MACRO BACKDROP:
Good Monday, readers. I’ll be very brief with my take on the equities today. I believe I mentioned last week that volatility for many stocks was going to be very apparent as we head into the end of the year for a few reasons. As equities digested the, seemingly, positive implications from the G20 summit, it appears that stocks had the best excuse to shake off some optimism following the arrest of a Chinese tech company executive named Meng Wanzhou. The result? Underlying stocks got dragged through the mud with fear and uneasiness. Could the well-trained algos have done this? Possibly, can’t say for sure. The path forward, I believe, is that many traders’ eyes will lay heavily on the situation with Brexit (with a vote now delayed), the FOMC (as we work to establish a better understanding on rate increases), and any other kneejerk macro reactions which can affect trade. All headline risk, in my view. As we head deeper into the, typically euphoric, holiday season, it is my contention that an end of year rally can be easily challenged and may be short lived at the whim of large funds or the algos as they search for “keyword risk.” Be careful, traders.
STRATEGY: No real change from last week. If you are long only in your underlying portfolio, I’m sure you felt some pain. Conventional flight to safety assets, like gold and Treasuries, may have provided some relief. Opportunities to use the Dec index futures are rapidly disappearing as these contracts face just 11 days until expiration. Please refer to my comments last week to understand my approach for index contracts. Rolling strategies into nearby contracts may apply.
Futures and options trading involves substantial risk and is not suitable for all investors. Therefore, individuals should carefully consider their financial condition in deciding whether to trade. Option traders should be aware that the exercise of a long option will result in a futures position. The valuation of futures and options may fluctuate, and as a result, clients may lose more than their original investment. The information contained on this site is the opinion of the writer or was obtained from sources cited within the commentary. The impact on market prices due to seasonal or market cycles and current news events may already be reflected in market prices. PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS
For questions, comments or deeper conversation regarding these insights or to talk more specific trade ideas, please reach me via email: [email protected] or my direct line: (312) 957-8079.