OAP 070: How To Manage Trades During Options Expiration Week – Close Or Roll?
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Often "expiration" of options implies something undesirable in the end of an option's life, but the final week before the expiration actually creates some unique opportunities for short-term traders.
Read on below for a couple of my favorite expiration strategies. Buy as stock moves from out to in the money. The greatest leverage point for an option's gain or loss occurs as it moves through a key strke price. We sent this call as a buy at 0. Strategically you want to see the stock hold above the strike price, in this case 40, in order to capitalize on the positive leverage of the calls as the stock moves further into the options expiration week trading.
We're still holding the other half of the Taser call at what we consider a "free trade" as we've already captured back our initial risk premium by selling half at a double or more. Buy as stock is already nicely in the money. A way to further manage the risk of time decay is to buy the option that is 1 strike deeper in the money in order to have a safer selection in case the stock fails to move much either way.
For example, when Apple Computer was around 67, we decided that the safer choice was the Feb. Sure, if the stock goes quickly to 70, the out of the money call will get better leverage, for for a slow move to 68 or Time decay will accelerate as you get closer to the expiration, but the further an option goes into the money in the expiration week, the more the time decay will literally go to virtually nothing anyway. So if a 65 strike call option is trading at 3. Certainly these expiration trades must be managed carefully as a flip back down can still lead to losses, though as a trade options expiration week trading from in the money to at the money, the option will options expiration week trading up some time value to salvage something if the trade turns against you.
But all in all, I love the final week of options expiration to take advantage of options expiration week trading leverage points for short-term active trading. Price Headley is the founder and chief analyst of BigTrends. Add to 'Articles to Read'. Buy as stock moves from out to in the money The greatest leverage point for an option's gain or loss occurs as it moves through a key strke price.
Buy as stock is already nicely in the money A way to further manage the risk options expiration week trading time decay is to buy the option options expiration week trading is 1 strike deeper in the money in order to have a safer selection in case the stock fails to move much either way.
It should not be options expiration week trading that the methods, techniques, or indicators presented on these websites will be profitable or that they will not result in losses. Past results are not necessarily indicative of future results. Examples presented on these websites are for educational purposes only. These set-ups are not solicitations of any order to buy or sell. There is a high degree of risk in trading.
McMillan No popular authors found. Free Festival of Traders Videos. The Best Expiration Week Strategies.