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Newsletter

Enhance your trading with a series of short videos on topics such as range bars, support & resistance, parabolics, price confirmation and much more. We also take a look at a weekly chart of the soybeans futures market.

May 31st, 2019 - Issue #967

In This Issue

1. Trading 202: Futures Options Writing ( Collecting Premium)
2. Hot Market Report: NASDAQ 100 Testing Support Levels
3. Economic Calendar

Latest Updates on MICRO E-Minis!!

1. Trading 202: Futures Options Writing

Have you ever wondered who sells the futures options that most people buy? These people are known as the option writers/sellers. Their sole objective is to collect the premium paid by the option buyer. Option writing can also be used for hedging purposes and reducing risk. An option writer has the exact opposite to gain as the option buyer. The writer has unlimited risk and a limited profit potential, which is the premium of the option minus commissions. When writing naked futures options your risk is unlimited, without the use of stops. This is why we recommend exiting positions once a market trades through an area you perceived as strong support or resistance. So why would anyone want to write an option? Here are a few reasons:

  1. Most futures options expire worthless and out of the money. Therefore, the option writer is collecting the premium the option buyer paid.
  2. There are three ways to win as an option writer. A market can go in the direction you thought, it can trade sideways and in a channel, or it can even go slowly against you but not through your strike price. The advantage is time decay.
  3. The writer believes the futures contract will not reach a certain strike price by the expiration date of the option. This is known as naked option selling.
  4. To hedge against a futures position. For example: someone who goes long cocoa at 850 can write a 900 strike price call option with about one month of time until option expiration. This allows you to collect the premium of the call option if cocoa settles below 900, based on option expiration. It also allows you to make a profit on the actual futures contract between 851 and 900. This strategy also lowers your margin on the trade and should cocoa continue lower to 800, you at least collect some premium on the option you wrote. Risk lies if cocoa continues to decline because you only collect a certain amount of premium and the futures contract has unlimited risk the lower it goes.
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    2. Hot Market Report: NASDAQ 100 Testing Support Levels

    By Ilan Levy-Mayer, VP

    Click on image below to enlarge

    NQ futures;

    This week’s highlighted Market is mini NASDAQ 100 futures.Part of the stock index family that includes mini SP 500, mini Russell, mini Dow, Mid cap, Nikkei and a few more. Most traded on the CME/CBOT/GLOBEX exchanges.


    Daily Chart of NQ Futures for your review from this morning ( May 31st 2019). The market has backed off due to a few reasons, in my opinion:

    * Bulls have run out of steam....for now
    * Trump and China....
    * Trump and Mexico....
    * Technicals....
    The big question is not what happened and why but what do we think will happen next and what is a "common sense" way to speculate and take advantage of this change in market perception? My personal opinion is that we may see a decline towards the 7108 level, maybe even 6868. When and if this happens, we will need to evaluate market reaction and price behavior before we can try to look for next steps etc. I personally like the NQ for day trading, sometimes more than the ES. While ES has more volume, the moves on the NQ are more rewarding/ punishing at the same time which fits my personality. One thing to understand is that the aggressive day-trading margins most firms, including Cannon offer for markets such as the NQ and ES can be a double edge sword. With $500 day-trading margins, you as a trader control LARGE amounts of money and that can translate to large fast losses or gains in volatile manner. I urge you to create a self imposed margin that is higher. Be aware, be careful. This chart was prepared using CQG Q Trader software, which you can demo for 14 days with realtime data.
    To access a free trial to the ALGOS shown in the chart along with other tools, visit and sign up for a free trial for 21 days with real-time data.

    Mini NASDAQ 100 Futures Specs
    Hours: 5:00 PM to 4:00 PM next day PM Central Time
    Margins: $9350 initial, $8600 Maint. ( as of the date of this newsletter)
    Point Value: full point = $2000 ( Example: 7067.00 to 7167.00 ). Min fluctuation is 0.1 = $5 ( Example: 7067.00 to 7067.25) Settlement: Cash on the open of the third Friday of each QUARTER ( June, Sep, Dec, March )
    Months: Quarterly cycle, June, Sep, Dec, March. M,U,Z,H
    Weekly Options:YES
    We now have the MICRO mini nasdaq!!. Symbol is MNQ and it is 1/10th of the size fo the Mini NASDAQ. Latest Updates on MICRO E-Minis!!

    Mini NASDAQ 100 is one of my favorite markets for Day Trading because of the intraday range and movements. Be careful, these factors can work against you or in your favor.
    Some of the basic fundamentals to keep in mind when you are considering trading the NQ or other indices for this matter:
    1. Longer term view of current market prices
    2. Dates and times of important reports. CPI, Housing, employment, FOMC are just some of the reports you need to watch for
    3. Earning reports
    4. U.S. Fiscal and Monetary Stability

    Our brokers here at Cannon will be happy to chat about the MINI NASDAQ market, other indices, other futures, options, futures spreads and much more! Feel free to contact us at any time.

    3. Economic Calendar

    Source: Moore Research Center, Inc.

