While career athletes from around the planet have converged in Beijing to compete in what might be the most significant games of their careers and, maybe, their lives, it is impossible to resist pointing out other competitions taking place this summer that are far bigger and more intense than the mere sporting events of the Olympics.
CHINA: 1, MOTHER NATURE: 0
For instance, there is the Chinese government versus the weather. China plans to change Beijing’s natural weather patterns so no rain will fall on the Olympics by using 37 mm anti-aircraft guns firing silver iodide missiles at passing clouds.
China’s chosen contestant, Chen Zhenlin — a director at the Weather Modification Office — expects his team of missile-firing weather modifiers will be successful in causing the clouds to dump their moisture before they reach Beijing.
Zhenlin and the Weather Modification Office have a strong record of getting rid of pollution, sandstorms, hail and fires through altered weather using their 7,000 cannons and 4,687 rocket-launchers.
Now if they could just do something about all that smog. …
PAULSON LEADING TEAM USA
The U.S. government, not to be outdone, has decided to take on the natural economic forces at play in this country in a contest that looks something like a Greco-Roman wrestling match. Our lead athlete is Hank Paulson.
Paulson reckons the U.S. government can change the path of the U.S. economy this summer …
… by pounding short-sellers, financial companies and homeowners with a combination of restrictions, incentives and unlimited financial backing to make sure we do not suffer from a market freefall.
Zhenlin notes that his weather modifiers will only be successful as long as a major front does not come through. Paulson and the U.S. government are in the same boat.
ECONOMICS VERSUS OPTIONS
Learning how options fit into the larger economics picture is like understanding the parts of a finely made Swiss watch taken individually versus the watch itself as a whole. Economics are all of the little pieces. Options are the watch.
Many Wall Street types believe they are watchmakers. They take all of the economic pieces, jam them together in some crude way and come up with a view of the future. The danger of this is that if the pieces are not put together exactly right or if a piece is missing, the watch won’t work properly.
Options take into account all known information and distill it into an indicator that we can trust and understand. Options tell us what time it is. And right now, they are telling us it’s time to buy, to be bullish. Our broader-market option indicators continue to be in confirmed buy modes.
THE U.S. DOLLAR VERSUS THE EURO
As the Olympics officially kicked off in China this past Friday, the U.S. dollar beat the Euro. …
… Read: It closed lower for the day, for the week and for the fourth week in a row.
Given that the Euro almost doubled against the dollar over the past eight years since October 2000, no medal should be handed out nor should a victory lap be taken — a polite wave would be acceptable, though.
There is talk around the water cooler that the Euro may be 30% overvalued — and further dollar strengthening could make things interesting.
We can make arguments for a weak and a strong dollar, but there is no denying that the market liked the recent dollar strength (and the break in commodities), with each increasing 3.6% last week.
However, the end result didn’t come easy, as we had to digest horrendous earnings reports from American International Group (AIG), Freddie Mac (FRE) and Fannie Mae (FNM) and Thursday’s 225-point Dow (DJI) decline.
Nothing good comes easy, as we were reminded on Friday in an e-mail from our friend Austin Sperry, who is sailing for the United States in the Olympics.
He wrote to us, “This is one historic day! Man, I cannot believe how cool this experience is; I worked so hard to be here and now it seems that it was worth it — giving up most of my life to follow my dreams and believe in my passion.”
Good luck, Austin!
GO FOR THE OPTIONS-TRADING GOLD
The great thing about sports and life in general is that the obvious is not always what happens. That is why we play the options trading game — …
… to make inexpensive, well-placed bets on stock-trading activity and, of course, to profit as often and as much as we possibly can!
Sometimes the game goes our way easily; other times, the wait through temporarily unfavorable conditions can be downright excruciating. The main difference between competitive sports and options trading is that, by nature of expiration Fridays, there is no overtime when you’re trading options. They come off the board without possibility of a do-over or the need for referees and instant-replays.
With options, you either win or you don’t. And like the Olympics, you can get the equivalent of gold-medal options trades (i.e., the triple-digit winners), the silver-medal trades (where you double your money) and the bronze-medal trades (where you still bank a nice gain) for your efforts.
Sure, you might not get a multimillion-dollar endorsement contract from Nike (NKE), but you also don’t have to wait another four years for your shot at “going for the gold.”
Let the games begin!
If you enjoyed this article, check out Nick Atkeson and Andrew Houghton’s “3 Ways to Kickstart Your Options Trading Returns” and “Trading Full of Window-Dressing, Confessing.”
