Trying to Anticipate the Fed's Movement

03/17/2014 10:37 am EST

Focus: OPTIONS

Bob Lang

Founder and Chief Analyst, Explosive Options

Veteran options trader Bob Lang discusses the pros and cons of trying to anticipate the transparent fed's next movement.

SPEAKER:  Most of us who watch the markets for a living have at one time or another tried to anticipate what the Federal Reserve is going to do and I’m here with Bob Lang.  Do you find that to be a wise decision to try to anticipate what the Fed’s going to do?

BOB LANG:  I think it is, Rob, because in some respects, all the Fed has been doing has been they’ve been very transparent tells us exactly what they’re looking for and often times they’re telling us we’re just looking at the data.  We’re looking at the economic data as it’s coming out here so we should all be doing the same thing but as you talk about anticipation, it may be a good thing but in some cases, it’s not.  It’s trying to jump the shark and say I want to try and get ahead of what the Fed is doing is pretty dangerous isn’t it?  Especially, I mean these are the guys who set policy, right?  This is the Federal Reserve is the one that is out there telling you what to do and if they’re telling you that hey look, we’re just paying attention to the data and telling you we’re looking at X, Y, Z, economic reports that are coming out and they’ll give us the clues to tell us when the economy is heating up or slowing down.  We should just be looking at the same thing and not necessary and trying to anticipate what they’re going to do based on the data. 

SPEAKER:  I remember when I first started as a currency trader.  I was looking at trade balance reports all the time when I was thinking about my macro economic analysis.  I don’t seem to do that at all anymore.  What are some of the data points that you look at when you’re doing your analysis?

BOB LANG:  Well, some of the economic data that’s really, really important.  I basically talk about what the Fed is looking at and that’s important in terms of retail sales, industrial production, economic growth in terms of unemployment, whether the unemployment rate is doing, where there is some job growth there, the trade data, all these sort of things.  There’s about five or six different elements that really give us a good picture to capture what is happening in the economy.  Currently right now, the fourth quarter was a great quarter and a lot of people were saying that it was going to dismal because of the weather and because of heading into the holidays.  Expectations were a little bit too high and we saw some retailers kind of flaming out and showing some poor numbers and then now of course we’re heading into the first quarter, second quarter.  It’s always a really tough time for retailers so that’s the sort of thing that I look for and those are the trends that really guide you into what’s happening not just in the current quarter, but what’s going to be happening going forward. 

SPEAKER:  Great advice about what data to pay attention to.  Thanks Bob.

BOB LANG:  Thank you. 

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