Consistent income with long term option trades.
Good afternoon O$ members!
What year of ES levels! From a high of 4808 in January to a low of 3502 in October!
We’ve spent the last ten trading days in the ES 3900 and 3820 channel waiting for a breakout to the upside or downside to occur.
The last time we were stuck in this channel was in June/July, and we eventually exploded upward back toward 4300. We were also in here a bit toward the end of October, and we exploded upward toward 4100 but have since bottomed where we’re at with 3810-3820 being a strong level of demand/support. News-wise we have the Job Openings and Labor Turnover Report on Wed Jan 4th and the Consumer Price Index on Thursday Jan 12 which always provides a big reaction either way. The market is closed Monday so it’ll be interesting to see how Tuesday unfolds. With the strong buying toward the end of today’s session, I’d lean bullish next week, especially if that 3820 floor of demand can hold.
For the most part–half of the year was spent trading sideways. In a sideways market with frequent ups and downs, but with no follow-up direction, long-term calls and long-term puts typically burn away to zero with time decay. I’ve switched strategies over the year to focus on some shorter-term plays which have been more successful. We have the market knowing about interest rate hikes, the FED’s plan, and the desire to cool the economy, create less demand, and increase unemployment so there should be no ‘shock’ surprises to crash the market. The market typically (should) be forward-thinking and steps ahead of where the economy actually is. When the FED finally does pause their rate hikes, this should create some enthusiasm and spur more buying. We also know they are unloading their balance sheet over the year so this favors a more bearish tone to the overall market.
2023 will be a year not to be a bear or a bull, but to be nimble and flexible with trades. There has been tremendous destruction to the stock market, and many stocks are at multi-year lows. We’ll also take advantage of long-term options that expire in 2025 to provide us with time for recovery and more positive sentiment to return to the market.
See everyone next year…. Happy New Year!
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