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Buffett is Nervous, Food Crisis Looms, You Need to Understand & Trade Strangles Like This | tastylive Weekly Roundup

By:Eric Villa

Our best stories on YouTube this week.

  • Errol Coleman decides between trading stocks, options and futures.
  • Warren Buffett is selling, so what does he see?
  • You may be losing money if you trade strangles like this.
  • Traders need to pay attention to this potential food crisis

Stocks vs. futures vs. options battle royale

Stocks, options and futures can offer traders and investors wildly different opportunities and risks. To understand which product may be best for traders with all levels of experience levels and under any market conditions, Errol Coleman led a roundtable discussion that included Chris Vecchio CFA, Dr. Jim Schultz and Garrett Baldwin. 

Warren Buffett’s Berkshire Hathaway is at all-time highs … for now

Frank Kaberna recently conducted an analysis of Berkshire Hathaway's (BRK.A) holdings. Despite the firm's price nearing an all-time high—which may suggest Warren Buffett feels confident—there are indications he is reducing risk in anticipation of a potential stock market downturn. Is it possible Buffett believes the 2023 stock rally is too good to be true?

What is the perfect strangle strategy?

The research team at tastylive has compiled a study of the most statistically advantageous methods of trading strangles. Here are some highlights from this research piece that could potentially enhance your trading strategies:

  1. Historical analysis shows 16 delta strangles at 45 days to expiration tend to have higher win percentages, median profit and loss (P&L), and initial credits. However, the optimal range for days to expiration is between 45 and 90.
  2. The delta of the strangle also affects its performance. As the delta increases, the win percentage decreases, but the median P&L and initial credit increase. The 20 delta is considered the optimal choice based on win percentage and median P&L.
  3. IVR (implied volatility rank) is important in determining the suitability of a strangle. Higher IVR environments, ideally above 30 or even between 50 and 75, tend to yield better results. However, extremely high IVR values above 75 are rare.
  4. The recommended strategy is to use 20 delta strangles with 45 days to expiration because they provide a balance between probability of profit (POP), P&L and premium collected. It is essential to consider personal risk tolerance because some traders may be willing to accept a lower win percentage for a larger credit.

Is a food crisis nigh? 

Inflation may be cooling down, but global forces won't allow the inflationary magma to solidify without a struggle. Ilya Spivak dissects the next potential global inflationary force—a looming food crisis. Here are the salient points from his insightful discussion of the potential food crisis, as linked above. Traders, take note and strategize accordingly.

  1. India's decision to ban the export of some varieties of white rice has raised concerns about a potential food shortage. This comes at a time when the Russia-Ukraine war are already raising concerns about wheat, fertilizer and corn shipments.
  2. The spike in stories mentioning a "food crisis" suggests growing concern about the issue in the markets.
  3. The breakdown of the Black Sea grain initiative between Russia and Ukraine, along with other geopolitical tensions, has the potential to disrupt food supply chains and contribute to food inflation.
  4. Rice prices have been on the rise, with India the largest exporter. A significant increase in rice prices could complicate global disinflation efforts and lead to more hawkish central bank actions.
  5. While there are concerns about a potential food crisis, it is important to note that India's measures are preemptive and there is uncertainty about the impact on rice production. Additionally, the global impact of a potential food crisis may be limited to specific regions like the Middle East or Africa.

Eric Villa is a YouTube specialist at tastylive. 

For live daily programming, market news and commentary, visit tastylive or the YouTube channels tastylive (for options traders), and tastyliveTrending for stocks, futures, forex & macro.

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