Editor’s Note: At the age of 65, I’ve decided to take up golf again. I quit playing ten years ago after my wife and I moved inside the beltway of Washington DC. There weren’t many public golf courses in the area, and I didn’t have the time to drive out to the suburbs to play.

But now that we’re living in southeastern North Carolina, golf courses are plentiful and close by. I started taking lessons a few weeks ago to sharpen my dormant game.

Once he found out what I do for a living, the golf pro giving me lessons asked what he should do with his money. My terse response: “Put it under your mattress until the trade wars are over.”

I hope he took my advice. He’s helped me become a decent golfer again, so the least I can do is help him stay out of the rough on Wall Street.

Trader’s Market

The stock market’s brutal selloff over the past week has spared few companies. There aren’t many businesses that can thrive while the global economy is held hostage by the Trump trade wars.

That does not mean that you cannot make money in this market. However, it does mean that a conventional “buy and hold” approach to investing probably won’t do you much good right now.

In short, this has become a trader’s market. And if you time it right, you can still make a lot of money in a short amount of time like I did a few days ago.

Not all companies are in the business of making or selling products manufactured here or elsewhere. In that respect, the trade tariffs roiling the stock market do not have a direct impact on their revenue streams.

One such company is Tradeweb Markets (NSDQ: TW) based in New York City. It makes money by “operating electronic marketplaces for rates, credit, equities and money markets” primarily for institutional investors.

Until a week ago, TW was enjoying a nice ride up the charts. On April 2 it closed above $149 after trading below $100 one year earlier. The stock was on a roll with seemingly no end in sight.

Swaps Make a Comeback

On March 26, I recommended buying a put option on TW. A put option increases in value when the price of the underlying security goes down.

For aggressive traders, I suggested buying the put option that expires on April 17 at the $135 strike price. And since TW was trading well above that price at that time, we could buy that option for just $1 per share.

For a few days I was worried about this trade. TW was still going up even though the stock market was going down. That is, until late last week when TW suddenly plunged below $130 (circled area in chart below).

At the start of this week that same put option could be sold for $9 per share. In less than two weeks we made an 800 percent profit on this one trade!

By the way, that happened during the same week that the company reported record trading volume during the month of March.

You may be wondering why Tradeweb Services took a dive at the same time its trading volume was increasing. The answer has to do with the nature of the contracts that trade on their exchanges.

Many of those contracts are “swaps” which essentially transfer the risk of losing money on a bond to another party in exchange for a fee. Hence use of the term swap to describe them.

If that word sounds familiar, it’s because swaps are what drove former Wall Street investing banking giant Lehman Brothers out of business in 2008. Lehman bet a lot of money that mortgage securities would not go down in value.

Same Result

We all know how that story ended. The real estate market crashed, and a lot of the mortgages Lehman guaranteed ended up being worth pennies on the dollar.

Lehman did not have enough cash to pay up on the swaps that it owned. As a result, the investors that held swap contracts with Lehman got stiffed. In Wall Street parlance, that is referred to as counterparty risk.

Apparently, Wall Street is afraid that a lot of Tradeweb Services’ clients may end up with a lot of counterparty risk on its hands. Even though it is not a party to the swap contracts that trade on its exchanges, a collapse of that market would put a big dent in its revenue stream.

It remains to be seen how big of an impact the Trump trade wars will have Tradeweb Services’ Q2 results. If the reciprocal tariffs are postponed or cancelled, then its share price could recover quickly.

At this point, it makes no difference to me which way TW goes. I’ve already made my money on the company, even if I never owned a single share of its stock. Now, I can focus on my golf game again!