Brainard, Harker, Yellen, Dudley and Fisher.
Today we get the Federal Reserve’s version of Murderer’s Row and, if they strike out – we have another 7 speeches lined up tomorrow and Friday. Imagine the chaos that lies ahead for the next 3 market days with all this Fed speak coming at us every few hours throughout each day.
On Monday we speculated that we’d run up to test the market highs again (check) ahead of the Fed Speak but we also posited that the reason for all the Fed Speak scheduled was that something bad was going to happen and they were trying to get in front of it. What that is, we’re not sure yet but today we have International Trade, Mortgage Applications, ADP Jobs, Gallup Job Creation, PMI Services, ISM Services and Oil Inventories – all while Yellen testifies before Congress.
This morning we’ll get a chance to press our FXI short bet because China’s Shanghai Index popped 4% today on news that the country would further open its markets to foreign investment by establishing a trading link between Shenzhen and Hong Kong by the end of the year.
While that is very exciting-sounding – it’s also the same news that popped the market 6 months ago and was re-released this morning to make it LOOK like it was a new announcement from the Plenary Session.
As you can see from the Bloomberg chart above, AFTER the close, people realized the “news” was not new and the market quickly corrected but that won’t stop the China ETF (FXI) from opening near $40, where we can press our short bets for a likely quick gain. This would be the “Opportunity” portion of our Options Opportunity Portfolio that we love to take advantage of. Our current position is the Jan $41 puts, which we bought for $3.20 back on 10/19 and we shorted the Nov $38 puts at $1.17 on 10/12.
Given the likely action, we’ll buy back the short $38 puts for 0.40 or less and we will roll up our Jan $41 puts to probably the $43 puts for less than $1, buying $2 of position for $1 will be more valuable than buying more time in this case. When FXI reverses back below $38.50, we’ll sell short puts again to cover our position (and put some money in our pocket). Last time we had an opportunity like this, we made $1,570 (77%) in one week!
Leave A Comment