Cautious Optimism Heading Into Expiration

With midweek in the rearview mirror, monthly expiration is fast approaching Friday.

Expectations are for the market to follow a normal grind higher into expiration. Not looking for any explosive moves as the market makers are waiting for options to expire.

Traders should be cautious holding out of the money calls that can be a setup for a loss.

Heading into the remainder of the week Simpler’s traders are focused on options-related expiration setups designed to produce short-term income. Friday after the effects of expiration are revealed may present opportunities for calls holding into the weekend. More earnings are on the horizon next week.

For lack of a better term, this is a “normal” rally into expiration so far this week with sideways chop expected into Friday.

Certain sectors, such as bio tech and transports, have presented opportunities outside the market’s center stage.

Despite a “stable” session so far this week some internal cautions have come to light. Recent rallying in bonds aligned with stocks uptrending presents a potentially unsustainable concurrent rise. A daily squeeze in the VIX is also cautionary with potential to fire short. Worth keeping an eye on into next week.

Even with any retracements, the consensus is leaning toward the long side.

We Saw: a grinding rally into expiration Friday — 

• Dow up four days straight, down almost 6% on the year
• Nasdaq up again, pushing toward 18% growth this year
• S&P 500 strong today and flat so far in 2020

We’re Watching: monthly options expiration plays —

• Caution signals from internals
• Non-limelight sectors, tickers showing potential
• Play into Friday in: NQ, EXAS, PETS, NFLX, MSFT

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