Freaky Friday - Momentum Trades : Momentum Trades

Freaky Friday

11:00am (EST) Today is one of those rare days in the market that only happens four times a year. It’s an event known as “freaky Friday” and it occurs when the contracts for stock index futures, stock index options and stock options all expire on the same day. These days are dubbed “triple witching days” and they take place on the third Friday of March, June, September and December. It is usually a bullish day for the market and the Dow, Nasdaq, and S&P 500 are all showing gains. The Nasdaq has been the strongest as it is up 30 points, or 1.6%, to 1,836. The bulls are trying to win the week but the bears did enough damage on Monday and Tuesday and appear to be taking today’s round off. Will the bulls pull an upset and win the week? Well, it’s possible but unlikely. The final trading hour is known as the “triple witching hour”. Sounds like a good name for a movie but the market can get quite volatile in this final hour. We normally get high volume as traders are quickly offsetting their option and futures orders before the closing bell but I don’t think the final results will be enough for the bulls to raise their hand in victory. You have to give the bulls credit though. The bears really could have done some damage and maybe they will but this battle could get nasty once 2Q earnings start to roll in. We have been stuck in this tight trading range and I’m looking for a breakout one way or the other once earnings start to hit the second week of July. Taking a look at a specific trade we are following; Abercrombie & Fitch (ANF, $26.30, down $0.19) started the morning higher but appears to be heading below $26. This is our initial target area for the July 25 puts (ZWRSE, $1.20, up $0.05) but this was only meant to be a one or two day trade. The two choices are to leave the position open or take profits. You still have the rest of the day to watch the stock and maybe we get the break later in the day and the call options make it to $1.30 or higher. If you don’t close the position, you will risk losing your profits. I will try and update the Blog one last time today but I could be in the pits with the witches. Rick Rouse Rick@TheOptionInvestor.com]]>

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