A Fiscal Cliff Preview?
Did the market just give us a hint of what to expect upon a fiscal cliff resolution? It certainly feels that way. A bounce, a big bounce and a big move higher would be the expectation. There's a catch, though. (Isn't there always?) What level will the bounce come from? Today's action did nothing to change the trend; it is still lower. We'll all spend the weekend trying to figure out whether Apple (AAPL) actually bottomed today or not, but we are returning to a light-volume, holiday-shortened week next week. Then factor in that today was options expiration and I think you will find plenty of folks who just want to stroll into next week without much to worry about whether they are currently long or short. I don't see politicians coming to any sort of agreement or compromise in front of the holiday, so we will be left to rumors and innuendos in a very light-volume environment. Although one would expect little movement next week, that is the type of setup that could whipsaw you just enough to stop out of positions only to see them return to where they started by the end of trading on Wednesday.
I don't plan to hold any of the earnings positions past today. Aruba Networks (ARUN) is going to be wiped out while Dell (DELL) may close the day near $9, which should allow me to escape that trade breakeven or close to it. The Sears Holding (SHLD) puts were the big winners, now sitting some $9 in the money from a $1.30 purchase price. My hedge/exit was done with $47.92 calls, so I was able to enjoy a bit more upside; however, I sacrificed $1.70 for that, so all-in was $3 on the $9 rather than $1.30. Still, it is time to exit these as well....168 more words left in this article. To read them, just click below and try Real Money FREE for 14 days.
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