Zacks’ Voice of the People Highlights user inthemoneystocks: “Options Expiration Whipsaw” from the People & Picks community.
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Options Expiration Whipsaw
Tomorrow is options expiration and if you watched the action in the market this week it is nothing short of wild and volatile. This is the one week of the month when institutional money will shake the markets both ways in order to shake out the small retail options trader. Look at the action in stocks such as Apple Inc. (AAPL), NetFlix, Inc. (NFLX) and F5 Networks Inc. (FFIV) this week. These stocks have been all over the map this week trading in choppy fashion, and sometimes making violent swings in both directions.
Many investors will say that this action in the market is due to corporate earnings and that certainly is partially true. However, if you have followed us over the years you will have noticed that this type of action that we are seeing this week occurs every month during options week.
Just look at the intra-day swings today and any trader will have to admit the action is downright violent. It is important to remember that most retail options traders play options because they do not have the capital to actually purchase the stock. Therefore, these options traders usually look to settle their options before the actual expiration date for a premium gain or loss.
This is a week to trade only the best chart setups and protect profits when you get them with a stop in the money or at break-even. This is not the week to get cute and look for the home run trade. Money management is essential during this week when trading the market.
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In 2008, Zacks Investment Research launched PeopleAndPicks.com, a stock-picking website where members of the Zacks community can test their strategies and share ideas with other members. Each user is scored on the accuracy of his or her picks, and top users are rewarded with free products from Zacks. Registration is free. To learn more visit http://www.PeopleAndPicks.com
APPLE INC (AAPL): Free Stock Analysis Report
F5 NETWORKS INC (FFIV): Free Stock Analysis Report
NETFLIX INC (NFLX): Free Stock Analysis Report
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