On Wednesday the Federal Reserve announced it will continue with the current taper (10 billion) of its bond purchase program. The latest cut brings the Fed’s stimulus program down to $55 billion in bond purchases a month, and was expected by most Fed watchers. What came as a surprise was the timetable the Fed Chair Yellen laid out for the Fed’s interest rate plan.

In what may be a turn out to be a “rookie” move, Yellen gave a timeframe for the Fed to start raising interest rates. The current taper pace would appear to end the Fed’s stimulus program in October or November. When asked how soon the Fed would look to raise interest rates after the stimulus program ends, Yellen’s response was “around six months.” This is very non Fed speak, and gave traders a clear idea that rate hikes could start in early 2015.

E-MINI PLAY

The equity markets weren’t exactly crazy about the news, with some quick selling off. They were able to minimize some of the dip and rally later in the day. I think the news gives traders a lilt e more concern about a downside move than we had before the Fed’s announcement. I like buying the April E-Mini S&P 500 1850-1825 put spread at 7 points ($350.00) or better. I’d like this all the way into expiration on April 17, trying to achieve full value of the spread. We are long premium, so risk is limited to the cost of entry plus fees and commissions.

The calendar tells me that it is a change of season, walking through snow flurries on the way to work has me skeptical. Sometimes things don’t always arrive on schedule. The same could be said for Fed actions. Be sure and manage your exposure accordingly. Hope for the best but prepare for the worst.

WEBINAR

For those interested Walsh Trading is holding our weekly grain webinar series this Thursday March 20th at 3pm 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.