Options – week of Dec. 14, 2015

Commentary for last week

Week endingOpenHighLowClose
Dec. 112092.252095.501996.251998.75
Dec. 42089.502105.002040.002088.50

Oil price declined to the lowest level in six years. The US stock markets were also under selling pressure last week. The SP500 index wiped out all the gain made in November, and closed down 2.8% for the year on Friday.

Option trades last week

All of our option trades lost money last week. The ES was down about 100 points for the week, with most the of damage coming on Friday. The decline from the high made Thursday afternoon to the low made just before the close Friday was 69 points.We sold Puts on Tuesday when the ES dipped below the meanline, only to have them stopped out for a loss of $100 per option.

Stop losses often take you out of trades you would prefer to stay in, but this was one of the occasions where they prevented a much larger loss. Puts held to expiration Friday would have lost about $1,700 per contract for the 2035 strikes, and about $1,100 per contract for the 2020 strike.


This week:

This week is quadruple witching expiration week. We also have the Federal Reserve FOMC policy meeting for two days on Dec 15-16, when the Fed is expected to make a decision about an interest rate increase. The stock market will be largely influenced by the Fed decision.

At the same time, volatility will be very high this week due to the VIX option, the Cash index options, the futures contract, and the futures contract options all expiring more-or-less simultaneously, on Dec. 15, Dec, 17 and Dec. 18 . That overlaps the FOMC policy meeting. In addition, the SP500 index is in a bearish stage. Busy week.

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