Expiration Week and Market Volatility

It's expiration week once again and, as far as my portfolio is concerned, I'm not worried about violent market movement.  I've covered essentially all my short February spreads and am happy not to have to be at risk from negative gamma (for the moment).

The market has been going nowhere, implied options volatility has been declining, and iron condor trading is profitable.  That's all good news.  And yet I'm concerned that things are about to change.  I have no specific reasons for feeling that way and I hope my fears fade away.  But I do fear the immediate future.

GM is trying to reach agreements with its bondholders and employees in an attempt to avoid bankruptcy.  Another potential ponzi scheme may be uncovered (Google: Stanford bank, ponzi) if you are unaware of this situation) as the SEC once again takes forever to investigate.  The banking situation is unresolved.  The stimulus package has been passed and we all wait to see if it will have positive results – before it's too late.  Treasury Secretary Geithner must provide details of his plan: will the market be patient and wait for the plan to be revealed?  And will it be pleased with the news?

There is so much bad news pending that I'm thinking that the best thing to do may be to ignore it.  But, I cannot.  I'm afraid.  yet I continue to go about my business of buying iron condors – making an effort to add a few more every day.

Is everyone else cool with what's going on?  Do we have reason to be optimistic that all will be well soon?


4 Responses to Expiration Week and Market Volatility

  1. income trader 02/17/2009 at 8:15 AM #

    I think if anyone is “cool” with what’s going on they are either dead or need to have their meds checked!
    Very tough times ahead for the U.S. economy which will affect all Americans to some extent. I am cautious as well and even though times are good for us Iron Condor guys and gals, I fear for the future of our nation.
    On the other hand, I am not seeing what we usually see when there is widespread panic. Trading volume has been relatively week and lackluster. The VIX is hovering at about 43 and even though it is a historically higher than normal level, it is no where near panic levels and actually has been on the decrease the last few trading sessions. Another point to consider is the shorts have few financial players left to target! The automakers are not attractive shorts as well so that strategy in my opinion has been played out. There is a lot of headline risk today and shorts are concerned with “panic” short covering. What we do see is an absolute buyer strike out there and I believe we need to go ahead and test the lows to see if we can’t get some good buying action going again.
    I think we may break the interday trading lows set in November but I am not sure that we trade much lower than that.
    Just my 2 cents on this wild tuesday morning! hang on its looking pretty grim

  2. Mark Wolfinger 02/17/2009 at 8:20 AM #

    Thanks for sharing.
    No panic = complacency, and that’s not a good thing.

  3. dave appel 02/17/2009 at 5:36 PM #

    Hi Mark,
    i wouldn’t say i am cool with whats going on. i certainly feel for all the people who have lost there jobs and homes . i wouldn’t say I am cool with that. And while in retirement accounts I do hold long term bullish equity mutual funds and etf’s I have certainly made money trading this year as well as last. So when it comes to the trading environment I am cool with that. Outside of mutual funds for retirement i have done well and continue to trade in the volatility . So when it comes to trading I would say i am cool with that. I am doing so much better than in 2005 7 2006 when although bullish there was no volatility. The volatility has created some cool opporunities

  4. Mark Wolfinger 02/18/2009 at 9:06 AM #

    And with those opportunities comes increased risk. But if you are skilled at managing that risk, they you will continue to do well.