An Important Observation for Option Traders..! Market Gaps
All traders have noticed the change in the market behavior in 2022..!
This a market like you never have seen before..!
This is the second-worst start of the year for US equities in 123 years.
For context, the -11.9% drop in the first 44 trading days in 2022 is only rivaled by the 1920 Great Depression and the Great Financial Crisis.
(MacroAlf, Author of The Macro Compass, a free newsletter delivering financial education, macro insights & investment ideas.
Former Head of a $20bn Investment Portfolio.)
Now, you might realize the reason why your old rules might not work..!
What Is a Gap?
A gap is an area discontinuity in a security's chart where its price either rises or falls from the previous day’s close with no trading occurring in between. Gaps are common when news causes market fundamentals to change during hours when markets are typically closed, for instance, an earnings call after-hours. (Investopedia)
In 2022, 14 out of the past 45 trading days Nasdaq 100 has opened with a gap bigger than 1%..!
Interestingly, the number of the Bullish and Bearish gaps are equal, 7 for each..!
How significant this could be???
There was not a single Gap bigger than 1% in 2021..!
Conclusion:
Do not hold your option position overnights..!
The chance of losing all your premiums is high..!
It applies to those who use statistics to trade, gamblers can do whatever they want as usual..!
Best,
Dr . Moshkelgosha M.D
DISCLAIMER
I’m not a certified financial planner/advisor, a certified financial analyst, an economist, a CPA , an accountant, or a lawyer. I’m not a finance professional through formal education. The contents on this site are for informational purposes only and do not constitute financial, accounting, or legal advice. I can’t promise that the information shared on my posts is appropriate for you or anyone else. By using this site, you agree to hold me harmless from any ramifications, financial or otherwise, that occur to you as a result of acting on information found on this site.
This a market like you never have seen before..!
This is the second-worst start of the year for US equities in 123 years.
For context, the -11.9% drop in the first 44 trading days in 2022 is only rivaled by the 1920 Great Depression and the Great Financial Crisis.
(MacroAlf, Author of The Macro Compass, a free newsletter delivering financial education, macro insights & investment ideas.
Former Head of a $20bn Investment Portfolio.)
Now, you might realize the reason why your old rules might not work..!
What Is a Gap?
A gap is an area discontinuity in a security's chart where its price either rises or falls from the previous day’s close with no trading occurring in between. Gaps are common when news causes market fundamentals to change during hours when markets are typically closed, for instance, an earnings call after-hours. (Investopedia)
In 2022, 14 out of the past 45 trading days Nasdaq 100 has opened with a gap bigger than 1%..!
Interestingly, the number of the Bullish and Bearish gaps are equal, 7 for each..!
How significant this could be???
There was not a single Gap bigger than 1% in 2021..!
Conclusion:
Do not hold your option position overnights..!
The chance of losing all your premiums is high..!
It applies to those who use statistics to trade, gamblers can do whatever they want as usual..!
Best,
Dr . Moshkelgosha M.D
DISCLAIMER
I’m not a certified financial planner/advisor, a certified financial analyst, an economist, a CPA , an accountant, or a lawyer. I’m not a finance professional through formal education. The contents on this site are for informational purposes only and do not constitute financial, accounting, or legal advice. I can’t promise that the information shared on my posts is appropriate for you or anyone else. By using this site, you agree to hold me harmless from any ramifications, financial or otherwise, that occur to you as a result of acting on information found on this site.