Speculating On A Powell Smackdown
NOTE: The options trade recommended in this blog is risky. You could lose all of your money. Only invest a small amount of money if you decided to take the trade.
The stock and bond markets have had nice rallies in the wake of the dovish October CPI Report. However Fed Chair Powell is scheduled to speak tomorrow at 1:30pm EST at the Brookings Institute and if recent history is any guide he may try to talk down the market. I agree with Mark Dow that he has little incentive to be anything other than hawkish. Nobody has forgotten how hawkish he was at Jackson Hole when he lectured the market about getting ahead of itself and put an end to a nice rally.
I am speculating that he may do so again by buying ARKK $32.50 Dec02 Puts which I was able to get for 13 cents. We need about a 7% drop from current prices for this trade to pay off so the odds are long. However on the off chance that Powell does come down hard the upside is substantial because the cheapness of the options provides tremendous leverage.