To The Moon

FOMC December meeting is the last interest rate increasing this year, the probabilities of 50 basis points and 75 basis points are similar. Dove or Hawk will decide the market direction.

Anyway, The most important factor is CPI.

The September CPI data has beat expectations, even energy factors weakened. However, the original high base in October should theoretically drive the next one down.

Data from Bloomberg.com

The median value of market expectation is 7.9%, with the highest value 8.1%, lower than the 8.2% in September.However, it coincides with the integer mark of 8%. Investors are nervous. If it is still above 8% in the end, the market will naturally feel bad.

Personally, I think the probability of exceeding market expectations is higher, and the most important reason is the cost of "Shelter". According to the data in August, the weight of shelter in CPI has reached 32%, of which rent accounts for 24%, way more higer than food and energy.

Data from Bloomberg.com

According to the recent trend, the year-on-year growth rate of residence may reach 6.8%, and the contribution of this weight item will be the highest in recent years.

Let's see, If

CPI beat 8%, exceeding market expectations. US bond yields rose, and the stock market fell;

CPI missed expectations, confirming that "the point has passed", with US bond yields falling and stock markets rising.

In the case of possible large fluctuations, it is better to use cross option strategy to participate, as I mentioned last time. Just in time for the mid-term election results, the market volatility may be even greater.

$Invesco QQQ Trust(QQQ)$ is more volatile than $SPDR S&P 500 ETF Trust(SPY)$, so QQQ's IV is higher, but the option liquidity of both is quite good.

Let's try two trading ideas.

Fast-pace: Choose Lastday-options.

That is to say, buy Call and Put due on November 11th at the same time, preferably based on the actual point before you place an order, and buy and sell CALL and PUT at the same price at the same time.

Slow pace: Choose options for the next week or two.

For example, buy CALL and PUT due on November 18th at the same time.

When to close?

Unless the result of CPI is too surprised, it is generally difficult to have continuous fluctuations after a large jump. When closing positions, you can choose different times to close positionsCALL and PUT.

For example, CPI is not as expected, the index rises sharply, and CALL makes money, so it can be leveled first. When the market calms down, it still needs to digest the part of raising interest rates. If the index falls back, it can close the PUT again.

Of course, the safest way is to close the whole span combination at the same time, to avoid risks!

Happy Trading!