At the beginning of September we saw the E-mini S&P 500 open at 1999. The index then posted a new contract high of 2014.50 mid-month, followed by a steady decline. We did not see a large pull back on any kind but the December contract closed the month at 1960.75, down nearly 2%.

The downward trend has continued, giving October one of the worst starts that we have ever seen. When you mention October and markets to many people think “crash.” Some of the worst days in market history have occurred in October. My grandparents remember 1929, and experienced another crash along with my parents in 1987.  I remember the fear and concern amongst friends for their parent’s jobs and wondering what might happen to the real estate market.  I witnessed and experienced firsthand the start of the financial crisis in 2008.

When you look at things closer, September tends to be a greater down month than October. I’m looking at the latest sell off as an opportunity to play a bull strategy for at a discount. I like buying the October E-Mini S&P 500 1975 call at 7 points ($350.00) or better. There are 14 days left until expiration, so this is a short term trade. I am setting an early target exit at 18 points. If the market continues to drift down, I would look to keep losses to 3 points. Risk is limited to the cost of entry plus fees and commissions.
For those interested Walsh Trading is holding our weekly grain webinar on Friday October 3rd at 2 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.