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Market Movers: 3/8 U.S. Jobs Report

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[Jim Iuorio] Welcome to Market Movers, I'm Jim Iuorio, and today we're discussing Friday's Payroll Data. Now, remember it was just released last month that spooked the market regarding inflation, and began this month of exaggerated volatility. We'll be looking at using weekly E-Mini options. Either hedge risk or create additional exposure to these types of binary events. Joining me is Chief Investment Officer of Kingsview Asset Management, Scott Martin. [Scott Martin] Hi Jim. [Jim Iuorio] Okay, so we've made a fairly impressive comeback, as it stands right now we're about 3%ish off the highs that we put in. Could this NFP be the catalyst that throws us back to the highs. [Scott Martin] Yes, and it could also be the catalyst that could throw us back down to the lows. That's what so fun about this environment right now, if you like to say "fun". Which is more maybe appropriately put that's why this environment is an interesting one to trade, because of the fact that there's so much reliance and influence in today's data points with its tariffs or NFP they could move the market in any which way. [Jim Iuorio] Okay, when you look and say it could be the catalyst that could push it down, do you think it could be the inflation part of it or just a crummy number overall? [Scott Martin] I think it's the inflation part. If you look at what the market's been paying attention to which has been interest rates. We've talked about ZN a lot in February especially with the move that we've had in the 10-year. Jim, to me it's the interest rate reaction that the market will have to the data which obviously influences the ES. [Jim Iuorio] I like that, too. Now, before we dive into our trade discussions, I'd like to point out that with all Market Movers, it's important to view these trade examples as different ways to use features and options products to either manage risks or create additional trade opportunities, not as recommendations or advice. Price and movements will vary in the market. And when we're pricing this now, the ESH, the March contract trading at about 2730, Scott. [Scott Martin] Okay, you scare me every time you do that. I used the word "fun" earlier, and that may be a euphemism for other words that you can't say on the internet. Because this market is really interesting, and I believe there's a lot of opportunities here and when I punched up the ES today and looked for some opportunity, Jim. To me it was about risk reward, it was about price, it was about finding something that I believe was at least a favorable outlay for a potential nice handy return. So, specifically Jim looking today at buying the March 2675-2650 Put spread in the ES. It'll cost you three ticks to put on, or about $150. It expires March 16th. It's a March contract. The earn line, as you mentioned, was 2730. You risk the $150 to put it on to make a potential $1,100 if it fills out. And here's the thing. I'm not exactly saying that this thing's going to totally fill out by, say, March 16th, but the reality is that when you look at the risk-reward on that trade, and the expression of maybe a bit of hedge on that downside volatility, to me that looks like a fair expression as far as what you have to put out. [Jim Iuorio] When I look at it, it's funny, because the first thing that hit me was, well yeah it's cheap because it's kind of far away, but the second thing that hit me is that we've been down there fairly recently. And we go down there. [Scott Martin] That range can totally be hit again when we see the number tomorrow, if it is crazy inflationary. [Jim Iuorio] Okay, I'm looking at it a little different than you. I'm looking at it for-I do think the strength of the last couple weeks is impressive, so I'm selling the March, that's the same expiration as you, March 16th, The 2700-2690 Put spread, and then buying the week 4, so getting an extra week, buying the week 4, 2775-2785 Call spread for a total of one tick. Now the Put spread expires on March 16th, and the call spread expires on March 23rd. One's the March underlying and one's the June underlying. [Scott Martin] Right, and I like it. Now here's the interesting thing about it, though. I like the fact of the expression and the fact that you're not laying out too much to give up too much upside either, in the sense that it's a fair priced trade or expression. But here's the thing to me, though, is how do you manage, though, the different expiries, because you have two different-- [Jim Iuorio] Because it rolls into two different months, that's right. Okay, so I'm not keeping this to the grave anyway. I want to cover both these about an hour before they expire. So, the Put spread on Friday, March 16th, and then the Call spread on Friday, March 23rd. Get out of these before the market ends. We don't want to deal with the futures position anyways, so it never mattered to me if one was March and one was June when I thought about it. They're trading five ticks different. You're risking $550 to make a potential $450 on the trade. But even that, options are about probabilities. I think the probability of making money is slightly more than losing money. [Scott Martin] And that's what's interesting about mine, too, as we talked about the risk-reward on mine is vast, because of the fact that mine is so far away. And frankly, we talk about this a lot, is when you price up options, if you just look at straddles as a way to figure out if Calls or Puts are more expensive, you can kind of tell where I believe the market wants to go [Jim Iuorio] I like that. [Scott Martin] So, on yours, the probability looks pretty high that that's going to fill out. [Jim Iuorio] Last quick question, the Fed has made it seem like the recent volatility hasn't scared them one bit in the red on course. Do you believe them? [Scott Martin] No, I don't. If they don't believe it, or let's say if they don't think the market volatility has scared them yet, let's have another period like early February and see how they react. [Jim Iuorio] I agree with you 100%. Thanks for joining us on Market Movers. I'm Jim Iuorio. We're hoping to make you a better trader.

Video Details

Duration: 5 minutes and 9 seconds
Country: Andorra
Language: English
License: Dotsub - Standard License
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Views: 18
Posted by: scott.szczurek on Mar 8, 2018

Market Movers: 3/8 U.S. Jobs Report

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