Are Central Banks About To Open The Monetary Spigots Even More?


by Steven Sarnoff

In response to the 2007-2009 financial crisis, central banks opened up the monetary spigots.  They employed a creative strategy of QE (quantitative easing), the purchasing of financial assets as a way of creating new money in hopes of stimulating economic recovery and keeping the demon of deflation at bay, when their usual monetary policy tools were rendered ineffective.

The overall effectiveness of several rounds of QE as an economic stimulus is debatable.  What is clear is that ballooning central bank balance sheets have been a boost to asset prices. Since 2013, Japan has taken it to a new level. Continue reading

The Role Of Luck


by Steven Sarnoff

When people find out what I do for a living, they invariably ask what I think the market is going to do.  I politely tell them that if I knew what the market was going to do, I wouldn’t have to work.  If you ever encounter someone who claims to know what the market is going to do, zip your wallet.

In option trading and in life, luck plays a featured role.  We are practitioners of uncertainty. Somewhere back in the mid-1990’s I recall seeing Alec Baldwin interviewed on the show, Inside the Actor’s Studio. He was asked to describe what acting was like to him.  Baldwin answered that it was like repeatedly banging your head against a door and then, it’s all up to luck. Continue reading

Is The “Buy the Dip” Crowd Facing A Rough Road Ahead?


by Steven Sarnoff

Those who drive down the gritty paradise that is the Baja may recognize this stretch of road found south of Margaritaville San Felipe.  Drivers are warned as they approach a “zona de vados” to moderate their speed, because hitting a dip with velocity can end up being fatal.   So to, a trader must see the signs to know when conditions are clear and when to proceed with caution.  Blindly taking up positions may wreck your portfolio. Continue reading

Never Be Surprised And Always Be Surprised


by Steven Sarnoff

“We have 2 classes of forecasters: Those who don’t know . . . and those who don’t know they don’t know.” — John Kenneth Galbraith

Looking at today’s markets, the forces of deflation and inflation continue to slug it out in a titanic struggle for dominance. Options traders face ever-changing wind conditions as they attempt to pilot their portfolios to profit. Over the years, we’ve managed to navigate the stormy seas with a steady hand on the tiller. One of the keys to our success is keeping a sense of perspective. As our service sails along toward its 28th year of advocating sensible speculation, I’d like to share some seemingly impracticable musings you may find useful. Continue reading

Volatility Returns And Is Percolating


by Steven Sarnoff

While contemplating the current condition of the stock market this morning, I glanced at my coffee cup and the idea for this blog post came to mind.  The CBOE (Chicago Board Options Exchange) Volatility Index (VIX) measures market expectations of the implied volatility of S&P 500 index options.  In plain terms, the VIX measures volatility (fear).  Having a good read on investor fear, or lack thereof, can be a valuable tool for traders.

There is a correlation between a lower VIX and higher stock prices and a higher VIX and lower stock prices.  Options Hotline subscribers know I’m fond of saying, “Smart traders use the absence of volatility to prepare for its return.” Continue reading

Bonds, T-Bonds — Shaken, Not Stirred


by Steven Sarnoff

No, not that Bond.  I’m talking US Treasury bonds! In today’s session staid T-bonds sold off a little over 1%, as investors fret over future central bank monetary largesse.  Interest rates move inverse to bond prices, so falling bond prices mean higher yields.

Our Options Hotline subscribers were positioned beautifully for this scenario and saw their money multiply in just over two weeks! Continue reading

A Tennis Lesson For Traders And Us All


by Steven Sarnoff

Congratulations to Stanislas “Stan” Wawrinka, of Switzerland, for winning the 2016 United States Open Tennis Championship on Sunday in New York.  Stan took down top-seeded world no. 1 Novak Djokovic, of Serbia, to claim his first US Open title and the third grand slam of his career.

For many years, Stan struggled to break through against the top four players in the world: his countryman Roger Federer, Spain’s Rafael Nadal, Djokovik, and Britain’s Andy Murray.

Inked on his left arm resides a quote from 20th century avant-garde Irish novelist, playwright and poet Samuel Beckett, “Ever tried. Ever failed. No matter. Try again. Fail again. Fail Better.

Continue reading

Shares of SUN Setting


by Steven Sarnoff

The power of our Superleverage method is shining as shares of SUN (Sunoco) are setting back.

On Sunday, August 21, 2016 I recommended that our Options Hotline subscribers buy the Sunoco September $30 put for $50 or less.  That recommendation was triggered at the opening on Monday, August 22, 2016 for $40, with SUN shares trading at  $30.72.

We call this an “el cheapo” option play, because each option gives you the right to control 100 shares of stock for less than $100.  The reasons the option was inexpensive are that, with SUN at $30 or above, the option had no intrinsic (real) value and there wasn’t much time until expiration (the third Friday in September). Continue reading

My 9/11 Story


by Steven Sarnoff

On Sunday, September 9, 2001 I told thousands of people to bet that American Airlines was going down.

And on this solemn day of remembrance, marking the 15th anniversary of the terror attacks, I recall my personal story from that tragic time to give you a smile as we move forward in life…

You know what happened on the ensuing Tuesday.  I really felt like a New Yorker that day.  Back in the eighties I worked in the World Trade Center, amid the open outcry bedlam of the gold and silver trading pits. Flashing forward, we had taken a family trip to NYC and brought our two wide-eyed young kids to the top of the Twin Towers in April of that fateful year.

When trading resumed I started receiving emails like “Dear Mr. Sarnoff, I made $250,000 in one day on your American Airlines recommendation, but my account in the Cayman Islands has been frozen by the government.  What should I do?  Please advise.  Many thanks,…”  You may picture me pushing my chair back from my desk and throwing my arms skyward in the international signal of surrender!

Then I saw Dan Rather on television reporting about how the terrorists were suspected of using the options market to profit from the 9/11 attacks.  I imagined my subscribers getting grilled by the FBI and testifying, “Sarnoff told me to do it!”  So I waited for my phone to ring. Continue reading