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Options Expiration Week, Let The Games Begin



February 13, 2012 – Comments (0) | RELATED TICKERS: AAPL , NFLX , GMCR.DL

On February 17, 2012, it will be options expiration. The days leading up to the actual expiration will usually make for a lot of volatility in many of the popular and highly traded stocks. Traders and investors must understand that this week is notorious for rumors and game playing by the large financial institutions. You see, it is the institutions that move market indexes and stocks, it is not the individual at home with an online account that cause the popular stocks to rally or decline. This is a week when traders will see a lot of choppy action in stocks such as Apple Inc (NASDAQ:AAPL), Netflix Inc (NASDAQ:NFLX), Green Mountain Coffee Roasters inc (NASDAQ:GMCR), Inc (NASDAQ:AMZN) and many others popular equities.

If there are too many small retail options traders owning calls or puts at a popular strike price the large institutions will usually drive the price away from that level. It is important to remember that the large institutions have enough capital on hand to move stocks anyway that they see fit to make a profit. One of the worse mistakes that a small retail options trader can make is that they will buy options that are expiring at the end of the week. The institutions also know that the the small retail options trader will normally try and capture a gain in the premium paid and will rarely want to take possession of the stock. Most small retail options traders do not have the capital to buy the stock and the option trade is a cheaper way for them to play the market. Once again, the institutions know this and will capitalize by moving the stock away from the popular strike price. This game happens every month by the large institutions.

Nicholas Santiago

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