Two Important Items that could Impact the Markets this Week

Tom Gentile

Posted in

By: Tom Gentile
July 3rd, 2024

5 mins read

Originally published via our newsletter previously. Subscribe for early access!

This week is going to be interesting in terms of how the financial markets end up.

The two big items that could impact the markets are as follows:

The first item is tomorrow night’s first Presidential debate.

It’s not the first time Biden and Trump have debated, nor will it be the last. It will be interesting to see what each is going to lead with and show as their primary focal points and set the stage for the debates to come as they vie for re-election.

The second is the PCE report

My programming team and I are compiling what stocks have fared well from a seasonal basis the last quarter of the final year, year 4 of a President’s term.  I am looking to see if there are certain stocks that perform well in the last year of a President’s term on and around that year’s election.

What we find I will bring to you in the months to come.

The PCE is the Personal Consumption Expenditures Price Index report or the PCE.

This is considered the most important number for the Fed. More important than even the CCI and PPI.

It measures changes in US households cost of living each month, which is an indication of U.S. inflation. It tracks the prices of a basket of goods and services and their different  weightings.

This report is due out Friday morning.

Tom Gentile
C1P: Chief 1-Percenter

Markets in Focus: SPY – SPDR S&P 500 ETF Trust

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I suspect the consolidation in price for SPY is a result of investors and traders alike, not really wnating to put too muhc more money to work on things until we get through those two items I refernece on the front pagte of this week’s newsletter;

The first Presidential debate this Thursday and 

The PCE due out Firday morning.

Often times you see periods of stillness or inaction in the markets right before and expected news event or economic report.

Similar to what we see prior to a Fed announcement on interest rates.

It might not be until Monday until things get moving one way or another.

Tools and Observations

Stock Split Education

I have been writing about stock splits as the markets are experiencing them at a higher frequency than in years past.

Let me re iterate why I love stock splits from an options traders point of view.

Stocks have a habit of regaining their pre plit price over time.  As an investor that is great news,

As an option trader you may not be able to or want to hold call options too long, because the options may expire prior to the stock gaining its pre split price.

That’s fine as I see it, bcause I am looking to trade options on stock split companies at certain times based on its split, but not for the long-term reason I would invest in that company’s shares.

Remember, when the stock splits, the potion splits.

Last week I gave an example of  a call option on NVDA showing the pricing going in to the split and what happened to the otpions after the split.

I tracked it to show a wonderful trade scenario where the optoin doubled in 12 trading days.

Chipotle Mexican Grill, Inc. (NYSE: CMG) 50-1 Stock Split

I am going to show you another example using another company doing a split and that is Chipotle Mexican Grill, Inc. (NYSE:CMG).

THIS IS NOT A RECOMMENDATION and is for educational purposes only.

CMG has already split overnight 50:1. Meaning if oyu had one share at the close of market yesterday you wake up with 50 shares at the split adjusted price this morning.

The stock closed at $3283.04 and opened at $65.81.

Last night the July 19, 2024, $3280 Call options closed at $113.30 or a cost of $11, 330 per contract.

This morning one would now have 50 contracs of the July 19, 2024, $65.60 Call options.

If one picked up at least one contract last night at $113.30 it would now show you have 50 contracts at an entry cost of $2.27.  It is still rouglhy the same value amount, just the number of contracts and the strike price is adjusted accordingly.

A stock that splits has a tendency to regain its pre split price as I have tuaght, it just doesn’t mean it is going to do so in the next 10-20 trading days.

Besides, this contract expires at the close of market, basically, July 19.

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If one wants to track pricing on this scenario go for it.  I may liekly bring what happens to this otpion in a later lesson plan or article to follow up on it for everyone as well.  It is not a recommendation, but it could prove enlightening for you all who wish to see what happens to these options post a stock split.

Tom Gentile
C1P: Chief 1-Percenter

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