By: Tom Gentile
on May 26th, 2023
The Debt Crisis or potential debt crisis looming over congress and our economy has been a much-discussed topic. According to almost everything that has been written the deadline for them to come to a resolution, temporary or permanent is June 1, next Thursday.
The Treasury Secretary is on record for saying if congress does not at least raise the debt ceiling their could be catastrophic results to our economy.
Consequences that are not favorable should they fail to do so are potential mass unemployment, payment failures, and broad economic weakness to name a few.
The non-agreement to do so and the fact they haven’t made an agreement of what to do is a weight around the neck of the markets and is likely attributing to the markets trading significantly higher.
Granted the SPY is up off its lows from mid- to early October 2022, but anytime there is an article or news that congress is far apart in coming to an agreement it puts pressure on the markets.
As soon as something is written or a news announcement comes they are getting closer to a deal, the markets has a bullish day – like today thus far.
One of the benefits of options trading is one can make a trade based on an anticipated move higher or lower without having to fork over the amount of capital to actually buy (or short) a stock.
Options Activity Prior to Next Week’s Pending Resolution of Congress Resolving its Debt Issue
Here is a look at the Morning Reports Lists that show activity for calls and puts.
The anticipation is congress resolves the issue in a positive way and the markets at least on that news trades higher. Should they not resolve the issue by next Thursday and the debt ratings are tagged as negative, and they default on what they owe that could see the markets tailspin down.
The above lists gives one an idea of where options activity is prior to next week. At least research what the security’s for these options look like and work with your brokers in determining if any one of these look suitable for your account or not.
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