A few weeks back I wrote how I felt that this August had a different feeling than usual. Little did I know what was in store. End of summer, Europe on traditional holiday, tend to bring slow markets and long days with them. Obviously this year was a just a little bit different.
To say the last two weeks have been volatile is a just a bit of an understatement. Some of the moves we saw last week were of historic proportion, market swings in minutes that previously took days. Just when it looked like last Tuesday’s session was in recovery mode, the S&P 500 gave back over 62 points in the last 90 minutes to finish the day barely positive.
Just when you thought it was safe to go back into the water, the volatile markets showed up again this week. As usual the action was kicked off in the Chinese markets and carried over across the globe. If you missed the wild action on Monday, you got what you were asking for on Tuesday as the S&P 500 broke the 1900 level again. These markets are not for everyone, but if you are involved you better have your seat belt securely fastened.
I don’ think the push to the downside is ending anytime soon. I am looking at a bearish play to take advantage of another sell off in the next week. I like buying the September E-Min S&P 500 Week 2 (expiration on 9/11/15) 1900 put and selling the September E-Mini S&P 500 Week 1 1980 call (expiration on 9/4/15) for a cost of 8 points ($400.00) or better. The position has unlimited risk to the upside if the September E-Mini S&P is above 1980 at expiration. We are betting that the S&P will below 1980 and the Week 1 call will expire worthless, and we will remain in the long put position for one more week. I am setting an early target exit of 25 points on the 1900 put.
For those interested Walsh Trading is holding our weekly grain webinar Thursday September 3rd, at 3 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.
