BookingAlpha subscribers got to experience "Pinning" or "Pin Risk" during Friday's weekly Options Expiration. Pinning occurs when underlyings are drawn like magnets to a particular strike price, closing on or very near that strike. Volume and Open Interest are usually the culprits and the only indicator of Pinning. Unfortunately, Pin Risk is not something an option trader can forecast or predict as it typically only becomes evident during Expiration Day. Instead, we must react when the elusive beast shows its ugly head.
Friday, subscribers went into weekly OpEx with open IWM and SPY Iron Condors. The call spreads of the Iron Condors were out of the money (which is a good thing and what we want) but the market continued to grind higher throughout the day. No real volume or events other then Egypt's Mubarak stepping aside existed and the markets were at multi year highs. There was no real reason for the market to continue to advance higher, but it did.
Volume far exceeded open interest of our short calls mid-day Friday which is about the only heads up an options trader gets that Pinning may occur. Our call spreads were held through the day to allow the premium spike existing Friday morning to decay and reduce the price at which we had to buy back our short optoins. During the last 2 hours of trading the call spreads were closed to avoid potential assignment if the options were to close In The Money.
Fortunately, the put spreads of the Iron Condors expired for full profit and offset the marginal losses incurred on the credit spreads. In whole, the SPY & IWM Iron Condor positions netted to be profitable.