Hopefully many traders and investors know that this Friday is options expiration. Often during the trading week leading up to the expiration there will be a lot of games being played by the large institutional trading desks. You see, this is a time when the small retail options traders will most likely be shaken out of their near term options position. The institutions will usually look to see where the small retail options traders have placed there bets. Once the elaborate computer programs sniff out where the popular bet has been placed the institutional money will move the stock in the other direction. This is why options expiration week is always so volatile, erratic, and tricky.
It is important to always remember that many small retail options traders will rarely ever exercise a stock, they are simply looking to capture a gain in the premium paid. Most options traders will generally close out the position before the actual expiration of the option. This is another reason why the entire trading week leading up to options expiration is so volatile. Traders should also be aware that this is a week where rumors run rampant in the market place.
Traders and investors will see the most volatility on the popular trading stocks. Stocks such as Apple Inc.(NASDAQ:AAPL), Netflix Inc.(NASDAQ:NFLX), Amazon.com Inc.(NASDAQ:AMZN), and Biadu Inc.(NASDAQ:BIDU) will usually be extremely active and volatile throughout the trading week. It is important to remember most traders that are purchasing options simply do not have the capital to directly purchase the stock and the institutions know that, therefore, the institutions will take advantage of this and try to shake out the small retail options trader throughout the entire week.