Triple Witching explanation wanted

K

Kevmeister

Can someone please explain how stocks are influenced on options expiration days. It seems that alot of the stocks I follow generally close around a strike price.

A lot of traders stay away on option expiration but it seems to me that this can be a playable strategy.

Anybody out there playing this?

Anybody successful playing this?

Kev
 
there are many reasons stocks may close around the strike price on expiration. some say manipulation but in reality it is probably market forces.

The deltas of ATM option can fluctuate wildly as expirations expire (i.e. 1 tick could decide if the option has a 0 delta -worthless, or a 100 delta - in the money). Those wanting to hedge those deltas may buy or sell stock to flatten their positions When the stock is at a strike price it basically neutralizes those that would buy or sell.

I think this does happen when there are large open positions. However, I would not be shocked if you look at the number of stocks that close on a strike price on any given day, that it doesn't vary too much from an expiration day.
 
"On options expiration day, stocks tend to be "sucked" to the nearest strike price with the greatest open interest. Now December is not a really big month in terms of options open interest, but it is something to keep an eye on given the thinness of the market."

from tony saliba: market wizard and a very large options trader
 
The best idea that I have is to sell the option yourself and let it expire worthless. That is sell a put if you want to own the stock or sell a call if you what to deliver the stock. I would not recommend naked plays, or selling options on stuff you don't want.

The other option is if you own a put that is getting sucked toward a strike is to buy a position in the underlying to hedge the deterioration of the put and profit from an upmove in the stock.
Of course there are risks with this strategy as well.

Regards,
 
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