Winds of Change

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UPCOMING EVENTS

Winds of Change With bad news including piss poor Chinese manufacturing data, continued protests in Hong Kong, and Eurozone Core CPI printing the lowest on record, the e-mini S&P futures are of course higher overnight. So it's seemingly bad news is good news again for the markets, but that may all change like the Chicago weather. One thing that does not change is the assbackwards policies that benefit the small few at the top. I have written about this issue before but I think it is important to remind everyone how the game is really played. From the Wall Street Journal: Banks headquartered outside the U.S. have been unlikely beneficiaries of the Federal Reserve's interest-rate policies, and they are likely to keep profiting as the Fed changes the way it controls borrowing costs. Foreign firms have received nearly half of both the $4.7 billion in interest the Fed paid banks so far this year for the money, called reserves, they deposit at the U.S. central bank, and the $5.1 billion it paid last year, according to an analysis of Fed data by The Wall Street Journal. Those lenders control only about 17% of all bank assets in the U.S. Moreover, the Fed's plans for raising interest rates make it likely banks will see those payments grow in coming years. Though small in relation to their overall revenues, interest payments from the Fed have been a source of virtually risk-free returns for banks including Deutsche Bank AGDBK.XE -0.74% , UBS AG UBSN.VX +0.18% , Bank of China Ltd. 601988.SH -0.37%and Bank of Tokyo-Mitsubishi UFJ, according to bank regulatory filings. U.S. banks including J.P. Morgan Chase JPM -0.73% & Co., Well Fargo & Co. and Bank of America Corp. BAC -0.41% are also big recipients of Fed interest payments, according to the filings. "It is a small transfer from U.S. taxpayers to foreign taxpayers," said Joseph Gagnon, a former Fed economist at the Peterson Institute for International Economics. The transfer, he added, was a side effect of Fed policy, not a goal. When the Fed and the big banks are involved, the wind is often a windfall.  Read Past Issues of Larry's Newsletters at TradeWithLarry.com

With the markets set up for a big losing day, it looked early on to extend down quite a bit. Instead the major averages rebounded off the lows and nearly closed a huge gap from Fridays close. With a knee jerk reaction to the HK pro democracy protests, the overnight futures trading plummeted. Well, the day session traders saw this as a major buying opportunity and took advantage of the situation. I did suspect we could leg down after the rally yesterday, but I can also see the markets shooting higher. With the end of the month trading, there could be a lot of profit taking and repositioning, as we are set to start a new quarter. Look for some volatility in the markets, and be prepared to see swing in either direction. Read More

TECHNICAL DATA ES 1971.25/1961.75 POC 1970.00 YM 16985/16889 NQ 4042.50/4018.50

​Today a review on the most important factor in determining the price of an option:​ The volatility of the underlying financial instrument is the most important factor in calculating an option's price. Volatility is the variable that fluctuates most and thus affects the price of an option the most. It measures the amount that an underlying asset is expected to change in a given period of time. However, volatility DOES NOT indicate a bias toward price movement in one direction or the other. Volatility can be seen as the degree to which the price of the instrument tends to move over time versus one that sits still. An increase in volatility increases the value of both call and put options; a decrease in volatility lowers the value of both call and put options. A nervous or unstable market causes more volatility and thus higher option premiums. A stable market has less volatility, thus reducing the amount of an option's premium. Read More

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