If you chose to read this commentary today, I have a feeling you are a survivor of the events of the last few days. Your portfolio may have taken a hit, but you are probably still standing in upright stable position. Congratulations to you. Now get ready for another round of volatility.
If you have been paying attention to the markets and the surrounding news I’m guessing you caught some words and phrases being repeated. Correction, retracement, global economy, Ebola. All appear to have had an effect on the market. I think the combination of all of them is what has knocked down the equities and sent bond futures higher.
One thing I learned a long time ago in regards to trading is the fear is more powerful than greed. When markets aren’t moving the way they are expected, there is a sense of the unknown, which eventually turns to being afraid of what’s next. Once that initial fear has set in, people tend to panic, and when we panic we don’t do very well in our decision making.
This week we have seen a large down move in the equity markets (wiping out the gains for the year in the S&P), combined with a world health crisis that has arrived in the United States. Everyone has concerns over the spread of Ebola and how it will be handled, and can what is being done to contain it. Traders are well aware of everyone’s concerns, and that carries over to the way they participate in markets.
E-Mini Trade
I think there are opportunities to take advantage of a recovery move like buying the November E-Mini S&P 500 1940 call at 9 points ($450.00) or better. There is more selling off ahead, but I think we can see things stabilize and move up again in the coming weeks. The November options expire on 11/21/14 so we have time for this trade to develop. I am intent to ride it out for as long as possible as we approach expiration. Risk is limited to the cost of entry plus fees and commissions.
Webinar
For those interested Walsh Trading is holding our weekly grain webinar Friday October 17 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.
