Market Before The Open - Monday 11 December

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Triple Witching x Santa

Friday is Triple Witching aka. options expiry for single stock options, index options, and index futures options. This weight of options expiry tends to create volatility to the up- or downside as dealers rebalance their hedges heading into and out of the end of the trading day Friday. The effects can usually be seen throughout the opex day itself and often into the following Monday & Tuesday. The seasonal Santa Rally trend is also in evidence. The two currents will re-inforce one another if investor positioning heading into opex is bearish (because dealers will have sold puts; hedged by shorting the underlying instruments; and will have to get back to delta neutral by covering their underlying shorts), and work against each other if investor positioning into opex is bullish (because dealers will have sold calls, hedged by being long the underlying, and will have to sell the underlyings to get back to delta neutral after opex).

As usual it's best to let price action itself tell you what is happening with price. But it pays to be prepared when market events are en route. So - we anticipate some volatility this week.

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