This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Playing the Fed's Decision for Profit

NEW YORK ( TheStreet) -- We're almost there. Tomorrow is the much-anticipated speech from Ben Bernanke from Jackson Hole, Wyoming. The $64,000 question is: Will an announcement about another round of economic stimulus -- called QE3 for the third step in quantitative easing -- be made or not?

Watching market action this week, it has been painfully obvious that investors and traders have been on the sidelines. The likes of gold, the dollar/euro and Treasuries have seen some relatively quiet, yet erratic, trading as position squaring is done ahead of the speech.

With some new negative headlines coming out of Europe today, one must wonder about the euro/dollar. I am of the opinion that we will not get a QE3 announcement tomorrow. Assuming I am right, what is a way to potentially profit from this?

I think a long-dollar, short-euro position makes sense. After all, who really believes that the eurozone is going to get its problems under control any time soon? I certainly don't.

Although the dollar has been on the softer side recently because of the notion of QE3, it seems to me that a lack of additional Fed stimulus, along with more negative headlines, could quell this little rally we've seen in the euro of late, and could put upward pressure on the greenback.

If your outlook is similar, here is one way to potentially play it for a quick "pop." Due to better liquidity, we will use the Eurocurrency futures rather than the dollar. If futures are not your thing, feel free to contact me to discuss how to structure a position using other instruments or vehicles (such as options).

Sell 1 September Eurocurrency futures at 12460 on a stop good until canceled.

If filled, place a protective stop at 12580 good until canceled.

Target 12200 or lower.

Stop may be trailed based on an individual's risk tolerance and money management preferences.

Risk on trade: As stated above, $1545 including a $45 R/T commission inclusive of all fees.

Profit potential: theoretically unlimited down to zero. If target stated above is reached, profit would be $3205 after subtracting a $45 R/T commission inclusive of all fees.

Please note that mini euro futures may be used. Risk and profit objectives would be half that of above-stated amounts.

Please note: Futures and options trading is inherently risky and isn't suitable for all investors. Past performance isn't indicative of future results. Stop-loss orders meant to limit losses may not be effective because market conditions may make it impossible to execute such orders.
Matt Zeman is a trader at Kingsview Financial. He began his trading career as a runner in the grain pits at the Chicago Board of Trade before becoming an arbitrage clerk. Eventually he started trading equity options and stocks. Matt now is a full-time futures broker. He has been a frequent guest on CNBC, Fox and Bloomberg, and provides his views on the stock, bond and futures markets for financial media including Dow Jones, the L.A. Times and The Associated Press. Matt is a member of the Chicago Board of Trade, and carries series 3, 7 and 66 licenses.

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
AAPL $93.64 0.00%
FB $118.57 0.00%
GOOG $698.21 0.00%
TSLA $241.80 0.00%
YHOO $36.53 0.00%


Chart of I:DJI
DOW 17,891.16 +117.52 0.66%
S&P 500 2,081.43 +16.13 0.78%
NASDAQ 4,817.5940 +42.2360 0.88%

Free Reports