Hi Jesterx Here, there is a lot of talk on the blogosphere about the opex week that is here. Many
people are scared and dont know what to do so I thought I would shed some light
as to how I normally play this.
I am very cautious of expiration strategies: options and futures have an
expiration date, and I've noticed that the market will often have a severe
drop into the Thursday or Friday the week before expiration, only to then turn
up and rally into the following week's option expiration.
If I see this
pattern set up, I'm leery of getting caught on the short side because I've
seen this pattern before. Many times during option expiration, buy and sell
programs will hit and shake you out of your position and fool you into
leaning the wrong way. I see it time and time again.
Something else that I've observed is that program traders oftentimes will
close the market very strongly in the last half hour, and I've noticed they
go the opposite way the last hour of the following day. I find expiration day
very hard to trade and try to stay out because there are many fake-out moves
due to the unwinding of options positions.
I THINK I CAN…. I THINK I CAN…..
In a volative situation like opex, sometimes the market creates nontrending
days where the market is trading back and forth in a range, I found out a long
time ago that the big boys in the futures pits will make money trying to take
out the stops, which no doubt sit right near the highs and the lows of the day.
In a non trending day, since these guys know where the stops are, they will
try their guts out and try and blow out all the stops and it usually works. But
BEWARE! No sooner will they do that then you will see that it was just a fake
out and the price action will swing the other way again. I see this time and
They dont want you to know this, but its how the game is played. The
way to counteract this is to put bids in below the low and offers above the
highs to participate with the big boys. Hey If you want to play with the BIG
BOYS, you have to atleast try to trade similar to them right? OK Great!
Here is the most important tip I can give : ALWAYS REMEMBER TO USE STOPS.
Write it out 100 times, 1000 times if you have to. I cant STRESS this enough. I
have seen too many traders with VERY large accounts blow them up because they
think they are invincible and simply dont use them. No matter how many wins in a
row you have or how long you have been trading, you will never beat the market.
So Don't fall into this trap, or the market will teach you an expensive lesson
you won't forget in a hurry.
STOP LOSSES are a must, and will save you if you
are wrong, you are stopped out, then you live to fight another day.
No matter what you hear on the news, or that idiot on the subway with the
next hot stock tip, Repeat this over and over when you get up in the morning, as
I do. "The Market Is Never Wrong, And my charts never lie" Because that is the
truth, whether you like it or not. The charts are your crystal ball to show you the way and to indicate what could be coming.
Here is one of my favorite quotes from Louis Binstock “Very often
we are our own worst enemy as we foolishly build stumbling blocks on the path
that leads to success and happiness"