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A day early but figured I'd get the thread started for July! 😀
Fri, then next Monday is closed so Tuesday will be the next day after.
Nice! My strikes were 4255 and 4260. Slim pickings over the quiet holiday weekend.
@earlyretirementnowcom vix has been so low premiums are rough these days!
I had a random question and I was hoping you can clarify this for me. I know your prior work experience included working at the federal reserve.
When the Fed does QE, there is issue of no increase in money supply presumably m1 and m2 because the fed creates new reserves then uses them to buy treasuries. So if I understand correctly, they are putting the bonds on their balance sheet as assets and the new reserves are put into the banks balance sheet that is participating?
Or does the fed buy these bonds on the open market? If they did it seems the reserves would add to the money supply. If they are buying directly from the banks like. JP Morgan, if the reserves are now at JP Morgan, can't the bank now use that cash and loan it out to consumers to buy houses or other assets thus it makes its way into the system?
My impression would be if lower rates are ultimately the goal, why not tell the treasury to stop issues 30 and 10 year bonds, and finance strictly on the short end which is close to zero. The shortage would naturally drive up prices and lower yields so all these maneuvers wouldn't be needed. Just eliminate the supply.
Is there something obvious I am missing? Thanks!
@alex Bond purchases add to the money supply. Unfortunately, the increased money supply doesn't create any inflation because a lot of the excess money is then simply held as excess reserves of banks at the Fed. So, when the Fed uses this new tool it might create some effect during the worst stress periods (2008, March/April 2020), but during the non-stress periods, this is mostly useless. Pushing on a string.
Also, I updated the strikes vs SPX index time series charts in Part 4 of the put-writing series to include the entire 2020CY and 2021 YTD to July 1.
See Part 4.
Also copied here:
2020 CY:
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2021 YTD:
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Sold the Put option 30 minutes after open with 4200 Strike for $1.20.
Lucky that I missed Wednesday close due to being at the beach with family.
Darn it. I sold Fri puts shortly after the open. The exact worst timing. I even considered covering them at a .15 loss. Now they are 2.5x what I sold them for.
@e-trader likely turns out fine, but I always hate selling into gaps up open or on big up days.
@navypack Hard to avoid selling on up days in this runaway bull market. Risk is if you don't sell high you may have to sell higher.
Likely turn out fine, yeah, thankfully the strategy is pretty forgiving. I've nailed some lows as well.....all evens out in the end.
@e-trader certainly still sell on up days, but go a touch safer or wait until later if there is massive gap up.
@e-trader Bummer. That happens. But the market recovered again, so shouldn't be so bad.
I sold the 4240-4250 puts at a 0.90-1.00 premium.
@earlyretirementnowcom No worries. I sold the 4285s for 1.15. They are 1.10 now.