    Date Reports Expiration & Notice Dates
    05/31
    Fri
    7:30 AM CDT - USDA Weekly Export Sales
    7:30 AM CDT - Personal Income & Spending(Apr)
    7:30 AM CDT - PCE Price Index(Apr)
    7:30 AM CDT - Core PCE Price Index(Apr)
    9:00 AM CDT - Univ of Mich Consumer Sent-Final(May)
    FN: Jun 2,5,10 Year Notes(CBT)
    Jun Bonds(CBT)
    Jun Copper(CMX)
    Jun Gold & Silver(CMX)
    Jun Platinum & Palladium(NYM)
    LT: May Bitcoin(CME)
    May Fed Funds(CME)
    Jun RBOB & ULSD(NYM)
    May Fed Funds Options(CME)
    Jun Lumber Options(CME)
    06/03
    Mon
    9:00 AM CDT - Construction Spending(Apr)
    9:00 AM CDT - ISM Manufacturing Index(May)
    2:00 PM CDT - Cotton System
    2:00 PM CDT - Fats & Oils
    2:00 PM CDT - Grain Crushings

     
     
     
    06/04
    Tue
    9:00 AM CDT - Factory Orders(Apr)
    3:30 PM CDT - API Energy Stocks
     
     
    FN: Jun RBOB & ULSD(NYM)
    LT: May Butter(CME)
    May Milk(CME)
    May Butter Options(CME)
    May Milk Options(CME)
    06/05
    Wed
    6:00 AM CDT - MBA Mortgage Applications Index
    7:15 AM CDT - ADP Employment Change(May)
    9:00 AM CDT - ISM Non-Manufacturing Index(May)
    9:30 AM CDT - EIA Petroleum Status Report
    1:00 PM CDT - Fed's Beige Book(Jun)
    2:00 PM CDT - Dairy Products Sales

     
     
     
    06/06
    Thu
    7:30 AM CDT - USDA Weekly Export Sales
    7:30 AM CDT - Initial Claims-Weekly
    7:30 AM CDT - Productivity-Rev(Q1)
    7:30 AM CDT - Unit Labor Costs-Rev(Q1)
    7:30 AM CDT - Trade Balance(Apr)
    9:30 AM CDT - EIA Natural Gas Report
    3:30 PM CDT - Money Supply

     
     
     
    06/07
    Fri
    7:30 AM CDT - Nonfarm Payrolls(May)
    7:30 AM CDT - Ave Hourly Earnings & Workweek(May)
    7:30 AM CDT - Unemployment Rate(May)
    9:00 AM CDT - Wholesale Inventories(Apr)
    2:00 PM CDT - Consumer Credit(Apr)
    LT: Jun Canadian Dollar Options(CME)
    Jun Currencies Options(CME)
    Jun Live Cattle Options(CME)
    Jun Mx Peso Options(CME)
    Jun US Dollar Index Options(ICE)
    Jul Cocoa Options(ICE)

    06/10
    Mon

     
     
     
    FN: Jun Live Cattle(CME)
    LT: Jul Sugar-16(ICE)
     
     
    06/11
    Tue
    7:30 AM CDT - Core PPI & PPI(May)
    11:00 AM CDT - WASDE Report & Crop Production
    3:30 PM CDT - API Energy Stocks
    FN: Jul Sugar-16(ICE)
     
     
     
    06/12
    Wed
    6:00 AM CDT - MBA Mortgage Applications Index
    7:30 AM CDT - Core CPI & CPI(May)
    9:30 AM CDT - EIA Petroleum Status Report
    1:00 PM CDT - Treasury Budget(May)
    2:00 PM CDT - Dairy Products Sales

     
     
     
    06/13
    Thu
    7:30 AM CDT - USDA Weekly Export Sales
    7:30 AM CDT - Initial Claims-Weekly
    7:30 AM CDT - Export(ex-ag) & Import(ex-oil) Prices(May)
    9:30 AM CDT - EIA Natural Gas Report
    3:30 PM CDT - Money Supply
    LT: Jun Nikkei(CME)
    Jun Nikkei Options(CME)
    Jul Coffee Options(ICE)

    FN=First Notice, OE=Option Expiration, LT=Last Trade

    Disclaimer: This calendar is compiled from sources believed to be reliable. Moore Research Center, Inc. assumes no responsibility for any errors or omissions. It is meant as an alert to events that may affect trading strategies and is not necessarily complete. The release dates for certain economic reports may have been rescheduled.

    * Please note that the information contained in this letter is intended for clients, prospective clients, and audiences who have a basic understanding, familiarity, and interest in the futures markets.

    ** The material contained in this letter is of opinion only and does not guarantee any profits. These are risky markets and only risk capital should be used. Past performances are not necessarily indicative of future results.

    *** This is not a solicitation of any order to buy or sell, but a current market view provided by Cannon Trading Inc. Any statement of facts herein contained are derived from sources believed to be reliable, but are not guaranteed as to accuracy, nor they purport to be complete. No responsibility is assumed with respect to any such statement or with respect to any expression of opinion herein contained. Readers are urged to exercise their own judgment in trading!

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