Top 4 Trading Assets for the Week - 12/14/2015

This is going to be one of the most important financial trading weeks of the year, given that it is likely to be the first interest-rate hike in the US in several years. It should be remembered that most of the price movement expected from this decision has already been factored into equities, commodities, indices and stocks. However, as a binary option trader all that’s needed is a slight movement in price to maximise profitability. The US has taken center stage in the global arena, and all eyes are on the Fed’s decision moving forward. The Bank of Russia is deeply concerned about the volatility that will accompany the Fed decision. Already the interest-rate in Russia is 11%, and the Russian ruble has been languishing as a result of capital flight, punitive sanctions on US dollar strength. The Fed decision is likely to place additional stress on the Russian ruble, and many other EM currencies, but these are only a handful of the many tradable opportunities available to you this week.

Let’s take look at the most profitable binary options trades for currencies, commodities, indices and stocks. This week I’m going to list several opportunities since they are all favorable options for you to trade.

1 – CURRENCIES: Consider Put Options on the Russian ruble and the South African Rand

Heavily Bearish USD/ZAR – The South African Rand Plunges

One of my favorite binary options trades of the year is the South African rand. Very few emerging market currencies have shown such one-sided bias as this currency. Just recently President Jacob Zuma fired the Minister of Finance. This saw the rand plummeting to an all-time low, and the upcoming Fed rate hike is bound to add additional pressure on the South African Rand. Therefore I unequivocally support put options on the USD/ZAR currency pair for the week. As with all currency movements, slight upticks are possible on a negative trend in care, but the overall consensus among currency traders is that the ZAR is bearish. Take a look at the above chart for confirmation. In much the same fashion, the Russian ruble is also languishing as a result of the pressures coming to bear on the currency. Below is a one-month chart of the Russian ruble/US dollar exchange rate. It is absolutely clear that put options on the ruble warranted.

USD/RUB Currency Pair – 1 Month Chart (Ruble Heavily Bearish)

Not surprisingly, the overall picture is one of bearish sentiment for most emerging market currencies at this time. As we head into an uncertain period for developing economies, it is clear that developed nations such as the Eurozone, Japan and the US are going to gain favor as far as currency strength is concerned.

2 – INDICES: Consider Call Options on the US Dollar Index

I would be remiss if I was advising you to go long on the USD and then not to go long on the US Dollar Index. It is absolutely clear that we can expect at least minuscule upward movement in the trajectory of the US Dollar Index this week. Therefore, I unequivocally recommend call options on the US dollar index. Let’s take a look at the 1-weak performance of the US dollar index leading up to this week’s Fed interest-rate decision. The reason the US Dollar Index has traded lower recently is a result of ECB policy decisions that were less dramatic than speculators, analysts and investors expected. However Fed policy is likely to swing the pendulum in favor of the greenback this week. Even a slight uptick above the current level will yield positive returns for binary option traders.

3 – STOCKS: Consider Put Options on Goldcorp Stock

Goldcorp is an interesting stock to trade. While the 5-day price chart reflects a slight bullish trend, my opinion on the stock is bearish. I rate the stock a sell, owing to several negative factors about the company. The weaknesses in Goldcorp Inc include rapidly declining net income and a poor ROE. If we look at the historical performance of the stock, there is very little to write home about either. Also, the 52-week trading range for the stock paints a very different picture to the positive movement we have seen of late. The 52-week high is $25 and the 52-week low is $11.30. At current prices, we are essentially trading near the one-year low. Let’s take a look at some stats from the stock to help you make your decisions about placing put options on GG:

• The 3-year performance is -67.58%
• The 1-year performance is -37.96%
• The 3-month performance is -4.91%
• The year-to-date performance of the stock is -35.15%

Given that the Fed is likely to hike interest rates this week, put options on gold-related companies and commodities is a safe bet. Why? Because gold does not earn any interest.

4 – COMMODITIES: Consider Put Options on Gold

You probably saw that one coming given that I recommended put options on Goldcorp Incorporated. It’s really important to trade the news in finance because if you keep your eyes and ears open, you will find many profitable opportunities in front of you. It is an established fact that gold has an interesting relationship with the US dollar and interest rates. As the dollar weakens the demand for gold increases, but as the interest-rate rise the demand for gold decreases. We can expect a double whammy for gold this week because the dollar should rise as interest rates rise. My prediction – go short on gold commodities this week.