• Skip to primary navigation
  • Skip to main content
  • Skip to primary sidebar

Investing With Options

Become a Better Options Trader

Weekly Options and Pinning Effects

August 2, 2010 By Steven Place

If you haven't yet noticed, weekly options have been released on a bucket of names, and it's changing how the stocks trade at the end of the week as well as the options expiration cycle. My dream (see here) was fulfilled when weeklies were opened up for a variety of names, and it appears that new listings open up every few weeks. You can see the specs here as well as a full listing of options here (XLS).

So how does this change the options pinning effect at options expiration? To refresh your memory, "pinning" is an effect where the supply and demand of a stock oscillates around a particular price point that is associated with an option strike price that has very high open interest relative to the volume of shares traded.

Weekly options are providing short term option traders a different vehicle than regular monthlies; instead of waiting for the near term gamma and theta characteristics to come through on monthly options, you can now play with weekly "hand grenades". For instance, the GS 150 weekly call last friday traded from .32 to around 3.50-- not bad for a daily percentage! So there has been widespread adoption of some names, as seen in the daily trading volume and OI on the board.

This in turn will reduce the overall open interest on the monthlies. Because of this, pinning effects will be less prevalent during options expiration. This, in my opinion, is a good thing because now the true supply and demand of a stock will be realized more quickly, and could potentially reduce weekend "gappiness" of a name.

Of course, there is a tradeoff-- we are starting to see pinning action on weekly options. Notice how AAPL traded around 260 over the past 2 weeks. While it didn't actually "pin." this price point was a strong support and resistance level, and I believe it was reinforced by the vested interest many traders had around the 260 strike on AAPL. I've seen similar action in GOOG and AMZN due to the introduction of weekly options.

These instruments are very new, and I'm expecting to see further adoption through the end of the year. There are trading strategies available now that should definitely be worth your consideration if you do trade these, but that is for another time.

Free Iron Condor Toolkit

Want to learn how to beat the market without needing to time the market?

Do you desire a way to earn aggressive returns without staring at screens for six hours a day?

Get this free iron condor toolkit that will show you how this trade works in the real world.

Download the Toolkit Here

Primary Sidebar

Resources


Option Trading Basics
Income Trading

Recent Posts

  • How I Profited From A One-Day Pullback In Tech Stocks
  • 3 Option Trades for CCIV
  • Time to Call a Top in Solar
  • Winning In Both Directions
  • Big Water, Small Hose

Get The Options Trading Training You Need.

See All IWO Trading Courses!

© 2017 InvestingWithOptions | Disclaimer | Financial Disclaimer | Terms and Conditions | Privacy Policy