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Check Weekly Option PINs in Amazon, Google

Weekly options offer greater expiration trading opportunities


Follow Adam Warner on Twitter @agwarner.

Now that we have Weekly options, every Friday can become Pintastic! So you know Pin is option traders’ lingo for a stock closing exactly on a strike price at expiration – in other words it’s pinned at the strike.

With Weeklys expiring every week, they create more option trading opportunities.

For an underlying to be PIN eligible, you need a combo of high options open interest (OI) on a strike, and slow, non-volatile, trading in the stock. Effective open interest can include options bought and held today. Since there’s no way of measuring that, the best we can do is infer that if a certain options series sees high volume, then at least some of them are open and long and hoping the stock doesn’t go out right at the strike they own.

So with that in mind, we see Amazon (NASDAQ: AMZN) hovering near the 180 strike. About 4000 expiring 180 calls had traded by 11:30 Eastern this morning, vversus pre-existing open interest of 2748, while over 3100 puts traded vversus OI of 2855. The stock has also meandered between 179.50 and 180.50 since about 9:45 am. That combined open interest is low vversus a stock that averages about 5 million shares per day. But again, the stock is just not doing much, so that will have some impact.

Google (NASDAQ: GOOG) is always a pin candidate, especially now that we have five-point strikes. That being said, GOOG sits as far from strike as possible now at around 612.50. Volume in the expiring 610 calls of 3000 already exceeds open interest of 2001. The same is not true on either the 610 calls or puts. GOOG trades sluggishly enough that it might drift to a strike out of habit.

Now big caveat. Pins are a relatively minor force. News dwarfs any tug to one strike or another. They also have two sides to them. For every trader that owns calls or puts on a strike, there’s another one who shorted them. If a stock does nothing, option owners feel the pinch from time premium withering away, and tend to trade a stock tightly around the strike they own. That’s the dynamic that can cause a pin. On the flip side, if a stock is volatile, options shorts have the pain. And that’s a pain of unlimited loss on an option short without much premium cushion.

There’s a slow trade in general today, with declining volatility, so presumably options long have the pressure on them. For now.

Follow Adam Warner on Twitter @agwarner.

Article printed from InvestorPlace Media,

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