Wednesday, September 23, 2009

Straddles to Profit From Surprises From The Fed Decision Today

The Fed will make its policy announcement today at 2:15PM. It used to be that we ran polls to see if they Fed was going to lower, raise, or keep the rates the same. It is widely expected that they will keep the rates unchanged in light of the current state of the economy.

However in case there are any surprises, either with the rates, or with the wording of the announcement on the state of the economy and the "recovery", and in light of the recent collapse of the US Dollar, here are possibly straddles to profit.

With straddles, the investor profits if the stock price moves either up or down, i.e, regardless of direction. Our StraddlesCalc V2 tool computes the maximum moves required for profit.

Here they are. We look at UUP, GLD, and our favourite, IWM.

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