Day trading options on Friday "expiration day "

Discussion in 'Options' started by semsem24, Mar 15, 2013.

  1. semsem24


    I want to get your input on this video on this link

    This is Karson Keith where he reocmends buying options on aapl, goog or ibm on expiration day .
    for example
    aapl opens up close to 440 , so he recmoneds selling 1 call at
    335 and buying 2 calls at 445 and try to get a credit of 1.5 - $ 2.00 for that . He recomends waiting for an hour or two and close the position for a profit if the underlying moves 2 or $ 3.00 in any direction.

    I am wondering if any body has tried this or came across any info on this or have any advice


  2. Twinsen


    You may lose money if it does not move strong enough and sometimes it does not move much. I tried to buy straddles on Friday (they are cheap atm) so it may be dangerous when it's not moving. Better buy 2 calls at 440. You probably will not get a big credit if any, but will have narrower break even points.

    I was trying such strategy (backspread) one time, but I opened it on Thursday afternoon. And I was doing on both sides - put and call. I am attaching a screenshot of Friday morning about 10-15 minutes after open, after that later most positions started losing money. All those positions are backspreads on puts and calls.
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  3. Twinsen


    Second screen is afternoon
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  4. rwk


    I don't open option trades on expiration day, because I believe I have better plays. But I agree with Twinsen that in general there are no risk-free option trades. I found Augen's book useful for getting me over my sqeemishness about holding options to expiration:

    It's hard to backtest option strategies well, so I recommend keeping your commitments small until you get a feel for the action and risk.
  5. option expiration day is the best trading session.
    first, there is almost no premium/time value effect (almost traded with sysnic with the underlying). you can trade options like trading the underlying.

    second, the larverge is the best. since premium/time value almost removed, one slight move will be magnified into big move. for exapmle, if you buy 440call, on monday, maybe 3bucks, but at friday, almost on the money, maybe just under 1bucks in the opening, aapl shoot to 445, yoir 440 call gained almost 500%, but your monday option call may just gain 80%.

    the best time to day options!
  6. semsem24


    Great responses and thanks for the book recommendation .
    for trader 198 , I fully agree with the potential for trading options on expiration day .
    Having said that , the risk is huge and that is clear where twinsen tried the straddles and strangles on thursday evening and he mentioned how hard it is to make money and back test .
    Now my question for trader 198 and everyone elth who wants to chime in ..
    What trades do you do on Friday , risk managment and exit techniques to lock in your profit for trading options on Friday .
    please share and I truely appreciate the information
  7. Twinsen


    rwk, please tell what are the better combinations you prefer for longer term trading?

    semsem, if you know how to predict market move correctly you can buy atm put or call or sell itm credit spread, for example if AAPL stays at 448 and you think it will go down you may sell 445 call, buy 450 call. If you cannot guess correct market move then buy atm strangle or straddle. But if market stays flat you will lose money! You will watch they disappear in real time. Paper trade and you will see how it works, but do not think if it worked today it would work the next time as good.

    Also ask your broker about trading the expiration day. If I am not mistaken Tradeking has some problems with it (does not allow by defaul or something like this, I do not remember). Interactivebrokers will close your open positions any time on the expiration day if you do not have enough cash to hold stock on being assigned/exercised.
  8. i mean normally you should have a precise entry/exit w/ loss/exit w/ profit defined ahead of time but you really need it here. just have a system (if it's trend trending like enter if price above 50 MA on 5 or 1 min chart and exit 1 or 2 atr below that and exit w/ profit like half of position at double and trail other half).

    you have to be very disciplined in exiting w/ both profits and losses. a double can turn into a 100% loss for an atm option in minutes.
  9. I just use the simplest strategy: buy call or puts.
    or you can call me directional trader. no direction no trading to me.

    friday options can be treated as the underlying without time value and premium. so it is a little bit easier.

    I buy as the the market opens, often the first guy. I monitor option quote in one computer, and I use another computer to watch the underlyings' intra-day chart, figure out intra-day key level, trending direction, trending type, reversal, and use this chart to get out at pre-determined price level, very technical.
    lock profit very agressively, decisively, will not play "wait for the last bird to come in" game, if I aim for 200% gain, I get out with no hesistation when it hits 200%. if it kissed 200% gain, and quickly retraced to 100%, even 30%, I get out as soon as possible. so I write target limit order just after I enter. I do not want to miss those kiss.

    if I was wrong at the entry, and I realized I made mistake, I got out without any hesitation. immeadiately buy another direction options.

    day trading options are very nerve-reck, so beforehand planning or preparing is very critical. the greatest trades or the easiest trades are in those strong trending sessions. get in at the opening, out at closing, other time, just relax.