By Sellputs
As you may or may not know this past Friday was Opex, we saw quite a bit of movement across the board. The result of a "fun" expiration is usually a very slow following trading day with options barely moving. The culprit for the lack of movement is lots of time value (theta) build into prices, you got the whole cycle ahead of you. i like to think the time premium built in is the, "anything can happen" extrinsic factor. Because of these factors options move very slowly unless you buy a better delta. Higher deltas though are more expensive, but the trade off is they will pay you more if the underlying gets a good move. If you buy a low delta say below a 50 you will be aggravated the underlying moves but you lose value in your calls or puts. A prime example of this today is buying lower deltas in CIEN X and APPL, they simply did not pay even though you had great underlying moves.
So much aggravation can be saved by just not day trading options the first day of the cycle, its always light volume. If i would have not traded today i would have saved TONS of transaction costs. I over traded trying to playing apple, which has MASSIVE sellers every single tick up near its 52 highs. For as much as this market is up every single say there are many many sellers resting on the top of many offers which are usually hidden and have size that will out gun you no matter what. Gap ups get sold, gaps down get bought.. Maybe they want this market flat??
As for next OPEX, remember the factors which make today a miserable day for options unless you are a premium seller. The flip side is those who sell premium, like mysel, can really do well today, though much riskier of a strategy. Lets see where AAPL goes from here, the tablet coming up
Tuesday, January 19, 2010
Trading the first day of OPEX cycle, what to expect (SPY)
