Playing the FED meetings

[TapeReader]

Is there anyone who is willing to share an interesting way to play the markets ahead of FED meetings like the upcoming one on the 30th?

of course, I believe the way you play it would be heavily affected by general market participants sentiment about additional rate cuts. So I believe correctly assessing that is the key here. easier said than done...

thanks

[aiki14]

Originally Posted by TapeReader

Is there anyone who is willing to share an interesting way to play the markets ahead of FED meetings like the upcoming one on the 30th?

of course, I believe the way you play it would be heavily affected by general market participants sentiment about additional rate cuts. So I believe correctly assessing that is the key here. easier said than done...

thanks

I posted this strategy in another thread, but a good way to play the FED is with VIX calls against QQQQ calls, if the fed cuts 25bps the VIX calls will come in and big, if they cut 75bps the QQQQ calls will cover your commissions and potentially make you a little profit. A 50bps cut and you'll be out a few points on the contracts.
Overall a good risk versus reward, in my opinion.

[MarkB]

did you actually trade the pair? FED cut by 50bps, how did it go? it would be interesting to know how the strategy fared.

[Soverus Khan]

Originally Posted by TapeReader

Is there anyone who is willing to share an interesting way to play the markets ahead of FED meetings like the upcoming one on the 30th?

of course, I believe the way you play it would be heavily affected by general market participants sentiment about additional rate cuts. So I believe correctly assessing that is the key here. easier said than done...

thanks

Bracket a volatile stock before the release with limit entries just outside the range it is trading in. Especially one with constricting price channel or probable chart pattern.

JASO and AAPL both followed through today as they were the only one's I watched at FED time. JASO was hugging support and down almost 5% on the day and AAPL was hugging an intra-day resistance level. With the minutes leading up to the release, you can easily calculate your stops, target price, # shares, and entry price. Some slippage occured as both stocks slowly moved higher in the seconds preceeding the news. Do the math quickly!

This is the second time I used this to my advantage, so not a solid "edge" by any means....but generally risk free.

[OverTheTop]

I suppose by bracketing you mean placing both buy and sell limit orders like a market maker would? if that's the case, wouldn't doing that be a little risky? meaning, suppose you get filled on the bid and the FED comes out with bad news for the markets. selling your longs and taking a loss can be kind of hard if your stocks are in freefall.

just trying to understand how this can be considered an almost risk-free trade.

tnx

[Soverus Khan]

Originally Posted by OverTheTop

I suppose by bracketing you mean placing both buy and sell limit orders like a market maker would? if that's the case, wouldn't doing that be a little risky? meaning, suppose you get filled on the bid and the FED comes out with bad news for the markets. selling your longs and taking a loss can be kind of hard if your stocks are in freefall.

just trying to understand how this can be considered an almost risk-free trade.

tnx

OTT...the limit order is on the side of the swing (above the current price as a limit order that will be hit IF the stock moves in that direction. If hit, immediately place a stop at the break point. For example, a limit buy at $.15above the current price. If hit, a limit sell at $.20 below the entry (risking $.20 with over 10 times the potential reward). For the stocks I listed, this is enough breathing room. AAPL ran over $2 on the news within 10 minutes. JASO ran a buck. $.65 was the target on AAPL.

As I stated in the OP...both began creeping up within a minute before the news.

I had a strong rule to not trade around FED news in the past. Last FED meeting I experiemented, this time I did the same.

[aiki14]

Originally Posted by MarkB

did you actually trade the pair? FED cut by 50bps, how did it go? it would be interesting to know how the strategy fared.

The vix calls moved up during the day and the q's down a bit, when the cut was announced the q calls cranked up and I sold them out when the DJIA was up 120 for a 30% profit, the vix calls dropped and came back to where if I had sold them I would have about a 21% profit, but I am holding going into today due to the Mono line stuff, and the futs being so down. I think we'll see them come in for a 50% profit today.
I didn't think we'd get the move we did, but I was set up to get lucky, and did.

[Soverus Khan]

Well played Aiki...I would not consider that Luck in it's form or function.

[OverTheTop]

Originally Posted by Soverus Khan

OTT...the limit order is on the side of the swing (above the current price as a limit order that will be hit IF the stock moves in that direction. If hit, immediately place a stop at the break point. For example, a limit buy at $.15above the current price. If hit, a limit sell at $.20 below the entry (risking $.20 with over 10 times the potential reward). For the stocks I listed, this is enough breathing room. AAPL ran over $2 on the news within 10 minutes. JASO ran a buck. $.65 was the target on AAPL.

As I stated in the OP...both began creeping up within a minute before the news.

I had a strong rule to not trade around FED news in the past. Last FED meeting I experiemented, this time I did the same.

ok, I think I gotcha now. for some reason, I thought you were doing some kind of enveloping strategy. instead, you are basically entering a stop limit buy or sell order. you prefer to use a stop limit rather than a simple stop order since you would risk getting filled at the top correct?

interesting way to approach FED news, by the way.

[Soverus Khan]

Originally Posted by OverTheTop

ok, I think I gotcha now. for some reason, I thought you were doing some kind of enveloping strategy. instead, you are basically entering a stop limit buy or sell order. you prefer to use a stop limit rather than a simple stop order since you would risk getting filled at the top correct?

interesting way to approach FED news, by the way.

Limit order...yes. Market orders may "ride the wave" until filled at the top.

I tried this last fed news and the strategy worked. I only then tried it after watching the reaction to some of the biggies during the fed news in the past. It's a small edge that I chose to exploit and it has paid twice.

Beware, its for fast fingers!