Here we are the day everyone has been waiting for is upon us. Many have marked this week on the calendar for months, with great anticipation. You might think I am referring to the Rugby World Cup, but in this instance I am talking about Thursday’s FOMC announcement.

Will they or won’t they? If they do, how much? If they don’t what will they say? How long can we stay in a near zero interest rate environment?  These are the questions many of us want answered. Everyone seems to have an opinion on what the Fed will do, but we will have to wait until Thursday afternoon for the answer.

I think a .25% rate hike may have been on the table up until the recent events in the equity markets. The stock market slide kicked off by global events (hint: China) brought a volatility to the market that we haven’t seen for years. The up and down, and down, then up again, had many of us wondering if we were looking at another 2008.  I don’ think that is coming, but I do think it gave the Fed enough concern to maintain current policy.

I have an opinion on what the Fed might do, but they did not send me their decision in advance. I think the market could respond in a few different ways, depending on what the decision is along with their statement. I am looking to play a move in either direction buying a strangle. I like buying the September E-Mini S&P 500 1940-2020 strangle at 8 points ($400.00) or better. This is a short term play with the options expiring this Friday. Risk is limited to the cost of entry plus fees and commissions. I am setting an initial target exit at 20 points.

 

For those interested Walsh Trading is holding our weekly grain webinar Thursday September 17th, at 3 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 corn. Registration is free and if you cannot attend live, a recording will be sent to your email upon signup.

 

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.