Trading Around Key Options Indicators

For example, in a bullish market , they have an idea of how high the security prices will go and the expected timeframe in which this will occur, in order to form an optimal trading strategy.

Money Supply Money supply is the amount of money available for spending in an economy. Delivered twice a week, straight to your inbox. 

Share Most option trades, even many non-directional strategies, are impacted by economic factors.

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Will your goals be achieved within the time frame of the plan? Should the deadlines be modified? Are your goals and action items still realistic? Should your goals be changed? What can be gathered from an adaptation to improve future planning activities?

Why Track Your Goals? Having a stake and responsibility in the plan makes you feel part of it and leads you to drive your goals forward. Successful plans tie tracking and updating goals into organizational culture. Accountability and high visibility help drive change. This means that each measure, objective, data source and initiative must have an owner. Changing goals from In Progress to Complete just feels good! Once agreed upon, this topic should be developed to conclusion.

Holding meetings helps focus your goals on accomplishing top priorities and accelerating growth of the organization. Although the meeting structure is relatively simple, it does require a high degree of discipline. Strategy Review Session Questions: What were our three most important strategic accomplishments of the last 90 days — how have we changed our field of play in the past 90 days?

What are the three most important ways we fell short of our strategic potential? In the last 90 days, what are the three most important things that we have learned about our strategy? We are looking for insight to decision to action observations.

In many organizations, retreats have a bad reputation because stepping into one of the many planning pitfalls is so easy. Holding effective meetings can be tough, and if you add a lot of brainpower mixed with personal agendas, you can have a recipe for disaster. Having a good knowledge of these economic indicators provides the traders a guide as to where a certain option is heading to, if it is in an upward or downward direction.

A trader can use numerous economic indicators while trading options. The traders can combine the knowledge of these broad market indicators along with the other specific technical indicators to help predict market movement.

For example, in a bullish market , they have an idea of how high the security prices will go and the expected timeframe in which this will occur, in order to form an optimal trading strategy. Similarly, in a bearish market , they have an idea of how low the security prices will go and the expected timeframe in which this will occur. In this article, we will discuss the six important economic indicators, namely, consumer price index CPI , gross domestic product GDP , trade balance report, money supply , unemployment rate and credit markets.

Let's now look at each of these indicators in detail. What Are They For? Consumer Price Index The CPI measures the average change over time in the prices paid by consumers for goods and services. It is the most widely used measure of consumer price inflation. In principle, the stock markets perform well when there is strong economic growth and low inflation. High inflation adversely affects the performance of companies, which in turn affects the stock prices.

High inflation also leads to a rise in interest rates , which can adversely affect investments in the stock market. One reason is because in a high interest rate environment bond prices fall and the bond markets are seen as a cheaper investment option compared to stock markets. Gross Domestic Product GDP is the total value of all the goods and services produced over a specific period of time. It is a primary indicator of the growth or contraction of the economy.

GDP is announced quarterly and it can significantly impact the markets. Positive GDP indicates that the economy is growing, profits are rising for companies and, therefore, boosts the confidence of investors.

Negative GDP indicates that the economy is contracting, wherein the overall spending in the economy reduces, the companies' profits reduce and the stock markets are adversely affected. Trade Balance Report The trade balance report, released every month by the Bureau of Economic Analysis , provides useful information to the investors and helps them understand the health of the economy.

The report determines the overall standing of the country's economy against other world economies. The most important parameter in the trade balance report is the trade deficit , i. Another important parameter is the current account deficit.

This is mainly because the U. For instance, for the markets to do well, the investors will expect the trade balance to maintain the current level or to fall, which will indicate rising exports. Money Supply Money supply is the amount of money available for spending in an economy. The money supply movements are treated as a key indicator for predicting the future movement of stock prices.

The Fed also controls the short-term interest rates , called the Fed Fund rate , which affects the money supply with time lag. A tightening monetary policy is associated with falling stock prices, while a loosening monetary policy is associated with rising stock prices. When the Fed tightens the monetary policy, it leads investors to perceive stocks as being a riskier investment and thus demand higher returns. Given the same expected dividends , the higher return is achieved by a fall in stock prices.

Similarly, a loosening monetary policy leads to a rise in stock prices. A growth in money supply also indicates that inflation will increase soon.

 

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options that should be discussed thoroughly with a broker and/or tax advisor before engaging in option transactions. OCC publishes another document, Taxes & Investing: A Guide for the Individual Investor, which can serve to enlighten both you and your tax advisor on option strategies and the issue of taxes. ensure that the listed options markets remain vibrant, resilient and liquid in the eyes of regulators and the investing public. We believe that education is the key to prudent options investing, and that the tremendous growth of the U.S. listed options markets in recent years can be attributed, at least in part, to the value of this education. 

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The 25 strategies in this futures options strategy guide are not intended to provide a complete guide to every possible trading strategy. The 25 strategies in this futures options strategy guide are not intended to provide a complete guide to . Strategy Guide I - Pg 1 OPTIONS UNIVERSITY - STRATEGY GUIDE I Page 1 of 16 STRATEGY GUIDE I Buy-Write or Covered Call Construction – Long stock, short one call for every shares of stock owned.

The Bible of Options Strategies, I found myself cursing just how flexible they can be! Different options strategies protect us or enable us to benefit from factors such as . One of the ways for options traders to gauge the market direction is with the help of key economic indicators. [ For an in-depth overview of how options work and strategies to leverage when trading them in the market, check out Investopedia Academy's 4-hour, on-demand video course Options for Beginners.

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