Expiration and European Style Options

The markets have been 'relatively' calm in recent days.  By that I mean daily moves of more than 5% in the broad based market indexes appeared to have gone away.  It was not so long ago (Nov 26, 2008) that we discussed how frequently those (formerly known as black swans) large market moves occurred.

Are we heading back to the days of much lower volatility?  I have no way to know, but I doubt it.

The point of the above is to remind you that this is expiration week and, in my opinion, this is no time to get complacent.  If you sold options or option spreads that expire this week, please carefully consider whether it's best to try to collect every penny by allowing those options to expire worthless, or if it's in your best interests to remember how quickly markets can move – and thus, cover some or all of those out of the money options (or spreads).

If you have positions in European style index options, please remember that the last day of trading is Thursday and the settlement price is determined by the market's opening prices on Friday, December 19.

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