A Long December?

• Posted by Adam Warner
• on November 20th, 2009

So if we’ve learned one thing this week, it’s that pre-anticipating pins rarely works well. I mean even with yesterday’s mini-excitement, it’s still not a volatile week. Yet of the stocks we’ve highlighted this week, most flipped towards a strike that looked unlikely as recently as Tuesday night.

And keep in mind, it’s not like we crashed, SPY was down all of 1.27% yesterday.

But we’re not here to talk about the past. It’s time to start pre-anticipating December volatility carnage!

Well maybe. I noted the other day that when I ran numbers for my book, December pops out as the month where options consistently overprice “reality” by the widest margin. Keep in mind options almost always price higher in volatility terms than stocks actually move, it’s just more pronounced in December.

Of course price matters too, and with index volatility hovering near 52 week lows, and many indivual names trading at 18 month lows, it’s tough to pull the trigger too aggressively on sales. So I’m sticking more to spreads, shorting put spreads for the most part into these modest dips.

The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

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