The Fed Bails "Them" Out...


Getting prepared to sell this rally (mentally...down the road). Below is the text of the statement. Enjoy.

WASHINGTON (MarketWatch) - Here is the text of the statement released by the Federal Open Market Committee Tuesday.

The Federal Open Market Committee decided today to lower its target for the federal funds rate 50 basis points to 4-3/4 percent.

Economic growth was moderate during the first half of the year, but the tightening of credit conditions has the potential to intensify the housing correction and to restrain economic growth more generally. Today's action is intended to help forestall some of the adverse effects on the broader economy that might otherwise arise from the disruptions in financial markets and to promote moderate growth over time.

Readings on core inflation have improved modestly this year. However, the Committee judges that some inflation risks remain, and it will continue to monitor inflation developments carefully.

Developments in financial markets since the Committee's last regular meeting have increased the uncertainty surrounding the economic outlook. The Committee will continue to assess the effects of these and other developments on economic prospects and will act as needed to foster price stability and sustainable economic growth.

Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; Timothy F. Geithner, Vice Chairman; Charles L. Evans; Thomas M. Hoenig; Donald L. Kohn; Randall S. Kroszner; Frederic S. Mishkin; William Poole; Eric Rosengren; and Kevin M. Warsh.

In a related action, the Board of Governors unanimously approved a 50-basis-point decrease in the discount rate to 5-1/4 percent. In taking this action, the Board approved the requests submitted by the Boards of Directors of the Federal Reserve Banks of Boston, New York, Cleveland, St. Louis, Minneapolis, Kansas City, and San Francisco.

Yes I was expecting a rather innocuous 25 bp cut.....but our long plays have benefitted...should I anticipate these jumps to pull back as well?

thanks to Jeff, Brett, and Raimo for preaching patience and position sizing!!
i'm taking a late lunch today to check on the news and seems to have a positive effect on my acct today, NOW what can we expect in the days ahead?? should we expect the rally to continue or should we expect a pull back???

Well, 50 pts. I thought that would bring more up side but it is still early.

Oh and I HATE my computer. Just after the announcement I was posting and my whole system just shuts down. This leaving me blind for 10 minutes while I get everything back up. Sorry to rant here.


I, for one, need to learn about option pricing sooner than later. Today is a glaring reminder.


Thank You Jeff Eric, Brett, Raimo and all the Addict. for preaching position size so incessantly. It finally got through to me.

Now on to find some Home Builders to short. . .

Jeff, just watched the watchlist video (thanks)...wish i would have watched it sooner....ISRG is on fire !!!! holy smokes !!!

Just tuned in to the Shadow Trader and he said based on technicals you have to be Bullish? I still think LEN is at REE.

What do you do on a day like today?
Do you take profits early? Not sure how to react.


Bob & Pam
KBH looks the same way

It hasn't happenned much this year, but in the past, a counter fed rally was common the day after the announcement. Meaning the market will likely pull back tomorrow. Don't be afraid to take some profits off the table today.

Like BIDUoooooooooh!

Joel R.

I was wondering the same thing myself about a counter fed rally and how I should react to today's price movements.

I wish I had watched Jeff's video earlier as well. I was way too slow to react to pretty much everything. My puts jumped up, leveled off for 2 seconds and then I had to sell them as they went shooting for the moon.


I haven't had a chance to look at it either. Barely made it home before the news. I am watching my account like a deer in headlights wondering what to do. I think I will play conservative and take half profits. Guess we'll know next time after going through it what to do.


Well, to quote Frank Barrone, "HOLY CRAP!"

This is certainly less painful than a mamogram, huh Kim? :-)

GRMN seems to be running out of gas (already). Liz, I almost sold puts too but my computer crash saved me (maybe I should apologize to my computer - not). I do not remember what you had puts in but my homebuilder puts still look strong other than those troubling earnings announcements. I like both KBH and LEN but both have earnings next week. Raimo can you do something about that so that when we get REE these companies postpone their earnings? How big of a gun would that take I wonder.

As far as getting out of trades, I too, am in a quandry.

I have only one contract on all of my positions so it's all or nothing. I think that they way the market closes is how it will open. I have heard shadow trader say that the first 15-30 minutes of a new trading day is the left over price action from the previous day. So stay and trade tomorrow or get ou today and be very happy.

Woohoo! This is so much fun. I am loving finding the plays that are not participating in this rally. I'm me crazy.

I already did a 15 minute DIA call play (for a quick 40% profit) and got into POT, RESP, and JNPR after the announcement. I had already done my risk/reward calculations prior to the cut.


Michelle, please keep in mind I am no expert here but what Jeff and Eric outlined on the CAST last night really worked for me. They outlined the 1. If 25 pts and more later, 2. No cut and 3. 50 pt cut. Based on these I created lines in the sand for each trade and so far all are holding. The one I was mostly watching was LEN as I thought it had the most potential to move against me, which it did for the first few minutes and then settled back down. My position sizes are very very small so the only emotional outbreak was over the computer. Not sure if this is clear but the CAST did a much better job of it.

Hmmm, looking at volume has me re-thinking my trades. NUE and GRMN, although on fire now, don't have a lot of volume behind them. This should be important, right?

The same for HANS.

Hey, Bob (and Pam)
I didn't have any big losers. I just don't want to see the profits disappear. All of my trades are at REE, but the market is so whacky that profits can vanish if you don't take some. Profits aren't profits until you take them -- I've heard that somewhere. So I just took half profits and am going to let the rest run. Thanks for helping out.

So if we have counter-Fed day, I will be happy, and kind of like Brett said, I left some out there that can participate if it continues up. I will learn this rule, too.

Thanks, Raimo. Your teaching was very timely.

Jeff, Raimo, Brett and others,

I'd like to thank all of you. For the first time i feel like Kim and I were prepared going into this news event. The knowledge everyone shares here is awesome and I feel grateful to be here and I hope I can sometime post something that helps someone else like you all have helped me.

It seems that it is all about having the right tools to react in the right way. Today i feel like we took a nice step in the right direction.

Thanks again,


Laney, is it typically a part of your trading plan to exit bounce trades like GRMN if they don't show high volume on the way up?

I ask because I don't think you need to look for something today that you don't normally look for just because of the fed.

Thanks for that, I didn't even see it that way. I'll have to consider that as this is my first Fed day.

Here is what I did. Not sure if it will pan out. But I don't expect the rally to last through the end of the week.

Sold Oct BSCI this morning. Took small amount of profit and put back into some cheap Sept OTM 85's (are now ITM). Also got into VDSI

After 2:15 -
Shorted MA, OEX, XHB and XLF All Oct. Very small position sizes.

These maybe examples of what not to do at some point...

Welp, I got out of GRMN (expires Friday anyhoo) with a 68% profit!

Thanks everyone for being so patient with my newbie questions. Disney is not the happiest place on earth, this blog is!


Whoa, I love this excitement. The adrenaline pumped all day. I did pretty well thanks to BIDU, ZNH, RIMM and the Phonix. Got out of the bears friday and yesterday at small lost.

Jeff, the LIST is great. I like how fast you go through the charts. Also thanks for the tip on using the line graph for charting. My REE has improved from it.

I am stoked! I stuck with my rules so far through this and it has been the best 5 days of trading I have ever had.

Wonder what tomorrow will bring?


Thanks, Ben :)

Tony Chai
My Options Trading Blog

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  • I'm Option Addict
  • From Saratoga Springs, Utah, United States
  • I am a professional trader and an instructor for Investools. I've had relations with the markets for 9 years. Born in Concord, CA, but reside in Saratoga Springs, Utah. Father of THREE, Husband of one.
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