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Options Expiration Whipsaw Starts Up



February 15, 2011 – Comments (0)

After the lightest trading day of the year yesterday, the markets kicked it up a notch. They opened lower after retail sales came in below expectations. After an initial move higher from the gap down, the markets sold sharply as the Dollar gained. Then, as the lunch time volume kicked in, the markets moved back, heading towards the flat line. This is options expiration and Tuesday, Wednesday and Thursday could be very wild. The institutions will try and push stocks to certain price levels to have options expire worthless, thus capturing the premium of the option as pure profit. The SPDR S&P 500 ETF (NYSE:SPY) are trading at $133.04, -0.39 (-0.29%). This is close to the highs for the session.

One of the more amazing whipsaw swings in a stock can be seen on Exxon Mobil Corporation (NYSE:XOM).  The stock rose non stop yesterday, climbing over two-percent. Today, the stock has reversed, at one point negating the entire move higher yesterday. The games are definitely being played with XOM this week.

The leading group of the day is the financial sector. Within that sector, JPMorgan Chase & Co. (NYSE:JPM) is leading the charge. It is trading at $47.08, +0.54 (+1.16%). The agriculture stocks are among the weakest sectors on the day. Potash Corp./Saskatchewan (NYSE:POT) is trading at $184.02, -5.92 (-3.12%). These stocks have been the hottest of late on global food prices but are showing significant weakness today. They are due for a pull back.

This week is ruled by options expiration and the games that are played during. The markets are run by the institutions and they will do whatever they need to to make money. That includes whipping the markets to get options to expire worthless so they keep the full premiums.

Gareth Soloway

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