Black Friday Could Mean a Red Portfolio
It's the Friday after Thanksgiving and you are doing everything in your power to work off the gluttonous hangover from the day before. Some will find themselves a prisoner of the local mall, others a prisoner of the virtual mall. For the rest of us, we might find ourselves glued to the couch seeking a quiet escape from the in-laws. Regardless of where or what you end up doing on "Black Friday", please refrain from doing the following:
Completely and utterly disregarding your portfolio simply because it is a half-day in the market.
The horror stories are numerous. Traders who entered into short-term option trades (particularly weekly options), or speculative futures positions, assuming that the Friday after Thanksgiving would be quiet trading, only to find themselves in a pickle with a violent swing on light volume. It seems improbable, and many get caught in the complacency trap, so don't feel as if you are the only one. And for those of you with longer dated positions, the half-day on Friday more than likely will be a much-needed vacation away from the trading monitor. However, for those brave enough to venture into weekly options expiring this week, or looking to scalp E-mini S&P futures, Friday should be anything BUT an off day.
While Friday will certainly be slow on the data front, and the volumes will be much lighter than average, the combination of the two can create the perfect storm for a blindside punch from the market. Looking back at the Black Fridays that I spent in the S&P 500 options pit on the floor of the Chicago Mercantile Exchange, I almost always walked into the pit expecting a slow day and probably 90% of the time walked out of the pit frazzled by a flurry of activity and choppy swings in the futures.
With that said, I urge you to walk into this Friday proactive, being mindful of the positions that you have on and properly understanding the risk exposure that could arise from any erratic moves on that day. This warning should absolutely be heeded by anyone with weekly options expiring this week. Either exit positions early or plan on closely monitoring them for the 3.5 hours of trading on Friday.
Otherwise I wish everyone a very Happy Thanksgiving and the best of trading for the remainder of 2013!
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