
Enter multiple symbols separated by commas
London quotes now available
This week, the Federal Reserve will announce its plans for the future of quantitative easing, its $85 billion monthly bond-buying program. And traders are warning that if the Fed announces a reduction, or "tapering," of asset purchases, the market reaction could be negative and violent.
For that reason, anyone who is long stocks might do well to hedge their positions ahead of Wednesday's announcement.
"This week, defense wins games," said Rich Ilczyszyn of iiTrader. He recommends taking on bearish positions on the S&P "in case we get that taper. The idea here is that if they do taper, I'm going to capitalize on this move."
The Federal Open Market Committee meets on Tuesday, and will release its statement on Wednesday. After that release, Fed Chairman Ben Bernanke will hold a press conference to clarify the Fed's intentions.
The market had expected the Fed to taper in September, but the Fed pushed it off, partially due to concerns over a potential government shutdown and debt default threat. Now, with economic data improving and Congress hammering out a budget deal, some economists say that the time is right.
(Read more: Get ready, here it comes: A December taper)
"The economy's performance has continually improved since Q1. ... This momentum is expected to persist as the job market gains further traction, the housing recovery broadens, the headwinds of fiscal drag and household delevaraging abate (if not reverse) and exports regain traction," wrote Deutsche Bank's chief U.S. economist, Joseph LaVorgna, in a Friday note.
"We expect the Fed to initiate a tapering of QE as soon as next week and expect asset purchases to be completed by late September/October of next year."
But Ilczyszyn notes that the market is largely one-sided in the belief that the Fed will push tapering off once again.
"Most analysts suggest that we won't get anything until the first quarter," Ilczyszyn said. "Because the market is all one way, the options are undervalued and I'm playing the other way."
(Read more: Scared or not, you have to buy stocks: BlackRock's Koesterich)

Specifically, Ilczysyzn recommends buying bearish put options on both S&P 500 and 10-year note futures. This allows the holder to spend a certain amount of money to put on a bearish position that offers leverage to the downside, but will not end up costing any more if the asset soars.
"What I'm doing this week is buying some puts in the S&P" and "I'm using the 10-year note put as a vehicle. If they do taper, rates will spike, the S&P will drop and I'm positioned for that trade," he said.
Brian Stutland, meanwhile, would rather play for the possibility of a December taper by shorting gold.
(Read more: Experts predict a gold bounce soon—here's why)
"One thing I'm watching is the gold market this week," said Stutland, managing member of the Stutland Volatility Group. "If there's any indication of taper at all, I think it can get real ugly here. You could be seeing the lows put in on the year in gold should any indication happen."
—By CNBC's Alex Rosenberg. Follow him on Twitter: @CNBCAlex.
Watch "Futures Now" Tuesdays and Thursdays at 1 p.m. ET exclusively on FuturesNow.CNBC.com!
Like us on Facebook! Facebook.com/CNBCFuturesNow.
Follow us on Twitter! @CNBCFuturesNow.
Print Email Traders warn that one event this week could have a violent impact on the market. Commodities Futures Futures Now Investing Alex Rosenberg Rich Ilczyszyn Brian Stutland Ben Bernanke Joseph LaVorgna S&P 500 Index 10YR TNotes MAR4 The Fed Price Change%ChangeS&P 500---@ZN14H--- Featured Experts call a gold bounce—here’s why
The market may have gotten way too bearish on gold. Some expect the precious metal to hit $1,400 in the first quarter.
Scared? Buy stocks anyway: BlackRock
BlackRock's chief investment strategist says investors are smart to be nervous but still have to buy stocks.
BlackRock's 2014 outlook for stocks


A CNBC reporter, Jackie DeAngelis also hosts "Futures Now," which is available only on CNBC.com.
Anthony Grisanti
GRZ Energy Inc. Founder & President
Rich Ilczyszyn
iiTrader Founder & Chief Market Strategist
Subscribe Like us on Facebook Top News & Analysis Dollar bulls bet on mini-taper this week What every investor has to prepare for this week Google's running machines join robot race Swiss banker in eye of US tax evasion storm to face court China flash PMI slips – What are we missing? Most Popular Stories Nikkei, Shanghai lead Asia stocks lower; China PMI, Fed anxiety weigh What every investor has to prepare for this week Frequent fliers moving on, blame the fees Christmas tree sales boom may hurt procrastinators Ukrainians mass for new rally as EU halts trade deal Most Popular Video Santelli Exchange: Europe beyond stabilization Is Europe the place to invest in in 2014? Worldwide Exchange...in drawings! The bulls vs the bears on Japanese equities Confidence has returned to Ireland: Greencore CEO Most Shared Gold eases as Fed meeting looms, stimulus outlook eyed Millions of shoppers about to 'panic' this week North Korea frees US Korean War vet after 7 weeks Cramer: A Chinese 'game-changer' for this social stock Fed's dreaded 'taper' may not hurt after all NEWSU.S.AsiaEuropeEconomyEarningsEnergyInside WealthPoliticsTechnologyBlogsSlideshowsSpecial ReportsCorrectionsMARKETSPre-MarketsU.S.EuropeAsiaStocksCommoditiesCurrenciesBondsFundsETFsINVESTINGStock BlogPersonal FinanceCNBC ExplainsPortfolioWatchlistStock ScreenerFund ScreenerFinancial AdvisorsSMALL BUSINESSFranchisingFinancingManagementVideoVIDEOLatest VideoTop VideoU.S. VideoEurope VideoAsia VideoCEO InterviewsAnalyst InterviewsDigital WorkshopFull EpisodesClosed CaptioningSHOWSWatch LiveCNBC U.S.CNBC Asia-PacificCNBC EuropeCNBC WorldFull EpisodesWATCH LIVEPROCNBCAbout CNBCSite MapVideo ReprintsAdvertiseCareersHelpContactPrivacy PolicyTerms of ServiceIndependent Programming ReportLatest News ReleasesRSSCertain market data provided by Thomson ReutersData also provided byData is a real-time snapshot *Data is delayed at least 15 minutes
Global Business and Financial News, Stock Quotes, and Market Data and Analysis
© 2013 CNBC LLC. All Rights Reserved.
A Division of NBCUniversal
No comments:
Post a Comment