Hey Income Traders,

Happy Memorial Day!

I hope you've been taking some time away from the screens and enjoying the real people around you. The market will be there Tuesday.

Before you get on with your day, a small "did you know" for the options crowd.

Most traders assume a three-day weekend means three days of theta decay (the daily price erosion that helps option sellers). Logical. Not how it actually works.

Market makers see the long weekend coming and crush implied vol (the market's pricing of expected future movement) into Friday's close. They do this to protect themselves from eating that theta on new option sales that day. I did this for over a decade.

Into a long weekend, I would crush my option prices late Thursday if the end of the week felt like it was going to be a paint-dry kind of finish.

So the decay gets pulled forward, not stretched across the weekend. That "free money" option sellers think they soaked up while playing paddleball on Saturday? Didn't happen.

Watch the open Tuesday morning. Vol typically pops right back up. That's why we often see a three-quarter point jump in the VIX (the market's main fear gauge) on Mondays even with stocks stable.

Enjoy the day.

Here for a good time… AND a long time,

Hans