Weekend Wall Street #31 - 50 Cent Returns, The Best Trades for 2/20-2/24, and Futures Plans
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Good evening everyone, I hope you’re enjoying your long weekend after the rollercoaster of a week! Once again, as a reminder, the markets are closed although futures products will still open and trade tonight at 6PM EST until noon tomorrow, but I don’t expect much liquidity or action as institutions are closed as well.
Although the stock and bond markets are closed, we have a massive week in store with huge earnings and economic releases that should give a lot of volatility to the market.
Last week, the CPI and PPI inflation reports showed inflation slowing as the market predicted, but not as fast as they predicted.
The market has continued holding its upwards trend showing that investors do think a soft landing is possible, but the Fed has already told us that they are committed to bringing inflation down to 2%, and we are still above 6%, meaning the longer and higher rates are, the lower the likelihood of that happening is.
Economists at Goldman and BofA are predicting that the peak for the federal funds rate will be a range of 5.25-5.50%.
If inflation doesn’t fade, 6% isn’t out of the question. Last week I pointed out an $18M trade the is predicting that rates will be at 6% by September:
Let’s take a look at some upcoming catalysts for this week:
#1) Retail giants Walmart ($WMT) and Home Depot ($HD) are going to be kicking off the week on Tuesday morning before market open. The market loves looking at Walmart earnings because it is the largest consumer retailer company, so if they warn that spending is decreasing, it will not be good for the market.
That being said, we also have a some great speculative earnings this week, as you can see below:
#2) The Fed’s preferred method of gauging inflation is the PCE report on Friday. Bank of America is expecting a +0.5% month over month increase.
#3) The FOMC minutes will be released on Wednesday at 2PM as investors look for hints of a 50 basis point rate hike.
Here is the full economic calendar:
“50 Cent“ Returns
Okay, no the rapper, but the trader who made $200M back in 2017/18 with their huge $VIX trades around the price of “50 cents“, hence the name:
The first order hit of a Buyer of 100,000 $VIX May 50C for 50 cents at a total of $5M
An additional 50,000 contracts were bought at the same strike and price for another $2.7M the day after
VIX is used as a volatility hedge and failed to hedge against the 2022 market crash, but is now right back at key support and he is hoping that any small event will spike the VIX:
EARNINGS OUTLOOKS
Before I get into this, I’d like to remind everyone about two things. First, make sure that if you’re trading options you know the risks of implied volatility - you can lose even if you’re correct. Second, nothing in earnings is guaranteed and investors do not buy stocks based on their past performance, but rather how their performance can predict how they will do in the future.
The most interesting names are Coinbase, Unity, Etsy, Wish, Nikola, and Beyond, and Medical Property Trusts (I will get into why later).