As we approach the end of March a common discussion can be found in many offices and homes across the country; how are you doing with you picks? In case you are not one of the many casual participants in the Madness of March, I’m not referring to market picks. Millions of people participate in anything from a $5 bracket pool, to high stakes wagering. On trading floors you might be able to find a group willing to trade puts and calls on the teams in the field.
It’s always amazing the amount of time that some people will spend on research for their bracket sheet or fantasy sports. What’s even more amazing is the smaller amount of time those same people spend when considering a trading plan. If you are reading this publication, you probably don’t fall into that category. You have taken the time to read and research trading and strategies. Give yourself a pat on the back for getting a bit of an edge over the rest of the crowd.
I don’t think the break from recent contract highs in the S&P 500 is quite over. To me the market appears like it wants to drift a bit further down. I think this will be a short term move, and we could see a move to the upside again. I like playing a bear put spread for the short term, buying the April E-Mini S&P 500 1830-1790 put spread at 10 points ($500.00) or better, The options expire on April 17, so if we are looking for a move in the next 14 days. I am setting an upside target exit of 25 points. If we don’t get a continued push to the downside I would want to try to limit a loss to 5 points or less. We are long premium so risk is limited to the cost of entry plus fees and commissions.
The sporting events in March are a great distraction for the long (never ending) winter we have had here in the Midwest. Enjoy and embrace the madness while your teams are still alive. Just be sure not to lose focus on your tasks at hand.
For those interested, Walsh Trading is holding our weekly grain webinar series this Thursday March 27th at 3:00 PM Central time hosted by our Senior Grain Analyst Tim Hannagan. Tim has been ranked #1 by Reuters and Bloomberg in 2011 and 2012 for his most accurate end of year price predictions for soybeans and corns. Registration is free and a recording will be sent to you if you can’t attend the live event.
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.
