Friday’s results: S&P 500 up 11.33 points (0.90%) to 1,265.33

A look back on yesterday’s market

Santa Claus may exist after all, at least when it comes to the stock market’s traditional year end rally.  The market opened slightly positive yesterday and never looked back, gaining steadily through the first three hours, before settling into a tight trading range for most of the day, until posting a late day surge in the final hour.  This marked the fourth day in a row where the S&P showed positive gains, and it put the index in positive territory for the year.  With one more trading week left, it may be able to squeak out a positive gain, despite other international indexes showing double digit declines.

Like in the past few weeks, time value premiums quickly declined, and by midday, you could only find profitable trades in options that were one strike price away from being in the money (ignoring calls and puts that were already in the money).  With such a low premium environment, you weren’t able to have much of a safety buffer for your expiration-day trades, though, if you went with the trend and only put on bullish trades, you should have ended up doing well.  This should be another signal that you should avoid fighting the trend.  If you had tried to call the top, you may have been in for an ugly surprise with the market’s rally towards days’ end.

Volume has been light for the past few weeks, which has been expected.  The VIX is flirting with 20, and the market may be getting complacent.  Stay vigilant, and good luck trading.

Happy Holidays!