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Fed’s decision: sell dollar, buy gold & CADBefore moving on to the main event this month, and perhaps the next one too, we will talk about yesterday’s events. As usual, the most interesting news is coming from the UK. Johnson could find support for his idea of an early election. So in December, the British are expected to have the third parliamentary election over four years. According to some experts, they can become a kind of referendum on Brexit. If residents give preference to parties opposed Brexit, then Brexit might be cancelled. Our position on the pound has not changed. On the contrary, we believe even more strongly that the pound will rise. Yesterday its strengthening only confirms our idea. But everything goes to the point that its growth will be delayed by at least a month and a half. Wednesday can be called the main day of the week because today the Bank of Canada and the Fed will announce their decisions on the monetary policy parameters. The results are appearing to be clear, but the foreign exchange market might be wide open with its reaction. So, the Fed with a probability of 95% + will lower the interest rate by 0.25%. Formally, this is a powerful bearish signal for the dollar, as lowering the rate today will be the third in 2019. And this is considered as a trend. The last time the Fed launched a full-fledged rate reduction cycle, the dollar lost about 15% of its value in the foreign exchange market. That is why we will sell the dollar today, despite its stubborn reluctance to decline. As for the Bank of Canada, the rate is likely to remain unchanged. Against the background of a potential Fed’s decision to cut the interest rate, in our opinion, this will be an excellent occasion for a further USDCAD reduction. Therefore, today we will sell it (if the Bank of Canada leaves the rate unchanged, and the Fed lowers the rate). based on technical analysis, of course, it is worth waiting for a breakdown of 1.30 and enter the position below 1,30 right after stop losses execution. Gold looks quite good for purchases in anticipation of the Fed rate cut. Current prices are attractive in their own right, and a decrease in the Fed rate will only add arguments in favour of gold purchases (recall, one of the key problems of gold is the inability of the asset to generate stable income, unlike the dollar in the form of deposit income or purchases of treasury bonds).
TVC:DXYShort
by Trade24Fx
UNH insider sales flash a warning sign ahead of earningsUnitedHealth Group has had an incredibly strong showing this year, and right now it's priced pretty attractively at oversold level on the hourly chart. On its daily chart it's at RSI 38, nearing oversold (RSI 30) but not quite there yet. It also hasn't yet tested its August low of 220.78 or its one-year lows of 208.07 and 216.84. I suspect we'll get a bounce tomorrow from the hourly oversold level, then fall some more to the 216-220 range. At that point we should be about oversold on the daily chart and should bounce into earnings on October 15. The average analyst price target on UNH is about 299, implying about 33% upside from the current price. Analyst estimates of UNH earnings have held steady for the past month at 3.77, significantly better than 3.41 the same quarter last year. UNH has an 8.7/10 Equity Starmine Summary Score rating. So most signs are bullish. However, company director Richard Burke sold 10,000 shares last week. Other directors also recently sold thousands of shares. All this insider selling doesn't inspire confidence for good earnings this quarter. On that basis alone, I don't think I'd hold this for anything more than a pre-earnings bounce. On the other hand, insider sellers may be responding to political risk rather than to the company's financials. The healthcare sector is expected to report good earnings this quarter, which could make it attractive as a defensive play in an earnings recession. Healthcare is a defensive sector that usually does well when the rest of the market is down. Right now healthcare stocks are cheap, which makes them even more attractive. However, with Elizabeth Warren leading the Democratic pack, UNH's share price may continue its breakdown. Health insurance and pharmaceutical companies are at particular risk from Warren's "Medicare for All" plan, and you may be able to chart healthcare stocks' performance from now until the election as a function of Warren's popularity in the polls.
