Wow, December was a wild ride in the markets. Up one day and down the next. For option traders, the extra volatility meant that premiums were elevated. Mike Khouw always says, be a seller when premiums are high and a buyer when premiums are low. There were several opportunities to do just that last month.
The Options Edge team had a successful year this year. Mark in his usual fashion explains the thesis and presents a trade suggestion for you to analyze and execute. Check our our track record here.
Mark and Brad have a fascination with the Crypto currencies. Mark has set up several mining labs where he looks at different mining rigs to review how they are used for Mining. Brad has been trading crypto, recently looking at Trading Bots and how they help smooth out the volatility of just holding on for dear life. This next year we will be sharing our findings, stick around this will be the best year yet with cryptos.
As we start the new year, Remember to review your trades and strive for improvements in 2022.
Next week
- ISM Manufacturing Index
- Initial Claims
- Non Farm Payrolls
- Unemployment Rate
Happy Monday. Good Luck out there this week.
Economic Calendar
Briefing.com has a good U.S. economic calendar for the week. Here are the main U.S. releases.
Last week the initial jobless claims for week ending December 25 decreased 8000 to 198000 while the continuing claims for the wee ending December 18 decreased to 140000 to 1.716 million. That is the lowest level for this average since March 4, 2020. This report continues to show a tightness to the labor market.
Briefing.com
Last Weeks Numbers
Review Last weeks numbers here.
Earnings
Source I/B/E/S data from Refinitiv
Aggregate Estimates and Revisions
- 21Q3 Y/Y earnings are expected to be 42.6%. Excluding the energy sector, the Y/Y earnings estimate is 34.3%.
- Of the 499 companies in the S&P 500 that have reported earnings to date for 21Q3, 81.2% have reported earnings above analyst estimates. This compares to a long-term average of 65.8% and prior four quarter average of 84.7%.
- 21Q3 Y/Y revenue is expected to be 17.0%. Excluding the energy sector, the growth estimate is 13.7%.
- During the week of Jan. 3, four S&P 500 companies are expected to report quarterly earnings.
If you find this post helpful, please pass along to the investment community. If you would like to see any additional information, drop us a line and let us know.
Market Macro
In this section I look at the SP500 from a long term perspective. This helps me see the bigger picture.
In September and October, the SP500 dipped to the 20 week moving average. Last year these were good places to buy or sell some puts. Now look at December. there were 1.5 standard deviation moves for the whole month. Option premiums were high and the VIX was elevated. We closed the year with a nice rally.
Will we see this continue into 2022, if the last few years is any indication, the market will just bounce between the 20 Week moving average and stay between 2 standard deviations. There will be bumps along the way. Pay attention more when the SP500 price is below the 20 week moving average or the price is 2.75 to 3 standard deviations from the 20 week moving average.
