The holiday season is upon us. Thursday, November 28, is Thanksgiving and the first day of Hanukkah. For some, this is a stress-less time of family, food, and fun. Though, being from a rather large Italian family there is no such thing as a stress-less holiday. For traders, there is perhaps an added stress to the season due to the commodity markets now being open on holidays.
On Wednesday, November 27, the markets are open regular hours. On Thursday, November 28, the pit-traded contracts are closed. However, the Globex Interest Rates, FX products, Equity Indexes, Energies, Metals, and Ethanol electronic markets are open limited hours. Same goes for the Liffe Equities and Metals, and the ICE Financials, Equities, and Energies. On Friday, November 29, various pit-traded and electronic markets open in the morning and most close early for the day.
Uncommon opening and closing trading hours may lead to gaps in market prices. Lighter global trading participants may lead to wider than normal market ranges, especially if stop losses are run. Fills on larger-sized open orders may lead to volatility in both futures and commodity option contracts.
Traders may find they have limited access to a broker or trading platform during the holiday. Here are some pre-holiday steps to take that I have gleaned as a broker for the past nine holiday seasons:
With the potential for a market price gap or a stop loss run, liquidate a futures position if a stop loss is near the current market price. This may avoid a rejected stop loss order in the case of a market price gap or receiving a larger than normal slippage on a fill price. Unless it fits the original trading plan, don’t widen a stop loss and add risk to avoid the potential holiday occurrences.
You may not want to initiate a new futures position unless the stop loss is quite the distance from the current market price for the reasons above.
If long an option contract, place a target order to liquidate the position. You may be able to exit a position at your target price if there happens to be a wider than normal trading range or increased volatility.
If “writing” or selling an option contract during the holiday, place the entry order at a better (higher) price to collect additional premium if there is an increase in volatility. As always, if short an option contract, use a long option position to protect against unlimited risk. This is especially important during holidays with potentially increased volatility and potentially less access to the markets.
If a trading opportunity presents itself during the holiday season, do not shy away from a potential profitable trade. Just make sure to protect trading positions and capital vigilantly during such times. This way, you won’t end up the turkey on Thanksgiving.
STOP ORDERS DO NOT NECESSARILY LIMIT YOUR LOSS TO THE STOP PRICE BECAUSE STOP ORDERS, IF THE PRICE IS HIT, BECOME MARKET ORDERS AND, DEPENDING ON MARKET CONDITIONS, THE ACTUAL FILL PRICE CAN BE DIFFERENT FROM THE STOP PRICE. IF A MARKET REACHED ITS DAILY PRICE FLUCTUATION LIMIT, A "LIMIT MOVE", IT MAY BE IMPOSSIBLE TO EXECUTE A STOP LOSS ORDER.
This material is conveyed as a solicitation for entering into a derivatives transaction.
This material has been prepared by a Daniels Trading broker who provides research market commentary and trade recommendations as part of his or her solicitation for accounts and solicitation for trades; however, Daniels Trading does not maintain a research department as defined in CFTC Rule 1.71. Daniels Trading, its principals, brokers and employees may trade in derivatives for their own accounts or for the accounts of others. Due to various factors (such as risk tolerance, margin requirements, trading objectives, short term vs. long term strategies, technical vs. fundamental market analysis, and other factors) such trading may result in the initiation or liquidation of positions that are different from or contrary to the opinions and recommendations contained therein.
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