Friday’s options expiration created opportunities for us to look at this week. The end of week market uncertainty gave us higher volatility and created opportunities for our strategy. Lets take a quick look at what happened and how this works for us.
In my opinion, the markets are full of players who are an optimistic group and tend to have short memories. The abrupt softening of the market at last weeks end was not unusual. Participants these days are nervous and seem to be looking for the first sign of bad news to sell and good news to buy. Last week we saw buying on perceived good news at the beginning of last week and selling on perceived bad news at the end of last week. Given the jittery nature of market participants with all the buying and selling, somebody must be making a lot of money. Last weeks euphoria ended with Thursday’s unemployment numbers that overall were not surprising. As will be discovered, Census workers just got their “pink slips” and many had the ability to file for unemployment. Anyway the weekly unemployment numbers are unpredictable and in this environment the surprise would be if the were predictable. Our concern is not so much with the direction of the market but with the opportunities provided by the sideways or confined range of market activity. Certainly, the activity at weeks end gave us higher volatility to trade on.
Given that last Friday was options expiration day for the month, today we will get informed of what was and was not called. I like to view the Monday’s after expiration as a new investment day. A clean slate where we can look at our portfolio as if nothing were in it and start all over. Many of the positions in the portfolio stay provided they provide a favorable risk/reward profile. We also renew our search for new opportunities to add or re-establish old favorites that meet our criteria. We are under no obligation to keep or renew a position.
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