You had to marvel at the muted, insidious perfection of yesterday's expiration-day dirge ' a jazz funeral of sorts for near-the-money November puts and calls. Rick's Picks subscribers needed just a small rally in IBM to make our November 95 calls pay off at 4-to-1, but the stock's canny handlers would have none of it. Big Blue shares instead contrived to flatline for nearly the entire day, with most of the snooze-fest occurring within a 25-cent band and virtually all of it a dollar below the strike price we had bet would get blown to smithereens. (Click on image to enlarge) Traders are wont to ascribe such deathly price action as we saw yesterday to a perfidious, all-seeing 'They,' a cabal of malefactors who limo home to Rye and Short Hills each day, chortling over their success at having maneuvered yet one more expiration day to their certain advantage. But there really is no Mr. Market, only ourselves, to blame. To paraphrase Pogo's famous response to Porky, '�we have met the enemy and he is us.' Indeed, a coma-inducing expiration day like the one that just occurred tells us only that most traders must have been expecting the opposite ' that is, either a violent short-squeeze or a collapse commensurate with the scary, ongoing implosion of the U.S. economy. We had bet it both ways, straddling IBM calls with some January QQQ puts. The latter may come in handy, as I've already mentioned here, and you don't have to be a wild-eyed speculator to believe that a portfolio these days should not be without at least a small inventory of put options on a stock or index that could conceivably fall apart someday. A Day of Reckoning It seems all but certain not only that this will occur, but that
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