Fundamentally, the answer is unequivocally no. But today is option expiration. The selling has been organized and controlled. You wanna know why, don’t cha?
Remember the end of the month/quarter/half when any money manager worth his salt had to show fewer stocks and more bonds–especially Treasuries? That sent the market down for the a half-dozen or so trading days until it was complete. It was the calendar that was screwing you up. The calendar problem is the same now as it was then. Blame the giant Roll.
The roll is simply when institutions suffer expiring option protection and buy new ones. If someone is buying puts, it means there is an immediate and offsetting transaction as the option seller must hedge out their risk. That means selling or shorting the underlying stock or ETF. That offset is what today is all about. And don’t you think the Algo’s know it and are piggybacking?
Next quarter begins with October. What usually happens in the Sept-Oct. time frame? Right. And don’t you think protection is warranted?
The press will tell you it was a sell the news reaction to the settlement and Fin-Reg. Uh-uh. It’s about the roll, but the press won’t tell you cuz its bo-ring…And if you think it was bank earnings, think again. Banks suck, period.
Have a safe and happy weekend!
If you enjoy the content at iBankCoin, please follow us on Twitter
so does that not make the ROLL a zero sum game rather a vicious selloff?
It is for the option writer/seller because he generally hedges perfectly and immediately. Money managers generally do not.
Get it. Thanks Scott.
on a different note, where would your stop be on KLIC? I am looking double down on Monday. Today t held up really good given the carnage
It’s right back to where it was on July 1, and it has been trading 6.50 to 8.50 for a while…Obviously I’m a buyer at the low end of the range…
Scott Bleieieier, that’s quite the imagination you have….
Yeah, I’m just making this up as I go along… :)-
Man, there is so much to learn about trading and investing. Been at this a while, and still learning something new each week. Thanks for this post Scott. Good insights.
PS – I’d like a password to the radio show. Email me at the address used for this comment. Thanks in advance,
MOOBS
I like rolls.
Thanks Scott, great post
Scott,
On your advice, I bought some logi at 13.91 and sold it at 14.45 for a nice profit. Would you be a buyer here at 14.30 or wait for it to drop a little lower?
Thanks!
Scott,
Great post! So at what level do you see this roll taking us down to before we head back up for some respite again?
Thanks:)
I’d argue that big names had already bought protection before the opex voodoo. The vol differential in the Juls vs Aug and Sep lead me to that conclusion, that demand for options 3 months out have been running hot for the past 2 weeks.
Instead of fresh buyers, I think it was more like option shorts being forced to cover.
The bottom line is that it is the closing of positions. The roll has been underway for several days and it culminated on Friday.
Won’t it be just amazing when the sellers just dissapear again?