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Contract: OESX5 P1700
Quantity: 100 Premium: $4.15
Days to Expiration at Open: 95
Initial Margin: $800
Days Open: 0
Contract: OEWX5 P1650
Quantity: 45
Premium: $2.90
Days to Expiration at Open: 95
Initial Margin: $608
Days Open: 0
I will exit this trade in the first week of Sept. no matter what. I don't want to have any positions on during the fed meetings because of the pending interest rate hike.
My thought process here is pretty simple, this will be the first interest rate hike in 5+ years so there's just no telling how the market will react and with how much force. The bears have had a lot of chances and reasons to trigger a correction but this one, in my opinion, is the strongest justification yet and I am just more comfortable on the sidelines.
Since the delta of the P1700 is higher (in absolute terms), when the market moves up, it will lose value more quickly than an option with a lower delta (P1650), all else being equal.
My feeling is that the interest rate hike in September is already priced in to the market, as it has been telegraphed for quite a while now. The Yuan news took everybody by surprise.
I disagree. I would say that people are finally coming to terms with it, but that even still there are doubts we will see a rate rise in september. The first initial rate move itself will bring a modest move, but it will be the confirmation of continued rate rises past the initial one that will hit the hardest.
Just looking at the DXY, it's still not even above it's 52 week high. Bonds/Notes are still not convinced either, with 10s trading in the middle of the yearly range - to me that doesn't indicate 'priced in'.
I have stick with some positions on ES:
07/17 sold ESV5 1860/1800 spread at 3$ (IM = 396$, delta =3.18)
07/17 sold ESV5 1880/1780 spread at 5$ (IM = 659$, delta=5.33)