Options Trading News

September 19, 2013  Thu 5:16 AM CT

Traders went into yesterday positive on the global economy. Then the Federal Reserve kept easy money in place, and the bulls ran rampant.

The graphic below shows data from our researchLAB market scanner before and after the big announcement. Gains were initially limited, but then money poured into stocks that benefit from a weak dollar and low interest rates: gold and silver miners, homebuilders, and emerging markets.

Fed officials will continue to buy $85 billion of bonds a month because higher interest rates "could slow the pace of improvement in the economy and labor market," according to the central bank's statement. Bond yields had climbed sharply in recent months on concern that the Fed would "taper" purchases, and most economists expected a reduction to about $70 billion going into yesterday's meeting.

But more is going on than simple money printing. Economic reports from around the world have beaten forecasts since the summer, suggesting that both Chinese and European growth were accelerating on their own. researchLAB has flagged this trend on several occasions, detecting the flow of capital into ocean-shipping companies, Chinese stocks, and steelmakers in over the last month. optionMONSTER also pointed to price action in the euro and Australian dollar as a bullish indicator earlier this month.

(Graphic courtesy of researchLAB)

Two metal stocks in particular stood out early yesterday, long before the Fed gave a green light to target the sector. Cliffs Natural Resources saw early buyers in its November 28 calls for $0.60, followed minutes later by the November 25 calls in U.S. Steel for $0.26. The CLF contracts ended the session up to $0.70 and the X calls fetched $0.33.

Later in the day, there was also heavy bullish activity in related companies including Vale, BHP Billiton, and Rio Tinto.
Share this article with your friends

Invest Like a Monster - San Antonio: October 9-10


The fastest money in the market
View full report »

Premium Services

Archived Webinar

Education & Strategy

The covered call and unhedged risk

I have written a few things on the Covered Call Strategy over the last two weeks. Please understand that those two previous articles plus this one do not constitute a proper, fully in-depth lesson on the Covered Call Strategy like we have in our classes at Option Monster Education. I have picked out a few topics that I believe were worth noting and today I am going to add the final one.

View more education articles »