I hope you had a great Thanksgiving and are enjoying a second or third round of leftover pie!
I’m keeping this one light so you can get back to relaxing (or Black Friday shopping) with your family.
And the markets are keeping it light, too—for good reason…
Trading volume during Thanksgiving week tends to be a ghost town. Most traders are stepping away completely or treating today’s half-day like a full day off.
So, whether you’re planning to trade or stepping away until Monday, I wanted to say: Thank you.
Thank you for being part of this community and sharing your questions, your stories, your feedback, and your successes with me. I couldn’t ask for more this holiday weekend.
Now let’s get to the Mailbag…
Q: Tom, I hear that trading volume is going to be lower this week because of Thanksgiving… but what does that really mean for options traders like us?
Great question! And you probably heard that right here at Patterns & Profits because we talked about it on Monday.
When volume drops during the holidays, the market behaves differently. And while most people just see “quieter days,” we know there are three key things that tend to happen when trading activity thins out:
1. Liquidity dries up
Fewer traders = fewer contracts changing hands. And it’s not just that fewer people are participating… it’s that the traders who are around usually aren’t trading with size.
That can lead to:
- Wider bid–ask spreads
- Less aggressive market maker quotes
- Increased slippage risk
This is why limit orders matter more than ever. They help you avoid overpaying to enter or getting shortchanged on the way out.
2. Volatility tends to cool off
Now it doesn’t always drop, but with fewer market participants and fewer catalysts, both realized and implied volatility (IV) usually drift lower.
That means:
- Options sellers (like those using credit spreads) often benefit as IV decays.
- Options buyers may notice slower price movement and faster time decay (theta).
So depending on your strategy, light volume can either help or hurt.
3. Price moves can be more erratic
As we’ve discussed, just because the market’s quiet doesn’t mean it’s calm. Low volume can actually lead to choppy or exaggerated intraday moves.
That happens because:
- A single large order can move the stock more than usual
- Option chains may gap between trades
- Stops can get triggered unexpectedly
In other words, the market can act “jumpy” even when it’s not busy.
And in the coming days, we’ll talk about what happens when this Thanksgiving lull ends—and which stocks and exchange-traded funds (ETFs) could deliver the biggest gifts next month.
Talk soon…
Tom Gentile
America’s Pattern Trader