NYSE:UNH
by ChristopherCarrollSmith
THE WEEK AHEAD: M EARNINGS; GDXJ, XOP, QQQ, IWM, VIXEARNINGS: M (87/58) announces earnings this week and has the most appropriate rank/implied volatility metrics for a contraction play. Pictured here is a narrow short strangle in the September monthly that is almost a short straddle, set up this way primarily because M is trading at 19.43, which Is smack dab in the middle of the short strikes. It's paying 2.25 at the mid-price with delta/theta metrics of -4.39/3.11. For those looking for more room to be wrong, the 17/22 short strangle is paying .89 which is a somewhat marginal play at 50 max (.45). Given the fact that it has been somewhat hammered, I could also see taking a bullish assumption short put shot with the 22 delta 17 strike paying .52, the 31 delta 18 paying .83, and the 42 delta 19 strike paying 1.25. For those looking to potentially acquire, it pays an annualized dividend of 1.51 with a yield of 7.39% at current share price. EXCHANGE-TRADED FUNDS: SLV (98/26) GDX (97/34) GDXJ (94/40) TLT (88/14) GLD (87/16) XOP (46/39) Having worked through setups on all of these, only GDXJ and XOP appear to present worthwhile nondirectional premium selling opportunities in the September monthly with their respective at-the-money short straddles paying in excess of 10% of the value of the stock. The GDXJ September 20th 42 short straddle is paying 4.68 versus 41.84 spot (11.2%) with the 37/49 short strangle camped out around the 16 delta paying 1.09. Similarly, the XOP September 20th 22 short straddle is paying 2.29 versus 22.29 spot (10.3%) with the 22/23 short strangle straddling current price paying 1.81 should you want a more delta neutral setup with a smidge of room for intratrade adjustment without going inverted. BROAD MARKET: EEM (37/20) IWM (33/22) SPY (31/18) QQQ (31/21) EFA (17/15) As with the exchange-traded funds, I'm looking for setups whose at-the-money short straddles pay more than 10% of the value of where the stock is currently trading.* Because background volatility in broad market is lower than in the exchange-traded funds which are, in turn, lower than that in single name as a general rule, you'll have to go farther out in time to get paid more than 10%. Only QQQ and IWM meet the 10% test without going crazy far out in time (although I recognize that some might consider going out to February for a play is "crazy far out"). The QQQ January 17th 186 short straddle is paying 19.23 versus 186.49 spot (10.3%) with the January 17th short strangle set up around the 16 delta strikes -- the 160/207, paying 4.40. Similarly, the IWM February 21st 151 short straddle is paying 16.02 versus 150.62 spot (10.6%) with the 16 delta February 21st 130/168 paying 3.86. VIX/VIX DERIVATIVES: For you "Vol Heads" ... . VIX closed at 17.97 on Friday with the August /VX contract trading at 18.48, so the term structure is in contango from the front month to spot. M1-M2 is also in a smidge of contango, but M2-M5 are in backwardation, presenting a wonky S-shaped term structure. Look to potentially add VXX/UVXY bearish assumption setups on VIX pops back to >20 ... . * -- Although you're certainly free to sell at-the-money straddles in these instruments, I'm using the short straddle value as more of a test to see whether the premium is sufficient to be "worth it." If it isn't worth It at-the-money, then out-of-the-money short strangles are probably aren't worth it, either.
NYSE:M
by NaughtyPines
3
Aug 9 45 Short Straddle Weibo FOR WHOPPING 5.50 CREDITWith a moderate IVR of 32.3, it makes sense to enter into a short strangle, where we are writing both the 45 calls and puts with the August 9th expiry. This trade does have unlimited risk, but does earn a profit of 550 per contract when the underlying security, Weibo, a Chinese Internet Technology firm, stays exactly at the k of 45. Because of the priced-in volatility, it is possible to execute this trade for a whopping credit of 5.50 per contract, which allows there to be a large range of values the security can take for which the trade can be profitable. This trade is driven by the ability to get such a wide profit margin, and is supported by the channel in which the security has traded since May 22nd. Indicators further the neutral but slightly bullish notion, and the short strangle is likely to be profitable. Seeing that the RSI and CCI both indicate it is slightly overbought and the ADX indicates growing slight bullish momentum, we choose to execute this at the 45 instead of the 40 (there are no strikes for the aug 9th expiry actively traded in between, and closer-to-the-money). Also, by using the August 9th expiry, we are able to get out of the position before the earnings announcement, which could move the stock dramatically. Going out another week would've only given us .18 more credit, which is not needed. With Weibo being Chinese, there is obviously exposure to trade war tensions, but following the G20 summit, things seem to have stabilized. With an $11-wide area in which profit can be attained, this trade makes a lot of sense, even considering the possible changes to and budding instability in the macro environment.
NASDAQ:WB
by LaurenTrading