Trading Government Reports for fun and profits

BY ANDREW GIOVINAZZI

February 14, 2024

Yo Pit Crazies,

Mark is going live with his new trading strategy which last time I looked has not lost yet. Not bad! Sign up here for a little of the ole’ Mark Sebastian magic.

Speaking of fun and magic, Eddie Murphy and Dan Ackroyd in the greatest trading movie ever made, Trading Places, is centered around a government report, the Frozen Concentrated Orange Juice (Ticker; FCOJ) report after a big frost. The rest is legend.

The Duke and Duke trader that had the inside information from Beeks bought up the FCOJ contracts thinking the crop would come in short causing a huge price spike.

The report came out flat so the FCOJ contracts got smoked.

Billy Ray and Winthorp shorted the contracts into the report, sold them to Duke and Duke, and bought them back when the market collapsed.

Trading mastery at its finest. Sell high and buy low.

I did a little Trading Places on my own on Monday. Except my government report was the Consumer Price Index (Ticker: CPI). Conveniently they post the past dates of the report so a trader can get an idea what happened in the prior reports.

The problem was I did not have Clarence Beeks to give me the crop report for direction. But I did have something else.

Find out what I had.

I had a 3 day range from the last 10 CPI reports

That range was a minimum of 10 points in the SPDR S&P 500 Trust (Ticker: SPY) over a 3 day period. When the Federal Reserve is as intertwined in the market as it currently is, all numbers will play better then in the old days where the Fed was largely absent from overt market shenanigans. That all changed in 2009 with QE. After that, everything the Fed did mattered because they are the bull in the china shop.

5 Day SPY chart

Option traders can trade many things. Direction, volatility, time and they can also trade range. If the market makers are charging me $3.00 for a $10.00 range I will buy it and see what happens. That got me 20% on a short term SPY strangle and 10% on a longer term SPY strangle so far from a special Weekly Profit Cycles session I did on Monday.

My short term trade:

1 SPY Feb16 499/504 ss (straddle or a strangle) for $3.35 The 499 put got to $8.00. I did buy a VIX put too so I ended up with a 20% return over all since I closed my SPY put for $5.33.

If you want to learn how to price, trade and estimate market moves, join me in Weekly Profit Cycles. Mind you the history on this is 3 days of continued move, so I expect SPY to keep dropping today. If it does not, I will dump the remaining SPY puts I have.