Credit is tight. Be careful cash-burning industries!

The market action after this FOMC meeting is very confusing and very visual. The dollar fell sharply, the market soared (later down), I looked at the calendar, today is March 23, not February 2 ah, how the market is basically similar?

This time, the Fed duly raised interest rates by 25 basis points and the dot plot was slightly raised, so it is no surprise that the PCE of economic expectations was also raised. But the statement deleted any reference to continued rate hikes. The fact that the Fed has raised its inflation forecast without sticking to a rate hike only suggests that runs on regional banks are causing the Fed a little trouble. And the journalists at the press conference have lost sight of inflation, apparently the banking crisis is more important.

It has to be said that raising interest rates by 25 basis points was a sound decision by all accounts. Mr Powell's decision not only reinforced his determination to fight inflation, but also reassured markets that the financial system was not yet fragile enough to warrant a rate cut. Powell had wanted to add 50 basis points, but the credit tightening caused by the events of the past two weeks is similar to adding 25 basis points, or roughly 50 basis points. That argument may also satisfy hawkish members.

As a result of moving up the dot plot, markets will occasionally be swayed by hawkish comments.

But looking at the euphoria in the markets, I wonder who will bear the brunt of the credit squeeze. When does that happen?

$Financial Select Sector SPDR Fund(XLF)$

Tighter credit is not a good thing, but judging by the big short orders, the first short sellers have chosen to close their positions. Newly opened short order biased speculation:

And I'm gonna follow up on that. This should be a tough year for banks. But now that banks are under regulation, bears will have fewer opportunities to blow up.

$SPDR S&P Regional Banking ETF(KRE)$ Regional banks are riskier than big banks. The bears are still betting that there may be a few bad eggs in this basket.

$First Republic Bank(FRC)$ Although other regional banks may still have problems, the FRCS have been regulated, so the chances of another blowout are low. That may be why traders have sold a lot of put options. The reason not to buy call is simple. FRC may be fine, but other small banks can also blow up the stock price.

sell $FRC 20230519 12.5 PUT$

If you have enough money, you can do it. I don't think the regional banks are worth touching from an overall risk perspective.

$Spdr S&P Biotech Etf(XBI)$ As credit tightens, cash-burning projects will suffer this year. Which projects are costing money? For example drug research and development:

For reference only. I think the exercise price is too aggressive.Technology stocks:

$NVIDIA Corp(NVDA)$ Straddle but save money. An extra sell put. If you're both bullish and bearish and think straddle is expensive, consider this set of strategies.

$Advanced Micro Devices(AMD)$ If you are slightly bearish amd and want to buy bottom can refer to this strategy

Remember the bizarre strategies I wrote about in "The Nvidia bears are so afraid of the bulls".

It was visionary to set the sell call strike price at 360. Although I do have my doubts as to why this trader would short Nvidia on the low when he senses a breakout toward 360. Given the order placed on March 8th, it was probably a bet that the collapse of the banking sector would spread to semiconductors.

For now, though, it makes sense for the pair to trade in reverse.

I'm giving up on the semiconductor sector right now. In the first quarter, strong stocks often beat expectations on the way up and often fell short on the way down.

# Options Hub

Disclaimer: Investing carries risk. This is not financial advice. The above content should not be regarded as an offer, recommendation, or solicitation on acquiring or disposing of any financial products, any associated discussions, comments, or posts by author or other users should not be considered as such either. It is solely for general information purpose only, which does not consider your own investment objectives, financial situations or needs. TTM assumes no responsibility or warranty for the accuracy and completeness of the information, investors should do their own research and may seek professional advice before investing.

Report

Comment36

  • Top
  • Latest
  • YvetteGunther
    ·2023-03-26
    The banking crisis is not over, not by long shot. This was the fastest rise in interest rates in 45 years and rates are not coming down anytime soon, in fact the latest CPI number was the highest in 8 months.
    Reply
    Report
  • HarryCox
    ·2023-03-24
    AMD - nice looking h/s intraday. Looking to buy more puts on tomorrow with the dive at open
    Reply
    Report
  • BillyWilliams
    ·2023-03-24
    I think the market will still rally keep buying when pullback.
    Reply
    Report
  • DdAlpha1
    ·2023-03-24

    Great ariticle, would you like to share it?

    Reply
    Report
  • BruceBryant
    ·2023-03-24
    FED is going to do more the keep the economy healthy.
    Reply
    Report
  • YaleBrewster
    ·2023-03-26
    At some point the bottom will be reached. From there, it's headed to the moon, Alice.
    Reply
    Report
  • YorkTurner
    ·2023-03-26
    XLF has not only reversed all of yesterday's gain in pre-market, it has made a new bear market low!
    Reply
    Report
  • DdAlpha1
    ·2023-03-24

    Great ariticle, would you like to share it?

    Reply
    Report
  • jeffry09
    ·2023-03-26
    Opportunity long here. I bought JPM and FAS last week.
    Reply
    Report
  • Jeff Ng
    ·2023-03-25

    Great ariticle, would you like to share it?

    Reply
    Report
  • Dollydolly
    ·2023-03-24
    Will be a super tough year for banks
    Reply
    Report
  • OldCat
    ·2023-03-24
    Thanks for sharing
    Reply
    Report
  • 陳春豐
    ·2023-03-25
    👍
    Reply
    Report
  • YWTan
    ·2023-03-25
    👍
    Reply
    Report
  • WilliamWin
    ·2023-03-24
    😀
    Reply
    Report
  • OK
    Reply
    Report
  • Deathflash
    ·2023-03-24
    d
    Reply
    Report
  • Trawhal
    ·2023-03-24
    Good
    Reply
    Report
  • FrickL
    ·2023-03-24
    👌
    Reply
    Report
  • Tonyoh
    ·2023-03-24
    Like
    Reply
    Report