The strong upside move in the equity markets has not slowed down this week. We continue to see new highs put in the market without much resistance. The S&P seems to still be embracing the low interest rate environment. I’m not quite sure if there is anything out there right now that will keep a cap on the market over the next few weeks.
I’ve stated previously that I think there will be a correction of some sort, some time down the road. My gut feeling is that it will occur in late September but it won’t be as big as we have seen in the past. I also think there may be some back and forth moves ahead of September that would take some of the fuel out of a downward correction in the near future. For the time being I am trying to figure out a way to play a market that still has potential to the upside, but could give some back at any moment.
I am trying to collect a bit pf premium and play a strangle in the September E-Mini S&P 500. I am looking to sell the 1970 put and the 2240 call for 12 points ($600.00) or better. These options expire on 9/16/16 so we have less than two months to be in the trade. We are short premium so be sure to see if the margins are suitable for your trading. I am setting an initial target exit at 2 points. If we get a large swing in either direction and volatility kicks up, I would look to limit a loss to 5 points.
For those interested Walsh Trading is holding our weekly grain webinar Thursday July 14th 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 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.
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.
