If you are thinking of jumping in the water for the reports tomorrow, be careful. These are the days the big fish come out to eat. If you don’t think you are a shark watch out, you might just be the bait.
NEWS RECAP
The release of the Federal Reserve’s Beige Book yesterday afternoon gave a bit more insight on the Fed’s current view of the economy. “Modest to moderate pace” was the phrase used to describe the growth rate of economic activity from late February to early April.It was also noted that consumer spending and vehicle sales saw “slight to moderate” gains in most districts. Real estate on the residential side and construction activity increased at “a moderate to strong pace” in all districts.
On the employment side, hiring increased at a “measured” pace across all districts. Small signs of growth aren’t exactly an economic turnaround, but they will allow the Fed to continue with their current quantitative easing strategy. If you like to live your life in moderation, this Beige Book is for you.
TRADE IDEA
It is the first week of the month and tomorrow brings us the Employment Situation numbers. I think traders should be extremely cautious when trying to “play” a number. One way to do it without too much exposure is to be long option premium. I think the larger potential reaction will be to the downside. With the June E-Mini S&P 500 trading near the 1600 level, I like buying the June E-Mini S&P 500 1550 Put at 7 points ($350.00) or better.This is a short term play, trying to take advantage of a possible sell off after tomorrow’s report. If things go our way, I am looking to get out at the 15-20 point area. If the numbers are bullish for the equity market, I would look to get out at a loss of three points or less.
RISK DISCLOSURE: THERE IS A SUBSTANTIAL RISK OF LOSS IN FUTURES AND OPTIONS TRADING. PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS. 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. 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.
= = =
Check out the TraderPlanet Summer Journal–a free quarterly trading education publication.
Read an exclusive interview with StockTwits founder Howard Lindzon.
