DECEMBER AND TRADING OPTIONS

The market is gyrating quite extensively and most days very quickly.

Over the years I noticed a first part of December phenomenon. I was looking at many December charts over the years, and in particular, I was monitoring my own trades. It’s almost comical to watch the financial pundits trying to ascribe a reason for this, and their opinions are all over the board.

My wife’s birthday in Dec. 3rd. About that time, almost every year, the market sells off—usually quite a bit. This is important to note, especially if you’re an option trader. This downturn seems to reverse itself around the 20th of the month. That is right around the time the main options expire for the month.

Think of that. You’re is a short term option with the Dec. expiration around the 16th or 20th, and the downturn may have devastated your option premium—especially if it’s a call option.

If you’re in a covered call, a small downturn may be beneficial if you looking to do a buy-back and resell later on, after the expiration has come and gone.

The point is to notice these things. I know many of you are here to get my insights. This is one, and one you should monitor. Don’t get caught in this downturn, which happens almost every year.

Wade Cook