This Friday’s job numbers might be getting the microscope treatment from many traders. The Fed has hinted that rate action might take place in the near future (June, July), and market participants will be going over the data with close attention. Traders will be making sure that there is nothing in the employment report that may cause the Fed to back off its latest stance.
I always remind people that trading numbers, announcements, or events can be very hard. If you are on the wrong side of the market you can get beat up pretty quick. It is usually best left to the professionals. If you feel like you still want to step into the storm that can occur, I recommend defining risk.
I am looking to take advantage of a directional move in the E-Mini S&P 500 using a strangle. Buying a call and a put at the same time enables us to potentially benefit from a move in either direction. Since we are long premium, we will also be defining our risk.
I like buying the June E-Mini S&P 500 Week 2 2120-2070 strangle at 9 points ($450.00) or better. These will expire on June 10th, but the intention is to stay in the trade for a shorter time frame. I am setting an initial target exit of 20 points. If you are able to get into the position ahead of Friday morning’s numbers, I would have your exit working in case there is any kind of big move. I am looking to keep a loss to 5 points if the trade is not working.
For those interested Walsh Trading is holding our weekly grain webinar Friday June 3rd at 2:00 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 corn. Registration is free and if you cannot attend live, a recording will be sent to your email upon signup.
John Weyer
Director of Commercial Hedging
Walsh Trading Inc.,
jweyer@walshtrading.com
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.
