One of the most common words I hear in the trading world is the word: Why…??????????
-Why is the market rallying so hard?
-Why is this stock up?
-Why is this stock down?
-Why is the market down?
My favorite might be:
Why did this happen to me?
Most of the time my response is, “because that is the way the market acted today”
However, MOST often my answer is “You think this is the answer and this is what they are telling you the answer is BUT…here is the real answer.”
Keep reading because I give you an actual trade happening today, right now, that shows this very phenomenon.
For instance, as I write this, the most common reason for rallying or selling off in the market is around a Coronavirus headline.
While the Coronavirus might be a catalyst for selling, the real reason we rally or sell off has so much less to do with economic slow downs as it does with movements in the dollar’s price and valuations in the market place.
Basically, the headline is almost NEVER the reason for a sell off. Sometimes, there really is no reason other than dollar flows (which are in fact the MOST common reason for market movement).
Understanding the real reasons for sell offs is important. More often than not it is mechanical (meaning related to time of the month or year, rebalancing, or an allocation) and not directly related to the news as the media and/or twitter would have you believe.
Thus, it is really important to understand the news because you need to know not the WHY, but the WHAT…the “what is next” that is!
The media and rookie traders want to know the why…I don’t care.
I don’t have to care because I trade volatility which means my question is, “what’s next?”
What are the ramifications and what is going to happen next? Money is rarely made on understanding ‘why something happened.’
Money is almost ALWAYS made on what is next. Let’s take a look at China again…
Right now there are NO exports coming out and no imports going INTO China. This is going to affect DOLLARS and how many China has.
This is all happening at the same time it’s actively fiddling with its economy to keep it off of life support.
If you want to know why the dollar is strong: take a look at China.
Most of us do not trade forex, but let’s take this a step further. Recall that China has agreed to buy a TON of imports. Right now they are importing NOTHING.
At the same time they are killing 50-75% of their own hogs and 20 million chickens.
GEE…once they open up ports, what is the easiest way for them to play ‘catch up’ on their imports?
Tyson Foods (TSN) has way too many live hogs and there is a GIANT contango in the hog market (meaning there are expectations that prices will rise).
Regardless though, when China DOES open up, they are going to have such rampant demand for live hogs that TSN is going to make money hand over fist.
Long term, some of the buyers that were lost during the trade war will be FORCED back, and new buyers may PERMANENTLY come to the table to buy meats from TSN.
Thus, I would be a buyer of long term calls in TSN as a play on China.
These are the types of trades I’m delivering everyday in my SHARP B.E.T.S. system every single week.
Your Only Option,
PS. Stay tuned for a VIDEO on Friday
PPS Stay EXTRA tuned for more news from us
The materials presented from Option Pit LLC are for your informational and educational purposes only.Option Pit LLC nor its employees do not offer investment, legal or tax advice ofany kind, and the analysis displayed with various tools does not constitute investment, legal or tax advice and should not be interpreted as such. Using the data and analysis contained inthe materials for reasons other than the informational and educational purposes intended is atthe user’s own risk. Option Pit LLC is not responsible for any losses that may occur from transactions effected based upon information or analysis contained in the presented materials.Specific trading ideas or strategies discussed in the presentations or materials are entirely illustrative and do not constitute a solicitation of a transaction (or transactions) or recommendation to execute a particular transaction or implement a particular trading strategy.To the extent that you make use of the concepts with the presentation material,you are solely responsible for the applicable trading or investment decision. Use caution when entering any option transaction and it’s recommended you consult with your financial advisor for investment, legal or tax advice relating to options transactions.