ld - play of the expiration week
Wow, that is a long story and plays with redelman on the CMGIOT board.
First idea was the MaxPain theory, then it evolved to the peak open interest.
As you near expiration, open interest declines very rapidly for that month.
We finally experimented and the best play should be:
- analyze of the peak interest the Monday night of expiration week
- play the Tuesday = still 4 full sessions before expiration.
I prefer the theta play, you can find many options priced around $2 which loose $1/2 a day. Although not every month.
I mostly sell, puts or calls, depending on TA of the stock.
Caveat: never enter orders for more than 10 contracts (theoretically, less than 20 contracts are routed on the automated systems = exchanges rules, not true for every MM, you must catch them off-guard, split the volumes...).
Once you've made your Dollar, close the position: take no unnecessary risks.
Just for fun, pays the cigars.
The BIG play is a market to close order, entered the last trading hour, as the share market is far more important than the options market in volume: if MMs trend to make the market towards "one tick miss" of a peak open interest (pure profit, as their positions are hedged anyway), they would not trade against the trend. An option bot in the last hour for 1/8 or 1/16th could close for some Dollars on a rat tail. But you would need a real broker as you should either exercise or even close your position at close also. |
