Weekly Market Assessment
It seems there are two words that are constantly being thrown out, "Taper" and "Tighten". To the Federal Reserve, "Taper" or what some call Quantitative Easing, is to cut back on the monthly bond purchases (currently $85 billion) which keeps rates low and "Tighten", is to increase the Federal Funds Rate, which is the interest rate at which banks and other depository institutions lend money to each other (currently 0-0.25%). With that being said, I have to sit back and ask myself, why would these terms be used when there is no place for them in our current economic status. The only time a rate increase "Tightening", is implemented is when the economy is growing too fast however on Wednesday, the GDP released a number of 1.7%, which showed that the U.S. economy's growth picked up slightly in the second quarter but not enough to use either of these terms. This minute growth is all good however, when you look at how our monetary policy is suppose to handle this recovery, it is hard to imagine why these two terms are even being discussed! Our economy is growing at a snails pace in relationship to the current policies which are designed specifically to spark an economy back into growth. There are many sectors of the economy doing well, however, are they capable of standing on their own if there was a change and we started to taper or tighten?
From the Trading Floor to the Option Pit: A quick look at what's on the trading desk
E-Mini S&P 500 futures- The 1700/1705 Vertical Call Spread was exited as the E-minis held below these levels and the premium was collected. I also purchased a 1670 "PUT" looking for a end of the month sell off and with the jobs report approaching. Depending on how the jobs report goes on Friday I will be looking to how the market reacts and then choose a position from there. Facebook (FB)- I bought weekly $37.5 "PUTS" as FB reached and traded past its IPO price on Wednesday. I saw this as people who had held since the IPO would exit this trade once it got back to this price, volume was ~3X average, a dark cloud candle pattern formed which is bearish and like mentioned I thought this was a psychological level where people would exit their trade do to frustration of holding a stock for so long and just wanting to get out and breakeven. Exited this trade same day as it dropped from $38.31 to 36.33 for option gain of 20%
Boeing (BA)- Still holding this position as I have AUG $110 "CALLS"
Amazon (AMZN)- Should have exited this trade when I had the gain as I thought it was going to continue higher. I took a loss of 43% to the weekly "CALLS" I had purchased after their earning release. I will be looking to renter this trade if it drops below $300 again or below its 20 day moving average.
Herbalife (HLF)- Reported better than expected earning on Monday and opened up huge on Tuesday. I shorted this stock through buying "PUTS" as it reached new highs and saw this as an opportunity to take advantage of others selling to take profits. The stock opened up on Tuesday at $64.60 then dropped to $59.40. I captured a 72% option gain with the $60 weekly "PUTS".
Fortinet (FTNT)- provides network security solutions worldwide. Reported better than expected earnings on Tuesday and opened up the following day over ~2%. I am still looking to take a position and learn more about this company in comparison to others but still looking for the right entry point.
Sandridge Energy (SD)- operates as an independent natural gas and oil company in the United States. I have been following this company for awhile as it is one of Leon Coopermans top picks. I have entered a trade at $5.50 and will be looking to see how it does when it reports its earnings next Tuesday(8/6).