{"id":7189,"date":"2010-09-19T11:20:31","date_gmt":"2010-09-19T15:20:31","guid":{"rendered":"http:\/\/www.smbtraining.com\/blog\/?p=7189"},"modified":"2010-09-19T11:32:09","modified_gmt":"2010-09-19T15:32:09","slug":"the-pin-play","status":"publish","type":"post","link":"https:\/\/www.smbtraining.com\/blog\/the-pin-play","title":{"rendered":"The &#8220;Pin Play&#8221;"},"content":{"rendered":"<p>Expiration day can have a strong effect on a stock. This is known as  \u201cpinning the stock\u201d.\u00a0 A stock that is stuck at strike on expiration day  when the general market is moving will move away from strike after  expiration day.\u00a0 Stocks with high open interest at a particular strike  usually get pinned near the strike on expiration day.\u00a0 This occurs  because both the put and call holders (both long and short options)  fight back and forth.\u00a0 In the end nobody ends up winning and the stock  ends near the strike.<\/p>\n<p>The question is how does one profit from the pin?\u00a0 The likelihood the  stock moves away the day after expiration is high.\u00a0 The extra weight  due to expiration is lifted.\u00a0 Let\u2019s take two stocks from last months  (August) expiration.\u00a0 AAPL was stuck near the strike while other tech  stocks were higher.\u00a0 The stock basically sat on the 250 strike during  expiration day.\u00a0\u00a0 The whole days range happened the first hour.\u00a0 Then on  Monday the stock tried to play catch-up and gapped to the $251 level  and spiked to $252 which was support the day before expiration.\u00a0 After  the pop the stock sank right thru the 250 strike and trended lower the  rest of the day.<\/p>\n<p><a href=\"http:\/\/www.smbtraining.com\/blog\/wp-content\/uploads\/2010\/09\/aaple-pin-august-2010.png\"><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter size-medium wp-image-7194\" title=\"aaple pin august 2010\" src=\"http:\/\/www.smbtraining.com\/blog\/wp-content\/uploads\/2010\/09\/aaple-pin-august-2010-300x210.png\" alt=\"\" width=\"300\" height=\"210\" srcset=\"\/\/www.smbtraining.com\/blog\/wp-content\/uploads\/2010\/09\/aaple-pin-august-2010-300x210.png 300w, \/\/www.smbtraining.com\/blog\/wp-content\/uploads\/2010\/09\/aaple-pin-august-2010.png 500w\" sizes=\"auto, (max-width: 300px) 100vw, 300px\" \/><\/a><\/p>\n<p>The chart below of DE is similar to AAPL.\u00a0 The stock closed the day  before expiration day a bit above the 65 strike ($65.71).\u00a0 It spent most  of the day above the strike and couldn\u2019t mount any downside below $65.\u00a0  The next day after all the options went away the stock broke $65 and  kept dropping the rest of the day.\u00a0 Notice the volatility on expiration  day in DE was very low.<\/p>\n<p><a href=\"http:\/\/www.smbtraining.com\/blog\/wp-content\/uploads\/2010\/09\/de-pin-august-2010.png\"><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter size-medium wp-image-7195\" title=\"de pin august 2010\" src=\"http:\/\/www.smbtraining.com\/blog\/wp-content\/uploads\/2010\/09\/de-pin-august-2010-300x210.png\" alt=\"\" width=\"300\" height=\"210\" srcset=\"\/\/www.smbtraining.com\/blog\/wp-content\/uploads\/2010\/09\/de-pin-august-2010-300x210.png 300w, \/\/www.smbtraining.com\/blog\/wp-content\/uploads\/2010\/09\/de-pin-august-2010.png 500w\" sizes=\"auto, (max-width: 300px) 100vw, 300px\" \/><\/a><\/p>\n<p>So what can we take away with the effect of expiration day on a  stock\u2019s movement the following Monday?\u00a0 We know the \u201cpin effect \u201cis now  lifted giving the chance of a move through the strike price which didn\u2019t  happen on Friday a higher likelihood.\u00a0 Not all stocks are affected by  the strike price on expiration day.\u00a0 The two examples above it was very  clear what expiration day had on their movement both on and after that  Friday.<\/p>\n<p>A daily stock trader can use expiration day to their benefit.\u00a0 In the  case of DE stay long the stock at $65.10 with a stop below 64.80.\u00a0 The  stock was trending down the day before expiration but the 65 strike  became a floor.\u00a0 If the stock would have blown through $65 early on  expiration day then shorting the stock and using $65.20 would be  recommended.<\/p>\n<p>What stocks are best for using this technique?\u00a0 There are three main  ingredients- open interest at strike, daily volume at strike and the  stocks average daily volume.\u00a0 Don\u2019t forget on expiration day the volume  will be distorted.\u00a0 Part of the reason of higher volume is all the  option volume creating stock volume near the strike.<\/p>\n<p>GOOG is a good example of how the option volume on expiration day and  open interest can force the stock to strike.\u00a0 It\u2019s amazing how a $500  stock can get pinned so many times over the years.\u00a0 The main reason is  daily volume is 2-4 million but option volume at a certain strike  creates twice or three times the normal volume leaving a pin a likely  scenario.<\/p>\n<p>Trading on the floor so much money has been left on the table from  getting pinned on expiration day only to have the stock blow through the  strike the following week.\u00a0 Use expiration day for trading stocks which  are near strike and use the following Monday to trade the same stocks  like the strike price never existed and in the long run this will make  for a better trader.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Expiration day can have a strong effect on a stock. This is known as \u201cpinning the stock\u201d.\u00a0 A stock that is stuck at strike on expiration day when the general market is moving will move away from strike after expiration day.\u00a0 Stocks with high open interest at a particular strike usually get pinned near the strike on expiration day.\u00a0 This &#8230; <a href=\"https:\/\/www.smbtraining.com\/blog\/the-pin-play\" class=\"more-link\">Read More<\/a><\/p>\n","protected":false},"author":290,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1402,1378],"tags":[],"class_list":["post-7189","post","type-post","status-publish","format-standard","hentry","category-options-education","category-todds-blogs","no-post-thumbnail"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v26.1.1 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>The &quot;Pin Play&quot; | SMB Training<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.smbtraining.com\/blog\/the-pin-play\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"The &quot;Pin Play&quot; | SMB Training\" \/>\n<meta property=\"og:description\" content=\"Expiration day can have a strong effect on a stock. This is known as \u201cpinning the stock\u201d.\u00a0 A stock that is stuck at strike on expiration day when the general market is moving will move away from strike after expiration day.\u00a0 Stocks with high open interest at a particular strike usually get pinned near the strike on expiration day.\u00a0 This ... 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