James Cordier comments on Fed Hike and Implications for Option Sellers




James Cordier comments on Fed Hike and Implications for Option Sellers

Click To Read Video Transcript

(Video Transcript)

December 18, 2015 James Cordier Market Update

Good afternoon this is James Cordier of OptionsSellers.com with a market update for December 18th, well with just a few days left in 2015 Janet Yellen and the Federal Reserve came through and did normalize interest rates raising them all the way to a quarter and further strengthening the dollar as we go into the end of 2015.

Initial reaction is not exactly fan-fare especially from the equities as many multi-national companies are not having the greatest time with the stronger US dollar and certainly slowing in some areas of the global economy trying to continue to lag and fallen even further. China continues to lag and fall even further. A lot of the smartest money in the world now is talking about the Chinese economy is doing even less as far as turning around global strength there and the Asian economy which continues to lag. Europe right now there are some signs in Germany that economy is turning somewhat and other parts of the European Union is not doing too well.

Here in the United States the economy here is kind of slashing along, it appears to be about 2% growth. However, going into the end of the year a lot of some of the largest money managers in the world are talking about a very sloppy US economy next year. A couple of the biggest investors are talking a possible recession next year. Many mixed pictures. You have some of the best ideas in the world thinking that the US economy is slowing next year, and yet the Federal Reserve has anywhere from 2-4 interest rates hikes already set if you compare to the dots with this year versus next year and also two or three rises again in interest rates in 2017 – very interesting. Certainly the equity market is going to have a lot to chew over in 2016 as its thought that many of the corporate earnings will be coming down next year at a time when we have strengthening US dollar and a weaker global economy. Very interesting, the data points going forward are certainly going to be something to navigate.

With our company we’ve enjoyed a very nice return this past year we are looking forward to the landscape in 2016 possibly offering a very good opportunity as well. Some of the things we are looking at right now are is the crude oil market, which continues to lose about fifty cents on a daily basis, trading in the mid thirties right now. Seasonally, crude oil bottoms in December; however, because of the extremely mild conditions we have in the North East this winter it looks as though some of the heating demand is simply not going to take place over the next two to three months. Bottoming oil prices will likely happens in January or February of this year instead of the normal December because of the mild winter that we are having. We are looking at mid to upper 20’s as far as crude oil puts. We are looking at going at 26/27 and 28 for summer delivery. We expect oil prices to be trading around $50 and if we’re long at 28 we certainly like the odds of that participation in energy market. As far as buying oil companies I’m not so sure how that’s going to go.

For the Dow Jones and the S&P for next year some of the other markets we are following of course, the coffee markets as we talked about two weeks ago did get a little bit of a rally. It rallied from $125 to up to $135 per pound. We sold calls double the price of coffee. I know a lot of you who are client barriers are very familiar with that for those of you who are listening to us for the first time and yes you can sell options in commodities double the current price and that we think is going to be a good opportunity in 2015. Anyone wanting more information from OptionsSellers.com or if you would like to have your own portfolio, feel free to contact me at our office and we can get something right out to you. To all of you who are listening to me today I wish you a Merry Christmas, Happy Holidays and a very healthy New Year. Look forward to speaking to you again in two weeks. Thank you.

  1. Robert Levinson Says:
    December 20, 2015 at 5:35 pm

    Your commentary said “buying” opportunity in 26 and 27 summer oil puts. This seems contrary to OptionSellers usual strategy.

    • OptionSellers.com Says:
      December 21, 2015 at 3:27 pm

      Dear Robert,

      Thanks for your observant response. You are correct in your catch. However, I believe that was a misstatement on James’ part. He says “buying opportunity” meaning its low enough to buy the underlying. However, we would only position by selling puts in such a market. I hope that clarifies.

      M. Gross

  2. John Killam Says:
    December 18, 2015 at 8:26 pm

    What do you mean “double” the price?
    sounds good to me

    • OptionSellers.com Says:
      December 21, 2015 at 3:25 pm

      Dear John,

      When we say “double” the price, we mean selling strikes at double the current value of the underlying. Thus, if coffee were trading at 1.25, we would look to sell the 2.50 call.

      Thanks and hope that helps.

      M. Gross

Share This

Share This

Share this post with your friends!