Beward the Early Pin Call

• Posted by Adam Warner
• on December 20th, 2009

Didn’t go all pin-posty (yes, that’s a real word) this go around. So as such, we missed this POT here, right to the 105 strike.

But, alas, saying something will pin and picking the strike are two different things. And of course, if you game it, your whole profit depends on picking the correct strike. And if you picked the right strike in POT, you truly have greater talent than simple options trading.

POT closed last week near 120, moved towards 115 Tuesday and Wednesday, threatened 110 Thursday, then on Friday hit 105 for the first time since mid November.

And if you think open interest attracted this POT around, think again. The totals were not high on any strike, as the combined open interest went out between 18K and 28K on all the above strikes. And the high number was the 115 line. The 115 line also had the highest call number at 18K.

What’s my point? That gaming a pin too early can prove wildly dangerous. We couldn’t have had a less volatile week going in, and yet here you get a 15% move South, and rigtht to strike!

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