Black Monday Crash Re-Visited

Friday was the 20th anniversary of the 1987 Black Monday market crash.

Heavy equipment maker Caterpillar (CAT) lowered its 2007 outlook based on slow U.S. economic growth. 3M, a diversified industrial firm, said it has to lower prices on some products due to competitive pressures.

These two DJIA components weighed heavily on the market, pulling the large cap indexes down by about 2.5%. The small-caps fared worse, shedding about 3% of their value.

Volume was higher, fueled in party by the fact that options were expiring. Yields on Treasuries slid, indicating that investors were selling their equity positions and seeking the "safety" of government securities.

There is little doubt that investors are jittery and it would not be surprising if we continue to see volatility in this market. I remain bullish on the market, but do suggest that you keep a close eye on any positions showing weakness.

My portfolio mains delta and theta positive. Those positive deltas have increased over the last week, but I am not tamping them down with new negative delta positions. My expectation is tht we will see the market trade higher, and as it does, I will then look to add reign in those positive delta positions.

The bottom line is that as long as I am bullish, I am willing to ride these corrections out.

Trade well!

Christopher Smith
TheOptionClub.com