The one bet I will not be making is that the stock market finishes election week anywhere near where it began the week.
In other words, there is a high likelihood of a large directional move following the election. And there will likely be some epic whipsaws along the way.
As such, it feels to me that options traders should start building a good mix of both bullish and bearish bets, as well as a wide variety of expirations so as to mute the volatility likely to be introduced to our portfolios.
I don't think we want to be too overweighted on delta-neutral positions (though I think it's a good practice to have one or two on at all times). I do think it is prudent to have some long-premium bets on that can return 5-10x in the direction of the trend. Simple long calls and long puts will do the trick.
Since my portfolio is leaning long at the moment (it is a Bull Market, you know...), I added some more short exposure this morning. And will likely continue to do so in the coming week.
Take a look at your portfolio. Are you leaning too heavily in one direction? Do you have a good mix of options strategies on? How about expirations? Do you have a good mix there?
These are all things we would benefit from considering today.
We talk about this, as well as updates on current positions in this week's Options Jam Session. Enjoy!
Sean McLaughlin | Chief Options Strategist, All Star Charts
