How Should You Trade Options as the Trade War Worsens?

B y w w w . O p t i o n s - T r a d i n g - E d u c a t i o n . c o m
How Should You Trade Options
as the Trade War Worsens?

http://www.options-trading-education.com/24729/how-should-you-trade-options-as-the-trade-war-worsens/
Calls and puts are the weapons of
choice for the option trader.

Considering that the US China trade
war is likely to worsen and likely to
endure, how should you trade options
as the trade war worsens?

A lot of this will play out with a
political spin on both sides which will
momentarily drive stocks up or down.

Short term calls or puts may see be
useful in such cases.

But, how will this play out in the
longer term and which stocks will
most strongly affected?

An obvious case in point is Boeing.
These folks are selling billions of
dollars-worth of airplanes to China.

And, China is very likely going to slap
prohibitive tariffs on Boeing jets or
simply direct their airlines to buy only
from Airbus.

Boeing and the Trade War

In the last year Boeing has had four
significant down and up cycles as
global events and the threat of a trade
war have played out.

An options trader who correctly
anticipated each, or any, of these
swings in stock price could have
purchased puts first of all and then
calls for double profits in each price
swing.

An option trade who was uncertain of
market direction during the year, or
right now, would still recognize the
market volatility and could use a long
straddle approach.

He or she could profit from price
movement in either direction.

A real problem for Boeing, and the
rest of the world, is that the trade war
could be very prolonged or even
permanent, changing trade
relationships for years and years.

Our sister site,
ForexConspiracyReport.com, asked a
good question.

Can China make the changes
necessary to end the trade war?

The basic problem for China is that
the people who run the Communist
Party plan to stay in power.

Each time there is a fork in the road
leading to greater economic, social
and political freedom versus the
status quo the Party sees freedom as a
threat to Party authority and the
status quo wins, no matter the cost.

The trouble is that China has become
very successful and has over-
leveraged itself due to its ambitions.

The country has a massive and
growing debt and many wealthy
Chinese finding ways to take money
out of the country.

China’s money is now “voting with its
feet” so there is trouble in the land of
managed capitalism.

How Do You Apply Your
Calls and Puts to This
Situation?

While many of the trading
opportunities will be short term and
short term options contract will be
sufficient

many of the changes in markets will
play out over time frames longer than
the duration of a normal option
contract.

As such, LEAPS options may be a
better choice.

These long term equity anticipation
securities typically have two year
durations and all of them expire in
January.

This longer timeframe may be useful
as the give and take of the China USA
trade war works out.

The sad fact is that neither the USA
nor China wants the other to gain

China because it wants to advance
and the USA because it wants to
retain its position.

This will be a long fight and option
traders can profit by correctly
anticipating market movements.

How Should You Trade Options as the Trade War Worsens?

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How Should You Trade Options as the Trade War Worsens?