Options Trading Newsletter - Multiplication - Issue #150 [Options Today - Updates on Positions]
Multiplication...
MULTIPLICATION…
As a child, I was never good at multiplication. That’s why I ended up as an accountant, where we mostly deal with pluses and minuses. Interestingly, some of these mathematical challenges seem to have been inherited by my next generation, as they too struggle with mathematics.
Over the weekend, we organized a family photoshoot at our home, encompassing my family and my wife’s. What started as a family of two each has now blossomed into a vibrant family of 26, spanning three generations. The growth multiplication from 4 to 10 to 26 illustrates a thriving family tree. Reflecting on this, I realize our parents never seemed overly concerned about whether they could afford to raise us – three children with only our father working and our mother dedicated to home care. They managed admirably, despite the economic constraints of their time.
In contrast, our generation faces different challenges. Both spouses often need to work, and there's a prevailing concern about the financial feasibility of raising multiple children. Despite earning more than ten to twenty times what our parents did, the cost of living has escalated dramatically. Historical data shows a clear trend: where once the average family had three children, it then became two, and now it's increasingly common to have just one. This shift reflects not just economic pressures but also changing societal norms and aspirations.
The economic landscape has profoundly influenced human multiplication and family dynamics. Traditional economic models, which sustained larger families in the past, are becoming less viable. As living costs rise and personal aspirations evolve, family sizes are naturally shrinking. This trend is not just a local phenomenon but a global one, observed across various cultures and economies.
It’s indeed a shift in the social fabric when children often grow up without siblings and parents juggle work and family life. However, recognizing this reality opens avenues for action. Instead of accepting this as an inevitable outcome, we can explore ways to balance economic well-being with family life. Upskilling, pursuing promotions, side jobs, investing/trading or entrepreneurship are ways to enhance economic stability. By doing so, we can aim not just to sustain our families but to provide enriching experiences for our children. The message is clear: Multiply and prosper, but also adapt and thrive in changing times.
“Life is a math equation, it’s dynamic but the answer is always there, just need to look deep enough to solve it”
SPX (4890)
SPX is continuing lifetime high of 4906 and closed 4890 for the week. The momentum slowed down on Friday after Intel spooked investors on weaker 1Q24 outlook. Which means market is still very much dependent on how the business performs in 2024. GDP came out stronger than expected at 3.3% against forecast of 2%. TSLA was down over 13% on weak sales and declining margins.
This week is the Federal Reserve policy meeting on Wednesday and likelyhood is an unchanged rate for that meeting. What the market wants to hear is of course the Fed’s expectation going forward for more policy clues. The best thing is for them to shut up as market is nicely playing its own bullish outlook for now. Come Friday the Non-Farm payroll will be released.
Any retracement, we shall see if 4818’s previous high gives a support for further upside move.
This week is jam packed with very crucial earnings releases. Key would be AMD, GOOGL, MSFT, SBUX and UPS on Tuesday and AAPL, AMZN, META, QCOM on Thursday. As significant weightage on SPX is released this week, we would expect some kind of volatility.
Trading range for the week is 4850 to 4950.
NDX (17421)
Although, NDX is slightly up for the week, things does not seem too positive after some of the earnings reactions such as TSLA came out badly. If the trend continues, coming from weaker business expectations for 1Q24 onwards, the market would look for some kind of short term retracement. It should be a healthy one at least opportunity to buyin perhaps on some form of retracement. A pullback on NDX to 16700, its previous high would be a good one before it makes its next move..
Trading range for the week is between 17250 to 17800.
HANG SENG INDEX (15952)
HSI is up 4.2% after the market woke up from the announcement of the stock market stimulus plan and ease of liquidity by reducing the bank’s capital reserve ratio. The market reaction is obviously quick and we also took opportunity to exit some of our long positions leaving some runners behind for 16300 level. As the US market is still strong, the impact of the new stimulus would only be more domestically driven for now as foreign funds would still be a bit weary unless FOMO kicks in when HSI hits back 17000 level by this week. Hence, we still trade alongside the down channel taking opportunity to add when it hits the lower channel and take profit when it closes up to the upper channel.
OPTIONS TODAY - TRADE STATUS ON SPY IRON CONDOR
It’s just 3 days till it expires and it’s close to getting ITM on the short call. We just need a few bad earnings to have a 100% winner on this. Lets see.
OPTIONS TODAY - TRADE STATUS ON MICRO CRUDE OIL FUTURES IRON CONDOR
Crude oil futures have broken last month’s high of 76.76 and could continue higher for now. OPEC meeting is expected on 3 February which should hold oil futures up until then. The price now is close to our short call strike of 78.75 but we need not take any action for now.
OPTIONS TODAY - POOR MAN’S COVERED CALL ON XLU
XLU has recovered a bit this week closing at $61.21. As the Fed Meeting is expected on Wednesday, we could see XLU having a bigger move this week. As it may be likely that the Fed may say that inflation is in control and the labour market is staying strong and not significantly down, that may well support the soft landing and the high interest rate regime can be slowly diminished, giving support to higher XLU price. If there are any opportunity to roll-up the strikes expiring 16 February, it would be good to do so, even if there is no additional premium from rolling. We have already exhausted almost half of the last premium from rolling down to $60.
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