STOP TRADING OPTIONS

The stock market finally retested last weeks lows today as traders digested a host of economic data & the carnage from earlier this week. With more volatility & more new lows I thought it would be a good time to discuss what happens to options during volatility. You may have noticed by now that many options contracts have high implied volatility & are generally more expensive to the downside. This is what happens when volatility remains in the market for a prolonged time and it really is offering a different risk vs. reward than in the past. Essentially, with option premiums so high, there are now competitive alternatives to trade small and get gains. By using shares or futures & avoiding the upfront premium, on small trades, you can make sure that volatile markets don't shake you out of the best trades in this market.

After going over this mini options lesson, I go over a brief market recap and the importance of tomorrows option expiration. There will be inflation data in the University of Michigan consumer sentiment tomorrow & that will be the bigger market driver. Beyond that though, there was big news after hours from FedEx & GE that will negatively impact the market tomorrow.

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