Manage your risk wisely. Don’t let losing trades get away from you. When you are on the right side of the market be sure and take profits when available.
QUICK RECAP
Just a month after seeing an all-time high, the S&P 500 saw a serious sell-off. The index had four consecutive lower closes for the first time in two years. Tuesday’s session stopped the bleeding followed by another up day on Wednesday. It appears to me that there has been a sudden change of view by many of the market participants. Perhaps the all the talk of “tapering” the current Fed policy has given more than a few people market jitters.
IS IT A WASH-OUT OR REVERSAL?
Only time will tell if this recent downtrend is a reversal, or just a washout from the all time high. The equity market should still be appealing to many as a place for a good return on their investment.
The sell-off in the index markets is a mere dip compared to the plunge currently taking place in the once attractive precious metals. Bonds and Treasuries aren’t exactly providing the performance that investors and traders look for. Even with the possibility of the Fed cutting back on their buying spree, the equity markets still look like a good opportunity to other markets.
BULL CALL SPREAD
In anticipation of a possible move the upside, I am looking to buy bull call spreads. Right now I like the July E-Mini S&P 500 1630-1680 call spread at 10 points ($500.00) or better. Since the trade is long premium, risk is limited to the cost of entry plus fees and commissions. The short leg of this spread is right near the contract high touched in May. If buyers come back to this market, I am looking for the S&P 500 to flirt with the 1650 level. The July options expire on 7/19/13 so we are looking to take advantage of a bullish move n the short term. I would not risk more than 5 points from entry, with a target exit of 20 points or better.
REMEMBER THIS
Stay disciplined and stick to your plan. When you are on a good winning streak, be aware of what is working for you and enjoy your success. Stay humble, the market is bigger than any one trader. Leave the exuberant celebrations to the professionals, the Chicago Blackhawks.
RISK DISCLOSURE: THERE IS A SUBSTANTIAL RISK OF LOSS IN FUTURES AND OPTIONS TRADING. 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. WHILE 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.
