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PUBLIC: Jan post out last week, today’s post is for Members Only – Dr. J's Market Thoughts Press "Enter" to skip to content

PUBLIC: Jan post out last week, today’s post is for Members Only

The only thing I will post here is a cautionary tale for those that think markets are always ORDERLY and LIQUID….these option pricing tables indicate to me that the end of the day was a complete mess and heaven help you if you are trying to use MARKET orders to get things accomplished.  If you trade options, PLEASE be sure to use LIMIT orders.

Members, I will be posting a private post just for you in a few minutes.  Be sure to log in and see it!

When PANIC starts to set in, prices are not very friendly to the investor.  Remember, if no one is willing to BID on what you own, then it is effectively worth ZERO.  If you are familiar with an options table, this is the SPY options table for the option chain that will expire on Wednesday (2 days from now) close with strike prices in the middle and bid/ask to the left and right for calls and puts (respectively) circled in RED.

  1. Note the large bid/ask spread for a product that normally trades from $0.01 to $0.10 on a daily basis (I know, I trade them).
  2. Note the lack of gradual rise or fall in an orderly fashion from top to bottom.  The BID on the 264 strike PUT is $4.08 and the neighboring strikes are both above it.
  3. The PUT side of the table is at least much more normal (discounting the stupid wide spreads)…while the CALL side is in complete disarray!

Be careful out there!  Have a plan, trade your plan, and if you don’t have a plan–find someone who does and get some help!  (Perhaps you should subscribe to this website and visit a financial planner!)  If your plan was to exit in an orderly fashion, how did that work out for you today?  I hope you didn’t panic or feel sick to your stomach.  I was travelling all day (driving home) and didn’t even care what the markets did today….why?  Because I purchased insurance on my portfolio using options.  I’ve lost less than HALF of what the markets have gone down in the last 2 days.  What about you?