In the last FOMC meeting of the year, the Federal Reserve decided to leave in every observer’s favorite phrase “considerable time.” When the Fed says “considerable time,” it reminds me of being a kid, asking your parents for something and getting the reply, “maybe later.” Maybe later? What does that mean? Is it yes or no and when is later? The Fedspeak translator 2014 still hasn’t told me what “considerable time” equates to on the calendar.
What we do know from the Fed’s statement and follow up from Chair Yellen is the Federal Reserve is in no hurry to raise interest rates. The Fed said it will remain “patient” regarding a rate hike, which is viewed by many as the Fed will continue to digest jobs and economic data before making any decisions.
The equity markets seemed to like the latest news from the Federal Reserve. After a week or so of getting knocked down, the Dow and S&P are making another move to the upside.
The Trade
- I’m looking a bit further out in the calendar and am trying to buy the February E-Mini S&P 500 2100-2150 call spread at 13 points ($650.00) or better.
- The maximum value of this spread at expiration is 50 points ($2500.00)
- I would like to stay in this as long as possible, with an initial exit target of 30 points.
- We are long premium in this trade, so risk is defined to the cost of entry plus fees and commissions.
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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.
