Today, is options expiration Friday. This trading week is a time when the markets will trade all over the map. There will usually be a lot of game playing in many of the popular stocks by the institutional traders. Often leading stocks such as Apple Inc (Nasdaq: AAPL), Green Mountain Coffee Roasters Inc (Nasdaq: GMCR), Netflix Inc (Nasdaq: NFLX), First Solar Inc (Nasdaq: FSLR) and others will be extremely volatile throughout the week.
Remember, this is the time to be a contrarian trader. If every investor in the world is buying puts (option contract betting that the stock declines) on a stock such as Amazon.com Inc (Nasdaq: AMZN) the institutional traders will usually move the stock higher in order to shake out the small retail options trader.
Most novice retail options traders will generally try to make money from the increase in the premium paid and never actually exercise the option. Another mistake that the small retail option trader will make is that they will usually buy the near term expiring contract because it is cheap. Believe me, it is cheap for a reason and that is because the clock is ticking and the option is losing intrinsic value by the minute. When trading options it is best to give yourself some time, buy the next expiration date.
This options expiration volatility and game playing will take place each and every month. Inexperienced retail options traders will usually become the victims of the large institutional traders during the week of options expiration every month. This is the real shark week and everyone should know what to expect next month.
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