12:48 EST update
Options expire the third Friday of each month, it is sometimes called the witching hour. In the old days, the day often produced volatile trading with wide price swings. These days the volatility often occurs ahead of that time and the day itself is non-event. The option and stock markets are connected, but the market makers are separate. The option dealers have a vested interest in trying to pin stocks to strike prices. For example, Advanced Micro Devices is trading around 39.50. The option dealers may their money to get stocks as close to the strike price of 40 as possible to make as many options expire worthless as possible. I expect less volatility going to Friday as option dealers do what they do.
Oil below $60 a barrel, transports, especially rails are at all time highs. Transportation stocks doing well are often a leading indicator as stuff that gets shipped, later gets sold. I could not pull the trigger on JWN this morning. Gold and silver drifting lower. I am looking at the XLE (oil ETF) chart and it may show a possible pattern for GLD (gold ETF). I will look at it some more, but it may prove to be a useful pair of charts to look at.
I have buy/writes on the following:
ABX (Barrick Gold) out of the money
AMD (Advanced Micro Devices) in the money
AMZN (Amazon) in the money
PDLI (Protein Design Labs) out of the money
PIXR (Pixar) in the money
The ones that are in the money will almost definitely be called away. I will look to sell calls next week on those out of the money. One negative about covered calls extra commissions and spreads, two commissions and two bid/ask spreads in, the same out. In a fast moving market it is not as easy to get in or out.
A few minutes after I write the above, both gold and silver are getting hammered. I don't know if it has anything to do with new Fed Chairman Bernanke comments. Looks like I got scared out of my puts early, will keep looking. Sentiment back to favoring bears.
No comments:
Post a Comment