Weekly Options – Pinning
Weekly options pinning is an option trading strategy that can be done once a month – on expiration day – or now with the new weekly options it can also be done potentially every friday on stocks that have weekly options.
Weekly Options – Strike Price
What tends to happen on expiration day is that very popular stocks like Google, BIDU, AMZN, AAPL – these stocks get ‘pinned’ at what could be considered the most ‘popular’ strike price – or the strike price that has the most ‘open interest’.
Weekly Options – Pin Trading Example
For example – lets say we are trading XYZ which is trading at 102.00 – and it is Thursday afternoon – the day before option expiration.
Now the next day on option expiration day we see that the open interest is the largest at the 100.00 level. We can feel fairly confident that XYZ will get ‘pinned’ to the 100.0o level – which basically means that for either a good portion of the day – or perhaps even the majority of the day – XYZ stock will hover right at or very close to the 100.00 level as all the positions at this level are being unwound.
So in this case – here is a potential strategy we could do…
We could purchase the 102.00 put option – and then sell the 100.00 put option – creating a 102/100 put debit spread on XYZ. Then, if things transpire as we hope they will and XYZ does get pinned at 100.00 – the 102.00 put option we purchased will increase in value as XYZ moves down to 100.00 – and the 100.00 put we sold will decay away and expire worthless as the stock gets pinned to 100.00.
Again, this was (and still is) a popular way to ‘pin trade’ on monthly expiration days – but with the new weekly options that are now available – it is possible to play this trade every single week on stocks that have weekly options.
This is just ONE of the many different way to trade weekly options – and expiration day trades. To learn others plus a ton of other cool option income strategies – using both traditional and weekly options – join our free options income newsletter by clicking here