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X Games

|Includes: American Eagle Outfitters, Inc. (AEO), NTR, X
One must really get a good laugh when looking at all the shenanigans played during options expiration week. Yesterday the Dow Jones Industrial Average rallied higher by more than 170.00 points only close the session higher by 103.00 points. This tells us that the large institutions took care of business when it came to shaking out the small retail options trader.

Yesterday Potash Inc (NYSE:POT) turned down a buyout bid from BHP Billiton Ltd (NYSE:BHP) for $39.5 billion. As we all know Potash Inc stock has soared higher and now has a floor underneath it. Today buyout rumors are everywhere. United States Steel Corp (NYSE:X) is rumored to be bought out by another company. This is one of the oldest stocks on the New York Stock Exchange. Is someone really looking to buy this company? Perhaps someone or some institution needs that stock at a certain level before Friday's expiration. The stock is trading higher by $2.60 to $49.90 a share and was even higher intra-day.

What about American Eagle Outfitters (NYSE:AEO) today? This stock soared higher intra-day by nearly one point on a buyout rumor. Come on give me a break. How can these rumors just spread like wild fire without anyone questioning their legitimacy? These games get played all the time during the week of options expiration.

Please realize that the small retail options investor rarely ever exercises an option. They will usually close out the option position long before the Friday expiration for a gain or loss in the premium. Therefore, take this week with a grain of salt as it seems these are just institutional games that are getting played. This type of activity has happened from the beginning and will unfortunately happen until the end. I even remember Ben Bernanke cutting the discount rate just before the opening bell on an options expiration Friday. What a shame.

Nicholas Santiago
Chief Market Strategist