Options and Oil Likely to Cause Volatility

Today is the third Friday of the month of December and that means options will expire.  That's likely to drive volatility in the markets.  On options expiration date, traders try to close out their positions with a profit, so they tend to make big purchases and that tends to drive stock prices up or down.

Our options positions, where we sold covered calls, are very likely to expire worthless today. That means we get to book the income and we don't have to sell our position, and then on Monday, we'll roll those options over and sell covered calls on our positions again.

Oil is likely to drive the markets as well, with news that Iran briefly moved its troops into Iraq and "seized an oil well."  The oil well was abandoned and Iranian troops withdrew after a few hours, but the news drove the price of oil up.  Concerns over oil may also cause some volatility in the markets today.

Naturally, the price of oil going up drove down the price of energy dependent stocks.  Airlines are likely to drop since the price of fuel is so critical to their profit margins, which have been negative lately.

There may also be some effect by the approach of Christmas next week.  Many traders will take some of the week of and that may cause them to close out their positions before they leave for the holiday.

In short, there are lots of factors that may drive volatility this trading day.  Enjoy the ride!