Move along, nothing to see here. That was basically the reaction to yesterday’s FOMC announcement, in my opinion.

FOMC ANNOUNCEMENT

As expected the Fed left interest rates unchanged at .25%. They also stuck by the previous QE3 and QE plans to buy mortgage backed securities and Treasuries. The Fed hinted that the plan is to keep rates low as long as the unemployment rate remains above 6.5%.

MINOR SHIFT

The Fed’s statement also stated that inflation is subdued and the economy continues to grow “at a moderate pace.” The only noticeable change was the reference to the Fed having “flexibility about amount, timing and composition of asset purchases.” In other words, they gave themselves an out if they want to change policy.

THE DATA

Today’s jobless claims came in at 324,000, down 18,000 from last week. The four-week average was down 16,000 to 342,250, its lowest level in over a month. Tomorrow is the first Friday of the month and market eyes will be on the Employment Situation numbers.

PLAYING THE JOBS NUMBER

I am looking at a trade to play tomorrow’s payroll and job numbers. The June E-Mini S&P 500 is currently trading near 1580-1585, down a bit form the contract high of 1595.50. A continued drop in the unemployment rate and an increase in non-farm payrolls could give this market more incentive to move higher. If those numbers come in lower than expectations might trigger a pullback.

THE TRADE

Buying a strangle gives us the opportunity to play a move either way.

I am trying to buy the May E-Mini S&P 1610-1550 (1610 call, 1550 put) strangle for 10 points ($500) or better. Since the trade is long premium, risk is limited to the cost of entry plus commissions and fees. This is a short term play, looking for a strong market move in either direction. I would have a target exit at double the point of entry, if the trade is not going our way I’d look to be out by early next week.

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. THIS REPORT IS A SOLICITATION FOR ENTERING A DERIVATIVES TRANSACTION AND ALL TRANSACTIONS INCLUDE A SUBSTANTIAL RISK OF LOSS.