Every day we look for a stock that is trending in the news or social media. We do this looking to find assets that have mispriced options. We then prepare high level analysis to report here in this newsletter about 250 times each year. Rarely do we have a day like today when we don’t find anything where the balance between risk, reward, and probability works in our favor.

Short-term risks are too high for us to sell options ahead of the Fed Chair press conference that will be held today. Options prices are elevated because everyone knows that when the Fed Chair speaks, the market will hang on every word that comes out of Jerome Powell’s mouth. If he says anything unexpected, the market could move explosively, harming any position designed to profit from a stable market.

Buying options would be a better way to trade ahead of the Fed Chair press conference, but investors have pushed options prices up too high ahead of the Fed meeting. Options we would normally like to buy are too expensive to justify taking the risk. In general, options are too expensive to buy and too risky to sell today.

This shows that investors have been preparing for the Fed Chair’s Q&A today. Sometimes the best trade idea is to do nothing and keep your capital ready for a better opportunity later. We are happy with the open positions we’ve taken and now we are in a holding pattern while we wait and see what Chairman Powell says today. Once his words are known, the market will adjust, and we will try to find trending assets with mispriced options again tomorrow.

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Thank you,

Don Fishback