We get Chairman Powell speaking Friday morning in Jackson Hole, Wyoming, at 10am EST. 

The 10-year yield currently sits at 3.87%.

This market is already priced for cuts. I see more risk in Friday's speech from Chairman Powell than possible reward to the upside for this market. If he confirms the cuts then the market has already priced most of that in, but if he remains Hawkish and the market fears they may not cut as fast as anticipated, then there could be a re-pricing, as we have seen many times recently. He is likely to say that they still get the August payroll report in early September before their next meeting, so they will let the data guide them as they always have, and I’m not sure the market is going to like that answer.

We are selling an SPY call-spread above this market. There is a decent amount of volatility priced into this week's SPY options, allowing us to absorb some of that premium with a directional trade that is bearish. SPY options are pricing in about a 1.5% move in either direction this week by Friday’s close. A majority of that volatility premium is for Friday's exposure to Powell's speech. 

We are selling a call spread above the market from $561 to $562 in the SPY. The SPY is currently trading at $556.50.

You should be able to receive a credit of $0.32 or 32 per contract pair upon placing this trade. Our maximum profit is the $32 we receive upon initiation. Our max risk is if the SPY closes above 562 this week we lose $0.68 or $68 per contract pair.

We may exit this trade if the SPY hits $561.50 this week, although with options only trading during market hours it is not always possible to exit this trade. There is no stop on this trade, and we are risking about $68 to make $32 on this trade, and with it being a high-risk trade with only 5 days of duration there is always a very real chance for a complete loss so keep that in mind. 

Don't take less than a $0.25 credit when placing this trade if the market has already pulled back a bit before you get a chance to place your trade. 

SPY AUG 23RD $561-$562 Credit Call Spread=

Sell SPY AUG 23rd  $561 Call

Buy SPY AUG 23rd  $562 Call

Should  result in a credit of about $0.32 for the pair. Our max profit is the credit we take in when placing the trade, and our max loss is about $0.68 if the SPY closes above $562 for the week. Don't take less than a $0.25 credit when placing this trade. It's at about $0.30 to $0.32 right now. 

The SPY traded down 8.5% to start the month of August, made a short-term low the morning on August 5th, and is now up more than 9% from its low made just 2 weeks ago, with a green monthly bar.

 

 

 

 

Disney is trading at $90.42. We bought DIS at $102.25 and got stopped out at $86.89 for a $15.36 or 15.02% loss.

Stay tuned for updates!

 

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