US Federal Reserve
The US Federal Reserve are likely to continue their policy of stimulus, providing markets with a lift this week. Grass root/green shoot signs of improvement are there, but not yet at the level wanted by the Fed.
Housing starts, for example, climbed by 6.8%, albeit a lower level than expected, but still a positive move. Permits for new single family homes are also now at a 5 year high. These are encouraging signs, and while inflation is remaining under control, unemployment continues to remain stubbornly at more than 7%. As such, and until this starts to fall, it is likely that the Fed will continue to fuel the fire.
So where is the opportunity in all of this?
Calendar Spread Option Strategy
This week will see us lock in solid (20% Plus) profits on our calendar spread in TBT – the Ultra Short 20 year treasury ETF. I think this is the second or third time we have banked profits from this particular instrument this year. Did you get on this or the previous trades?
We also have a stock position in Disney, which we will be selling calls over. The movie factory and theme park operator has moved up considerably from its lows and with reasonably solid fundamentals, should offer a decent return from the calls – a meat and potatoes trade.
While our US analyst and trader, Mr Brown is away on a well deserved break, one stock that has been another honey hole for clients trading US positions, has been Lennar Corp – a US home builder. This is a stock that has traded nicely within its range for the past 6 months, providing great opportunity for our covered call traders. Given the economic picture, housing starts and the fact that Summer (typically strong for the US construction sector) is upon us, building positions into this would seem a logical play and consistent with our trading plan.
So as you can see, while many eyes in Australia are focused on the noise around the Election, and its outcome, a world of opportunity continues to present itself across the water in the US. We have a number of clients who now trade the US just as regularly as they do the Australian market.
If you have yet to do so, or perhaps have some interest, would like to receive our US recommendations or simply would like to know more, CLICK HERE and one of the team will be in touch to discuss this with you.
Meantime, as we approach the back end of the Financial Year, it is always good to revisit your plans and strategies – perhaps now is a time that adding in the US market could add some serious value to your approach.