Prepared by the good people at Random Walk, LLC. (and Scott)
Great Morning!
Yesterday and Today
Yesterday
A schizophrenic day. Actually schizophrenic is the term most people use, when the real term in split personality.
The Dow opened up and climbed to up 120 points. Once the Fed released its FOMC minutes the market fell into negative territory. The Fed hinted that it might raise rates in December and that was enough to bring out some sellers.
Once people read into the minutes further and saw that the word āmightā was in there the market rebounded. The Dow closed up almost 200 points. The SPX closed at 2090, almost the same level we were at 2 months ago before the Fed wrecked the markets. The NASDAQ 5,000 to 5,100 range that we sat in for 7 months is back with the NASDAQ closing at 5,095.
Stand outs today were AAPL. AAPL reported last night and for most of the after-hours sessions the stock was down modestly. When the stock opened yesterday morning it was lackluster and moderately higher. Then in the last hour the stock ran up another $2 to close up $4.72.
FED
Immediately after the Fed released its minutes with āno rate changeā the markets fell from the Dow being up 120 to up 20. They sat there a while and then fell some more, going negative on the day for a while. About 30 minutes later the market started coming back above the break-even line.
From 3:00pm Eastern to the close people jumped over themselves trying to get long. Below is the graph of the day.
TODAY
Yesterday was a HUGE day up but a little overdone. The manner in which we closed indicates (to me) that there was a little short covering on the close. Even AAPL shot up $2 in the last hour when it was having problems being up $2 all day.
Do NOT take this the wrong way. I suspect we will be between 2,150 and 2,200 in the SPX by the end of they year. But for today we should pull back a little.
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We kicked butt yesterday. I have to modestly say I can not do too much better.
We came in long the market. Once the market stabilized up 120 Dow points we slowly sold out of long positions and bought a 420 wide put butterfly. Once the market fell 150 points we sold out of long put spreads and bought call spreads. We then rode those deltas into the close.
We also legged into 50 contracts of an AAPL call butterfly for a $0.03 credit. We got out of some risk reversals that could make only $2 aft $1.50.
Lastly, a couple weeks ago we bought a $50 SPX call spread and sold a $35 call spread against it. Yesterday we sold out of a $10 spread that was part of the long $50 portion, reducing the long $50 spread down to a long $40 spread. We now have on a butterfly for a 43 credit.
At the end of the day the account had a fantastic day and the account is up 100% for the year 2 months before the usual time frame of December 31. Let’s keep going and learning ! Thank you.
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