To Taper or Not To Taper – That Is The Question…

The Fed meet today and tomorrow to determine whether or not they will begin “tapering”, a euphemism for ending the $85 billion of money printing they have been doing every month in a desperate attempt to revive the sluggish US economy. Most economists believe inflation figures are too low for the Fed to begin tapering this month, but a full 38% of those polled do see an immediate tapering.

I believe there will be a postponement – consider it a Christmas gift to the stock and bond markets – but I’m not confident enough to bet on it! However, I’m more certain about uncertainty, if you’ll pardon the cheap pun. I foresee a continued increase in uncertainty or volatility, peaking tomorrow afternoon at the time of the Fed statement.

This presents the following opportunity, which is delta neutral – in other words it doesn’t care in which direction stocks move – to make money. It will only lose money if uncertainty stays stagnant or drops between now and tomorrow
and if the price of the index remains stable, moving only in a tight range.

The Opportunity

  • Probability : greater than 70%
  • Risk : Reward : around 1 to 7
  • Duration: 2 day trade
  • Minimum Investment: $37
  • Maximum Investment: none

Log in |
Lost your password?

Disclosure: Options investing is inherently risky. This is not a solicitation to buy or sell. Please read our full disclosure on this site.

Please login to view the MEMBERS ONLY content. (Register here.)
You can leave a response, or trackback from your own site.

Leave a Reply

You must be logged in to post a comment.

Disclosure:This web site discusses exchange-traded options issued by The Options Clearing Corporation. Options involve risk and are not suitable for all investors. Prior to buying or selling an option, a person must receive a copy of Characteristics and Risks of Standardized Options. Copies of this document may be obtained from your broker, from any exchange on which options are traded or by contacting The Options Clearing Corporation, One North Wacker Dr., Suite 500 Chicago, IL 60606 is not a registered investment advisor or broker-dealer. We do not make recommendations as to particular securities or derivative instruments, and do not advocate the purchase or sale of any security or investment by you or any other individual. By continuing to use this site, you agree to read and abide by the full disclaimer.