Over time, there are many rules, investing, trading, hedging, and basic strategies we’ll employ to take advantage of what’s happening around the world. While the primary plan followed remains central to our strategy, earning profits on the “margin” makes for a more successful approach.
In conjunction with buying when they sell and selling when they buy, just buying on rumor and selling on news takes advantage of the rookies in the market, better known as the “herd.” Face it, folks, the herd is always late to either side of the equation and wrong more often than not. We take advantage of it, and you should, too.
Nice Retail Sales Numbers
The expectations were for a slight decline. We were met with a very slight increase in the reported number. I have just as much faith in this number as in the unemployment number so I’ve learned to take everything with a “grain of salt.” Besides, it’s a monthly reported event so it’s not as valuable as others. Today, however, it gives us good reason to act so we did.
I would be surprised if the Fed does anything more than 25 basis points. Nonetheless, our friends, the herd, jumped on board and bid the markets higher. Gamma spoke to us, and we bought March 2025 VIX call options using a GTC order at the lows of the day.
What About Tomorrow
Again, if the Fed does a 50 basis point interest rate reduction, all bets are off. There is still a chance of that happening. I sense there are enough people in the herd expecting just that so I’m ready. Here is what I’m looking for.
Interest rates are coming down. How ‘far’ and how ‘fast’ remains to be answered. The world is betting on a lowering by the Fed, so more than likely, they’ll bid up the debt markets and sell the U.S. Dollar. I’m positioned to take profits to sell when they “buy” then sit in cash and wait for the pullback.
Cash is king, and it is a position. Having “dry powder” is important as it allows profits to be earned on the fringes, the “margin.” I think it’s going to be “tough sledding” in the next six to eighteen months. Interest rates heading lower is not a good thing. The “best of breed” are the stocks that will prevail during times of difficulty. Remember, not having a position is a position. Put time on your side, and sell naked put and call options, and react when opportunities find you.
Let opportunity find you versus looking for it. That does not mean you should simply sit on your hands, no. Think through your investment, trading, and hedging plan. It’s a good idea to think ahead. Look for what may happen and ‘prepare’ yourself to act if you see it. When I say to wait for the opportunity I mean to get ready for opportunity to find you. If you are prepared to act, when the “stars” align, you will be ready to act.