Editor's Note:

The stock market is oscillating sideways as investors wait for October options to expire after Friday and while they wait for the EU summit this weekend. Investors are expecting some sort of deal that will limit the damage from a Greek default and protect the EU banking system from collapse (from said default). There is no guarantee of a deal but there are certainly growing expectations for one.

This makes for a dangerous trading environment especially if you only go long or short stocks (or ETFs). If you bet the wrong way and the news this weekend goes against you then Monday could be very painful. Yes, stop losses can mitigate your risk but the equity you're trading can gap open several points the wrong way and exacerbate your loss.

The Premier Investor newsletter currently does not have any bearish positions because for the most part stocks have been trending higher in the month of October. The rally has stalled recently as investors look for some sort of rescue in Europe. We are not suggesting any new trades tonight but readers may want to consider some sort of hedge. If you trade options then consider buying some puts either on your individual positions or on the major indices before the closing bell on Friday.

Keep in mind that if there is a deal and stocks rally on Monday then your puts are going to drop in value. It's an insurance policy in case things go really poorly but you don't get your insurance premium back if there isn't a disaster (although if you're quick you might be able to sell them fast and reduce your expense if stocks rally on Monday morning).

Option traders may also want to consider some sort of market neutral strategy like a straddle or a strangle. That way you do not care what direction the market moves as long as it moves big.

Summary: No new positions for Premier tonight. I would expect a quiet, sideways market tomorrow but you never know. There could be a new rumor out of Europe to move stocks on Friday.