Will Rocket Man Live Up to His Word
The party is over, and everyone has gone home. The big question now is it safe? In the 1972 thriller The Marathon Man, Sir Laurence Oliver plays a sadistic Nazi dentist named Zell who has all of his money in the form of diamonds stored in New York City. Dustin Hoffman plays the brother of a spy and when Sir Laurence does his brother in, he tries to find the diamonds thru Hoffman’s character. He finds it useful to torture Dustin Hoffman’s character. When he was done with the session he always asks, “Is it safe?”, meaning can he get his diamonds without being caught.
That is sort of like dealing with the reverend leader, Kim Jong Un. He makes all kind of promises but if he changes his mind, he takes on a new color to keep the regime in power. Make no mistake about it. If Mr. Un had the military power of Hitler or Stalin he would be on his way to taking over the world. So, is it possible to trust him while working on a new deal to make the Korean peninsula safe?
On the negative side there is nothing to suggest that after three decades of trying to solve the mess in the East that anything will come of it but a lot of hot air. Still sometimes the hot air will eventually lead to a meaningful discussion and the ability to live with one another, In April, it is said that Mr. Un met with his most trusted advisors and said that the nuclear program had now been completed and with this great success, the North could live a “dignified existence”.
I believe that the “dignified existence” is really a pressure from North Korea’s biggest trading partner, China. Remember, if nukes start flying, China is going to get its hair mussed up too. There is no way around it. China is geographically too close to the action to avoid serious damage to its South Eastern providences, so they have the incentive to keep Mr. Un under control.
Perhaps after 70 years in power, the regime has finally figured it out that instead of continuing to repress their citizens to the level of starvation that it may be a better idea to move their money away from the nukes and allow for some trade so that they can eat. The greatest threat to most regimens is usually form the people that they are repressing.
Perhaps Mr. Un, who was educated in the West when he wasn’t taking lessons from his tyrannically father on how to destroy the world, is different and he can see the world thru the eyes of the West. Mr. Trump is certainly a lightning rod, but sometimes you need a lightning rod to wake you up to the challenges ahead. Let’s hope in this case that is exactly what has happened.
Ask Mr. Seifert
I am constantly asked questions about trading and how to exploit certain market factors to insure success. Each week I will answer one of those questions here with a short paragraph.
Question: How do I figure profit and losses in the credit spread part of the trade when I do 21st Century Covered Calls and Low Cost Covered Put transactions?
This sounds confusing but it is a simple calculation. A spread loss occurs when the stock closes above either the short call (21st Century Calls) or below the short put (Put Hedge Trades). In both cases, the loss will never be more than the difference between the strike prices less the credit received when initiating the trade. The loss is offset by the move in the stock.
21st Century Covered Calls Credit Spread Losses: If a stock closes above the short call option strike price, the loss is the difference between Friday’s close and the short call option strike price but no more than the long call option strike price less the credit received when initiating the spread. If the stock closes above the long call option, the loss is the difference between the two strike prices less the credit received when initiating the spread.
Low Cost Bullish Put Hedge Credit Spread Losses: If a stock closes below its short put option strike price, but above the long put strike price, the loss is the difference between Friday’s close and the short put option strike price but no more than the long put option strike price less the credit received when initiating the spread. If the stock closes below the long put option strike, the loss is the difference between the two strike prices less the credit received when initiating the spread.
The Wise Guy Report: The View From The Electronic Floor
Each week I talk about how the Wise Guys (floor traders) find the soft spots in the market and take advantage of price dislocation in three major commodity markets: Gold (GC), Crude Oil (CL) and Long-Term Interest Rates (ZB). On the equity side, I cover the MSS which is the Mister Seifert Sez Composite Index. This is a proprietary index that I created which measures the dollar flow of the four major indexes (S&P 500, Nasdaq 100, Russell 2000 and the Dow Jones Industrials) on an unweighted basis. This week let’s take a look at last’s week price action in Crude Oil and Gold.
Crude Oil Continues to Flounder, Gold Starting To Follow (Congestion)
Crude Oil continued to try to find its way back to the top, but after some gains early in the week, it suffered a 4% loss on Friday and is now once again up against support. US rig count went up slightly for the week for the 12th week in a row. However, the increase is so small that it looks like for now the top may be in. This market continues to bear watching. Until the $64 level can be taken out, I would only enter this market from the long side.
While only a few people have noticed, investors have been moving their money out of gold and into equities and housing again. Gold is now down more than 6% from its high back in April. It has a large area of support around the $1285 and is now up against that level. It is too early at this time to tell if it is going to break to the downside or reverse off this support area.
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- The Bullish – Bearish Credit Spread Strategy: The nuts and bolts of trading weekly credit spreads.
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- The Earnings Trade: Trade potential big movers with little or no downside risk.
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Mr. Seifert