Black swans
A black swan event in an unpredictable or unforeseen crisis that causes extreme consequences. The possibility of such an event is a major market risk. Today’s attack in Afghanistan was potentially such an event. I say potentially because in a bygone era, the death of so many people, our servicemen in particular, would have raised alarm bells and the market would have sold off significantly. Today, there was less than a 1% drop, and it was not clear how much of that may simply be due to worry over Jackson Hole and Powell’s speech tomorrow morning as regards tapering. It seems like the market, like so many of us, have almost become indifferent to tragedy and violence. It is almost sad to see the market reaction be so muted. On September 11th, 2008 the market (when it opened) was down over 20%. Given today was only the first day, it may drop more, depending on how Biden reacts to the crisis. Just an example of how political, as well as economic, events can have a significant impact on the stock market.
A true black swan event is generally a buying opportunity, hard as it can be to wade into the market when there is so much uncertainty. It is a matter of faith and trust that things will get eventually get better. The market has almost always generously rewarded people that can look beyond the event itself. Just letting you know so if this gets worse, you may want to think about buying.
Market Today: It was a slow day as the market opened down. I did have a Salesforce (CRM) put that I closed profitably. They reported earnings after the market closed last night so I wrote a put before they reported. When they stock popped on good earnings news, the premium for the put dropped and I made money. I write a lot of earnings specific puts during earning season. However, I only do this when I am pretty sure it will be a good report. I also thought Coty would have good report, but I generally only gamble on one or two stocks before earnings (Coty popped even more so I might have done even better). To see who is reporting earning on any give day, check out https://www.nasdaq.com/market-activity/earnings. Given the market sold off in the afternoon on the Afghan news, I only did about half the trades I did yesterday and in the afternoon closed mostly calls rather than puts. Waiting to see whether the down swing continues tomorrow.