Whipsaw Wednesday, Expect The Unexpected
Traders and investors must remember that this coming Friday is options expiration. It is not only options expiration, it is also quadruple witching options expiration. This is when options are scheduled to expire on stock index futures, stock index options, single stock futures, and stock options. Therefore, this week is likely to be even more volatile and turbulent leading up to the options expiration this coming Friday.
As many of you may know, this is a time when the large financial institutions will play a lot of games. Often the small retail options trader will get faked right out of their shoes during options expiration week. Just think about how many retail options traders bought puts before the close on Friday September 9, 2011 when the Dow Jones Industrial Average closed lower by over 300.00 points. Many of these same retail options traders closed out those put positions at a lose this week as the markets reversed higher since Monday. Traders and investors must remember that these institutions have enough capital on hand to shake out the small retail traders that are holding near term options contracts. This game of big fish eats little fish takes place each and every month before options expiration.
Some leading stocks that are often very volatile before options expiration include Netflix Inc.(NASDAQ:NFLX), VMWare Inc.(NYSE:VMW), Amazon.com Inc.(NASDAQ:AMZN), and Apple Inc.(NASDAQ:AAPL). Traders should expect the unexpected especially in these stocks during this trading week.