Fight at the Federal Reserve?
Richmond Federal Reserve President Thomas Barkin recently took a firm stance on inflation, dismissing the possibility of an imminent rate cut and suggesting the potential for another rate hike.
Barkin expressed skepticism about inflation reaching the Fed’s 2% target, differing from his colleagues who see progress.
In contrast, Atlanta Federal Reserve President Raphael Bostic believes inflation is on the decline, citing tighter monetary policy’s impact on economic activity.
Despite Barkin’s uncertainty, market expectations have shifted, with a 46.2% probability of a rate cut in the March 2024 FOMC meeting, according to the CME FedWatch Tool. There’s also a growing chance of a rate cut in May. Barkin highlighted the challenge of precisely managing inflation through interest rates, emphasizing the need for flexibility in economic adjustments.
The U.S. Commerce Department reported a higher-than-expected 5.2% annualized GDP growth in Q3, suggesting a resilient economy. While Barkin remains cautious, the absence of a looming recession indicates the potential success of the Federal Reserve’s approach to achieving a “soft landing.”
Looking forward to seeing who wins this fight!
Mobile Gaming Brings in BILLIONS
Can you believe the incredible earnings mobile game developers are pulling in?
According to Newzoo, revenue from mobile games alone, excluding console games like those on Xboxes and PlayStations, is projected to exceed $92 billion this year.
The standout of 2022 was Honor of Kings, a game by Chinese conglomerate Tencent, which brought in a staggering $1.81 billion—something I wasn’t even aware of until today.
Following closely was Tencent’s PUBG Mobile, earning $1.52 billion.
Candy Crush Saga by King, a game I’m familiar with and played briefly, generated over 980 million last year, a remarkable feat given its sustained popularity.
The leading American mobile game, Roblox, a constant topic in my son’s conversations, achieved revenue surpassing $860 million in 2022. Check it out
Amazon and Nvidia are AI BFFs
This week, Amazon ($AMZN) revealed the launch of two new chips, Graviton4 and Trainium2, designed in-house for artificial intelligence (AI) applications within its cloud computing unit, Amazon Web Services (AWS). These chips aim to enhance performance and energy efficiency for various workloads. AWS is also offering customers access to the latest Nvidia models, such as the H200 AI graphics processing unit (GPU), in a bid to compete with Microsoft (MSFT), which has introduced its own AI chip, Maia 100.
In the intensifying AI chip competition, Amazon holds a slight advantage as AWS becomes the first to provide access to Nvidia’s GH200 Grace Hopper Superchips. Furthermore, a collaboration between AWS and Nvidia will bring DGX Cloud, Nvidia’s AI-training-as-a-service, to AWS. The partnership emphasizes a 13-year history of collaboration between AWS and Nvidia, offering a wide range of GPU solutions for various workloads.
Generative AI, exemplified by services like OpenAI’s ChatGPT, has been a focal point in 2023, contributing to the remarkable stock performance of AI-heavy companies like Amazon, Nvidia, and Microsoft. This contrasts with the tech stock decline in 2022. The question now is whether the AI buzz will persist into 2024, a trend that remains to be seen.
Will Nvidia’s Fourth Quarter Be Even Better?
Speaking of Nvidia, the chip maker reported third-quarter results that blew Wall Street’s best estimates out of the water last week.
Revenue more than tripled, to $18.1 billion. Estimates had called for $16 billion.
However, Nvidia is expecting the fourth quarter to be even better, with revenue of roughly $20 billion.
Take a look:
Weekly Trading Strategy
At CFU we trade 3 sentiments:
Bullish – Stock will rise
Bearish – Stock will decline
Neutral – Stock will trade sideways
But we will also enter a trade to take advantage of a rise in volatility.
Here is one of our favorite ways to do this:
DOUBLE DIAGONAL
A double diagonal option trade is an options trading strategy that involves the use of both long and short options with different expiration dates and strike prices. It combines elements of both the diagonal spread and the calendar spread to create a more complex position.
Here’s a breakdown of how a double diagonal spread is typically structured:
Long Diagonal Call Spread: Buy a longer-term call option with a higher strike price and sell a shorter-term call option with a lower strike price.
Short Diagonal Put Spread: Simultaneously, buy a longer-term put option with a lower strike price and sell a shorter-term put option with a higher strike price.
The main idea behind the double diagonal spread is to take advantage of time decay and volatility changes. The strategy profits from the differential decay rates of options with different expiration dates and benefits from any increase in implied volatility.
Here are some key points to consider:
Time Decay: The strategy benefits from the time decay of the short-term options. As time passes, the short-term options lose value at a faster rate than the longer-term options.
Vega Exposure: The position profits from changes in implied volatility. An increase in volatility can lead to an increase in the value of both the long calls and long puts.
Limited Risk: The risk is limited to the net premium paid for the options. This makes it a defined risk strategy.
Profit Range: The strategy can be profitable within a certain price range. It typically benefits from the underlying asset trading close to the strike prices of the options at the short-term expiration.
Here is an example:
STRATEGY: DOUBLE DIAGONAL ON AMD
“Buy the February 105 Put, Sell the January 110 Put, Buy the February 145 Call, Sell the January 140 Call, Limit 1.45 Debit, GTC”
BTO AMD 021624 105 P
STO AMD 011924 110 P
BTO AMD 021624 145 C
STO AMD 011924 140 C
AMD currently trades with an IV that is at historic lows. Here is the profit profile of this trade given the current IV level:
Now watch what happens when we increase IV back to normal levels:
Moreover, the trade enables us to capitalize on increased earnings when IV inevitably rises. The potential for profit in this trade is exceptionally high.
Furthermore, we maintain hedging throughout the entire duration. At CFU, we excel in trading Spreads, Iron Condors, PMCCs, and Cash Secured Puts.
Our performance in 2023 has been remarkable as we strive to generate profits for our members on a weekly basis. Below is our updated performance chart:
Trading Results at CFU for last week earned by Members
TSCO: 15%
UNH: 33%
SOFI: 18%
COIN: 78%
MRVL: 98%
TSLA: 97%
TSLA: 92%
PAYX: 31%
TSLA: 42%
AAPL: 23%
MSFT: 50%
SNOW: 90%
SNOW: 98%
Actual member results:
If you haven’t joined CFU yet, what is stopping you?
Here, I’ll throw you a deal, 25% off your first month so you can ease in, see the quality of our service and the results we will produce for you within 4-6 weeks.
PROMO: CFUINSIDER25
Look forward to seeing you inside,
Stephen
Founder, CFU
