How Important Are Holiday Sales To The US?

| November 25, 2013 | 0 Comments

Believe it or not, it’s already that time of year again.  Thanksgiving is this week… which means Black Friday is almost here.  Yep, the holiday season is upon us and it’s time for America to go shopping.

But, the holidays aren’t just about presents, family time, and cheesy music (which is always playing no matter where you go).  It’s actually an extremely important period for businesses and the economy as a whole.

Here’s the thing…

Retail spending drives the US economy.

The fourth quarter is a time when several retail businesses generate half or more of their annual revenues.  Plus, many companies save a huge portion of their marketing budgets just for this time period.

More importantly, consumer spending historically represents 70% of GDP.

It’s not big business building a fancy, new manufacturing facility.  It’s not even the government constructing an aircraft carrier or paving highways.  It’s the family going to the mall on Saturday that drives this economy.

Think about it…

If a company has a good holiday season, they have more money to expand.  That could mean new products, new facilities, or new businesses in the coming quarters.  Regardless, it means more hiring and more spending.

The more people getting hired, the more money consumers have to spend as well.  And so the cycle continues, consistently pumping up the economy in the process.  But it all starts with holiday spending.

Moreover, it’s not just the retail companies that benefit.  Think about shipping companies for instance.  Any company thriving from shipping or transportation is bound to get a boost during this period as well.

In other words, equities could get another big push in the coming weeks.  As such, it’s a good idea for savvy traders to pay attention to all the retail and sales data soon to be released.  In particular, Black Friday and Cyber Monday could set the tone for a big holiday shopping season.

For options traders, buying ATM calls on some retailers or selling OTM puts on others could both be effective strategies.  For call buyers, you can often find cheaper calls on the less volatile retailers.  For higher volatility stocks, selling puts may be the way to go.

Yours in Profit,

Gordon Lewis

Tags: , , , ,

Category: Options Trading, Stocks

About the Author ()

Gordon Lewis is the Chief Investment Strategist and editor for the popular daily newsletter – Options Trading Research. He’s also one of the key analysts behind the highly successful Options Trading Wire and Advanced Options Adviser. As a market maker on the floor of the CBOE, Gordon analyzed and traded stocks and options across a broad range of market caps and industries including retail, internet, oil, insurance, and telecom. He often traded thousands of options contracts per month… and it’s fair to say, Gordon’s analyzed and invested in some of the most complex and successful options strategies in the world.

Leave a Reply

Your email address will not be published. Required fields are marked *