Investors may be experiencing some anxious moments over Fed Chairman’s Ben Bernanke’s press conference today. In a bit of foreshadowing, President Obama in an interview earlier this week added speculation that Bernanke has “already stayed a lot longer than he wanted or he was supposed to. “

Immediately, traders began speculating that the Fed Chairman might announce he is leaving on Wednesday. That is unlikely to happen; the President will most likely make that announcement this fall. 

What is potentially expected is that the FOMC will keep their fed funds target rate at zero to 25 basis points.  Many analysts will also be closely watching for any clues as to when the Fed will taper their bond purchases. It is my view, that rising long term interest rates are becoming the unintended consequence of too much quantitative easing and possibly becoming a problem for some Group of Seven central banks, especially the Federal Reserve and the Bank of Japan.  I also believe that the era of printing money will soon be winding down, and the trend toward rising global interest rates will become the norm rather than the exception.

E-MINI TRADE

With stock indices already showing impressive gains of over ten percent for the year, the time could be right for the Fed Chairman to scale back the $85 billion in bond purchases. Therefore I am proposing the following trade.

Look at buying the August E mini S&P 1580 put and selling the August E Mini S&P 1500 put for 10 points or $500.00. The risk on the put spread is the price paid for the spread, which in this case is $500.00, plus all commissions and fees. The max you could collect here is 4,000.00 minus commissions and fees, if both strikes finish in the money at the time of expiration. August option expiration is August 16th, and leaves enough time of almost two months for a potential pullback.

RISK DISCLOSURE: THERE IS A SUBSTANTIAL RISK OF LOSS IN FUTURES AND OPTIONS TRADING.  PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.  THIS REPORT IS A SOLICITATION FOR ENTERING A DERIVATIVES TRANSACTION AND ALL TRANSACTIONS INCLUDE A SUBSTANTIAL RISK OF LOSS. THE USE OF A STOP-LOSS ORDER MAY NOT NECESSARILY LIMIT YOUR LOSS TO THE INTENDED AMOUNT. CURRENT EVENTS, MARKET ANNOUNCEMENTS AND SEASONAL FACTORS ARE TYPICALLY BUILT INTO FUTURES PRICES. A MOVEMENT IN THE CASH MARKET WOULD NOT NECESSARILY MOVE IN TANDEM WITH THE RELATED FUTURES AND OPTIONS CONTRACTS. THIS REPORT IS A SOLICITATION FOR ENTERING A DERIVATIVES TRANSACTION AND ALL TRANSACTIONS INCLUDE A SUBSTANTIAL RISK OF LOSS.