Which stocks tend to come really close to a strike price on option expiration dates

Discussion in 'Options' started by float, Mar 14, 2008.

  1. float


    It is well know that stock price may just stop on a strike during option expiration Fridays, such as March 21, 2008. One that comes to my mind is GOOG which almost always ends up with a closing price like $490.52.

    It is said that hedging behavior of option traders makes this happen. Anther theory is that there are manipulators who push the stock price to a strike to kill both calls and puts.

    No matter what the driving force is, knowing which stock(s) will be pinned to a strike will be good for trading since it is a good chance to use butterflies.

    My question is, other than GOOG, whose tend to stop at a strike on OE days?

  2. Focus on the stocks/indices that have the largest daily trading volume. Most of that volume is "linked" to options trading.
  3. Study the max pain theory threads on ET. According to this at expiration the underlying will settle at or around the strike price that has the largest open interest.

    The theory goes, if I get it correctly, that because most of the writers are pros they are forcing the underlying to the strike where the most option money would be lost by the longs and made by the shorts..

    It is uncanny how often this actually happened in the indices.
  4. With strikes every 5 and 10 dollars I would say 99% of stocks tend to come close to a strike.
    Simple reason: OTM and ITM options are not as popular as ATM options, as a stock moves it places more open interest on those ATM options. And with strikes every 5/10 dollars a stock will settle close to one of those strikes.