Option Expiration Week

Ah, yes…option expiry. Let the frustration begin! I love hearing stories about how people’s positions are “screwed over” by the option traders trying to pin a strike. Do pins really happen? Sure. As Adam Warner points out in his book, a good rule of thumb is the higher the volatility, the less likely the stock will pin.

We can add option pins to the list of other market quirks like hunting for stops and other shenanigans that occur. Consider such acts as risk and account for it in your trading. Playing pins is like any other form of market participation–there are winners and losers. If you sell a straddle based on max pain and take a loss then you better be prepared, both financially and psychologically, to accept the risk. I consider trading pins low probability trading and prefer not to participate. I do like watching certain names though, but refuse to risk my hard earned capital.

I guess the point of this post is to say that yes, pins occur. But that doesn’t mean all option traders are scum and market manipulators. The markets aren’t an easy place to make a living and perhaps pins are one of many reason why. However, if you blame your poor trading results on the actions of others then I’d say you need to check yourself.

Enjoy the expiry and watch the option stream on Stocktwits!