Federally Fueled Wednesday – Low Rates And Tariff Delays – What Can Go Wrong?

The Fed makes their final decision at 2pm.

We'll be doing our Live Trading Webinar at 1pm, EST so we'll be reacting to the FOMC announcement live but, other than yesterday's little dip, we've been chugging along so far this week and I think only bad trade news can derail us now.  

With this President, we won't know for sure until midnight on Sunday whether or not there will be another round of tariffs placed on China.  Yesterday morning there was a rumor the tariffs were delayed but now the signals are back to being mixed and the situation changes by the tweet.  Trump is busy at the moment, lashing out at anyone not helping to get him out of his impeachment mess but it's too late now and this will drag on into next year – but traders don't seem to care.

As it's December 11th, we only have a month to go on our "5 Trade Ideas to Make $25,000 in 5 Months" so we'd better go over them and see if it's worth risking over the volatile holidays.  We hedged our Member Portfolios last week but these were just 5 trade ideas to make money to spend for Christmas – so it really is time to take them off the table:

  • Sell 5 VAC April $85 puts for $5.70 ($2,850) 
  • Buy 7 VAC Jan $80 calls for $20 ($14,000) 
  • Sell 7 VAC Jan $90 calls for $12.80 ($8,960) 

The net cost of the spread is $2,190 and, if successful, it pays $7,000 at $90 or higher for a gain of $4,810 (219%) in 5 months, though the short puts won't expire until April – it should get us very close to our goal by January.   The ordinary margin requirement of the short puts is $5,280 so a pretty efficient way to make $4,810 in 5 months! 

As you can see, VAC has blasted up to $124.98 so we are DEEPLY in the money on this one.  The Jan $80/90 bull call spread is now $45.40/$35.50 so the full net $10 there ($7,000) and the short April $85 puts are not 0.85 ($425) so net $6,575 is up $4,385 (200%) and I'd leave the short puts to expire worthless as it's still $425 more to be gained.  

When a stock has been as volatile as WBA, we don't have to play them to win – they just need to not go lower so we're going to engineer a spread that pays us if the stock simply holds $50 into January options expiration (17th):

  • Sell 10 WBA Jan $50 puts for $3.70 ($3,700) 
  • Buy 30 WBA Jan $47.50 calls for $5 ($15,000) 
  • Sell 30 WBA Jan $50 calls for $3.60 ($10,800) 

The net cost of the spread is $500 in cash and the ordinary margin requirement for the short puts is $8,918 and, if WBA is over $50 on Jan 17th, the short puts expire worthless and the spread would be $7,500 in the money for a $7,000 (1,400%) gain in 5 months. 

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