Selling Options Across Election Day
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Selling Options Across Election Day We've been discussing issues with selling covered options across earnings releases. We're experiencing some of the fury today. But what about our upcoming Election Day? Do you think there is reason to have similar concerns about the potential for that to have some extreme impact on options prices? Anybody been through this and have an interest in sharing their experience? Laurie Frederiksen Invest with your friends! www.bivio.com Become our Facebook friend! www.facebook.com/bivio Follow us on twitter! www.twitter.com/bivio Follow Us on Google+ Click here to Subscribe to the Club Cafe email list. Click here to Unsubscribe Laurie
I had the same thought while listening to Paul's presentation on Wednesday. I do not think we can use history on this one since to my knowledge this presidential election along with which party controls the Senate and House is unique since the choices for the country's future are so widely different. In the big picture it seems to be a choice between a larger and more powerful government trending toward European type Socialism or a return to a smaller government and increased economic freedom for capitalism to work. I do not think we have ever had such two widely different views of what America should be. From an investors viewpoint one aspect is a choice between higher or lower taxes. I know one candidate says those making less than $250K will have no change in their tax rates. However in order to reduce the $1T deficits there simply are not enough people making over $250K to provide Treasury enough money to balance or significantly reduce the deficit. I am of the view the deficit must be reduced if not eliminated and this will likely have to be done slowly over time. Either way it will provide a level of austerity for quite a while that many Americans have not experienced and it will be tough on everyone. In short we have been living beyond our means for too long and it is time to adjust to a leaner future. There is no Silver Bullet that will quickly solve our long trend to overspend. Sort of like ending a smoking habit that is quite hard to go cold turkey So yes I do expect the outcome of the election on Nov 6 will have a significant impact on the future prospects of many companies with some benefiting and some being negatively impacted. Knowing who will win the election with some many divided polls is in itself a tough call. Even if we were sure of the outcome then we would have to determine which companies would benefit and which would be negatively impacted. For example if Romney were to win and the Republicans control both houses then based upon Romney's plan to eliminate taxes on interest and dividends would lead one to see this as positive for dividend paying stocks. So my thought is to treat Nov 6 like an earnings release date and await the outcome and on Nov 7 be prepared to take advantage of opportunities that may exist. Thus I plan to try to identify stocks that would benefit and be hurt if Obama wins and likewise for Romney. This has to be tempered with which parties control the House and Senate since I doubt one party will control all 3 and there will remain some level of gridlock. In addition, I am of the view the long awaited correction of the overall market may have started providing a headwind at least to those on the long side. My thoughts on the topic and I hope others will chime in since I surely do not view I have all or even most of the answers on this. Dan n 10/19/2012 1:27 PM, Laurie Frederiksen wrote: We've been discussing issues with selling covered options across earnings releases. We're experiencing some of the fury today. First, let me say that I agree totally with both Laurie and Dan that the election can be a strong inflection point. Selling options across it might not be wise. Especially just like earnings dates, selling Cash-Secured Puts would not be prudent. Calls can be somewhat different if you are truly happy being called away at your strike and do not mind the possibly of a lost opportunity if the stock price jumps up. On kind of the political side, I have some of your same thoughts, Dan, but what worries me is that neither party has any real discipline on budget control. They both have strong tendencies to spend or provide tax benefits. The only thing that changes is what special interests are the benefactors of their largess. It would seem we all want special treatment from the government. The result is we are digging a huge hole for the generations behind us. I hope we can find true fiscal discipline before it is too late. I think the key to get it done is that we are all going to have to give up on something. If we only point out what we want others to give up we are not going to get the job done. With that said, I think we need to be careful with our political discussions as that is not the intent of the COOL_Club discussion list. So maybe we just need to leave it with the recognition that the election day could be viewed as the same type of event as each company's earnings date. In some ways it could be even more dramatic as it affects the entire market on one day rather than just a subset each earnings day. On Fri, Oct 19, 2012 at 1:45 PM, Dan Hess <danhess@nc.rr.com> wrote:
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