Updated: Jan 21, 2019
After today's huge jobs report beat, that really puts the spotlight on the Fed for their next meeting. The narrative they've been pushing is, they will remain data dependent and ready to raise rates if the economy continues to be strong. Well, 312,000 jobs added and annual wages jumping 3.2% seems to be just that. So keep raising right? But then there's also the narrative out there that any more rate hikes will crush the economy and push us into recession.
So which is it? The economy is strong, or fragile? This is the problem with having so many years of easy money policies. Now people are addicted and behaving irrationally.
Many fund managers proved last year they can't make money unless the market keeps going straight up, so it's no surprise that many of them are begging the Fed to start lowering rates again. But it's my hope that the Fed stays the course and does what is right for the economy and for the future. The cycle has to be broken at some point, so it mine as well be gradually during a strong economy rather than suddenly later on during a weak one.
New "Vol Step Strategy" trade today
Long Vertical Put Spread on UVXY for February expiration
BUY to OPEN 2 x 15 Feb 19' UVXY 75 PUT SELL to OPEN 2 x 15 Feb 19' UVXY 70 PUT Debit: ~ 2.50
* prices change throughout the day so do the best you can The lower the price the better
* The model portfolio has been reset for 2019 at 25,000
Long vertical spreads are defined risk trades and require very little margin. It's just the cost of the contract multiplied by the options factor of 100, and then multiplied by the number of contracts.
2.50 x 100 = 250.00 margin per contract 2 contracts x 250.00 = 500.00 total margin required
500.00 / 25,000 model portfolio value = 2.00%
* You can scale your trade to roughly 2% of available capital within your VTS Discretionary allocated funds.
Risk management / future action:
Often times if I capture most of the profit early I close them out early to reduce gamma risk, but since these are very small allocation trades I need to factor trade fees in the equation as well. That does mean sometimes I just let them expire. If you want to keep things really simple you can also consider them "set and forget" trades where you just let them expire each time.
Want to join the Awesome VTS Community?
* All information, analysis, and articles on this site are provided for informational purposes only. Nothing herein should be interested as personalized investment advice as I make no recommendations to buy, sell, or hold any securities or positions. I'm making this website available "as is" with no warranty or guarantees of it's accuracy, completeness, or current's. If you rely on this website or any of the information contained, you do so entirely at your own risk. I do not hold myself out as a financial advisor and nothing herein is a solicitation for any fund or securities mentioned. Although I may answer general questions about the information herein, I'm not licensed or registered under security laws to address your personal investment situation. Past performance is not indicative of future results. Any and all financial decisions are the sole responsibility of you the individual.