That Was The Week Ending 20April

Gentle Drift Lower for Vol. Gentle Drift Up For FTSE

We closed out a long put for a handsome profit on Monday. This was a ‘pre-apocalyptic’ put trade.  The market suddenly decided the fear was overdone by Monday evening. In my view, politics, while grabbing headlines, may not serve us so well for trading,

Major Events and The Markets

I hope you can see the market numbers for the 2003 Iraq War20th March) and the July 7 2005 London bombings. See a pattern? The market knows that money will be spent. I also looked, out of curiosity, at the terrible floods in New Orleans on 29th August 2005 in the wake of hurricane Katrina- S&P futures closed UP 0.7% on the day.

What is the Market Saying Right Now?

I suggest markets have a terrible memory- February’s 10% drop is forgotten and it’s about earnings now. Company earnings have been stellar,in part due to cheap credit as they buy back their own stock for peanuts. Company F or A, or N or G  can now play the best game in town-you winning every way as they borrow cheap,  ramp up the stock price, and reduce the number of shares in issue. So, their earnings per share look fabulous. So, I wonder if this a trend set to continue? We have seen artificially low interest rates for almost a decade. Central bankers have helped people with large borrowings, crushed the prudent savers and so made the world look like a better place.

Winners and Losers

Affluent consumers are the clear winners. We also know that chaos/disaster is good for the velocity of money. Sadly not good for traditional ways of doing business. Retailers have very high fixed costs and the high street is no longer the place to be. Can we use this in our trading?  Not on the index, as oil bounces up,banks ‘whiffle’ around, miners show promise,pharmas have a wonder dug every other week and then disappoint. However, we use that mix that to ensure we avoid major disasters.

 

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About the Author: First found out about options in 1995.From the arcane magazine Exchange and Mart! First trade- a covered call on VOD in 1999. Made 10%,VOD almost doubled. That's when I realised I was not a good trader,and I was forgiven thanks to the amazing world of exchange traded options

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