On Friday, as I do every 3rd Friday of the month, I frequently noted the phrase âoptions expiration todayâ¦carefulâ to anyone who asked me about scalp trades. Without going into an esoteric and ultimately boring explanation as to how options work, the 3rd Friday of the month are when all American-style current month options expire. An option holder must decide that particular day whether to exercise his/her option contracts or let them expire. Typically, weeks of options expiration tend to be somewhat more volatile than normal as options players position themselves for the expiration, but Fridays of expiration week tend to be relatively slow in normal trading markets because most of the options activity is taken care of by Friday morning. Thus, we get days like Friday where the pace of trading is oftentimes frenetic in the early going (on Friday, I for one had my first sizable position at 6:32AM), but did not trade much whatsoever from 12PM-3:30PM. Most traders who do not trade accordingly in that time schematic tend not to do well on the 3rd Fridays of the month. The other trick of the day is that big volume options contracts tend to occur at round numbers and the middles of said numbersâ¦usually, a stock priced at 30 tends to have big volume options contracts at 30, 27 ½, 25, 32 1/2 , and 35 as a for instance. When a stock approaches those numbers, the options players tend to keep the movement of the stocks in place. For instance, X traded within 1% of 30 most of the day, GE closed near 12.50, LVS hovered around 5, FSLR around 145, and so forth. Thus, it makes the game of breakouts and breakdowns via trading on momentum a bit harder as stocks tend to be a little heavier just above and below major strike prices. In short, the two lessons to impart here are: be aware that options expiration sessions tend to be very busy early in the day yet very slow thereafter in normal circumstances and have a rudimentary understanding of the fact that equity prices can tend to be pegged close to major numbers on the 3rd Friday of the month. Overnight, markets in Asia were quiet and mixed with Tokyo down a little under 1% and Hong Kong up 1%. The situation, however, deteriorated rapidly as we Americans slept with oil prices decline and European bourses tumbling down about 2% plus as of this writing. Late last night, the âFinancial Timesâ out of London reported that a senior government official wants strong banks to only repay bail-out funds only if as part of the stress test being proposed, said returning of the money must be in âthe national economic interest.â Also, Obamaâs top economic adviser was on âMeet The Pressâ that repayments could provide further resources to help the weaker banks, but was noncommittal on the London FT rumor. Add to the mix BAC was out this morning with options expiration behind us and instant recipe for downside soup. As people trudge back to their offices after many were on vacation last week, look for a relatively slow day with much of the great action having already occurred before 8AM ET when BAC came out, but one that should stick to the downside in a very choppy manner all day. Reiterating- Please understand that if the ideas do not get to the hoped for set-ups cited below, more often than not, one should not blindly trade the symbol next to said idea. If the whole story is not there - If something is good, assume either a short thru unchanged or an A-B-A2 (preferably to the downside in a downside market and the upside in an upside market) based on direction of the market unless specifiedIf something is bad, assume either a buy thru unchanged or an A-B-A2 (preferably to the downside in a downside market and the upside in an upside market) based on direction of the market unless specified- Good- The following stocks have good news and/or a strong technical pattern DFR â continued its recent run; closed near a high AOS- warned on earnings last Thursday night; closed well lower but near a high CYT- warned on earnings last Thursday night; closed well lower but near a high SCON- closed near a high CMED, NCTY- two Chinese speculative plays that closed near their highs MR â closed on its high CVO- closed on its high LLY- good earnings DNDN- positive detail on its recent drug news release at the American Association of Cancer Research conference over the weekend JAVA- being bought out by ORCL for 9.50 LZ- pre-announced to upside earnings-wise BAC- beat guidance handily, but may be a case of âbuy the rumor, sell the newsâ particularly when taken in combination with the FT report. Bad-The following stocks have bad news and/or a weak technical pattern ETN- terrible earnings HAL- bad earnings PEP- beat pre-announced earnings, but buying out its bottlers PAS and PBG MMR- poor earnings ORCL- acquiring JAVA as noted above, but may well be taken as a negative for ORCL today because of the cash outlay Earnings: MON APR 20 BEFORE BAC BOH ETN HAL HAS LLY MMR SXT WFT MON APR 20 AFTER BRO BSX BXS CNI CR HWAY IBM IES LNCR OMI PKG SYK TXN ZION Good luck today. Erik R. Kolodny