As we head into the final week of August regular expiration we are coming off of several Friday’s where AAPL pinned a strike. Last week, AAPL closed less than a dollar from the 250 strike. Can we expect the same results? My guess, maybe not, the weekly expiring this week, is in fact NOT a weekly. It’s the standard August expiration.
Thus, the positions that customers and traders have on are for the most part older and put on longer ago than any type of weekly trade. This should make sense as the options have been around for almost 2 months. Trading expiration in the weeklies has its perks, there are not built up positions produced from weeks of time spreads, straddle strangles and call spreads. This will produce expiration results that will probably be much harder to manage than you’re the nice clean weekly pins have been.
Taking a look at the weekly at the END of the week last week; we can see that the majority of the open interests are right at the straddle:
If we look at the last week of the month, traders can see that there are many strikes with massive amounts of open interest.
Any time a there are more traders involved, there is more psychology and more unpredictable results. The monthly’s probably have a lot more of the MAJOR players with open positions in a stock like AAPL.
If some of these larger positions are against stock, the unwinding of one of these trades could move the IV and the stock itself. I do not know what the positions are of the big banks but supposed one of the banks is long 5,000 of the Aug 240 puts against long 5,000,000 AAPL underlying. This type of unwinding could definitely move the AAPL if unwound. Truth is I am not sure how AAPL will act this week; I will say that traders should take a second look if planning to sell a straddle into the weekly.... that isn't really a weekly.
As the weekly's get more an more popular, I expect their behavior to change, I also expect the standard monthly trades to move and change. This is a time of great change in the equity option world. Do not fear, the mentors at Option Pit are already working on ways to trade the different weeks against each other. Don't forget to check out the free morning pit report. We give it free every day at 9:50 AM EDT. Simply register for a free account here: Option Pit!
