The market continued its tug of war and not really going anywhere. The 1.3% drop since the open of 2023 is very much negligible but I see a warning sign: The US jobs report was much better than expected and the Fed believes that they have to increase unemployment to fight inflation so they will continue increasing the interest rates, which will have a downwards pressure on the market.
The theory behind this thinking is that if you have less people working then the overall purchasing capacity of people drops, which can push down, or at least stabilise, prices.
Although it's logical, I think it is a fundamentally wrong way of trying to suppress the inflation.
I would prefer to see the money supply shrinking and productivity increased instead.
For those, who are new to my daily market comments, I place and document one trade a day with the objective of helping everyone learn how to trade options.
What's my trade for today?
#X (#UnitedStatesSteel) strangle expiring in Feb. I am expecting the overall market to go down in the short-term so a strangle against X seems like a safe option. Another major advantage of this trade is that it's very cheap and the premium is relatively high offering great ROI potential.
The stats
Trade Type: Short Strangle
Strike: $21 / 30
Expiry: 17 Feb
Delta: -5
IV Rank: 33.7
Premium: $1.03
Cap Req: $256
Annualised Prof at Expiration: 342%
IMPORTANT: Studying previous trades provide the opportunity to everyone to learn a great deal so I encourage you to click on the links below and digest the info.
Closed:
https://www.tycoonitos.com/community/market-comments/daily-trades-20230103
Rolled:
https://www.tycoonitos.com/community/market-comments/market-comments-20220421
Watch more detail here:
Let me know what you think.
Perfect winner!
Closed at $0.28 for an annualised profit of 324%.