The Federal Open Market Committee two-day meeting will culminate with an announcement and release of forecasts on Wednesday at 2 p.m., followed by a news conference with Chair Yellen at 2:30 p.m.
The FOMC in 2008 lowered its fed funds rate to a range of from 0.00% to 0.25% on Dec. 16, 2008, and kept it there for long valley of the Great Recession. The money regulators began raising rates seven years later, on Dec. 17, 2015, by a quarter point to 0.25% to 0.50%, and has since raised the target twice, at quarter-point intervals: On Dec. 15, 2017 to 0.50% to 0.75% and last March 16, 2017 to 0.75% to 1.00%.
If they were to raised rates at this week’s meeting, it would be the first break with one-year intervals in nine years. Will they or won’t they? And will the markets care?
Five economic reports of note will be published during the week: At 8:30 a.m., the producer price final demand index on Tuesday; the consumer price index and retail sales on Wednesday, and housing starts on Friday. The industrial production stats will be out on Thursday at 9:15 a.m.
NVIDIA Corp. (NVDA)
Update 6/15/2017: NVDA traded sideways during the period I held the position, and I exited at my target price of 25% of maximum potential profit.
Shares declined by -1.0% over six days, or a -60% annual rate. The options position produced a 33.3% yield on debit for a +2,025% annual rate.
NVDA has sufficiently high implied volatility on all the metrics I use — against the annual range, current trend and VIX — that it is worth examining for a trade.
I shall use options that trade for the last time 14 days hence, on June 23.
Implied volatility stands at 42%, which is 4.1 times the VIX, a measure of the volatility of the S&P 500 index.
NVDA’s IV stands in the 52nd percentile of its annual range and the 75th percentile of its most recent broad movement.
6/9 – 3:00 p.m. New York time
In today’s trading outcomes, I exited GLNG , FL and AMBA for losses and entered NVDA as a direction neutral position.
MSFT’s price declined suddenly on news reports of a possible lawsuit. Although it expires a week from today, I intend to hold the position in anticipaton of a rebound on Monday that would, best case, return the position to profitability or, less bad case, mitigate the loss.
6/9 – 12:45 p.m. New York time
I have exited GLNG , FL and AMBA for losses and shall update their analyses with results shortly.
I have decided to delay an exit of THO until next week. Elliott wave analysis suggests that the trend is down, toward profitability.
Netflix Inc. (NFLX)
Update 6/16/2017: Tech stocks, NFLX among them, began a sharp decline the day after I entered into the position, rapidly carrying the price below the profit zone. With a week to go before expiration, I attempted to roll the position forward for a small premium in hopes of a partial recovery, but was unable to get a fill. I instead exited for a loss.
When I entered implied volatility had been rising for a month, coming off of a small pop to the downside after earnings were published, within a context of a price uptrend that had been running for nearly a year. There was no visible trigger for the decline, which hit much of the tech sector.
NFLX shares declined by 7.5% over eight days, or a -341% annual rate. The options position produced a -41% loss o debit for a -1,892% annual rate.
NFLX has sufficiently high implied volatility in relation to its most recent trend and in comparison to the VIX to support a trade.
I shall use options that trade for the last time 15 days hence, on June 23.
Implied volatility stands at 34%, which is 3.3 times the VIX, a measure of the volatility of the S&P 500 index.
NFLX’s IV stands in the 29th percentile of its annual range and the 87th percentile of its most recent broad movement.
VeriFone Systems Inc. (PAY)
Update 6/9/2017: PAY declined sharply after earnings were published and then rose, remaining well below it’s prior close. The price remained within the zone of profitability throughout the movement. I exited during the bounce, at 37.5% of maximum potential profit, above my 25% target.
Shares showed a net decline of 4.4% over the day I held the position, or a -1,617% annual rate. The options position produced a 60.0% yield on debit for a +21,900% annual rate.
PAY publishes earnings on Thursday after the closing bell.
I shall use options that trade for the last time eight days hence, on June 16.
Implied volatility stands at 48%, which is 4.7 times the VIX, a measure of the volatility of the S&P 500 index.
PAY’s IV stands in the 62nd percentile of its annual range and the 99th percentile of its most recent broad movement.
Microsoft Corp. (MSFT)
Update 6/12/2017: MSFT, along with other tech stocks, began to decline at entry on June 7, and I exited for a loss on the fourth day of decline as expiration approached.
Shares fell by 4.1% over five days, or a -299% annual rate. The options position produced a -40.9% loss on debit for a -2,986% annual rate.
MSFT has sufficiently high implied volatility and liquidity to qualify as a trade.
I shall use options that trade for the last time nine days hence, on June 16.
Implied volatility stands at 20%, which is 1.9 times the VIX, a measure of the volatility of the S&P 500 index.
MSFT’s IV stands in the 54th percentile of its annual range and the 72nd percentile of its most recent broad movement.
SJM Smucker Co. (SJM)
Update 6/8/2017: SJM gapped sharply higher after earnings were published and then fell below its pre-earnings close I exited on the the way down slightly above my entry price, at 36% of maximum potential profit.
Shares showed a net increase of 0.6% from my entry to exit the next day, or a 210% annual rate. The options position produced a 56.4% yield on debit for a +20,566% annual rate.
SJM publishes earnings on Thursday before the opening bell.
I shall use options that trade for the last time nine days hence, on June 16.
Implied volatility stands at 24%, which is 2.3 times the VIX, a measure of the volatility of the S&P 500 index.
SJM’s IV stands in the 59th percentile of its annual range and in the 96th percentile of its most recent broad movement.
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