Early last week, I saw an article on CNBC that talked about investors moving back into equity funds for the first time in six months. This development was followed by the election, the Fed announcement on the latest round of quantitative easing (QE2), and the subsequent strong rally in the equities market.
Finally, when option volume was announced for last Thursday at 25 million contracts it was one of the biggest trading days we have seen during a non-expiration week all year. Put these together with the fact that the market is at its two-year highs, and what do you think it does to volatility? (more…)
Potash Corp. (NYSE:POT) spiked about $31 higher today after the company revealed it received an unsolicited, $130-per-share offer from BHP Billiton. The board of POT unanimously rejected this offer as “grossly inadequate.”
Don’t worry, the wicked witches from each nautical direction aren’t going to come swooping down on their broomstick, although it may feel like that now. Quadruple witching happens on the third Friday at the end of each quarter – March, June, September, and December. Most of us are familiar with regular equity options expiration, which occurs on the third Friday of every month. Quadruple witching is simply the simultaneous expiration of four different financial vehicles:
On a percentage basis, this May was the worst-performing month since 1962. Volatility really began to pick up around April 27 and exploded on May 6, with the so-called “flash crash.” Many long side investors were “stopped out” that day, possibly at prices that were far below where their actual stop loss orders were, due to the speed at which the market moved.
…not to mention a way to potentially increase your probability of having a profitable trade (or a trade that loses less) based on statistics.
