{"id":12365,"date":"2011-06-17T12:56:56","date_gmt":"2011-06-17T16:56:56","guid":{"rendered":"http:\/\/www.smbtraining.com\/blog\/?p=12365"},"modified":"2023-04-18T13:51:18","modified_gmt":"2023-04-18T17:51:18","slug":"expiration-friday-pinning-trades-in-goog-and-aapl","status":"publish","type":"post","link":"https:\/\/www.smbtraining.com\/blog\/expiration-friday-pinning-trades-in-goog-and-aapl","title":{"rendered":"Expiration Friday Pinning Trades in GOOG and AAPL"},"content":{"rendered":"

\"\"<\/a><\/p>\n

The great thing about options is that they can be played in so many different interesting and creative ways.<\/p>\n

A case in point:\u00a0 There is a cult of options traders who focus on the last two days of the monthly options expiration cycle.\u00a0 These traders focus, separately, on\u00a0 expiration Thursday trades and expiration Friday “pinning” trades.\u00a0 The premise for each of these trades is different.<\/p>\n

Expiration Thursday trades focus on the tendency of options to bleed implied volatility in a fairly dramatic fashion on expiration Thursday. Vega negative trades are usually chosen to take advantage of this phenomenon.<\/p>\n

Expiration Friday “pinning” trades focus on the tendency of stocks to “pin” to a certain price on options expiration day for certain technical reasons which may have something to do with the amount of open interest at various strikes. There are lots of\u00a0 ways to play this\u00a0 phenomenon\u00a0 utilizing options including the outright purchase of puts or calls , the buying or selling of vertical spreads and\u00a0 the structuring of at-the-money, theta positive\u00a0 structures\u00a0 centered at the predicted pinning price such as butterflies.<\/p>\n

On Tuesday, Craig Wassenberg will be presenting his approach to these trades to our Options Tribe community. This morning, Craig and I exchanged emails on his current thinking about GOOG and AAPL.\u00a0\u00a0 Craig is an extremely thoughtful and careful trader in an arena which is very technical and potentially dangerous. He’ been keeping me updated\u00a0 this morning as to his\u00a0 thoughts:<\/p>\n

First thing this morning<\/strong>: “ might be a good pinning day in spite of all the recent upheaval. It\u2019ll be interesting to see what the price charts reveal over the next hour. AAPL and GOOG have nearly identical open interest\u00a0 patterns.<\/em>”<\/p>\n

An hour later<\/strong>:\u00a0 “My strategy now is\u00a0 to wait for the pins to declare themselves. I\u2019m now guessing AAPL at 320 and GOOG 490, but could be 325 and 500 respectively… some good set up aspects: the market is quiet and both GOOG and AAPL have both shown some independent behavior relative to the market.”<\/em><\/p>\n

Yet later<\/strong>: “This is a perverse situation. I expect both AAPL and GOOG to head for a strike price. Question is which ones? Migrations to a pin usually happen fast with big candles. I might go in early if\/when I see that happen.<\/em>Good news is option prices will likely hold up until pretty late in the session given the patterns of late moves we\u2019ve seen this week.<\/em> Watching and waiting….”<\/em><\/p>\n

Moments before I posted this blog entry: <\/strong>AAPL Looks Like It’s Headed to $320…Trade seems fairly safe at this point to me<\/em>.<\/p>\n

So many of SMB’s fundamentals are evident in Craig’s approach to Friday pinning trades: patience, discipline, hard work and a detailed plan. Whatever Craig ends up doing, including a valid decision to do nothing, will be dictated not by emotion or greed, but by the principles of what we call “One Good Trade” at SMB.\u00a0 I’m anxious to find out what Craig ultimately decides to do. Stay tuned.<\/p>\n

Update:<\/strong> The recording of this webinar is available on the Options Tribe Premium<\/a> archive.<\/p>\n

Have a great weekend everybody!<\/p>\n

Seth Freudberg<\/p>\n

Director, SMB Options Training Program<\/p>\n

The SMB Options Training Program<\/a> is a program designed for novice and intermediate level options traders who are seeking an intensive training process to learn how to trade options spreads for monthly income. For more information on this program contact Seth Freudberg: sfreudberg@smbcap.com<\/a>.<\/em><\/p>\n

 <\/p>\n

Risk Disclaimer<\/a><\/div>\n","protected":false},"excerpt":{"rendered":"

The great thing about options is that they can be played in so many different interesting and creative ways. 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