In today’s article, we will discuss what our “Red Flag Warning – Market Volatility” notice is all about and how it came to be in regard to regulatory red flags, market trends, and economic patterns. Last week, the huge online retail broker Robinhood increased its margin maintenance requirements for stocks affected by election-related volatility. Before that, Interactive Brokers, one of the largest online clearing houses, tightened margin requirements across the board. At the same time, the Chicago Mercantile Exchange relaxed their “circuit breaker,” which would shut off the market in the event of a major move. That is three big changes for three big players all revolving around market volatility. So why does this matter to you and your portfolio? The answer is simple. This is could be a strong indication that they are expecting major volatility, and don’t want it to disrupt trading activity.
We have been warning for weeks about the risks to buy-and-hold portfolios. If you are holding substantial long positions in equities, you may need to evaluate hedging strategies, in the event of a big downside move in the stock market. It may also be suggested that bond investors assess exposure to upward pressure in interest rates. The yield curve is beginning to spread out… corporate and municipal bonds are especially vulnerable now.
The global resurgence of COVID and weakness in the U.S. economy threaten stock positions, as well. While the new stimulus will probably drive things up again in the short run, it could be a big mistake to confuse this upturn with a healthy bull move. Maybe everything will be fine, and we are on our way back to some version of “new normal.” If so, great! Long-term investors will be fine, and traders can take profits on the upside.
On the other hand, some very big players in the market are signaling deep concerns. Taken together with all the uncertain factors we’ve been talking about, it remains critically important to be positioned with a long/short strategy, to make money whichever way the markets go.
With FFR Trading, you’ll have access to investment strategies that not only take advantage of the upside but also make money when things go south. We take special pride in actively tracking market trends, educating our clients and keeping them informed, and prompting financial freedom all around. Our experienced market strategists and dedicated client care teams do their absolute best to ensure that the best approach is used to meet your individualized needs. To learn more about our individual strategies, visit our options, forex, index futures, and commodities pages to learn more. If you would like to contact us to discuss your portfolio needs, please contact us by filling out our contact form, giving us a call at (800) 883-0524 , or emailing us at [email protected]. For more frequent updates, you can follow us on social media on Instagram, Facebook, Twitter, and LinkedIn. We hope that you enjoyed our update on the Red Flag Warning – Market Volatility, and hope that it inspires you to assess your portfolio and prepare for market trends. We wish you the absolute best in your trading endeavors!