens by contextualizing the current period as "one of the most volatile times" since 2020 and even 2008.
  • Quote:

    “If there's one thing that proves certain for sure no matter what the circumstances are, is that the investor that stays calm and takes advantage of opportunities does far better than investor who panics.” (C, 01:13)

• Significance of VIX Levels

  • Tom Lee’s analysis of the VIX is highlighted, noting the importance of certain numerical thresholds:
    • VIX at 60 (market panic—previously during COVID-19 and the 2008 financial crisis)
    • Closing below 37.56 and then below 31 signal recovery post-structural low.
  • Quote:

    “The VIX above 60 has only happened a handful of times. It happened, of course, this past week, it happened during the GFC, right?” (D, 01:41)

2. Is the Bottom In? Historical Precedent

• Comparisons to Past Crises

  • Detailed comparison of current VIX movements versus those during the 2008 crash and COVID-19.
  • Structural lows typically appear shortly after spikes above VIX 60; as VIX subsides under 31, markets historically are past their lows.
  • Quote:

    “When you close below 31 you were past the low because the low was March '09... during COVID the VIX didn't close below 37.56 until March 24, 2020, and it didn't close 31 until April 2020. But you are already past the low.” (D, 02:23)

• Range-Bound Market Expectations

  • Jaffee expresses a belief in a range-bound market rather than a quick V-shaped recovery, citing continued uncertainty (geopolitics, interest rates, legislative gridlock).
  • Quote:

    “My gut feeling is that we're going to be range bound because there's too much uncertainty. I think that continued volatility is something that we're going to experience...” (B, 02:57)

3. Tactical Options Strategies in a Sideways Market

• Sell Put Options to Monetize Neutrality

  • Selling put options is advocated as an optimal strategy if the market trades sideways, to generate income and position for potential stock ownership at attractive prices.

  • Quote:

    “If the market is going to be range bound to sell put options... the best opportunity will be to still create income and to purchase Companies as they are going back up...” (C, 04:22)

  • Considerations for stock selection (Palantir brought up but host prefers large-cap tech such as Google, Amazon, Microsoft due to stability and recent price action).

  • Quote:

    “I'm not sure that Palantir is the best stock to sell put options on... I believe that a better value play would be to sell put options on something like Google or Amazon or Microsoft...” (B, 03:47)

• Covered Calls and Strike Selection

  • For investors comfortable owning shares, selling covered calls after buying undervalued stocks, or selling puts at a strike where you genuinely want to own the stock, is recommended.
  • Quote:

    “If you're going to sell puts in order to collect extra premium, then you'd want to sell puts at a strike price where you wanted to take ownership of the stock... probably selling a 50 or 60 delta...” (B, 04:53)

4. Psychological Aspects of Options Trading

• Decision Fatigue and Ownership Commitment
  • Host points out a common psychological pitfall: traders lose nerve as prices fall towards their put strike, despite originally being comfortable with assignment.
  • Notable Advice:

    “Anytime you put on a trade, do I feel comfortable owning this security at this strike price? If the answer is yes and the market falls, take ownership... If not, roll, manage or close it out for a loss.” (B, 06:44)

5. Current Sentiment, Caution, and Opportunity

• Loss Aversion and Capitulation

  • Many investors have left markets in frustration; those who remained disciplined are now recovering as the market stabilizes.
  • Limiting further delay is emphasized; now is “the urgent time” to act on new investment opportunities amidst reduced valuations.
  • Quote:

    “Right now is essentially the urgent time that you should be taking action. There should be no more waiting and guessing...” (C, 07:43)

• Cautious Optimism

  • The market is described as having “lost its low” with risk now more asymmetric to the upside, though the environment may remain choppy until macro uncertainties resolve.
  • Quote:

    “I believe that the low is already in, and I believe that we're going to trade sideways until some of the uncertainty is no longer a factor, and then we'll continue to climb higher.” (B, 09:40)

Notable Quotes & Memorable Moments

• On opportunity in volatility:

  “The investor that stays calm and takes advantage of opportunities does far better than investors who panic.” (C, 01:13)

• On the VIX as a signal:

  “VIX above 60 is basically COVID and the GFC. Now it's coming back down.” (C, 02:09)

• On the psychology of assignment:

  “When they sell a put option... they don't mind getting assigned... But as the market continues to fall... suddenly they no longer want to take ownership...” (B, 06:44)

• On current trading mindset:

  “Now is a good time to be cautiously optimistic.” (B, 06:44)

Important Timestamps

• [01:13] – Behavioral advantages: Calm vs. emotional investors
• [01:41] – Tom Lee on VIX and structural lows
• [02:23] – VIX historical milestones and implications
• [02:57] – Jaffee on range-bound market and continued volatility
• [03:47] – Stock-specific put-selling strategies debate (Palantir vs Big Tech)
• [04:53] – Covered calls and selecting appropriate put strikes
• [06:44] – Psychological pitfalls: Assignment discomfort in options
• [07:43] – Comparison to 2008; urgent action call
• [08:34] – Current market sentiment and outlook
• [09:40] – Concluding thoughts: sideways trade then gradual recovery

Summary Takeaways

• The recent market volatility is reminiscent of crisis periods, but evidence (especially VIX history) suggests that a structural low is likely in.
• Investors should focus on generating income and positioning through put selling and covered calls, targeting stocks they genuinely want to own.
• Mental discipline—committing to a position and accepting assignment risk—is crucial for long-term success.
• Now is a good time to cautiously add exposure, taking advantage of temporarily depressed valuations while awaiting resolution of broader macro-political risks.

For further tactical instruction and mindset coaching, follow David Jaffee at BestStockStrategy.com.