I would like to thank everyone who wrote comments or sent me an email. I love hearing from readers! Grasshopper, no question is a bad question. I better watch what I wish for; we did just get started but as “Main Street beats Wall Street” gets bigger I could get overwhelmed. I look forward to that day! It’s nice to know others are interested in this crap. But you must be! Don’t trust anyone with your hard earned money.
Because of yesterdays post I want to talk a little about the Fed’s interest rate. This is the short term lending interest rate. It’s such an important part of our economy and the stock market I want to make sure you know exactly what it is, Grasshopper.
The Fed interest rate is the short term rate the Federal Reserve lends money to banks overnight. The federal funds rate is generally only applicable to the most creditworthy institutions when they borrow and lend overnight funds to each other. The federal funds rate is one of the most influential interest rates in the U.S. economy, since it affects monetary and financial conditions, which in turn have a bearing on key aspects of the broad economy including employment, growth and inflation. The Federal Open Market Committee (FOMC), is the Federal Reserve’s primary monetary policymaking.
Banks maintain accounts at the Federal Reserve to make payments for themselves or on behalf of their customers. The end-of-the-day balances in these accounts are used to meet the reserve requirements mandated by the Federal Reserve. If a bank expects to have a larger end-of-day balance than it needs, it will lend the excess amount to an institution that expects to have a shortfall in its own balance. This money comes from the federal fund and the rate of interest these banks pay for these short overnight loans is “the fed rate.” Basically these are bank funds they are lending each other with funds maintained and regulated in the federal reserve fund.
The higher the federal funds rate, the more expensive it is to borrow money. Since it is only applicable to very creditworthy institutions for extremely short-term (overnight) loans, the federal funds rate can be viewed as the base rate that determines the level of all other interest rates in the U.S. economy.
As I mentioned yesterday, Japan changed it’s lending rate to a negative rate. If this happens in the US, which it can, your bank account interest rate can also go negative. This means the banks will charge you interest for them to use your money. Grasshopper, I think you’re starting to understand why I said negative interest rates in Japan are not a good thing. BUT when Japan did this yesterday our market went up 393 points yesterday. ?????
You know I haven’t made many trades of late, this is one of the reasons. Be very careful! There will be many money making opportunities, be patient! We might have to wait a bit. I am looking forward to what Monday will bring!
This week I only had one trade expire and I was able to put some money in the mattress. Not as much as I’d like but it is something. On 1/19/16 I sold a Call on shares of Netflix (NFLX). NFLX is not moving the way I’d hope but this Call did expire and I was able to keep the entire premium of $2200. I sold the 1/19/16 $125 Calls and received $2.20 on 10 contracts (1000 shares). The stock never got up to 125 so I keep the premium I received.
Total Weekly Profit $2200
For this week I’m hoping for oil to continue up slowly, announced earnings are good and any report due out is good. I know I’m asking for a lot but I want the market to go up organically not up 300 points on the rollercoaster! I want to get back to where the market moves up with realistic numbers. Like 50 – 70 points a day not up 300 and the next day down 300. Quite honestly I don’t have confidence this will happen. I predict rollercoaster continues!
If you don’t understand something send me an email. I am here for you. I will answer your question or direct you where you can get information. Coachsjc@gmail.com . Have a nice weekend!
Steve
The Options Coach
Good Morning BIg Stevie I’m starting to get edgea macated on whats goin on. You never cease to amaze me. Talk to ya.Brian
who knew all this good stuff was in that head of yours… keep up the good work!