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BNY ConvergEX Group Chief Market Strategist Nick Colas on how investors should adjust their investment strategy ahead of the potential fiscal cliff.
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The feared all falling over the cliff real if you -- look at the chart of the fix -- the fear index.
You might not think so at all it's incredibly low but guess what market players an insider's.
They're already making trades in advance of something our next guest says is about to happen related to the fix.
Let's get you in on the -- that's what we do here on capped out at the closing bell this column is the chief market strategist at BNY -- -- group he's here to help you do just that -- What are you -- -- crystal ball that's what happened next week.
But -- we only have about ten days left to fix the fiscal cliff.
What SA -- because it's four weeks yes because congress actually officially leaves a week from Friday thanks -- you can get it but they only work until a week from Friday so.
The really remarkable start to get nervous that we don't have broker agreement if we don't get -- by next week.
So I expect to see some volatility creep back into this otherwise very -- market.
For the middle of next week because we all know negotiating styles are such that you're not gonna get a resolution to the very last minute.
Markets I think and I -- should at least one warning shot across the -- congress and president before it was also.
-- that -- at seventeen that hasn't closed above twenty since June if you stretch this out a year that this is unbelievably low so surely you're not saying somehow trade the -- or by.
ETFs that are involved in the fix what is the Smart money doing right now.
The Smart money is looking to trades right now the first is if you want to own stocks -- the into the year.
Protect yourself -- buy some cheap put options anticipating a little pick up in volatility and not -- to -- that volatility in your overall portfolio.
The second strategy here for a lot of options players -- buy some cheap call options because as we go forward through the end of the -- every expects one final rally once we get a decision.
-- want to I want people to know it's December's traditionally a -- slow month as far as volume is concerned but guess what.
In trading at the -- -- in the volume of the fix the trading has been.
I'm not believe -- record breaking for three months in a row now so that's how we're trying to tell you this -- -- that the Smart money's in and doing something.
You just at a very broad statement but what's to tell me where who why what yet.
So if you got a portfolio and you don't think even -- the volatility of the coming ten days and let's face it we've had a very -- marker for a long period of time now.
If you're worried that perhaps -- even fall off the cliff you want some protection.
-- -- either after money or near the money puts and stocks that you -- already.
You protecting yourself against the downside pretty simple -- to they have to have a certain expiration date as we color or as you know itself you wanna get it through the end of the year whether it's January February or march of next year that's more enough time to cover you -- you do want some protection and because the -- is cheap.
The implied volatility the price of these options is also -- -- expect in the market to fall next week if there's.
Absolutely certain market actually have a little bit of a different -- that's because there's no way we get a deal until the very last.
-- -- -- It seems like you know -- -- what you're talking about Wednesday Thursday having that figure you're at the tipping point on Wednesday of congress.
Exactly I gotta believe it's Tuesday Wednesday of next week.
So far December's -- each and every December it's boring it's flat there's no -- in -- -- volatile accepted CBO is accepted in the volume of events that followed through the Smart money want theft protection should go a long -- alongside them how high does the fixed get there.
You know the long term average Divx is twenty which is amazing to believe it worth 1748.
By the way folks what during the the flash crash number two years -- -- that's right so I expect of -- to get back to twenty -- -- simply its long run average but very high for December any sectors it would buy on the dip.
-- financials financials and technology and as I do think we're gonna get a snap back rally because we have to solve this fiscal for problem.
And the markets from a coiled spring right now they do want -- rise.
So again what do you think of -- ETFs there all kinds of ways to play this to stay away from outside stay away from those and I encourage clients the most Rashtchy from parts don't -- those that go after the single stock options single stock options you -- if you make moves today it.
Make a real money -- of money next week good to see you next thank you thank you for coming not seek.
We try to -- the people who watch what the Smart money is doing and then help you follow that trait that -- -- is chief market strategist at BMY -- X group doesn't.
