2 Reasons Why This Choppy Stock Market Means Nothing To Smart Investors

The stock market has seen a return of volatility in September. Investors are scambling to figure out if the markets are going back to their all-time highs or collapsing lower. The simple answer? This is chop to take your hard earned money. It is mostly games by the institutions, being headed by top hedge fund managers that want to make money after coming back to work from vacation over the summer and an end to the 3rd quarter.

1. It Is Options Expiration Week

Understand that it is options expiration and the return to volatility gives institutions an easy way to take money from investors and pad their bottom line. Remember, the summer was dead so they are smelling blood (easy money) in the water. Let me explain how this works. Institutions sell a majority of options (puts/calls) to investors. Investors pay a premium to the seller in order to buy the option. For example, an investor pays $3 for an at the money MSFT call options.

Since it is at the money, they are paying a $3 premium. Obviously, it is in the best interest of the institution to have that option contract expire worthless, because they make the entire profit. The week of options expiration is the best week to create ups and downs in the stock market. Mainly because the big boys (institutions) sucker the small investor into making crazy options bets and paying higher premiums. REMEMBER, this is the last options expiration before the 3rd quarter comes to a close. These institutions are padding their quarterly earnings in a major way. Ultimately, until this week passes, don't make too much out of the ups and downs in the stock market.

2. The Federal Reserve Gives Their Statement Next Week

While the market is shooting up and down wildly over the last week, it ultimately means nothing. Why? Because next Wednesday investors will hear from the Federal Reserve on interest rates. This has been the whole reason the stock market has been worried, therefore it is likely all the ups/downs are junk until we actually get real word from the Federal Reserve. Don't get too worried or excited until next Wednesday at 2pm ET.

By Pro-Trader

Anthony Jackson

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