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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory
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To: ild who wrote (54005)2/17/2006 11:23:02 AM
From: ild  Read Replies (1) of 110194
 
"Options expire this week, which means some investors might be tempted to sell February options in order to take advantage of the fact that they will be worthless in just a few days."
----(The Wall Street Journal - "Expiration Drives Urge To Sell" - 2/15/06)

Schaeffer's addendum: This single lead sentence says it all about the direction in which risk preferences have moved over the past five years.

Options expiration week used to be a time for options traders to line up their bets on the stocks that might make big moves and produce huge profits for those fortunate enough to have bought low-dollar premium, high-gamma options that were soon to expire.

These days, traders look to scoop up nickels and dimes in front of a steamroller by selling cheap (in dollars and in terms of implied volatility) near-expiring premium and risking ruin if a position moves big against them.

This options equivalent of Russian roulette will blow up many traders before it is rightfully abandoned.

Bernie Schaeffer
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